<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
WEYERHAEUSER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
WASHINGTON 91-0470860
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
TACOMA, WASHINGTON 98477
(206) 924-2345
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
----------------
SANDY D. MCDADE
WEYERHAEUSER COMPANY
TACOMA, WASHINGTON 98477
(206) 924-5272
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR
SERVICE)
----------------
COPIES TO:
FRANCIS J. MORISON
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NY 10017
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement, as determined
by market conditions and other factors.
If the only securities being registered on this Form are to be 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, please check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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- -------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(1)(2) FEE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities................
Preferred Shares............... $850,000,000 100% $850,000,000 $257,575.78
Preference Shares..............
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- -------------------------------------------------------------------------------------------
</TABLE>
(1) Or, if any Debt Securities are issued (a) with a principal amount
denominated in a foreign currency, or a unit of two or more currencies,
such principal amount as shall result (when added to the principal amount
of other Debt Securities issued hereunder) in an aggregate initial
offering price of all Debt Securities covered hereby equivalent to
$790,000,000, or (b) at an original issue discount, such greater principal
amount as shall result (when added to the principal amount of other Debt
Securities issued hereunder) in aggregate proceeds to the registrant of
the equivalent of $790,000,000.
(2) Estimated solely for the purpose of calculation of the registration fee.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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- -------------------------------------------------------------------------------
* Pursuant to Rule 429 of the Securities Act of 1933, the prospectus included
in this Registration Statement also relates to $150,000,000 in principal
amount of the Registrant's debt securities remaining under Registration
Statement on Form S-3 No. 33-52789, which was declared effective on April 8,
1994. The amount of securities being registered, together with the remaining
debt securities registered under Registration Statement on Form S-3 No. 33-
52789, represents the maximum amount of securities which are expected to be
offered for sale.
<PAGE>
PROSPECTUS SUPPLEMENT (Subject to Completion)
(To Prospectus dated September , 1997)
$1,000,000,000
Weyerhaeuser Company
MEDIUM-TERM NOTES, SERIES B
----------
Due from Nine Months from Date of Issue
----------
Weyerhaeuser Company (the "Company") may offer from time to time its Medium-
Term Notes, Series A (the "Notes"), having an aggregate initial public offering
price of up to $1,000,000,000 or the equivalent thereof in other currencies,
including composite currencies such as the European Currency Unit (the
"Specified Currency"). See "Important Currency Exchange Information." The
interest rate on each Note will be either a fixed rate established by the
Company at the date of issue of such Note, which may be zero in the case of
certain Original Issue Discount Notes, or a floating rate as set forth therein
and specified in the applicable Pricing Supplement. A Fixed Rate Note may pay a
level amount in respect of both interest and principal amortized over the life
of the Note (an "Amortizing Note").
Unless otherwise indicated in the applicable Pricing Supplement, interest on
each Fixed Rate Note is payable semi-annually on each March 1 and September 1
and at maturity. Interest on each Floating Rate Note is payable on the dates
set forth herein and in the applicable Pricing Supplement. Amortizing Notes
will pay principal and interest semi-annually each March 1 and September 1, or
quarterly each March 1, June 1, September 1 and December 1 and at maturity.
Each Fixed Rate Note will mature on any day from nine months from the date of
issue, as set forth in the applicable Pricing Supplement. Each Floating Rate
Note will mature on an Interest Payment Date from nine months from the date of
issue, as set forth in the applicable Pricing Supplement. See "Description of
Notes." Unless otherwise specified in the applicable Pricing Supplement, the
Notes may not be redeemed by the Company or repaid at the option of the holder
prior to maturity and will be issued in fully registered form in denominations
of $1,000 (or, in the case of Notes not denominated in U.S. dollars, the
equivalent thereof in the Specified Currency, rounded down to the nearest 1,000
units of the Specified Currency) or any amount in excess thereof which is an
integral multiple of $1,000 (or, in the case of Notes not denominated in U.S.
dollars, 1,000 units of the Specified Currency). Any terms relating to Notes
being denominated in foreign currencies or composite currencies will be as set
forth in the applicable Pricing Supplement. Each Note will be represented
either by a Global Note registered in the name of a nominee of The Depository
Trust Company, as Depositary (a "Book-Entry Note"), or by a certificate issued
in definitive form (a "Certificated Note"), as set forth in the applicable
Pricing Supplement. Beneficial interests in Global Notes representing Book-
Entry Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary (with respect to its
participants' interests) and its participants. Book-Entry Notes will not be
issuable as Certificated Notes except under the circumstances described in this
Prospectus Supplement.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
ANY PRICING SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (2)(3)
---------- --------------- --------------
<S> <C> <C> <C>
Per Note ....... 100.000% .125%-.750% 99.875%-99.250%
Total (4) ...... $1,000,000,000 $1,250,000-$7,500,000 $998,750,000-$992,500,000
</TABLE>
- -----
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Company issues any
Notes at a discount from or at a premium over its principal amount, the
Price to Public of any Note issued at a discount or premium will be set
forth in the applicable Pricing Supplement.
(2) The commission payable to an Agent for each Note sold through such Agent
will be computed based upon the Price to Public of such Note and will depend
upon such Note's maturity; provided, however, that commissions with respect
to Notes maturing in 30 years or more will be negotiated. The Company may
also sell Notes to an Agent, as principal, at negotiated discounts, for
resale to one or more investors.
(3) Before deducting expenses payable by the Company estimated at $507,000.
(4) Or the equivalent thereof in other currencies, including composite
currencies.
----------
Offers to purchase the Notes are being solicited from time to time by the
Agents on behalf of the Company, and the Agents have agreed to use reasonable
efforts to solicit purchases of such Notes. The Company may also sell Notes to
an Agent acting as principal for its own account for resale to one or more
investors at varying prices related to prevailing market prices at the time of
resale or otherwise, to be determined by such Agent. The Company reserves the
right to sell Notes directly on its own behalf and to withdraw, cancel or
modify the offering contemplated hereby without notice. No termination date for
the offering of the Notes has been established. The Company or an Agent may
reject any order in whole or in part. The Notes will not be listed on any
securities exchange, and there can be no assurance that the Notes offered
hereby will be sold or that there will be a secondary market for the Notes. See
"Plan of Distribution."
----------
MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.
, 1997
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS. THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND
MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PROSPECTUS SUPPLEMENT ----
<S> <C>
Important Currency Exchange Information.....3
Description of Notes........................3
Foreign Currency Risks.....................17
United States Federal Taxation.............18
Plan of Distribution.......................23
Legal Matters..............................24
</TABLE>
<TABLE>
<CAPTION>
PAGE
PROSPECTUS ----
<S> <C>
Available Information.......... 2
Incorporation of Certain
Documents by Reference........ 2
The Company.................... 3
Use of Proceeds................ 3
Ratios of Earnings to Fixed
Charges and Earnings to Fixed
Charges and Preferred and
Preference Share Dividends.... 3
Description of Debt Securities. 4
Description of the Preferred
Shares........................ 10
Description of the Preference
Shares........................ 12
Plan of Distribution........... 14
Legal Opinions................. 15
Experts........................ 15
</TABLE>
S-2
<PAGE>
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in the Specified Currency, and
payments of principal of, premium, if any, and interest on, such Notes will be
made in the Specified Currency, unless otherwise provided in the applicable
Pricing Supplement. Currently, there are limited facilities in the United
States for the conversion of U.S. dollars into foreign currencies and vice
versa. In addition, most banks do not currently offer non-U.S. dollar
denominated checking or savings account facilities in the United States.
Accordingly, unless otherwise specified in a Pricing Supplement or unless
alternative arrangements are made, payment of principal of, premium, if any,
and interest on Notes in a Specified Currency other than U.S. dollars will be
made to an account at a bank outside the United States. See "Description of
Notes" and "Foreign Currency Risks."
If the applicable Pricing Supplement provides for payments of principal of
and interest on a non-U.S. dollar denominated Note to be made in U.S. dollars,
the conversion of the Specified Currency into U.S. dollars will be handled by
The Chase Manhattan Bank, in its capacity as Exchange Rate Agent. The costs of
such conversion will be borne by the holder of a Note through deductions from
such payments.
References herein to "U.S. dollars" or "U.S. $" or "$" are to the currency
of the United States of America.
----------------
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which reference is hereby made. The particular
terms of the Notes sold pursuant to any pricing supplement (a "Pricing
Supplement") will be described therein. The terms and conditions set forth in
"Description of Notes" will apply to each Note unless otherwise specified
herein or in the applicable Pricing Supplement and in such Note. There are no
covenants or provisions relating to the Notes that may afford debt holders
protection in the event of a highly leveraged transaction.
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars, and payment of principal of and premium,
if any, and interest on the Notes will be made in U.S. dollars. If any Note is
not to be denominated in U.S. dollars, the applicable Pricing Supplement will
specify the currency or currencies, including composite currencies such as the
European Currency Unit ("ECU"), in which such Note is to be denominated (the
"Specified Currency") and, if different, the currency or currencies in which
the principal, premium, if any, and interest with respect to such Note are to
be paid, along with any other related terms, including exchange rates for such
Specified Currency as against the U.S. dollar at selected times during the
last five years, and any exchange controls or other foreign currency risks
relating to such Specified Currency. See "Foreign Currency Risks."
GENERAL
The Notes will be issued under an Indenture dated as of April 1, 1986, as
supplemented by the First Supplemental Indenture, dated as of February 15,
1991 and the Second Supplemental Indenture, dated as of February 1, 1993 (the
"Indenture") between the Company and The Chase Manhattan Bank (formerly
Chemical Bank), as Trustee (the "Trustee"), the terms of which are more fully
described in the Prospectus. The Notes will constitute a single series under
the Indenture and may be issued from time to time, in an aggregate principal
amount of up to $1,000,000,000 or the equivalent thereof in one or more
foreign or composite currencies. The Indenture does not limit the amounts of
additional unsecured indebtedness ranking pari passu with the Notes that the
Company may incur and the Company may incur additional obligations ranking
pari passu with the Notes. For the purpose of this paragraph, (i) the
principal amount of any Original Issue Discount Note (as defined below) means
the Issue Price (as defined below) of such Note and (ii) the principal amount
of
S-3
<PAGE>
any Note issued in a foreign or composite currency means the U.S. dollar
equivalent on the date of issue of the Issue Price of such Note.
Notes issued under the Indenture will be unsecured and unsubordinated
obligations of the Company and will rank equally and ratably with other
unsecured and unsubordinated obligations of the Company.
Fixed Rate Notes, Amortizing Notes and Original Issue Discount Notes will
mature on any day from nine months from the date of issue (the "Stated
Maturity Date"), as set forth in the applicable Pricing Supplement. Floating
Rate Notes will mature on an Interest Payment Date (as defined below) from
nine months from the date of issue, as set forth in the applicable Pricing
Supplement. Such Pricing Supplement will specify whether the Stated Maturity
Date or Interest Payment Date, as the case may be, may be extended by the
Company, and if so, the Final Maturity Date (as defined below). Notes
denominated in a Specified Currency other than U.S. dollars will be issued in
denominations of the equivalent of U.S. $1,000 (rounded down to an integral
multiple of 1,000 units of such Specified Currency), or any amount in excess
thereof which is an integral multiple of 1,000 units of such Specified
Currency, as determined by reference to the noon dollar buying rate in New
York City for cable transfers of such Specified Currency published by the
Federal Reserve Bank of New York (the "Market Exchange Rate") on the Business
Day (as defined below) immediately preceding the date of issuance; provided,
however, in the case of ECUs, the Market Exchange Rate shall be the rate of
exchange determined by the Commission of the European Communities (or any
successor thereto) as published in the Official Journal of the European
Communities, or any successor publication, on the Business Day immediately
preceding the date of issuance. Except as may be specified for Notes
denominated in foreign or composite currencies or as otherwise provided in the
Pricing Supplement, the Notes will be issued only in fully registered form in
denominations of U.S. $1,000 or any amount in excess thereof which is an
integral multiple of U.S. $1,000.
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a Book-Entry Note or a Certificated Note. Except as
set forth in the Prospectus under "Description of Debt Securities-Global
Securities," Book-Entry Notes will not be issuable as Certificated Notes. See
"Book-Entry System" below. The laws of some states may require that certain
purchasers of securities take physical delivery of securities in definitive
form. Such limits may impair the ability to own, transfer or pledge beneficial
interests in Global Securities. See "Book-Entry System" below.
The Notes may be presented for payment of principal and interest, transfer
of Notes will be registrable and the Notes will be exchangeable at the agency
in the Borough of Manhattan, The City of New York, maintained by the Company
for such purpose; provided that Book-Entry Notes will be exchangeable only in
the manner and to the extent set forth under "Description of Debt Securities-
Global Securities" in the Prospectus. On the date hereof, the agent for the
payment, transfer and exchange of the Notes (the "Paying Agent") is the
Trustee, acting through the corporate trust office at 450 West 33rd Street,
15th Floor, New York, New York 10001.
The applicable Pricing Supplement will specify the price (the "Issue Price")
of each Note to be sold pursuant thereto, the interest rate or interest rate
formula, ranking maturity, currency or composite currency, principal amount
and any other terms on which each such Note will be issued.
As used herein, the following terms shall have the meanings set forth below:
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in the City of New York and (i) with
respect to LIBOR Notes (as defined below), that is also a London Banking Day,
(ii) with respect to Notes denominated in a Specified Currency other than U.S.
dollars, Australian dollars or ECUs, in the principal financial center of the
country of the Specified Currency, (iii) with respect to Notes denominated in
Australian dollars, in Sydney and (iv) with respect to Notes denominated in
ECUs, that is not a non-ECU clearing day, as determined by the ECU Banking
Association in Paris.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
S-4
<PAGE>
"London Banking Day" means any day on which dealings in deposits in the
relevant Indexed Currency (as defined below) are transacted in the London
interbank market.
"Original Issue Discount Note" means any Note that provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to the Indenture.
The "Record Date" with respect to any Interest Payment Date shall be the
date 15 calendar days prior to such Interest Payment Date, whether or not such
date shall be a Business Day.
PAYMENT CURRENCY
If the applicable Pricing Supplement provides for payments of interest and
principal on a non-U.S. dollar denominated Note to be made, at the option of
the holder of such Note, in U.S. dollars, conversion of the Specified Currency
into U.S. dollars will be based on the highest bid quotation in the City of
New York received by the Exchange Rate Agent at approximately 11:00 A.M., New
York City time, on the second Business Day preceding the applicable payment
date from three recognized foreign exchange dealers (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer of the Specified
Currency for U.S. dollars for settlement on such payment date in the aggregate
amount of the Specified Currency payable to the holders of Notes and at which
the applicable dealer commits to execute a contract. If such bid quotations
are not available, payments will be made in the Specified Currency. All
currency exchange costs will be borne by the holders of Notes by deductions
from such payments.
Except as set forth below, if the principal of, premium, if any, or interest
on, any Note is payable in a Specified Currency other than U.S. dollars and
such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances
beyond the control of the Company or is no longer used by the government of
the country issuing such currency or for the settlement of transactions by
public institutions within the international banking community, then the
Company will be entitled to satisfy its obligations to holders of the Notes by
making such payments in U.S. dollars on the basis of the Market Exchange Rate
two Business Days prior to the date of such payment or, if the Market Exchange
Rate is not available on such date, as of the most recent practicable date;
provided, however, that if such Specified Currency is replaced by the Euro (as
described under "Special Provisions Relating to Notes Denominated in ECU"
below), the payment of principal of, premium, if any, or interest on any Note
denominated in such currency shall be effected in Euro in conformity with
legally applicable measures taken pursuant to, or by virtue of, the treaty
establishing the European Community (the "EC"), as amended by the treaty on
European Union (as so amended, the "Treaty"). Any payment made under such
circumstances in U.S. dollars (or, if applicable, Euro) where the required
payment is in a Specified Currency other than U.S. dollars will not constitute
an Event of Default.
SPECIAL PROVISIONS RELATING TO NOTES DENOMINATED IN ECU
Valuation of the ECU
Subject to the provisions under "Payment in a Component Currency" below, the
value of the ECU, in which the Notes may be denominated or may be payable, is
equal to the value of the ECU that is from time to time used as the unit of
account of the EC and which is at the date hereof valued on the basis of
specified amounts of the currencies of 12 of the 15 member states of the EC.
Under Article 109G of the Treaty, the currency composition of the ECU may not
be changed. Other changes to the ECU may be made by the EC in conformity with
EC law, in which event the ECU will change accordingly. From the start of the
third stage of European monetary union, the value of the ECU as against the
currencies of member states participating in the third stage will be
irrevocably fixed and the ECU will become a currency in its own right,
replacing all or some of the currencies of the 15 member states of the EC (as
of the date of this Prospectus Supplement, such currencies include the
Austrian shilling, Belgian franc, Danish krone, Dutch guilder, Finnish markka,
French franc, German mark, Greek drachma, Irish pound, Italian lira,
Luxembourg franc, Portuguese escudo, Spanish peseta,
S-5
<PAGE>
Swedish krona and pound sterling). In contemplation of the third stage, the
European Council meeting in Madrid on December 16, 1995 decided that the name
of the new currency will be the Euro and that, in accordance with the Treaty,
substitution of the Euro for the ECU will be at the rate of one Euro for one
ECU. From the start of the third stage of European monetary union, all
payments in respect of the Notes denominated or payable in ECU will be payable
in Euro at the rate then established in accordance with the Treaty.
Payment in a Component Currency
With respect to each due date for the payment of principal of, or interest
on, the Notes on or after the first business day in Brussels on which the ECU
ceases to be used as the unit of account of the EC and has not become a
currency in its own right replacing all or some of the currencies of the
member states of the EC, the Company shall choose a substitute currency (the
"Chosen Currency"), which may be any currency which was, on the last day on
which the ECU was used as the unit of account of the EC, a component currency
of the ECU or U.S. dollars, in which all payments due on or after that date
with respect to the Notes and coupons shall be made. Notice of the Chosen
Currency so selected shall, where practicable, be published in the manner
described in the "Notices" below. The amount of each payment in such Chosen
Currency shall be computed on the basis of the equivalent of the ECU in that
currency, determined as described below, as of the fourth business day in
Brussels prior to the date on which such payment is due.
On the first business day in Brussels on which the ECU ceases to be used as
the unit of account of the EC and has not become a currency in its own right
replacing all or some of the currencies of the member states of the EC, the
Company shall select a Chosen Currency in which all payments with respect to
Notes and coupons having a due date prior thereto but not yet presented for
payment are to be made. Notice of the Chosen Currency so selected shall, where
practicable, be published in the manner described in "Notices" below. The
amount of each payment in such Chosen Currency shall be computed on the basis
of the equivalent of the ECU in that currency, determined as described below,
as of such first business day.
The equivalent of the ECU in the relevant Chosen Currency as of any date
(the "Day of Valuation") shall be determined by, or on behalf of, the Exchange
Rate Agent on the following basis. The amounts and components composing the
ECU for this purpose (the "Components") shall be the amounts and components
that composed the ECU as of the last date on which the ECU was used as the
unit of account of the EC. The equivalent of the ECU in the Chosen Currency
shall be calculated by, first, aggregating the U.S. dollar equivalents of the
Components; and then, in the case of a Chosen Currency other than U.S.
dollars, using the rate used for determining the U.S. dollar equivalent of the
components in the Chosen Currency of such aggregate amount in U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be determined by,
or on behalf of, the Exchange Rate Agent on the basis of the middle spot
delivery quotations prevailing at 2:30 P.M., Brussels time, on the Day of
Valuation, as obtained by, or on behalf of, the Exchange Rate Agent from one
or more major banks, as selected by the Company, in the country of issue of
the component currency in question.
If for any reason no direct quotations are available for a Component as of a
Day of Valuation from any of the banks selected for this purpose, in computing
the U.S. dollar equivalent of such Component, the Exchange Rate Agent shall
(except as provided below) use the most recent direct quotations for such
Component obtained by it or on its behalf, provided that such quotations were
prevailing in the country of issue not more than two Business Days before such
Day of Valuation. If such most recent quotations were so prevailing in the
country of issue more than two Business Days before such Day of Valuation, the
Exchange Rate Agent shall determine the U.S. dollar equivalent of such
Component on the basis of cross rates derived from the middle spot delivery
quotations for such component currency and for the U.S. dollar prevailing at
2:30 P.M., Brussels time, on such Day of Valuation, as obtained by, or on
behalf of, the Exchange Rate Agent from one or more major banks, as selected
by the Company, in a country other than the country of issue of such component
currency. Notwithstanding the foregoing, the Exchange Rate Agent shall
determine the U.S. dollar equivalent of such Component on the basis of such
cross rates if the Company or such agent judges that the equivalent so
calculated
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is more representative than the U.S. dollar equivalent calculated as provided
in the first sentence of this paragraph. Unless otherwise specified by the
Company, if there is more than one market for dealing in any component
currency by reason of foreign exchange regulations or for any other reason,
the market to be referred to in respect of such currency shall be that upon
which a nonresident issuer of securities denominated in such currency would
purchase such currency in order to make payments in respect of such
securities.
Payments in the Chosen Currency will be made at the specified office of a
paying agent in the country of the Chosen Currency or, if none, or at the
option of the holder, at the specified office of any Paying Agent either by a
check drawn on, or by transfer to an account maintained by the holder with, a
bank in the principal financial center of the country of the Chosen Currency.
All determinations referred to above made by, or on behalf of, the Company
or by, or on behalf of, the Exchange Rate Agent shall be at such entity's sole
discretion and shall, in the absence of manifest error, be conclusive for all
purposes and binding on holders of Notes and coupons.
Notes Denominated in the Currencies of EC Member States
If, pursuant to the Treaty, all or some of the currencies of the member
countries of the EC are replaced by the Euro, the payment of the principal of,
premium, if any, or interest on, the Notes denominated in such currencies
shall be effected in Euro in conformity with legally applicable measures taken
pursuant to, or by virtue of, the Treaty.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether or not the
date of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. The initial interest
payment on a Note will be made on the first Interest Payment Date falling
after the date the Note is issued; provided, however, that payments of
interest (or, in the case of an Amortizing Note, principal and interest) on a
Note issued less than 15 calendar days before an Interest Payment Date will be
paid on the next succeeding Interest Payment Date to the holder of record on
the Record Date with respect to such succeeding Interest Payment Date.
U.S. dollar payments of interest, other than interest payable at maturity
(or on the date of redemption or repayment, if a Note is redeemed or repaid by
the Company prior to maturity), will be made by check mailed to the address of
the person entitled thereto as shown on the Note register. U.S. dollar
payments of principal, premium, if any, and interest upon maturity, redemption
or repayment will be made in immediately available funds against presentation
and surrender of the Note. Notwithstanding the foregoing, (a) the Depositary,
as holder of Book-Entry Notes, shall be entitled to receive payments of
interest by wire transfer of immediately available funds and (b) a holder of
$10,000,000 or more in aggregate principal amount of Certificated Notes having
the same Interest Payment Date shall be entitled to receive payments of
interest by wire transfer of immediately available funds upon written request
to the Paying Agent not later than 15 calendar days prior to the applicable
Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement or unless
alternative arrangements are made, payments of principal of, premium, if any,
and interest on Notes in a Specified Currency other than U.S. dollars will be
made by wire transfer of immediately available funds to an account maintained
by the payee with a bank located outside the United States and the holder of
such Notes shall provide the Paying Agent with the appropriate wire transfer
instructions not later than 15 calendar days prior to the applicable payment
date. If such wire transfer instructions are not so provided, payments of
interest on such Notes (other than interest payable at maturity or on any
redemption or repayment date) will be made by check payable in U.S. dollars
mailed to the address of the person entitled thereto as such address shall
appear in the Note register. Conversion of the
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Specified Currency into U.S. dollars shall be made at the Market Exchange Rate
two Business Days prior to the date of such payment, or if the Market Exchange
Rate is not available on such date, as of the most recent practicable date.
Certain Notes, including Original Issue Discount Notes, may be considered to
be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant rate. See "United
States Federal Taxation-Discount Notes" below. Unless otherwise specified in
the applicable Pricing Supplement, if the principal of any Discount Note is
declared to be due and payable immediately as described under "Description of
Debt Securities-Events of Default" in the Prospectus, the amount of principal
due and payable with respect to such Note shall be limited to the aggregate
principal amount of such Note multiplied by the sum of its Issue Price
(expressed as a percentage of the aggregate principal amount) plus the
original issue discount amortized from the date of issue to the date of
declaration, which amortization shall be calculated using the "interest
method" (computed in accordance with generally accepted accounting principles
in effect on the date of declaration). Special considerations applicable to
any such Notes will be set forth in the applicable Pricing Supplement.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issue at the annual
rate stated on the face thereof until the principal thereof is paid or made
available for payment. Such interest will be computed on the basis of a 360-
day year of twelve 30-day months. Payments of interest on Fixed Rate Notes
other than Amortizing Notes will be made semi-annually on each March 1 and
September 1 and at maturity or upon any earlier redemption or repayment.
Payments of principal and interest on Amortizing Notes, which are securities
on which payments of principal and interest are made in equal installments
over the life of the security, will be made either quarterly on each March 1,
June 1, September 1 and December 1 or semi-annually on each March 1 and
September 1, as set forth in the applicable Pricing Supplement, and at
maturity or upon any earlier redemption or repayment. Payments with respect to
Amortizing Notes will be applied first to interest due and payable thereon and
then to the reduction of the unpaid principal amount thereof. A table setting
forth repayment information in respect of each Amortizing Note will be
provided to the original purchaser and will be available, upon request, to
subsequent holders.
If any Interest Payment Date for any Fixed Rate Note would fall on a day
that is not a Business Day, the interest payment shall be postponed to the
next day that is a Business Day, and no interest on such payment shall accrue
for the period from and after the Interest Payment Date. If the maturity date
(or date of redemption or repayment) of any Fixed Rate Note falls on a day
that is not a Business Day, the payment of interest and principal (and
premium, if any) may be made on the next succeeding Business Day, and no
interest on such payment shall accrue for the period from and after the
maturity date (or date of redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from
the date of issue or from the last date in respect of which interest has been
paid (or duly provided for), as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be. The interest rates the Company will agree to
pay on newly-issued Fixed Rate Notes are subject to change without notice by
the Company from time to time, but no such change will affect any Fixed Rate
Notes theretofore issued or that the Company has agreed to issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issue until the
principal thereof is paid or made available for payment at a rate determined
by reference to an interest rate basis (the "Base Rate"), which may be
adjusted by a Spread and/or Spread Multiplier (each as defined below). The
applicable Pricing Supplement will designate one of the following Base Rates
as applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate Note"),
(b) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the
Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"),
(e) the Prime Rate (a "Prime Rate Note"),
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(f) the Treasury Rate (a "Treasury Rate Note") or (g) such other Base Rate as
is set forth in such Pricing Supplement and in such Floating Rate Note. The
"Index Maturity" for any Floating Rate Note is the period of maturity of the
instrument or obligation from which the Base Rate is calculated and will be
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to
the specified Base Rate (i) plus or minus the Spread, if any, and/or
(ii) multiplied by the Spread Multiplier, if any. The "Spread" is the number
of basis points (one one-hundredth of a percentage point) specified in the
applicable Pricing Supplement to be added to or subtracted from the Base Rate
for such Floating Rate Note and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement to be applied to the Base Rate
for such Floating Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any interest period
("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the
rate of interest which may accrue during any interest period ("Minimum
Interest Rate"). In addition to any Maximum Interest Rate which may be
applicable to any Floating Rate Note pursuant to the above provisions, the
interest rate on a Floating Rate Note will in no event be higher than the
maximum rate permitted by New York law, as the same may be modified by United
States law of general application. Under current New York law, the maximum
rate of interest, subject to certain exceptions, for any loan in an amount
less than $250,000 is 16% and for any loan in the amount of $250,000 or more
but less than $2,500,000 is 25% per annum on a simple interest basis. This
limitation does not apply to loans of $2,500,000 or more.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (such period being the "Interest
Reset Period" for such Note, and the first day of each Interest Reset Period
being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the Pricing Supplement, the Interest
Reset Date will be, in the case of Floating Rate Notes (other than Treasury
Rate Notes) which reset daily, each Business Day; in the case of Floating Rate
Notes (other than Treasury Rate Notes) which reset weekly, the Wednesday of
each week; in the case of Treasury Rate Notes which reset weekly, the Tuesday
of each week, except as provided below; in the case of Floating Rate Notes
which reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December; in the case of Floating Rate Notes which reset semi-
annually, the third Wednesday of two months of each year, as specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes which
reset annually, the third Wednesday of one month of each year, as specified in
the applicable Pricing Supplement; provided, however, that (a) the interest
rate in effect from the date of issue to the first Interest Reset Date with
respect to a Floating Rate Note will be the initial interest rate set forth in
the applicable Pricing Supplement (the "Initial Interest Rate") and (b) the
interest rate in effect for the fifteen days immediately prior to maturity,
redemption or repayment will be that in effect on the fifteenth day preceding
such maturity, redemption or repayment date. If any Interest Reset Date for
any Floating Rate Note would otherwise be a day that is not a Business Day,
such Interest Reset Date shall be postponed to the next succeeding Business
Day, except that in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Reset Date shall be the next
preceding Business Day.
Except as provided below, and unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in
the case of Floating Rate Notes with a daily, weekly or monthly Interest Reset
Date, on the third Wednesday of each month or on the third Wednesday of March,
June, September and December, as specified in the applicable Pricing
Supplement; (ii) in the case of Floating Rate Notes with a quarterly Interest
Reset Date, on the third Wednesday of March, June, September and December,
(iii) in the case of Floating Rate Notes with a semi-annual Interest Reset
Date, on the third Wednesday of the two months specified in the applicable
Pricing Supplement; and (iv) in the case of Floating Rate Notes with an annual
Interest Reset Date, on the third Wednesday of the month specified in the
applicable Pricing Supplement. If any Interest Payment Date for any Floating
Rate Note would fall on a day that is not a Business Day with respect to such
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Floating Rate Note, such Interest Payment Date will be postponed to the
following day that is a Business Day with respect to such Floating Rate Note,
except that, in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Payment Date shall be the immediately
preceding day that is a Business Day with respect to such LIBOR Note. If the
maturity date or any earlier redemption or repayment date of a Floating Rate
Note would fall on a day that is not a Business Day, the payment of principal,
premium, if any, and interest will be made on the next succeeding Business
Day, and no interest on such payment shall accrue for the period from and
after such maturity, redemption or repayment date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes (except Floating Rate Notes on which interest
is reset daily or weekly) shall be the amount of interest accrued from the
date of issue or from the last date to which interest has been paid (or duly
provided for) to, but excluding, the Interest Payment Date. In the case of a
Floating Rate Note on which interest is reset daily or weekly, interest
payments shall be the amount of interest accrued from the date of issue or
from the last date to which interest has been paid (or duly provided for), as
the case may be, to and including the Record Date immediately preceding such
Interest Payment Date, except that at maturity or earlier redemption or
repayment, the interest payable will include interest accrued to, but
excluding, the maturity, redemption or repayment date, as the case may be.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. The interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360, in the case of CD Rate Notes,
Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime
Rate Notes or by the actual number of days in the year, in the case of
Treasury Rate Notes. All percentages used in or resulting from any calculation
of the rate of interest on a Floating Rate Note will be rounded, if necessary,
to the nearest one hundred-thousandth of a percentage point (.0000001), with
five one-millionths of a percentage point rounded upward, and all dollar
amounts used in or resulting from such calculation on Floating Rate Notes will
be rounded to the nearest cent, with one-half cent rounded upward. The
interest rate in effect on any Interest Reset Date will be the applicable rate
as reset on such date. The interest rate applicable to any other day is the
interest rate from the immediately preceding Interest Reset Date (or, if none,
the Initial Interest Rate).
The applicable Pricing Supplement shall specify a calculation agent (the
"Calculation Agent") with respect to any issue of Floating Rate Notes. Upon
the request of the holder of any Floating Rate Note, the Calculation Agent
will provide the interest rate then in effect and, if determined, the interest
rate which will become effective on the next Interest Reset Date with respect
to such Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes and Prime
Rate Notes will be the second Business Day next preceding such Interest Reset
Date. The Interest Determination Date pertaining to an Interest Reset Date for
a LIBOR Note will be the second London Banking Day preceding such Interest
Reset Date. The Interest Determination Date pertaining to an Interest Reset
Date for a Treasury Rate Note will be the day of the week in which such
Interest Reset Date falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is normally held on the
following Tuesday, but such auction may be held on the preceding Friday. If,
as the result of a legal holiday, an auction is so held on the preceding
Friday, such Friday will be the Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week. If an auction falls
on a day that is an Interest Reset Date, such Interest Reset Date will be the
next following Business Day.
The "Calculation Date," where applicable, pertaining to an Interest
Determination Date will be the earlier of (i) the tenth calendar day after
such Interest Determination Date or, if such day is not a Business Day, the
next succeeding Business Day, or (ii) the Business Day preceding the
applicable Interest Payment Date or Maturity Date, as the case may be.
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Interest rates will be determined by the Calculation Agent as follows:
CD RATE NOTES
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected
Interest Rates," or any successor publication of the Board of Governors of the
Federal Reserve System ("H.15(519)") under the heading "CDs (Secondary
Market)," or, if not so published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate
will be the rate on such Interest Determination Date for negotiable
certificates of deposit of the Index Maturity designated in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in its
daily statistical release "Composite 3:30 P.M. Quotations for U.S. Government
Securities" (the "Composite Quotations") under the heading "Certificates of
Deposit." If such rate is not yet published in either H.15(519) or the
Composite Quotations by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate on such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 A.M., New
York City time, on such Interest Determination Date, for certificates of
deposit in the denomination of $5,000,000 with a remaining maturity closest to
the Index Maturity designated in the Pricing Supplement of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in The City
of New York selected by the Calculation Agent for negotiable certificates of
deposit of major United States money center banks of the highest credit
standing in the market for negotiable certificates of deposit; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent
are not quoting as set forth above, the CD Rate in effect for the applicable
period will be the same as the CD Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the CD Rate Notes for which such CD Rate is being
determined shall be the Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on such date for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement, as
such rate shall be published in H.15(519), under the heading "Commercial
Paper--Nonfinancial." In the event that such rate is not published by 9:00
A.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on such Interest Determination Date for commercial paper of
the specified Index Maturity as published in Composite Quotations under the
heading "Commercial Paper." If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet available in either H.15(519) or
Composite Quotations, then the Commercial Paper Rate shall be the Money Market
Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York
City time, on such Interest Determination Date of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper of the specified Index Maturity, placed for an industrial
issuer whose bond rating is "AA", or the equivalent, from a nationally
recognized rating agency; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting offered rates as mentioned
in this sentence, the Commercial Paper Rate in effect for the applicable
period will be the same as the
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Commercial Paper Rate for the immediately preceding Interest Reset Period (or,
if there was no such Interest Reset Period, the rate of interest payable on
the Commercial Paper Rate Notes for which such Commercial Paper Rate is being
determined shall be the Initial Interest Rate).
"Money Market Yield" shall be calculated in accordance with the following
formula:
Money Market Yield = D x 360 x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the Index Maturity.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date,
the rate on such date for Federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)," or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate will be the rate on such Interest
Determination Date as published in the Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not yet published in either
H.15(519) or the Composite Quotations by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate for such Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight Federal funds, as of 11:00 A.M., New York City time,
on such Interest Determination Date, arranged by three leading brokers of
Federal funds transactions in The City of New York selected by the Calculation
Agent; provided, however, that if the brokers selected as aforesaid by the
Calculation Agent are not quoting as set forth above, the Federal Funds Rate
in effect for the applicable period will be the same as the Federal Funds Rate
for the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the Federal Funds Rate
Notes for which such Federal Funds Rate is being determined shall be the
Initial Interest Rate).
LIBOR NOTES
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Reset Date will be determined by the Calculation Agent as
follows:
(i) As of the Interest Determination Date, LIBOR will be either: (a) if
"LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified Designated LIBOR
Page (as defined below) by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on such Interest Determination Date, that appear on
the Designated LIBOR Page as of 11:00 A.M., London time, on that Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement, the rate for deposits in the Index Currency having the Index
Maturity designated in the applicable Pricing Supplement, commencing on
such Interest Determination Date, that appears on the Designated LIBOR Page
as of
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11:00 A.M., London time, on that Interest Determination Date. If fewer than
two offered rates appear or no rate appears (if, as aforesaid, only a
single rate is required) (if "LIBOR Reuters" is specified in the applicable
Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified in
the applicable Pricing Supplement), LIBOR in respect of the related
Interest Determination Date will be determined as if the parties had
specified the rate described in clause (ii) below.
(ii) With respect to an Interest Determination Date on which fewer than
two offered rates appear or no rate appears (if, as aforesaid, only a
single rate is required) (if "LIBOR Reuters" is specified in the applicable
Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified in
the applicable Pricing Supplement), the Calculation Agent will request the
principal London offices of each of four major reference banks in the
London interbank market, as selected by the Calculation Agent, to provide
the Calculation Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity designated in the applicable
Pricing Supplement commencing on the second London Banking Day immediately
following such Interest Determination Date, to prime banks in the London
interbank market at approximately 11:00 A.M., London time, on such Interest
Determination Date and in a principal amount of not less than $1,000,000
(or the equivalent in the Index Currency, if the Index Currency is not the
U.S. dollar) that is representative for a single transaction in such Index
Currency in such market at such time. If at least two such quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M. (or such
other time specified in the applicable Pricing Supplement), in the
applicable principal financial center for the country of the Index Currency
on such Interest Determination Date, by three major banks in such principal
financial center selected by the Calculation Agent for loans in the Index
Currency to leading European banks, having the Index Maturity designated in
the applicable Pricing Supplement and in a principal amount of not less
than $1,000,000 commencing on the second London Banking Day immediately
following such Interest Determination Date (or the equivalent in the Index
Currency, if the Index Currency is not the U.S. dollar) that is
representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
in effect for the applicable period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the LIBOR Notes for
which such LIBOR is being determined shall be the Initial Interest Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable
Pricing Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for
the applicable Index Currency will be determined as if LIBOR Telerate (and, if
the U.S. dollar is the Index Currency, Page 3750) has been specified.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if
any) specified in the Prime Rate Notes and in the applicable Pricing
Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set
forth in H.15(519) for such date opposite the caption "Bank Prime Loan." If
such rate is not yet published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Prime
Rate for such Interest Determination Date will be the arithmetic mean of the
rates of interest publicly announced by each bank named on the Reuters Screen
USPRIME1 Page (as defined below) as such bank's prime rate or base lending
rate as in effect for such Interest Determination Date as quoted on the
Reuters Screen USPRIME1 Page on such Interest Determination Date, or, if fewer
than four such rates appear on the Reuters Screen USPRIME1 Page for such
Interest Determination Date, the rate shall be the arithmetic mean of the
prime rates quoted on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Interest Determination Date
by at least two of the three major money center banks in The City of New York
selected by the Calculation Agent from which quotations are requested. If
fewer than two quotations are provided, the Prime Rate shall be calculated by
the Calculation Agent and shall be determined as the arithmetic mean on the
basis of the prime rates in The City of New York by the appropriate number of
substitute banks or trust companies organized and doing business under the
laws of the United States, or any State thereof, in each case having total
equity capital of at least U.S. $500 million and being subject to supervision
or examination by federal or state authority, selected by the Calculation
Agent to quote such rate or rates. "Reuters Screen USPRIME1 Page" means the
display designated as Page "USPRIME1" on the Reuters Monitor Money Rates
Service (or such other page as may replace the USPRIME1 Page on that service
for the purpose of displaying prime rates or base lending rates of major
United States banks).
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the Maximum Interest Rate,
if any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such date of direct obligations of the United
States ("Treasury Bills") having the Index Maturity designated in the
applicable Pricing Supplement, as published in H.15(519) under the heading
"Treasury Bills--auction average (investment)" or, if not so published by 9:00
A.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination
Date (expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the auction of Treasury Bills having the Index Maturity designated in the
applicable Pricing Supplement are not published or reported as provided above
by 3:00 P.M., New York City time, on such Calculation Date or if no such
auction is held on such Interest Determination Date, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) calculated using the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New York
City time, on such Interest Determination Date, of three leading primary
United States government securities dealers selected by the Calculation Agent
for the issue of Treasury Bills with a remaining maturity closest to the Index
Maturity designated in the applicable Pricing Supplement; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting bid rates as mentioned in this sentence, the Treasury Rate for such
Interest Reset Date will be the same as the Treasury Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the Treasury Rate Notes for which the
Treasury Rate is being determined shall be the Initial Interest Rate).
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date from 9 months from the Issue Date and/or on which the
amount of interest payable on an Interest Payment Date will be determined by
reference to currencies, currency units, commodity prices, financial or non-
financial
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indices or other factors (the "Indexed Notes"), as indicated in the applicable
Pricing Supplement. Holders of Indexed Notes may receive a principal amount at
maturity that is greater than or less than the face amount of such Notes
depending upon the fluctuation of the relative value, rate or price of the
specified index. Specific information pertaining to the method for determining
the principal amount payable at maturity, a historical comparison of the
relative value, rate or price of the specified index and the face amount of
the Indexed Note and certain additional United States federal tax
considerations will be described in the applicable Pricing Supplement.
EXTENSION OF MATURITY
The Variable Rate Renewable Notes (the "Renewable Notes") will mature on an
Interest Payment Date as specified in the applicable Pricing Supplement (the
"Initial Maturity Date"), unless the maturity of all or any portion of the
principal amount thereof is extended in accordance with the procedures
described below. On the Interest Payment Dates in March and September in each
year (unless different Interest Payment Dates are specified in the applicable
Pricing Supplement) (each such Interest Payment Date, an "Election Date"), the
maturity of the Renewable Notes will be extended to the Interest Payment Date
occurring twelve months after such Election Date, unless the holder thereof
elects to terminate the automatic extension of the maturity of the Renewable
Notes or of any portion thereof having a principal amount of $1,000 or any
multiple of $1,000 in excess thereof by delivering such notes to the Paying
Agent not less than nor more than the number of days to be specified in the
applicable Pricing Supplement prior to such Election Date. Short-term notes
will be issued in the place of surrendered notes, and such short-term notes
will set forth the terms thereof, including the maturity date. Such option may
be exercised with respect to less than the entire principal amount of the
Renewable Notes; provided that the principal amount for which such option is
not exercised is at least $1,000 or any larger amount that is an integral
multiple of $1,000. Notwithstanding the foregoing, the maturity of the
Renewable Notes may not be extended beyond the Final Maturity Date, as
specified in the applicable Pricing Supplement (the "Final Maturity Date"). If
the holder elects to terminate the automatic extension of the maturity of any
portion of the principal amount of the Renewable Notes and such election is
not revoked as described below, such portion will become due and payable on
the Interest Payment Date falling six months (unless another period is
specified in the applicable Pricing Supplement) after the Election Date prior
to which the holder made such election.
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $1,000
or any multiple of $1,000 in excess thereof by delivering a notice to such
effect to the Paying Agent on any day following the effective date of the
election to terminate the automatic extension of maturity and prior to the
date 15 days before the date on which such portion would otherwise mature.
Such a revocation may be made for less than the entire principal amount of the
Renewable Notes for which the automatic extension of maturity has been
terminated; provided that the principal amount of the Renewable Notes for
which the automatic extension of maturity has been terminated and for which
such a revocation has not been made is at least $1,000 or any larger amount
that is an integral multiple of $1,000. Notwithstanding the foregoing, a
revocation may not be made during the period from and including a Record Date
to but excluding the immediately succeeding Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent
holder.
The Renewable Notes may be redeemed in whole or in part at the option of the
Company on the Interest Payment Dates in each year specified in the applicable
Pricing Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement, at a redemption price of 100% of the principal
amount of the Renewable Notes to be redeemed, together with interest accrued
and unpaid thereon to the date of redemption. Notwithstanding anything to the
contrary in this Prospectus Supplement, notice of redemption will be provided
by mailing a notice of such redemption to each holder by first class mail,
postage prepaid, at least 180 days and not more than 210 days prior to the
date fixed for redemption to the respective address of each holder as that
address appears upon the books maintained by the registrar.
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The Renewable Notes are Floating Rate Notes as described herein.
BOOK-ENTRY SYSTEM
Upon issue, all Fixed Rate Book-Entry Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, maturity date and other
terms, if any, will be represented by one or more fully registered global
notes, (the "Global Notes") and all Floating Rate Book-Entry Notes having the
same Issue Date, Initial Interest Rate, Base Rate, Interest Reset Period,
Interest Payment Dates, Index Maturity, Spread and/or Spread Multiplier, if
any, Minimum Interest Rate, if any, Maximum Interest Rate, if any, maturity
date and other terms, if any, will be represented by one or more Global Notes.
Each such Global Note representing Book-Entry Notes will be deposited with, or
on behalf of, The Depository Trust Company, New York, New York, as Depositary,
and registered in the name of the Depositary or a nominee thereof.
Certificated Notes will not be exchangeable for Book-Entry Notes and, except
under the circumstances described in the Prospectus under "Description of Debt
Securities-Global Securities," Book-Entry Notes will not be exchangeable for
Certificated Notes and will not otherwise be issuable as Certificated Notes.
A further description of the Depositary's procedures with respect to Global
Notes representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities-Global Securities." The Depositary has
confirmed to the Company, each Agent and the Trustee that it intends to follow
such procedures.
OPTIONAL REDEMPTION OR REPAYMENT; REPURCHASE
Unless otherwise provided in the applicable Pricing Supplement, the Notes
will not be redeemable prior to maturity at the option of the Company or
repayable prior to maturity at the option of the holder. The Notes, except for
Amortizing Notes, will not be subject to any sinking fund.
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment, unless such Note was
issued with original issue discount, in which case the Pricing Supplement will
specify the amount payable upon such repayment.
In order for such a Note to be repaid, the Paying Agent must receive at
least 15 days but not more than 30 days prior to the repayment date (i) the
Note with the form entitled "Option to Elect Repayment" on the reverse of the
Note duly completed or (ii) a telegram, telex, facsimile transmission or a
letter from a member of a national securities exchange, or the National
Association of Securities Dealers, Inc. ("NASD") or a commercial bank or trust
company in the United States setting forth the name of the holder of the Note,
the principal amount of the Note, the principal amount of the Note to be
repaid, the certificate number or a description of the tenor and terms of the
Note, a statement that the option to elect repayment is being exercised
thereby and a guarantee that the Note to be repaid, together with the duly
completed form entitled "Option to Elect Repayment" on the reverse of the
Note, will be received by the Paying Agent not later than the fifth Business
Day after the date of such telegram, telex, facsimile transmission or letter;
provided, however, that such telegram, telex, facsimile transmission or letter
shall only be effective if such Note and form duly completed are received by
the Paying Agent by such fifth Business Day. Exercise of the repayment option
by the holder of a Note will be irrevocable, except as otherwise provided
herein under "Extension of Maturity." The repayment option may be exercised by
the holder of a Note for less than the entire principal amount of the Note
but, in that event, the principal amount of the Note remaining outstanding
after repayment must be an authorized denomination.
If a Note is represented by a Global Note, the Depositary's nominee will be
the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's
nominee will timely exercise a right to repayment with respect to a particular
Note, the beneficial owner of such Note must instruct the broker or other
direct or indirect participant through which it holds an interest in such
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Note to notify the Depositary of its desire to exercise a right to repayment.
Different firms have different deadlines for accepting instructions from their
customers and, accordingly, each beneficial owner should consult the broker or
other direct or indirect participant through which it holds an interest in a
Note in order to ascertain the deadline by which such an instruction must be
given in order for timely notice to be delivered to the Depositary.
The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be
held or resold or surrendered to the Trustee for cancellation.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either
the U.S. or foreign governments. Such risks generally depend on economic and
political events over which the Company has no control. In recent years, rates
of exchange between U.S. dollars and certain foreign currencies have been
highly volatile and such volatility may be expected to continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past
are not necessarily indicative, however, of fluctuations in such rate that may
occur during the term of any Note. Depreciation against the U.S. dollar of the
currency in which a Note is payable would result in a decrease in the
effective yield of such Note below its coupon rate and, in certain
circumstances, could result in a loss to the investor on a U.S. dollar basis.
In addition, depending on the specific terms of a currency linked Note,
changes in exchange rates relating to any of the currencies involved may
result in a decrease in its effective yield and, in certain circumstances,
could result in a loss of all or a substantial portion of the principal of a
Note to the investor.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN FINANCIAL AND LEGAL
ADVISORS AS TO ANY SPECIFIC RISKS ENTAILED BY AN INVESTMENT BY SUCH INVESTOR
IN NOTES THAT ARE DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE
VALUE OF, FOREIGN CURRENCY. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR
INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY
TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, premium, if any, and interest on the Notes. Such persons should
consult their own counsel with regard to such matters.
Foreign exchange rates can either float or be fixed by sovereign
governments. Exchange rates of most economically developed nations are
permitted to fluctuate in value relative to the U.S. dollar. National
governments, however, rarely voluntarily allow their currencies to float
freely in response to economic forces. From time to time governments use a
variety of techniques, such as intervention by a country's central bank or
imposition of regulatory controls or taxes, to affect the exchange rate of
their currencies. Governments may also issue a new currency to replace an
existing currency or alter the exchange rate or relative exchange
characteristics by devaluation or revaluation of a currency. Thus, a special
risk in purchasing non-U.S. dollar denominated Notes or currency linked Notes
is that their U.S. dollar-equivalent yields or payouts could be affected by
governmental actions, which could change or interfere with theretofore freely
determined currency valuation, fluctuations in response to other market
forces, and the movement of currencies across borders. There will be no
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adjustment or change in the terms of such Notes in the event that exchange
rates should become fixed, or in the event of any devaluation or revaluation
or imposition of exchange or other regulatory controls or taxes, or in the
event of other developments affecting the U.S. dollar or any applicable
Specified Currency.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a specified foreign currency (or of securities denominated in such
currency) at the time of payment of principal of, premium, if any, or interest
on a Note. Even if there are no actual exchange controls, it is possible that
the Specified Currency for any particular Note not denominated in U.S. dollars
would not be available when payments on such Note are due, including as a
result of the replacement of such Specified Currency by a single European
currency (expected to be named the Euro). In that event, the Company would
make required payments in U.S. dollars on the basis of the Market Exchange
Rate on the date of such payment, or if such rate of exchange is not then
available, on the basis of the Market Exchange Rate as of the most recent
practicable date; provided, however, that if the Specified Currency for any
Note is not available because it has been replaced by the Euro, the Company
would make such payments in Euro in conformity with legally applicable
measures taken pursuant to, or by virtue of, the Treaty. See "Description of
Notes--Payment Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current
exchange controls, if any, and historic exchange rate information on such
currency or currency unit. The information contained therein shall constitute
a part of this Prospectus Supplement and is furnished as a matter of
information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the
future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a court in the
United States, it is likely that such court would grant judgment relating to
the Notes only in U.S. dollars. If an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a New York court,
however, such court would render or enter a judgment or decree in the
Specified Currency. Such judgment would then be converted into U.S. dollars at
the rate of exchange prevailing on the date of entry of the judgment or
decree.
UNITED STATES FEDERAL TAXATION
In the opinion of Davis Polk & Wardwell, special tax counsel to the Company,
the following summary sets forth the material United States federal income tax
consequences of ownership and disposition of the Notes to an initial holder
purchasing a Note at its "issue price," that is, the first price at which a
substantial amount of Notes in an issue is sold (excluding sales to bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). This summary is based on the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code"),
administrative pronouncements, judicial decisions and existing and proposed
Treasury Regulations, including regulations concerning the treatment of debt
instruments issued with original issue discount (the "OID Regulations"),
changes to any of which subsequent to the date of this Prospectus Supplement
may affect the tax consequences described herein, possibly with retroactive
effect. This summary discusses only Notes held as capital assets within the
meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to a holder in light of his particular
circumstances or to holders subject to special rules, such as certain
financial institutions, insurance companies, dealers in securities or foreign
currencies, persons holding Notes in connection with a hedging transaction,
"straddle," conversion transaction or other integrated transaction, United
States Holders whose functional currency (as defined in Code Section 985) is
not the U.S. dollar or persons who have ceased to be United States citizens or
to be taxed as resident aliens. Persons considering the purchase of Notes
should consult
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their tax advisers with regard to the application of United States federal tax
laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
As used herein, the term "Holder" means a beneficial owner of a Note that
is, for United States federal income tax purposes, (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
PAYMENTS OF INTEREST
Interest paid on a Note will generally be taxable to a Holder as ordinary
interest income at the time it accrues or is received in accordance with the
Holder's method of accounting for federal income tax purposes. Under the OID
Regulations, all payments of interest on a Note that matures one year or less
from its date of issuance will be included in the stated redemption price at
maturity of the Notes and will be taxed in the manner described below under
"Discount Notes." Special rules governing the treatment of interest paid with
respect to Discount Notes (including certain Floating Rate Notes and Indexed
Notes) and Foreign Currency Notes are described under "Discount Notes" and
"Foreign Currency Notes" below.
DISCOUNT NOTES
A Note that has an issue price that is less than such Note's stated
redemption price at maturity will generally be considered to have been issued
at an original issue discount for federal income tax purposes (a "Discount
Note"). The stated redemption price at maturity of a Note will equal the sum
of all payments required under the Note other than payments of "qualified
stated interest." "Qualified stated interest" is stated interest
unconditionally payable as a series of payments in cash or property (other
than debt instruments of the issuer) at least annually during the entire term
of the Note and equal to the outstanding principal balance of the Note
multiplied by a single fixed rate of interest. In addition, stated interest on
Floating Rate Notes providing for one or more qualified floating rates of
interest, a single fixed rate and one or more qualified floating rates, an
objective rate, or a single fixed rate and a single objective rate that is a
qualified inverse floating rate will generally constitute qualified stated
interest if such stated interest is unconditionally payable at least annually
during the term of the Note at a rate that is considered to be a single
qualified floating rate or a single objective rate under the following rules.
If a Floating Rate Note provides for two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout
the term of the Note, the qualified floating rates together constitute a
single qualified floating rate. If interest on a debt instrument is stated at
a fixed rate for an initial period of one year or less followed by a variable
rate that is either a qualified floating rate or an objective rate for a
subsequent period, and the value of the variable rate on the issue date is
intended to approximate the fixed rate, the fixed rate and the variable rate
together constitute a single qualified floating rate or objective rate. Two or
more rates will be conclusively presumed to meet the requirements of the
preceding sentences if the values of the applicable rates on the issue date
are within 1/4 of 1 percent of each other. Special tax considerations
(including possible original issue discount) may arise with respect to
Floating Rate Notes providing for (i) one Base Rate followed by one or more
Base Rates, (ii) a single fixed rate followed by a qualified floating rate or
(iii) a Spread Multiplier. Purchasers of Floating Rate Notes with any of such
features should carefully examine the applicable Pricing Supplement and should
consult their tax advisers with respect to such a feature since the tax
consequences will depend, in part, on the particular terms of the Note.
Special rules may apply if a Floating Rate Note bears interest at an objective
rate and it is reasonably expected that the average value of the rate during
the first half of the Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Note's term. Special rules may also apply if a Floating Rate Note is
subject to a Maximum Interest Rate, Minimum Interest Rate or similar
restriction that is not fixed throughout the term of the Note and is
reasonably expected as of the issue date to cause the yield on the Note to be
significantly less or more than the expected yield determined without the
restriction.
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The OID Regulations address, among other things, the accrual of original
issue discount on, and the character of gain realized on the sale, exchange or
retirement of, debt instruments providing for contingent payments. Prospective
Holders of Indexed Notes or Floating Rate Notes that provide for contingent
payments should refer to the discussion regarding taxation in the applicable
Pricing Supplement and should consult their tax advisers regarding the federal
income tax consequences of the ownership and disposition of such Notes.
If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of
the stated redemption price at maturity multiplied by the number of complete
years to maturity, then the Note will not be considered to have original issue
discount. Holders of Notes with a de minimis amount of original issue discount
will generally include such original issue discount in income, as capital
gain, on a pro rata basis as principal payments are made on the Note.
A Holder of Discount Notes will be required to include any qualified stated
interest payments in income in accordance with the Holder's method of
accounting for federal income tax purposes. Holders of Discount Notes that
mature more than one year from their date of issuance will be required to
include original issue discount in income for federal income tax purposes as
it accrues, in accordance with a constant yield method based on a compounding
of interest, before the receipt of cash payments attributable to such income.
Under this method, Holders of Discount Notes generally will be required to
include in income increasingly greater amounts of original issue discount in
successive accrual periods.
Under the OID Regulations, a Note that matures one year or less from its
date of issuance will be treated as a "short-term Discount Note." In general,
a cash method Holder of a short-term Discount Note is not required to accrue
original issue discount for United States federal income tax purposes unless
it elects to do so. Holders who make such an election, Holders who report
income for federal income tax purposes on the accrual method and certain other
Holders, including banks and dealers in securities, are required to include
original issue discount in income on such short-term Discount Notes as it
accrues on a straight-line basis, unless an election is made to accrue the
original issue discount according to a constant yield method based on daily
compounding. In the case of a Holder who is not required and who does not
elect to include original issue discount in income currently, any gain
realized on the sale, exchange or retirement of the short-term Discount Note
will be ordinary income to the extent of the original issue discount accrued
on a straight-line basis (or, if elected, according to a constant yield method
based on daily compounding), reduced by any interest payments received,
through the date of sale, exchange or retirement. In addition, such Holders
will be required to defer deductions for any interest paid on indebtedness
incurred to purchase or carry short-term Discount Notes in an amount not
exceeding the deferred interest income, until such deferred interest income is
recognized.
Under the OID Regulations, a Holder may make an election (the "Constant
Yield Election") to include in gross income all interest that accrues on a
Note (including stated interest, acquisition discount, original issue
discount, de minimis original issue discount, market discount, de minimis
market discount, and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium) in accordance with a constant yield method
based on the compounding of interest.
Certain of the Discount Notes may be redeemed prior to maturity. Discount
Notes containing such a feature may be subject to rules that differ from the
general rules discussed above. Purchasers of Discount Notes with such a
feature should carefully examine the applicable Pricing Supplement and should
consult their tax advisers with respect to such a feature since the tax
consequences with respect to original issue discount will depend, in part, on
the particular terms and the particular features of the Note.
The OID Regulations contain aggregation rules stating that, in certain
circumstances, if more than one type of Note is issued as part of the same
issuance of securities to a single holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price,
maturity date, yield to maturity and stated redemption price at maturity for
purposes of calculating and accruing any original issue discount. Unless
otherwise provided in the applicable Pricing Supplement, the Company does not
expect to treat any of the Notes as being subject to the aggregation rules for
purposes of computing original issue discount.
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SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on
the sale, exchange or retirement and such Holder's adjusted tax basis in the
Note. For these purposes, the amount realized does not include any amount
attributable to accrued interest on the Note not previously included in
income. Amounts attributable to such interest are treated as ordinary income.
A Holder's adjusted tax basis in a Note will equal the cost of the Note to
such Holder, increased by the amounts of any original issue discount
previously included in income by the Holder with respect to such Note and
reduced by any amortized premium and any principal payments received by the
Holder and, in the case of a Discount Note, by the amounts of any other
payments that do not constitute qualified stated interest (as defined above).
Subject to the discussion under "Foreign Currency Notes" below, gain or loss
realized on the sale, exchange or retirement of a Note that is not an Indexed
Note or a Floating Rate Note that provides for contingent payments will be
capital gain or loss (except, in the case of a short-term Discount Note, to
the extent of any original issue discount not previously included in the
Holder's taxable income). See "Discount Notes" above. Prospective Holders
should consult their tax advisers regarding the treatment of capital gains
(which may be taxed at lower rates than ordinary income for certain taxpayers
who are individuals) and losses (the deductibility of which is subject to
limitations).
AMORTIZABLE BOND PREMIUM
If a Holder purchases a Note for an amount that is greater than the amount
payable at maturity, such Holder will be considered to have purchased such
Note with "amortizable bond premium" equal in amount to such excess, and may
elect (in accordance with applicable Code provisions) to amortize such
premium, using a constant yield method, over the remaining term of the Note
(where such Note is not optionally redeemable prior to its maturity date). If
such Note may be optionally redeemed prior to maturity, the amount of
amortizable bond premium is determined by reference to the amount payable on
maturity or, if it results in a smaller premium attributable to the period
from Holder's acquisition date to the earlier redemption date, by reference to
the amount payable on the earlier redemption date. A Holder who elects to
amortize bond premium must reduce his tax basis in the Note by the amount of
the premium amortized in any year. An election to amortize bond premium
applies to all taxable debt obligations then owned and thereafter acquired by
the taxpayer and may be revoked only with the consent of the Internal Revenue
Service.
If a Holder makes a Constant Yield Election for a Note with amortizable bond
premium, such election will result in a deemed election to amortize bond
premium for all of the Holder's debt instruments with amortizable bond premium
and may be revoked only with the permission of the Internal Revenue Service.
FOREIGN CURRENCY NOTES
The following summary relates to Notes that are denominated in a currency or
currency unit other than the U.S. dollar ("Foreign Currency Notes").
A Holder who uses the cash method of accounting and who receives a payment
of interest in a foreign currency with respect to a Foreign Currency Note
(other than a Discount Note on which original issue discount is accrued on a
current basis, except to the extent any qualified stated interest is received)
will be required to include in income the U.S. dollar value of the foreign
currency payment (determined on the date such payment is received), regardless
of whether the payment is in fact converted to U.S. dollars at that time, and
such U.S. dollar value will be the Holder's tax basis in the foreign currency.
A cash method Holder who receives such a payment in U.S. dollars pursuant to
an option available under such Note will be required to include the amount of
such U.S. dollar payment in income upon receipt.
To the extent the above paragraph is not applicable, a Holder will be
required to include in income the U.S. dollar value of the amount of interest
income (including original issue discount, but reduced by amortizable bond
premium to the extent applicable) that has accrued and is otherwise required
to be taken into account with respect to a Foreign Currency Note during an
accrual period. The U.S. dollar value of such accrued income will be
determined by translating such income at the average rate of exchange for the
accrual period or, with respect to
S-21
<PAGE>
an accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. Such Holder will recognize ordinary
income or loss with respect to accrued interest income on the date such income
is actually received. The amount of ordinary income or loss recognized will
equal the difference between the U.S. dollar value of the foreign currency
payment received (determined on the date such payment is received) in respect
of such accrual period (or, where a Holder receives U.S. dollars, the amount
of such payment in respect of such accrual period) and the U.S. dollar value
of interest income that has accrued during such accrual period (as determined
above). A Holder may elect to translate interest income (including original
issue discount) into U.S. dollars at the spot rate on the last day of the
interest accrual period (or, in the case of a partial accrual period, the spot
rate on the last day of the taxable year) or, alternatively, if the date of
receipt or payment is within five business days of the last day of the
interest accrual period, the spot rate on the date of receipt or payment. A
Holder that makes such an election must apply it consistently to all debt
instruments from year to year and cannot change the election without the
consent of the Internal Revenue Service.
Original issue discount and amortizable bond premium on a Foreign Currency
Note are to be determined in the relevant foreign currency.
Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a Holder who has not elected to amortize
such premium under Section 171 of the Code will be a capital loss to the
extent of such bond premium. If such an election is made, amortizable bond
premium taken into account on a current basis will reduce interest income in
units of the relevant foreign currency. Exchange gain or loss is realized on
such amortized bond premium with respect to any period by treating the bond
premium amortized in such period as a return of principal.
A Holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustment to such Holder's tax basis, will be the U.S. dollar
value of the foreign currency amount paid for such Foreign Currency Note, or
of the foreign currency amount of the adjustment, determined on the date of
such purchase or adjustment. A Holder who purchases a Foreign Currency Note
with previously owned foreign currency will recognize ordinary income or loss
in an amount equal to the difference, if any, between such Holder's tax basis
in the foreign currency and the U.S. dollar fair market value of the Foreign
Currency Note on the date of purchase.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss, which will not be treated as interest income
or expense. Gain or loss attributable to fluctuations in exchange rates will
equal the difference between (i) the U.S. dollar value of the foreign currency
principal amount of such Note, and any payment with respect to accrued
interest, determined on the date such payment is received or such Note is
disposed of, and (ii) the U.S. dollar value of the foreign currency principal
amount of such Note, determined on the date such Holder acquired such Note,
and the U.S. dollar value of the accrued interest received, determined by
translating such interest at the average exchange rate (or at a spot rate
elected as described above) for the accrual period. Such foreign currency gain
or loss will be recognized only to the extent of the total gain or loss
realized by a Holder on the sale, exchange or retirement of the Foreign
Currency Note. The source of such foreign currency gain or loss will be
determined by reference to the residence of the Holder or the "qualified
business unit" of the Holder on whose books the Note is properly reflected.
Any gain or loss realized by the Holder in excess of such foreign currency
gain or loss will generally be capital gain or loss (except, in the case of a
short-term Discount Note, to the extent of any original issue discount not
previously included in the Holder's income).
A Holder will have a tax basis in any foreign currency received on the sale,
exchange or retirement of a Foreign Currency Note equal to the U.S. dollar
value of such foreign currency, determined at the time of such sale, exchange
or retirement. Regulations issued under Section 988 of the Code provide a
special rule for purchases and sales of publicly traded Foreign Currency Notes
by a cash method taxpayer, under which units of foreign currency paid or
received are translated into U.S. dollars at the spot rate on the settlement
date of the purchase or sale. Accordingly, no exchange gain or loss will
result from currency fluctuations between the trade date and the settlement of
such a purchase or sale. An accrual method taxpayer may elect the same
treatment required of cash-method taxpayers with respect to the purchase and
sale of publicly traded Foreign Currency
S-22
<PAGE>
Notes provided the election is applied consistently. Such election cannot be
changed without the consent of the Internal Revenue Service. Any gain or loss
realized by a Holder on a sale or other disposition of foreign currency
(including its exchange for U.S. dollars or its use to purchase Foreign
Currency Notes) will be ordinary income or loss.
Extension of Maturity. The automatic extension of the maturity of a
Renewable Note by operation of its terms (as described above under the heading
"Description of Notes--Extension of Maturity") should not be treated as a
taxable event to Holders. Similarly, an election by a Holder to terminate the
automatic extension of the maturity of a Renewable Note generally should not
give rise to a taxable event. An extension of the maturity of other Notes
could have different U.S. federal income tax consequences, and Holders
intending to purchase such Notes should refer to the discussion relating to
taxation in the applicable Pricing Supplement.
Backup Withholding and Information Reporting. Certain noncorporate Holders
may be subject to backup withholding at a rate of 31% on payments of
principal, premium and interest (including original issue discount, if any)
on, and the proceeds of disposition of, a Note. Backup withholding will apply
only if the Holder (i) fails to furnish its Taxpayer Identification Number
("TIN"), which, for an individual, would be his Social Security number, (ii)
furnishes an incorrect TIN, (iii) is notified by the Internal Revenue Service
that it has failed to properly report payments of interest and dividends or
(iv) under certain circumstances, fails to certify, under penalty of perjury,
that it has furnished a correct TIN and has not been notified by the Internal
Revenue Service that it is subject to backup withholding for failure to report
interest and dividend payments. Holders should consult their tax advisers
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's United States federal income tax
liability and may entitle such Holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through one
or more of Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. (the
"Agents"), who have agreed to use reasonable efforts to solicit such offers.
The Company will have the sole right to accept offers to purchase Notes and
may reject any offer to purchase Notes in whole or in part. Each Agent will
have the right to reject any offer to purchase Notes solicited by it in whole
or in part. Payment of the purchase price of the Notes will be required to be
made in immediately available funds. The Company will pay an Agent, in
connection with sales of Notes resulting from a solicitation made or an offer
to purchase received by such Agent, a commission ranging from .125% to .750%
of the principal amount of the Notes to be sold, depending upon the maturity
of the Notes; provided, however, that commissions with respect to Notes
maturing in 30 years or more will be negotiated. The Company may appoint
additional agents to solicit sales of the Notes, provided that any such
solicitation and sale of Notes shall be on the same terms and conditions as
the Agents have agreed to. The Company may also sell Notes directly on its own
behalf.
The Company may also sell Notes to an Agent as principal for its own account
at discounts to be agreed upon at the time of sale. Such Notes may be resold
at a fixed offering price or at prevailing market prices, or prices related
thereto at the time of such resale or otherwise, as determined by such Agent
and specified in the applicable Pricing Supplement. The Agent may offer the
Notes it has purchased as principal to other dealers. The Agent may sell the
Notes to any dealer at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed to any dealer will not be
in excess of 66 2/3% of the discount to be received by the Agent from the
Company. After the initial public offering of Notes that are to be resold by
the Agent to investors and other purchasers on a fixed public offering price
basis, the public offering price, concession and discount may be changed.
S-23
<PAGE>
In order to facilitate the offering of the Notes, the Agents may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Agents may overallot in connection with the offering,
creating a short position in the Notes for their own account. In addition, to
cover overallotments or to stabilize the price of the Notes, the Agents may
bid for, and purchase, the Notes in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a
dealer for distributing the Notes in the offering, if the syndicate
repurchases previously distributed the Notes in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Notes above
independent market levels. The Agents are not required to engage in these
activities, and may end any of these activities at any time.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company and the Agents have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments made in
respect thereof. The Company has also agreed to reimburse the Agents for
certain expenses.
Concurrently with the offering of the Notes through the Agents as described
herein, the Company may issue other debt securities pursuant to the Indenture.
Any debt securities so issued and sold will reduce correspondingly the
aggregate initial offering price of Notes that may be offered by this
Prospectus Supplement and the Prospectus.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange, but has been advised by the Agents that the
Agents intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Agents are not obligated to do so, however, and the
Agents may discontinue making a market at any time without notice. No
assurance can be given as to the liquidity of any trading market for the
Notes.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Claire S.
Grace, Esq., Senior Legal Counsel of the Company. Certain legal matters
relating to the Notes will be passed upon for the Agents by Davis Polk &
Wardwell, New York, New York. The accuracy of the summary of certain tax
matters described under the caption "United States Federal Taxation," will be
passed upon by Davis Polk & Wardwell, New York, New York, special tax counsel
for the Company.
S-24
<PAGE>
PROSPECTUS
(Subject to Completion Dated September 30, 1997)
Weyerhaeuser Company
Debt Securities Preferred Shares Preference Shares
-----------
Weyerhaeuser Company (the "Company") may offer from time to time its (i) debt
securities (the "Debt Securities") (ii) preferred shares and (iii) preference
shares, at an aggregate initial offering price not to exceed the equivalent of
$1,000,000,000, on terms to be determined at the time of sale. The Debt
Securities, preferred shares and preference shares are herein collectively
referred to as the "Securities." As used herein, Debt Securities shall include
Debt Securities denominated in U.S. dollars or, at the option of the Company if
so specified in the accompanying Prospectus Supplement (the "Prospectus
Supplement"), in any other currency, including composite currencies such as the
European Currency Unit. If this Prospectus is being delivered in connection
with a sale of Debt Securities, the specific designation, aggregate principal
amount, maturity, rate and time of payment of any interest, purchase price, any
terms for mandatory or optional redemption (including any sinking fund), any
modification of the covenants and any other specific terms in connection with
the sale of the Debt Securities in respect of which this Prospectus is being
delivered (the "Offered Debt Securities"), are set forth in the accompanying
Prospectus Supplement. If this Prospectus is being delivered in connection with
a sale of preferred shares or preference shares, the specific designation,
number of shares, purchase price and rights, preference and privileges thereof
and any qualifications or restrictions thereon (including dividends,
liquidation value, voting rights, terms of conversion or exchange (if any),
terms for mandatory or optional redemption (if any) and any other specific
terms of the preferred shares or the preference shares in respect of which this
Prospectus is being delivered (the "Offered Shares"), are set forth in the
accompanying Prospectus Supplement. The Offered Debt Securities and the Offered
Shares are herein collectively referred to as the "Offered Securities." The
Prospectus Supplement also contains information about any listing of the
Offered Securities on a securities exchange.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
The Securities may be offered directly, through agents designated from time
to time, through dealers or through underwriters. Such underwriters may include
Morgan Stanley & Co. Incorporated and/or Goldman, Sachs & Co. and/or other
underwriters, acting alone or with other underwriters. See "Plan of
Distribution." Any such agents, dealers or underwriters are set forth in the
Prospectus Supplement. If an agent of the Company or a dealer or underwriter is
involved in the offering of the Offered Securities, the agent's commission,
dealer's purchase price, underwriter's discount and net proceeds to the Company
will be set forth in, or may be calculated from, the Prospectus Supplement. Any
underwriters, dealers or agents participating in the offering may be deemed
"underwriters" within the meaning of the Securities Act of 1933.
-----------
September , 1997
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER, DEALER OR AGENT. THIS
PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS AND
ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE THEREOF.
---------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and in accordance therewith
files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C.; Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois; and 7 World Trade Center, New York, New York. Copies of
such information can be obtained by mail from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Certain of such reports, proxy statements and other information are
also available from the Commission over the Internet at http://www.sec.gov.
Reports, proxy statements and other information concerning the Company can
also be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York, at the office of the Midwest Stock Exchange,
440 South LaSalle Street, Chicago, Illinois, and at the office of the Pacific
Stock Exchange, 301 Pine Street, San Francisco, California or 618 South Spring
Street, Los Angeles, California. This Prospectus does not contain all
information set forth in the Registration Statement and the exhibits thereto
which the Company has filed with the Commission under the Securities Act of
1933, as amended, and to which reference is hereby made.
---------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant to
Section 13 or 15(d) of the 1934 Act are incorporated by reference in this
Prospectus: (a) Annual Report on Form 10-K for the fiscal year ended
December 29, 1996; (b) Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 28, 1997 and June 29, 1997; and (c) Current Reports on Form 8-K
dated January 2, 1997, February 24, 1997, April 15, 1997, May 23, 1997, June
19, 1997, July 1, 1997, July 9, 1997, July 11, 1997, July 17, 1997 and
September 4, 1997.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute part of this Prospectus.
The Company will provide without charge upon written or oral request, to
each person to whom a copy of this Prospectus is delivered, a copy of the
material described above (not including exhibits to such documents unless such
exhibits are specifically incorporated by reference into such documents).
Requests should be directed to Weyerhaeuser Company, Tacoma, Washington 98477,
Attention: Richard J. Taggart, Director of Investor Relations, telephone
(206) 924-2058.
---------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING OF THE SECURITIES MAY ENGAGE
IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
SECURITIES OR OTHER SECURITIES OF THE COMPANY. SPECIFICALLY, THE AGENTS
SPECIFIED IN THE RELEVANT PROSPECTUS SUPPLEMENT MAY OVERALLOT IN CONNECTION
WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE SECURITIES OR IN THE
OPEN MARKET, FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION"
IN THIS PROSPECTUS AND "PLAN OF DISTRIBUTION" OR "UNDERWRITING" IN THE
RELEVANT PROSPECTUS SUPPLEMENT.
2
<PAGE>
THE COMPANY
Weyerhaeuser Company was incorporated in the state of Washington in January
1900, as Weyerhaeuser Timber Company. It is principally engaged in the growing
and harvesting of timber and the manufacture, distribution and sale of forest
products and real estate and financial services. Its principal business
segments include timberlands and wood products, and pulp, paper and packaging.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net
proceeds to be received by the Company from the sale of the Securities offered
hereby will be added to the Company's general funds and will be used for
general corporate purposes, including working capital, capital expenditures,
reduction of the Company's short-term debt or commercial paper presently
classified as long-term debt and acquisitions. Pending such application, the
net proceeds may be invested in marketable securities.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED CHARGES AND
PREFERRED AND PREFERENCE SHARE DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to fixed charges and preferred and preference share dividends for the
Company for the periods indicated.
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS
-----------------
YEAR
JUNE 29, JUNE 30, ------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges(1)......................... 1.88 2.66 2.59 3.81 3.11 2.89 2.27
Ratio of Earnings to Fixed Charges
and preferred and preference share
dividends(1)....................... 1.88 2.66 2.59 3.81 3.11 2.89 2.27
</TABLE>
- --------
(1) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of earnings before income taxes, extraordinary item and
fixed charges. For the purpose of calculating the ratio of earnings to
fixed charges and preferred and preference share dividends, earnings
consist of earnings before income taxes, extraordinary item, fixed charges
and preferred and preference share dividends. Fixed charges consist of
interest on indebtedness, amortization of debt expense and one-third of
rents which is deemed representative of an interest factor. This ratio
excludes the interest paid on deposit accounts by Republic Federal Savings
and Loan Association, a subsidiary of the Company acquired in 1985 and
dissolved in 1992. If such interest is included for the fiscal year ended
December 27, 1992, the ratio would be 2.25. The ratio of Weyerhaeuser
Company with its Weyerhaeuser Real Estate Company and Weyerhaeuser
Financial Services, Inc. subsidiaries accounted for on the equity method
but excluding the undistributed earnings of those subsidiaries is 1.95 and
3.45 for the twenty-six weeks ended June 29, 1997 and June 30, 1996,
respectively, and 3.26, 6.21, 4.43, 4.02 and 3.32 for the fiscal years
ended December 29, 1996, December 31, 1995, December 25, 1994, December
26, 1993 and December 27, 1992, respectively.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Offered Debt Securities are to be issued in one or more series under an
Indenture, dated as of April 1, 1986, as supplemented by the First
Supplemental Indenture, dated as of February 15, 1991 and the Second
Supplemental Indenture, dated as of February 1, 1993 (the "Indenture"),
between the Company and The Chase Manhattan Bank (formerly Chemical Bank), as
Trustee (the "Trustee"). A copy of the Indenture dated April 1, 1986 is filed
as an exhibit to the Company's Annual Report on Form 10-K (File No. 1-4825)
for the year ended December 28, 1986 and copies of the First Supplemental
Indenture and the Second Supplemental Indenture have been filed as exhibits to
the Company's Registration Statement on Form S-3 (No. 33-52982). The following
summary of certain provisions of the Indenture does not purport to be complete
and is qualified in its entirety by reference to the Indenture. The numerical
references in parentheses below are to provisions of the Indenture. Whenever a
defined term is indicated, the definition thereof is contained in the
Indenture.
GENERAL
The Indenture does not limit the amount of debentures, notes or other
evidences of indebtedness ranking pari passu with the Debt Securities which
may be issued thereunder (such securities issued under the Indenture being
herein referred to as "Debt Securities"). The Indenture provides that Debt
Securities may be issued from time to time in one or more series and may be
denominated and payable in foreign currencies or units based on or relating to
foreign currencies, including European Currency Units ("ECUs"). The ECU is an
accounting unit calculated as the weighted average of currencies of the
European Community countries in which relative weights are derived based on
each country's share in intra-European trade and output. Such weights are
subject to periodic realignment upon the deviation of any such currency beyond
its prescribed band of fluctuation. The ECU serves primarily as the accounting
unit for the European Monetary System. Special United States federal income
tax considerations applicable to any Debt Securities as denominated are
described in the relevant Prospectus Supplement. The Debt Securities will be
unsecured and will rank on a parity with any other unsecured and
unsubordinated obligations of the Company.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities (to the extent such terms are applicable to such
Debt Securities): (i) designation, aggregate principal amount, purchase price
and denomination; (ii) currency or units based on or relating to currencies in
which such Debt Securities are denominated and/or in which principal (and
premium, if any) and/or any interest will or may be payable; (iii) any date of
maturity; (iv) interest rate or rates (or method by which such rate will be
determined), if any; (v) the dates on which any such interest will be payable;
(vi) the place or places where the principal of, premium, if any, and
interest, if any, on the Offered Debt Securities will be payable; (vii) any
redemption or sinking fund provisions; (viii) any applicable United States
federal income tax consequences, including whether and under what
circumstances the Company will pay additional amounts on Offered Debt
Securities held by a person who is not a U.S. person (as defined in the
Prospectus Supplement) in respect of any tax, assessment or governmental
charge withheld or deducted and, if so, whether the Company will have the
option to redeem such Debt Securities rather than pay such additional amounts;
and (ix) any other specific terms of the Offered Debt Securities, including
additional events of default or covenants provided for with respect to such
Debt Securities and any terms which may be required by or advisable under
United States laws or regulations.
Debt Securities may be presented for exchange and registered Debt Securities
may be presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Debt Securities and the Prospectus Supplement.
See "Description of Debt Securities-Global Securities" below. Such services
will be provided without charge, other than any tax or other governmental
charge payable in connection therewith, but subject to the limitations
provided in the Indenture.
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities (bearing either no interest or bearing interest at a rate which at
the time of issuance is below the prevailing market rate) to be sold at a
substantial discount below their stated principal amount. Any special United
States federal income tax and other considerations applicable to such Original
Issue Discount Securities will be described in the Prospectus Supplement
relating thereto.
4
<PAGE>
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on
any interest payment date, to be determined by reference to one or more
currency exchange rates, commodity prices, equity indices or other factors.
Holders of such Debt Securities may receive a principal amount on any
principal payment date, or a payment of interest on any interest payment date,
that is greater than or less than the amount of principal or interest
otherwise payable on such dates, depending upon the value on such dates of the
applicable currency, commodity, equity index or other factor. Information as
to the methods for determining the amount of principal or interest payable on
any date, the currencies, commodities, equity indices or other factors to
which the amount payable on such date is linked and certain additional tax
considerations will be set forth in the applicable Prospectus Supplement.
GLOBAL SECURITIES
The registered Debt Securities of a series may be issued in the form of one
or more fully registered global Securities (a "Registered Global Security")
that will be deposited with a depositary (a "Depositary") or with a nominee
for a Depositary identified in the Prospectus Supplement relating to such
series and registered in the name of the Depositary or a nominee thereof. In
such case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding registered Debt Securities of the series to be
represented by such Registered Global Security or Securities. Unless and until
it is exchanged in whole for Debt Securities in definitive registered form, a
Registered Global Security may not be transferred except as a whole by the
Depositary for such Registered Global Security to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of
such Depositary or by such Depositary or any such nominee to a successor of
such Depositary or a nominee of such successor and except in such
circumstances as may be described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global
Security will be described in the applicable Prospectus Supplement. The
Company anticipates that the following provisions will apply to all depositary
arrangements.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Depositary holds
securities that its Participants (as defined below) deposit with the
Depositary. The Depositary also facilitates the settlement among Participants
of securities transactions through electronic computerized book-entry changes
in Participants' accounts thereby eliminating the need for physical movement
of securities certificates. Participants include securities brokers and
dealers (including one or more underwriters or agents of the Company), banks,
trust companies, clearing corporations and certain other organizations, some
of whom (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly. The
rules applicable to the Depositary and its Participants are on file with the
Commission.
Ownership of beneficial interests in a Registered Global Security registered
in the name of Depositary (a "Book-Entry Note") will be limited to persons
that have accounts with the Depositary ("Participants") or persons that may
hold interests through Participants. Upon the issue of a Book-Entry Note, the
Depositary will credit, on its book-entry registration and transfer system,
the Participants' accounts with the respective principal amounts of the Book-
Entry Notes beneficially owned by such Participants. The accounts to be
credited shall be designated by any dealers, underwriters or agents
participating in the distribution of such Debt Securities. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership interests will be effected only through,
records maintained by the Depositary (with respect to interests of
Participants) and on the records of Participants (with respect to interests of
persons holding through Participants).
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So long as the Depositary, or its nominee, is the registered owner of a
Registered Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole owner or holder of the Book-Entry Notes
represented by such Registered Global Security for all purposes under the
Indenture or a Registered Global Security. Except as provided below, owners of
beneficial interests in a Registered Global Security will not be entitled to
have the Book-Entry Notes represented by such Registered Global Securities
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes exchanged for Book-Entry Notes and will not be
considered the owners or holders thereof under the Indenture. Accordingly,
each Person owning a beneficial interest in a Registered Global Security must
rely on the procedures of the Depositary and, if such Person is not a
Participant, on the procedures of the Participant through which such Person
owns its interest, to exercise any rights of a holder under the Indenture or a
Registered Global Security. The Company understands that under existing policy
of the Depositary and industry practices, in the event that the Company
requests any action of holders or that an owner of a beneficial interest in
such a Registered Global Security desires to give any notice or take any
action (including, without limitation, any action pursuant to Section 5.7 of
the Indenture) which a holder is entitled to give or take under the Indenture
or a Registered Global Security, the Depositary would authorize the
Participants holding the relevant beneficial interests to give such notice or
take such action. Any beneficial owner that is not a Participant must rely on
the contractual arrangements it has directly, or indirectly through its
financial intermediary, with a Participant to give such notice or take such
action.
Payment of principal of and premium, if any, and interest on Notes
registered in the name of the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
Registered Global Security representing such Book-Entry Notes. None of the
Company, the Trustee or any other agent of the Company or agent of the Trustee
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. The Company expects that the Depositary, upon
receipt of any payment of principal and premium, if any, and interest in
respect of a Registered Global Security, will immediately credit the accounts
of the Participants with payment in amounts proportionate to their respective
beneficial interests in such Registered Global Security as shown on the
records of the Depositary. The Company also expects that payments by
Participants to owners of beneficial interests in a Registered Global Security
will be governed by standing customer instructions and customary practices, as
is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
Participants.
If (x) the Depositary is at any time unwilling or unable to continue as
Depositary or ceases to be a clearing agency registered under the Exchange
Act, and a successor Depositary registered as a clearing agency under the
Exchange Act is not appointed by the Company within 90 days, (y) the Company
executes and delivers to the Trustee or its agent a Company Order to the
effect that the Registered Global Securities shall be transferable and
exchangeable for Certificated Notes or (z) an Event of Default has occurred
and is continuing with respect to the Notes, the Registered Global Securities
will be transferable or exchangeable for Certificated Notes of like tenor and
of an equal aggregate principal amount. Such Certificated Notes shall be
registered in such name or names as the Depositary shall instruct the Trustee.
It is expected that such instructions may be based upon directions received by
the Depositary from Participants with respect to ownership of beneficial
interests in such Registered Global Securities.
CERTAIN RESTRICTIONS
The following restrictions apply to the Offered Debt Securities unless the
Prospectus Supplement provides otherwise.
Limitation on Liens. The Indenture states that, unless the terms of any
series of Debt Securities provide otherwise, if the Company or any Subsidiary
(as defined in the Indenture) issues, assumes or guarantees any indebtedness
for money borrowed ("Debt") secured by a mortgage, pledge, security interest
or other lien (collectively "Mortgage") on any timber or timberlands of the
Company or such Subsidiary located in the states of Washington, Oregon,
California, Arkansas or Oklahoma or on any principal manufacturing plant of
the
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Company or such Subsidiary located anywhere in the United States, the Company
must secure or cause such Subsidiary to secure the Debt Securities equally and
ratably with such Debt, unless the aggregate amount of all such Debt, together
with all Attributable Debt (as defined in the Indenture) in respect of Sale
and Lease-Back Transactions (as defined below) existing at such time (with the
exception of transactions that are excluded as described in "Limitation on
Sale and Lease-Back Transactions," below), would not exceed 5% of the
shareholders' interest in the Company and its consolidated Subsidiaries, as
shown on the audited consolidated balance sheet contained in the latest annual
report to shareholders of the Company. The term "principal manufacturing
plant" does not include any manufacturing plant that in the opinion of the
Board of Directors is not a principal manufacturing plant of the Company and
its Subsidiaries. The exercise of the Board of Directors' discretion in
determining which of the Company's plants are "principal manufacturing plants"
could have the effect of limiting the application of the limitation on liens.
The following types of transactions are not deemed to create Debt secured by a
Mortgage: (a) the sale, Mortgage or other transfer of timber in connection
with an arrangement under which the Company or a Subsidiary is obligated to
cut some or all of such timber to provide the transferee with a specified
amount of money however determined; and (b) the Mortgage of any property of
the Company or any Subsidiary in favor of the United States or any state, or
any department, agency or instrumentality of either, to secure any payments to
the Company or any Subsidiary pursuant to any contract or statute.
Such limitation will not apply to Mortgages (a) securing Debt of a
Subsidiary to the Company or another Subsidiary; (b) created, incurred or
assumed contemporaneously with, or within 90 days after, the acquisition or
improvement or construction of the mortgaged property or that secure or
provide for the payment of any part of the purchase price of such property or
the cost of such construction or improvement, provided that in the case of
construction or improvement, the Mortgage does not apply to any property
previously owned by the Company or any Subsidiary other than unimproved real
property on which the property so constructed, or the improvement, is located;
(c) existing at the time of acquisition of the mortgaged property; or (d) any
extension, renewal or replacement of any Mortgage described in (b) and (c),
not in excess of the principal amount of such Debt and limited to all or part
of the same property secured by the Mortgage so extended, renewed or replaced.
(Section 3.6)
Limitation on Sale and Lease-Back Transactions. The Indenture states that,
unless the terms of any series of Debt Securities provide otherwise, neither
the Company nor any Subsidiary may lease any real property in the United
States (except for temporary leases for a term of not more than three years),
which property has been or is to be sold or transferred by the Company or
Subsidiary to such lessor (a "Sale and Lease-Back Transaction"), unless the
aggregate amount of all Attributable Debt with respect to such transactions
together with all Debt upon property described under "Limitation on Liens,"
above (with the exception of Debt that is excluded as described therein) would
not exceed 5% of the shareholders' interest in the Company and its
consolidated Subsidiaries, as shown on the audited consolidated balance sheet
contained in the latest annual report to shareholders of the Company.
(Sections 3.6 and 3.7)
Such limitation will not apply to any Sale and Lease-Back Transaction if (a)
the Company or such Subsidiary would be entitled to incur Debt secured by a
Mortgage on the leased property without equally and ratably securing the Debt
Securities as described in "Limitation on Liens," above or (b) the Company,
within 90 days of the effective date of any such Sale and Lease-Back
Transaction, applies an amount equal to the fair value (as determined by the
Board of Directors of the Company) of the leased property to the retirement of
Debt that matures at, or is extendable or renewable at the option of the
obligor to, a date more than 12 months after the date of the creation of such
Debt. (Section 3.7)
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture with respect to any
series of Debt Securities if (a) the Company fails to pay when due any
installment of interest on any of such Debt Securities and such default
continues for 30 days, (b) the Company fails to pay when due all or any part
of the principal of (and premium, if any, on) any of such Debt Securities
(whether at maturity, upon redemption, upon acceleration or otherwise),
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(c) the Company fails to deposit any sinking fund payment when due on any of
such Debt Securities, (d) the Company fails to perform or observe any other
term, covenant or agreement contained in the Indenture (other than a covenant
included in the Indenture solely for the benefit of a different series of Debt
Securities) for 90 days after written notice thereof, as provided in the
Indenture, (e) certain events of bankruptcy, insolvency or reorganization have
occurred, or (f) the Company has not complied with any of certain specified
covenants. (Section 5.1)
If an Event of Default due to failure to pay the principal of, or interest
on, any series of Debt Securities, or the breach of any other covenant or
warranty of the Company applicable solely to such Debt Securities has occurred
and is continuing, either the Trustee or the holder or holders of 25% in
principal amount of such Debt Securities may declare the principal of all such
Debt Securities and interest accrued thereon to be due and payable
immediately. If an Event of Default due to default in the performance of any
other covenant or agreement in the Indenture applicable to all outstanding
Debt Securities or due to certain events of bankruptcy, insolvency and
reorganization of the Company, has occurred and is continuing, either the
Trustee or the holder or holders of 25% in principal amount of all Debt
Securities then outstanding (treated as one class) may declare the principal
of all Debt Securities and interest accrued thereon to be due and payable
immediately. The holders of a majority in principal amount of the Debt
Securities of such series (or of all series, as the case may be) then
outstanding may rescind such declaration if, prior to the entry of a judgment
or decree with respect to such acceleration, the Company pays or deposits with
the Trustee a sum sufficient to pay all matured installments of interest on
the outstanding Debt Securities and all the principal of the Debt Securities
that have become due otherwise than by acceleration and certain other expenses
and if all other Events of Default under the Indenture have been cured, waived
or otherwise remedied as permitted by the Indenture or prior to a declaration
of the acceleration of the maturity of the Debt Securities past defaults may
be waived (except a continuing default in payment of principal of (or premium,
if any) or interest on the Debt Securities). (Sections 5.1 and 5.10)
The holder or holders of a majority in principal amount of the outstanding
Debt Securities of any series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that such
direction may not conflict with any rule of law or the Indenture. (Section
5.9) Before proceeding to exercise any right or power under the Indenture at
the direction of such holder or holders, the Trustee is entitled to receive
from such holder or holders reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with any such direction. (Section 5.6)
The Company is required to furnish to the Trustee annually a statement of
certain of its officers to the effect that, to the best of their knowledge,
the Company is not in default in the performance of the terms of the Indenture
or, if they have knowledge that the Company is in default, specifying such
default. (Section 3.5)
The Indenture requires the Trustee to give to all holders of outstanding
Debt Securities of any series notice of any default by the Company with
respect to that series, unless such default has been cured or waived; however,
except in the case of a default in the payment of principal of (and premium,
if any) or interest on any outstanding Debt Securities of that series or in
the payment of any sinking fund installment, the Trustee is entitled to
withhold such notice in the event that the board of directors, the executive
committee or a trust committee of directors or certain officers of the Trustee
in good faith determine that withholding such notice is in the interest of the
holder or holders of the outstanding Debt Securities of that series.
DEFEASANCE AND DISCHARGE
The following defeasance provision will apply to the Offered Debt Securities
unless the Prospectus Supplement provides otherwise.
The Indenture provides that, unless the terms of any series of Debt
Securities provide otherwise, the Company will be discharged from obligations
in respect of the Indenture and the outstanding Debt Securities of such series
(including its obligation to comply with the provisions referred to under
"Certain Restrictions," if
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applicable, but excluding certain other obligations, such as the obligation to
pay principal of (and premium, if any) and interest on the Debt Securities of
such series then outstanding, obligations of the Company in the event of
acceleration following default under clause (a) referred to above under
"Events of Default" and obligations to register the transfer or exchange of
such outstanding Debt Securities and to replace stolen, lost or mutilated
certificates), upon the irrevocable deposit, in trust, of cash or U.S.
Government obligations (as defined in the Indenture) which through the payment
of interest and principal thereof in accordance with their terms will provide
cash in an amount sufficient to pay any installment of principal of (and
premium, if any) and interest on and mandatory sinking fund payments in
respect of such outstanding Debt Securities on the stated maturity of such
payments in accordance with the terms of the Indenture and such outstanding
Debt Securities, provided that the Company has received an opinion of counsel
to the effect that such a discharge will not be deemed, or result in, a
taxable event with respect to holders of the outstanding Debt Securities of
such series and that certain other conditions are met. (Section 10.1)
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee may enter into
supplemental indentures without the consent of the holders of Debt Securities
to: (a) secure any Debt Securities, (b) evidence the assumption by a successor
corporation of the obligations of the Company, (c) add covenants for the
protection of the holders of Debt Securities, (d) cure any ambiguity or
correct any inconsistency in the Indenture, (e) establish the form or terms of
Debt Securities of any series, and (f) evidence the acceptance of appointment
by a successor trustee. (Section 8.1)
The Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holder or holders of not less than a majority
in principal amount of Debt Securities of each series then outstanding and
affected, to add any provisions to, or change in any manner or eliminate any
of the provisions of, the Indenture or modify in any manner the rights of the
holder or holders of the Debt Securities of each series so affected, provided
that the Company and the Trustee may not, without the consent of the holder of
each outstanding Debt Security affected thereby, (a) extend the stated
maturity of the principal of any Debt Security, or reduce the principal amount
thereof or reduce the rate or extend the time of payment of interest thereon,
or reduce any amount payable on redemption thereof, or impair the right to
institute suit for the enforcement of any such payment when due, or (b) reduce
the percentage in principal amount of Debt Securities of any series the
consent of the holder or holders of which is required for any such
modification. (Section 8.2)
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
The Company may, without the consent of the Trustee or the holders of Debt
Securities, consolidate or merge with, or convey, transfer or lease its
properties and assets substantially as an entirety to any other corporation,
provided that any successor corporation must be a corporation organized under
the laws of the United States of America or any state and must expressly
assume all obligations of the Company under the Debt Securities and that
certain other conditions must be met. Thereafter, except in the case of a
lease, the Company will be relieved of all obligations thereunder. (Article
Nine)
APPLICABLE LAW
The Debt Securities and the Indenture will be governed by and construed in
accordance with the laws of the State of New York. (Section 11.8)
CONCERNING THE TRUSTEE
The Chase Manhattan Bank is the Trustee under the Indenture.
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DESCRIPTION OF PREFERRED SHARES
The following is a description of certain general terms and provisions of
the preferred shares of the Company. The particular terms of any series of
preferred shares will be set forth in the related Prospectus Supplement. If so
indicated in a Prospectus Supplement, the terms of any such series may differ
from the terms set forth below. The summary of the terms of the Company's
preferred shares contained in this Prospectus and the relevant Prospectus
Supplement does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Company's Restated Articles of
Incorporation and the statement regarding amendment of articles of
incorporation relating to the applicable series of preferred shares (the
"Statement"), which will be filed as an exhibit to or incorporated by
reference in the Registration Statement of which this Prospectus is a part at
the time of issuance of such series of preferred shares.
The Company's Restated Articles of Incorporation authorizes the issuance of
7,000,000 preferred shares having a par value of $1.00 per share. The Board of
Directors has the authority to divide the preferred shares into series, to
designate for each series established such rights and preferences as voting
rights, dividend rate, terms and conditions of redemption, amount payable upon
liquidation, sinking fund provisions and terms and conditions of conversion,
and to issue the shares so designated in such amounts and to such persons as
they lawfully determine without further action by the Company's shareholders.
Thus, the Board of Directors, without shareholder approval, could authorize
the issuance of preferred shares with voting, conversion, and other rights
that could adversely affect the voting power and other rights of holders of
common shares or other series of preferred shares or that could have the
effect of delaying, deferring or preventing a change in control of the
Company. The aggregate amount payable upon liquidation may not exceed
$350,000,000 with respect to all series of preferred shares. All preferred
shares rank senior to common and preference share with respect to accrued
dividends and assets available on liquidation. There are currently no series
of preferred shares outstanding.
GENERAL
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the preferred shares of any series (to the extent
such terms are applicable to such preferred shares): (i) the specific
designation, number of shares and purchase price; (ii) any liquidation
preference per share; (iii) any date of maturity; (iv) any redemption, payment
or sinking fund provisions; (v) any dividend rate or rates and the dates on
which any such dividends will be payable (or the method by which such rates or
dates will be determined); (vi) any voting rights; (vii) the currency or units
based on or relating to currencies in which such preferred shares are
denominated and/or payment will or may be payable; (viii) the methods by which
amounts payable in respect in respect of such preferred shares may be
calculated and any commodities, currencies or indices, or value, rate or
price, relevant to such calculation; (ix) the place or places where dividends
and other payments on the preferred shares will be payable; (x) and any
additional voting, dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions.
The preferred shares offered hereby will be issued in one or more series.
The preferred shares offered hereby will not be convertible or exchangeable
into common shares of the Company or into securities convertible or
exchangeable into common shares of the Company. The holders of preferred
shares will have no preemptive rights. Preferred shares, upon issuance against
full payment of the purchase price therefor, will be fully paid and
nonassessable. Neither the par value nor the liquidation preference is
indicative of the price at which the preferred shares will actually trade on
or after the date of issuance. All preferred shares will be of equal rank with
each other, regardless of series.
DIVIDENDS
Holders of preferred shares of each series will be entitled to receive, when
and as declared by the Board of Directors of the Company out of funds legally
available therefor, cumulative dividends at the rate determined by the Board
of Directors for such series, and no more. Dividends on the preferred shares
accrue on a daily basis
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from such date as may be fixed by the Board of Directors for any series.
Unless dividends at the rate prescribed for each series of preferred shares
have been declared and paid or set apart for payment in full on all
outstanding preferred shares for all past dividend periods and the current
dividend period, no dividends may be declared or paid upon any class of shares
ranking as to dividends subordinate to the preferred shares, and no sum or
sums may be set aside for the redemption of preferred shares of any series
(including any sinking fund payment therefor) or for the purchase, redemption
(including any sinking fund payment therefor) or other acquisition for value
of any class or series of shares ranking as to dividends or assets on a parity
with or subordinated to any such series of preferred shares. Accrued and
unpaid dividends on the preferred shares will not bear interest.
REDEMPTION
The terms, if any, on which preferred shares of any series may be redeemed
will be set forth in the related Prospectus Supplement.
If fewer than all of the outstanding preferred shares of any series are to
be redeemed, the number of shares of such series and the method of effecting
such redemption, whether by lot or pro rata, will be as determined by the
Company (with adjustment to avoid redemption of fractional shares).
LIQUIDATION
In the event of voluntary or involuntary liquidation of the Company, before
any distribution of assets may be made to the holders of any class of shares
ranking as to assets subordinate to the preferred shares, the holders of the
preferred shares of each series will be entitled to receive out of the assets
of the Company available for distribution to its shareholders the sum of the
liquidation preference for such series and the amount per share equal to all
accrued and unpaid dividends thereon. Neither the consolidation nor merger of
the Company with or into any other corporation or corporations, the sale or
lease of all or substantially all of the assets of the Company, nor the merger
or consolidation of any other corporation into and with the Company, will be
deemed to be a voluntary or involuntary liquidation.
VOTING
The preferred shares of a series will not be entitled to vote, except as
provided below or in the applicable Prospectus Supplement and as required by
applicable law. Unless otherwise indicated in the Prospectus Supplement
relating to a series of preferred shares, each series of shares will be
entitled to one vote on matters which holders of such series are entitled to
vote. Notwithstanding the foregoing, the Company may not alter certain rights
and preferences of a series of preferred shares without the affirmative vote
of the holders of at least two-thirds of the shares of such affected series.
Whenever dividends on the preferred shares are in arrears in an aggregate
amount equal to six quarterly dividend periods, then the holders of preferred
shares, voting as a class, will be entitled to elect two additional directors
beyond the number specified in the bylaws to be elected by all shareholders
and beyond the number that may be elected by the holders of the preference
shares.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the preferred shares is ChaseMellon
Shareholder Services.
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DESCRIPTION OF PREFERENCE SHARES
The following is a description of certain general terms and provisions of
the preference shares of the Company. The particular terms of any series of
preference shares will be set forth in the related Prospectus Supplement. If
so indicated in a Prospectus Supplement, the terms of any such series may
differ from the terms set forth below. The summary of the terms of the
Company's preference shares contained in this Prospectus and the relevant
Prospectus Supplement does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Restated
Articles of Incorporation and the statement regarding amendment of articles of
incorporation relating to the applicable series of preference shares (the
"Statement"), which will be filed as an exhibit to or incorporated by
reference in the Registration Statement of which this Prospectus is a part at
the time of issuance of such series of preference shares.
The Company's Restated Articles of Incorporation authorizes the issuance of
40,000,000 preference shares having a par value of $1.00 per share. The Board
of Directors has the authority to divide the preference shares into series, to
designate for each series established such rights and preferences as voting
rights, dividend rate, terms and conditions of redemption, amount payable upon
liquidation, sinking fund provisions and terms and conditions of conversions,
and to issue the shares so designated in such amounts and to such persons as
they lawfully determine without further action by the Company's shareholders.
Thus, the Board of Directors, without shareholder approval, could authorize
the issuance of preference shares with voting, conversion, and other rights
that could adversely affect the voting power and other rights of holders of
common shares or other series of preferred or preference shares or that could
have the effect of delaying, deferring or preventing a change in control of
the Company. The aggregate amount payable upon liquidation of all series of
preference shares is unlimited. All preference shares rank senior to common
shares but subordinate to the preferred shares with respect to accrued
dividends and assets available on liquidation.
GENERAL
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the preference shares of any series (to the extent
such terms are applicable to such preference shares): (i) the specific
designation, number of shares and purchase price; (ii) any liquidation
preference per share; (iii) any date of maturity; (iv) any redemption, payment
or sinking fund provisions; (v) any dividend rate or rates and the dates on
which any such dividends will be payable (or the method by which such rates or
dates will be determined); (vi) any voting rights; (vii) the currency or units
based on or relating to currencies in which such preference shares are
denominated and/or payments will or may be payable; (viii) the methods by
which amounts payable in respect of such preference shares may be calculated
and any commodities, currencies or indices, or value, rate or price, relevant
to such calculation; (ix) the place or places where dividends and other
payments on the preference shares will be payable; (x) and any additional
voting, dividend, liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions.
The preference shares offered hereby will be issued in one or more series.
The preference shares offered hereby will not be convertible or exchangeable
into common shares of the Company or into securities convertible or
exchangeable into common shares of the Company. The holders of preference
shares will have no preemptive rights. Preference shares, upon issuance
against full payment of the purchase price therefor, will be fully paid and
nonassessable. Neither the par value nor the liquidation preference is
indicative of the price at which the preference shares will actually trade on
or after the date of issuance. All preference shares will be of equal rank
with each other, regardless of series.
DIVIDENDS
Holders of preference shares of each series will be entitled to receive,
when and as declared by the Board of Directors of the Company out of funds
legally available therefor, cumulative dividends at the rate determined by the
Board of Directors for such series, and no more. Dividends on the preference
shares accrue on a daily basis from such date as may be fixed by the Board of
Directors for any series. Unless dividends at the rate prescribed for each
series of preferred shares have been declared and paid or set apart for
payment in full on all
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outstanding preferred shares for all past dividend periods and the current
dividend period, no dividends may be declared or paid upon any class of shares
ranking as to dividends subordinate to the preferred shares, and no sum or
sums may be set aside for the redemption of preferred shares of any series
(including any sinking fund payment therefor) or for the purchase, redemption
(including any sinking fund payment therefor) or other acquisition for value
of any class or series of shares ranking as to dividends or assets on a parity
with or subordinate to any such series of preferred shares. Unless dividends
at the rate prescribed for each series of preference shares have been declared
and paid or set apart for the payment in full on all outstanding preference
shares for all past dividend periods and the current dividend period, no
dividends may be declared or paid upon any class of shares ranking as to
dividends subordinate to the preference shares, and no sum or sums may be set
aside for the redemption of preference shares of any series (including any
sinking fund payment therefor) or for the purchase, redemption (including any
sinking fund payment therefor) or other acquisition for value of any class or
series of shares ranking as to dividends or assets on a parity with or
subordinate to any series of preference shares. Accrued and unpaid dividends
on the preference shares will not bear interest.
REDEMPTION
The terms, if any, on which preference shares of any series may be redeemed
will be set forth in the related Prospectus Supplement.
If fewer than all of the outstanding preference shares of any series are to
be redeemed, the number of shares of such series and the method of effecting
such redemption, whether by lot or pro rata, will be as determined by the
Company (with adjustment to avoid redemption of fractional shares).
LIQUIDATION
In the event of voluntary or involuntary liquidation of the Company, before
any distribution of assets may be made to the holders of any class of shares
ranking as to assets subordinate to the preference shares, the holders of the
preference shares of each series will be entitled to receive out of the assets
of the Company available for distribution to its shareholders the sum of the
liquidation preference for such series and the amount per share equal to all
accrued and unpaid dividends thereon, but the holders of the preference shares
will not be entitled to receive the liquidation price of such shares until the
liquidation price of the preferred shares at the time outstanding shall have
been paid in full. The holders of all series of preference shares are entitled
to share ratably, in accordance with the respective amounts payable thereon,
in any such distribution which is not sufficient to pay in full the aggregate
amounts payable thereon. After payment in full of the liquidation price of the
preference shares the holders of such shares are not entitled to any further
participation in any distribution of assets by the Company. Neither the
consolidation nor merger of the Company with or into any other corporation or
corporations, the sale or lease of all or substantially all of the assets of
the Company, nor the merger or consolidation of any other corporation into and
with the Company, will be deemed to be a voluntary or involuntary liquidation.
VOTING
The preference shares of a series will not be entitled to vote, except as
provided below or in the applicable Prospectus Supplement and as required by
applicable law. Unless otherwise indicated in the Prospectus Supplement
relating to a series of preference shares, each series of shares will be
entitled to one vote on matters which holders of such series are entitled to
vote. Notwithstanding the foregoing, the Company may not alter certain rights
and preferences of a series of preference shares without the affirmative vote
of the holders of at least two-thirds of the shares of such affected series.
Whenever dividends on the preference shares are in arrears in an aggregate
amount equal to six quarterly dividend periods, then the holders of preference
shares, voting as a class, will be entitled to elect two additional directors
beyond the number specified in the bylaws to be elected by all shareholders
and beyond the number that may be elected by the holders of the preferred
shares.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the preference shares is ChaseMellon
Shareholder Services.
13
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell Offered Securities (i) through agents, (ii) through
underwriters, (iii) through dealers or (iv) directly to purchasers (through a
specific bidding or auction process or otherwise).
Securities may be offered and sold through agents designated by the Company
from time to time. Any such agent involved in the offer or sale of the Offered
Securities will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
best efforts basis for the period of its appointment. Any such agent may be
deemed to be an underwriter, as that term is defined in the Securities Act of
1933, as amended (the "1933 Act"), of the Securities so offered and sold.
Agents may be entitled under agreements that may be entered into with the
Company to indemnification by the Company against certain liabilities,
including liabilities under the 1933 Act, and may be customers of, engage in
transactions with or perform services for the Company in the ordinary course
of business.
If an underwriter or underwriters are utilized in the sale of Offered
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached,
and the names of the specific managing underwriter or underwriters, as well as
any other underwriters, and the terms of the transaction, including
compensation of the underwriters and dealers, if any, will be set forth in the
Prospectus Supplement, which will be used by the underwriters to make resales
of Offered Securities. The underwriters may be entitled, under the relevant
underwriting agreement, to indemnification by the Company against certain
liabilities, including liabilities under the 1933 Act. Morgan Stanley & Co.
Incorporated and/or Goldman, Sachs & Co. and/or other underwriters named in
the Prospectus Supplement may act as managing underwriter with respect to an
offering of Securities effected through underwriters. Only underwriters named
in the Prospectus Supplement are deemed to be underwriters in connection with
the Offered Securities and if Morgan Stanley & Co. Incorporated or Goldman,
Sachs & Co. is not named in the Prospectus Supplement, it will not be a party
to the underwriting agreement relating to such Securities, will not be
purchasing any such Securities from the Company in connection with such
offering and will have no direct or indirect participation in the underwriting
of such Securities, although it may participate in the distribution of such
Securities under circumstances where it may be entitled to a dealer's
commission.
If a dealer is utilized in the sale of Offered Securities, the Company will
sell such Securities to the dealer, as principal. The dealer may then resell
such Securities to the public at varying prices to be determined by such
dealer at the time of resale. Dealers may be entitled, under agreements which
may be entered into with the Company, to indemnification by the Company
against certain liabilities, including liabilities under the 1933 Act. The
name of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
In order to facilitate the offering of the Securities the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the Securities, or any other securities the prices of which may be used to
determine payments on such Securities. Specifically, the underwriters may
overallot in connection with the offering, creating a short position in the
Securities for their own accounts. In addition, to cover overallotments or to
stabilize the price of the Securities or of any such other securities, the
underwriters may bid for, and purchase, the Securities or any such other
securities in the open market. Finally, in any offering of the Securities
through a syndicate of underwriters, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Securities in the offering if the syndicate repurchases previously distributed
Securities in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Securities above independent market
levels. The underwriters are not required to engage in these activities, and
may end any of these activities at any time.
Offers to purchase Securities may be solicited directly by the Company and
sales thereof may be made by the Company directly to institutional investors
or others. The terms of any such sales, including the terms of any bidding or
auction process, if utilized, will be described in the Prospectus Supplement
relating thereto.
14
<PAGE>
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Securities from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date stated in the Prospectus
Supplement. Each Contract will be for an amount not less than, and unless the
Company otherwise agrees the aggregate principal amount of Securities sold
pursuant to Contracts will be not less nor more than, the respective amounts
stated in the Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions but in all cases must be approved by the
Company. Contracts will not be subject to any conditions except that any
related sale of Securities covered by its Contract may not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject. A commission indicated in the Prospectus
Supplement will be paid to underwriters and agents soliciting purchases of
Securities pursuant to Contracts accepted by the Company.
The place and time of delivery of Offered Securities are set forth in the
accompanying Prospectus Supplement.
LEGAL OPINIONS
The validity of the Offered Securities will be passed upon for the Company
by Claire S. Grace, Esq., Senior Legal Counsel of the Company.
Certain legal matters relating to Offered Securities will be passed upon for
underwriters and certain other purchasers by Davis Polk & Wardwell, New York,
New York.
EXPERTS
The financial statements and schedules incorporated herein by reference to
the Company's Annual Report on Form 10-K for the year ended December 29, 1996
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated herein
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
15
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee................... $257,576
Listing fees.................................................... 0*
Legal fees and expenses......................................... 30,000*
Rating agencies' fees........................................... 300,000*
Printing........................................................ 90,000*
Trustee's fees and expenses..................................... 6,000*
Issuing and Paying Agent's fees and expenses.................... 7,000*
Accountants' fees and expenses.................................. 20,000*
Blue Sky fees and expenses...................................... 20,000*
Miscellaneous................................................... 10,424*
--------
Total......................................................... $750,000*
========
</TABLE>
- --------
* Estimated.
ITEM 15. INDEMNIFICATION.
The Washington Business Corporation Act sets forth provisions pursuant to
which officers and directors of the Registrant may be indemnified against
liabilities that they may incur in their capacity as such. Article XII of the
Registrant's Bylaws provides for the indemnification of directors and officers
of the Registrant against certain liabilities under certain circumstances.
Under insurance policies of the Registrant, directors and officers of the
Registrant may be indemnified against certain losses arising from certain
claims that may be made against such persons by reason of their being such
directors or officers.
Under Section VII of the Underwriting Agreement Standard Provisions (Debt)
incorporated by reference in the Underwriting Agreement filed as Exhibit 1
hereto, the underwriters agree to indemnify, under certain conditions, the
Registrant, its directors, certain of its officers and persons who control the
Registrant within the meaning of the Act against certain liabilities.
ITEM 16. EXHIBITS.
This Registration Statement includes the following Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
(1)(a) Form of Underwriting Agreement, including Underwriting Agreement
Standard provisions (Debt).
(1)(b) Form of Underwriting Agreement (Preferred Shares and Preference
Shares).
(1)(c) Form of Distribution Agreement.
(4)(a) Indenture, dated as of April 1, 1986 between the Company and Chemical
Bank, as Trustee.
(4)(b) First Supplemental Indenture, dated as of February 15, 1991 between
the Company and Chemical Bank, as Trustee filed on October 6, 1992 as
Exhibit 4(b) to Registration Statement No. 33-52982.
(4)(c) Second Supplemental Indenture, dated as of February 1, 1993, between
the Company and Chemical Bank, as Trustee, filed as Exhibit 4(c) to
Registration Statement No. 33-59974.
(4)(d) Form of statement regarding amendment of Articles of Incorporation.*
(5) Opinion of Claire S. Grace, Senior Legal Counsel of the Company as to
validity of securities being registered.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
(12) Computation of Ratios of Earnings to Fixed Charges:
(a) Total Enterprise, excluding interest paid on depositor accounts by
Republic Federal Savings and Loan Association.
(b) Total Enterprise, including interest paid on depositor accounts by
Republic Federal Savings and Loan Association.
(c) Weyerhaeuser Company with its Weyerhaeuser Real Estate Company and
Weyerhaeuser Financial Services, Inc. subsidiaries accounted for on
the equity method, but excluding the undistributed earnings of those
subsidiaries.
(d) Total Enterprise, excluding interest paid on depositor accounts by
Republic Federal Savings and Loan Association.
(e) Total Enterprise, including interest paid on depositor accounts by
Republic Federal Savings and Loan Association.
(f) Weyerhaeuser Company with its Weyerhaeuser Real Estate Company and
Weyerhaeuser Financial Services, Inc. subsidiaries accounted for on
the equity method, but excluding the undistributed earnings of those
subsidiaries.
(13)(a) Annual Report on Form 10-K for the 52 weeks ended December 29, 1997.
(13)(b) Quarterly Report on Form 10-Q for the 13 weeks ended March 28, 1997.
(13)(c) Quarterly Report on Form 10-Q for the 13 weeks ended June 29, 1997.
(23) Consent of Experts and Counsel:
(a) Consent of Claire S. Grace (contained in Exhibit 5 hereto).
(b) Consent of Arthur Andersen LLP, independent public accountants.
(24) Power of Attorney (contained on the signature pages hereof).
(25)
</TABLE>
Statement of Eligibility and Qualification on Form T-1 of Chemical
Bank, as Trustee.
- --------
* To be filed by amendment
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, unless the information required to be included
in such post-effective amendment is contained in a periodic report
filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 and incorporated by reference in this
Registration Statement;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this 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 this Registration Statement, unless such information required to be
included in such post-effective amendment is contained in a periodic
report filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 and incorporated herein by
reference;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions (except for the insurance
referred to in the second paragraph of Item 15) or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
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 REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED, IN THE COUNTY OF KING, AND STATE OF WASHINGTON, ON THE 29TH DAY OF
SEPTEMBER, 1997.
Weyerhaeuser Company
By /s/ Sandy D. McDade
___________________________________
Sandy D. McDade
Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES AND APPOINTS ROBERT A. DOWDY, SANDY D. MCDADE, AND
CYNTHIA J. ALEXANDER, AND EACH OF THEM, AS TRUE AND LAWFUL ATTORNEYS-IN-FACT
AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, TO EXECUTE IN
THE NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT, AND TO FILE THE SALE, WITH ALL EXHIBITS THERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM,
FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE AND NECESSARY TO BE DONE, AS FULLY TO ALL INTENTS AND PURPOSES AS
COULD BE DONE. IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John W. Creighton, Jr. President and Chief September 29, 1997
____________________________________ Executive Officer
(JOHN W. CREIGHTON, JR.) (Principal Executive
Officer) and Director
/s/ W. C. Stivers Senior Vice President and September 29, 1997
____________________________________ Chief Financial Officer
(W. C. STIVERS) (Principal Financial
Officer)
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Kenneth J. Stancato Vice President and September 29, 1997
____________________________________ Controller (Principal
(KENNETH J. STANCATO) Accounting Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ W. John Driscoll Director September 29, 1997
____________________________________
(W. JOHN DRISCOLL)
/s/ Philip M. Hawley Director September 29, 1997
____________________________________
(PHILIP M. HAWLEY)
Director September 29, 1997
____________________________________
(MARTHA R. INGRAM)
/s/ John I. Kieckhefer Director September 29, 1997
____________________________________
(JOHN I. KIECKHEFER)
/s/ Rt. Hon. Donald F. Magankowski Director September 29, 1997
____________________________________
(RT. HON. DONALD F.
MAGANKOWSKI)
/s/ William D. Ruckelshaus Director September 29, 1997
____________________________________
(WILLIAM D. RUCKELSHAUS)
/s/ Richard H. Sinkfield Director September 29, 1997
____________________________________
(RICHARD H. SINKFIELD)
/s/ George H. Weyerhaeuser Director September 29, 1997
____________________________________
(GEORGE H. WEYERHAEUSER)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ----
<C> <S> <C>
(1)(a) Form of Underwriting Agreement, including Underwriting
Agreement Standard provisions (Debt).
(1)(b) Form of Underwriting Agreement (Preferred Shares and Preference
Shares).
(1)(c) Form of Distribution Agreement.
(4)(a) Indenture, dated as of April 1, 1986 between the Company and
Chemical Bank, as Trustee.
(4)(b) First Supplemental Indenture, dated as of February 15, 1991
between the Company and Chemical Bank, as Trustee filed on
October 6, 1992 as Exhibit 4(b) to Registration Statement No.
33-52982.
(4)(c) Second Supplemental Indenture, dated as of February 1, 1993,
between the Company and Chemical Bank, as Trustee, filed as
Exhibit 4(c) to Registration Statement No. 33-59974.
(4)(d) Form of statement regarding amendment of Articles of
Incorporation.*
(5) Opinion of Claire S. Grace, Senior Legal Counsel of the Company
as to validity of securities being registered.
(12) Computation of Ratios of Earnings to Fixed Charges:
(a) Total Enterprise, excluding interest paid on depositor
accounts by Republic Federal Savings and Loan Association.
(b) Total Enterprise, including interest paid on depositor
accounts by Republic Federal Savings and Loan Association.
(c) Weyerhaeuser Company with its Weyerhaeuser Real Estate
Company and Weyerhaeuser Financial Services, Inc.
subsidiaries accounted for on the equity method, but
excluding the undistributed earnings of those subsidiaries.
(d) Total Enterprise, excluding interest paid on depositor
accounts by Republic Federal Savings and Loan Association.
(e) Total Enterprise, including interest paid on depositor
accounts by Republic Federal Savings and Loan Association.
(f) Weyerhaeuser Company with its Weyerhaeuser Real Estate
Company and Weyerhaeuser Financial Services, Inc.
subsidiaries accounted for on the equity method, but
excluding the undistributed earnings of those subsidiaries.
(13)(a) Annual Report on Form 10-K for the 52 weeks ended December 29,
1997.
(13)(b) Quarterly Report on Form 10-Q for the 13 weeks ended March 28,
1997.
(13)(c) Quarterly Report on Form 10-Q for the 13 weeks ended June 29,
1997.
(23) Consent of Experts and Counsel:
(a) Consent of Claire S. Grace (contained in Exhibit 5 hereto).
(b) Consent of Arthur Andersen LLP, independent public
accountants.
(24) Power of Attorney (contained on the signature pages hereof).
(25)
</TABLE>
Statement of Eligibility and Qualification on Form T-1 of Chemical
Bank, as Trustee.
- --------
* To be filed by amendment.
<PAGE>
EXHIBIT 1(a)
WEYERHAEUSER COMPANY
(a Washington corporation)
UNDERWRITING AGREEMENT
STANDARD PROVISIONS (DEBT)
<PAGE>
From time to time, Weyerhaeuser Company, a Washington corporation (the
"Company"), may enter into one or more underwriting agreements that provide for
the sale of designated securities to the several underwriters named therein.
The standard provisions set forth herein may be incorporated by reference in any
such underwriting agreement (an "Underwriting Agreement"). The Underwriting
Agreement, including the provisions incorporated therein by reference, is herein
referred to as this Agreement. Unless otherwise defined herein, terms defined
in the Underwriting Agreement are used herein as therein defined.
I.
The Company proposes to issue from time to time debt securities (the
"Securities") to be issued pursuant to the provisions of the Indenture dated as
of April 1, 1986, (the "Indenture") between the Company and Chemical Bank, as
Trustee. The Securities will have varying designations, maturities, rates and
times of payment of interest, selling prices, redemption terms and other terms.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement including a prospectus relating to the
Securities and has filed with, or mailed for filing to, the Commission a
prospectus supplement or supplements specifically relating to the Offered
Securities pursuant to Rule 424 under the Securities Act of 1933. The term
Registration Statement means the registration statement as amended to the date
of the Underwriting Agreement. The term Basic Prospectus means the prospectus
relating to the Registration Statement in the form first filed with the
Commission pursuant to Rule 424(b) or (c) in connection with the offering of the
Offered Securities. The term Prospectus means the Basic Prospectus together
with the prospectus supplement (other than a preliminary prospectus supplement)
specifically relating to the Offered Securities as filed with, or mailed for
filing to, the Commission pursuant to Rule 424. The term preliminary prospectus
means any preliminary form of the Prospectus used in connection with the
offering of the Offered Securities. As used herein, the terms "Registration
Statement", "Basic Prospectus", "Prospectus" and "preliminary prospectus" shall
include, in each case, the material, if any, incorporated by reference therein.
<PAGE>
The term Underwriters' Securities means the Offered Securities to be
purchased by the Underwriters herein. The term Contract Securities means the
Offered Securities, if any, to be purchased pursuant to the delayed delivery
contracts referred to below.
II.
If the Prospectus provides for sales of Offered Securities pursuant to
delayed delivery contracts, the company hereby authorizes the Underwriters to
solicit offers to purchase Contract Securities on the terms and subject to the
conditions set forth in the Prospectus pursuant to delayed delivery contracts
substantially in the form of Schedule I attached hereto ("Delayed Delivery
Contracts") but with such changes therein as the Company may authorize or
approve. Delayed Delivery Contracts are to be with institutional investors
approved by the Company and of the types set forth in the Prospectus. On the
Closing Date (as hereinafter defined), the Company will pay the Manager as
compensation, for the accounts of the Underwriters, the fee set forth in the
Underwriting Agreement in respect of the Contract Securities. The Underwriters
will not have any responsibility in respect of the validity or the performance
of Delayed Delivery Contracts.
If the Company executes and delivers Delayed Delivery Contracts with
institutional investors, the Contract Securities shall be deducted from the
Offered Securities to be purchased by the several Underwriters and the aggregate
principal amount of Offered Securities to be purchased by each Underwriter shall
be reduced pro rata in proportion to the principal amount of Offered Securities
set forth opposite each Underwriter's name in the Underwriting Agreement, except
to the extent that the Manager determines that such reduction shall be otherwise
and so advises the Company.
III.
The Company is advised by the Manager that the Underwriters propose to
make a public offering of their respective portions of the Underwriters'
Securities as soon after this Agreement is entered into as in the Manager's
judgment is advisable. The terms of the public offering of the Underwriters'
Securities are set forth in the Prospectus.
-2-
<PAGE>
IV.
Payment for the Underwriters' Securities shall be made by certified or
official bank check or checks payable to the order of the Company in New York
Clearing House funds at the time and place set forth in the Underwriting
Agreement, upon delivery to the Manager for the respective accounts of the
several Underwriters of the Underwriters' Securities registered in such names
and in such denominations as the Manager shall request in writing not less than
two full business days prior to the date of delivery. The time and date of such
payment and delivery with respect to the Underwriters' Securities are herein
referred to as the Closing Date.
V.
The several obligations of the Underwriters hereunder are subject to
the following conditions:
(a) (i) subsequent to the execution and delivery of the Underwriting
Agreement and prior to the Closing Date, there shall not have been any
downgrading, nor any notice given of any intended or potential downgrading
or of a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by
any "nationally recognized statistical rating organization," as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act;
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise,
or in the earnings, business or operations, of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus,
that, in the judgment of the Manager, is material and adverse and that
makes it, in the judgment of the Manager, impracticable to market the
Offered Securities on the terms and in the manner contemplated in the
Prospectus; and
(iii) the Manager shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in clause (i)
-3-
<PAGE>
above and to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the Closing
Date and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied on
or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his knowledge as to proceedings threatened.
(b) The Manager shall have received on the Closing Date an opinion of
Alan P. Vandevert, Secretary and Counsel of the Company or other counsel
satisfactory to the Manager, dated the Closing Date, to the effect set
forth as Exhibit A.
(c) The Manager shall have received on the Closing Date an opinion of
Davis Polk & Wardwell, counsel for the Underwriters, dated the Closing
Date, to the effect set forth as Exhibit B.
(d) The Manager shall have received on the Closing Date, a letter
dated the Closing Date in form and substance satisfactory to the Manager,
from Arthur Andersen & Co., independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in or incorporated by reference
into the Registration Statement and the Prospectus.
VI.
In further consideration of the agreements of the Underwriters
contained in this Agreement, the Company covenants as follows:
(a) To furnish the Manager, without charge, three signed copies of
the Registration Statement including exhibits and materials, if any,
incorporated by reference therein and, during the period mentioned in
paragraph (c) below, as many copies of the Prospectus, any documents
incorporated by reference therein and any supplements and amend-
-4-
<PAGE>
ments thereto as the Manager may reasonably request. The terms "supplement"
and "amendment" or "amend" as used in this Agreement with respect to the
Registration Statement or Prospectus shall include all documents filed by
the Company with the Commission subsequent to the date of the Basic
Prospectus, pursuant to the Securities Exchange Act of 1934, which are
deemed to be incorporated by reference in the Registration Statement and
Prospectus.
(b) Before amending or supplementing the Registration Statement or
the Prospectus with respect to the Offered Securities, to furnish the
Manager a copy of each such proposed amendment or supplement.
(c) If, during such period after the first date of the public
offering of the Offered Securities as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered with respect
thereto, any event shall occur as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if it is necessary to amend or to supplement
the Prospectus to comply with law, forthwith to prepare and furnish, at its
own expense, to the Underwriters, either amendments or supplements to the
Prospectus so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law.
(d) To qualify the Offered Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Manager shall
reasonably request and to pay all expenses (including reasonable fees and
disbursements of counsel) in connection with such qualification and in
connection with the determination of the eligibility of the Offered
Securities for investment under the laws of such jurisdiction as the
Manager may designate.
-5-
<PAGE>
(e) To make generally available to the Company's security holders as
soon as practicable an earnings statement covering a twelve-month period
beginning after the date of the Underwriting Agreement, which shall satisfy
the provisions of Section 11(a) of the Securities Act of 1933 and the
applicable rules and regulations of the Commission thereunder.
(f) During the period beginning on the date of the Underwriting
Agreement and continuing to and including the Closing Date not to offer,
sell, contract to sell or otherwise dispose of any debt securities of the
Company substantially similar to the Offered Securities without the prior
written consent of the Manager.
VII.
The Company represents and warrants to each Underwriter that (i) each
document, if any, filed or to be filed pursuant to the Securities Exchange Act
of 1934 and incorporated by reference in the Prospectus complied or will comply
when so filed in all material respects with such Act and the applicable rules
and regulations thereunder, (ii) each part of the registration statement
(including the documents incorporated by reference therein), filed with the
Commission pursuant to the Securities Act of 1933 relating to the Securities,
when such part became effective under the Securities Act of 1933 did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (iii) each preliminary prospectus, if any, filed pursuant to Rule
424 under the Securities Act of 1933 complied when so filed in all material
respects with such Act and the applicable rules and regulations thereunder, (iv)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act of 1933 and the applicable rules and regulations thereunder and
(v) the Registration Statement and the Prospectus do not contain and, as amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; except that these representations and warranties do not
apply to statements or omissions in the Registration Statement, any preliminary
prospectus or the
-6-
<PAGE>
Prospectus based upon information furnished to the Company in writing by any
Underwriter expressly for use therein.
The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls such Underwriter within the meaning of either
Section 15 of the Securities Act of 1933 or Section 20 of the Securities
Exchange Act of 1934, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus (if used within the period set forth in paragraph
(c) of Article VI hereof and as amended or supplemented if the Company shall
have furnished any amendments of supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information furnished in writing to the Company by any Underwriter expressly for
use therein.
Each Underwriter agrees to indemnify and hold harmless the Company,
its directors, its officers who sign the Registration Statement and any person
controlling the Company to the same extent as the foregoing indemnity from the
Company to each Underwriter, but only with reference to information relating to
such Underwriter furnished in writing by such Underwriter expressly for use in
the Registration Statement, any preliminary prospectus or the Prospectus.
In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel
-7-
<PAGE>
or (ii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm (in addition to any local counsel) for
all such indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by the
Manager in the case of parties indemnified pursuant to the second preceding
paragraph and by the Company in the case of parties indemnified pursuant to the
first preceding paragraph. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
If the indemnification provided for in this Article VII is unavailable
to an indemnified party under the second or third paragraphs hereof or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Offered Securities or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters
-8-
<PAGE>
on the other in connection with the offering of the Offered Securities shall be
deemed to be in the same proportions as the total net proceeds from the offering
of such Offered Securities (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriters in respect thereof. The relative fault of the Company on the one
hand and of the Underwriters on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Article VII were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses (including expenses of local counsel)
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Article VII, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Offered Securities
underwritten and distributed to the public by such Underwriter were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act of
1933) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Article VII are several, in proportion to the respective
principal amounts of Offered Securities purchased by each of such Underwriters,
and not joint.
The indemnity and contribution agreements contained in this Article
VII and the representations and warranties of the Company in this Agreement
shall remain operative and in
-9-
<PAGE>
full force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by any Underwriter or on behalf of any Underwriter or any
person controlling any Underwriter or by or on behalf of the Company, its
directors or officers or any person controlling the Company and (iii) acceptance
of and payment for any of the Offered Securities.
VIII.
This Agreement shall be subject to termination in the Manager's
absolute discretion, by notice given to the Company, if (a) after the execution
and delivery of the Underwriting Agreement and prior to the Closing Date (i)
trading generally shall have been suspended or materially limited on or by, as
the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the National Association of Securities Dealers, Inc., the Chicago
Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board
of Trade, (ii) trading of any securities of the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities in New York shall have been declared
by either Federal or New York State authorities, or (iv) there shall have
occurred any outbreak or escalation of hostilities or any change in financial
markets or any calamity or crisis that, in the judgment of the Manager, is
material and adverse and (b) in the case of any of the events specified in
clauses (a) (i) through (iv), such event, singly or together with any other such
event, makes it, in the judgment of the Manager, impracticable to market the
Offered Securities on the terms and in the manner contemplated in the
Prospectus.
IX.
If, on the Closing Date, any one or more of the Underwriters shall
fail or refuse to purchase Offered Securities which it or they have agreed to
purchase hereunder on such date, and the aggregate principal amount of Offered
Securities which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase is not more than one-tenth of the aggregate principal
amount of the Offered Securities to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions which the principal
amount of Offered Securities set forth opposite their names in the Underwriting
Agreement pursuant to which the Offered Securities are being purchased bear to
the
-10-
<PAGE>
aggregate principal of Offered Securities set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as the Manager
may specify, to purchase the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided, however, that in no event shall the principal amount of Offered
Securities which any Underwriter has agreed to purchase pursuant to such
Underwriting Agreement be increased pursuant to this Article IX by an amount in
excess of one-ninth of such principal amount of Offered Securities without the
written consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Offered Securities and the
aggregate principal amount of Offered Securities with respect to which such
default occurs is more than one-tenth of the aggregate principal amount of
Offered Securities to be purchased on such date, and arrangements satisfactory
to the Manager and the Company for the purchase of such Offered Securities are
not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter or the Company.
In any such case the non-defaulting Underwriters shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement, with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with the Offered
Securities.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
-11-
<PAGE>
SCHEDULE I
DELAYED DELIVERY CONTRACT
, 1982
Dear Sirs:
The undersigned hereby agrees to purchase from Weyerhaeuser Company, a
Washington corporation (the "Company"), and the Company agrees to sell to the
undersigned
$ . . . . . . . . . . . .
principal amount of the Company's [state title of issue] (the "Securities"),
offered by the Company's prospectus dated ________________, 1982 and Prospectus
Supplement dated _______________, 1982, receipt of copies of which are hereby
acknowledged, at a purchase price of ___% of the principal amount thereof plus
accrued interest and on the further terms and conditions set forth in this
contract. The undersigned does not contemplate selling Securities prior to
making payment therefor.
The undersigned will purchase from the Company Securities in the
principal amounts and on the delivery dates set forth below:
Delivery Principal Plus Accrued
Date Amount Interest From:
------ ------ -------------
________________________ $ ______________ _________________
________________________ $ ______________ _________________
________________________ $ ______________ _________________
Each such date on which Securities are to be purchased hereunder is hereinafter
referred to as a "Delivery Date".
Payment for the Securities which the undersigned has agreed to
purchase on each Delivery Date shall be made to the Company or its order by
certified or official bank check in New York Clearing House funds at the office
of
<PAGE>
________________________, New York, N.Y., at 10:00 A.M. (New York time) on
the Delivery Date, upon delivery to the undersigned of the Securities to be
purchased by the undersigned on the Delivery Date, in such denominations and
registered in such names as the undersigned may designate by written or
telegraphic communication addressed to the Company not less than five full
business days prior to the Delivery Date.
The obligation of the undersigned to take delivery of and make payment
for the Securities on the Delivery Date shall be subject to the conditions that
(1) the purchase of Securities to be made by the undersigned shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which the
undersigned is subject and (2) the Company shall have sold, and delivery shall
have taken place to the underwriters (the "Underwriters") named in the
Prospectus Supplement referred to above of, such part of the Securities as is to
be sold to them. Promptly after completion of sale and delivery to the
Underwriters, the Company will mail or deliver to the undersigned at its address
set forth below notice to such effect, accompanied by a copy of the opinion of
counsel for the Company delivered to the Underwriters in connection therewith.
Failure to take delivery of and make payment for Securities by any
purchaser under any other Delayed Delivery Contract shall not relieve the
undersigned of its obligations under this contract.
This contract will inure to the benefit of and be binding upon the
parties hereto and their respective successors, but will not be assignable by
either party hereto without the written consent of the other.
If this contract is acceptable to the Company, it is requested that
the Company sign the form of acceptance below and mail or deliver one of the
counterparts hereof to the undersigned at its address set forth below. This will
become a binding contract, as of the date first above written, between the
Company and the undersigned when such counterpart is so mailed or delivered.
-2-
<PAGE>
This contract shall be governed by and construed in accordance with
the laws of the State of New York.
Yours very truly,
__________________________
(Purchaser)
By_________________________
_________________________
(Title)
_________________________
_________________________
(Address)
Accepted:
Weyerhaeuser Company
By_________________________
-3-
<PAGE>
PURCHASER--PLEASE COMPLETE AT TIME OF SIGNING
The name and telephone and department of the representative of the
Purchaser with whom details of delivery on the Delivery Date may be discussed is
as follows: (Please print.)
Telephone No.
Name (Including Area Code) Department
---- --------------------- ----------
_______________________ ______________________ __________________
_______________________ ______________________ __________________
_______________________ ______________________ __________________
_______________________ ______________________ __________________
-4-
<PAGE>
EXHIBIT A
Opinion of Alan P. Vandevert,
Secretary and Counsel to the Company
The opinion of Alan P. Vandevert, Secretary and Counsel to the
Company, to be delivered pursuant to Article V, paragraph (b) of the document
entitled Weyerhaeuser Company Underwriting Agreement Standard Provisions (Debt)
shall be to the effect that:
(i) the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Washington and
is duly qualified to transact business and is in good standing in each
other state of the United States in which the conduct of its business or
the ownership or leasing of property requires such qualification,
(ii) the Indenture has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company and has
been duly qualified under the Trust Indenture Act of 1939,
(iii) the Offered Securities have been duly authorized, and when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Underwriters or by
institutional investors, if any, pursuant to Delayed Delivery Contracts,
will be valid and binding obligations of the Company in accordance with
their terms,
(iv) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company except as rights to indemnity and contribution thereunder may be
limited by applicable law,
(v) the Delayed Delivery Contracts, if any, have been duly
authorized, executed and delivered by the Company and are valid and binding
agreements of the Company,
(vi) the execution, delivery and performance of the Underwriting
Agreement and the sale of the Offered Securities by the Company as provided
therein will not result in any violation of any
<PAGE>
provisions of applicable law or the articles of incorporation or bylaws of
the Company or of any indenture, mortgage or other agreement known to such
counsel to which the Company or any of its subsidiaries is bound, and no
consent, approval or authorization of any governmental body is required,
except such as are specified and have been obtained,
(vii) the statements in the Prospectus under "Description of the Debt
Securities", "Plan of Distribution", "Underwriting" and [other sections],
insofar as such statements constitute a summary of the documents or
proceedings referred to therein, fairly present the information called for
with respect to such documents and proceedings and
(viii) such counsel (1) is of the opinion that each document, if any,
filed pursuant to the Securities Exchange Act of 1934 (except as to
financial statements and schedules contained therein, as to which such
counsel need not express any opinion) and incorporated by reference in the
Prospectus complied when so filed as to form in all material respects with
such Act and the rules and regulations thereunder, (2) is of the opinion
that the Registration Statement and Prospectus, as amended or supplemented,
if applicable (except as to financial statements and schedules contained
therein, as to which such counsel need not express any opinion) comply as
to form in all material respects with the Securities Act of 1933 and the
rules and regulations thereunder, (3) believes that (except for the
financial statements and schedules contained therein, as to which such
counsel need not express any belief) each part of the registration
statement (including the documents incorporated by reference therein),
filed with the Commission pursuant to the Securities Act of 1933 relating
to the Securities, when such part became effective, did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and that the Registration Statement and the Prospectus on
the date of the Underwriting Agreement did not, and the Prospectus, as
amended or supplemented, if applicable, on the Closing Date does not,
contain any untrue statement of a material fact or omit to
-2-
<PAGE>
state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
-3-
<PAGE>
EXHIBIT B
Opinion of Davis Polk & Wardwell, Counsel
for the Underwriters
The opinion of Davis Polk & Wardwell, counsel for the Underwriters, to
be delivered pursuant to Article V, paragraph (c) of the document entitled
Weyerhaeuser Company Underwriting Agreement Standard Provisions (Debt) shall be
to the effect that:
(i) the Indenture has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company and has
been duly qualified under the Trust Indenture Act of 1939,
(ii) the Offered Securities have been duly authorized, and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Underwriters or by
institutional investors, if any, pursuant to Delayed Delivery Contracts,
will be valid and binding obligations of the Company in accordance with
their terms,
(iii) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, except as rights to indemnity and contribution thereunder may be
limited by applicable law,
(iv) the Delayed Delivery Contracts, if any, have been duly
authorized, executed and delivered by the Company and are valid and binding
agreements of the Company,
(v) the statements in the Prospectus under "Description of
the Debt Securities", "Plan of Distribution" and "Underwriting", insofar as
such statements constitute a summary of the documents or proceedings
referred to therein, fairly present the information called for with respect
to such documents and proceedings and
(vi) such counsel (1) is of the opinion that the Registration
Statement and Prospectus, as amended or supplemented, if applicable (except
as to financial statements and schedules contained therein, as to which
such counsel need not express
<PAGE>
any opinion) comply as to form in all material respects with the Securities
Act of 1933 and the rules and regulations thereunder and (2) believes that
(except for the financial statements and schedules contained therein, as to
which such counsel need not express any belief) the Registration Statement
and the Prospectus on the date of the Underwriting Agreement did not, and
the Prospectus, as amended or supplemented, if applicable, on the Closing
Date does not, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided that such counsel may state that their opinion and belief is based
--------
upon their participation in the preparation of the Registration Statement
and the Prospectus and any amendments and supplements thereto (other than
the documents incorporated by reference therein) and review and discussion
of the contents thereof, but is without independent check or verification
except as specified.
-2-
<PAGE>
EXHIBIT 1(b)
WEYERHAEUSER COMPANY
(a Washington corporation)
UNDERWRITING AGREEMENT
STANDARD PROVISIONS PREFERRED STOCK
AND PREFERENCE STOCK
<PAGE>
From time to time, Weyerhaeuser Company, a Washington corporation (the
"Company"), may enter into one or more underwriting agreements that provide for
the sale of designated securities to the several underwriters named therein.
The standard provisions set forth herein may be incorporated by reference in any
such underwriting agreement (an "Underwriting Agreement"). The Underwriting
Agreement, including the provisions incorporated therein by reference, is herein
referred to as this Agreement. Unless otherwise defined herein, terms defined
in the Underwriting Agreement are used herein as therein defined.
I.
The Company proposes to issue from time to time preferred stock or
preference stock (in either case, the "Securities"). Each issue of Securities
may vary as to designation, number of shares, liquidation values, dividend rate
or rates and timing of payments thereof, redemption provisions and conversation
provisions, if any, and any other variable terms.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement including a prospectus relating to the
Securities and has filed with, or mailed for filing to, the Commission a
prospectus supplement or supplements specifically relating to the Offered
Securities pursuant to Rule 424 under the Securities Act of 1933. The term
Registration Statement means the registration statement as amended to the date
of the Underwriting Agreement. The term Basic Prospectus means the prospectus
relating to the Registration Statement in the form first filed with the
Commission pursuant to Rule 424(b) or (c) in connection with the offering of the
Offered Securities. The term Prospectus means the Basic Prospectus together
with the prospectus supplement (other than a preliminary prospectus supplement)
specifically relating to the Offered Securities as filed with, or mailed for
filing to, the Commission pursuant to Rule 424. The term preliminary prospectus
means any preliminary form of the Prospectus used in connection with the
offering of the Offered Securities. As used herein, the terms "Registration
Statement", "Basic Prospectus", "Prospectus" and "preliminary prospectus" shall
include, in each case, the material, if any, incorporated by reference therein.
The term Underwriters' Securities means the Offered Securities to be
purchased by the Underwriters herein. The term Contract Securities means the
Offered Securities, if any, to be purchased pursuant to the delayed delivery
contracts referred to below.
<PAGE>
II.
If the Prospectus provides for sales of Offered Securities pursuant to
delayed delivery contracts, the company hereby authorizes the Underwriters to
solicit offers to purchase Contract Securities on the terms and subject to the
conditions set forth in the Prospectus pursuant to delayed delivery contracts
substantially in the form of Schedule I attached hereto ("Delayed Delivery
Contracts") but with such changes therein as the Company may authorize or
approve. Delayed Delivery Contracts are to be with institutional investors
approved by the Company and of the types set forth in the Prospectus. On the
Closing Date (as hereinafter defined), the Company will pay the Manager as
compensation, for the accounts of the Underwriters, the fee set forth in the
Underwriting Agreement in respect of the Contract Securities. The Underwriters
will not have any responsibility in respect of the validity or the performance
of Delayed Delivery Contracts.
If the Company executes and delivers Delayed Delivery Contracts with
institutional investors, the Contract Securities shall be deducted from the
Offered Securities to be purchased by the several Underwriters and the aggregate
number of Offered Securities to be purchased by each Underwriter shall be
reduced pro rata in proportion to the principal amount of Offered Securities set
forth opposite each Underwriter's name in the Underwriting Agreement, except to
the extent that the Manager determines that such reduction shall be otherwise
and so advises the Company.
III.
The Company is advised by the Manager that the Underwriters propose to
make a public offering of their respective portions of the Underwriters'
Securities as soon after this Agreement is entered into as in the Manager's
judgment is advisable. The terms of the public offering of the Underwriters'
Securities are set forth in the Prospectus.
IV.
Payment for the Underwriters' Securities shall be made by certified or
official bank check or checks payable to the order of the Company in New York
Clearing House funds at the time and place set forth in the Underwriting
Agreement, upon delivery to the Manager for the respective accounts of the
several Underwriters of the Underwriters' Securities registered in such names
and in such number of
2
<PAGE>
shares as the Manager shall request in writing not less than
two full business days prior to the date of delivery. The time and date of such
payment and delivery with respect to the Underwriters' Securities are herein
referred to as the Closing Date.
V.
The several obligations of the Underwriters hereunder are subject to
the following conditions:
(a) (i) subsequent to the execution and delivery of the Underwriting
Agreement and prior to the Closing Date, there shall not have been any
downgrading, nor any notice given of any intended or potential downgrading
or of a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by
any "nationally recognized statistical rating organization," as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act;
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise,
or in the earnings, business or operations, of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus,
that, in the judgment of the Manager, is material and adverse and that
makes it, in the judgment of the Manager, impracticable to market the
Offered Securities on the terms and in the manner contemplated in the
Prospectus; and
(iii) the Manager shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in clause (i) above and to the effect
that the representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date and that the Company
has complied with all of the agreements and satisfied all of the conditions
on its part to be performed or satisfied on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his knowledge as to proceedings threatened.
(b) The Manager shall have received on the Closing Date an opinion of
________________ , ____________ and _______ of the Company or other counsel
3
<PAGE>
satisfactory to the Manager, dated the Closing Date, to the effect set
forth as Exhibit A.
(c) The Manager shall have received on the Closing Date an opinion of
Davis Polk & Wardwell, counsel for the Underwriters, dated the Closing
Date, to the effect set forth as Exhibit B.
(d) The Manager shall have received on the Closing Date, a letter
dated the Closing Date in form and substance satisfactory to the Manager,
from Arthur Andersen & Co., independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in or incorporated by reference
into the Registration Statement and the Prospectus.
VI.
In further consideration of the agreements of the Underwriters
contained in this Agreement, the Company covenants as follows:
(a) To furnish the Manager, without charge, three copies of
the Registration Statement including exhibits and materials, if any,
incorporated by reference therein and, during the period mentioned in
paragraph (c) below, as many copies of the Prospectus, any documents
incorporated by reference therein and any supplements and amend-
ments thereto as the Manager may reasonably request. The terms "supplement"
and "amendment" or "amend" as used in this Agreement with respect to the
Registration Statement or Prospectus shall include all documents filed by
the Company with the Commission subsequent to the date of the Basic
Prospectus, pursuant to the Securities Exchange Act of 1934, which are
deemed to be incorporated by reference in the Registration Statement and
Prospectus.
(b) Before amending or supplementing the Registration Statement or
the Prospectus with respect to the Offered Securities, to furnish the
Manager a copy of each such proposed amendment or supplement.
(c) If, during such period after the first date of the public
offering of the Offered Securities as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered with respect
thereto, any event shall occur as a result of which it is necessary to
amend or supplement the
4
<PAGE>
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or to supplement the Prospectus
to comply with law, forthwith to prepare and furnish, at its own expense,
to the Underwriters, either amendments or supplements to the Prospectus so
that the statements in the Prospectus as so amended or supplemented will
not, in the light of the circumstances when the Prospectus is delivered to
a purchaser, be misleading or so that the Prospectus will comply with law.
(d) To qualify the Offered Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Manager shall
reasonably request and to pay all expenses (including reasonable fees and
disbursements of counsel) in connection with such qualification and in
connection with the determination of the eligibility of the Offered
Securities for investment under the laws of such jurisdiction as the
Manager may designate.
(e) To make generally available to the Company's security holders as
soon as practicable an earnings statement covering a twelve-month period
beginning after the date of the Underwriting Agreement, which shall satisfy
the provisions of Section 11(a) of the Securities Act of 1933 and the
applicable rules and regulations of the Commission thereunder.
(f) During the period beginning on the date of the Underwriting
Agreement and continuing to and including the Closing Date not to offer,
sell, contract to sell or otherwise dispose of any securities of the
Company substantially similar to the Offered Securities without the prior
written consent of the Manager.
VII.
The Company represents and warrants to each Underwriter that (i) each
document, if any, filed or to be filed pursuant to the Securities Exchange Act
of 1934 and incorporated by reference in the Prospectus complied or will comply
when so filed in all material respects with such Act and the applicable rules
and regulations thereunder, (ii) each part of the registration statement
(including the documents incorporated by reference therein), filed with the
Commission pursuant to the Securities Act of 1933 relating to the Securities,
when such part became effective under the Securities Act of 1933 did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
5
<PAGE>
therein not misleading, (iii) each preliminary prospectus, if any, filed
pursuant to Rule 424 under the Securities Act of 1933 complied when so filed in
all material respects with such Act and the applicable rules and regulations
thereunder, (iv) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects
with the Securities Act of 1933 and the applicable rules and regulations
thereunder and (v) the Registration Statement and the Prospectus do not contain
and, as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; except that these representations and warranties
do not apply to statements or omissions in the Registration Statement, any
preliminary prospectus or the Prospectus based upon information furnished to the
Company in writing by any Underwriter expressly for use therein.
The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls such Underwriter within the meaning of either
Section 15 of the Securities Act of 1933 or Section 20 of the Securities
Exchange Act of 1934, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus (if used within the period set forth in paragraph
(c) of Article VI hereof and as amended or supplemented if the Company shall
have furnished any amendments of supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information furnished in writing to the Company by any Underwriter expressly for
use therein.
Each Underwriter agrees to indemnify and hold harmless the Company,
its directors, its officers who sign the Registration Statement and any person
controlling the Company to the same extent as the foregoing indemnity from the
Company to each Underwriter, but only with reference to information relating to
such Underwriter furnished in writing by such Underwriter expressly for use in
the Registration Statement, any preliminary prospectus or the Prospectus.
In case any proceeding (including any governmental investigation)
shall be instituted involving any person in
6
<PAGE>
respect of which indemnity may be sought pursuant to either of the two preceding
paragraphs, such person (the "indemnified party") shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party, shall
retain counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm (in addition to any local counsel)
for all such indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by the
Manager in the case of parties indemnified pursuant to the second preceding
paragraph and by the Company in the case of parties indemnified pursuant to the
first preceding paragraph. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
If the indemnification provided for in this Article VII is unavailable
to an indemnified party under the second or third paragraphs hereof or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result
7
<PAGE>
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the offering of the Offered
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and of the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other in connection with the offering of the Offered
Securities shall be deemed to be in the same proportions as the total net
proceeds from the offering of such Offered Securities (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters in respect thereof. The relative fault
of the Company on the one hand and of the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Article VII were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses (including expenses of local counsel)
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Article VII, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Offered Securities
underwritten and distributed to the public by such Underwriter were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act of
1933)
8
<PAGE>
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Article VII are several, in proportion to the respective
numbers of Offered Securities purchased by each of such Underwriters, and not
joint.
The indemnity and contribution agreements contained in this Article
VII and the representations and warranties of the Company in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by any Underwriter or
on behalf of any Underwriter or any person controlling any Underwriter or by or
on behalf of the Company, its directors or officers or any person controlling
the Company and (iii) acceptance of and payment for any of the Offered
Securities.
VIII.
This Agreement shall be subject to termination in the Manager's
absolute discretion, by notice given to the Company, if (a) after the execution
and delivery of the Underwriting Agreement and prior to the Closing Date (i)
trading generally shall have been suspended or materially limited on or by, as
the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the National Association of Securities Dealers, Inc., the Chicago
Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board
of Trade, (ii) trading of any securities of the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities in New York shall have been declared
by either Federal or New York State authorities, or (iv) there shall have
occurred any outbreak or escalation of hostilities or any change in financial
markets or any calamity or crisis that, in the judgment of the Manager, is
material and adverse and (b) in the case of any of the events specified in
clauses (a) (i) through (iv), such event, singly or together with any other such
event, makes it, in the judgment of the Manager, impracticable to market the
Offered Securities on the terms and in the manner contemplated in the
Prospectus.
IX.
If, on the Closing Date, any one or more of the Underwriters shall
fail or refuse to purchase Offered Securities which it or they have agreed to
purchase hereunder on such date, and the aggregate number of Offered Securities
which such defaulting Underwriter or Underwriters
9
<PAGE>
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Offered Securities to be purchased on such date, the
other Underwriters shall be obligated severally in the proportions which the
number of Offered Securities set forth opposite their names in the Underwriting
Agreement pursuant to which the Offered Securities are being purchased bear to
the number of Offered Securities set forth opposite the names of all such non-
defaulting Underwriters, or in such other proportions as the Manager may
specify, to purchase the Offered Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided,
however, that in no event shall the number of Offered Securities which any
Underwriter has agreed to purchase pursuant to such Underwriting Agreement be
increased pursuant to this Article IX by an amount in excess of one-ninth of
such number of Offered Securities without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail
or refuse to purchase Offered Securities and the aggregate amount of Offered
Securities with respect to which such default occurs is more than one-tenth of
the aggregate number of Offered Securities to be purchased on such date, and
arrangements satisfactory to the Manager and the Company for the purchase of
such Offered Securities are not made within 36 hours after such default, this
Agreement will terminate without liability on the part of any non-defaulting
Underwriter or the Company. In any such case the non-defaulting Underwriters
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and in the Prospectus or in any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement, with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with the Offered
Securities.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
10
<PAGE>
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
11
<PAGE>
EXHIBIT A
Opinion of ________________,
___________________ to the Company
The opinion of ___________ , _____________ and ____________ to the
Company, to be delivered pursuant to Article V, paragraph (b) of the document
entitled Weyerhaeuser Company Underwriting Agreement Standard Provisions
(Preferred Stock and Preference Stock) shall be to the effect that:
(i) the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Washington and
is duly qualified to transact business and is in good standing in each
other state of the United States in which the conduct of its business or
the ownership or leasing of property requires such qualification,
(ii) the Offered Securities have been duly authorized, and when issued
and delivered in accordance with the provisions of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such
offered Securities is not subject to any preemptive or similar rights,
(iii) the Underwriting Agreement has been duly authorized, executed
and delivered by the Company and is a valid and binding agreement of the
Company except as rights to indemnity and contribution thereunder may be
limited by applicable law,
(iv) the Delayed Delivery Contracts, if any, have been duly
authorized, executed and delivered by the Company and are valid and binding
agreements of the Company,
(v) the execution, delivery and performance of the Underwriting
Agreement and the sale of the Offered Securities by the Company as provided
therein will not result in any violation of any provisions of applicable
law or the articles of incorporation or bylaws of the Company or of any
indenture, mortgage or other agreement known to such counsel to which the
Company or any of its subsidiaries is bound, and no consent, approval or
authorization of any governmental body is required, except such as are
specified and have been obtained,
(vi) the statements in the Prospectus under "Description of the Debt
Securities", "Plan of
<PAGE>
Distribution", "Underwriting" and [other sections],
insofar as such statements constitute a summary of the documents or
proceedings referred to therein, fairly present the information called for
with respect to such documents and proceedings and
(vii) such counsel (1) is of the opinion that each document, if any,
filed pursuant to the Securities Exchange Act of 1934 (except as to
financial statements and schedules contained therein, as to which such
counsel need not express any opinion) and incorporated by reference in the
Prospectus complied when so filed as to form in all material respects with
such Act and the rules and regulations thereunder, (2) is of the opinion
that the Registration Statement and Prospectus, as amended or supplemented,
if applicable (except as to financial statements and schedules contained
therein, as to which such counsel need not express any opinion) comply as
to form in all material respects with the Securities Act of 1933 and the
rules and regulations thereunder, (3) believes that (except for the
financial statements and schedules contained therein, as to which such
counsel need not express any belief) each part of the registration
statement (including the documents incorporated by reference therein),
filed with the Commission pursuant to the Securities Act of 1933 relating
to the Securities, when such part became effective, did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and that the Registration Statement and the Prospectus on
the date of the Underwriting Agreement did not, and the Prospectus, as
amended or supplemented, if applicable, on the Closing Date does not,
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
-2-
<PAGE>
EXHIBIT B
Opinion of Davis Polk & Wardwell, Counsel
for the Underwriters
The opinion of Davis Polk & Wardwell, counsel for the Underwriters, to
be delivered pursuant to Article V, paragraph (c) of the document entitled
Weyerhaeuser Company Underwriting Agreement Standard Provisions (Preferred Stock
and Preference Stock) shall be to the effect that:
(i) the Offered Securities have been duly authorized, and, when
issued and delivered in accordance with the provisions of this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Offered Securities is not subject to any preemptive or
similar rights,
(ii) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, except as rights to indemnity and contribution thereunder may be
limited by applicable law,
(iii) the Delayed Delivery Contracts, if any, have been duly
authorized, executed and delivered by the Company and are valid and binding
agreements of the Company,
(iv) the statements in the Prospectus under "Description of
the Debt Securities", "Plan of Distribution" and "Underwriting", insofar as
such statements constitute a summary of the legal matters or documents
referred to therein, fairly present the information called for with respect
to such documents and proceedings and
(v) such counsel (1) is of the opinion that the Registration
Statement and Prospectus, as amended or supplemented, if applicable (except
as to financial statements and schedules contained therein, as to which
such counsel need not express any opinion) comply as to form in all
material respects with the Securities Act of 1933 and the rules and
regulations thereunder and (2) believes that (except for the financial
statements and schedules contained therein, as to which such counsel need
not express any belief) the Registration Statement and the Prospectus on
the date of the Underwriting Agreement did not, and the Prospectus, as
amended or supplemented, if applicable, on the Closing Date does not,
contain any untrue statement of a
<PAGE>
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that such counsel may state that their
opinion and belief is based upon their participation in the preparation of
the Registration Statement and the Prospectus and any amendments and
supplements thereto (other than the documents incorporated by reference
therein) and review and discussion of the contents thereof, but is without
independent check or verification except as specified.
-2-
<PAGE>
SCHEDULE I
DELAYED DELIVERY CONTRACT
, 199_
Dear Sirs:
The undersigned hereby agrees to purchase from Weyerhaeuser Company, a
Washington corporation (the "Company"), and the Company agrees to sell to the
undersigned
$ . . . . . . . . . . . .
principal amount of the Company's [state title of issue] (the "Securities"),
offered by the Company's prospectus dated ________________, 1982 and Prospectus
Supplement dated _______________, 1982, receipt of copies of which are hereby
acknowledged, at a purchase price of $___ per share and on the further terms
and conditions set forth in this contract. The undersigned does not contemplate
selling Securities prior to making payment therefor.
The undersigned will purchase from the Company the numbers of
Securities on the delivery dates set forth below:
Delivery
Date Number of Shares
------ ----------------
________________________ $ _______________________________
________________________ $ _______________________________
________________________ $ _______________________________
Each such date on which Securities are to be purchased hereunder is hereinafter
referred to as a "Delivery Date".
Payment for the Securities which the undersigned has agreed to
purchase on each Delivery Date shall be made to the Company or its order by
certified or official bank check in New York Clearing House funds at the office
of ________________________, New York, N.Y., at 10:00 A.M. (New
<PAGE>
York time) on the Delivery Date, upon delivery to the undersigned of the
Securities to be purchased by the undersigned on the Delivery Date, in such
numbers and registered in such names as the undersigned may designate by written
or telegraphic communication addressed to the Company not less than five full
business days prior to the Delivery Date.
The obligation of the undersigned to take delivery of and make payment
for the Securities on the Delivery Date shall be subject to the conditions that
(1) the purchase of Securities to be made by the undersigned shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which the
undersigned is subject and (2) the Company shall have sold, and delivery shall
have taken place to the underwriters (the "Underwriters") named in the
Prospectus Supplement referred to above of, such part of the Securities as is to
be sold to them. Promptly after completion of sale and delivery to the
Underwriters, the Company will mail or deliver to the undersigned at its address
set forth below notice to such effect, accompanied by a copy of the opinion of
counsel for the Company delivered to the Underwriters in connection therewith.
Failure to take delivery of and make payment for Securities by any
purchaser under any other Delayed Delivery Contract shall not relieve the
undersigned of its obligations under this contract.
This contract will inure to the benefit of and be binding upon the
parties hereto and their respective successors, but will not be assignable by
either party hereto without the written consent of the other.
If this contract is acceptable to the Company, it is requested that
the Company sign the form of acceptance below and mail or deliver one of the
counterparts hereof to the undersigned at its address set forth below. This will
become a binding contract, as of the date first above written, between the
Company and the undersigned when such counterpart is so mailed or delivered.
-2-
<PAGE>
This contract shall be governed by and construed in accordance with
the laws of the State of New York.
Yours very truly,
__________________________
(Purchaser)
By_________________________
_________________________
(Title)
_________________________
_________________________
(Address)
Accepted:
Weyerhaeuser Company
By_________________________
-3-
<PAGE>
PURCHASER--PLEASE COMPLETE AT TIME OF SIGNING
The name and telephone and department of the representative of the
Purchaser with whom details of delivery on the Delivery Date may be discussed is
as follows: (Please print.)
Telephone No.
Name (Including Area Code) Department
---- --------------------- ----------
_______________________ ______________________ __________________
_______________________ ______________________ __________________
_______________________ ______________________ __________________
_______________________ ______________________ __________________
-4-
<PAGE>
EXHIBIT 1(c)
WEYERHAEUSER COMPANY
$
Medium-Term Notes, Series
Due from 9 Months from Date of Issue
U.S. DISTRIBUTION AGREEMENT
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Dear Sirs:
Weyerhaeuser Company, a Washington corporation (the "Company"),
confirms its agreement with each of you with respect to the issue and sale from
time to time by the Company of up to $ (or the equivalent thereof
in one or more foreign currencies or composite currencies) aggregate initial
public offering price of its medium-term notes due from 9 months from date of
issue (the "Notes"). The Notes will be issued under an Indenture dated as of
April 1, 1986 (as amended, the "Indenture") between the Company and Chemical
Bank, as Trustee (the "Trustee"), and will have the maturities, interest rates,
redemption provisions, if any, and other terms as set forth in supplements to
the Basic Prospectus referred to below. With respect to the issue and sale by
the Company on or after the date hereof of the Notes, the Agreement amends,
supplements and restates the U.S. Distribution Agreement between each of you and
the Company dated February 15, 1991, as amended on April 27, 1993, relating to
the Company's Medium-Term Notes, Series __.
The Company hereby appoints Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), Goldman, Sachs & Co. and J.P. Morgan Securities Inc. (individually,
an "Agent" and
1
<PAGE>
collectively, the "Agents") as its agents, subject to Section 12, for the
purpose of soliciting and receiving offers to purchase Notes from the Company by
others and, on the basis of the representations and warranties herein contained,
but subject to the terms and conditions herein set forth, each Agent agrees to
use reasonable efforts to solicit and receive offers to purchase Notes upon
terms acceptable to the Company at such times and in such amounts as the Company
shall from time to time specify. In addition, any Agent may also purchase Notes
as principal pursuant to the terms of a terms agreement relating to such sale (a
"Terms Agreement") in accordance with the provisions of Section 2(b) hereof.
The Company has filed with the Securities and Exchange Commission (the
"Commission") one or more registration statements, including a prospectus,
relating to the Notes. Such registration statements, including the exhibits
thereto, as amended at the Commencement Date (as hereinafter defined), are
hereinafter referred to as the "Registration Statement." The Company proposes
to file with the Commission from time to time, pursuant to Rule 424 under the
Securities Act of 1933, as amended (the "Securities Act"), supplements to the
prospectus included in the Registration Statement that will describe certain
terms of the Notes. The prospectus in the form in which it appears in the
Registration Statement is hereinafter referred to as the "Basic Prospectus."
The term "Prospectus" means the Basic Prospectus together with the prospectus
supplement or supplements (each a "Prospectus Supplement") specifically relating
to Notes, as filed with, or transmitted for filing to, the Commission pursuant
to Rule 424. As used herein, the terms "Basic Prospectus" and "Prospectus"
shall include in each case the documents, if any, incorporated by reference
therein. The terms "supplement," "amendment" and "amend" as used herein shall
include all documents that are deemed to be incorporated by reference in the
Prospectus that are filed subsequent to the date of the Basic Prospectus by the
Company with the Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
1. Representations and Warranties. The Company represents and
------------------------------
warrants to and agrees with each Agent as of the Commencement Date, as of each
date on which an Agent solicits offers to purchase Notes or on which the Company
accepts an offer to purchase Notes (including any purchase by an Agent pursuant
to a Terms Agreement), as of each date the Company issues and delivers Notes and
as of each date the Registration Statement or the Basic Prospectus is amended or
supplemented, as follows (it being understood that such representations,
warranties and agreements shall be deemed to relate to the Registration
Statement, the Basic
2
<PAGE>
Prospectus and the Prospectus, each as amended or supplemented to each such
date):
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or will
comply when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder, (ii) each part of
the Registration Statement, when such part became effective, did not contain,
and each such part, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus comply, and, as
amended or supplemented, if applicable, will comply in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iv) the Prospectus does not contain and, as amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that (1) the representations and warranties set forth in this
Section 1(b) do not apply (A) to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to an Agent
furnished to the Company in writing by such Agent expressly for use therein or
(B) to that part of the Registration Statement that constitutes the Statement of
Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"), of the Trustee and (2) the
representations and warranties set forth in clauses (iii) and (iv) above, when
made as of the Commencement Date or as of any date on which an Agent solicits
offers to purchase Notes or on which the Company accepts an offer to purchase
Notes, shall be deemed not to cover information concerning an offering of
particular Notes to the extent such information will be set forth in a
supplement to the Basic Prospectus.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing
3
<PAGE>
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(e) Each of this Agreement and any applicable Written Terms Agreement
(as hereinafter defined) has been duly authorized, executed and delivered by the
Company.
(f) The Indenture has been duly qualified under the Trust Indenture
Act and has been duly authorized, executed and delivered by the Company and is a
valid and binding agreement of the Company, enforceable in accordance with its
terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(g) The Notes have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and delivered
to and duly paid for by the purchasers thereof, will be entitled to the benefits
of the Indenture and will be valid and binding obligations of the Company,
enforceable in accordance with their respective terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(h) The execution and delivery by the Company of this Agreement, the
Notes, the Indenture and any applicable Written Terms Agreement, and the
performance by the Company of its obligations under this Agreement, the Notes,
the Indenture and any applicable Terms Agreement will not contravene any
provision of applicable law or the articles
4
<PAGE>
of incorporation or bylaws of the Company or any agreement or other instrument
binding upon the Company or any of its subsidiaries that is material to the
Company and its subsidiaries, taken as a whole, or any judgment, order or decree
of any governmental body, agency or court having jurisdiction over the Company
or any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, the Notes,
the Indenture and any applicable Terms Agreement, except such as may be required
by the securities or Blue Sky laws of the various states in connection with the
offer and sale of the Notes and except such as are specified and have been
obtained.
(i) Other than changes in operating results arising in the ordinary
course of business, there has been no material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the business, assets, operations or prospects, of
the Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus.
(j) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed or incorporated by reference as exhibits to the
Registration Statement that are not described, filed or incorporated as
required.
Notwithstanding the foregoing, the representations and warranties set
forth in Section 1(b)(iii) and (iv), (g) (except as to due authorization of the
Notes) and (h), when made as of the Commencement Date, or as of any date on
which an Agent solicits offers to purchase Notes, with respect to any Notes the
payments of principal or interest on which will be determined by reference to
one or more currency exchange rates, commodity prices, equity indices or other
factors, shall be deemed not to address the application of the Commodity
Exchange Act, as amended, or the rules, regulations or interpretations of the
Commodity Futures Trading Commission.
2. Solicitations as Agent; Purchases as Principal.
----------------------------------------------
5
<PAGE>
(a) Solicitations as Agent. In connection with an Agent's actions as
----------------------
agent hereunder, such Agent agrees to use reasonable efforts to solicit offers
to purchase Notes upon the terms and conditions set forth in the Prospectus as
then amended or supplemented.
The Company reserves the right, in its sole discretion, to instruct
the Agents to suspend at any time, for any period of time or permanently, the
solicitation of offers to purchase Notes. Upon receipt of at least one business
day's prior notice from the Company, the Agents will forthwith suspend
solicitations of offers to purchase Notes from the Company until such time as
the Company has advised the Agents that such solicitation may be resumed. While
such solicitation is suspended, the Company shall not be required to deliver any
certificates, opinions or letters in accordance with Sections 5(a), 5(b) and
5(c); provided, however, that if the Registration Statement or Prospectus is
-------- -------
amended or supplemented during the period of suspension (other than by an
amendment or supplement providing solely for a change in the interest rates,
redemption provisions, amortization schedules or maturities offered on the Notes
or for a change the Agents deem to be immaterial), no Agent shall be required to
resume soliciting offers to purchase Notes until the Company has delivered such
certificates, opinions and letters as such Agent may reasonably request.
The Company agrees to pay to each Agent, as consideration for the sale
of each Note resulting from a solicitation made or an offer to purchase received
by such Agent, a commission in the form of a discount from the purchase price of
such Note equal to the percentage set forth below of the purchase price of such
Note:
<TABLE>
<CAPTION>
Term Commission Rate
---- ---------------
<S> <C>
From 9 months to less than 1 year .125%
From 1 year to less than 18 months .150%
From 18 months to less than 2 years .200%
From 2 years to less than 3 years .250%
From 3 years to less than 4 years .350%
From 4 years to less than 5 years .450%
From 5 years to less than 6 years .500%
From 6 years to less than 7 years .550%
From 7 years to less than 10 years .600%
From 10 years to less than 15 years .625%
From 15 years to less than 20 years .700%
From 20 years to less than 30 years .750%
30 years or more to be negotiated
</TABLE>
Each Agent shall communicate to the Company, orally or in writing,
each offer to purchase Notes received by such Agent as agent that in its
judgment should be
6
<PAGE>
considered by the Company. The Company shall have the sole right to accept
offers to purchase Notes and may reject any offer in whole or in part. Each
Agent shall have the right to reject any offer to purchase Notes that it
considers to be unacceptable, and any such rejection shall not be deemed a
breach of its agreements contained herein. The procedural details relating to
the issue and delivery of Notes sold by the Agents as agents and the payment
therefor shall be as set forth in the Administrative Procedures (as hereinafter
defined).
(b) Purchases as Principal. Each sale of Notes to an Agent as
----------------------
principal shall be made in accordance with the terms of this Agreement. In
connection with each such sale, the Company will enter into a Terms Agreement
that will provide for the sale of such Notes to and the purchase thereof by such
Agent. Each Terms Agreement will take the form of either (i) a written
agreement between such Agent and the Company, which may be substantially in the
form of Exhibit A hereto (a "Written Terms Agreement"), or (ii) an oral
agreement between such Agent and the Company confirmed in writing by such Agent
to the Company.
An Agent's commitment to purchase Notes pursuant to a Terms Agreement
shall be deemed to have been made on the basis of the representations and
warranties of the Company herein contained and shall be subject to the terms and
conditions herein set forth. Each Terms Agreement shall specify the principal
amount of Notes to be purchased by such Agent pursuant thereto, the maturity
date of such Notes, the price to be paid to the Company for such Notes, the
interest rate and interest rate formula, if any, applicable to such Notes and
any other terms of such Notes. Each such Terms Agreement may also specify any
requirements for officers' certificates, opinions of counsel and letters from
the independent public accountants of the Company pursuant to Section 4 hereof.
A Terms Agreement may also specify certain provisions relating to the reoffering
of such Notes by such Agent.
Each Terms Agreement shall specify the time and place of delivery of
and payment for such Notes. Unless otherwise specified in a Terms Agreement,
the procedural details relating to the issue and delivery of Notes purchased by
an Agent as principal and the payment therefor shall be as set forth in the
Administrative Procedures. Each date of delivery of and payment for Notes to be
purchased by an Agent pursuant to a Terms Agreement is referred to herein as a
"Settlement Date."
Unless otherwise specified in a Terms Agreement, if an Agent is
purchasing Notes as principal such Agent may resell such Notes to other dealers.
Any such sales may be
7
<PAGE>
at a discount, which shall not exceed the amount set forth in the Prospectus
Supplement relating to such Notes.
(c) Administrative Procedures. The Agents and the Company agree to
-------------------------
perform the respective duties and obligations specifically provided to be
performed in the Medium-Term Notes Administrative Procedures (attached hereto as
Exhibit B) (the "Administrative Procedures"), as amended from time to time. The
Administrative Procedures may be amended only by written agreement of the
Company and the Agents.
(d) Delivery. The documents required to be delivered by Section 4 of
--------
this Agreement as a condition precedent to each Agent's obligation to begin
soliciting offers to purchase Notes as an agent of the Company shall be
delivered at the office of Davis Polk & Wardwell, counsel for the Agents, not
later than 3:00 p.m., New York time, on the date hereof, or at such other time
and/or place as the Agents and the Company may agree upon in writing, but in no
event later than the day prior to the earlier of (i) the date on which the
Agents begin soliciting offers to purchase Notes and (ii) the first date on
which the Company accepts any offer by an Agent to purchase Notes pursuant to a
Terms Agreement. The date of delivery of such documents is referred to herein
as the "Commencement Date."
(e) Obligations Several. The Company acknowledges that the
-------------------
obligations of the Agents under this Agreement are several and not joint.
3. Agreements. The Company agrees with each Agent that:
----------
(a) Prior to the termination of the offering of the Notes pursuant to
this Agreement or any Terms Agreement, the Company will not file any Prospectus
Supplement relating to the Notes or any amendment to the Registration Statement
unless the Company has previously furnished to the Agents copies thereof for
their review and will not file any such proposed supplement or amendment to
which the Agents reasonably object; provided, however, that (i) the foregoing
-------- -------
requirement shall not apply to any of the Company's periodic filings with the
Commission required to be filed pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, copies of which filings the Company will cause to be delivered
to the Agents promptly after being transmitted for filing with the Commission
and (ii) any Prospectus Supplement that merely sets forth the terms or a
description of particular Notes shall only be reviewed and approved by the Agent
or Agents offering such Notes. Subject to the foregoing sentence, the Company
will promptly cause each Prospectus Supplement to be filed with or transmitted
for
8
<PAGE>
filing to the Commission in accordance with Rule 424(b) under the Securities
Act. The Company will promptly advise the Agents (i) of the filing of any
amendment or supplement to the Basic Prospectus (except that notice of the
filing of an amendment or supplement to the Basic Prospectus that merely sets
forth the terms or a description of particular Notes shall only be given to the
Agent or Agents offering such Notes), (ii) of the filing and effectiveness of
any amendment to the Registration Statement, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Basic Prospectus or for any additional information, (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the institution or threatening of any proceeding
for that purpose and (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order or notice of suspension of qualification and, if issued, to
obtain as soon as possible the withdrawal thereof. If the Basic Prospectus is
amended or supplemented as a result of the filing under the Exchange Act of any
document incorporated by reference in the Prospectus, no Agent shall be
obligated to solicit offers to purchase Notes so long as it is not reasonably
satisfied with such document.
(b) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Securities Act, any event occurs or condition
exists as a result of which the Prospectus, as then amended or supplemented,
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances when the Prospectus, as then amended or supplemented, is delivered
to a purchaser, not misleading, or if, in the opinion of the Agents or in the
opinion of the Company, it is necessary at any time to amend or supplement the
Prospectus, as then amended or supplemented, to comply with applicable law, the
Company will immediately notify the Agents by telephone (with confirmation in
writing) to suspend solicitation of offers to purchase Notes and, if so notified
by the Company, the Agents shall forthwith suspend such solicitation and cease
using the Prospectus, as then amended or supplemented. If the Company shall
decide to amend or supplement the Registration Statement or Prospectus, as then
amended or supplemented, it shall so advise the Agents promptly by telephone
(with confirmation in writing) and, at its expense, shall prepare and cause to
be filed promptly with the Commission an amendment or supplement to the
Registration Statement or Prospectus, as then amended or
9
<PAGE>
supplemented, satisfactory in all respects to the Agents, that will correct such
statement or omission or effect such compliance and will supply such amended or
supplemented Prospectus to the Agents in such quantities as they may reasonably
request. If such amendment or supplement and any documents, certificates,
opinions and letters furnished to the Agents pursuant to paragraph (f) below and
Sections 5(a), 5(b) and 5(c) in connection with the preparation and filing of
such amendment or supplement are satisfactory in all respects to the Agents,
upon the filing with the Commission of such amendment or supplement to the
Prospectus or upon the effectiveness of an amendment to the Registration
Statement, the Agents will resume the solicitation of offers to purchase Notes
hereunder. Notwithstanding any other provision of this Section 3(b), until the
distribution of any Notes an Agent may own as principal has been completed, if
any event described above in this paragraph (b) occurs, the Company will, at its
own expense, forthwith prepare and cause to be filed promptly with the
Commission an amendment or supplement to the Registration Statement or
Prospectus, as then amended or supplemented, satisfactory in all respects to
such Agent, will supply such amended or supplemented Prospectus to such Agent in
such quantities as it may reasonably request and shall furnish to such Agent
pursuant to paragraph (f) below and Sections 5(a), 5(b) and 5(c) such documents,
certificates, opinions and letters as it may request in connection with the
preparation and filing of such amendment or supplement.
(c) The Company will make generally available to holders of Notes
issued pursuant to this Agreement and to the Agents as soon as practicable
earning statements that satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations of the Commission thereunder
covering twelve month periods beginning, in each case, not later than the first
day of the Company's fiscal quarter next following the "effective date" (as
defined in Rule 158 under the Securities Act) of the Registration Statement with
respect to each sale of Notes. Such earning statements shall be made available
as soon as practicable after the close of the period covered thereby.
(d) The Company will furnish to each Agent, without charge, two
conformed copies of the Registration Statement, including exhibits and all
amendments thereto, and during the period mentioned in Section 3(b) above, as
many copies of the Prospectus, any documents incorporated by reference therein
and any supplements and amendments thereto as such Agent may reasonably request.
(e) The Company will endeavor to qualify the Notes for offer and sale
under the securities or Blue Sky
10
<PAGE>
laws of such jurisdictions as the Agents shall reasonably request and to
maintain such qualifications for as long as the Agents shall reasonably request.
(f) During the term of this Agreement, the Company shall furnish to
the Agents such relevant documents and certificates of officers of the Company
relating to the business, operations and affairs of the Company, the
Registration Statement, the Basic Prospectus, any amendments or supplements
thereto, the Indenture, the Notes, this Agreement, the Administrative
Procedures, any Terms Agreement and the performance by the Company of its
obligations hereunder or thereunder as the Agents may from time to time
reasonably request.
(g) The Company shall notify the Agents promptly in writing of any
downgrading, or of its receipt of any notice of any intended or potential
downgrading or of any review for possible change that does not indicate the
direction of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the Securities Act.
(h) The Company will, whether or not any sale of Notes is
consummated, pay all expenses incident to the performance of its obligations
under this Agreement and any Terms Agreement, including: (i) the preparation
and filing of the Registration Statement and the Prospectus and all amendments
and supplements thereto, (ii) the preparation, issuance and delivery of the
Notes, (iii) the fees and disbursements of the Company's counsel and accountants
and of the Trustee and its counsel, (iv) the qualification of the Notes under
securities or Blue Sky laws in accordance with the provisions of Section 3(e),
including filing fees and the fees and disbursements of counsel for the Agents
in connection therewith and in connection with the preparation of any Blue Sky
or Legal Investment Memoranda, (v) the printing and delivery to the Agents in
quantities as hereinabove stated of copies of the Registration Statement and all
amendments thereto and of the Prospectus and any amendments or supplements
thereto, (vi) the printing and delivery to the Agents of copies of the Indenture
and any Blue Sky or Legal Investment Memoranda, (vii) any fees charged by rating
agencies for the rating of the Notes, (viii) the fees and expenses, if any,
incurred with respect to any filing with the National Association of Securities
Dealers, Inc., (ix) the fees and disbursements of one counsel for the Agents
incurred in connection with the offering and sale of the Notes, including any
opinions to be rendered by such counsel hereunder, and (x) any out-of-pocket
expenses incurred by the Agents; provided that
--------
11
<PAGE>
any advertising expenses incurred by the Agents shall have been approved by the
Company.
(i) Between the date of any Terms Agreement and the Settlement Date
with respect to such Terms Agreement, the Company will not, without such Agent's
prior consent, offer, sell, contract to sell or otherwise dispose of any debt
securities of the Company substantially similar to such Notes (other than (i)
the Notes that are to be sold pursuant to such Terms Agreement, (ii) Notes
previously agreed to be sold by the Company and (iii) commercial paper issued in
the ordinary course of business), except as may otherwise be provided in such
Terms Agreement.
4. Conditions of the Obligations of the Agents. Each Agent's
-------------------------------------------
obligation to solicit offers to purchase Notes as agent of the Company, each
Agent's obligation to purchase Notes pursuant to any Terms Agreement and the
obligation of any other purchaser to purchase Notes will be subject to the
accuracy of the representations and warranties on the part of the Company
herein, to the accuracy of the statements of the Company's officers made in each
certificate furnished pursuant to the provisions hereof and to the performance
and observance by the Company of all covenants and agreements herein contained
on its part to be performed and observed (in the case of an Agent's obligation
to solicit offers to purchase Notes, at the time of such solicitation, and, in
the case of an Agent's or any other purchaser's obligation to purchase Notes, at
the time the Company accepts the offer to purchase such Notes and at the time of
issuance and delivery) and (in each case) to the following additional conditions
precedent when and as specified:
(a) Prior to such solicitation or purchase, as the case may be:
(i) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise,
or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus, as
amended or supplemented at the time of such solicitation or at the time
such offer to purchase was made, that, in the judgment of the relevant
Agent or such other purchaser, as the case may be, is material and adverse
and that makes it, in the judgment of such Agent or such purchaser,
impracticable to market the Notes on the terms and in the manner
contemplated by the Prospectus, as so amended or supplemented;
(ii) there shall not have occurred any (A) suspension or material
limitation of trading
12
<PAGE>
generally on or by, as the case may be, the New York Stock Exchange, the
American Stock Exchange, the National Association of Securities Dealers,
Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange
or the Chicago Board of Trade, (B) suspension of trading of any securities
of the Company on any exchange or in any over-the-counter market, (C)
declaration of a general moratorium on commercial banking activities in New
York by either Federal or New York State authorities or (D) any outbreak or
escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the relevant Agent or such
other purchaser, as the case may be, is material and adverse and, in the
case of any of the events described in clauses (ii)(A) through (D), such
event, singly or together with any other such event, makes it, in the
judgment of such Agent or such purchaser, impracticable to market the Notes
on the terms and in the manner contemplated by the Prospectus, as amended
or supplemented at the time of such solicitation or at the time such offer
to purchase was made; and
(iii) there shall not have been any downgrading, nor shall any notice
have been given of any intended or potential downgrading or of any review
for a possible change that does not indicate the direction of the possible
change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act;
(A) except, in each case described in paragraph (i), (ii) or (iii) above, as
disclosed to the relevant Agent in writing by the Company prior to such
solicitation or, in the case of a purchase of Notes, as disclosed to the
relevant Agent or such other purchaser, as the case may be, before the offer to
purchase such Notes was made or (B) unless in each case described in (ii) above,
the relevant event shall have occurred and been known to the relevant Agent
prior to such solicitation or, in the case of a purchase of Notes, to the
relevant Agent or such other purchaser, as the case may be, before the offer to
purchase such Notes was made.
(b) On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the relevant Agents shall have
received:
(i) The opinion, dated as of such date, of Sandy D. McDade, Secretary
and Senior Legal Counsel for the Company to the effect that:
13
<PAGE>
(A) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus,
as then amended or supplemented, and is duly qualified to transact
business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole;
(B) each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus, as then amended or supplemented, and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole;
(C) each of this Agreement and any applicable Written Terms
Agreement has been duly authorized, executed and delivered by the
Company;
(D) the Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability;
(E) the Notes have been duly authorized and, if executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and duly paid for by the purchasers thereof on the date
of such opinion, would be entitled to the benefits of the Indenture
and would be valid and
14
<PAGE>
binding obligations of the Company, enforceable in accordance with
their respective terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of
general applicability;
(F) the execution and delivery by the Company of this Agreement,
the Notes, the Indenture and any applicable Written Terms Agreement,
and the performance by the Company of its obligations under this
Agreement, the Notes, the Indenture and any applicable Terms Agreement
will not contravene any provision of applicable law or the articles of
incorporation or bylaws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company
and its subsidiaries, taken as a whole, or any judgment, order or
decree of any governmental body, agency or court having jurisdiction
over the Company or any subsidiary, and no consent, approval,
authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its
obligations under this Agreement, the Notes, the Indenture and any
applicable Terms Agreement, except such as may be required by the
federal securities laws or the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Notes;
(G) the statements (1) in the Prospectus, as then amended or
supplemented, under the captions "Description of Notes", "Plan of
Distribution" and "Description of Debt Securities", (2) in the
Registration Statement under Item 15, (3) in "Item 3 - Legal
Proceedings" of the Company's most recent annual report on Form 10-K
incorporated by reference in the Prospectus and (4) in "Item 1 -
Legal Proceedings" of Part II of the Company's quarterly reports on
Form 10-Q, if any, filed since such annual report, in each case
insofar as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents
and proceedings and fairly summarize the matters referred to therein;
15
<PAGE>
(H) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus, as then amended or supplemented, and are not so described
or of any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus, as then amended or supplemented, or to be filed or
incorporated by reference as exhibits to such Registration Statement
that are not described, filed or incorporated as required; and
(I) such counsel (1) is of the opinion that each document, if
any, filed pursuant to the Exchange Act and incorporated by reference
in the Prospectus, as then amended or supplemented (except for
financial statements and schedules included therein as to which such
counsel need not express any opinion), complied when so filed as to
form in all material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder, (2) believes that
(except for financial statements and schedules as to which such
counsel need not express any belief and except for that part of the
Registration Statement that constitutes the Form T-1 heretofore
referred to) each part of the Registration Statement, as then amended,
if applicable, when such part became effective did not, and as of the
date such opinion is delivered, does not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (3) is of the opinion that the Registration Statement and
Prospectus, as then amended or supplemented, if applicable (except for
financial statements and schedules included therein as to which such
counsel need not express any opinion), comply as to form in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (4) believes that (except
for financial statements and schedules as to which such counsel need
not express any belief) the Prospectus, as then amended or
supplemented, if applicable, as of the date such opinion is delivered
does not contain any untrue statement of a material fact or omit to
state a material fact
16
<PAGE>
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided
--------
that in the case of an opinion delivered on the Commencement Date or
pursuant to Section 5(b), the opinion and belief set forth in clauses
(3) and (4) above shall be deemed not to cover information concerning
an offering of particular Notes to the extent such information will be
set forth in a supplement to the Basic Prospectus.
(ii) The opinion, dated as of such date, of Davis Polk & Wardwell,
counsel for the Agents, covering the matters in subparagraphs (C), (D), (E)
and (G) (with respect to statements in the Prospectus, as then amended or
supplemented, under the captions "Description of Notes", "Plan of
Distribution" and "Description of Debt Securities") and clauses (2), (3)
and (4) of subparagraph (I) in paragraph (b)(i) above.
(iii) The opinion, dated as of such date, of Davis Polk & Wardwell,
special tax counsel for the Company, to the effect that such counsel is of
the opinion ascribed to it in the Prospectus, as then amended or
supplemented, under the caption "United States Federal Taxation".
Notwithstanding the foregoing, the opinions described in subparagraphs
(E) (except as to due authorization of the Notes), (F), (G)(1) and (I)(3) and
(4) of paragraph (b)(i) above, when contained in an opinion delivered on the
Commencement Date or pursuant to Section 5(b), shall be deemed not to address
the application of the Commodity Exchange Act, as amended, or the rules,
regulations or interpretations of the Commodity Futures Trading Commission to
Notes the payments of principal or interest on which will be determined by
reference to one or more currency exchange rates, commodity prices, equity
indices or other factors.
With respect to subparagraph (I) of paragraph (b)(i) above, counsel
for the Company may state that his opinion and belief are based upon his
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and documents incorporated therein by
reference and review and discussion of the contents thereof, but are without
independent check or verification, except as specified. With respect to clauses
(2), (3) and (4) of subparagraph (I) of paragraph (b)(i) above, Davis Polk &
Wardwell may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto (but not including
17
<PAGE>
documents incorporated therein by reference) and review and discussion of the
contents thereof (including documents incorporated therein by reference), but
are without independent check or verification, except as specified.
(c) On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the relevant Agents shall have
received a certificate, dated the Commencement Date or such Settlement Date, as
the case may be, signed by an executive officer of the Company to the effect set
forth in subparagraph (a)(iii) above and to the effect that the representations
and warranties of the Company contained herein are true and correct as of such
date and that the Company has complied with all of the agreements and satisfied
all of the conditions on its part to be performed or satisfied on or before such
date.
The officer signing and delivering such certificate may rely upon the
best of his knowledge as to proceedings threatened.
(d) On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the Company's independent
public accountants shall have furnished to the relevant Agents a letter or
letters, dated as of the Commencement Date or such Settlement Date, as the case
may be, in form and substance satisfactory to such Agents containing statements
and information of the type ordinarily included in accountant's "comfort
letters" to underwriters with respect to the financial statements and certain
financial information contained in or incorporated by reference into the
Prospectus, as then amended or supplemented.
(e) On the Commencement Date and on each Settlement Date, the Company
shall have furnished to the relevant Agents such appropriate further
information, certificates and documents as they may reasonably request.
5. Additional Agreements of the Company. (a) Each time the
------------------------------------
Registration Statement or Prospectus is amended or supplemented (other than by
an amendment or supplement providing solely for a change in the interest rates,
redemption provisions, amortization schedules or maturities offered on the Notes
or for a change the Agents deem to be immaterial), the Company will deliver or
cause to be delivered forthwith to each Agent a certificate signed by an
executive officer of the Company, dated the date of such amendment or
supplement, as the case may be, in form reasonably satisfactory to the Agents,
of the same tenor as the certificate referred to in Section 4(c) relating to the
Registration Statement or the Prospectus as amended or supplemented to the time
of delivery of such certificate.
18
<PAGE>
(b) Each time the Company furnishes a certificate pursuant to Section
5(a), the Company will furnish or cause to be furnished forthwith to each Agent
a written opinion of counsel for the Company. Any such opinion shall be dated
the date of such amendment or supplement, as the case may be, shall be in a form
satisfactory to the Agents and shall be of the same tenor as the opinion
referred to in Section 4(b)(i), but modified to relate to the Registration
Statement and the Prospectus as amended and supplemented to the time of delivery
of such opinion. In lieu of such opinion, counsel last furnishing such an
opinion to an Agent may furnish to each Agent a letter to the effect that such
Agent may rely on such last opinion to the same extent as though it were dated
the date of such letter (except that statements in such last opinion will be
deemed to relate to the Registration Statement and the Prospectus as amended or
supplemented to the time of delivery of such letter.)
(c) Each time the Registration Statement or the Prospectus is amended
or supplemented to set forth amended or supplemental financial information or
such amended or supplemental information is incorporated by reference in the
Prospectus, the Company shall cause its independent public accountants forthwith
to furnish each Agent with a letter, dated the date of such amendment or
supplement, as the case may be, in form satisfactory to the Agents, of the same
tenor as the letter referred to in Section 4(d), with regard to the amended or
supplemental financial information included or incorporated by reference in the
Registration Statement or the Prospectus as amended or supplemented to the date
of such letter.
(d) Each time the Company intends to issue a Note, the payment of
principal or interest on which is to be determined by reference to one or more
currency exchange rates, commodity prices, equity indices or other factors, (i)
the Company shall furnish or cause to by furnished an opinion of counsel for the
Company on the corresponding Settlement Date to the effect set forth in Section
4(b)(i) hereof, and (ii) Davis Polk & Wardwell shall deliver an opinion on the
corresponding Settlement Date to the effect set forth in Section 4(b)(ii)
hereof, both as modified to relate to the Registration Statement and the
Prospectus as then amended and supplemented. Such opinions shall be dated the
corresponding Settlement Date, shall be in a form reasonable satisfactory to the
Agents, and delivery of such opinions shall be a condition of the purchasers
obligation to purchase such Notes.
6. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Agent and each person, if any, who controls
such Agent within the meaning of either Section 15 of the Securities Act or
19
<PAGE>
Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or in any
amendment thereof or the Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to such Agent furnished to the Company in writing by
such Agent expressly for use therein.
(b) Each Agent agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to such Agent, but
only with reference to information relating to such Agent furnished to the
Company in writing by such Agent expressly for use in the Registration Statement
or the Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to
20
<PAGE>
any local counsel) for all such indemnified parties and that all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by Morgan Stanley or, if Morgan Stanley is not an indemnified party,
by the Agents that are indemnified parties, in the case of parties indemnified
pursuant to paragraph (a) above, and by the Company, in the case of parties
indemnified pursuant to paragraph (b) above. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 6 is unavailable to an indemnified party or insufficient
in respect of any losses, claims, damages or liabilities referred to therein in
connection with any offering of Notes, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and each Agent on the other hand from the offering of such Notes or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and each Agent on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and each Agent on the other hand in
connection with the offering of such Notes shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of such Notes
(before deducting expenses) received by the Company bear to the total discounts
and commissions received by each Agent in respect thereof. The relative fault of
the Company on the one hand and of each Agent on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement
21
<PAGE>
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by such Agent and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. Each Agent's obligation to contribute
pursuant to this Section 6 shall be several (in the proportion that the
principal amount of the Notes the sale of which by or through such Agent gave
rise to such losses, claims, damages or liabilities bears to the aggregate
principal amount of the Notes the sale of which by or through any Agent gave
rise to such losses, claims, damages or liabilities) and not joint.
(e) The Company and the Agents agree that it would not be just or
equitable if contribution pursuant to this Section 6 were determined by pro rata
--- ----
allocation (even if the Agents were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6, no Agent shall be required to contribute any amount in excess of the
amount by which the total price at which the Notes referred to in paragraph (d)
above that were offered and sold to the public through such Agent exceeds the
amount of any damages that such Agent has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
remedies provided for in this Section 6 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any indemnified party
at law or in equity.
7. Position of the Agents. In acting under this Agreement and in
----------------------
connection with the sale of any Notes by the Company (other than Notes sold to
an Agent pursuant to a Terms Agreement), each Agent is acting solely as agent of
the Company and does not assume any obligation towards or relationship of agency
or trust with any purchaser of Notes. An Agent shall make reasonable efforts to
assist the Company in obtaining performance by each purchaser whose offer to
purchase Notes has been solicited by such Agent and accepted by the Company, but
such Agent shall not have any liability to the Company in the event any such
purchase is not consummated for any reason. If the Company shall default in
22
<PAGE>
its obligations to deliver Notes to a purchaser whose offer it has accepted, the
Company shall hold the relevant Agent harmless against any loss, claim, damage
or liability arising from or as a result of such default and shall, in
particular, pay to such Agent the commission it would have received had such
sale been consummated.
8. Termination. This Agreement may be terminated at any time by the
-----------
Company or, as to any Agent, by the Company or such Agent upon the giving of
written notice of such termination to the other parties hereto, but without
prejudice to any rights, obligations or liabilities of any party hereto accrued
or incurred prior to such termination. The termination of this Agreement shall
not require termination of any Terms Agreement, and the termination of any such
Terms Agreement shall not require termination of this Agreement. If this
Agreement is terminated, the provisions of the third paragraph of Section 2(a),
Section 2(e), the last sentence of Section 3(b) and Sections 3(c), 3(h), 6, 7,
9, 11 and 14 shall survive; provided that if at the time of termination an offer
--------
to purchase Notes has been accepted by the Company but the time of delivery to
the purchaser or its agent of such Notes has not occurred, the provisions of
Sections 2(b), 2(c), 3(a), 3(b), 3(e), 3(f), 3(g), 3(i), 4 and 5 shall also
survive until such delivery has been made.
9. Representations and Indemnities to Survive. The respective
------------------------------------------
indemnity and contribution agreements, representations, warranties and other
statements of the Company, its officers and the Agents set forth in or made
pursuant to this Agreement or any Terms Agreement will remain in full force and
effect, regardless of any termination of this Agreement or any such Terms
Agreement, any investigation made by or on behalf of an Agent or the Company or
any of the officers, directors or controlling persons referred to in Section 6
and delivery of and payment for the Notes.
10. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to Morgan Stanley, will be mailed,
delivered or telefaxed and confirmed to it at 1251 Avenue of the Americas, New
York, New York 10020, Attention: Peter Cooper -- Investment Banking Information
Center (telephone number 212-703-8385; telefax number 212-703-6476), with a copy
to it at 1221 Avenue of the Americas, New York, New York 10020, Attention:
Manager -- Continuously Offered Products (telephone number 212-296-6700; telefax
number 212-764-7490), if sent to Goldman Sachs & Co., will be mailed, delivered
or telefaxed and confirmed to it at 85 Broad Street, New York, New York 10004,
Attention: Registration Department, (telefax number: 212-809-1583), and
23
<PAGE>
if sent to J.P. Morgan Securities Inc., will be mailed, delivered or telefaxed
and confirmed to it at 60 Wall Street, New York, New York, 10260, Attention:
Medium-Term Note Trading Desk, 3rd Floor (telefax number: 212-648-5907), or, if
sent to the Company, will be mailed, delivered or telefaxed and confirmed to it
at CH2E31 South, Tacoma, Washington 98477, Attention: David R. Edwards (telefax
number: 206-924-3543).
11. Successors. This Agreement and any Terms Agreement will inure to
----------
the benefit of and be binding upon the parties hereto and their respective
successors and the officers, directors and controlling persons referred to in
Section 6 and the purchasers of Notes (to the extent expressly provided in
Section 4), and no other person will have any right or obligation hereunder.
12. Amendments. This Agreement may be amended or supplemented if,
----------
but only if, such amendment or supplement is in writing and is signed by the
Company and each Agent; provided that the Company may from time to time, on 7
--------
days prior written notice to the Agents but without the consent of any Agent,
amend this Agreement to add as a party hereto one or more additional firms
registered under the Exchange Act, whereupon each such firm shall become an
Agent hereunder on the same terms and conditions as the other Agents that are
parties hereto. The Agents shall sign any amendment or supplement giving effect
to the addition of any such firm as an Agent under this Agreement.
13. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
14. Applicable Law. This Agreement will be governed by and construed
--------------
in accordance with the internal laws of the State of New York.
15. Headings. The headings of the sections of this Agreement have
--------
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
24
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Company and you.
Very truly yours,
WEYERHAEUSER COMPANY
By_________________________
Title:
The foregoing Agreement
is hereby confirmed
and accepted as of the
date first above written.
MORGAN STANLEY & CO. INCORPORATED
By_________________________
Title:
___________________________
(Goldman, Sachs & Co.)
J.P. MORGAN SECURITIES INC.
By_________________________
Title:
25
<PAGE>
Exhibit A
WEYERHAEUSER COMPANY
MEDIUM-TERM NOTES, SERIES __
TERMS AGREEMENT
_________________, 19__
Weyerhaeuser Company
Tacoma, Washington 98477
Attention:
Re: Distribution Agreement dated ___________, 199_
(the "Distribution Agreement")
----------------------------------------------
We agree to purchase your Medium-Term Notes having the following terms:
<TABLE>
<CAPTION>
All Notes: Fixed Rate Notes: Floating Rate Notes:
- --------- ---------------- -------------------
<S> <C> <C>
Principal amount: Interest Rate: Base Rate:
Purchase amount: Applicability of Index maturity:
modified payment
upon acceleration:
Price to public: If yes, state Spread:
issue price:
Settlement date Amortization Spread
and time: schedule multiplier:
Event spread: Alternate rate
Place of Event spread:
delivery:
Specified Initial interest
currency: rate:
Maturity date: Initial interest
reset date:
Initial accrual Interest reset
period OID: dates:
Total amount of Maximum interest
OID: rate:
Original yield to Minimum interest
maturity: rate:
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
Optional Interest reset
redemption period:
date(s):
Calculation Interest payment
agent: dates:
Initial
redemption
percentage:
Annual redemption
percentage
decrease:
Other terms:
</TABLE>
The provisions of Sections 1, 2(b), 2(c) and 2(e) and 3
through 6, 9, 10, 11, 13 and 14 of the Distribution Agreement and the
related definitions are incorporated by reference herein and shall be
deemed to have the same force and effect as if set forth in full
herein.
This Agreement is subject to termination in our absolute
discretion on the terms incorporated by reference herein. If this
Agreement is so terminated, the provisions of Sections 2(e), 3(h), 6,
9, 11 and 14 of the Distribution Agreement shall survive for the
purposes of this Agreement.
The following information, opinions, certificates, letters
and documents referred to in Section 4 of the Distribution Agreement
will be required: ________________
[NAME OF AGENT]
By ______________________________
Title:
Accepted:
WEYERHAEUSER COMPANY
By ________________________
Title:
27
<PAGE>
EXHIBIT 4(a)
================================================================================
WEYERHAEUSER COMPANY
AND
CHEMICAL BANK, Trustee
Indenture
Dated as of April 1, 1986
________
================================================================================
<PAGE>
TABLE OF CONTENTS
________
<TABLE>
<CAPTION>
Page
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<S> <C>
PARTIES.................................................. 1
RECITALS
Authorization of Indenture.......................... 1
Compliance with Legal Requirements.................. 1
Purpose of and Consideration for Indenture.......... 1
ARTICLE ONE
DEFINITIONS
SECTION 1.1. Certain Terms Defined..................... 1
Attributable Debt......................... 2
Authorized Newspaper...................... 2
Board of Directors........................ 2
Board Resolution.......................... 2
Business Day.............................. 2
Commission................................ 3
Composite Rate............................ 3
Corporate Trust Office.................... 3
Coupon.................................... 3
Dollar.................................... 3
ECU....................................... 3
Event of Default.......................... 3
Foreign Currency.......................... 4
Holder, holder of Securities,
Securityholder.......................... 4
Indenture................................. 4
Interest.................................. 4
Issuer.................................... 4
Issuer Order.............................. 4
Mortgage.................................. 4
Officers' Certificate..................... 4
Opinion of Counsel........................ 4
Original issue date....................... 5
Original Issue Discount Security.......... 5
Outstanding............................... 5
Person.................................... 6
Principal................................. 6
Registered Security....................... 6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Responsible Officer........................ 6
Security or Securities..................... 6
Subsidiary................................. 6
Trust Indenture Act of 1939................ 6
Trustee.................................... 7
Unregistered Security...................... 7
U.S. Government Obligations................ 7
Vice president............................. 7
Yield to Maturity.......................... 7
ARTICLE TWO
SECURITIES
SECTION 2.1. Forms Generally............................ 7
SECTION 2.2. Forms of Trustee's Certificate
of Authentication........................ 8
SECTION 2.3. Amount Unlimited; Issuable in Series....... 8
SECTION 2.4. Authentication and Delivery of
Securities............................... 11
SECTION 2.5. Execution of Securities.................... 13
SECTION 2.6. Certificate of Authentication.............. 13
SECTION 2.7. Denomination and Date of
Securities; Payments of Interest......... 14
SECTION 2.8. Registration, Transfer and Exchange........ 15
SECTION 2.9. Mutilated, Defaced, Destroyed, Lost
and Stolen Securities.................... 17
SECTION 2.10. Cancellation of Securities;
Destruction Thereof...................... 19
SECTION 2.11. Temporary Securities....................... 19
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1. Payment of Principal and Interest.......... 20
SECTION 3.2. Offices for Payments, etc.................. 21
SECTION 3.3. Appointment to Fill a Vacancy in
Office of Trustee........................ 22
SECTION 3.4. Paying Agents.............................. 22
SECTION 3.5. Written Statement to Trustee............... 23
SECTION 3.6. Limitation on Liens........................ 24
SECTION 3.7. Limitation on Sale and
Lease-back............................... 26
SECTION 3.8. Luxembourg Publications.................... 27
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE
ISSUER AND THE TRUSTEE
SECTION 4.1. Issuer to Furnish Trustee Information
as to Name and Addresses of
Securityholders................................... 27
SECTION 4.2. Presentation and Disclosure of
Securityholders Lists............................. 28
SECTION 4.3. Reports by the Issuer............................... 29
SECTION 4.4. Reports by the Trustee............................. 30
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 5.1. Event of Default Defined; Acceleration
of Maturity; Waiver of Default.................... 32
SECTION 5.2. Collection of Indebtedness by Trustee;
Trustee May Prove Debt............................ 36
SECTION 5.3. Application of Proceeds............................. 39
SECTION 5.4. Suits for Enforcement............................... 40
SECTION 5.5. Restoration of Rights on Abandonment
of Proceedings.................................... 40
SECTION 5.6. Limitations on Suits by
Securityholders................................... 41
SECTION 5.7. Unconditional Right of
Securityholders to Institute
Certain Suits..................................... 42
SECTION 5.8. Powers and Remedies Cumulative;
Delay or Omission Not Waiver of
Default........................................... 42
SECTION 5.9. Control by Holders of Securities.................... 42
SECTION 5.10. Waiver of Past Defaults............................. 43
SECTION 5.11. Trustee to Give Notice of Default,
But May Withhold in Certain
Circumstances..................................... 44
SECTION 5.12. Right of Court to Require Filing
of Undertaking to Pay Costs....................... 44
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
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ARTICLE SIX
CONCERNING THE TRUSTEE
<S> <C>
SECTION 6.1. Duties and Responsibilities of the Trustee; During
Default; Prior to Default............................. 45
SECTION 6.2. Certain Rights of the Trustee.......................... 47
SECTION 6.3. Trustee Not Responsible for Recitals, Disposition of
Securities, or Applicable of Proceeds Thereof......... 48
SECTION 6.4. Trustee and Agents May Hold Securities of Coupons;
Collections, etc...................................... 48
SECTION 6.5. Moneys Held by Trustee................................. 49
SECTION 6.6. Compensation and Indemnification of Trustee and Its
Prior Claim........................................... 49
SECTION 6.7. Right of Trustee to Rely on Officers' Certificate,
etc................................................... 50
SECTION 6.8. Qualification of Trustee; Conflicting Interest......... 50
SECTION 6.9. Person Eligible for Appointment as Trustee............. 57
SECTION 6.10. Resignation and Removal; Appointment of Successor
Trustee............................................... 58
SECTION 6.11. Acceptance of Appointment by Successor Trustee......... 60
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business of Trustee................................... 62
SECTION 6.13. Preferential Collection to Claims Against the Issuer... 62
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1. Evidence of Action Taken by Securityholders............ 67
SECTION 7.2. Proof of Execution of Instruments and of Holding of
Securities............................................ 68
SECTION 7.3. Holders to Be Treated as Owners........................ 69
SECTION 7.4. Securities Owned by Issuer Deemed Not Outstanding...... 69
SECTION 7.5. Right of Revocation of Action Taken.................... 70
</TABLE>
-iv-
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<TABLE>
<CAPTION>
PAGE
----
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
<S> <C>
SECTION 8.1. Supplemental Indentures Without
Consent of Securityholders................... 71
SECTION 8.2. Supplemental Indentures With Consent
of Securityholders........................... 73
SECTION 8.3. Effect of Supplemental Indenture............... 75
SECTION 8.4. Documents to Be Given to Trustee............... 75
SECTION 8.5. Notation on Securities in Respect of
Supplemental Indentures...................... 75
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 9.1. Issuer May Consolidate, etc., on
Certain Terms................................ 75
SECTION 9.2. Successor Issuer Substituted................... 76
SECTION 9.3. Opinion of Counsel to Trustee.................. 77
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 10.1. Satisfaction and Discharge of
Indenture.................................... 77
SECTION 10.2. Application by Trustee of Funds
Deposited for Payment of Securities.......... 80
SECTION 10.3. Repayment of Moneys Held by Paying
Agent........................................ 80
SECTION 10.4. Return of Moneys Held By Trustee and
Paying Agent Unclaimed for Three
Years........................................ 81
SECTION 10.5. Indemnity For U.S. Government
Obligations.................................. 81
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
<S> <C>
SECTION 11.1. Incorporators, Stockholders, Officers
and Directors of Issuer Exempt from
Individual Liability....................... 82
SECTION 11.2. Provisions of Indenture for the Sole
Benefit of Parties and Holders of
Securities and Coupons..................... 82
SECTION 11.3. Successors and Assigns of Issuer
Bound by Indenture......................... 82
SECTION 11.4. Notices and Demands on Issuer,
Trustee and Holders of Securities
and Coupons................................ 82
SECTION 11.5. Officers' Certificates and Opinions
of Counsel; Statements to Be Con-
tained Therein............................. 83
SECTION 11.6. Payments Due on Saturdays, Sundays
and Holidays............................... 84
SECTION 11.7. Conflict of Any Provision of
Indenture with Trust Indenture
Act of 1939................................ 84
SECTION 11.8. New York Law to Govern....................... 85
SECTION 11.9. Counterparts................................. 85
SECTION 11.10. Effect of Headings........................... 85
SECTION 11.11. Securities in a Foreign Currency
or in ECUs................................. 85
SECTION 11.12. Judgment Currency............................ 86
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1. Applicability of Article..................... 87
SECTION 12.2. Notice of Redemption; Partial
Redemptions................................ 87
SECTION 12.3. Payment of Securities Called for
Redemptions................................ 89
SECTION 12.4. Exclusion of Certain Securities from
Eligibility for Selection for
Redemption................................. 90
</TABLE>
-vi-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 12.5. Mandatory and Optional Sinking
Funds.................................... 90
TESTIMONIUM................................................ 94
SIGNATURES................................................. 94
</TABLE>
-vii-
<PAGE>
THIS INDENTURE, dated as of April 1, 1986 between WEYERHAEUSER
COMPANY, a Washington corporation (the "Issuer"), and CHEMICAL BANK, a New York
banking corporation (the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Issuer has duly authorized the issue from time to time of
its unsecured debentures, notes or other evidences of indebtedness to be issued
in one or more series (the "Securities") up to such principal amount or amounts
as may from time to time be authorized in accordance with the terms of this
Indenture and to provide, among other things, for the authentication, delivery
and administration thereof, the Issuer has duly authorized the execution and
delivery of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid indenture
and agreement according to its terms have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities
by the holders thereof, the Issuer and the Trustee mutually covenant and agree
for the equal and proportionate benefit of the respective holders from time to
time of the Securities and of the Coupons, if any, appertaining thereto as
follows:
ARTICLE ONE
DEFINITIONS
-----------
SECTION 1.1 Certain Terms Defined. The following terms (except as
---------------------
otherwise expressly provided or unless the context otherwise clearly requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section. All other terms
used in this Indenture that are defined in the Trust Indenture Act of 1939 or
the definitions of which in the Securities Act of 1933 are referred to in the
Trust Indenture Act of 1939, including terms defined therein by reference to the
Securities Act of 1933 (except as herein otherwise expressly provided or unless
the context otherwise clearly requires), shall have the meanings assigned to
such terms in said Trust Indenture Act and in said Securities Act as in force at
the date of this Indenture. All accounting terms
<PAGE>
used herein and not expressly defined shall have the meanings assigned to such
terms in accordance with generally accepted accounting principles, and the term
"generally accepted accounting principles" means such accounting principles as
----------------------------------------
are generally accepted at the time of any computation. The words "herein",
------
"hereof" and "hereunder" and other words of similar import refer to this
------ ---------
Indenture as a whole and not to any particular Article, Section or other
subdivision. The terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular.
"Attributable Debt" shall have the meaning set forth in Section 3.6.
-----------------
"Authorized Newspaper" means a newspaper (which, in the case of The
--------------------
City of New York, will, if practicable, be The Wall Street Journal (Eastern
Edition), in the case of the United Kingdom, will, if practicable, be the
Financial Times (London Edition) and, in the case of Luxembourg, will, if
practicable, be the Luxemburger Wort) published in an official language of the
country of publication customarily published at least once a day for at least
five days in each calendar week and of general circulation in The City of New
York, the United Kingdom or in Luxembourg, as applicable. If it shall be
impractical in the opinion of the Trustee to make any publication of any notice
required hereby in an Authorized Newspaper, any publication or other notice in
lieu thereof which is made or given with the approval of the Trustee shall
constitute a sufficient publication of such notice.
"Board of Directors" means either the Board of Directors of the Issuer
------------------
or any committee of such Board duly authorized to act on its behalf.
"Board Resolution" means a copy of one or more resolutions, certified
----------------
by the secretary or an assistant secretary of the Issuer to have been duly
adopted by the Board of Directors and to be in full force and effect, and
delivered to the Trustee.
"Business Day" means, with respect to any Security, a day that in the
------------
city (or in any of the cities, if more than one) in which amounts are payable,
as specified in the form of such Security, is not a day on which banking
institutions are authorized by law or regulation to close.
-2-
<PAGE>
"Commission" means the Securities and Exchange Commission, as from
----------
time to time constituted, created under the Securities Exchange Act of 1934, or
if at any time after the execution and delivery of this Indenture such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties on such date.
"Composite Rate" means, at any time, the rate of interest, per annum,
--------------
compounded semiannually, equal to the sum of the rates of interest borne by the
Securities of each series (as specified on the face of the Securities of each
series, provided, that, in the case of the Securities with variable rates of
--------
interest, the interest rate to be used in calculating the Composite Rate shall
be the interest rate applicable to such Securities at the beginning of the
year in which the Composite Rate is being determined and, provided, further,
--------
that, in the case of Securities which do not bear interest, the interest rate to
be used in calculating the Composite Rate shall be a rate equal to the yield to
maturity on such Securities, calculated at the time of issuance of such
Securities) multiplied, in the case of each series of Securities, by the
percentage of the aggregate principal amount of the Securities of all series
Outstanding represented by the Outstanding Securities of such series. For the
purposes of this calculation, the aggregate principal amounts of Outstanding
Securities that are denominated in a foreign currency, shall be calculated in
the manner set forth in Section 11.11.
"Corporate Trust Office" means the office of the Trustee at which the
----------------------
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located at 55 Water Street, New York, New York, 10041.
"Coupon" means any interest coupon appertaining to a Security.
------
"Dollar" means the coin or currency of the United States of America as
------
at the time of payment is legal tender for the payment of public and private
debts.
"ECU" means the European Currency Unit as defined and revised from
---
time to time by the Council of European Communities.
"Event of Default" means any event or condition specified as such in
----------------
Section 5.1.
-3-
<PAGE>
"Foreign Currency" means a currency issued by the government of a
----------------
country other than the United States.
"Holder", "holder of Securities", "Securityholder" or other similar
------ -------------------- --------------
terms mean (a) in the case of any Registered Security, the person in whose name
such Security is registered in the security register kept by the Issuer for that
purpose in accordance with the terms hereof, and (b) in the case of any
Unregistered Security, the bearer of such Security, or any Coupon appertaining
thereto, as the case may be.
"Indenture" means this instrument as originally executed and
---------
delivered or, if amended or supplemented as herein provided, as so amended or
supplemented or both, and shall include the forms and terms of particular series
of Securities established as contemplated hereunder.
"Interest" means, when used with respect to non-interest bearing
--------
Securities, interest payable after maturity.
"Issuer" means (except as otherwise provided in Article Six)
------
Weyerhaeuser Company, and, subject to Article Nine, its successors and assigns.
"Issuer Order" means a written statement, request or order of the
------------
Issuer signed in its name by the chairman of the Board of Directors, the
president or any vice president of the Issuer.
"Mortgage" shall have the meaning set forth in Section 3.6.
--------
"Officers' Certificate" means a certificate signed by the chairman of
---------------------
the Board of Directors or the president or any vice president and by the
treasurer or the secretary or any assistant secretary of the Issuer and
delivered to the Trustee. Each such certificate shall include the statements
provided for in Section 11.5.
"Opinion of Counsel" means an opinion in writing signed by the general
------------------
corporate counsel or such other legal counsel who may be an employee of or
counsel to the Issuer and who shall be satisfactory to the Trustee. Each such
opinion shall include the statements provided for in Section 11.5, if and to the
extent required hereby.
-4-
<PAGE>
"Original issue date" of any Security (or portion thereof) means the
-------------------
earlier of (a) the date of such Security or (b) the date of any Security (or
portion thereof) for which such Security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"Original Issue Discount Security" means any Security that provides
--------------------------------
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the maturity thereof pursuant to Section 5.1.
"Outstanding" (except as otherwise provided in Section 6.8), when used
-----------
with reference to Securities, shall, subject to the provisions of Section 7.4,
mean, as of any particular time, all Securities authenticated and delivered by
the Trustee under this Indenture, except
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or redemption of
which moneys or U.S. Government Obligations (as provided for in Section
10.1) in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Issuer) or shall have been
set aside, segregated and held in trust by the Issuer for the holders of
such Securities (if the Issuer shall act as its own paying agent), provided
--------
that if such Securities, or portions thereof, are to be redeemed prior to
the maturity thereof, notice of such redemption shall have been given as
herein provided, or provision satisfactory to the Trustee shall have been
made for giving such notice; and
(c) Securities in substitution for which other Securities shall have
been authenticated and delivered, or which shall have been paid, pursuant
to the terms of Section 2.9 (except with respect to any such Security as to
which proof satisfactory to the Trustee is presented that such Security is
held by a person in whose hands such Security is a legal, valid and binding
obligation of the Issuer).
In determining whether the holders of the requisite principal amount
of Outstanding Securities of any or all series have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding for such purposes shall be the
-5-
<PAGE>
amount of the principal thereof that would be due and payable as of the date of
such determination upon a declaration of acceleration of the maturity thereof
pursuant to Section 5.1.
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"principal" whenever used with reference to the Securities or any
---------
Security or any portion thereof, shall be deemed to include "and premium, if
any".
"Registered Security" means any Security registered on the Security
------------------
register of the Issuer.
"Responsible Officer" when used with respect to the Trustee means the
-------------------
chairman of the Board of Directors, any vice chairman of the board of
directors, the chairman of the trust committee, the chairman of the executive
committee, any vice chairman of the executive committee, the president, any vice
president, the cashier, the secretary, the treasurer, any trust officer, any
assistant trust officer, any assistant vice president, any assistant cashier,
any assistant secretary, any assistant treasurer, or any other officer or
assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject.
"Security" or "Securities" (except as otherwise provided in Section
-------- ----------
6.8) has the meaning stated in the first recital of this Indenture, or, as the
case may be, Securities that have been authenticated and delivered under this
Indenture.
"Subsidiary" means a corporation a majority of the outstanding voting
----------
stock of which is owned, directly or indirectly, by the Issuer or by one or more
subsidiaries of the Issuer, or by the Issuer and one or more subsidiaries of the
Issuer.
"Trust Indenture Act of 1939" (except as otherwise provided in
---------------------------
Sections 8.1 and 8.2) means the Trust Indenture Act of 1939 as in force at the
date as of which this Indenture was originally executed.
-6-
<PAGE>
"Trustee" means the Person identified as "Trustee" in the first
-------
paragraph hereof and, subject to the provisions of Article Six, shall also
include any successor trustee. "Trustee" shall also mean or include each Person
who is then a trustee hereunder and if at any time there is more than one such
Person, "Trustee" as used with respect to the Securities of any series shall
mean the trustee with respect to the Secuities of such series.
"Unregistered Security" means any Security other than a Registered
---------------------
Security.
"U.S. Government Obligations" shall have the meaning set forth in
---------------------------
Section 10.1(A).
"Vice president" when used with respect to the Issuer or the Trustee,
--------------
means any vice president, whether or not designated by a number or a word or
words added before or after the title of "vice president".
"Yield to Maturity" means the yield to maturity on a series of
-----------------
securities, calculated at the time of issuance of such series, or, if
applicable, at the most recent redetermination of interest on such series, and
calculated in accordance with accepted financial practice.
ARTICLE TWO
SECURITIES
SECTION 2.1 Forms Generally. The Securities of each series and the
---------------
Coupons, if any, to be attached thereto shall be substantially in such form (not
inconsistent with this Indenture) as shall be established by or pursuant to one
or more Board Resolutions (as set forth in a Board Resolution or, to the
extent established pursuant to rather than set forth in such Board Resolution,
an Officers' Certificate detailing such establishment) or in one or more
indentures supplemental hereto, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have imprinted or otherwise reproduced thereon such
legend or legends or endorsements, not inconsistent with the provisions of this
Indenture, as may be required to comply with any law or with any rules or
regulations pursuant thereto, or with any rules of any securities exchange or to
conform to general usage, all as may be determined by the officers executing
such Securities and Coupons, if any, as evidenced by their execution of the
Securities and Coupons.
-7-
<PAGE>
The definitive Securities and Coupons, if any, shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Securities and
Coupons, if any, as evidenced by their execution of such Securities and Coupons,
if any.
SECTION 2.2 Form of Trustee's Certificate of Authentication. The
-----------------------------------------------
Trustee's certificate of authentication on all Securities shall be in
substantially the following form:
This is one of the Securities of the series designated herein and
referred to in the within-mentioned Indenture.
CHEMICAL BANK,
as Trustee
By________________________
Authorized Officer
SECTION 2.3 Amount Unlimited, Issuable in Series. The aggregate
------------------------------------
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to one or more Board Resolutions of the Board of
Directors and set forth in a Board Resolution, or to the extent established
pursuant to (rather than set forth in) such Board Resolution in an Officers'
Certificate detailing such establishment, and/or established in one or more
indentures supplemental hereto, prior to the initial issuance of Securities of
any series,
(1) the designation of the Securities of the series (which may be
part of a series of Securities previously issued);
(2) any limit upon the aggregate principal amount of the Securities
of the series that may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange
-8-
<PAGE>
for, or in lieu of, other Securities of the series pursuant to Section 2.8,
2.9, 2.11, 8.5 or 12.3);
(3) if other than Dollars, the coin or currency in which the
Securities of that series are denominated (including, but not limited to,
any Foreign Currency or ECU);
(4) any date on which the principal of the Securities of the series
is payable;
(5) the rate or rates at which the Securities of the series shall
bear interest, if any, the date or dates from which such interest shall
accrue, on which such interest shall be payable and on which a record shall
be taken for the determination of Holders to whom interest is payable
and/or the method by which such rate or rates or date or dates shall be
determined;
(6) the place or places where the principal of and any interest on
Securities of the series shall be payable (if other than as provided in
Section 3.2);
(7) the price or prices at which, the period or periods within which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Issuer, pursuant to any
sinking fund or otherwise;
(8) the obligation, if any, of the Issuer to redeem, purchase or
repay Securities of the series pursuant to any mandatory redemption,
sinking fund or analogous provisions or at the option of a Holder thereof
and the price or prices at which and the period or periods within which and
any terms and conditions upon which Securities of the series shall be
redeemed, purchased or repaid, in whole or in part, pursuant to such
obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof in the case of Registered Securities, or $1000 and $5000 in the
case of Unregistered Securities, the denominations in which Securities of
the series shall be issuable;
-9-
<PAGE>
(10) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the maturity thereof;
(11) if other than the coin or currency in which the Securities of
that series are denominated, the coin or currency in which payment of the
principal of or interest on the Securities of such series shall be payable;
(12) if the principal of or interest on the Securities of such series
are to be payable, at the election of the Issuer or a holder thereof, in a
coin or currency other than that in which the Securities are denominated,
the period or periods within which, and the terms and conditions upon
which, such election may be made;
(13) if the amount of payments of principal of and interest on the
Securities of the series may be determined with reference to an index based
on a coin or currency other than that in which the Securities of the series
are denominated, the manner in which such amounts shall be determined;
(14) whether the Securities of the series will be issuable as
Registered Securities or Unregistered Securities (with or without Coupons),
or both, any restrictions applicable to the offer, sale or delivery of
Unregistered Securities and, if other than as provided in Section 2.8, the
terms upon which Unregistered Securities of any series may be exchanged for
Registered Securities of such series and vice versa;
(15) whether and under what circumstances the Issuer will pay
additional amounts on the Securities of the series held by a person who is
not a U.S. person in respect of any tax, assessment or governmental charge
withheld or deducted and, if so, whether the Issuer will have the option to
redeem such Securities rather than pay such additional amounts;
(16) if the Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary
-10-
<PAGE>
Security of such series) only upon receipt of certain certificates or
other documents or satisfaction of other conditions, then the form and
terms of such certificates, documents or conditions;
(17) any trustees, authenticating or paying agents, transfer agents
or registrars or any other agents with respect to the Securities of such
series;
(18) any other events of default or covenants with respect to the
Securities of such series; and
(19) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
SECTION 2.4 Authentication and Delivery of Securities. The
-----------------------------------------
Issuer may deliver Securities of any series having attached thereto appropriate
Coupons, if any, executed by the Issuer to the Trustee for authentication
together with the applicable documents referred to below in this Section, and
the Trustee shall thereupon authenticate and deliver such Securities to or upon
the order of the Issuer (contained in the Issuer Order referred to below in this
Section), or pursuant to such procedures acceptable to the Trustee and to such
recipients as may be specified from time to time by an Issuer Order. The
maturity date, original issue date, interest rate and any other terms of the
Securities of such series and Coupons, if any, appertaining thereto shall be
determined by or pursuant to such Issuer Order and procedures. If provided for
in such procedures, such Issuer Order may authorize authentication and delivery
pursuant to oral instructions from the Issuer or its duly authorized agent,
which instructions shall be promptly confirmed in writing. In authenticating
such Securities and accepting the additional responsibilities under this
Indenture in relation to such Securities the Trustee shall be entitled to
receive, and (subject to Section 6.1) shall be fully protected in relying upon:
(1) an Issuer Order requesting such authentication and setting
forth delivery instructions if the Securities and Coupons, if any, are not
to be delivered to the Issuer;
-11-
<PAGE>
(2) any Board Resolution, Officers' Certificate and/or executed
supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant
to which the forms and terms of the Securities and Coupons, if any, were
established;
(3) an Officers' Certificate setting forth the form or forms and
terms of the Securities and Coupons, if any, stating that the form or forms
and terms of the Securities and Coupons, if any have been established
pursuant to Sections 2.1 and 2.3 and comply with this Indenture, and
covering such other matters as the Trustee may reasonably request; and
(4) an Opinion of Counsel to the effect that:
(a) the form or forms and terms of such Securities and Coupons,
if any, have been established pursuant to Sections 2.1 and 2.3 and
comply with this indenture,
(b) the authentication and delivery of such Securities and
Coupons, if any, by the Trustee are authorized under the provisions of
this Indenture;
(c) Such Securities and Coupons, if any, when authenticated and
delivered by the Trustee and issued by the Issuer in the manner and
subject to any conditions specified in such Opinion of Counsel, will
constitute valid and binding obligations of the Issuer,
(d) all laws and requirements in respect of the execution and
delivery by the Issuer of the Securities and Coupons, if any, have
been complied with, and
(e) covering such other matters as the Trustee may reasonably
request.
The Trustee shall have the right to decline to authenticate and
deliver any Securities under this Section if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken by the
Issuer or if the Trustee in good faith by its board of directors or board
of trustees, executive committee, or a trust committee of direc-
-12-
<PAGE>
tors or trustees or Responsible Officers shall determine that such action would
expose the Trustee to personal liability to existing Holders or would affect
the Trustee's own rights, duties or immunities under the Securities, this
Indenture or otherwise.
SECTION 2.5 Execution of Securities. The Securities and, if
-----------------------
applicable, each Coupon appertaining thereto shall be signed on behalf of the
Issuer by the chairman of its Board of Directors or any vice chairman of its
Board of Directors or its president or any vice president or its treasurer,
under its corporate seal (except in the case of Coupons) which may, but need
not, be attested. Such signatures may be the manual or facsimile signatures of
the present or any future such officers. The seal of the Issuer may be in the
form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Securities. Typographical and other minor errors or
defects in any such reproduction of the seal or any such signature shall not
affect the validity or enforceability of any Security that has been duly
authenticated and delivered by the Trustee.
In case any officer of the Issuer who shall have signed any of the
Securities or Coupons, if any, shall cease to be such officer before the
Security or Coupon so signed (or the Security to which the Coupon so signed
appertains) shall be authenticated and delivered by the Trustee or disposed of
by the Issuer, such Security or Coupon nevertheless may be authenticated and
delivered or disposed of as though the person who signed such Security or Coupon
had not ceased to be such officer of the Issuer; and any Security or Coupon may
be signed on behalf of the Issuer by such persons as, at the actual date of the
execution of such Security or Coupon, shall be the proper officers of the
Issuer, although at the date of the execution and delivery of this Indenture any
such person was not such an officer.
SECTION 2.6 Certificate of Authentication. Only such Securities as
-----------------------------
shall bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed by the Trustee by the manual signature of one of
its authorized officers, shall be entitled to the benefits of this Indenture or
be valid or obligatory for any purpose. No Coupon shall be entitled to the
benefits of this Indenture or shall be valid and obligatory for any purpose
until such certificate by the Trustee shall have become duly executed on the
Security to which such Coupon appertains. Such certificate by the Trustee upon
any Security executed by
-13-
<PAGE>
the Issuer shall be conclusive evidence that the Security so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture.
SECTION 2.7 Denomination and Date of Securities; Payments of
------------------------------------------------
Interest. The Securities of each series shall be issuable as Registered
- --------
Securities or Unregistered Securities in denominations established as
contemplated by Section 2.3 or, with respect to the Registered Securities of any
series, if not so established, in denominations of $1,000 and any integral
multiple thereof. If denominations of Unregistered Securities of any series are
not so established, such Securities shall be issuable in denominations of $1,000
and $5,000. The Securities of each series shall be numbered, lettered, or
otherwise distinguished in such manner or in accordance with such plan as the
officers of the Issuer executing the same may determine with the approval of the
Trustee as evidenced by the execution and authentication thereof.
Each Registered Security shall be dated the date of its
authentication. Each Unregistered Security shall be dated as provided in the
resolution or resolutions of the Board of Directors of the Issuer referred to in
Section 2.3. The Securities of each series shall bear interest, if any, from the
date and such interest shall be payable on the dates established as contemplated
by Section 2.3.
The person in whose name any Registered Security of any series is
registered at the close of business on any record date applicable to a
particular series with respect to any interest payment date for such series
shall be entitle to receive the interest, if any, payable on such interest
payment date notwithstanding any transfer or exchange of such Registered
Security subsequent to the record date and prior to such interest payment date,
except if and to the extent the Issuer shall default in the payment of the
interest due on such interest payment date for such series, in which case such
defaulted interest shall be paid to the persons in whose names Outstanding
Registered Securities for such series are registered at the close of business on
a subsequent record date (which shall be not less than five Business Days prior
to the date of payment of such defaulted interest) established by notice given
by mail by or on behalf of the Issuer to the holders of Securities not less than
15 days preceding such subsequent record date. The term "record date" as used
with respect to any interest payment date (except a date for payment of
defaulted interest) for the
-14-
<PAGE>
Securities of any series shall mean the date specified as such in the terms of
the Registered Securities of such series established as contemplated by Section
2.3, or, if no such date is so established, if such interest payment date is the
first day of a calendar month, the fifteenth day of the next preceding calendar
month or, if such interest payment date is the fifteenth day of a calendar
month, the first day of such calendar month, whether or not such record date is
a Business Day.
SECTION 2.8 Registration, Transfer and Exchange. The Issuer will keep
-----------------------------------
at each office or agency to be maintained for the purpose as provided in Section
3.2 for each series of Securities a register or registers in which, subject to
such reasonable regulations as it may prescribe, it will provide for the
registration of Securities of such series and the registration of transfer of
Registered Securities of such series. Such register shall be in written form in
the English language or in any other form capable of being converted into such
form within a reasonable time. At all reasonable times such register or
registers shall be open for inspection by the Trustee.
Upon due presentation for registration of transfer of any Registered
Security of any series at any such office or agency to be maintained for the
purpose as provided in Section 3.2, the Issuer shall execute and the Trustee
shall authenticate and deliver in the name of the transferee or transferees a
new Registered Security or Registered Securities of the same series, maturity
date, interest rate and original issue date in authorized denominations for a
like aggregate principal amount.
Unregistered Securities (except for any temporary Unregistered
Securities) and Coupons (except for Coupons attached to any temporary
Unregistered Securities) shall be transferrable by delivery.
At the option of the Holder thereof, Registered Securities of any
series may be exchanged for a Registered Security or Registered Securities of
such series, maturity date, interest rate and original issue date of other
authorized denominations and of a like aggregate principal amount, upon
surrender of such Registered Securities to be exchanged at the agency of the
Issuer that shall be maintained for such purpose in accordance with Section 3.2
and upon payment, if the Issuer shall so require, of the charges hereinafter
provided. If the Securities of any series are issued in both registered and
unregistered form, except as
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otherwise specified pursuant to Section 2.3, at the option of the Holder
thereof, Unregistered Securities of any series may be exchanged for Registered
Securities of such series, maturity date, interest rate and original issue date
of any authorized denominations and of a like aggregate principal amount, upon
surrender of such Unregistered Securities to be exchanged at the agency of the
Issuer that shall be maintained for such purpose in accordance with Section
3.2, with, in the case of Unregistered Securities that have Coupons attached,
all unmatured Coupons and all matured Coupons in default thereto appertaining,
and upon payment, if the Issuer shall so require, of the charges hereinafter
provided. At the option of the Holder thereof, if Unregistered Securities of any
series, maturity date, interest rate and original issue date are issued in more
than one authorized denomination, except as otherwise specified pursuant to
Section 2.3, such Unregistered Securities may be exchanged for Unregistered
Securities of such series, maturity date, interest rate and original issue date
of other authorized denominations and of a like aggregate principal amount, upon
surrender of such Unregistered Securities to be exchanged at the agency of the
Issuer that shall be maintained for such purpose in accordance with Section 3.2
or as specified pursuant to Section 2.3, with, in the case of Unregistered
Securities that have Coupons attached, all unmatured coupons and all matured
coupons in default thereto appertaining, and upon payment, if the Issuer shall
so require, of the charges hereinafter provided. Unless otherwise specified
pursuant to Section 2.3, Registered Securities of any series may not be
exchanged for Unregistered Securities of such series. Whenever any Securities
are so surrendered for exchange, the Issuer shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive. All Securities and Coupons surrendered upon any exchange or
transfer provided for in this Indenture shall be promptly cancelled and disposed
of by the Trustee and the Trustee will deliver a certificate of disposition
thereof to the Issuer.
All Registered Securities presented for registration of transfer,
exchange, redemption or payment shall (if so required by the Issuer or the
Trustee) be duly endorsed by, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Issuer and the Trustee duly
executed by, the holder or his attorney duly authorized in writing.
The Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge that may be
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<PAGE>
imposed in connection with any exchange or registration of transfer of
Securities. No service charge shall be made for any such transaction.
The Issuer shall not be required to exchange or register a transfer of
(a) any Securities of any series for a period of 15 days next preceding the
first mailing of notice of redemption of Securities of such series to be
redeemed, or (b) any Securities selected, called or being called for redemption,
in whole or in part, except, in the case of any Security to be redeemed in part,
the portion thereof not so to be redeemed.
All Securities issued upon any transfer or exchange of Securities
shall be valid obligations of the Issuer, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such transfer or exchange.
Notwithstanding anything herein or in the terms of any series of
Securities to the contrary, neither the Issuer nor the Trustee (which shall rely
on an Officers' Certificate and an Opinion of Counsel) shall be required to
exchange any Unregistered Security for a Registered Security if such exchange
would result in adverse Federal income tax consequences to the Issuer (such as,
for example, the inability of the Issuer to deduct from its income, as computed
for Federal income tax purposes, the interest payable on the Unregistered
Securities) under then applicable United Stated Federal income tax laws.
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen
----------------------------------------------
Securities. In case any temporary or definitive Security or any Coupon
- ----------
appertaining to any Security shall become mutilated, defaced or be destroyed,
lost or stolen, the Issuer in its discretion may execute, and upon the written
request of any officer of the Issuer, the Trustee shall authenticate and deliver
a new Security of the same series, maturity date, interest rate and original
issue date, bearing a number or other distinguishing symbol not
contemporaneously outstanding, in exchange and substitution for the mutilated or
defaced Security, or in lieu of and substitution for the Security so destroyed,
lost or stolen with Coupons corresponding to the Coupons appertaining to the
Securities so mutilated, defaced, destroyed, lost or stolen, or in exchange or
substitution for the Security to which such mutilated, defaced, destroyed, lost
or stolen Coupon appertained, with Coupons appertaining thereto corresponding to
the Coupons so mutilated, defaced, destroyed, lost or stolen. In every
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case the applicant for a substitute Security or Coupon shall furnish to the
Issuer and to the Trustee and any agent of the Issuer or the Trustee such
security or indemnity as may be required by them to indemnify and defend and to
save each of them harmless and, in every case of destruction, loss or theft,
evidence to their satisfaction of the destruction, loss or theft of such
Security or Coupon and of the ownership thereof and in the case of mutilation or
defacement shall surrender the Security and related Coupons to the Trustee.
Upon the issuance of any substitute Security or Coupon, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith. In case any Security
or Coupon which has matured or is about to mature or has been called for
redemption in full shall become mutilated or defaced or be destroyed, lost or
stolen, the Issuer may instead of issuing a substitute Security, pay or
authorize the payment of the same or the relevant Coupon (without surrender
thereof except in the case of a mutilated or defaced Security or Coupon), if the
applicant for such payment shall furnish to the Issuer and to the Trustee and
any agent of the Issuer or the Trustee such security or indemnity as any of them
may require to save each of them harmless, and, in every case of destruction,
loss or theft, the applicant shall also furnish to the Issuer and the Trustee
and any agent of the Issuer or the Trustee evidence to their satisfaction of the
destruction, loss or theft of such Security or Coupon and of the ownership
thereof.
Every substitute Security or Coupon of any series issued pursuant to
the provisions of this Section by virtue of the fact that such Security or
Coupon is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Issuer, whether or not the destroyed, lost or stolen Security
or Coupon shall be at any time enforceable by anyone and shall be entitled to
all the benefits of (but shall be subject to all the limitations of rights set
forth in) this Indenture equally and proportionately with any and all other
Securities or Coupons of such series duly authenticated and delivered hereunder.
All Securities and Coupons shall be held and owned upon the express condition
that, to the extent permitted by law, the foregoing provisions are exclusive
with respect to the replacement or payment of mutilated, defaced or destroyed,
lost or stolen Securities and Coupons and shall preclude any and all other
rights or remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the
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replacement or payment of negotiable instruments or other securities without
their surrender.
SECTION 2.10 Cancellation of Securities; Destruction Thereof. All
-----------------------------------------------
Securities and Coupons surrendered for payment, redemption, registration of
transfer or exchange, or for credit against any payment in respect of sinking ??
analogous fund, if surrendered to the Issuer or any agent of the Issuer or the
Trustee, shall be delivered to the Trustee for cancellation or, if surrendered
to the Trustee, shall be cancelled by it; and no Securities or Coupons shall be
issued in lieu thereof except as expressly permitted by any of the provisions of
this Indenture. The Trustee shall dispose of cancelled Securities and Coupons
held by it and deliver a certificate of disposition to the Issuer. If the Issuer
shall acquire any of the Securities or Coupons, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Securities or Coupons unless and until the same are delivered to the Trustee for
cancellation.
SECTION 2.11 Temporary Securities. Pending the preparation of
--------------------
definitive Securities for any series, the Issuer may execute and the Trustee
shall authenticate and deliver temporary Securities for such series (printed,
lithographed, typewritten or otherwise reproduced, in each case in form
satisfactory to the Trustee). Temporary Securities of any series shall be
issuable as Registered Securities without coupons, or as Unregistered Securities
with or without coupons attached thereto, of any authorized denomination, and
substantially in the form of the definitive Securities of such series but with
such omissions, insertions and variations as may be appropriate for temporary
Registered Securities, all as may be determined by the Issuer with the
concurrence of the Trustee as evidenced by the execution and authentication
thereof. Temporary Securities may contain such reference to any provisions of
this Indenture as may be appropriate. Every temporary Security shall be executed
by the Issuer and be authenticated by the Trustee upon the same conditions and
in substantially the same manner, and with like effect, as the definitive
Securities. Without unreasonable delay the Issuer shall execute and shall
furnish definitive Securities of such series and thereupon temporary Registered
Securities of such series may be surrendered in exchange therefor without charge
at each office or agency to be maintained by the Issuer for that purpose
pursuant to Section 3.2 and in the case of Unregistered Securities, at any
agency maintained by the Issuer for such purpose as specified pursuant to
Section 2.3, and the Trustee shall
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authenticate and deliver in exchange for such temporary Securities of such
series a like aggregate principal amount of definitive Securities of the same
series of authorized denominations and, in the case of Unregistered Securities,
having attached thereto any appropriate Coupons. Until so exchanged, the
temporary Securities of any series shall be entitled to the same benefits under
this Indenture as definitive Securities of such series. The provisions of this
Section are subject to any restrictions or limitations on the issue and delivery
of temporary Unregistered Securities of any series that may be established
pursuant to Section 2.3 (including any provision that Unregistered Securities
of such series initially be issued in the form of a single global Unregistered
Security to be delivered to a depositary or agency of the Issuer located outside
the United States and the procedures pursuant to which definitive Unregistered
Securities of such series would be issued in exchange for such temporary global
Unregistered Security).
ARTICLE THREE
COVENANTS OF THE ISSUER
-----------------------
SECTION 3.1 Payment of Principal and Interest. The Issuer covenants
---------------------------------
and agrees for the benefit of each series of Securities that it will duly and
punctually pay or cause to be paid the principal of, and interest on, each of
the Securities of such series (together with any additional amounts payable
pursuant to the terms of such Securities) at the place or places, at the
respective times and in the manner provided in such Securities and in the
Coupons appertaining thereto and in this Indenture. The interest on Securities
with Coupons attached (together with any additional amounts payable pursuant to
the terms of such Securities) shall be payable only upon presentation and
surrender of the several Coupons for such interest installments as are evidenced
thereby as they severally mature. The interest on any temporary Unregistered
Securities (together with any additional amounts payable pursuant to the terms
of such Securities) shall be paid, as to the installments of interest evidenced
by Coupons attached thereto, if any, only upon presentation and surrender
thereof, and, as to the other installments of interest, if any, only upon
presentation of such Securities for notation thereon of the payment of such
interest. The interest on Registered Securities (together with any additional
amounts payable pursuant to the terms of such Securities) shall be payable only
to or upon the written order of the Holders thereof and at the option of the
Issuer
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<PAGE>
may be paid by mailing checks for such interest payable to or upon the written
order of such Holders at their last addresses at they appear on the registry
books of the Issuer.
SECTION 3.2 Offices for Payments, etc. The Issuer will maintain in
-------------------------
the Borough of Manhattan, The City of New York, an agency where the Registered
Securities of each series may be presented for payment, an agency where the
Securities of each series may be presented for exchange as is provided in this
Indenture and, if applicable, pursuant to Section 2.3 and an agency where the
Registered Securities of each series may be presented for registration of
transfer as in this Indenture provided.
The Issuer will maintain one or more agencies in a city or cities
located outside the United States (including any city in which such an agency
is required to be maintained under the rules of any stock exchange on which the
Securities of such series are listed) where the Unregistered Securities, if any,
of each series and Coupons, if any, appertaining thereto may be presented for
payment. No payment on any Unregistered Security or Coupon will be made upon
presentation of such Unregistered Security or Coupon at an agency of the Issuer
within the United States nor will any payment be made by transfer to an account
in, or by mail to an address in, the United States unless pursuant to applicable
United States laws and regulations then in effect such payment can be made
without adverse tax consequences to the Issuer. Notwithstanding the foregoing,
payments in Dollars of Unregistered Securities of any series and Coupons
appertaining thereto which are payable in Dollars may be made at an agency of
the Issuer maintained in the Borough of Manhattan, The City of New York if such
payment in Dollars at each agency maintained by the Issuer outside the United
States for payment on such Unregistered Securities is illegal or effectively
precluded by exchange controls or other similar restrictions.
The Issuer will maintain in the Borough of Manhattan, The City of New
York, an agency where notices and demands to or upon the Issuer in respect of
the Securities of any series, the Coupons appertaining thereto or this
Indenture may be served.
The Issuer will give to the Trustee written notice of the location of
each such agency and of any change of location thereof. In case the Issuer shall
fail to maintain any agency required by this Section to be located in the
Borough of Manhattan, The City of New York, or shall fail to
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<PAGE>
give such notice of the location or of any change in the location of any of the
above agencies, presentations and demands may be made and notices may be served
at the Corporate Trust Office of the Trustee.
The Issuer may from time to time designate one or more additional
agencies where the Securities of a series and Coupons appertaining thereto may
be presented for payment, where the Securities of that series may be presented
for exchange as provided in this Indenture and pursuant to Section 2.3 and where
the Registered Securities of that series may be presented for registration of
transfer as in this Indenture provided, and the Issuer may from time to time
rescind any such designation, as the Issuer may deem desirable or expedient;
provided, however, that no such designation or rescission shall in any manner
- -------- -------
relieve the Issuer of its obligation to maintain the agencies provided for in
the immediately preceding paragraphs. The Issuer will give to the Trustee prompt
written notice of any such designation or rescission thereof.
SECTION 3.3 Appointment to Fill a Vacancy in Office of Trustee. The
--------------------------------------------------
Issuer, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 6.10, a Trustee, so that there
shall at all times be a Trustee with respect to each series of Securities
hereunder.
SECTION 3.4 Paying Agents. Whenever the Issuer shall appoint a paying
-------------
agent other than the Trustee with respect to the Securities of any series, it
will cause such paying agent to execute and deliver to the Trustee an instrument
in which such agent shall agree with the Trustee, subject to the provisions of
this Section,
(a) that it will hold all sums received by it as such agent for the
payment of the principal of or interest on the Securities of such series
(whether such sums have been paid to it by the Issuer or by other obligor
on the Securities of such series) in trust for the benefit of the holders
of the Securities of such series, or Coupons appertaining thereto, or of
the Trustee,
(b) that it will give the Trustee notice of any failure by the
Issuer (or by any other obligor on the Securities of such series) to make
any payment of the principal of or interest on the
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<PAGE>
Securities of such series when the same shall be due and payable, and
(c) that at any time during the continuance of any such failure, upon
the written request of the Trustee, it will forthwith pay to the Trustee
all sums so held in trust by such paying agent.
The Issuer will, on or prior to each due date of the principal of or
interest on the Securities of such series, deposit with the paying agent a sum
sufficient to pay such principal or interest so becoming due, and (unless such
paying agent is the Trustee) the Issuer will promptly notify the Trustee of any
failure to take such action.
If the Issuer shall act as its own paying agent with respect to the
Securities of any Series, it will, on or before each due date of the principal
of or interest on the Securities of such series, set aside, segregate and hold
in trust for the benefit of the holders of the Securities of such series or the
Coupons appertaining thereto a sum sufficient to pay such principal or interest
so becoming due. The Issuer will promptly notify the Trustee of any failure to
take such action.
Anything in this Section to the contrary notwithstanding, the Issuer
may at any time, for the purpose of obtaining a satisfaction and discharge with
respect to one or more or all series of Securities hereunder, or for any other
reason, pay or cause to be paid to the Trustee all sums held in trust for any
such series by the Issuer or any paying agent hereunder, as required by this
Section, such sums to be held by the Trustee upon the trusts herein contained.
Anything in this Section to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section is subject to the
provisions of Sections 10.3 and 10.4.
SECTION 3.5 Written Statement to Trustee. The Issuer will deliver to
----------------------------
the Trustee on or before April 15 in each year (beginning with 1987) a written
statement, signed by two of its officers (which need not comply with Section
11.5), stating that in the course of the performance of their duties as officers
of the Issuer they would normally have knowledge of any default by the Issuer in
the performance or fulfillment of any covenant, agreement or condition contained
in this Indenture, stating whether or not they have knowledge of any such
default and, if so, specifying each
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such default of which the signers have knowledge and the nature thereof.
SECTION 3.6 Limitation on Liens. The following provisions shall apply
-------------------
to the Securities of each series unless specifically otherwise provided in a
Board Resolution, Officers, Certificate or indenture supplemental hereto
provided pursuant to Section 2.3.
(a) The Issuer will not itself, and will not permit any Subsidiary
to, issue, assume, or guarantee any indebtedness for money borrowed (hereinafter
in this Section 3.6 referred to as "debt"), if such debt is secured by mortgage,
pledge, security interest or other lien or encumbrance (any mortgage, pledge,
security interest or other lien or encumbrance being hereinafter in this Section
3.6 referred to as a "Mortgage" or "Mortgages") upon or with respect to any
timber or timberlands of the Issuer or such Subsidiary located in the States of
Washington, Oregon, California, Arkansas or Oklahoma or any principal
manufacturing plant of the Issuer or such Subsidiary located anywhere in the
United States of America, now owned or hereafter acquired, without in any such
case effectively providing, concurrently with the issuance, assumption or
guarantee of any such debt, that the Securities (together with, if the Issuer
shall so determine, any other indebtedness of or guaranteed by the Issuer or
such Subsidiary ranking equally with the Securities and then existing or
thereafter created) shall be secured equally and ratably with (or prior to) such
debt; provided, however, that the foregoing restrictions shall not be applicable
-------- -------
to
(i) Mortgages upon or with respect to any property of a Subsidiary
securing debt of such Subsidiary to the Issuer or another Subsidiary;
(ii) Mortgages upon or with respect to any property acquired,
constructed or improved by the Issuer or any Subsidiary after the date of
this Indenture which are created, incurred or assumed contemporaneously
with, or within ninety days after, such acquisition, construction or
improvement to secure or provide for the payment of any part of the
purchase price of such property or the cost of such construction or
improvement, or Mortgages upon or with respect to any property existing at
the time of acquisition thereof; provided, however, that in the case of any
-------- -------
such construction or improvement the Mortgage shall not apply to any
property theretofore owned by the Issuer or any
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<PAGE>
Subsidiary other than any theretofore unimproved real property on which the
property so constructed, or the improvement, is located; and
(iii) any extension, renewal or replacement of any Mortgage referred
to in clause (ii) above; provided, however, that the principal amount of
-------- -------
indebtedness secured thereby shall not exceed the principal amount of
indebtedness so secured at the time of such extension, renewal or
replacement and that such extension, renewal or replacement shall be
limited to all or part of the same property which secured the mortgage so
extended, renewed or replaced.
(b) Notwithstanding the provisions of subsection (a) of this Section
3.6, the Issuer or any Subsidiary may issue, assume or guarantee secured debt
which would otherwise be subject to the foregoing restrictions in an aggregate
amount which, together with all other such debt of the Issuer and its
Subsidiaries and the Attributable Debt in respect of Sale and Lease-Back
Transactions (as defined in Section 3.7) existing at such time (other than Sale
and Lease-Back Transactions permitted because the Issuer would be entitled to
incur debt secured by a mortgage on the property to be leased without equally
and ratably securing the Securities pursuant to subsection (a) of this Section
3.6 and other than Sale and Lease-Back Transactions the proceeds of which have
been applied in accordance with clause (b) of Section 3.7), does not at the time
exceed five percent of shareholders' interest in the Issuer and its consolidated
Subsidiaries (as hereinafter defined), as shown on the audited consolidated
balance sheet contained in the latest annual report to shareholders of the
Issuer. The term "Attributable Debt" as used in this paragraph shall mean, as of
any particular time, the present value discounted at the Composite Rate, of the
obligation of a lessee for rental payments during the remaining term of any
lease (including any period for which such lease has been extended or may, at
the option of the lessor, be extended).
(c) For the purpose of this Section 3.6,
(1) the term "principal manufacturing plant" shall not include any
manufacturing plant which in the opinion of the Board of Directors is not a
principal manufacturing plant of the Issuer and its Subsidiaries;
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<PAGE>
(2) the following types of transactions shall not be deemed to create
debt secured by a Mortgage;
(a) the sale, Mortgage or other transfer of timber in connection
with an arrangement under which the Issuer or a Subsidiary is
obligated to cut such timber or a portion thereof in order to provide
the transferee with a specified amount of money however determined;
and
(b) the Mortgage of any property of the Issuer or any Subsidiary
in favor of the United States, or any State, or any department, agency
or instrumentality or either, to secure partial, progress, advance or
other payments to the Issuer or any Subsidiary pursuant to the
provisions of any contract or statute; and
(3) the term "shareholders' interest in the Issuer and its
consolidated Subsidiaries" shall mean the aggregate of capital and surplus,
including surplus resulting from the March 1, 1913 revaluation of timber
and timberlands, of the Issuer and its consolidated Subsidiaries, after
deducting the cost of shares of the Issuer held in treasury.
SECTION 3.7 Limitation on Sale and Lease-Back. The following
---------------------------------
provisions shall apply to the Securities of each series unless specifically
otherwise provided in a Board Resolution, Officers' Certificate or indenture
supplemental hereto provided pursuant to Section 2.3. The Issuer will not, nor
will it permit any Subsidiary to, enter into any arrangement with any Person
providing for the leasing by the Issuer or a Subsidiary of any real property in
the United States (except for temporary leases for a term of not more than three
years), which property has been or is to be sold or transferred by the Issuer or
such Subsidiary to such Person (herein referred to as a "Sale and Lease-Back
Transaction"), unless (a) the Issuer or such Subsidiary would be entitled to
incur debt secured by a Mortgage on the property to be leased without equally
and ratably securing the Securities pursuant to Section 3.6, or (b) the Issuer
shall, and in any such case the Issuer covenants that it will, apply an amount
equal to the fair value (as determined by the Board of Directors) of the
property so leased to the retirement (other than any mandatory retirement),
within ninety days of
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<PAGE>
the effective date of any such Sale and Lease-Back Transaction, of indebtedness
for borrowed money incurred or assumed by the Issuer which by its terms matures
at, or is extendible or renewable at the option of the obligor to, a date more
than twelve months after the date of the creation of such debt.
SECTION 3.8. Luxembourg Publications. In the event of the publication
-----------------------
of any notice pursuant to Section 5.11, 6.10(a), 6.11, 3.2, 10.4, 12.2 or 12.5,
the party making such publication in the Borough of Manhattan, The City of New
York and London shall also, to the extent ???? notice is required to be given
to Holders of Securities of any series by applicable Luxembourg law or stock
exchange regulation, as evidenced by an Officers' Certificate delivered to
such party, make a similar publication in Luxembourg.
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE
ISSUER AND THE TRUSTEE
----------------------
SECTION 4.1. Issuer to Furnish Trustee Information as to Names and
-----------------------------------------------------
Addresses of Securityholders. The Issuer covenants and agrees that it will
- ----------------------------
furnish or cause to be furnished to the Trustee a list in such form as the
Trustee may reasonably require of the names and addresses of the holders of the
Securities of each series:
(a) semiannually and not more than 15 days after each record date for
the payment of interest on such Securities, as hereinabove specified, as of
such record date and on dates to be determined pursuant to Section 2.3 for
non-interest bearing securities in each year, and
(b) at such other times as the Trustee may request in writing, within
30 days after receipt by the Issuer of any such request as of a date not
more than 15 days prior to the time such information is furnished,
provided that if and so long as the Trustee shall be the Security registrar for
- --------
such series and all of the Securities of any series are Registered Securities,
such list shall not be required to be furnished.
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<PAGE>
SECTION 4.2 Preservation and Disclosure of Securityholders Lists. (a)
----------------------------------------------------
The Trustee shall preserve, in as current a form as is reasonably practicable,
all information as to the names and addresses of the holders of each series of
Securities (i) contained in the most recent list furnished to it as provided in
Section 4.1, (ii) received by it in the capacity of Security registrar for such
series, if so acting and (iii) filed with it within two preceding years pursuant
to 4.4(c)(ii). The Trustee may destroy any list furnished to it as provided in
Section 4.1 upon receipt of a new list so furnished.
(b) In case three or more holders of Securities (hereinafter referred
to as "applicants") apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other holders
of Securities of a particular series (in which case the applicants must all hold
Securities of such series) or with Holders of all Securities with respect to
their rights under this Indenture or under such Securities and-such application
is accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within five business
days after the receipt of such application, at its election, either
(i) afford to such applicants access to the information preserved at
the time by the Trustee in accordance with the provisions of subsection (a)
of this Section, or
(ii) inform such applicants as to the approximate number of holders
of Securities of such series or all Securities, as the case may be, whose
names and addresses appear in the information preserved at the time by the
Trustee, in accordance with the provisions of subsection (a) of this
Section, and as to the approximate cost of mailing to such Securityholders
the form of proxy or other communication, if any, specified in such
application.
If the Trustee shall elect not to afford to such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Securityholder of such series or all Securities, as the
case may be, whose name and address appears in the information
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<PAGE>
preserved at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section a copy of the form of proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to the Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of mailing, unless within
five days after such tender, the Trustee shall mail to such applicants and file
with the Commission together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the holders of Securities of such series or
all Securities, as the case may be, or would be in violation of applicable law.
Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for hearing,
that all the objections so sustained have been met, and shall enter an order so
declaring, the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the entry of such order and
the renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Each and every holder of Securities and Coupons, by receiving and
holding the same, agrees with the Issuer and the Trustee that neither the Issuer
nor the Trustee nor any agent of the Issuer or the Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the holders of Securities in accordance with the provisions of
subsection (b) of this Section, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under such subsection
(b).
SECTION 4.3 Reports by the Issuer. The Issuer covenants:
---------------------
(a) to file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual reports
and of the information, documents, and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and
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regulations prescribe) which the Issuer may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, or if the Issuer is not required to file information,
documents, or reports pursuant to either of such Sections, then to file
with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents, and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934, or
in respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(b) to file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents, and reports with respect to compliance
by the Issuer with the conditions and covenants provided for in this
Indenture as may be required from time to time by such rules and
regulations; and
(c) to transmit by mail to the holders of Securities, in the manner
and to the extent provided in Section 4.4(c), such summaries of any
information, documents and reports required to be filed by the Issuer
pursuant to subsections (a) and (b) of this Section as may be required to
be transmitted to such Holders by rules and regulations prescribed from
time to time by the Commission.
SECTION 4.4 Reports by the Trustee. (a) On or before July 15 in
----------------------
each year following the date hereof, so long as any Securities are outstanding
hereunder, the Trustee shall transmit to the Securityholders of each series, as
provided in subsection (c), a brief report dated as of a date convenient to the
Trustee no more than 60 nor less than 45 days prior thereto with respect to:
(i) its eligibility under Section 6.9 and its qualification
under Section 6.8, or in lieu thereof, if to the best of its
knowledge it has continued to be eligible and qualified under such
Sections, a written statement to such effect;
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(ii) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the date of such report and
for the reimbursement of which it claims or may claim a lien or charge,
prior to that of the Securities of any series, on any property or funds
held or collected by it as Trustee, except that the Trustee shall not be
required (but may elect) to report such advances if such advances so
remaining unpaid aggregate not more than 1/2 of 1% of the principal amount
of the Securities of any series Outstanding on the date of such report;
(iii) the amount, interest rate, and maturity date of all other
indebtedness owing by the Issuer (or by any other obligor on the
Securities) to the Trustee in its individual capacity on the date of such
report, with a brief description of any property held as collateral
security therefor, except any indebtedness based upon a creditor
relationship arising in any manner described in Section 6.13(b)(2), (3),
(4) or (6);
(iv) the property and funds, if any, physically in the possession of
the Trustee (as such) on the date of such report;
(v) any additional issue of Securities which the Trustee has not
previously reported; and
(vi) any action taken by the Trustee in the performance of its
duties under this Indenture which it has not previously reported and which
in its opinion materially affects the Securities, except action in respect
of a default, notice of which has been or is to be withheld by it in
accordance with the provisions of Section 5.11.
(b) The Trustee shall transmit to the Securityholders of each
series, as provided in subsection (c) of this Section, a brief report with
respect to the character and amount of any advances (and if the Trustee elects
so to state, the circumstances surrounding the making thereof) made by the
Trustee, as such, since the date of the last report transmitted pursuant to the
provisions of subsection (a) of this Section (or if no such report has yet been
so transmitted, since the date of this Indenture) for the reimburse-
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ment of which it claims or may claim a lien or charge prior to that of the
Securities of such series on property or funds held or collected by it as
Trustee and which it has not previously reported pursuant to this subsection
(b), except that the Trustee shall not be required (but may elect) to report
such advances if such advances remaining unpaid at any time aggregate 10% or
less of the principal amount of Securities of such series outstanding at such
time, such report to be transmitted within 90 days after such time.
(c) Reports pursuant to this Section shall be transmitted by mail:
(i) to all registered holders of Securities, as the names and
addresses of such holders appear upon the registry books of the Issuer;
(ii) to such other Holders of Securities as have, written two years
preceding such transmissions, filed their names and addresses with the
Trustee for that purpose; and
(iii) except in the case of reports pursuant to subsection (b); to
each Holder of a Security whose name and address are preserved at the time
by the Trustee as provided in Section 4.2(a).
(d) A copy of each such report shall, at the time of such
transmission to Securityholders, be furnished to the Issuer and be filed by
the Trustee with each stock exchange upon which the Securities of any applicable
series are listed and also with the Commission. The Issuer agrees to notify the
Trustee with respect any series when and as the Securities of such series become
admitted to trading on any national securities exchange.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
-------------------
SECTION 5.1 Event of Default Defined; Acceleration of Maturity;
---------------------------------------------------
Waiver of Default. "Event of Default" with respect to Securities of any series
- -----------------
wherever used herein, means each one of the following events which shall have
occurred and be continuing (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to
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any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(a) default in the payment of any instalment of interest upon any of
the Securities of such series as and when the same shall become due and
payable, and continuance of such default for a period of 30 days; or
(b) default in the payment of all or any part of the principal on any
of the Securities of such series as and when the same shall become due and
payable either at maturity, upon redemption, by declaration or otherwise;
or
(c) default in the payment of any sinking fund instalment as and when
the same shall become due and payable by the terms of the Securities of
such series; or
(d) default in the performance, or breach, of any covenant or
warranty of the Issuer in respect of the Securities of such series (other
than a covenant or warranty in respect of the Securities of such series a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a
period of 90 days after there has been given, by registered or certified
mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding Securities
of all series affected thereby, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(e) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Issuer in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Issuer or for any
substantial part of its property or ordering the winding up or liquidation
of its affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
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(f) the Issuer shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under
any such law, or consent to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee or sequestrator (or
similar official) of the Issuer or for any substantial part of its
property, or make any general assignment for the benefit of creditors; or
(g) any other Event of Default provided in the supplemental indenture
or resolution of the Board of Directors under which such series of
Securities is issued or in the form of Security for such series.
If an Event of Default described in clauses (a), (b), (c) or (d) above (if the
Event of Default under clause (d) is with respect to less than all series of
Securities then Outstanding) occurs and is continuing, then, and in each and
every such case, unless the principal of all of the Securities of such series
shall have already become due and payable, either the Trustee or the holders of
not less than 25% in aggregate principal amount of the Securities of such series
then Outstanding hereunder (each such series voting as a separate class) by
notice in writing to the Issuer (and to the Trustee if given by
Securityholders), may declare the entire principal (or, if the Securities of
such series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of such series) of all
Securities of such series and the interest accrued thereon, if any, to be due
and payable immediately, and upon any such declaration the same shall become
immediately due and payable. If an Event of Default described in clause (d) (if
the Event of Default under clause (d) is with respect to all series of
Securities then Outstanding), (e) or (f) occurs and is continuing, then and in
each and every such case, unless the principal of all the Securities shall have
already become due and payable, either the Trustee or the Holders of not less
than 25% in aggregate principal amount of all the Securities then Outstanding
hereunder (treated as one class), by notice in writing to the Issuer (and to the
Trustee if given by Securityholders), may declare the entire principal (or, if
any Securities are Original Issue Discount Securities, such portion of the
principal as may be specified in the terms thereof) of all the Securities then
outstanding
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and interest accrued thereon, if any, to be due and payable immediately, and
upon any such declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal (or, if the Securities are Original Issue
Discount Securities, such portion of the principal as may be specified in the
terms thereof) of the Securities of any series (or of all the Securities, as the
case may be) shall have been so declared due and payable, and before any
judgment or decree for the payment of the moneys due shall have been obtained or
entered as hereinafter provided, the Issuer shall pay or shall deposit with the
Trustee a sum sufficient to pay all matured instalments of interest upon all the
Securities of such series (or of all the Securities, as the case may be) and the
principal of any and all Securities of such series (or of all the Securities, as
the case may be) which shall have become due otherwise than by acceleration
(with interest upon such principal and, to the extent that payment of such
interest is enforceable under applicable law, on overdue instalments of
interest, at the same rate as the rate of interest or Yield to Maturity (in the
case of Original Issue Discount Securities) specified in the Securities of such
series, (or at the respective rates of interest or Yields to Maturity of all the
Securities, as the case may be) to the date of such payment or deposit) and such
amount as shall be sufficient to cover reasonable compensation to the Trustee,
its agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee except as a result of negligence
or bad faith, and if any and all Events of Default under the Indenture, other
than the non-payment of the principal of Securities which shall have become due
by acceleration, shall have been cured, waived or otherwise remedied as provided
herein--then and in every such case the holders of a majority in aggregate
principal amount of all the Securities of such series, each series voting as a
separate class, (or of all the Securities, as the case may be, voting as a
single class) then Outstanding, by written notice to the Issuer and to the
Trustee, may waive all defaults with respect to such series (or with respect to
all the Securities, as the case may be) and rescind and annul such declaration
and its consequences, but no such waiver or rescission and annulment shall
extend to or shall affect any subsequent default or shall impair any right
consequent thereon.
For all purposes under this Indenture, if a portion of the principal
of any Original Issue Discount Securities
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<PAGE>
shall have been accelerated and declared due and payable pursuant to the
provisions hereof, then, from and after such declaration, unless such
declaration has been rescinded and annulled, the principal amount of such
Original Issue Discount Securities shall be deemed, for all purposes hereunder,
to be such portion of the principal thereof as shall be due and payable as a
result of such Acceleration, and payment of such portion of the principal
thereof as shall be due and payable as a result of such acceleration, together
with interest, if any, thereon and all other amounts owing thereunder, shall
constitute payment in full of such Original Issue Discount Securities.
SECTION 5.2 Collection of Indebtedness by Trustee; Trustee May Prove
--------------------------------------------------------
Debt. The Issuer covenants that (a) in case default shall be made in the payment
- ----
of any instalment of interest on any of the Securities of any series when such
interest shall have become due and payable, and such default shall have
continued for a period of 30 days or (b) in case default shall be made in the
payment of all or any part of the principal of any of the Securities of any
series when the same shall have become due and payable, whether upon maturity of
the Securities of such series or upon any redemption or by declaration or
otherwise--then upon demand of the Trustee, the Issuer will pay to the Trustee
for the benefit of the Holders of the Securities of such series the whole amount
that then shall have become due and payable on all Securities of such series,
and such Coupons, for principal or interest, as the case may be (with interest
to the date of such payment upon the overdue principal and, to the extent that
payment of such interest is enforceable under applicable law, on overdue
instalments of interest at the same rate as the rate of interest or Yield to
Maturity (in the case of Original Issue Discount Securities) specified in the
Securities of such series); and in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee and each predecessor Trustee, their
respective agents, attorneys and counsel, and any expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of its negligence or bad faith.
In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any
such judgment or final decree
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<PAGE>
against the Issuer or other obligor upon such Securities and collect in the
manner provided by law out of the property of the Issuer or other obligor upon
such Securities, whenever situated, the moneys adjudged or decreed to be
payable.
In case there shall be pending proceedings relative to the Issuer or
any other obligor upon the Securities under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor, or in case
of any other comparable judicial proceedings relative to the Issuer or other
obligor upon the Securities of any series, or to the creditors or property of
the Issuer or such other obligor, the Trustee, irrespective of whether the
principal of any Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount of
principal and interest (or, if the Securities of any series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of such series) owing and unpaid in respect of the
Securities of any series, and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and each
predecessor Trustee, and their respective agents, attorneys and counsel,
and for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as a
result of negligence or bad faith) and of the Securityholders allowed in
any judicial proceedings relative to the Issuer or other obligor upon the
Securities of any series, or to the creditors or property of the Issuer or
such other obligor,
(b) Unless prohibited by applicable law and regulations, to vote on
behalf of the holders of the Securities of any series in any election of a
trustee or a standby trustee in arrangement, reorganization, liquidation or
other bankruptcy or
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<PAGE>
insolvency proceedings or person performing similar functions in comparable
proceedings, and
(c) to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute all amounts received with
respect to the claims of the Securityholders and of the Trustee on their
behalf; and any trustee, receiver, or liquidator, custodian or other
similar official is hereby authorized by each of the Securityholders to
make payments to the Trustee, and, in the event that the Trustee shall
consent to the making of payments directly to the Securityholders, to pay
to the Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, each predecessor Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee except as a result of negligence or bad faith and all other amounts
due to the Trustee or any predecessor Trustee pursuant to Section 6.6.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities of any series or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding except, as aforesaid, to vote for the
election of a trustee in bankruptcy or similar person.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities of any series or Coupons appertaining to such
Securities, may be enforced by the Trustee without the possession of any of the
Securities of such series or Coupons appertaining to such Securities or the
production thereof on any trial or other proceedings relative thereto, and any
such action or proceedings instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to
the payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the holders of the Securities or Coupons appertaining to such
Securities in respect of which such action was taken.
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In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Securities or Coupons appertaining to such Securities in respect to which
such action was taken, and it shall not be necessary to make any holders of such
Securities or Coupons appertaining to such Securities parties to any such
proceedings.
SECTION 5.3 Application of Proceeds. Any moneys collected by the
-----------------------
Trustee pursuant to this Article in respect of any series shall be applied in
the following order at the date or dates fixed by the Trustee and, in case of
the distribution of such moneys on account of principal or interest, upon
presentation of the several Securities and Coupons appertaining to such
Securities in respect of which monies have been collected and stamping (or
otherwise noting) thereon the payment, or issuing Securities of such series in
reduced principal amounts in exchange for the presented Securities of like
series if only partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses applicable to such series
in respect of which monies have been collected, including reasonable
compensation to the Trustee and each predecessor Trustee and their
respective agents and attorneys and of all expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee except as a result of negligence or bad faith, and all other
amounts due to the Trustee or any predecessor Trustee pursuant to Section
6.6;
SECOND: In case the principal of the Securities of such series in
respect of which moneys have been collected shall not have become and be
then due and payable, to the payment of interest on the Securities of such
series in default in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue instalments of interest at the
same rate as the rate of interest or Yield to Maturity (in the case of
Original Issue Discount Securities) specified in such Securities, such
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payments to be made ratably to the persons entitled thereto, without
discrimination or preference;
THIRD: In case the principal of the Securities of such series in
respect of which moneys have been collected shall have become and shall be
then due and payable, to the payment of the whole amount then owing and
unpaid upon all the Securities of such series for principal and interest,
with interest upon the overdue principal, and (to the extent that such
interest has been collected by the Trustee) upon overdue instalments of
interest at the same rate as the rate of interest or Yield to Maturity (in
the case of Original Issue Discount Securities) specified in the Securities
of such series; and in case such moneys shall be insufficient to pay in
full the whole amount so due and unpaid upon the Securities of such series,
then to the payment of such principal and interest or Yield to Maturity,
without preference or priority of principal over interest or Yield to
Maturity over principal, or of any instalment of interest over any other
instalment of interest, or of any Security of such series over any other
Security of such series, ratably to the aggregate of such principal and
accrued and unpaid interest or Yield to Maturity; and
FOURTH: To the payment of the remainder, if any, to the Issuer or any
other person lawfully entitled thereto.
SECTION 5.4 Suits for Enforcement. In case an Event of Default has
---------------------
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Identure or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
SECTION 5.5 Restoration of Rights on Abandonment of Proceedings. In
---------------------------------------------------
case the Trustee shall have proceeded to enforce any right under this Indenture
and such proceedings
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shall have been discontinued or abandoned for any reason, or shall have been
determined adversely to the Trustee, then and in every such case the Issuer and
the Trustee shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Issuer, the Trustee and
the Securityholders shall continue as though no such proceedings had been taken.
SECTION 5.6 Limitations on Suits by Securityholders. No holder of any
---------------------------------------
Security of any series or of any Coupon appertaining thereto shall have any
right by virtue or by availing of any provision of this Indenture to institute
any action or proceeding at law or in equity or in bankruptcy or otherwise upon
or under or with respect to this Indenture, or for the appointment of a trustee,
receiver, liquidator, custodian or other similar official or for any other
remedy hereunder, unless such holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Securities of such series then Outstanding shall have
made written request upon the Trustee to institute such action or proceedings in
its own name as trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby and the Trustee for 60 days after
its receipt of such notice, request and offer of indemnity shall have failed to
institute any such action or proceeding and no direction inconsistent with such
written request shall have been given to the Trustee pursuant to Section 5.9; it
being understood and intended, and being expressly covenanted by the taker and
Holder of every Security or Coupon with every other taker and Holder and the
Trustee, that no one or more Holders of Securities of any series or Coupons
appertaining to such Securities shall have any right in any manner whatever by
virtue or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of any other such Holder of Securities or Coupons
appertaining to such Securities, or to obtain or seek to obtain priority over or
preference to any other such Holder or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of Securities of the applicable series and Coupons
appertaining to such Securities. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.
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SECTION 5.7 Unconditional Right of Securityholders to Institute
---------------------------------------------------
Certain Suits. Notwithstanding any other provision in this Indenture and any
- -------------
provision of any Security, the right of any Holder of any Security or Coupon to
receive payment of the principal of and interest on such Security or Coupon on
or after the respective due dates expressed in such Security or Coupon, or to
institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 5.8 Powers and Remedies Cumulative; Delay or Omission Not
-----------------------------------------------------
Waiver of Default. Except as provided in Section 5.6, no right or remedy herein
- -----------------
conferred upon or reserved to the Trustee or to the holders of Securities or
Coupons is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any holder of Securities or
Coupons to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to Section 5.6, every power and remedy given
by this Indenture or by law to the Trustee or to the holders of Securities or
Coupons may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the holders of Securities or Coupons.
SECTION 5.9 Control by Holders of Securities. The Holders of a
--------------------------------
majority in aggregate principal amount of the Securities of each series affected
(with each series voting as a separate class) at the time Outstanding shall have
the right to direct the time, method, and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee with respect to the Securities of such series by this Indenture;
provided that such direction shall not be otherwise than in accordance with law
- --------
and the provisions of this Indenture and provided further that (subject to the
-------- -------
provisions of Section 6.1) the Trustee shall have the right to decline to follow
any such direction if the Trustee, being advised by counsel,
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<PAGE>
shall determine that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith by its board of directors, the executive
committee, or a trust committee of directors or Responsible Officers of the
Trustee shall determine that the action or proceedings so directed would involve
the Trustee in personal liability or if the Trustee in good faith shall so
determine that the actions or forebearances specified in or pursuant to such
direction would be unduly prejudicial to the interests of Holders of the
Securities of all series so affected not joining in the giving of said
direction, it being understood that (subject to Section 6.1) the Trustee shall
have no duty to ascertain whether or not such actions or forebearances are
unduly prejudicial to such Holders.
Nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and which is not
inconsistent with such direction or directions by Securityholders.
SECTION 5.10 Waiver of Past Defaults. Prior to the declaration of the
-----------------------
acceleration of the maturity of the Securities of any series as provided in
Section 5.1, the Holders of a majority in aggregate principal amount of the
Securities of such series at the time Outstanding may on behalf of the Holders
of all the Securities of such series waive any past default or Event of Default
described in clause (c) of Section 5.1 (or, in the case of an event specified in
clause (d) of Section 5.1 which relates to less than all series of Securities
then Outstanding, the Holders of a majority in aggregate principal amount of the
Securities then Outstanding affected thereby (each series voting as a separate
class) may waive any such default or Event of Default, or, in the case of an
event specified in clause (d) (if the Event of Default under clause (d) relates
to all series of Securities then Outstanding), (e) or (f) of Section 5.1 the
Holders of Securities of a majority in principal amount of all the Securities
then Outstanding (voting as one class) may waive any such default or Event of
Default), and its consequences except a default in respect of a covenant or
provision hereof which cannot be modified or amended without the consent of the
Holder of each Security affected. In the case of any such waiver, the Issuer,
the Trustee and the Holders of the Securities of such series shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or impair any right consequent
thereon.
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<PAGE>
Upon any such waiver, such default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 5.11 Trustee to Give Notice of Default, But May Withhold in
------------------------------------------------------
Certain Circumstances. The Trustee shall, within ninety days after the
- ---------------------
occurrence of a default with respect to the Securities of any series, give
notice of all defaults with respect to that series known to the Trustee (i) if
any Unregistered Securities of that series are then Outstanding, to the Holders
thereof, by publication at least once in an Authorized Newspaper in the Borough
of Manhattan, The City of New York and at least once in an Authorized Newspaper
in London (and, if required by Section 3.8, at least once in an Authorized
Newspaper in Luxembourg), (ii) if any Unregistered Securities of that series are
then Outstanding, to all Holders thereof who have filed their names and
addresses with the Trustee pursuant to Section 4.4 (c) (ii), by mailing such
notice to such Holders at such addresses and (iii) to all Holders of then
Outstanding Registered Securities of that series, by mailing such notice to such
Holders at their addresses as they shall appear in the registry books, unless in
each case such defaults shall have been cured before the mailing or publication
of such notice (the term "defaults" for the purpose of this Section being hereby
defined to mean any event or condition which is, or with notice or lapse of time
or both would become, an Event of Default); provided that, except in the case of
--------
default in the payment of the principal of or interest on any of the Securities
of such series, the Trustee shall be protected in withholding such notice if and
so long as the board of directors, the executive committee, or a trust committee
of directors or trustees and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interests of the
Securityholders of such series.
SECTION 5.12 Right of Court to Require Filing of Undertaking to Pay
------------------------------------------------------
Costs. All parties to this Indenture agree, and each Holder of any Security or
- -----
Coupon by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit,
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and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Securityholder or group
of Securityholders of any series holding in the aggregate more than 10% in
aggregate principal amount of the Securities of such series, or, in the case of
any suit relating to or arising under clause (d) of Section 5.1 (if the suit
relates to Securities of more than one but less than all series), 10% in
aggregate principal amount of Securities Outstanding affected thereby, or in the
case of any suit relating to or arising under clause (d) (if the suit under
clause (d) relates to all the Securities then Outstanding), (e) or (f) of
Section 5.1, 10% in aggregate principal amount of all Securities Outstanding, or
to any suit instituted by any Securityholder for the enforcement of the payment
of the principal of or interest on any Security on or after the due date
expressed in such Security or any date fixed for redemption.
ARTICLE SIX
CONCERNING THE TRUSTEE
----------------------
SECTION 6.1 Duties and Responsibilities of the Trustee; During
--------------------------------------------------
Default; Prior to Default. With respect to the Holders of any series of
- -------------------------
Securities issued hereunder, the Trustee, prior to the occurrence of an Event of
Default with respect to the Securities of a particular series and after the
curing or waiving of all Events of Default which may have occurred with respect
to such series, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default with
respect to the Securities of a series has occurred (which has not been cured or
waived) the Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that
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(a) prior to the occurrence of an Event of Default with respect to the
Securities of any series and after the curing or waiving of all such Events
of Default with respect to such series which may have occurred:
(i) the duties and obligations of the Trustee with respect to the
Securities of any series shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
statements, certificates or opinions furnished to the Trustee and
conforming to the requirements of his Indenture; but in the case of
any such statements, certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders pursuant to Section 6.9 relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds
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or otherwise incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers, if there shall be
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such liability is not reasonably assured to it.
SECTION 6.2 Certain Rights of the Trustee. Subject to Section 6.1:
-----------------------------
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate or any
other certificate statement, instrument, opinion, report, notice, request,
consent, order, bond, debenture, note, coupon, security or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request, direction, order or demand of the Issuer mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the secretary or an assistant secretary of the
Issuer;
(c) the Trustee may consult with counsel and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
trusts of powers vested in it by this Indenture at the request, order of
direction of any of the Securityholders pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to authorized or within the
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discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall not
be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, appraisal, bond, debenture, note,
coupon, security, or other paper or document unless requested in writing so
to do by the holders of not less than a majority in aggregate principal
amount of the Securities of all series affected then Outstanding; provided
--------
that, if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of every
such investigation shall be paid by the Issuer or, if paid by the Trustee
or any predecessor Trustee, shall be repaid by the Issuer upon demand; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent
or attorney appointed with due care by it hereunder.
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of
----------------------------------------------------
Securities or Application of Proceeds Thereof. The recitals contained herein
- ---------------------------------------------
and in the Securities, except the Trustee's certificates of authentication,
shall be taken as the statements of the Issuer, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Securities or Coupons. The Trustee shall not be accountable for the use or
application by the Issuer of any of the Securities or of the proceeds thereof.
SECTION 6.4 Trustee and Agents May Hold Securities or Coupons;
--------------------------------------------------
Collections, etc. The Trustee or any agent of
- ----------------
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<PAGE>
the Issuer or the Trustee, in its individual or any other capacity, may become
the owner or pledgee of Securities or Coupons with the same rights it would have
if it were not the Trustee or such agent and, subject to Sections 6.8 and 6.13,
may otherwise deal with the Issuer and receive, collect, hold and retain
collections from the Issuer with the same rights it would have if it were not
the Trustee or such agent.
SECTION 6.5 Moneys Held by Trustee. Subject to the provisions of
----------------------
Section 10.4 hereof, all moneys received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Neither the Trustee nor any agent of
the Issuer or the Trustee shall be under any liability for interest on any
moneys received by it hereunder.
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior
---------------------------------------------------------
Claim. The Issuer covenants and agrees to pay to the Trustee from time to time,
- -----
and the Trustee shall be entitled to, reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) and the Issuer covenants and agrees to pay or reimburse the
Trustee and each predecessor Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by or on behalf of it in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
The Issuer also covenants to indemnify the Trustee and each predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this Indenture or the trusts hereunder
and its duties hereunder, including the costs and expenses of defending itself
against or investigating any claim of liability in the premises. The obligations
of the Issuer under this Section to compensate and indemnify the Trustee and
each predecessor Trustee and to pay or reimburse the Trustee and each
predecessor Trustee for expenses, disbursements and advances shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. Such additional indebtedness shall be a senior
claim to that of the Securities upon all property and funds held or collected by
the Trustee as such, except funds held in trust for
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<PAGE>
the benefit of the holders of particular Securities or Coupons, and the
Securities are hereby subordinated to such senior claim.
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc.
------------------------------------------------------
Subject to Sections 6.1 and 6.2, whenever in the administration of the trusts of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 6.8 Qualification of Trustee; Conflicting Interests. (a) If
-----------------------------------------------
the Trustee has or shall acquire any conflicting interest, as defined in this
Section, it shall, within 90 days after ascertaining that it has such
conflicting interest, either eliminate such conflicting interest or resign in
the manner and with the effect specified in this Indenture.
(b) In the event that the Trustee shall fail to comply with the
provisions of subsection (a) of this Section, the Trustee shall, within 10 days
after the expiration of such 90 day period, transmit by mail notice of such
failure to the Securityholders in the manner and to the extent required by
Section 4.4(c).
(c) For the purposes of this Section, the Trustee shall be deemed to
have a conflicting interest with respect to Securities of any series if
(i) the Trustee is trustee under this Indenture with respect to the
Outstanding Securities of any other series or is a trustee under another
indenture under which any other securities, or certificates of interest or
participation in any other securities, of the Issuer are outstanding,
unless such other indenture is a collateral trust indenture under which the
only collateral consists of Securities issued under this Indenture;
provided that there shall be excluded from the operation of this paragraph
the Indenture dated July 15, 1969
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between the Issuer and Chemical Bank, as trustee, relating to the Issuer's
7.65% Sinking Fund Debentures Due July 15, 1994; the Indenture dated
October 1, 1970 between the Issuer and Chemical Bank, as trustee, relating
to the Issuer's 8 5/8% Sinking Fund Debentures Due October 1, 2000; the
Indenture dated November 15, 1974 between the Issuer and Chemical Bank, as
trustee, relating to the Issuer's 8.90% Sinking Fund Debentures Due
November 15, 2004; the Indenture dated October 28, 1976 between the Issuer
and Chemical Bank, as trustee, relating to the Issuer's 7.95% Sinking Fund
Debentures Due August 15, 2006 and this Indenture with respect to the
Securities of any other series and there shall also be so excluded any
other indenture or indentures under which other securities, or certificates
of interest or participation in other securities, of the Issuer are
outstanding if (i) this Indenture is and, if applicable, this Indenture and
any series issued pursuant to this Indenture and such other indenture or
indentures are wholly unsecured, and such other indenture or indentures are
hereafter qualified under the Trust Indenture Act of 1939, unless the
Commission shall have found and declared by order pursuant to Section
305(b) or Section 307(c) of such Trust Indenture Act of 1939 that
differences exist between the provisions of this Indenture with respect to
Securities of such series and one or more other series, or the provisions
of this Indenture and the provisions of such other indenture or indentures
which are so likely to involve a material conflict of interest as to make
it necessary in the public interest or for the protection of investors to
disqualify the Trustee from acting as such under this Indenture with
respect to Securities of such series and such other series, or under this
Indenture or such other indenture or indentures, or (ii) the Issuer shall
have sustained the burden of proving, on application to the Commission and
after opportunity for hearing thereon, that trusteeship under this
Indenture with respect to Securities of such series and such other series,
or under this Indenture and such other indenture or indentures is not so
likely to involve a material conflict of interest as to make it necessary
in the public interest or for the protection of investors to disqualify the
Trustee from acting as such under this Indenture with respect to Securities
of such
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<PAGE>
series and such other series, or under this Indenture and such other
indentures;
(ii) the Trustee or any of its directors or executive officers is an
obligor upon the Securities of any series issued under this Indenture or an
underwriter for the Issuer;
(iii) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with
the Issuer or an underwriter for the Issuer;
(iv) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee, or representative of the
Issuer, or of an underwriter (other than the Trustee itself) for the Issuer
who is currently engaged in the business of underwriting, except that (x)
one individual may be a director or an executive officer, or both, of the
Trustee and a director or an executive officer, or both, of the Issuer, but
may not be at the same time an executive officer of both the Trustee and
the Issuer; (y) if and so long as the number of directors of the Trustee in
office is more than nine, one additional individual may be a director or an
executive officer, or both, of the Trustee and a director of the Issuer;
and (z) the Trustee may be designated by the Issuer or by any underwriter
for the Issuer to act in the capacity of transfer agent, registrar,
custodian, paying agent, fiscal agent, escrow agent, or depositary, or in
any other similar capacity, or, subject to the provisions of subsection
(c)(i) of this Section, to act as trustee, whether under an indenture or
otherwise;
(v) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Issuer or by any director, partner or
executive officer thereof, or 20% or more of such voting securities is
beneficially owned, collectively, by any two or more of such persons; or
10% or more of the voting securities of the Trustee is beneficially owned
either by an underwriter for the Issuer or by any director, partner, or
executive officer thereof, or is beneficially owned, collectively, by any
two or more such persons;
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<PAGE>
(vi) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, (x) 5% or more of the
voting securities or 10% or more of any other class of security of the
Issuer, not including the Securities issued under this Indenture and
securities under any other indenture under which the Trustee is also
trustee, or (y) 10% or more of any class of security of an underwriter for
the Issuer;
(vii) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, 5% or more of the voting
securities of any person who, to the knowledge of the Trustee, owns 10% or
more of the voting securities of, or controls directly or indirectly or is
under direct or indirect common control with, the Issuer;
(viii) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, 10% or more of any class of
security of any person who, to the knowledge of the Trustee, owns 50% or
more of the voting securities of the Issuer; or
(ix) the Trustee owns on May 15 in any calendar year, in the
capacity of executor, administrator, testamentary or inter vivos trustee,
----- -----
guardian, committee or conservator, or in any other similar capacity, an
aggregate of 25% or more of the voting securities, or of any class of
security, of any person, the beneficial ownership of a specified percentage
of which would have constituted a conflicting interest under Section
6.8(c)(vi), (vii) or (viii). As to any such securities of which the Trustee
acquired ownership through becoming executor, administrator, or
testamentary trustee of an estate which included them, the provisions of
the preceding sentence shall not apply, for a period of two years from the
date of such acquisition, to the extent that such securities included in
such estate do not exceed 25% of such voting securities or 25% of any such
class of security. Promptly after May 15 in each calendar year, the Trustee
shall make a check of its holdings of such securities in any of the above-
mentioned capacities as of such May 15. If
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the Issuer fails to make payment in full of principal of or interest on any
of the Securities when and as the same becomes due and payable, and such
failure continues for 30 days thereafter, the Trustee shall make a prompt
check of its holdings of such securities in any of the above-mentioned
capacities as of the date of the expiration of such 30-day period, and
after such date, notwithstanding the foregoing provisions of this
paragraph, all such securities so held by the Trustee, with sole or joint
control over such securities vested in it, shall, but only so long as such
failure shall continue, be considered as though beneficially owned by the
Trustee for the purposes of subsections (c)(vi), (vii) and (viii) of this
Section.
The specification of percentages in subsections (c)(v) to (ix)
inclusive of this Section shall not be construed as indicating that the
ownership of such percentages of the securities of a person is or is not
necessary or sufficient to constitute direct or indirect control for the
purposes of subsections (c)(iii) or (vii) of this Section.
For the purposes of subsections (c)(vi), (vii), (viii) and (ix), of
this Section, only,
(i) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys lent to a person by one or more banks, trust
companies, or banking firms, or any certificate of interest or
participation in any such note or evidence of indebtedness;
(ii) an obligation shall be deemed to be in default when a default
in payment of principal shall have continued for 30 days or more and shall
not have been cured; and
(iii) the Trustee shall not be deemed to be the owner or holder of
(x) any security which it holds as collateral security, as trustee or
otherwise, for an obligation which is not in default as defined in clause
(ii) above, or (y) any security which is holds as collateral security under
this Indenture, irrespective of any default hereunder, or (z) any security
which it holds as agent for
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collection, or as custodian, escrow agent, or depositary, or
in any similar representative capacity.
Except as provided above, the word "security" or "securities" as
used in this Section shall mean any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or
participation in any profit-sharing agreement, collateral trust
certificate, preorganization certificate or subscription, transferable
share, investment contract, voting trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas or other
mineral rights, or, in general, any interest or instrument commonly known
as a "security", or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of, or warrant
or right to subscribe to or purchase, any of the foregoing.
(d) For purposes of this Section:
(i) the term "underwriter" when used with reference to
the Issuer shall mean every person who, within three years
prior to the time as of which the determination is made, has
purchased from the Issuer with a view to, or has offered or
sold for the Issuer in connection with, the distribution of
any security of the Issuer outstanding at such time, or has
participated or has had a direct or indirect participation
in any such undertaking, or has participated or has had a
participation in the direct or indirect underwriting of any
such undertaking, but such term shall not include a person
whose interest was limited to a commission from an
underwriter or dealer not in excess of the usual and
customary distributors' or sellers' commission;
(ii) the term "director" shall mean any director of a
corporation or any individual performing similar functions
with respect to any organization whether incorporated or
unincorporated;
(iii) the term "person" shall mean an individual, a
corporation, a partnership, an association, a joint-stock
company, a trust, an unincorporated organization, or a
government or political subdivision thereof; as used in this
paragraph, the term "trust" shall include only a trust where
the interest or interests of the
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beneficiary or beneficiaries are evidenced by a security;
(iv) the term "voting security" shall mean any security
presently entitling the owner or holder thereof to vote in the
direction or management of the affairs of a person, or any security
issued under or pursuant to any trust, agreement or arrangement
whereby a trustee or trustees or agent or agents for the owner or
holder of such security are presently entitled to vote in the
direction or management of the affairs of a person;
(v) the term "Issuer" shall mean any obligor upon the
Securities; and
(vi) the term "executive officer" shall mean the president,
every vice president, every trust officer, the cashier, the secretary,
and the treasurer of a corporation, and any individual customarily
performing similar functions with respect to any organization whether
incorporated or unincorporated, but shall not include the chairman of
the board of directors.
(e) The percentages of voting securities and other
securities specified in this Section shall be calculated in accordance with
the following provisions:
(i) a specified percentage of the voting securities of the
Trustee, the Issuer or any other person referred to in this Section
(each of whom is referred to as a "person" in this paragraph) means
such amount of the outstanding voting securities of such person as
entitles the holder or holders thereof to cast such specified
percentage of the aggregate votes which the holders of all the
outstanding voting securities of such person are entitled to cast in
the direction or management of the affairs of such person;
(ii) a specified percentage of a class of securities of a
person means such percentage of the aggregate amount of securities of
the class outstanding;
(iii) the term "amount", when used in regard to securities,
means the principal amount if relating to evidences of indebtedness,
the number of shares
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if relating to capital shares, and the number of units if relating to
any other kind of security;
(iv) the term "outstanding" means issued and not held by or for
the account of the issuer; the following securities shall not be
deemed outstanding within the meaning of this definition:
(A) securities of an issuer held in a sinking fund
relating to securities of the issuer of the same class;
(B) securities of an issuer held in a sinking fund
relating to another class of securities of the issuer, if the
obligation evidenced by such other class of securities is not in
default as to principal or interest or otherwise;
(C) securities pledged by the issuer thereof as security
for an obligation of the issuer not in default as to principal or
interest or otherwise; and
(D) securities held in escrow if placed in escrow by the
issuer thereof;
provided, that any voting securities of an issuer shall be deemed outstanding if
- --------
any person other than the issuer is entitled to exercise the voting rights
thereof; and
(v) a security shall be deemed to be of the same class as
another security if both securities confer upon the holder or holders
thereof substantially the same rights and privileges; provided, that,
--------
in the case of secured evidences of indebtedness, all of which are
issued under a single indenture, differences in the interest rates or
maturity dates of various series thereof shall not be deemed
sufficient to constitute such series different classes and provided,
--------
further, that, in the case of unsecured evidences of indebtedness,
-------
differences in the interest rates or maturity dates thereof shall not
be deemed sufficient to constitute them securities of different
classes, whether or not they are issued under a single indenture.
SECTION 6.9 Persons Eligible for Appointment as Trustee. The
-------------------------------------------
Trustee for each series of Securities hereunder
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shall at all times be a corporation organized and doing business under the laws
of the United States of America or of any State or the District of Columbia
having a combined capital and surplus of at least $50,000,000, and which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by Federal, State or District of Columbia authority.
Such corporation shall have its principal place of business in the Borough of
Manhattan, The City of New York if there be such a corporation in such location
willing to act upon reasonable and customary terms and conditions. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 6.10.
SECTION 6.10 Resignation and Removal; Appointment of Successor
-------------------------------------------------
Trustee. (a) The Trustee, or any trustee or trustees hereafter appointed, may
- -------
at any time resign with respect to one or more or all series of Securities by
giving written notice of resignation to the Issuer and (i) if any Unregistered
Securities of a series affected are then Outstanding, by giving notice of such
resignation to the Holders thereof, by publication at least once in an
Authorized Newspaper in the Borough of Manhattan, The City of New York, and at
least once in an Authorized Newspaper in London (and, if required by Section
3.8, at least once in an Authorized Newspaper in Luxembourg), (ii) if any
Unregistered Securities of a series affected are then Outstanding, by mailing
notice of such resignation to the Holders thereof who have filed their names and
addresses with the Trustee pursuant to Section 4.4(c)(ii) at such addresses as
were so furnished to the Trustee and (iii) by mailing notice of such resignation
to the Holders of then Outstanding Registered Securities of each series affected
at their addresses as they shall appear on the registry books. Upon receiving
such notice of resignation, the Issuer shall promptly appoint a successor
trustee or trustees with respect to the applicable series by written instrument
in duplicate, executed by authority of the Board of Directors, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee or trustees. If no successor trustee shall have been so
appointed with respect to any series and have accepted
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appointment within 30 days after the mailing of such notice of resignation, the
resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Securityholder who has been a bona
fide Holder of a Security or Securities of the applicable series for at least
six months may, subject to the provisions of Section 5.12, on behalf of himself
and all others similarly situated, petition any such court for the appointment
of a successor trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of Section
6.8 with respect to any series of Securities after written request therefor
by the Issuer or by any Securityholder who has been a bona fide Holder of a
Security or Securities of such series for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 6.9 and shall fail to resign after written request
therefor by the Issuer or by any Securityholder; or
(iii) the Trustee shall become incapable of acting with respect to any
series of Securities, or shall be adjudged a bankrupt or insolvent, or a
receiver or liquidator of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee with respect to the
applicable series of Securities and appoint a successor trustee for such series
by written instrument, in duplicate, executed by order of the Board of Directors
of the Issuer, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or, subject to the provisions of
Section 5.12, any Securityholder who has been a bona fide Holder of a Security
or Securities of such series for at least six months may on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor trustee with
respect to such series. Such court may thereupon, after
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such notice, if any, as it may deem proper and prescribe, remove the Trustee and
appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the
Securities of each series at the time outstanding may at any time remove the
Trustee with respect to Securities of such series and appoint a successor
trustee with respect to the Securities of such series by delivering to the
Trustee so removed, to the successor trustee so appointed and to the Issuer the
evidence provided for in Section 7.1 of the action in that regard taken by the
Securityholders.
(d) Any resignation or removal of the Trustee with respect to any
series and any appointment of a successor trustee with respect to such series
pursuant to any of the provisions of this Section 6.10 shall become effective
upon acceptance of appointment by the successor trustee as provided in Section
6.11.
SECTION 6.11 Acceptance of Appointment by Successor Trustee. Any
----------------------------------------------
successor trustee appointed as provided in Section 6.10 shall execute and
deliver to the Issuer and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee with respect to all or any applicable series shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all rights, powers, duties and obligations
with respect to such series of its predecessor hereunder, with like effect as if
originally named as trustee for such series hereunder; but, nevertheless, on the
written request of the Issuer or of the successor trustee, upon payment of its
charges then unpaid, the trustee ceasing to act shall, subject to Section 10.4,
pay over to the successor trustee all moneys at the time held by it hereunder
and shall execute and deliver an instrument transferring to such successor
trustee all such rights, powers, duties and obligations. Upon request of any
such successor trustee, the Issuer shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a prior claim upon all property or funds held or collected
by such trustee to secure any amounts then due it pursuant to the provisions of
Section 6.6.
If a successor trustee is appointed with respect to the Securities of
one or more (but not all) series, the
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Issuer, the predecessor Trustee and each successor trustee with respect to the
Securities of any applicable series shall execute and deliver an indenture
supplemental hereto which shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the predecessor Trustee with respect to the Securities of any series as to
which the predecessor Trustee is not retiring shall continue to be vested in the
predecessor Trustee, and shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such trustees
co-trustees of the same trust and that each such trustee shall be trustee of a
trust or trusts under separate indentures.
No successor trustee with respect to any series of Securities shall
accept appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor trustee shall be qualified under the provisions of
Section 6.8 and eligible under the provisions of Section 6.9.
Upon acceptance of appointment by any successor trustee as provided in
this Section 6.11, the Issuer shall mail notice thereof (a) if any Unregistered
Securities of a series affected are then Outstanding, to the Holders thereof, by
publication of such notice at least once in an Authorized Newspaper in the
Borough of Manhattan, The City of New York and at least once in an Authorized
Newspaper in London (and, if required by Section 3.8, at least once in an
Authorized Newspaper in Luxembourg), (b) if any Unregistered Securities of a
series affected are then Outstanding, to the Holders thereof who have filed
their names and addresses with the Trustee pursuant to Section 4.4(c)(ii), by
mailing such notice to such Holders at such addresses as were so furnished to
the Trustee (and the Trustee shall make such information available to the Issuer
for such purpose) and (c) to the Holders of Registered Securities of each series
affected, by mailing such notice to such Holders at their addresses as they
shall appear on the registry books. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
6.10. If the Issuer fails to mail such notice within ten days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Issuer.
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SECTION 6.12 Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business of Trustee. Any corporation into which the Trustee may be merged or
- -------------------
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided that such
--------
corporation shall be qualified under the provisions of Section 6.8 and eligible
under the provisions of Section 6.9, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of any series shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and deliver
such Securities so authenticated; and, in case at that time any of the
Securities of any series shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Securities of
such series or in this Indenture provided that the certificate of the Trustee
shall have; provided, that the right to adopt the certificate of authentication
--------
of any predecessor Trustee or to authenticate Securities of any series in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
SECTION 6.13 Preferential Collection of Claims Against the Issuer.
----------------------------------------------------
(a) Subject to the provisions of this Section, if the Trustee shall be or shall
become a creditor, directly or indirectly, secured or unsecured, of the Issuer
within four months prior to a default, as defined in subsection (c) of this
Section, or subsequent to such a default, then, unless and until such default
shall be cured, the Trustee shall set apart and hold in a special account for
the benefit of the Trustee individually, the Holders of the Securities and the
holders of other indenture securities (as defined in this Section):
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
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effected after the beginning of such four months' period and valid as
against the Issuer and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
subsection (a)(2) of this Section, or from the exercise of any right of
set-off which the Trustee could have exercised if a petition in bankruptcy
had been filed by or against the Issuer upon the date of such default; and
(2) all property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composition therefor, or in satisfaction or composition thereof, or
otherwise, after the beginning of such four months' period, or an amount
equal to the proceeds of any such property, if disposed of, subject,
however, to the rights, if any, of the Issuer and its other creditors in
such property or such proceeds.
Nothing herein contained, however, shall affect the right of the
Trustee:
(A) to retain for its own account (i) payments made on account of any
such claim by any person (other than the Issuer) who is liable thereon,
(ii) the proceeds of the bona fide sale of any such claim by the Trustee to
a third person, and (iii) distributions made in cash, securities or other
property in respect of claims filed against the Issuer in bankruptcy or
receivership or in proceedings for reorganization pursuant to Title 11 of
the United States Code or applicable state law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such four months' period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such four
months' period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default
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as defined in subsection (c) of this Section would occur within four
months; or
(D) receive payment on any claim referred to in paragraph (B) or (C)
against the release of any property held as security for such claim as
provided in such paragraph (B) or (C), as the case may be, to the extent of
the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such four months' period for property held as security at
the time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released, and, to the
extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any pre-existing claim of the Trustee as such creditor, such claim shall have
the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned
between the Trustee, the Securityholders and the Holders of other indenture
securities in such manner that the Trustee, such Securityholders and the Holders
of other indenture securities realize as a result of payments from such special
account and payments of dividends on claims filed against the Issuer in
bankruptcy or receivership or in proceedings for reorganization pursuant to
Title 11 of the United States Code or applicable State law, the same percentage
of their respective claims, figured before crediting to the claim of the Trustee
anything on account of the receipt by it from the Issuer of the funds and
property in such special account and before crediting to the respective claims
of the Trustee, such Securityholders and the Holders of other indenture
securities dividends on claims filed against the Issuer in bankruptcy or
receivership or in proceedings for reorganization pursuant to Title 11 of the
United States Code or applicable State law, but after crediting thereon receipts
on account of the indebtedness represented by their respective claims from all
sources other than from such dividends and from the funds and property so held
in such special account. As used in this paragraph, with respect to any claim,
the term "dividends" shall include any distribution with respect to such claim,
in bankruptcy or receivership or in proceedings for reorganization pursuant to
Title 11 of the United States Code or applicable State law, whether such
distribution is made in
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cash, securities or other property, but shall not include any such distribution
with respect to the secured portion, if any, of such claim. The court in which
such bankruptcy, receivership or proceeding for reorganization is pending shall
have jurisdiction (i) to apportion between the Trustee, such Securityholders and
the Holders of other indenture securities, in accordance with the provisions of
this paragraph, the funds and property held in such special account and the
proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to
give to the provisions of this paragraph due consideration in determining the
fairness of the distributions to be made to the Trustee, such Securityholders
and the Holders of other indenture securities with respect to their respective
claims, in which event it shall not be necessary to liquidate or to appraise the
value of any securities or other property held in such special account or as
security for any such claim, or to make a specific allocation of such
distributions as between the secured and unsecured portions of such claims, or
otherwise to apply the provisions of this paragraph as a mathematical formula.
Any Trustee who has resigned or been removed after the beginning of
such four months' period shall be subject to the provisions of this subsection
(a) as though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such four months' period, it
shall be subject to the provisions of this subsection (a) if and only if the
following conditions exist:
(i) the receipt of property or reduction of claim which
would have given rise to the obligation to account, if such
Trustee had continued as trustee, occurred after the beginning of
such four months' period; and
(ii) such receipt of property or reduction of claim occurred
within four months after such resignation or removal.
(b) There shall be excluded from the operation of this Section a
creditor relationship arising from
(1) the ownership or acquisition of securities
issued under any indenture, or any security or
securities having a maturity of one year or more at the
time of acquistion by the Trustee;
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(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereto, if notice of such advance and of the circumstances surrounding the
making thereof is given to the Securityholders at the time and in the
manner provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depository, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c)(3)
below;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Issuer; or
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in subsection (c)(4) of
this Section.
(c) As used in this Section:
(1) the term "default" shall mean any failure to make payment in full
of the principal of or interest upon any of the Securities or upon the
other indenture securities when and as such principal or interest becomes
due and payable;
(2) the term "other indenture securities" shall mean securities upon
which the Issuer is an obligor (as defined in the trust Indenture Act of
1939) outstanding under any other indenture (i) under which the Trustee is
also trustee, (ii) which contains provisions substantially similar to the
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provisions of subsection (a) of this Section, and (iii) under which a
default exists at the time of the apportionment of the funds and property
held in said special account;
(3) the term "cash transaction" shall mean any transaction in which
full payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(4) the term "self-liquidating paper" shall mean any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Issuer for the purpose of financing the purchase,
processing, manufacture, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Issuer arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation; and
(5) the term "Issuer" shall mean any obligor upon the Securities.
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
------------------------------
SECTION 7.1 Evidence of Action Taken by Securityholders. Any request,
-------------------------------------------
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by a specified percentage in
principal amount of the Securityholders of any or all series may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such specified percentage of Securityholders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee. Proof of execution of any instrument or of a writing appoint-
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ing any such agent shall be sufficient for any purpose of this Indenture and
(subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the
Issuer, if made in the manner provided in this Article.
SECTION 7.2 Proof of Execution of Instruments and of Holding of
---------------------------------------------------
Securities. Subject to Sections 6.1 and 6.2, the execution of any instrument by
- ----------
a Securityholder or his agent or proxy may be proved in the following manner:
(a) The fact and date of the execution by any Holder of any
instrument may be proved by the certificate of any rotary public or other
officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the person executing such instruments acknowledged to
him the execution thereof, or by an affidavit of a witness to such
execution sworn to before any such notary or other such oficer. Where such
execution is by or on behalf of any legal entity other than an individual,
such certificate or affidavit shall also constitute sufficient proof of the
authority of the person executing the same. The fact of the holding by any
Holder of an Unregistered Security of any series, and the identifying
number of such Security and the date of his holding the same, may be proved
by the production of such Security or by a certificate executed by any
trust company, bank, banker or recognized securities dealer wherever
situated satisfactory to the Trustee, if such certificate shall be deemed
by the Trustee to be satisfactory. Each such certificate shall be dated and
shall state that on the date thereof a Security of such series bearing a
specified identifying number was deposited with or exhibited to such trust
company, bank, banker or recognized securities dealer by the person named
in such certificate. Any such certificate may be issued in respect of one
or more Unregistered Securities of one or more series specified therein.
The holding by the person named in any such certificate of any Unregistered
Securities of any series specified therein shall be presumed to continue
for a period of one year from the date of such certificate unless at the
time of any determination of such holding (1) another certificate bearing a
later date issued in respect of the same Securities shall be produced, or
(2) the Security of such series specified in such certificate shall be
produced by
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some other person, or (3) the Security of such series specified in such
certificate shall have ceased to be Outstanding. Subject to Sections 6.1
and 6.2, the fact and date of the execution of any such instrument and the
amount and numbers of Securities of any series held by the person so
executing such instrument and the amount and numbers of any Security or
Securities for such series may also be proven in accordance with such
reasonable rules and regulations as may be prescribed by the Trustee for
such series or in any other manner which the Trustee for such series may
deem sufficient.
(b) In the case of Registered Securities, the ownership of such
Securities shall be proved by the Security register or by a certificate of
the Security registrar.
SECTION 7.3 Holders to be Treated as Owners. The Issuer, the Trustee
-------------------------------
and any agent of the Issuer or the Trustee may deem and treat the person in
whose name any Security shall be registered upon the Security register for such
series as the absolute owner of such Security (whether or not such Security
shall be overdue and notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on account of the principal
of and, subject to the provisions of this Indenture, interest on such Security
and for all other purposes; and neither the Issuer nor the Trustee nor any agent
of the Issuer or the Trustee shall be affected by any notice to the contrary.
The Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Holder of any Unregistered Security and the Holder of any Coupon as the absolute
owner of such Unregistered Security or Coupon (whether or not such Unregistered
Security or Coupon shall be overdue) for the purpose of receiving payment
thereof or on account thereof and for all other purposes and neither the Issuer,
the Trustee, nor any agent of the Issuer or the Trustee shall be affected by any
notice to the contrary. All such payments so made to any such person, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any
such Security or Coupon.
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In
-------------------------------------------------
determining whether the Holders of the requisite aggregate principal amount of
Outstanding Securities of any or all series have concurred in any direc-
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tion, consent or waiver under this Indenture, Securities which are owned by the
Issuer or any other obligor on the Securities with respect to which such
determination is being made or by any person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Issuer or
any other obligor on the Securities with respect to which such determination is
being made shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination, except that for the purpose of determining whether
the Trustee shall be protected in relying on any such direction, consent or
waiver only Securities which the Trustee knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Issuer or any other obligor upon the Securities or any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Issuer or any other obligor on the Securities.
In case of a dispute as to such right, the advice of counsel shall be full
protection in respect of any decision made by the Trustee in accordance with
such advice. Upon request of the Trustee, the Issuer shall furnish to the
Trustee promptly an Officers' Certificate listing and identifying all
Securities, if any, known by the Issuer to be owned or held by or for the
account of any of the above-described persons; and, subject to Sections 6.1 and
6.2, the Trustee shall be entitled to accept such Officers' Certificate as
conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed therein are Outstanding for the purpose of any such
determination.
SECTION 7.5 Right of Revocation of Action Taken. At any time prior
-----------------------------------
to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of
the taking of any action by the Holders of the percentage in aggregate principal
amount of the Securities of any or all series, as the case may be, specified in
this Indenture in connection with such action, any Holder of a Security the
serial number of which is shown by the evidence to be included among the serial
numbers of the Securities the Holders of which have consented to such action
may, by filing written notice at the Corporated Trust Office and upon proof of
holding as provided in this Article, revoke such action so far as concerns such
Security. Except as aforesaid any such action taken by the Holder of any
Security shall be conclusive and binding upon such Holder and upon all future
Holders and owners of such Security and of any Securities issued in exchange or
sub-
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stitution therefor or on registration of transfer thereof, irrespective of
whether or not any notation in regard thereto is made upon any such Security.
Any action taken by the Holders of the percentage in aggregate principal amount
of the Securities of any or all series, as the case may be, specified in this
Indenture in connection with such action shall be conclusively binding upon the
Issuer, the Trustee and the Holders of all the Securities affected by such
action.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
-----------------------
SECTION 8.1 Supplemental Indentures Without Consent of
------------------------------------------
Securityholders. The Issuer, when authorized by a resolution of its Board of
- ---------------
Directors, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act of 1939 as in force at the date of the
execution thereof) for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of one or more series any property or assets;
(b) to evidence the succession of another corporation to the Issuer,
or successive successions, and the assumption by the successor corporation
of the covenants, agreements and obligations of the Issuer pursuant to
Article Nine;
(c) to add to the covenants of the Issuer such further covenants,
restrictions, conditions or provisions as its Board of Directors and the
Trustee shall consider to be for the protection of the Holders of
Securities or Coupons, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants, restrictions,
conditions or provisions an Event of Default permitting the enforcement of
all or any of the several remedies provided in this Indenture as herein set
forth; provided, that in respect of any such additional covenant,
--------
restriction, condition or provision such supplemental indenture may provide
for a particular period of grace after default
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(which period may be shorter or longer than that allowed in the case
of other defaults) or may provide for an immediate enforcement upon
such an Event of Default or may limit the remedies available to the
Trustee upon such an Event of Default or may limit the right of the
Holders of a majority in aggregate principal amount of the Securities
of such series to waive such an Event of Default;
(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may
be defective or inconsistent with any other provision contained herein
or in any supplemental indenture, or to make any other provisions as
the Board of Directors may deem necessary or desirable, provided that
--------
no such action shall adversely affect the interests of the Holders of
the Securities or Coupons;
(e) to establish the form or terms of Securities of any series
or of the Coupons appertaining to such Securities as permitted by
Sections 2.1 and 2.3; and
(f) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one trustee,
pursuant to the requirements of Section 6.11.
The Trustee is hereby authorized to join with the Issuer in the
execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be therein contained and
to accept the conveyance, transfer, assignment, mortgage or pledge of any
property thereunder, but the Trustee shall not be obligated to enter into
any such supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section may be executed without the consent of the Holders of any of the
Securities at the time outstanding, notwithstanding any of the provisions
of Section 8.2.
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SECTION 8.2 Supplemental Indentures With Consent of Securityholders.
-------------------------------------------------------
With the consent (evidenced as provided in Article Seven) of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding of all series affected by such supplemental indenture (voting as one
class), the Issuer, when authorized by a resolution of its Board of Directors,
and the Trustee may, from time to time and at any time, enter into an indenture
or indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act of 1939 as in force at the date of execution thereof) for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Securities of each such
series or of the Coupons appertaining to such Securities; provided, that no such
--------
supplemental indenture shall (a) extend the final maturity of any Security, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any amount payable on redemption thereof,
or make the principal thereof (including any amount in respect of original issue
discount), or interest thereon payable in any coin or currency other than that
provided in the Securities and Coupons or in accordance with the terms thereof,
or reduce the amount of the principal of an Original Issue Discount Security
that would be due and payable upon an acceleration of the maturity thereof
pursuant to Section 5.1 or the amount thereof provable in bankruptcy pursuant to
Section 5.2, or alter the provisions of Section 11.11, or impair or affect the
right of any Securityholder to institute suit for the payment thereof or, if the
Securities provide therefor, any right of repayment at the option of the
Securityholder without the consent of the Holder of each Security so affected,
or (b) reduce the aforesaid percentage of Securities of any series, the consent
of the Holders of which is required for any such supplemental indenture, without
the consent of the Holders of each Security so affected.
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of Holders of Securities of such series, or of Coupons appertaining
to such Securities, with respect to such covenant or provision, shall be deemed
not to affect the rights under this Indenture of the Holders of Securities
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<PAGE>
of any other series or of the Coupons appertaining to such Securities.
Upon the request of the Issuer, accompanied by a copy of a resolution
of the Board of Directors certified by the secretary or an assistant secretary
of the Issuer authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Securityholders
as aforesaid and other documents, if any, required by Section 7.1, the Trustee
shall join with the Issuer in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Securityholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall mail a notice thereof (i) to the Holders of then Outstanding Registered
Securities of each series affected thereby, by mailing a notice thereof by
first-class mail to such Holders at their addresses as they shall appear on the
Security register, (ii) if any Unregistered Securities of a series affected
thereby are then Outstanding, to the Holders thereof who have filed their names
and addresses with the Trustee pursuant to Section 4.4(c)(ii), by mailing a
notice thereof by first-class mail to such Holders at such addresses as were so
furnished to the Trustee and (iii) if any Unregistered Securities of a series
affected thereby are then Outstanding, to all Holders thereof, by publication of
a notice thereof at least once in an Authorized Newspaper in the Borough of
Manhattan, The City of New York and at least once in an Authorized Newspaper in
London (and, if required by Section 3.8, at least once in an Authorized
Newspaper in Luxembourg), and in each case such notice shall set forth in
general terms the substance of such supplemental indenture. Any failure of the
Issuer to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
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SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of
--------------------------------
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Issuer and the Holders of Securities of
each series affected thereby shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject
--------------------------------
to the provisions of Sections 6.1 and 6.2, may receive an Officers' Certificate
and an Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article 8 complies with the applicable provisions of
this Indenture.
SECTION 8.5 Notation on Securities in Respect of Supplemental
-------------------------------------------------
Indentures. Securities of any series authenticated and delivered after the
- ----------
execution of any supplemental indenture pursuant to the provisions of this
Article may bear a notation in form approved by the Trustee for such series as
to any matter provided for by such supplemental indenture or as to any action
taken by Securityholders. If the Issuer or the Trustee shall so determine, new
Securities of any series so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared by the Issuer,
authenticated by the Trustee and delivered in exchange for the Securities of
such series then outstanding.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
-----------------------------------------
SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms. The Issuer
----------------------------------------------
covenants that it will not merge or consolidate with any other corporation or
sell or convey (including by way of lease) all or substantially all of its
assets to any Person, unless (i) either the Issuer shall be the continuing
corporation, or the successor corporation or the Person which acquires by sale
or conveyance substantially all the assets of the Issuer (if other than the
Issuer) shall
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be a corporation or entity organized under the laws of the United States of
America or any State thereof and shall expressly assume the due and punctual
payment of the principal of and interest on all the Securities and Coupons,
according to their tenor, and the due and punctual performance and observance of
all of the covenants and conditions of this Indenture to be performed or
observed by the Issuer, by supplemental indenture satisfactory to the Trustee,
executed and delivered to the Trustee by such corporation or entity, and (ii)
the Issuer or such successor corporation or entity, as the case may be, shall
not, immediately after such merger or consolidation, or such sale or conveyance,
be in default in the performance of any such covenant or condition.
SECTION 9.2 Successor Issuer Substituted. In case of any such
----------------------------
consolidation, merger, sale or conveyance, and following such an assumption by
the successor corporation, such successor corporation shall succeed to and be
substituted for the Issuer, with the same effect as if it had been named herein.
Such successor corporation may cause to be signed, and may issue either in its
own name or in the name of the Issuer prior to such succession any or all of the
Securities issuable hereunder, together with any Coupons appertaining thereto,
which theretofore shall not have been signed by the Issuer and delivered to the
Trustee; and, upon the order of such successor corporation instead of the Issuer
and subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver any Securities,
together with any Coupons appertaining thereto, which previously shall have been
signed and delivered by the officers of the Issuer to the Trustee for
authentication, and any Securities, together with any Coupons appertaining
thereto, which such successor corporation thereafter shall cause to be signed
and delivered to the Trustee for that purpose. All of the Securities so issued,
together with any Coupons appertaining thereto, shall in all respects have the
same legal rank and benefit under this Indenture as the Securities and Coupons
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Securities and Coupons had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance
such changes in phraseology and form (but not in substance) may be made in the
Securities and Coupons thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance
by way of lease) the Issuer or any succes-
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sor corporation which shall theretofore have become such in the manner describe
in this Article shall be discharged from all obligations and covenants under
this Indenture and the Securities and may be liquidated and dissolved.
SECTION 9.3 Opinion of Counsel to Trustee. The Trustee, subject to
-----------------------------
the provisions of Sections 6.1 and 6.2, may receive an Opinion of Counsel,
prepared in accordance with Section 11.5, as conclusive evidence that any such
consolidation, merger, sale, lease or conveyance, and any such assumption, and
any such liquidation or dissolution, complies with the applicable provisions of
this Indenture.
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS.
----------------
SECTION 10.1 Satisfaction and Discharge of Indenture. (A) If at any
---------------------------------------
time (a) the Issuer shall have paid or caused to be paid the principal of and
interest on all the Securities of any series Outstanding hereunder and all
unmatured Coupons appertaining thereto (other than Securities of such series and
Coupons appertaining thereto which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.9) as and when the same
shall have become due and payable, or (b) the Issuer shall have delivered to the
Trustee for cancellation all Securities of any series theretofore authenticated
and all unmatured Coupons appertaining thereto (other than any Securities of
such series and Coupons appertaining thereto which shall have been destroyed,
lost or stolen and which shall have been replaced or paid as provided in Section
2.9) or (c) (i) all the Securities of such series and all unmatured Coupons
appertaining thereto not theretofore delivered to the Trustee for cancellation
shall have become due and payable, or are by their terms to become due and
payable within one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption,
and (ii) the Issuer shall have irrevocably deposited or caused to be deposited
with the Trustee as trust funds the entire amount in cash (other than moneys
repaid by the Trustee or any paying agent to the Issuer in accordance with
Section 10.4) or direct obligations of the United States of America, backed by
its full faith and credit ("U.S. Government Obligations"), maturing as to
principal and interest in such amounts and at such times as will insure the
availability of cash sufficient to pay at maturity or upon
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redemption all Securities of such series and all unmatured Coupons appertaining
thereto other than any Securities of such series and Coupons appertaining
thereto which shall have been destroyed, lost or stolen and which shall have
been replaced or paid as provided in Section 2.9) not theretofore delivered to
the Trustee for cancellation, including principal and interest due or to become
due to such date of maturity as the case may be, and if, in any such case, the
Issuer shall also pay or cause to be paid all other sums payable hereunder by
the Issuer with respect to Securities of such series, then this Indenture shall
cease to be of further effect with respect to Securities of such series (except
as to (i) rights of registration of transfer and exchange of Securities of such
series, and of Coupons appertaining thereto, and the Issuer's right of optional
redemption, (ii) substitution of mutilated, defaced, destroyed, lost or stolen
Securities or Coupons, (iii) rights of holders of Securities and Coupons
appertaining thereto to receive payments of principal thereof and interest
thereon, upon the original stated due dates therefor (but not upon acceleration)
and remaining rights of the holders to receive mandatory sinking fund payments,
if any, (iv) the rights (including the Trustee's rights under Section 10.5) and
immunities of the Trustee hereunder and the Trustee's obligations under Sections
10.2 and 10.4, (v) the rights of the holders of Securities of such series and
Coupons appertaining thereto as beneficiaries hereof with respect to the
property so deposited with the Trustee payable to all or any of them and (vi)
the obligations of the Issuer under Section 3.2), and the Trustee, on demand of
the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel
which complies with Section 11.5 and at the cost and expense of the Issuer,
shall execute proper instruments acknowledging such satisfaction of and
discharging this Indenture with respect to such series; provided, that the
--------
rights of Holders of the Securities and Coupons to receive amounts in respect of
principal of and interest on the Securities and Coupons held by them shall not
be delayed longer than required by then-applicable mandatory rules or policies
of any securities exchange upon which the Securities are listed. The Issuer
agrees to reimburse the Trustee for any costs or expenses thereafter reasonably
and properly incurred and to compensate the Trustee for any services thereafter
reasonably and properly rendered by the Trustee in connection with this
Indenture or the Securities of such series.
(B) The following provisions shall apply to the Securities of each
series unless specifically otherwise provided in a Board Resolution, Officers'
Certificate or
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<PAGE>
indenture supplemental hereto provided pursuant to Section 2.3. In addition to
discharge of this Indenture pursuant to the next preceding paragraph, the Issuer
shall be deemed to have paid and discharged the entire indebtedness on all the
Securities of a series and Coupons appertaining thereto on the 121st day after
the date of the deposit referred to in subparagraph (a) below, and the
provisions of this Indenture with respect to the Securities of such series and
Coupons appertaining thereto shall no longer be in effect (except as to (i)
rights of registration of transfer and exchange of Securities of such series,
and of Coupons appertaining thereto, (ii) substitution of apparently mutilated,
defaced, destroyed, lost or stolen Securities or Coupons, (iii) rights of
holders of Securities and Coupons appertaining thereto to receive payments of
principal thereof and interest thereon, upon the original stated due dates
therefor (but not upon acceleration) and remaining rights of the holders to
receive sinking fund payments, if any, (iv) the rights (including the Trustee's
rights under Section 10.5) and immunities of the Trustee hereunder and the
Trustee's obligations with respect to the Securities of such series under
Sections 10.2 and 10.4, (v) the rights of the holders of Securities of such
series and Coupons appertaining thereto as beneficiaries hereof with respect to
the property so deposited with the Trustee payable to all or any of them and
(vi) the obligations of the Issuer under Section 3.2 and the Trustee, at the
expense of the Issuer, shall at the Issuer's request, execute proper instruments
acknowledging the same, if
(a) with reference to this provision the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as trust
funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Securities of such series and Coupons
appertaining thereto (i) cash in an amount, or (ii) U.S. Government
Obligations, maturing as to principal and interest at such times and in
such amounts as will insure the availability of cash or (iii) a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay (A) the principal and interest on all
Securities of such series and Coupons appertaining thereto on the date that
such principal or interest is due and payable and (B) any mandatory sinking
fund payments on the day on which such payments are
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due and payable in accordance with the terms of the Indenture and the
Securities of such series;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which the Issuer
is a party or by which it is bound;
(c) the Issuer has delivered to the Trustee an Officers' Certificate
or an opinion of independent legal counsel satisfactory to the Trustee to
the effect that the Issuer has received from, or there has been published
by, the Internal Revenue Service a ruling to the effect that Holders of the
Securities of such series and Coupons appertaining thereto will not
recognize income, gain or loss for Federal income tax purposes as a result
of such deposit, defeasance and discharge and will be subject to Federal
income tax on the same amount and in the same manner and at the same times,
as would have been the case if such deposit, defeasance and discharge had
not occurred; and
(d) the Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided for relating to the defeasance contemplated by this provision have
been complied with, and the Opinion of Counsel shall also state that such
deposit does not violate applicable law.
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of
--------------------------------------------------------
Securities. Subject to Section 10.4, all moneys deposited with the Trustee (or
- ----------
other trustee) pursuant to Section 10.1 shall be held in trust and applied by it
to the payment, either directly or through any paying agent (including the
Issuer acting as its own paying agent), to the Holders of the particular
Securities of such series and of Coupons appertaining thereto for the payment or
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest; but such money
need not be segregated from other funds except to the extent required by law.
SECTION 10.3 Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture with respect to Securities
of any series, all moneys then held by any paying agent under the provisions of
this Indenture with respect to such series of Securities
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shall, upon demand of the Issuer, be repaid to it or paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent
-------------------------------------------------
Unclaimed for Two Years. Any moneys deposited with or paid to the Trustee or any
- -----------------------
paying agent for the payment of the principal of or interest on any Security of
any series or Coupons attached thereto and not applied but remaining unclaimed
for two years after the date upon which such principal or interest shall have
become due and payable, shall, upon the written request of the Issuer and unless
otherwise required by mandatory provisions of applicable escheat or abandoned or
unclaimed property law, be repaid to the Issuer by the Trustee for such series
or such paying agent, and the Holder of the Security of such series and of any
Coupons appertaining thereto shall, unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property laws,
thereafter look only to the Issuer for any payment which such Holder may be
entitled to collect, and all liability of the Trustee or any paying agent with
respect to such moneys shall thereupon cease; provided, however, that the
-------- -------
Trustee or such paying agent, before being required to make any such repayment
with respect to moneys deposited with it for any payment (a) in respect of
Registered Securities of any series, shall at the expense of the Issuer, mail by
first-class mail to Holders of such Securities at their addresses as they shall
appear on the Security register, and (b) in respect of Unregistered Securities
of any series, shall at the expense of the Issuer cause to be published once, in
an Authorized Newspaper in the Borough of Manhattan, The City of New York and
once in an Authorized Newspaper in London (and if required by Section 3.8, once
in an Authorized Newspaper in Luxembourg), notice, that such moneys remain and
that, after a date specified therein, which shall not be less than thirty days
from the date of such mailing or publication, any unclaimed balance of such
money then remaining will be repaid to the Issuer.
SECTION 10.5 Indemnity for U.S. Government Obligations. The Issuer
-----------------------------------------
shall pay and indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against the U.S. Government Obligations deposited pursuant to
Section 10.1 or the principal or interest received in respect of such
obligations.
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ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
------------------------
SECTION 11.1 Incorporators, Stockholders, Officers and Directors of
------------------------------------------------------
Issuer Exempt from Individual Liability. No recourse under or upon any
- ---------------------------------------
obligation, covenant or agreement contained in this Indenture, or in any
Security, or because of any indebtedness evidenced thereby, shall be had against
any incorporator, as such or against any past, present or future stockholder,
officer or director, as such, of the Issuer or of any successor, either directly
or through the Issuer or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance of the Securities and the Coupons appertaining
thereto by the holders thereof and as part of the consideration for the issue of
the Securities and the Coupons appertaining thereto.
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties
-------------------------------------------------------
and Holders of Securities and Coupons. Nothing in this Indenture, in the
- -------------------------------------
Securities or in the Coupons appertaining thereto, expresses or implied, shall
give or be construed to give to any person, firm or corporation, other than the
parties hereto and their successors and the Holders of the Securities or
Coupons, if any, any legal or equitable right, remedy or claim under this
Indenture or under any covenant or provision herein contained, all such
covenants and provisions being for the sole benefit of the parties hereto and
their successors and of the Holders of the Securities or Coupons, if any.
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All
---------------------------------------------------
the covenants, stipulations, promises and agreements in this Indenture contained
by or in behalf of the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of
-----------------------------------------------------
Securities and Coupons. Any notice or demand which by any provision of this
- ----------------------
Indenture is required or permitted to be given or served by the Trustee or by
the Holders of Securities or Coupons to or on the Issuer may be given or served
by being deposited postage prepaid, first-class mail (except as otherwise
specifically provided herein) addressed (until another address of the Issuer is
filed by the Issuer with the Trustee) to Weyerhaeuser Company, Tacoma,
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Washington 98477, Attn: Secretary. Any notice, direction, request or demand by
the Issuer or any Holder of Securities or Coupons to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given or
made at the Corporate Trust Office, Attn: Corporate Trustee Administration
Department.
In case, by reason of the suspension of or irregularities in regular
mail service, it shall be impracticable to mail notice to the Issuer when such
notice is required to be given pursuant to any provision of this Indenture, then
any manner of giving such notice as shall be satisfactory to the Trustee shall
be deemed to be a sufficient giving of such notice.
SECTION 11.5 Officers' Certificates and Opinions of Counsel;
-----------------------------------------------
Statements to Be Contained Therein. Upon any application or demand by the Issuer
- ----------------------------------
to the Trustee to take any action under any of the provisions of this Indenture,
the Issuer shall furnish to the Trustee an Officer's Certificate stating that
all conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or demand, no additional
certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (a) a statement that the person
making such certificate or opinion has read such covenant or condition, (b) a
brief statement as to the nature and scope of the examination of investigation
upon which the statements or opinions contained in such certificate or opinion
are based, (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with and (d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with,
Any certificate, statement or opinion of an officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of or representations by counsel, unless such officer knows that the certificate
or
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opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters, information with respect to which is in the possession of
the Issuer, upon the certificate, statement or opinion of or representations by
an officer or officers of the Issuer, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the Issuer or
of counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Issuer, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with and directed to the Trustee shall contain a statement
that such firm is independent.
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays. If the
-----------------------------------------------
date of maturity of interest on or principal of the Securities of any series or
any Coupons appertaining thereto or the date fixed for redemption or repayment
of any such Security or Coupon shall not be a Business Day, then payment of
interest or principal need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period after such date.
SECTION 11.7 Conflict of Any Provision of Indenture with Trust
-------------------------------------------------
Indenture Act of 1939. If and to the extent that any provision of this Indenture
- ---------------------
limits, qualifies or conflicts with another provision included in this Indenture
which is required to be included herein by any of Sections 310 to 317,
inclusive, of the Trust Indenture Act of 1939, such required provision shall
control.
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SECTION 11.8 New York Law to Govern. This Indenture and each Security
----------------------
and Coupon shall be deemed to be a contract under the laws of the State of New
York, and for all purposes shall be construed in accordance with the laws of
such State, except as may otherwise be required by mandatory provisions of law.
SECTION 11.9 Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 11.10 Effect of Headings. The Article and Section headings
------------------
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
SECTION 11.11 Securities in a Foreign Currency or in ECU. Unless
------------------------------------------
otherwise specified in an Officer's Certificate delivered pursuant to Section
2.3 of this Indenture with respect to a particular series of Securities,
whenever for purposes of this Indenture any action may be taken by the holders
of a specified percentage in aggregate principal amount of Securities of all
series or all series affected by a particular action at the time Outstanding
and, at such time, there are Outstanding Securities of any series which are
denominated in a coin or currency other than Dollars (including ECUs), then the
principal amount of Securities of such series which shall be deemed to be
Outstanding for the purpose of taking such action shall be that amount of
Dollars that could be obtained for such amount at the Market Exchange Rate. For
purposes of this Section 11.11, Market Exchange Rate shall mean the noon Dollar
buying rate for that currency for cable transfers quoted in The City of New York
as certified for customs purposes by the Federal Reserve Bank of New York;
provided, however, in the case of ECUs, Market Exchange Rate shall mean the rate
- -------- -------
of exchange determined by the Commission of the European Communities (or any
successor thereto) as published in the Official Journal of the European
Communities (such publication or any successor publication, the "Journal"). If
such Market Exchange Rate is not available for any reason with respect to such
currency, the Trustee shall use, in its sole discretion and without liability on
its part, such quotation of the Federal Reserve Bank of New York or, in the case
of ECUs, the rate of exchange as published in the Journal, as of the most recent
available date, or quotations or, in the case of ECUs, rates of exchange from
one or more major banks in The City of New York or in the country of issue of
the currency in question,
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<PAGE>
which for purposes of the ECU shall be Brussels, Belgium, or such other
quotations or, in the case of ECU, rates of exchange as the Trustee shall deem
appropriate. The provisions of this paragraph shall apply in determining the
equivalent principal amount in respect of Securities of a series denominated in
a currency other than Dollars in connection with any action taken by holders of
Securities pursuant to the terms of this Indenture.
All decisions and determinations of the Trustee regarding the Market
Exchange Rate ?? any alternative determination provided for in the preceding
paragraph shall be in its sole discretion and shall, in the absence of manifest
error, be conclusive for all purposes and irrevocably binding upon the Issuer
and all Holders.
SECTION 11.12. Judgment Currency. The Issuer agrees, to the fullest
-----------------
extent that it may effectively do so under applicable law, that (a) if for the
purpose of obtaining judgment in any court it is necessary to convert the sum
due in respect of the principal of or interest on the Securities of any series
(the "Required Currency") into a currency in which a judgment will be rendered
(the "Judgment Currency"), the rate of exchange used shall be the rate at which
in accordance with normal banking procedures the Trustee could purchase in The
City of New York the Required Currency with the Judgment Currency on the New
York Banking Day preceding that on which final unappealable judgment is given
and (b) its obligations under this Indenture to make payments in the Required
Currency (i) shall not be discharged or satisfied by any tender, or any recovery
pursuant to any judgment (whether or not entered in accordance with subsection
(a)), in any currency other than the Required Currency, except to the extent
that such tender or recovery shall result in the actual receipt, by the payee,
of the full amount of the Required Currency expressed to be payable in respect
of such payments, (ii) shall be enforceable as an alternative or additional
cause of action for the purpose of recovering in the Required Currency the
amount, if any, by which such actual receipt shall fall short of the full amount
of the Required Currency so expressed to be payable and (iii) shall not be
affected by judgment being obtained for any other sum due under this Indenture.
For purposes of the foregoing, "New York Banking Day" means any day except a
Saturday, Sunday or a legal holiday in The City of New York or a day on which
banking institutions in The City of New York are authorized or required by law
or executive order to close.
-86-
<PAGE>
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
------------------------------------------
SECTION 12.1 Applicability of Article. The provisions of this Article
------------------------
shall be applicable to the Securities of any series which are redeemable before
their maturity or to any sinking fund for the retirement of Securities of a
series except as otherwise specified as contemplated by Section 2.3 for
Securities of such series.
SECTION 12.2 Notice of Redemption; Partial Redemptions. Notice of
-----------------------------------------
redemption to the Holders of Registered Securities of any series to be redeemed
as a whole or in part at the option of the Issuer shall be given by mailing
notice of such redemption by first class mail, postage prepaid, at least 30 days
and not more than 60 days prior to the date fixed for redemption to such Holders
of Securities of such series at their last addresses as they shall appear upon
the registry books. Notice of redemption to the Holders of Unregistered
Securities to be redeemed as a whole or in part, who have filed their names and
addresses with the Trustee pursuant to Section 4.4(c)(ii), shall be given by
mailing notice of such redemption, by first class mail, postage prepaid, at
least thirty days and not more than sixty prior to the date fixed for
redemption, to such Holders at such addresses as were so furnished to the
Trustee (and, in the case of any such notice given by the Issuer, the Trustee
shall make such information available to the Issuer for such purpose). Notice of
redemption to all other holders of Unregistered Securities shall be published in
an Authorized Newspaper in the Borough of Manhattan, The City of New York and in
an Authorized Newspaper in London (and, if required by Section 3.8, in an
Authorized Newspaper in Luxembourg), in each case, once in each of three
successive calendar weeks, the first publication to be not less than thirty nor
more than sixty days prior to the date fixed for redemption. Any notice which is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the Holder receives the notice. Failure to give
notice by mail, or any defect in the notice to the Holder of any Security of a
series designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Security of such
series.
The notice of redemption to each such Holder shall specify the
principal amount of each Security of such series
-87-
<PAGE>
held by such Holder to be redeemed, the date fixed for redemption, the
redemption price, the place or places of payment, that payment will be made upon
presentation and surrender of such Securities and, in the case of Securities
with Coupons attached thereto, of all Coupons appertaining thereto maturing
after the date fixed for redemption, that such redemption is pursuant to the
mandatory or optional sinking fund, or both, if such be the case, that interest
accrued to the date fixed for redemption will be paid as specified in such
notice and that on and after said date interest thereon or on the portions
thereof to be redeemed will cease to accrue. In case any Security of a series is
to be redeemed in part only the notice of redemption shall state the portion of
the principal amount thereof to be redeemed and shall state that on and after
the date fixed for redemption, upon surrender of such Security, a new Security
or Securities of such series in principal amount equal to the unredeemed portion
thereof will be issued.
The notice or redemption of Securities of any series to be redeemed at
the option of the Issuer shall be given by the Issuer or, at the Issuer's
request, by the Trustee in the name and at the expense of the Issuer.
On or before the redemption date specified in the notice of redemption
given as provided in this Section, the Issuer will deposit with the Trustee or
with one or more paying agents (or, if the Issuer is acting as its own paying
agent, set aside, segregate and hold in trust as provided in Section 3.4) an
amount of money sufficient to redeem on the redemption date all the Securities
of such series so called for redemption at the appropriate redemption price,
together with accrued interest to the date fixed for redemption. If less than
all the Outstanding Securities of a series are to be redeemed at the election of
the Issuer, the Issuer will deliver to the Trustee at least 70 days prior to the
date fixed for redemption an Officers' Certificate stating the aggregate
principal amount of Securities to be redeemed. In case of a redemption at the
election of the Issuer prior to the expiration of any restriction on such
redemption, the Issuer shall deliver to the Trustee, prior to the giving of any
notice of redemption to Holders pursuant to this Section, an Officers'
Certificate stating that such restriction has been complied with.
If less than all the Securities of a series are to be redeemed, the
Trustee shall select, in such manner as it shall deem appropriate and fair,
Securities of such Series to be redeemed in whole or in part. Securities may be
redeemed
-88-
<PAGE>
in part in multiples equal to the minimum authorized denomination for Securities
of such series or any multiple thereof. The Trustee shall promptly notify the
Issuer in writing of the Securities of such series selected for redemption and,
in the case of any Securities of such series selected for partial redemption,
the principal amount thereof to be redeemed. For all purposes of this Indenture,
unless the context otherwise requires, all provisions relating to the redemption
of Securities of any series shall relate, in the case of any Security redeemed
or to be redeemed only in part, to the portion of the principal amount of such
Security which has been or is to be redeemed.
SECTION 12.3 Payment of Securities Called for Redemption. If notice of
-------------------------------------------
redemption has been given as above provided, the Securities or portions of
Securities specified in such notice shall become due and payable on the date and
at the place stated in such notice at the applicable redemption price, together
with interest accrued to the date fixed for redemption, and on and after said
date (unless the Issuer shall default in the payment of such Securities at the
redemption price, together with interest accrued to said date) interest on the
Securities or portions of Securities so called for redemption shall cease to
accrue, and the unmatured Coupons, if any, appertaining thereto shall be void,
and, except as provided in Sections 6.5 and 10.4, such Securities shall cease
from and after the date fixed for redemption to be entitled to any benefit or
security under this Indenture, and the Holders thereof shall have no right in
respect of such Securities except the right to receive the redemption price
thereof and unpaid interest to the date fixed for redemption. On presentation
and surrender of such Securities at a place of payment specified in said notice,
together with all Coupons, if any, appertaining thereto maturing after the
date fixed for redemption, said Securities or the specified portions thereof
shall be paid and redeemed by the Issuer at the applicable redemption price,
together with interest accrued thereon to the date fixed for redemption;
provided that payment of interest becoming due on or prior to the date fixed for
- --------
redemption shall be payable in the case of Securities with Coupons attached
thereto, to the bearers of the Coupons for such interest upon surrender thereof,
and in the case of Registered Securities, to the Holders of such Registered
Securities registered as such on the relevant record date subject to the terms
and provisions of Sections 2.3 and 2.7 hereof.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal
-89-
<PAGE>
shall, until paid or duly provided for, bear interest from the date fixed for
redemption at the rate of interest or Yield to Maturity (in the case of an
Original Issue Discount Security) borne by the Security.
If any Security with Coupons attached thereto is surrendered for
redemption and is not accompanied by all appurtenant Coupons maturing after the
date fixed for redemption, the surrender of such missing Coupon or Coupons may
be waived by the Issuer and the Trustee, if there be furnished to each of them
such security or indemnity as they may require to save each of them harmless.
Upon presentation of any Security redeemed in part only, the Issuer
shall execute and the Trustee shall authenticate and deliver to or on the order
of the Holder thereof, at the expense of the Issuer, a new Security or
Securities of such series, of authorized denominations, in principal amount
equal to the unredeemed portion of the Security so presented.
SECTION 12.4 Exclusion of Certain Securities from Eligibility for
----------------------------------------------------
Selection for Redemption. Securities shall be excluded from eligibility for
- ------------------------
selection for redemption if they are identified by registration and certificate
number in an Officers' Certificate delivered to the Trustee at least 40 days
prior to the last date on which notice of redemption may be given as being owned
of record and beneficially by, and not pledged or hypothecated by either (a) the
Issuer or (b) an entity specifically identified in such written statement as
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Issuer.
SECTION 12.5 Mandatory and Optional Sinking Funds. The minimum amount
------------------------------------
of any sinking fund payment provided for by the terms of Securities of any
series is herein referred to as a "mandatory sinking fund payment", and any
payment in excess of such minimum amount provided for by the terms of Securities
of any series is herein referred to as an "optional sinking fund payment". The
date on which a sinking fund payment is to be made is herein referred to as the
"sinking fund payment date".
In lieu of making all or any part of any mandatory sinking fund
payment with respect to any series of Securities in cash, the Issuer may at its
option (a) deliver to the Trustee Securities of such series theretofore
purchased or otherwise acquired (except upon redemption pursuant to the
mandatory sinking fund) by the Issuer or receive credit for Securities of such
series (not previously so credited) there-
-90-
<PAGE>
tofore purchased or otherwise acquired (except as aforesaid) by the Issuer and
delivered to the Trustee for cancellation pursuant to Section 2.10, (b) receive
credit for optional sinking fund payments (not previously so credited) made
pursuant to this Section, or (c) receive credit for Securities of such series
(not previously so credited) redeemed by the Issuer through any optional
redemption provision contained in the terms of such series. Securities so
delivered or credited shall be received or credited by the Trustee at the
sinking fund redemption price specified in such Securities.
On or before the 60th day next preceding each sinking fund payment
date for any series, the Issuer will deliver to the Trustee an Officers'
Certificate (which need not contain the statements required by Section 11.5) (a)
specifying the portion of the mandatory sinking fund payment to be satisfied by
payment of cash and the portion to be satisfied by credit of Securities of such
series and the basis for such credit, (b) stating that none of the Securities of
such series has theretofore been so credited, (c) stating that no defaults in
the payment of interest or Events of Default with respect to such series have
occurred (which have not been waived or cured) and are continuing and (d)
stating whether or not the Issuer intends to exercise its right to make an
optional sinking fund payment with respect to such series and, if so, specifying
the amount of such optional sinking fund payment which the Issuer intends to pay
on or before the next succeeding sinking fund payment date. Any Securities of
such series to be credited and required to be delivered to the Trustee in order
for the Issuer to be entitled to credit therefor as aforesaid which have not
theretofore been delivered to the Trustee shall be delivered for cancellation
pursuant to Section 2.10 to the Trustee with such Officers' Certificate (or
reasonably promptly thereafter if acceptable to the Trustee). Such Officers'
Certificate shall be irrevocable and upon its receipt by the Trustee the Issuer
shall become unconditionally obligated to make all the cash payments or payments
therein referred to, if any, on or before the next succeeding sinking fund
payment date. Failure of the Issuer, on or before any such 60th day, to deliver
such Officers' Certificate and Securities specified in this paragraph, if any,
shall not constitute a default but shall constitute, on and as of such date, the
irrevocable election of the Issuer (i) that the mandatory sinking fund payment
for such series due on the next succeeding sinking fund payment date shall be
paid entirely in cash without the option to deliver or credit Securities of such
series in respect thereof and (ii) that the Issuer will make no
-91-
<PAGE>
optional sinking fund payment with respect to such series as provided in this
Section.
If the sinking fund payment or payments (mandatory or optional or
both) to be made in cash on the next succeeding sinking fund payment date plus
any unused balance of any preceding sinking fund payments made in cash shall
exceed $50,000 (or a lesser sum if the Issuer shall so request) with respect to
the Securities of any particular series, such cash shall be applied on the next
succeeding sinking fund payment date to the redemption of Securities of such
series at the sinking fund redemption price together with accrued interest to
the date fixed for redemption. If such amount shall be $50,000 or less and the
Issuer makes no such request then it shall be carried over until a sum in excess
of $50,000 is available. The Trustee shall select, in the manner provided in
Section 12.2, for redemption on such sinking fund payment date a sufficient
principal amount of Securities of such series to absorb said cash, as nearly as
may be, and shall (if requested in writing by the Issuer) inform the Issuer of
the serial numbers of the Securities of such series (or portions thereof) so
selected. Securities shall be excluded from eligibility for redemption under
this Section if they are identified by registration and certificate number in an
Officers' Certificate delivered to the Trustee at least 60 days prior to the
sinking fund payment date as being owned of record and beneficially by, and not
pledged or hypothecated by either (a) the Issuer or (b) an entity specifically
identified in such Officers' Certificate as directly or indirectly controlling
or controlled by or under direct or indirect common control with the Issuer. The
Trustee, in the name and at the expense of the Issuer (or the Issuer, if it
shall so request the Trustee in writing) shall cause notice of redemption of the
Securities of such series to be given in substantially the manner provided in
Section 12.2 (and with the effect provided in Section 12.3) for the redemption
of Securities of such series in part at the option of the Issuer. The amount of
any sinking fund payments not so applied or allocated to the redemption of
Securities of such series shall be added to the next cash sinking fund payment
for such series and, together with such payment, shall be applied in accordance
with the provisions of this Section. Any and all sinking fund moneys held on the
stated maturity date of the Securities of any particular series (or earlier, if
such maturity is accelerated), which are not held for the payment or redemption
of particular Securities of such series shall be applied, together with other
moneys, if necessary, sufficient for the purpose, to the payment of the
principal of, and interest on, the Securities of such series at maturity.
-92-
<PAGE>
On or before each sinking fund payment date, the Issuer shall pay to
the Trustee in cash or shall otherwise provide for the payment of all interest
accrued to the date fixed for redemption on Securities to be redeemed on the
next following sinking fund payment date.
The Trustee shall not redeem or cause to be redeemed any Securities of
a series with sinking fund moneys or mail any notice of redemption of Securities
for such series by operation of the sinking fund during the continuance of a
default in payment of interest on such Securities or of any Event of Default
except that, where the mailing of notice of redemption of any Securities shall
therefore have been made, the Trustee shall redeem or cause to be redeemed such
Securities, provided that it shall have received from the Issuer a sum
sufficient for such redemption. Except as aforesaid, any moneys in the sinking
fund for such series at the time when any such default or Event of Default
shall occur, and any moneys thereafter paid into the sinking fund, shall, during
the continuance of such default or Event of Default, be deemed to have been
collected under Article Five and held for the payment of all such Securities. In
case such Event of Default shall have been waived as provided in Section 5.10
or the default cured on or before the sixtieth day preceding the sinking
fund payment date in any year, such moneys shall thereafter be applied on the
next succeeding sinking fund payment date in accordance with this Section to the
redemption of such Securities.
-93-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of April 1, 1986.
WEYERHAEUSER COMPANY
By /s/ W.C. Stivers
--------------------------
Treasurer
Attest:
By /s/ A.P. Vandevert
--------------------------
Secretary
CHEMICAL BANK, Trustee
By /s/ P.J. Gilkeson
-----------------------------
Senior Trust Officer
Attest:
By /s/ G. McFarlane
-------------------------
Trust Officer
<PAGE>
STATE OF WASHINGTON )
) ss.:
COUNTY OF KING )
On this 12th day of February, 1987 before me personally came W. C.
Stivers, to me personally known, who, being by me duly sworn, did depose and say
that he resides at 32325 40th Pl. S.W., Federal Way, Washington 98023; that he
is the Treasurer of WEYERHAEUSER COMPANY, one of the corporations described in
and which executed the above instrument; that he knows the corporate seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
/s/ Ruth L. Hatch
-----------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 13th day of February, 1987 before me personally came P.J.
GILKESON, to me personally known, who, being by me duly sworn, did depose and
say that he resides at 452 ???? Field Ave, Staten Island, N.Y. 10310; that he is
a Sr. Tr. Officer of CHEMICAL BANK, one of the corporations described in and
which executed the above instrument; that he knows the corporated seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
[NOTARIAL SEAL]
/s/ Frank S. Feczko
---------------------------
Notary Public
[SEAL]
<PAGE>
EXHIBIT 5
[LOGO OF WEYERHAEUSER] Law Department
Tacoma, Washington 98477
Air Express:
33663 Weyerhaeuser Way South
Federal Way, Washington 98003
Writers Direct Dial Number
September 30, 1997
Weyerhaeuser Company
Tacoma WA 98477
Dear Sirs:
I am Senior Legal Counsel of Weyerhaeuser Company, a Washington corporation (the
"Company") and in such capacity, I have examined the Registration Statement on
Form S-3 (the "Registration Statement") to be filed by the Company with the
Securities and Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended (the "1933 Act"), of $850,000,000 aggregate
principal amount of debt securities (the "Debt Securities") and preferred shares
or preference shares (the "Shares") (collectively, the "Securities") for an
offering to be made on a continuous or delayed basis pursuant to the provisions
of Rule 415 promulgated under the 1933 Act. I have examined the Indenture dated
as of April 1, 1986, as supplemented by the First Supplemental Indenture, dated
as of February 15, 1991 and the Second Supplemental Indenture dated as of
February 1, 1993 (the "Indenture") between the Company and the Chase Manhattan
Bank (formerly Chemical Bank), as Trustee, under which the Debt Securities are
to be issued. I am familiar with the proceedings heretofore taken and with the
additional proceedings proposed to be taken by the Company in connection with
the authorization, registration, issuance and sale of the Debt Securities and
the Shares.
Based upon the foregoing, I am of the opinion that:
(a) upon compliance with the terms and conditions of the Indenture with respect
to the creation, authentication and delivery of the Debt Securities, the due
execution by the Company and authentication and delivery by the Trustee
under the Indenture of the Debt Securities, and the sale of the Debt
Securities by the Company as contemplated in the Registration Statement
(after it is declared effective) and in accordance with corporate
authorizations, the Debt Securities will constitute in the hands of holders
thereof valid and binding obligations of the Company; and
(b) upon adoption by the Company's Board of Directors of an amendment to the
Articles of Incorporation of the Company in the form provided in Exhibit
4(d) to the Registration Statement and the issuance, delivery and payment
for the Shares as contemplated in the Registration Statement (after it is
declared effective), the Shares will be duly and validly issued, fully paid
and nonassessable).
I consent to the use of this opinion as an exhibit to the Registration Statement
and to the reference to me under the heading "Legal Opinions" in the Prospectus.
Very truly yours,
/S/ CLAIRE S. GRACE
Claire S. Grace
Senior Legal Counsel
<PAGE>
WEYERHAEUSER COMPANY AND SUBSIDIARIES Exhibit 12(a)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (1)
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDING
-------------------
JUNE 29 JUNE 30
1997 1996 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Available earnings:
Earnings before interest expense,
amortization of debt expense, income
taxes and extraordinary item.............. $385,030 $565,048 $1,089,493 $1,672,308 $1,261,542 $1,160,971 $943,046
Add interest portion of rental expense..... 12,598 9,768 22,023 21,241 20,303 19,719 19,013
----------------------------------------------------------------------------------
$397,628 $574,816 $1,111,516 $1,693,549 $1,281,845 $1,180,690 $962,059
==================================================================================
Fixed charges:
Interest expense incurred:
Weyerhaeuser Company and subsidiaries
excluding Weyerhaeuser Real Estate
Company and Weyerhaeuser Financial
Services, Inc. and their subsidiaries.. $136,342 $134,950 $ 269,927 $ 267,625 $ 233,748 $ 211,645 $185,519
Weyerhaeuser Real Estate Company and
consolidated subsidiaries.............. 34,834 33,548 65,402 75,555 78,426 77,646 72,561
Weyerhaeuser Financial Services, Inc.
and consolidated subsidiaries.......... 25,697 35,130 66,516 64,376 76,275 95,309 145,193
----------------------------------------------------------------------------------
Subtotal....................... 196,873 203,628 401,845 407,556 388,449 384,600 403,273
Less intercompany interest............... (436) (644) (1,707) (11,654) (464) (514) 1,682
----------------------------------------------------------------------------------
Total interest expense incurred.......... 197,309 204,272 403,552 419,210 388,913 385,114 401,591
----------------------------------------------------------------------------------
Amortization of debt expense............... 1,554 1,667 3,237 3,520 3,595 3,168 4,129
----------------------------------------------------------------------------------
Rental expense:
Weyerhaeuser Company and consolidated
subsidiaries......................... 32,865 23,311 50,477 50,938 45,613 41,860 38,500
Weyerhaeuser Real Estate Company and
consolidated subsidiaries............ 2,012 1,897 4,020 4,239 5,341 6,718 6,685
Weyerhaeuser Financial Services, Inc.
and consolidated subsidiaries........ 2,917 4,095 11,573 8,546 9,955 10,580 11,854
----------------------------------------------------------------------------------
37,794 29,303 66,070 63,723 60,909 59,158 57,039
----------------------------------------------------------------------------------
Interest portion of rental expense..... 12,598 9,768 22,023 21,241 20,303 19,719 19,013
----------------------------------------------------------------------------------
Fixed Charges............................... $211,461 $215,707 $428,812 $443,971 $412,811 $408,001 $424,733
==================================================================================
Ratio of earnings to fixed charges ............ 1.88 2.66 2.59 3.81 3.11 2.89 2.27
==================================================================================
</TABLE>
(1) Excludes Interest Paid on Depositor Accounts By Republic Federal Savings &
Loan Association in 1992.
<PAGE>
WEYERHAEUSER COMPANY AND SUBSIDIARIES Exhibit 12(b)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (1)
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDING
------------------------
JUNE 29 JUNE 30
1997 1996 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Available earnings:
Earnings before interest expense,
amortization of debt expense, income
taxes and extraordinary item.......... $385,030 $565,048 $1,089,493 $1,672,308 $1,261,542 $1,160,971 $949,371
Add interest portion of rental expense. 12,598 9,768 22,023 21,241 20,303 19,719 19,013
--------------------------------------------------------------------------------------
$397,628 $574,816 $1,111,516 $1,693,549 $1,281,845 $1,180,690 $968,384
======================================================================================
Fixed charges:
Interest expense incurred:
Weyerhaeuser Company and subsidiaries
excluding Weyerhaeuser Real Estate
Company and Weyerhaeuser Financial
Services, Inc. and their
subsidiaries...................... $136,342 $134,950 $ 269,927 $ 267,625 $ 233,748 $ 211,645 $185,519
Weyerhaeuser Real Estate Company and
consolidated subsidiaries.......... 34,834 33,548 65,402 75,555 78,426 77,646 72,561
Weyerhaeuser Financial Services, Inc.
and consolidated subsidiaries...... 25,697 35,130 66,516 64,376 76,275 95,309 151,518
--------------------------------------------------------------------------------------
Subtotal................... 196,873 203,628 401,845 407,556 388,449 384,600 409,598
Less intercompany interest........... (436) (644) (1,707) (11,654) (464) (514) 1,682
--------------------------------------------------------------------------------------
Total interest expense incurred...... 197,309 204,272 403,552 419,210 388,913 385,114 407,916
--------------------------------------------------------------------------------------
Amortization of debt expense........... 1,554 1,667 3,237 3,520 3,595 3,168 4,129
--------------------------------------------------------------------------------------
Rental expense:
Weyerhaeuser Company and
consolidated subsidiaries........ 32,865 23,311 50,477 50,938 45,613 41,860 38,500
Weyerhaeuser Real Estate Company
and consolidated subsidiaries..... 2,012 1,897 4,020 4,239 5,341 6,718 6,685
Weyerhaeuser Financial Services,
Inc. and consolidated
subsidiaries...................... 2,917 4,095 11,573 8,546 9,955 10,580 11,854
--------------------------------------------------------------------------------------
37,794 29,303 66,070 63,723 60,909 59,158 57,039
--------------------------------------------------------------------------------------
Interest portion of rental expense. 12,598 9,768 22,023 21,241 20,303 19,719 19,013
--------------------------------------------------------------------------------------
Fixed Charges........................... $211,461 $215,707 $428,812 $443,971 $412,811 $408,001 $431,058
======================================================================================
Ratio of earnings to fixed charges......... 1.88 2.66 2.59 3.81 3.11 2.89 2.25
======================================================================================
</TABLE>
(1) Includes Interest Paid on Depositor Accounts By Republic Federal Savings &
Loan Association in 1992.
<PAGE>
Exhibit 12(c)
26-Sep-97
WEYERHAEUSER COMPANY WITH ITS WEYERHAEUSER REAL ESTATE COMPANY AND
WEYERHAEUSER FINANCIAL SERVICES, INC. SUBSIDIARIES ACCOUNTED FOR ON THE
EQUITY METHOD, BUT EXCLUDING THE UNDISTRIBUTED EARNINGS OF THOSE SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDING
--------------------------
JUNE 29 JUNE 30
1997 1996 1996 1995 1994 1993 1992
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Available earnings:
Earnings before interest expense,
amortization of debt expense, income
taxes and extraordinary item............ $334,945 $506,069 $972,405 $1,494,797 $1,120,774 $1,000,087 $740,152
Add interest portion of rental expense... 10,955 7,770 16,826 16,979 15,204 13,953 12,833
------------------------------------------------------------------------------------
345,900 513,839 989,231 1,511,776 1,135,978 1,014,040 752,985
------------------------------------------------------------------------------------
Deduct undistributed earnings before income
taxes of Weyerhaeuser Real Estate Company
and Weyerhaeuser Financial Services, Inc.
and their subsidiaries: 55,904 15,750 43,555 (277,247) 17,940 94,763 80,530
------------------------------------------------------------------------------------
Available earnings before extraordinary item. $289,996 $498,089 $945,676 $1,789,023 $1,118,038 $919,277 $672,455
====================================================================================
Fixed charges:
Interest expense incurred................ $136,342 $134,950 $269,927 $267,625 $233,748 $211,645 $185,519
Amortization of debt expense............. 1,554 1,667 3,237 3,520 3,595 3,168 4,129
Interest portion of rental expense....... 10,955 7,770 16,826 16,979 15,204 13,953 12,833
------------------------------------------------------------------------------------
Fixed charges....................... $148,851 $144,387 $289,990 $288,124 $252,547 $228,766 $202,481
====================================================================================
Ratio of earnings to fixed charges....... 1.95 3.45 3.26 6.21 4.43 4.02 3.32
====================================================================================
</TABLE>
<PAGE>
WEYERHAEUSER COMPANY AND SUBSIDIARIES Exhibit 12(d)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND
PREFERRED AND PREFERENCE SHARE DIVIDENDS (1)
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDING
---------------------
JUNE 29 JUNE 30
1997 1996 1996 1995 1994 1993 1992
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Available earnings:
Earnings before interest expense,
amortization of debt expense, income
taxes and extraordinary item............ $385,030 $565,048 $1,089,493 $1,672,308 $1,261,542 $1,160,971 $943,046
Add interest portion of rental expense... 12,598 9,768 22,023 21,241 20,303 19,719 19,013
------------------------------------------------------------------------------------
Available earnings before extraordinary
item.................................... $397,628 $574,816 $1,111,516 $1,693,549 $1,281,845 $1,180,690 $962,059
====================================================================================
Fixed charges and preferred and
preference share dividends:
Interest expense incurred:
Weyerhaeuser Company and subsidiaries
excluding Weyerhaeuser Real Estate
Company and Weyerhaeuser Financial
Services, Inc. and their subsidiaries $136,342 $134,950 $ 269,927 $ 267,625 $ 233,748 $ 211,645 $185,519
Weyerhaeuser Real Estate Company and
consolidated subsidiaries............ 34,834 33,548 65,402 75,555 78,426 77,646 72,561
Weyerhaeuser Financial Services, Inc.
and consolidated subsidiaries........ 25,697 35,130 66,516 64,376 76,275 95,309 145,193
------------------------------------------------------------------------------------
Subtotal..................... 196,873 203,628 401,845 407,556 388,449 384,600 403,273
Less intercompany interest............. (436) (644) (1,707) (11,654) (464) (514) 1,682
------------------------------------------------------------------------------------
Total interest expense incurred........ 197,309 204,272 403,552 419,210 388,913 385,114 401,591
------------------------------------------------------------------------------------
Amortization of debt expense............. 1,554 1,667 3,237 3,520 3,595 3,168 4,129
------------------------------------------------------------------------------------
Rental expense:
Weyerhaeuser Company and consolidated
subsidiaries....................... 32,865 23,311 50,477 50,938 45,613 41,860 38,500
Weyerhaeuser Real Estate Company and
consolidated subsidiaries.......... 2,012 1,897 4,020 4,239 5,341 6,718 6,685
Weyerhaeuser Financial Services, Inc.
and consolidated subsidiaries...... 2,917 4,095 11,573 8,546 9,955 10,580 11,854
------------------------------------------------------------------------------------
37,794 29,303 66,070 63,723 60,909 59,158 57,039
------------------------------------------------------------------------------------
Interest portion of rental expense... 12,598 9,768 22,023 21,241 20,303 19,719 19,013
------------------------------------------------------------------------------------
Preferred and preference share
dividends of Weyerhaeuser Company
After-tax basis................. N/A N/A N/A N/A N/A N/A N/A
------------------------------------------------------------------------------------
Pre-tax basis................... N/A N/A N/A N/A N/A N/A N/A
------------------------------------------------------------------------------------
Fixed charges and preferred and
preference share dividends: $211,461 $215,707 $ 428,812 $ 443,971 $ 412,811 $ 408,001 $424,733
====================================================================================
Ratios of earnings to fixed charges and
preferred and preference share dividends..... 1.88 2.66 2.59 3.81 3.11 2.89 2.27
====================================================================================
</TABLE>
(1) Excludes Interest Paid on Depositor Accounts By Republic Federal Savings &
Loan Association in 1992.
<PAGE>
WEYERHAEUSER COMPANY AND SUBSIDIARIES Exhibit 12(e)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND
PREFERRED AND PREFERENCE SHARE DIVIDENDS (1)
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDING
----------------------
JUNE 29 JUNE 30
1997 1996 1996 1995 1994 1993 1992
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Available earnings:
Earnings before interest expense,
amortization of debt expense, income
taxes and extraordinary item............ $385,030 $565,048 $1,089,493 $1,672,308 $1,261,542 $1,160,971 $949,371
Add interest portion of rental expense... 12,598 9,768 22,023 21,241 20,303 19,719 19,013
------------------------------------------------------------------------------------
Available earnings before extraordinary
item.................................... $397,628 $574,816 $1,111,516 $1,693,549 $1,281,845 $1,180,690 $968,384
====================================================================================
Fixed charges and preferred and
preference share dividends:
Interest expense incurred:
Weyerhaeuser Company and subsidiaries
excluding Weyerhaeuser Real Estate
Company and Weyerhaeuser Financial
Services, Inc. and their subsidiaries $136,342 $134,950 $ 269,927 $ 267,625 $ 233,748 $ 211,645 $185,519
Weyerhaeuser Real Estate Company and
consolidated subsidiaries............ 34,834 33,548 65,402 75,555 78,426 77,646 72,561
Weyerhaeuser Financial Services, Inc.
and consolidated subsidiaries........ 25,697 35,130 66,516 64,376 76,275 95,309 151,518
------------------------------------------------------------------------------------
Subtotal..................... 196,873 203,628 401,845 407,556 388,449 384,600 409,598
Less intercompany interest............. (436) (644) (1,707) (11,654) (464) (514) 1,682
------------------------------------------------------------------------------------
Total interest expense incurred........ 197,309 204,272 403,552 419,210 388,913 385,114 407,916
------------------------------------------------------------------------------------
Amortization of debt expense............. 1,554 1,667 3,237 3,520 3,595 3,168 4,129
------------------------------------------------------------------------------------
Rental expense:
Weyerhaeuser Company and consolidated
subsidiaries....................... 32,865 23,311 50,477 50,938 45,613 41,860 38,500
Weyerhaeuser Real Estate Company and
consolidated subsidiaries.......... 2,012 1,897 4,020 4,239 5,341 6,718 6,685
Weyerhaeuser Financial Services, Inc.
and consolidated subsidiaries...... 2,917 4,095 11,573 8,546 9,955 10,580 11,854
------------------------------------------------------------------------------------
37,794 29,303 66,070 63,723 60,909 59,158 57,039
------------------------------------------------------------------------------------
Interest portion of rental expense... 12,598 9,768 22,023 21,241 20,303 19,719 19,013
------------------------------------------------------------------------------------
Preferred and preference share
dividends of Weyerhaeuser Company
After-tax basis................. N/A N/A N/A N/A N/A N/A N/A
------------------------------------------------------------------------------------
Pre-tax basis................... N/A N/A N/A N/A N/A N/A N/A
------------------------------------------------------------------------------------
Fixed charges and preferred and
preference share dividends: $211,461 $215,707 $ 428,812 $ 443,971 $ 412,811 $ 408,001 $431,058
====================================================================================
Ratios of earnings to fixed charges and
preferred and preference share dividends..... 1.88 2.66 2.59 3.81 3.11 2.89 2.25
====================================================================================
</TABLE>
(1) Includes Interest Paid on Depositor Accounts By Republic Federal Savings &
Loan Association in 1992.
<PAGE>
<TABLE>
<CAPTION>
WEYERHAEUSER COMPANY WITH ITS WEYERHAEUSER REAL ESTATE COMPANY AND Exhibit 12(f)
WEYERHAEUSER FINANCIAL SERVICES, INC. SUBSIDIARIES ACCOUNTED FOR ON THE 26-Sep-97
EQUITY METHOD, BUT EXCLUDING THE UNDISTRIBUTED EARNINGS OF THOSE SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED AND
PREFERENCE SHARE DIVIDENDS
(Dollar Amounts in Thousands)
TWENTY-SIX
WEEKS ENDING
-------------------------
JUNE 29 JUNE 30
1997 1996 1996 1995 1994 1993 1992
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Available earnings:
Earnings before interest expense,
amortization of debt expense, income
taxes and extraordinary item.............. $334,945 $506,069 $972,405 $1,494,797 $1,120,774 $1,000,087 $740,152
Add interest portion of rental expense..... 10,955 7,770 16,826 16,979 15,204 13,953 12,833
-----------------------------------------------------------------------------------
$345,900 $513,839 989,231 1,511,776 1,135,978 1,014,040 752,985
-----------------------------------------------------------------------------------
Deduct undistributed earnings before income
taxes of Weyerhaeuser Real Estate Company
and Weyerhaeuser Financial Services, Inc..
and their subsidiaries: 55,904 15,750 43,555 (277,247) 17,940 94,763 80,530
-----------------------------------------------------------------------------------
Available earnings before extraordinary
item...................................... $289,996 $498,089 $945,676 $1,789,023 $1,118,038 $919,277 $672,455
===================================================================================
Fixed charges and preferred and
preference share dividends:
Interest expense incurred.................. $136,342 $134,950 $269,927 $ 267,625 $ 233,748 $211,645 $185,519
Amortization of debt expense............... 1,554 1,667 3,237 3,520 3,595 3,168 4,129
Interest portion of rental expense......... 10,955 7,770 16,826 16,979 15,204 13,953 12,833
-----------------------------------------------------------------------------------
Fixed charges......................... 148,851 144,387 289,990 288,124 252,547 228,766 202,481
===================================================================================
Preferred and preference share
dividends:
After-tax basis................... N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------
Pre-tax basis..................... N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------
Fixed charges and preferred and
preference share dividends: $148,851 $144,387 $289,990 $ 288,124 $ 252,547 $228,766 $202,481
===================================================================================
Ratios of earnings to fixed charges and
preferred and preference share dividends....... 1.95 3.45 3.26 6.21 4.43 4.02 3.32
===================================================================================
</TABLE>
<PAGE>
EXHIBIT 13(a)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1996 or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 1-4825
WEYERHAEUSER COMPANY
A Washington Corporation (IRS Employer Identification No
91-0470860)
Tacoma, Washington 98477
CTelephone (206) 924-2345
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
- ------------------------------- -------------------------
Common Shares ($1.25 par value) Chicago Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_].
As of February 21, 1997, 198,549,288 shares of the registrant's common stock
($1.25 par value) were outstanding and the aggregate market value of the
registrant's voting shares held by non-affiliates was approximately
$9,182,904,570.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended December
29, 1996 are incorporated by reference into Parts I, II and IV.
Portions of the Notice of 1997 Annual Meeting of Shareholders and Proxy
Statement are incorporated by reference into Part III.
<PAGE>
Weyerhaeuser Company and Subsidiaries
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
----
<S> <C>
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Information 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 13
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management 14
Item 13. Certain Relationships and Related Transactions 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 15
Signatures 16
Report of Independent Public Accountants on
Financial Statement Schedules 17
Schedule II Valuation and Qualifying Accounts 18
</TABLE>
2
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 1. Business
- ------------------
Weyerhaeuser Company (the company) was incorporated in the state of Washington
in January 1900, as Weyerhaeuser Timber Company. It is principally engaged in
growing and harvesting of timber and the manufacture, distribution and sale of
forest products, real estate development and construction, and financial
services. Its principal business segments include timberlands and wood products;
pulp, paper and packaging; real estate; and financial services.
Information with respect to the description and general development of the
company's business, included on pages 42 through 47, Description of the Business
of the Company, contained in the company's 1996 Annual Report to Shareholders,
is incorporated herein by reference.
Financial information with respect to industry segments, included in Note 18 of
Notes to Financial Statements contained in the company's 1996 Annual Report to
Shareholders, is incorporated herein by reference.
Timberlands and Wood Products
The company owns approximately 5.3 million acres of commercial forestland in the
United States (61% in the South and 39% in the Pacific Northwest), most of it
highly productive and located extremely well to serve both domestic and
international markets. The company has, additionally, long-term license
arrangements in Canada covering approximately 22.9 million acres (of which 15
million acres are considered to be productive forestland). The combined total
timber inventory on these U.S. and Canadian lands is approximately 266 million
cunits (a cunit is 100 cubic feet of solid wood), of which approximately 75% is
softwood species. The relationship between cubic measurement and the quantity of
end products that may be produced from timber varies according to the species,
size and quality of timber, and will change through time as the mix of these
variables changes. To sustain the timber supply from its fee timberlands, the
company is engaged in extensive planting, suppression of nonmerchantable
species, precommercial and commercial thinning, fertilization and operational
pruning, all of which increase the yield from its fee timberland acreage.
<TABLE>
<CAPTION>
Inventory Thousands of Acres at December 29, 1996
--------- ---------------------------------------------
Millions Fee Long-term License
of Cunits Ownership Leases Arrangements Total
--------- --------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C>
Geographic Area
United States
West 57 2,077 -- -- 2,077
South 35 3,249 229 -- 3,478
--- ----- --- ------ ------
Total United
States 92 5,326 229 -- 5,555
--- ----- --- ------ ------
Canada
Alberta 91 -- -- 6,704 6,704
British
Columbia 10 38 -- 3,800 3,838
Saskatchewan 73 -- -- 12,359 12,359
--- ----- --- ------ ------
Total Canada 174 38 -- 22,863 22,901
--- ----- --- ------ ------
TOTAL 266 5,364 229 22,863 28,456
=== ===== === ====== ======
<CAPTION>
Thousands of Acres
Thousands of Acres Millions of -----------------------
------------------ Seedlings Stocking
Harvested Planted Planted Control Fertilization
--------- ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
1996 Activity
West 38.0 42.6 21.7 4.0 48.4
South 51.9 45.2 25.5 .5 223.1
---- ---- ---- --- -----
Total United
States 89.9 87.8 47.2 4.5 271.5
==== ==== ==== === =====
</TABLE>
3
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 1. Business - Continued
- ------------------------------
The company's wood products businesses produce and sell softwood lumber, plywood
and veneer; composite panels; oriented strand board; hardwood lumber and
plywood; doors; treated products; logs; chips and timber. These products are
sold primarily through the company's own sales organizations. Building materials
are sold to wholesalers, retailers and industrial users.
Sales volumes by major product class are as follows (millions):
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Raw materials - cubic ft. 577 535 564 547 545
Softwood lumber - board ft. 4,745 4,515 4,402 4,230 3,440
Softwood plywood and veneer -
sq. ft. (3/8") 2,172 2,324 2,685 2,435 2,227
Composite panels - sq. ft. (3/4") 604 648 660 626 590
Oriented strand board -
sq. ft. (3/8") 2,083 1,931 1,803 1,672 1,484
Hardboard - sq. ft. (7/16") 193 201 167 140 133
Hardwood lumber - board ft. 349 293 254 240 218
Engineered wood products -
lineal ft. 116 128 71 47 --
Hardwood doors (thousands) 652 648 617 556 514
</TABLE>
Selected product prices:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Export logs (#2 sawlog-
bark on) - $/MBF
Cascade - Douglas fir $1,330 $1,365 $1,168 $1,224 $930
Coastal - Hemlock 611 750 804 831 562
Coastal - Douglas fir 1,246 1,217 1,085 1,104 858
Lumber (common) - $/MBF
2x4 Douglas fir (kiln dried) 422 332 408 418 295
2x4 Douglas fir (green) 386 308 364 383 261
2x4 Southern yellow
pine (kiln dried) 422 364 419 397 285
2x4 Spruce-pine-fir
(kiln dried) 351 251 343 334 231
Plywood (1/2" CDX) - $/MSF
West 307 331 334 321 281
South 256 301 298 282 249
Oriented strand board
(7/16"-24/16) North Central
price - $/MSF 184 245 265 236 217
</TABLE>
4
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 1. Business - Continued
- ------------------------------
Pulp, Paper and Packaging
The company's pulp, paper and packaging businesses include: Pulp, which
manufactures chemical wood pulp for world markets; Newsprint, which manufactures
newsprint at the company's North Pacific Paper Corporation mill and markets it
to West Coast and Japanese newspaper publishers; Paper, which manufactures and
markets a range of both coated and uncoated fine papers through paper merchants
and printers; Containerboard Packaging, which manufactures linerboard and
corrugating medium, which is primarily used in the production of corrugated
packaging, and manufactures and markets industrial and agricultural packaging;
Paperboard, which manufactures and markets bleached paperboard, used for
production of liquid containers, to West Coast and Pacific Rim customers;
Recycling, which operates an extensive wastepaper collection system and markets
it to company mills and worldwide customers; and Chemicals, which produces
chlorine, caustic and tall oil, which are used principally by the company's
pulp, paper and packaging operations. In 1993, the Personal Care Products
business, which manufactured disposable diapers marketed under the private-label
brands of many of North America's largest retailers was sold through an initial
public offering of stock.
Sales volumes by major product class are as follows (thousands):
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Pulp - air-dry metric tons 1,868 2,060 2,068 1,886 1,238
Newsprint - metric tons 629 663 638 609 575
Paper - tons 1,007 1,006 998 990 966
Paperboard - tons 205 230 201 222 238
Containerboard - tons 346 259 254 290 318
Packaging - MSF 42,323 34,342 34,483 31,386 29,414
Recycling - tons 2,011 1,467 985 851 778
Personal care products -
standard cases -- -- -- -- 17,017
</TABLE>
Selected product prices (per ton):
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Pulp - NBKP-air-dry metric-U.S. $579 $883 $566 $445 $551
Paper - uncoated free sheet-U.S. 745 946 617 627 630
Linerboard - 42 lb.-Eastern U.S. 367 505 367 295 343
Newsprint - metric - West Coast U.S. 636 662 460 435 433
OCC 53 128 78 27 30
ONP 18 99 46 16 13
</TABLE>
5
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 1. Business - Continued
- ------------------------------
Real Estate
The company, through its real estate subsidiary, Weyerhaeuser Real Estate
Company, is engaged primarily in developing single-family housing and
residential lots for sale, including the development of master-planned
communities. Operations are mainly concentrated in selected metropolitan areas
in Southern California, Nevada, Washington, Texas, Maryland and Virginia.
Volumes sold:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Single-family units (1) 2,773 3,114 3,934 3,879 3,917
Multi-family units (1) 234 117 475 1,141 60
Lots (1) 2,522 1,628 2,157 1,372 2,762
Commercial space
(thousand sq. ft.) 569 -- 389 88 142
</TABLE>
(1) Includes one-half of joint venture sales.
Financial Services
The company, through its financial services subsidiary, Weyerhaeuser Financial
Services, Inc., is involved in a range of financial services. The principal
operating unit is Weyerhaeuser Mortgage Company, which has origination offices
in 19 states, with a servicing portfolio of $4.4 billion involving approximately
46,000 loans throughout the country. Mortgages are resold in the secondary
market through mortgage-backed securities to financial institutions and
investors. Through its insurance services organization, it also offers a broad
line of property, life and disability insurances.
The company has signed an agreement for the sale of its wholly owned subsidiary,
Weyerhaeuser Mortgage Company. This sale is expected to close in the second
quarter of 1997, subject to regulatory approvals and other contingencies. GNA
Corporation, a subsidiary that specialized in the sale of life insurance
annuities and mutual funds to the customers of financial institutions, was sold
in April 1993. Republic Federal Savings & Loan Association, a subsidiary that
operated in Southern California, was dissolved in 1992.
Volume information (millions):
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Loan servicing portfolio $ 4,354 $10,952 $11,300 $ 8,400 $ 9,800
Single-family
loan originations 3,436 2,196 2,763 4,405 3,380
</TABLE>
6
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 2. Properties
- --------------------
Timberlands and Wood Products
Facilities and annual production are summarized by major product class
as follows (millions):
<TABLE>
<CAPTION>
Production Number of
Capacity Facilities 1996 1995 1994 1993 1992
---------- ---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Logs - cubic ft. -- -- 912 914 671 673 749
Softwood lumber - board ft. 3,765 28 3,695 3,419 3,249 3,135 2,782
Softwood plywood and veneer -
sq. ft. (3/8") 1,181 7 1,243 1,292 1,249 1,188 1,125
Composite panels
- sq. ft. (3/4") 585 5 535 583 594 564 540
Oriented strand
board - sq. ft. (3/8") 2,105 6 1,687 1,654 1,568 1,443 1,234
Hardboard - sq. ft. -(7/16") -- -- 86 124 122 120 118
Hardwood lumber - board ft. 409 11 333 278 229 221 210
Hardwood doors (thousands) 717 1 646 643 597 522 469
</TABLE>
Principal manufacturing facilities are located as follows:
Softwood lumber and plywood Hardwood lumber
Alabama, Arkansas, Georgia, Arkansas, Oklahoma, Oregon,
Louisiana, Mississippi, Pennsylvania, Washington and
North Carolina, Oklahoma, Oregon, Wisconsin
Washington and Alberta, British
Columbia and Saskatchewan, Canada Hardwood doors
Wisconsin
Composite panels
Georgia, North Carolina, Oregon
and Wisconsin
Oriented strand board
Michigan, North Carolina, West
Virginia and Alberta, Canada
7
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 2. Properties - Continued
- --------------------------------
Pulp, Paper and Packaging
Facilities and annual production are summarized by major product class
as follows (thousands):
<TABLE>
<CAPTION>
Production Number of
Capacity Facilities 1996 1995 1994 1993 1992
-------- ---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Pulp - air-dry
metric tons 2,145 8 2,004 2,159 2,041 2,096 1,506
Newsprint - metric tons 700 1 631 687 651 618 588
Paper - tons 1,076 5 1,034 1,060 982 1,007 971
Paperboard - tons 220 1 206 229 189 217 229
Containerboard - tons 2,440 4 2,331 2,329 2,357 2,269 2,240
Packaging - MSF 48,000 45 44,471 36,041 36,020 32,795 31,040
Recycling - tons -- 40 3,428 2,754 2,042 1,847 1,692
Personal care products -
standard cases -- -- -- -- -- -- 16,743
</TABLE>
Principal manufacturing facilities are located as follows:
Pulp Containerboard
Georgia, Mississippi, North North Carolina, Oklahoma and
Carolina, Washington and Oregon
Alberta, British Columbia and
Saskatchewan, Canada Packaging
Arizona, California,
Newsprint Connecticut, Florida, Georgia,
Washington Hawaii, Illinois, Indiana, Iowa,
Kentucky, Maryland, Michigan,
Paper Minnesota, Mississippi,
Mississippi, North Carolina, Missouri, Nebraska, New Jersey,
Washington, Wisconsin and New York, North Carolina, Ohio,
Saskatchewan, Canada Oregon, Tennessee, Texas,
Virginia, Washington and
Paperboard Wisconsin
Washington
Recycling
Arizona, California, Colorado,
Florida, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas,
Maryland, Minnesota, Nebraska,
North Carolina, Oklahoma,
Oregon, Pennsylvania, Tennessee,
Texas, Utah, Virginia,
Washington, West Virginia and
Alberta and British Columbia,
Canada
Chemicals
Georgia, Mississippi, North
Carolina, Oklahoma, Washington
and Saskatchewan, Canada
8
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 2. Properties - Continued
- --------------------------------
Real Estate
The company has six primary facilities that operate in the following product
lines and locations:
Single-family housing Commercial development
California, Maryland, Nevada, California, Florida, Maryland
Texas, Virginia and Washington and Washington
Residential land development
Arkansas, California, Florida,
Georgia, Maryland, Nevada, North
Carolina, Texas, Virginia and
Washington
Financial Services
The company has four primary facilities that operate in the following product
lines and locations:
Mortgage banking and insurance Real estate investments
Branches in 19 states with major Arizona, California, Colorado,
concentrations in California, Nevada, Oregon and Washington
Hawaii, Nevada and Texas
Mortgage securities
California
9
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 3. Legal Proceedings
- ---------------------------
Trial began in May 1992 in a federal income tax refund case that the company
filed in July 1989 in the United States Claims Court. The complaint seeks a
refund of federal income taxes that the company contends it overpaid in 1977
through 1983. The alleged overpayments are the result of the disallowance of
certain timber casualty losses and certain deductions claimed by the company
arising from export transactions. The refund sought was approximately $29
million, plus statutory interest from the dates of the alleged overpayments. The
company settled the portion of the case relating to export transactions and
received a tax refund of approximately $10 million, plus statutory interest. In
September 1994, the United States Court of Federal Claims issued an opinion on
the casualty loss issues which will result in the allowance of additional tax
refunds of approximately $2 million, plus statutory interest. Both the company
and the government appealed the decision. On August 2, 1996, the Court of
Appeals for the Federal Circuit issued its opinion on the remaining timber
casualty loss issues, ruling in favor of the company on both the company's
appeal and the government's appeal. The United States Supreme Court denied the
government's request for certiorari on January 21, 1997.
On March 6, 1992, the company filed a complaint in the Superior Court for King
County, Washington, against a number of insurance companies. The complaint seeks
a declaratory judgment that the insurance companies named as defendants are
obligated under the terms and conditions of the policies sold by them to the
company to defend the company and to pay, on the company's behalf, certain
claims asserted against the company. The claims relate to alleged environmental
damage to third-party sites and to some of the company's own property to which
allegedly toxic material was delivered or on which allegedly toxic material was
placed in the past. Since December 1992, the company has agreed to settlements
with all but one of the defendants. The remaining defendant provided first layer
excess coverage during a three year period. That defendant's liability on groups
of sites is being tried in phases. Two trials against the remaining defendant,
affecting nine sites, began in October 1994 and February 1996 and resulted in
verdicts assigning 100 percent clean-up responsibility to the defendant on three
sites, partial responsibility on three others and a finding of no liability as
to the remaining three. The trial court has ruled that the primary policy has
been exhausted and imposed an obligation on the remaining defendant to provide a
defense on one of the sites, a ruling that may be expanded to include other
sites. After voluntary dismissal on 6 sites, trial for the remaining 10 sites
has been set for June 1997.
The company received from the Lane County, Oregon Regional Air Pollution Control
Authority (LRAPA) a draft Notice of Violation which seeks penalties for alleged
Prevention of Significant Deterioration (PSD) violations at the company's
Springfield, Oregon, particleboard operations. LRAPA informed the company in
July 1995 that it will withdraw its draft Notice of Violation (NOV) and will not
seek fines or penalties. On September 15, 1995, however, LRAPA issued a revised
draft NOV (the Revised Draft NOV), which alleged that the Springfield
particleboard facility had violated a condition of its Air Contaminant Discharge
Permit. The allegations in the Revised Draft NOV are based upon the same facts
and circumstances relied upon by LRAPA in the prior draft NOV. The company has
contested LRAPA's issuance of the Revised Draft NOV. On June 8, 1996, the
company and LRAPA entered into a Stipulated Final Order (SFO) to resolve all
past and ongoing alleged PSD issues, contested matters and alleged violations
associated with extended hours of operation at the Springfield particleboard
facility. In exchange for a full resolution of all past and ongoing contested
matters, the company agreed to pay a total civil penalty of $19.5 thousand, of
which $7.5 thousand was paid directly to LRAPA. The remaining $12 thousand civil
penalty was suspended. The company also agreed to implement a Supplemental
Environmental Project (SEP) consisting of the funding of the preparation of a
nitrogen oxides (Nox) emission inventory for Lane County. The emission inventory
will be conducted by an outside environmental consultant at a cost not to exceed
$40 thousand.
The company conducted a review of its 10 major pulp and paper facilities to
evaluate the facilities' compliance with federal PSD regulations. The results of
the reviews were disclosed to seven state agencies and the Environmental
Protection Agency (EPA) during 1994 and 1995. At the Cosmopolis, Washington,
Columbus, Mississippi, and Flint River, Georgia, facilities, the state
regulatory agencies agreed with the company's conclusions regarding the status
of each facility. For the Cosmopolis facility, the Washington Department of
Ecology agreed the changes made at the facility did not require PSD review. For
the Columbus and Flint River facilities, the states concluded the original PSD
permits issued to the facilities require updating. The company will update
emissions data for the Columbus and Flint River facilities as part of the Title
V permitting process. No penalties were assessed for the issues identified at
Columbus and Flint River. Agreements resolving the alleged PSD issues have been
reached with the states of Washington, Oklahoma and North Carolina, as noted
below. No issues were identified at the company's Rothschild, Wisconsin,
facility. In April 1995, EPA Region X issued a NOV to the company and to North
Pacific Paper Corporation (NORPAC), a joint venture in which the company has an
80 percent ownership interest. The NOV addresses alleged PSD violations at
NORPAC's Longview, Washington, newsprint manufacturing facility. A settlement
resolving alleged PSD issues at the Longview/NORPAC complex was reached with the
State of Washington on January 26, 1996. On November 14, 1995, the company
entered into a settlement with the State of Oklahoma to resolve alleged PSD
violations at the company's Valliant, Oklahoma, containerboard manufacturing
facility. The company also entered into Special Orders by Consent with the State
of North Carolina to resolve alleged PSD issues at the New Bern, North Carolina,
pulp mill and the Plymouth, North Carolina, pulp and paper complex. No decision
has been made by the LRAPA concerning alleged PSD and permit violations at the
company's Springfield, Oregon, containerboard manufacturing facility.
10
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 3. Legal Proceedings - Continued
- ---------------------------------------
The Washington Department of Ecology investigated the accidental release of
chorine, chlorine dioxide and noncondensable gasses in July 1994 at the
company's pulp mill in Longview, and issued a $10 thousand penalty for the
chlorine release and a $5 thousand penalty for the noncondensable gasses release
which have been paid by the company. In June 1995, EPA issued an Administrative
Complaint against the company, seeking penalties of $225 thousand and alleging a
failure to timely report the chlorine release. The company settled the matter on
January 21, 1997, agreeing to pay a penalty of $68 thousand and to perform
supplemental environmental projects in the amount of $110 thousand. On September
25, 1996, the company learned that the EPA has commenced a preliminary criminal
investigation of the incident, and in late November learned that the
investigation had been discontinued.
The Washington Department of Ecology issued a $10 thousand penalty to the
company because of three accidental chlorine releases which occurred at the
company's pulp mill in Longview on March 18, 1996, which has been paid. The EPA
is also investigating.
The Washington Department of Ecology has issued a notice of violation because of
an accidental spill of an estimated 8,700 gallons of crude sulfate turpentine on
January 27, 1997, at the company's pulp and paper operations in Longview. The
EPA is also investigating.
On April 9, 1993, the company entered into a SFO with the Oregon Department of
Environmental Quality (DEQ) for alleged air emissions in excess of permit levels
and PSD noncompliance at the company's North Bend, Oregon, containerboard
facility. The SFO established a compliance schedule for installing control
technology. A Supplemental SFO assessed a $247 thousand initial penalty and a
$500 per day stipulated penalty until compliance was demonstrated. On November
15, 1995, DEQ issued a letter, indicating that the company had satisfied the
requirements of the SFO and Supplemental SFO. No further penalties were assessed
against the company. Termination of the SFO will occur after issuance of the
federal air operating permit to the North Bend containerboard facility. The
North Bend containerboard facility received its federal air operating permit on
July 1, 1996.
On June 20, 1996, the Wisconsin Department of Natural Resources (WDNR) issued a
NOV for alleged air violations at the Marshfield, Wisconsin, wood products
manufacturing facility. No penalty was assessed in the NOV. Since the WDNR lacks
an administrative mechanism to assess penalties for alleged regulatory non-
compliance, it referred the NOV to the Wisconsin Department of Justice for
enforcement action on July 2, 1996. The Wisconsin Department of Justice has
accepted the referral.
On October 2, 1996, the WDNR conducted an inspection of a building demolition
project at the company's Marshfield, Wisconsin facility. The WDNR noted several
potential non-compliance issues in the work performed by the asbestos abatement
subcontractor retained for the project. Upon learning of the issues observed by
WDNR, the company removed the asbestos abatement subcontractor from the
plantsite. The WDNR and EPA Region V are reviewing the work performed to
evaluate whether an enforcement action should be brought against the asbestos
abatement subcontractor, the general contractor, and/or the company.
On November 2, 1992, an action was filed against the company in the Circuit
Court for the First Judicial District of Hinds County, Mississippi, on behalf of
a purported class of riparian property owners in Mississippi and Alabama whose
properties are located on the Tennessee Tombigbee Waterway, Aliceville Lake,
Cedar Creek and the Magoway Creek. The complaint seeks $1 billion in
compensatory and punitive damages for diminution in property value, personal
injuries and mental anguish allegedly resulting from the discharge of purported
hazardous substances, including dioxins and furans, by the company's pulp and
paper mill in Columbus, Mississippi, and the alleged fraudulent concealments of
such discharge. The complaint also seeks an injunction prohibiting future
releases and the removal of hazardous substances allegedly released in the past.
On August 20, 1993, a companion action was filed in Greene County, Alabama, on
behalf of a similar purported class of riparian owners with essentially the same
claims as the Mississippi case. By order dated April 5, 1995, venue of the
Alabama action was transferred to Sumter County, Alabama. On January 20, 1995,
the court in the Alabama action certified a class of all persons who, as of the
date the action commenced, were riparian owners, lessees and licensees of
properties located on the Tennessee Tombigbee Waterway in Greene, Sumter,
Pickens and Marengo counties, Alabama, and Lowndes and Noxubee counties,
Mississippi, to determine whether the company is liable to the members of the
class for compensatory and/or punitive damages and to determine the amount of
punitive damages, if any, to be awarded to the class as a whole. By order dated
April 12, 1995, as orally amended on February 1, 1996, the geographical
boundaries of the class were amended to run from below the Columbus mill's
wastewater discharge pipe to just above the confluence of the Black Warrior
River and the Tennessee Tombigbee Waterway. The class is estimated to range from
approximately 1,000 to 1,500 members. In late July, 1996, the company reached an
agreement to settle both the Mississippi action and the Alabama action for $2.5
million. The agreement is subject to the approval of the court in the Alabama
action.
11
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 3. Legal Proceedings - Continued
- ---------------------------------------
In November 1996, an action was filed against the company in Superior Court for
King County, Washington, on behalf of a purported class of all individuals and
entities that own property in the United States on which exterior hardboard
siding manufactured by the company has been installed since 1980. The action
alleges the company has manufactured and distributed defective hardboard siding
and has breached express warranties and consumer protection statutes in its sale
of hardboard siding. The action seeks compensatory damages, including
prejudgment interest, and seeks damages for the cost of replacing siding that
rots subsequent to the entry of any judgment. In January 1997, an action was
filed, also in Superior Court for King County, Washington, on behalf of a
purported class of all individuals, proprietorships, partnerships, corporations,
and other business entities in the United States on whose homes, condominiums,
apartment complexes or commercial buildings hardboard siding manufactured by the
company has been installed. The action alleges the company has breached express
and implied warranties in its sale of hardboard siding and also has violated the
Consumer Protection Act of the State of Washington. The action seeks damages,
prejudgment interest, costs and reasonable attorney fees. The company is a
defendant in approximately fifteen other hardboard siding cases, one of which
purports to be a class action on behalf of purchasers of single- or multi-family
residences in Nebraska that contain the company's hardboard siding.
The company is also a party to various proceedings relating to the clean-up of
hazardous waste sites under the Comprehensive Environmental Response
Compensation and Liability Act, commonly known as "Superfund," and similar state
laws. The EPA and/or various state agencies have notified the company that it
may be a potentially responsible party with respect to other hazardous waste
sites as to which no proceedings have been instituted against the company. The
company is also a party to other legal proceedings generally incidental to its
business. Although the final outcome of any legal proceeding is subject to a
great many variables and cannot be predicted with any degree of certainty, the
company presently believes that any ultimate outcome resulting from the legal
proceedings discussed herein, or all of them combined, would not have a material
effect on the company's current financial position, liquidity or results of
operations; however, in any given future reporting period, such legal
proceedings could have a material effect on results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 29, 1996.
12
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART II
Item 5. Market Price of and Dividends on the Registrant's Common Equity and
- -----------------------------------------------------------------------------
Related Stockholder Matters
- ---------------------------
Information with respect to market information, stockholders and dividends
included in Notes 19 and 20 of Notes to Financial Statements in the company's
1996 Annual Report to Shareholders, is incorporated herein by reference.
Item 6. Selected Financial Data
- ---------------------------------
Information with respect to selected financial data included in Note 20 of Notes
to Financial Statements in the company's 1996 Annual Report to Shareholders, is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations
- ---------------------
On February 24, 1997, the company announced that it expects to take an after-tax
charge of approximately $25 million, or 12 cents per common share, against
earnings in the 1997 first quarter. This charge will reflect the impact of
closure, consolidation or disposal of recycling facilities; the permanent
closure of its corrugated medium machine at Longview, Washington; the
anticipated sale of its wholly-owned subsidiary, Shemin Nurseries, Inc., a
wholesale nursery business based in Danbury, Connecticut; and interest income
from the favorable federal income tax decision relating to casualty losses
associated with the eruption of Mount St. Helens in 1980.
The company also expects to close the sale of its wholly-owned subsidiary,
Weyerhaeuser Mortgage Company, in the second quarter of 1997, although it is
subject to regulatory approvals and other contingencies. If this transaction
closes as presently anticipated, the company expects it to have a material
favorable effect on operating results and cash flow in the quarter in which it
closes.
Additional information with respect to Management's Discussion and Analysis
included on pages 1, 8-9, 12-13, 18-19, 24-25, 28-29, 34-35 and 40-52; contained
in the company's 1996 Annual Report to Shareholders, is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Information
- -----------------------------------------------------------
Financial statements and supplementary information, contained in the company's
1996 Annual Report to Shareholders are incorporated herein by reference:
<TABLE>
<CAPTION>
Page(s) in
Annual Report
to
Shareholders
------------
<S> <C>
Report of Independent Public Accountants 52
Consolidated Statement of Earnings 53
Consolidated Balance Sheet 54-55
Consolidated Statement of Cash Flows 56-57
Consolidated Statement of Shareholders' Interest 58
Notes to Financial Statements 59-77
Selected Quarterly Financial Information (Unaudited) 75
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
Not applicable.
13
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Information with respect to Directors of the company included on pages 1 through
4 of the Notice of 1997 Annual Meeting of Shareholders and Proxy Statement dated
March 3, 1997 is incorporated herein by reference.
The executive officers of the company are as follows:
<TABLE>
<CAPTION>
Name Title Age
---- ----- ---
<S> <C> <C>
William R. Corbin Executive Vice President 55
John W. Creighton, Jr. President 64
Richard C. Gozon Executive Vice President 58
Steven R. Hill Senior Vice President 49
Mack L. Hogans Senior Vice President 48
Norman E. Johnson Senior Vice President 63
Thomas M. Luthy Senior Vice President 59
William C. Stivers Senior Vice President 58
</TABLE>
Item 11. Executive Compensation
- --------------------------------
Information with respect to executive compensation included on pages 5 through
13 of the Notice of 1997 Annual Meeting of Shareholders and Proxy Statement
dated March 3, 1997 is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Information with respect to security ownership of certain beneficial owners and
management included on pages 4 and 5 of the Notice of 1997 Annual Meeting of
Shareholders and Proxy Statement dated March 3, 1997 is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information with respect to certain relationships and related transactions
included on page 17 of the Notice of 1997 Annual Meeting of Shareholders and
Proxy Statement dated March 3, 1997 is incorporated herein by reference.
14
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------------------------------------------------------------------------
Financial Statements
The consolidated financial statements of the company, together with the report
of independent public accountants, contained in the company's 1996 Annual Report
to Shareholders, are incorporated in Part II, Item 8 of this Form 10-K by
reference.
<TABLE>
<CAPTION>
Page Number(s)
Financial Statement Schedules in Form 10-K
- ----------------------------- --------------
<S> <C>
Report of Independent Public Accountants on Financial
Statement Schedules 17
Schedule II - Valuation and Qualifying Accounts 18
</TABLE>
All other financial statement schedules have been omitted because they are not
applicable or the required information is included in the consolidated financial
statements, or the notes thereto, contained in the company's 1996 Annual Report
to Shareholders and incorporated herein by reference.
Exhibits:
- ---------
3 - Articles of Incorporation and Bylaws
10 - Material Contracts
(a) Agreement with N. E. Johnson
(b) Agreement with W. R. Corbin
(c) Agreement with R. C. Gozon
11 - Statement Re: Computation of Per Share Earnings
(incorporated by reference to Note 1 of the 1996
Weyerhaeuser Company Annual Report to Shareholders)
13 - Portions of the 1996 Weyerhaeuser Company Annual
Report to Shareholders specifically incorporated by
reference herein
22 - Subsidiaries of the Registrant
23 - Consent of Independent Public Accountants
27 - Financial Data Schedules
Reports on Form 8-K
- -------------------
The registrant filed reports on Form 8-K dated February 14, April 24, July 17,
July 26 and October 15, 1996, and January 22 and February 25, 1997,
respectively, reporting information under Item 5, Other Events.
15
<PAGE>
Weyerhaeuser Company and Subsidiaries
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 14, 1997.
Weyerhaeuser Company
/s/ John W. Creighton, Jr.
------------------------------
John W. Creighton, Jr.
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities indicated on March 14, 1997.
/s/ John W. Creighton, Jr. /s/ P. M. Hawley
- -------------------------------- ---------------------------
John W. Creighton, Jr. Philip M. Hawley
President, Principal Executive Director
Officer and Director
/s/ George H. Weyerhaeuser /s/ Martha R. Ingram
- -------------------------------- ---------------------------
George H. Weyerhaeuser Martha R. Ingram
Chairman of the Board and Director
Director
/s/ William C. Stivers /s/ John Kieckhefer
- -------------------------------- ----------------------------
William C. Stivers John I. Kieckhefer Director
Principal Financial Officer
/s/ Kenneth J. Stancato /s/ William D. Ruckelshaus
- -------------------------------- ----------------------------
Kenneth J. Stancato William D. Ruckelshaus
Principal Accounting Officer Director
/s/ William Clapp /s/ Richard H. Sinkfield
- -------------------------------- ----------------------------
William H. Clapp Richard H. Sinkfield
Director Director
/s/ W. John Driscoll
- --------------------------------
W. John Driscoll
Director
16
<PAGE>
Weyerhaeuser Company and Subsidiaries
FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants on Financial Statement Schedules
To Weyerhaeuser Company:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in Weyerhaeuser Company's annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 6, 1997. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed on
page 15 is the responsibility of the company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Seattle, Washington,
February 6, 1997
17
<PAGE>
Weyerhaeuser Company and Subsidiaries
FINANCIAL STATEMENT SCHEDULES
- -----------------------------
Schedule II - Valuation and Qualifying Accounts For the three years ended
December 29, 1996 Dollar amounts in millions
<TABLE>
<CAPTION>
Balance at Deductions Balance at
Beginning Charged from End of
Description of Period to Income Reserve Period
- ----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Weyerhaeuser
Reserve deducted from
related asset accounts:
Doubtful accounts -
Accounts receivable
1996 $ 9 $ 4 $ 6 $ 7
==== ==== ==== ====
1995 $ 10 $ 2 $ 3 $ 9
==== ==== ==== ====
1994 $ 10 $ 4 $ 4 $ 10
==== ==== ==== ====
Real Estate and
Financial Services
Reserves and allowances
deducted from related
asset accounts:
Receivables
1996 $ 7 $ 3 $ 1 $ 9
==== ==== ==== ====
1995 $ 4 $ 1 $ (2)(1) $ 7
==== ==== ==== ====
1994 $ 7 $ 1 $ 4 $ 4
==== ==== ==== ====
Mortgage loans receivable
1996 $ 2 $ -- $ (5)(2) $ 7
==== ==== ==== ====
1995 $ 8 $ -- $ 6 $ 2
==== ==== ==== ====
1994 $ 4 $ 4 $ -- $ 8
==== ==== ==== ====
Investment in and
advances to joint
ventures and
limited partnerships
1996 $ 38 $ -- $ 11 $ 27
==== ==== ==== ====
1995 $ 49 $ -- $ 11 $ 38
==== ==== ==== ====
1994 $ 57 $ 2 $ 10 $ 49
==== ==== ==== ====
</TABLE>
(1) Includes allowances transferred in on partnership notes that were
consolidated.
(2) Includes allowances transferred in from other liabilities.
18
<PAGE>
Weyerhaeuser Company and Subsidiaries
Exhibit 22 Subsidiaries of the Registrant
- -----------------------------------------
<TABLE>
<CAPTION>
Percentage
State or Ownership of
Country of Immediate
Name Incorporation Parent
---- ------------- ------------
<S> <C> <C>
Colonvade S.A. Uruguay 100%
Columbia & Cowlitz Railway Company Washington 100
DeQueen and Eastern Railroad Company Arkansas 100
Fisher Lumber Company California 100
Golden Triangle Railroad Mississippi 100
Green Arrow Motor Express Company Delaware 100
Gryphon Asset Management, Inc. Delaware 100
J.H. Hamlen & Son, Inc. Arkansas 100
Mississippi & Skuna Valley
Railroad Company Mississippi 100
Mountain Tree Farm Company Washington 50
North Pacific Paper Corporation Delaware 80
NORPAC Sales Corporation Guam 100
Pacific Veneer, Ltd. Washington 90
SCA Weyerhaeuser Packaging Holding British Virgin
Company Asia Limited Islands 50
Shemin Nurseries, Inc. Delaware 100
Texas, Oklahoma & Eastern
Railroad Company Oklahoma 100
United Structures, Inc. California 100
Westwood Shipping Lines, Inc. Washington 100
Weycomp Claims Management Service, Inc. Texas 100
Weyerhaeuser Construction Company Washington 100
Weyerhaeuser Financial Services, Inc. Delaware 100
CMO Finance Corp. Nevada 100
MJ Finance Corporation California 100
Mortgage Securities III Corporation Nevada 100
Mortgage Securities IV Corporation Nevada 100
R4 Participant Corporation Nevada 100
ver Bes' Insurance Company Vermont 100
de Bes' Insurance Ltd. Bermuda 100
Weyerhaeuser Financial Investments, Inc. Nevada 100
Abfall Finance Corp. California 100
Brookview, Inc. Nevada 100
The Giddings Mortgage Investment Company California 100
Gudig Abfall, Inc. California 100
Kachura Finance Corp. California 100
Laurel Real Estate Development, Inc. California 100
McGNT Finance Corp. California 100
Pass-Through Finance Corp. California 100
RFS Development Corporation California 100
RFS Finance Corp. California 100
RFS Insurance Agency California 100
RFS Service Corporation California 100
</TABLE>
19
<PAGE>
Weyerhaeuser Company and Subsidiaries
Exhibit 22 Subsidiaries of the Registrant - Continued
- -----------------------------------------------------
<TABLE>
<CAPTION>
Percentage
State or Ownership of
Country of Immediate
Name Incorporation Parent
---- ------------- ------------
<S> <C> <C>
R. J. Plaza II, Inc. Nevada 100%
Trimark Development Company California 100
Trimark Realty Advisors, Inc. California 100
Weyerhaeuser Properties, Inc. Nevada 100
Woodland Hills Properties-W., Inc. Nevada 100
Monthill, Inc. California 100
Placer Business Center, Inc. California 100
Terman Properties, Inc. California 100
WVC II, Inc. Nevada 100
Weyerhaeuser Mortgage Company California 100
Mason-McDuffie Mortgage Corporation Delaware 100
Mason-McDuffie Service Corporation California 100
Southwest Partners, Inc. California 100
Westwood Associates California 100
Westwood Insurance Agency California 100
Westwood Insurance Agency of
Arizona, Inc. Arizona 100
WMC Mortgage Co. International California 100
WMC Finance Corp. I California 100
Weyerhaeuser Venture Company Nevada 100
Las Positas Land Co. California 100
WAMCO, Inc. Nevada 100
Weyerhaeuser Realty Investors, Inc. Washington 100
Weyerhaeuser Forestlands
International, Inc. Washington 100
Weyerhaeuser International, Inc. Washington 100
Weyerhaeuser Canada Ltd. Canada 100
Saskatoon Chemicals Ltd. Canada 100
Weyerhaeuser Saskatchewan Ltd. Canada 100
Weyerhaeuser China, Ltd. Washington 100
Weyerhaeuser GMBH Germany 100
Weyerhaeuser (Asia) Limited Hong Kong 100
Weyerhaeuser Italia, S.r.l. Italy 100
Weyerhaeuser Japan Ltd. Japan & Delaware 100
Weyerhaeuser Korea Ltd. Korea 100
Weyerhaeuser, S.A. Panama 100
Weyerhaeuser Taiwan Ltd. Delaware 100
Weyerhaeuser International Sales Corp. Guam 100
Weyerhaeuser (Mexico) Inc. Washington 100
Weyerhaeuser Midwest, Inc. Washington 100
Weyerhaeuser Overseas Finance Co. Delaware 100
Weyerhaeuser Real Estate Company Washington 100
Centennial Homes, Inc. Texas 100
Midway Properties, Inc. North Carolina 100
</TABLE>
20
<PAGE>
Weyerhaeuser Company and Subsidiaries
Exhibit 22 Subsidiaries of the Registrant - Continued
- -----------------------------------------------------
<TABLE>
<CAPTION>
Percentage
State or Ownership of
Country of Immediate
Name Incorporation Parent
---- ------------- ------------
<S> <C> <C>
Pardee Construction Company California 100%
Marmont Realty Company California 100
Pardee Construction Company of Nevada Nevada 100
Pardee Investment Company California 100
Parvada, Inc. Nevada 100
The Quadrant Corporation Washington 100
Quadrant Real Estate Services, Inc. Washington 100
South Jersey Assets, Inc. New Jersey 100
Scarborough Constructors, Inc. Florida 100
Silverthorn Country Club, Inc. Florida 100
TMI, Inc. Texas 100
Weyerhaeuser Real Estate
Company of Nevada Nevada 100
Winchester Homes, Inc. Delaware 100
SC-WHI, Inc. Delaware 100
The Wray Company Arizona 100
</TABLE>
21
<PAGE>
Weyerhaeuser Company and Subsidiaries
Exhibit 23 Consent of Independent Public Accountants
- ----------------------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
reports included and incorporated by reference in this Form 10-K, into
Weyerhaeuser Company's previously filed Registration Statement No. 33-52789 on
Form S-3 and Nos. 33-60527, 33-60529, 33-60521, 33-60525, 33-25928, 33-24979,
33-47392, 33-10165, 33-41414, 2-88109, 2-27929, 2-58498, 2-81463 and 333-01565
on Form S-8.
ARTHUR ANDERSEN LLP
Seattle, Washington,
March 14, 1997
22
<PAGE>
HIGHLIGHTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Dollar amounts in millions except per-share figures 1996 1995
- --------------------------------------------------------------------
<S> <C> <C>
Net sales and revenues $11,114 $11,788
- --------------------------------------------------------------------
Net earnings before special charge 463 983
Less: special charge(1) -- 184
- --------------------------------------------------------------------
Net earnings 463 799
- --------------------------------------------------------------------
Cash flow from operations,
before working capital changes 1,262 1,856
Capital expenditures (excluding acquisitions) 879 996
Total assets 13,596 13,253
Shareholders' interest 4,604 4,486
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1995
- ----------------------------------------------------------------------------
Before
Special (1)Special
1996 Charge Charge Net
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings per
common share:
First quarter $ .72 $ 1.00 $ 1.00
Second quarter .52 1.21 1.21
Third quarter .60 1.37 (.90) .47
Fourth quarter .50 1.25 1.25
- ----------------------------------------------------------------------------
$ 2.34 $ 4.83 $(.90) $ 3.93
============================================================================
</TABLE>
(1) The after-tax charge of $184 million ($290 million less income taxes of $106
million) taken in 1995 is a result of: (a) the company's decision to accelerate
the disposition of some of the affected assets and (b) the implementation of
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which required the company to change its method of valuing long-lived assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Market prices - high/low 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
First quarter $49 1/2 - 39 15/16 $42 5/8 - 36 7/8
Second quarter 49 7/8 - 41 3/4 47 3/8 - 37 1/2
Third quarter 48 1/4 - 39 1/2 50 3/8 - 44 3/4
Fourth quarter 48 1/8 - 43 7/8 48 - 40 7/8
- -----------------------------------------------------------------------
Year $49 7/8 - 39 1/2 $50 3/8 - 36 7/8
- -----------------------------------------------------------------------
</TABLE>
The consolidated financial statements include: (1) Weyerhaeuser Company
(Weyerhaeuser), which is principally engaged in the growing and harvesting of
timber and the manufacture, distribution and sale of forest products, and (2)
real estate and financial services including Weyerhaeuser Real Estate Company,
which is involved in real estate development and construction, and Weyerhaeuser
Financial Services, Inc., whose principal subsidiary is Weyerhaeuser Mortgage
Company.
1
<PAGE>
PULP, PAPER AND PACKAGING STATISTICAL DATA
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
NET SALES 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Millions of dollars)
Pulp $ 954 $ 1,616 $ 1,012 $ 823 $ 711
Newsprint 451 508 356 322 326
Paper 803 1,001 664 648 673
Paperboard and
containerboard 281 325 240 255 321
Packaging 1,921 1,863 1,495 1,302 1,323
Recycling 140 266 121 77 93
Chemicals 63 63 45 32 31
Personal care products -- -- -- -- 514
Miscellaneous products 35 40 133 120 117
- ----------------------------------------------------------------------
$ 4,648 $ 5,682 $ 4,066 $ 3,579 $ 4,109
======================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
SALES VOLUMES 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Thousands)
Pulp -- air-dry
metric tons 1,868 2,060 2,068 1,886 1,238
Newsprint -- metric tons 629 663 638 609 575
Paper -- tons 1,007 1,006 998 990 966
Paperboard -- tons 205 230 201 222 238
Containerboard -- tons 346 259 254 290 318
Packaging -- MSF 42,323 34,342 34,483 31,386 29,414
Recycling -- tons 2,011 1,467 985 851 778
Personal care products
-- standard cases -- -- -- -- 17,017
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
ANNUAL PRODUCTION CAPACITY 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Thousands)
Pulp -- air-dry
metric tons 2,145 2,004 2,159 2,041 2,096 1,506
Newsprint -- metric tons 700 631 687 651 618 588
Paper -- tons 1,076 1,034 1,060 982 1,007 971
Paperboard -- tons 220 206 229 189 217 229
Containerboard -- tons 2,440 2,331 2,329 2,357 2,269 2,240
Packaging -- MSF 48,000 44,471 36,041 36,020 32,795 31,040
Recycling -- tons -- 3,428 2,754 2,042 1,847 1,692
Personal care products --
standard cases -- -- -- -- -- 16,743
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL MANUFACTURING FACILITIES
- ---------------------------------------------------------------------------
<S> <C>
Pulp 8
- ---------------------------------------------------------------------------
Newsprint 1
- ---------------------------------------------------------------------------
Paper 5
- ---------------------------------------------------------------------------
Paperboard 1
- ---------------------------------------------------------------------------
Containerboard 4
- ---------------------------------------------------------------------------
Packaging 45
- ---------------------------------------------------------------------------
Recycling 40
- ---------------------------------------------------------------------------
Chemicals 7
- ---------------------------------------------------------------------------
</TABLE>
8
<PAGE>
TIMBERLANDS AND WOOD PRODUCTS STATISTICAL DATA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
NET SALES 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Millions of dollars)
Raw materials (logs, chips and timber) $1,066 $1,102 $1,091 $1,021 $ 872
Softwood lumber 1,988 1,648 1,880 1,704 1,138
Softwood plywood and veneer 519 591 636 567 498
Oriented strand board, composite and
other panel products 667 752 750 623 495
Hardwood lumber 235 193 175 154 127
Engineered wood products 233 207 157 100 --
Miscellaneous products 532 438 303 299 287
- --------------------------------------------------------------------------
$5,240 $4,931 $4,992 $4,468 $3,417
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
SALES VOLUMES 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Millions)
Raw materials -- cubic feet 577 535 564 547 545
Softwood lumber -- board feet 4,745 4,515 4,402 4,230 3,440
Softwood plywood and veneer --
square feet (3/8") 2,172 2,324 2,685 2,435 2,227
Composite panels -- square feet (3/4") 604 648 660 626 590
Oriented strand board --
square feet (3/8") 2,083 1,931 1,803 1,672 1,484
Hardboard -- square feet (7/16") 193 201 167 140 133
Hardwood lumber -- board feet 349 293 254 240 218
Engineered wood products -- lineal feet 116 128 71 47 --
Hardwood doors (thousands) 652 648 617 556 514
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
ANNUAL PRODUCTION CAPACITY 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Millions)
Logs -- cubic feet -- 912 914 671 673 749
Softwood lumber -- board feet 3,765 3,695 3,419 3,249 3,135 2,782
Softwood plywood and veneer
-- square feet (3/8") 1,181 1,243 1,292 1,249 1,188 1,125
Composite panels --
square feet (3/4") 585 535 583 594 564 540
Oriented strand board
-- square feet (3/8") 2,105 1,687 1,654 1,568 1,443 1,234
Hardboard -- square feet (7/16") -- 86 124 122 120 118
Hardwood lumber -- board feet 409 333 278 229 221 210
Hardwood doors (thousands) 717 646 643 597 522 469
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
PRINCIPAL MANUFACTURING FACILITIES
- --------------------------------------------------------------------------
<S> <C>
Softwood lumber, plywood and veneer 35
- --------------------------------------------------------------------------
Composite panels 5
- --------------------------------------------------------------------------
Oriented strand board 6
- --------------------------------------------------------------------------
Hardwood lumber 11
- --------------------------------------------------------------------------
Hardwood doors 1
- --------------------------------------------------------------------------
</TABLE>
9
<PAGE>
PULP, PAPER AND PACKAGING
After a prolonged downturn through the early 1990s, the 18-month rebound in pulp
and paper prices in 1994 and 1995 came as a welcome but short-lived respite.
Prices across all products and grades tumbled in 1996, producing earnings for
the Pulp, Paper and Packaging sector of $307 million compared with $1.2 billion
in 1995. Net sales were $4.6 billion compared with $5.7 billion last year.
<TABLE>
<CAPTION>
- --------------------------------
Pulp, Paper, Packaging Earnings
(millions of dollars)
<C> <S>
1996 $307
1995 $1,181
1994 $211
1993 $61
1992 $251
- -------------------------------
</TABLE>
Despite the challenge of this recent cycle, 1996 has been a rewarding year as
the sector focused on fundamentals, effectively making the most of a down market
by building a stronger foundation for long-term growth. This foundation includes
gains in asset utilization, improvements in product mix and innovation, and
continued discipline in capital spending.
As a result of this focused strategy, mills further improved operating
efficiency and customer relationships. Unscheduled downtime to adjust an
inventory buildup in late 1995 and 1996 prevented the sector from fully
realizing the benefit of these improvements, but they are firmly in place. As
inventories and markets adjust, operations should reap further benefits in
operating efficiency and work-systems improvements, leading to increased return
on capital.
The sector continued a disciplined approach to capital spending in 1996. With
major modernizations completed, our assets are well positioned to compete into
the next century. As a result, spending to sustain and improve assets totaled
12
<PAGE>
$415 million, just two-thirds of the average annual capital allocation over the
past three years. In the next four years, we plan to push down capital spending
even further, to an annual average of $400 million, exclusive of any
acquisitions or major expansion opportunities. Sector capital outlay in 1997 is
projected to be at the lowest level in 10 years, approximately equal to
depreciation.
- ----------------------------------------------------
Pulp, Paper, Packaging Capital Spending*
(millions of dollars)
1997 Estimated $400
1996 $415
1995 $501
1994 $794
1993 $652
*Excludes acquisitions
- ----------------------------------------------------
Looking to the future, sector growth is expected to come primarily through
strategic acquisitions and expanded business partnerships. Operations will
continue to focus on the basics: improving process reliability, asset
utilization and work systems; and achieving outstanding customer satisfaction.
These initiatives, coupled with continued improvement in product mix and
disciplined capital spending, will continue to lift the Pulp, Paper and
Packaging businesses nearer to the top of their peer groups.
The Containerboard Packaging business has grown to become the largest domestic
producer of corrugated packaging, increasing volume from 2.4 million tons in
1995 to 2.9 million tons in 1996. High asset utilization of existing and
modernized facilities and complete integration of the nine Westvaco packaging
plants purchased in 1995 contributed to the higher volumes. Nationwide, the
business is shipping 40 percent more product per packaging plant than the
industry average. The containerboard mill system benefited from a record start-
up of the No. 2 paper machine in August at the joint venture Cedar River
13
<PAGE>
Paper Company. An alliance with SCA Packaging Europe BV resulted in a unique
joint venture, SCA Weyerhaeuser Packaging Holding Company Asia Limited, that
will pursue opportunities to manufacture and supply high-quality packaging to
the fast-growing economies of Asia.
The Newsprint business attained its second-best year ever. Improved operating
efficiency at the North Pacific Paper Corporation (NORPAC) joint venture with
Nippon Paper Industries Co., Ltd., of Japan resulted in solid profitability
despite declining domestic prices. NORPAC successfully completed a major upgrade
of the No. 2 paper machine and its de-inked pulp facility to better capture
market opportunities. Operating improvements to the No. 1 and No. 3 machines -
resulting in increased uptime, reduced waste and running at target rates -
netted a 2 percent gain in productivity and lowered costs. Weyerhaeuser's
balance between the North American and Japanese markets paid off during the
cycle as the U.S. market struggled and the Japanese market grew by 4 percent.
Nearly 100 pressroom visits by NORPAC employees in both the United States and
Japan deepened operator knowledge of customer needs and demonstrated the
business's commitment to customer service.
Fine paper prices plunged to early 1990s levels, yet the Fine Paper business
delivered its third-highest profit in the business's history. These significant
results are due to employee involvement, process reliability, strong customer
relationships and improved product mix. Growth has been led by non-capital
investments in improved work systems as team-led efforts in marketing, product
development and manufacturing helped create new products with higher margins.
Current value-added office and printing products, such as First Choice TM,
Cougar TM
18
<PAGE>
and Lynx TM, are reducing the cyclical nature of the Fine Paper business and
capturing higher returns on assets. New products introduced in 1996, including
several aimed at the small-and home-office markets, are strengthening the basis
for value-added product lines. Two independent customer satisfaction surveys in
1996 ranked the Fine Paper business first overall. Strengths are knowledgeable
employees, fast and accurate responses to customer inquiries, quality of
products, on-time deliveries, and strategic use of electronic commerce.
World pulp markets experienced extreme volatility in both price and volume. An
inventory buildup through 1995 coupled with a recession in Europe, which
accounts for 40 percent of market demand, triggered a price collapse of 50
percent in less than six months. Weyerhaeuser sales were somewhat less volatile
than others in the industry because of our strategy to focus on more stable
grades, particularly fluff and northern softwood papergrade, and strong long-
term customer relationships. The Pulp business continued to increase the sale of
specialty fluff pulps, bringing specialty products to about 25 percent of total
fluff pulp sales by year-end. Created for specific markets and tailored to
customer specifications, these new products add greater stability and higher
margins to the product mix.
The Recycling business stepped up to the challenge of supplying increased
volumes of wastepaper used by internal containerboard mills. It did so during a
volatile market, with prices dipping to 1993 levels. Recycling continues to be
an important business at Weyerhaeuser. Volumes in 1996 increased nearly 40
percent, from 2.8 million tons to
19
<PAGE>
3.4 million tons. 1997 will be a year in which we pause from the rapid growth of
recent years and examine the effectiveness of our nationwide system to meet the
needs of internal and external customers in an increasingly competitive
marketplace.
Westwood Shipping provides product transportation timed to meet customer needs
and to ensure product quality. Lower pulp shipments in 1996 were offset in part
by strong newsprint and lumber orders to Japan. With no noticeable impact on
customers, Westwood centralized its North American service organization in 1996.
Operating units were reduced from five to two, supported by a new computer
system.
In 1996, the Pulp, Paper and Packaging sector effectively broadened its base of
manufacturing excellence, marketing innovation and customer service. Building on
this foundation will lift the sector to its highest goal: to lead the industry
in the creation of shareholder value.
24
<PAGE>
TIMBERLANDS AND WOOD PRODUCTS
Timberlands and Wood Products businesses posted solid performances in 1996.
Though higher labor and materials costs and weaker prices for oriented strand
board eroded some of the gains, earnings rose in response to increasing demand
and rising prices for softwood lumber, and continued results from business
improvement efforts. The sector reported operating earnings of $805 million
compared with earnings of $808 million in 1995. Net sales were $5.2 billion
compared with $4.9 billion last year.
- --------------------------------------
Timberlands and Wood Products Earnings
(millions of dollars)
1996 $805
1995 $808
1994 $1,034
1993 $891
1992 $515
- --------------------------------------
Domestically, following a weak first quarter, demand and prices for lumber
surged in response to a strong U.S. housing market. For much of the year, demand
for lumber matched capacity. Price volatility also increased, the result of
changing distribution patterns and uncertainty resulting from the imposition of
quotas on Canadian imports into the United States. Log volumes and prices
remained relatively stable the entire year.
Growing demand for Western-style wood housing in Japan fueled record
international lumber demand in 1996. Lumber exports to Japan from Weyerhaeuser's
Canadian and Western U.S. mills increased by 30 percent to 380 million board
feet.
Structural Panels experienced a difficult year due primarily to a dramatic
increase in oriented strand board (OSB) capacity. Prices for OSB weakened
significantly in the latter part of 1996.
Hardwood Lumber reported a solid year, buoyed by robust international markets
and the successful integration of mills
25
<PAGE>
acquired in 1995. This Weyerhaeuser business has become the largest in the North
American hardwood industry by providing a range of proprietary and standard
products, mainly to industrial customers worldwide.
The Building Materials Distribution business, encompassing 52 customer service
centers throughout the United States and Canada, experienced improved earnings
and a 5 percent increase in sales over 1995. Updated computerized information
systems effectively improved on-time deliveries, order-fill rates and inventory
management, resulting in improved customer service.
- ------------------------------------------------
Timberlands and Wood Products Capital Spending*
(millions of dollars)
1997 Estimated $300
1996 $418
1995 $446
1994 $257
1993 $241
*Excludes acquisitions
- -----------------------------------------------
The sector maintained its focus on managing capital expenditures, improving
operating efficiency, and improving customer satisfaction. Key sources of the
sector's business improvements are reducing operating costs, improving raw
material usage, making product improvements, and delivering customer service.
Success in these areas will continue to move the sector toward becoming the
best.
Weyerhaeuser enhanced its position as the world's largest private owner of
merchantable softwood timber by making major adjustments to its forestland
portfolio, adjustments that will increase raw material supplies to
Weyerhaeuser's Southern manufacturing facilities. The company acquired 661,200
acres of Southern pine forest in Mississippi and Louisiana and an additional
118,000 acres in central Georgia. Included in the Mississippi-Louisiana purchase
were two state-of-the-art dimension lumber mills and long-term agreements with
two contract sawmills. These purchases
28
<PAGE>
match the company's strategy of acquiring quality assets that fit core
businesses.
Negotiations to exchange 180,000 acres of environmentally sensitive Weyerhaeuser
forestland in Arkansas and Oklahoma with federal agencies were finalized in
1996. In return, Weyerhaeuser received from the U.S. Forest Service and U.S.
Fish and Wildlife Service 47,500 acres of forestland well suited for sustainable
timber production. The exchange supplements timber supplies for the company's
area mills and transfers to public ownership wetlands and mixed forests ideal
for wildlife management and recreation.
In August the company sold its long-time holdings near Klamath Falls, Ore. By
selling 600,000 acres of predominantly pine forest and the related manufacturing
operations, the company narrowed its focus in the Pacific Northwest to the
production of Douglas fir and hemlock.
Timberlands strengthened forestry operations nationwide with a major
restructuring to improve management effectiveness. The effort is expected to
improve operational performance throughout the Timberlands business in 1997, as
units take advantage of improved work processes, best practices and a flatter
organizational structure where employees are empowered to make decisions that
directly affect safety, operations, the environment and customers.
1996 marked the 30th anniversary of Weyerhaeuser's decision to develop High
Yield Forestry. In the past three decades, sustained investments in forestry
research, reforestation and silviculture have dramatically increased the amount
of wood growing in the company's private forests. Weyerhaeuser expects its
annual harvest from U.S. fee timberlands to increase approximately 70 percent
above present levels over the next 20 years.
29
<PAGE>
Recent forestry research on improving wood quality is projected to add
significant future value to the timber harvested. While most opportunities for
increasing volume have been captured, Timberlands continues to invest in
pruning, genetics and other technologies to enhance wood quality and
compatibility with specific manufacturing applications.
Wood Products businesses made important strides in 1996 in the area of work
systems improvement. Underscored by an abiding commitment to their customers,
employees are taking ownership to increase volumes, lower costs, make deliveries
on time, and improve product quality and performance. Typical of the more than
two dozen wood products facilities is Cottage Grove (Ore.) Lumber, where
operational uptime increased from 90 to 95 percent and product yield per log
increased from 92 to 98 percent. Better use of assets resulting in increased
manufacturing time and higher volumes leads to increased return on capital. With
commitment and ownership, Wood Products employees are making the key decisions
affecting operating efficiency, customer service and product quality that result
in lasting improvements to our business operations.
Our Timberlands and Wood Products assets are of high quality. A capable work
force is concentrating on improving manufacturing processes and work systems
that will further improve returns on invested capital to create future value for
our shareholders.
34
<PAGE>
REAL ESTATE AND FINANCIAL SERVICES
Combined earnings for the Real Estate and Financial Services sectors increased
from $13 million in 1995, before a special charge, to $43 million in 1996,
primarily the result of Weyerhaeuser Real Estate Company realizing benefits from
its business restructuring efforts.
The real estate company improved results from its primary businesses and markets
while continuing to make significant progress liquidating marginal assets
identified in 1995. With home building and land development activities in
Southern California, Las Vegas, Houston, Maryland, Virginia and the Puget Sound
area, the company continues to be one of the top 20 home builders in the United
States.
As part of its ongoing portfolio review and effort to concentrate on core
businesses, Weyerhaeuser Company announced in September it had retained an
investment banking firm to explore strategic options with respect to
Weyerhaeuser Mortgage Company, a subsidiary of Weyerhaeuser Financial Services,
Inc. As a result, an agreement has been signed to sell Weyerhaeuser Mortgage
Company to owners more strongly focused on financial products.
35
<PAGE>
1996 EVENTS AND ACCOMPLISHMENTS
In a company the size of Weyerhaeuser, it is not possible to include all of the
major events and accomplishments in the Letter to Shareholders or the segment
narratives. Listed below are some additional highlights of 1996.
SAFETY
Safety is a core value for Weyerhaeuser people; however, five employees and
three contractors lost their lives working for the company in 1996. These
fatalities occurred even as the company continued to reduce the number of lost-
time accidents, clearly demonstrating the need for further improvement. Lost-
time accidents decreased 6 percent, from a rate of 0.86 per 100 employees in
1995 to 0.81 per 100 employees in 1996. Over the last five years, the lost-time
accident rate has improved 72 percent, a tribute to the efforts of Weyerhaeuser
employees everywhere.
. The Senior Management Team Safety Excellence Award was established in 1996
to recognize "the best of the best"- those units that have completed five
years and/or 1 million work hours without a lost-time accident and have
achieved "stretch" safety targets. Award winners during 1996 are
containerboard packaging plants in Olympia, Wash., Jackson, Miss., and
Barrington, N.J.; containerboard mills in Valliant, Okla., and Springfield,
Ore.; the NORPAC newsprint mill in Longview, Wash.; the Flint River pulp
mill in Oglethorpe, Ga.; timberlands in Mississippi/Alabama; the Puget
Sound chip export center in Tacoma, Wash.; the Smith Island log yard in
Everett, Wash.; seed orchards in Sequim, Wash., and Central Point, Ore.;
and the nursery in Aurora, Ore.
. The pulp and paper complex in Columbus, Miss., was recertified as an "OSHA
Star" plant site for another three years by the U.S. Department of Labor,
officially designating Columbus "one of the safest pulp and paper-making
complexes in America." This is the second time Columbus has been named.
Also, the softwood lumber mill in Barnesville, Ga., was designated an "OSHA
Star" plant site for the first time in 1996, joining the containerboard
mill in Valliant, Okla., which was certified in 1995.
CUSTOMERS
. Four Pulp, Paper and Packaging operations received the Jack Waechter Award
for Customer Excellence: containerboard packaging plants in Belleville,
Ill., and Salinas, Calif.; the pulp mill in Grande Prairie, Alberta; and
the fine paper plant in Longview, Wash. The award recognizes exceptional
commitment to customer satisfaction.
. After two years as a certified supplier to Xerox, the paper mill
in Prince Albert, Sask., has been rated Xerox's number-one supplier.
. The pulp and paper complex in Columbus, Miss., was recertified as an ISO
9002 facility by the International Quality Management Institute,
Mississaugha, Ont. The designation means the mill's processes meet or
exceed internationally recognized standards for assured quality and
consistency.
. The oriented strand board mill in Grayling, Mich., won the 1996 Wood
Products Manufacturing Excellence Award. In its third year, the award
promotes excellence in manufacturing by challenging operations to
demonstrate world-class operational standards and share best practices.
Grayling was a recipient in 1995 also.
PARTNERSHIPS
. In an agreement with the Rocky Mountain Elk Foundation, Weyerhaeuser will
provide habitat for elk and other big game on its 2.1 million acres of
forestland in the Pacific Northwest. Weyerhaeuser also has agreed to work
with the Croatan National Forest and the U.S. Fish and Wildlife Service to
manage habitat for the red-cockaded woodpecker on its forestland in North
Carolina.
40
<PAGE>
. In 1996, the company submitted for federal approval its first-ever multi-
species Habitat Conservation Plan (HCP), covering 400,000 acres of company
timberland near Cottage Grove and Springfield, Ore. The 40- to 80-year plan
will increase biological diversity and protect special habitats while
ensuring the sustainable production of wood. Also, the company worked with
the U.S. Fish and Wildlife Service to complete an HCP to protect the
endangered American burying beetle in Arkansas and Oklahoma.
CITIZENSHIP
. For the second year running, Weyerhaeuser ranked number one in
responsibility to the community and environment among forest industry
companies, according to Fortune magazine's annual Corporate Reputation
Survey.
. The Pulp business's Flint River pulp mill in Oglethorpe, Ga., was the first
of the forest products industry accepted into the EPA's eXcellence and
Leadership Program (Project XL) and is now an official Project XL site.
Participation is based on continued commitment to minimum impact
manufacturing through voluntary pollution prevention. The facility has won
eight environmental awards for water and air quality from state and
national organizations, including the 1996 Water Protection Citizen of the
Year from the Georgia Chamber of Commerce and Department of Natural
Resources.
. The Oregon Department of Fish and Wildlife selected Weyerhaeuser as the
recipient of the Landowner of the Year award for the company's work in
improving wildlife habitat in the Willamette region.
. In 1996, the Weyerhaeuser Company Foundation expanded its Excellence in
Recycling awards to include seven states. These competitions are open to
elementary and secondary schools within the states and recognize effective
education regarding the value of integrated waste management. States
currently participating are Alabama, Arkansas, Mississippi, North Carolina,
Oklahoma, Oregon and Washington.
. Along with representatives from education, associations, industry and
environmental organizations, Weyerhaeuser people participated in the
Seventh American Forest Congress held in Washington, D.C., to work on
reaching agreement about the future management of U.S. forests.
. Weyerhaeuser and others in the forest products industry completed the
second year of implementing the American Forest and Paper Association's
Sustainable Forestry Initiative (R), a comprehensive program of forestry
and conservation practices.
. Weyerhaeuser foresters and scientists have completed watershed analyses for
1.2 million acres of forestland in the western United States and Canada.
Seven analyses were finished in Oregon and Washington in 1996, for a total
of 27 completed since 1993. In British Columbia, assessments of eight more
watersheds were completed on land managed under long-term leases. Watershed
analysis is a comprehensive assessment of a watershed followed by a
management plan to protect water quality and fish habitat. It is a key
process Weyerhaeuser uses to conserve precious natural resources while
continuing to manage forestlands for the sustainable production of wood.
. The Kamloops, B.C., pulp mill received a National Industry Energy Innovator
Award for participating in the Canadian Industry Program for Energy
Conservation, a voluntary network of industry associations. Weyerhaeuser
Canada and the Kamloops mill were recognized by Natural Resources Canada
for ongoing efforts in formalizing and meeting energy-efficiency targets
and programs.
41
<PAGE>
1996 FINANCIAL REPORT
CONTENTS
42 Description of the Business of the Company
48 Financial Review
52 Report of Independent Public Accountants
53 Consolidated Statement of Earnings
54 Consolidated Balance Sheet
56 Consolidated Statement of Cash Flows
58 Consolidated Statement of Shareholders' Interest
59 Notes to Financial Statements
76 Historical Summary
This report includes statements concerning the company'sresults and performance
that are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are subject to uncertainties and
risks that may cause actual results to differ materially from those projected.
The company's businesses are cyclical in nature and are influenced by economic
factors such as interest rates, housing starts, industrial production and GDP
growth in the United States. The company's performance is also affected by its
ability to successfully implement its business improvement plans and other
internal performance objectives and its ability to achieve expected returns on
numerous capital projects. Many of the company's products are used in the
manufacture of other products and face the threat of customers substituting
other materials. The company is also a large exporter and is affected both by
changes in economic activity in Europe and Asia, particularly by changes in GDP
and housing starts in Japan, our largest export market, and by changes in
currency exchange rates. The company's timberlands and manufacturing facilities
are subject to extensive forestry, land use and environmental regulations that
change frequently and are discussed in more detail on pages 45 through 47 of
this report. The company's major businesses are also affected by government
policies regarding the management of public lands in the United States and
Canada and by international trade restrictions. In addition to unanticipated
changes in government regulation and policy, natural disasters and unusual
weather conditions can damage the company's forests and operations and impact
supply conditions for the company's products.
DESCRIPTION OF THE BUSINESS OF THE COMPANY
Weyerhaeuser Company (the company) was incorporated in the state of Washington
in January 1900 as Weyerhaeuser Timber Company. It is principally engaged in the
growing and harvesting of timber and the manufacture, distribution and sale of
forest products, real estate development and construction, and financial
services. The company has 39,700 employees, of whom 37,300 are employed in its
timber-based businesses, and of this number, approximately 17,500 are covered by
collective bargaining agreements, which generally are negotiated on a multi-year
basis. Approximately 2,400 of the company's employees are involved in the
activities of its real estate and financial services subsidiaries. The major
markets, both domestic and foreign, in which the company sells its products are
highly competitive, wi th numerous strong sellers competing in each. Many of the
company's products also compete with substitutes for wood and wood fiber
products. The real estate and financial services subsidiaries also operate in
highly competitive markets, competing with numerous regional and national firms
in real estate development and construction and in financial services. In 1996,
the company's sales to customers outside the United States totaled $2.7 billion
(including exports of $1.8 billion from the United States and $.9 billion of
42
<PAGE>
Canadian export and domestic sales), or 24 percent of total consolidated sales
and revenues. The company believes these sales contributed a higher proportion
of aggregate operating profits (see Note 2 of Notes to Financial Statements).
All sales to customers outside the United States are subject to risks related to
international trade and to political, economic and other factors that vary from
country to country.
PRINCIPAL BUSINESS SEGMENTS
TIMBERLANDS AND WOOD PRODUCTS
The company owns approximately 5.3 million acres of commercial forestland in the
United States (61 percent in the South and 39 percent in the Pacific Northwest),
most of it highly productive and located extremely well to serve both domestic
and international markets. The company has, additionally, long-term license
arrangements in Canada covering approximately 22.9 million acres (of which 15
million acres are considered to be productive forestland). The combined total
timber inventory on these U.S. and Canadian lands is approximately 266 million
cunits (a cunit is 100 cubic feet of solid wood), of which approximately 75
percent is softwood species. The relationship between cubic measurement and the
quantity of end products that may be produced from timber varies according to
the species, size and quality of timber, and will change through time as the mix
of these variables changes. To sustain the timber supply from its fee
timberlands, the company is engaged in extensive planting, suppression of
nonmerchantable species, precommercial and commercial thinning, fertilization
and operational pruning, all of which increase the yield from its fee timberland
acreage.
The company's wood products businesses produce and sell softwood lumber, plywood
and veneer; composite panels; oriented strand board; hardwood lumber and
plywood; doors; treated products; logs; chips and timber. These products are
sold primarily through the company's own sales organizations. Building materials
are sold to wholesalers, retailers and industrial users. The company, through
its wholly owned subsidiary, Weyerhaeuser Forestlands International, formed a
joint-venture partnership with institutional investors represented by UBS
Resource Investments International, a unit of UBS Asset Management (New York)
Inc., which will make investments in timberlands and related assets outside the
United States. The primary focus of this partnership will be in pine forests in
the Southern Hemisphere. The company will be a 50 percent owner of the joint
venture, the total size of which is expected to be approximately $400 million.
The joint venture will be capitalized over time through equal cash contributions
by the company and the investor group. During the 1996 third quarter, the
company started up its new oriented strand board (OSB) mill in Sutton, West
Virginia. The mill, which is designed to produce approximately 550 million
square feet (3/8" basis) annually, is the company's sixth OSB operation and the
largest single-line OSB mill in the United States. Also in the third quarter,
the company sold its Klamath Falls, Oregon, hardboard, particleboard and plywood
manufacturing operations; 600,000 acres of predominantly pine timberlands; and
its nursery and seed orchard facilities in Eastern Oregon. Revenues and
operating earnings of these operations were not material to the company. During
the year, the company acquired 779,000 acres of private commercial timberlands
and two sawmills in the southern United States. A portion of these timberlands
was involved in a like-kind exchange for the Klamath Falls timberlands.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales:
Raw materials (logs, chips
and timber) $1,066 $1,102 $1,091 $1,021 $ 872
Softwood lumber 1,988 1,648 1,880 1,704 1,138
Softwood plywood and veneer 519 591 636 567 498
Oriented strand board,
composite and other panels 667 752 750 623 495
Hardwood lumber 235 193 175 154 127
Engineered wood products 233 207 157 100 --
Miscellaneous products 532 438 303 299 287
- ------------------------------------------------------------------------
$5,240 $4,931 $4,992 $4,468 $3,417
========================================================================
Approximate contributions
to earnings $ 805 $ 808 $1,034 $ 891 $ 515
========================================================================
</TABLE>
43
<PAGE>
PULP, PAPER AND PACKAGING
The company's pulp, paper and packaging businesses include: Pulp, which
manufactures chemical wood pulp for world markets; Newsprint, which manufactures
newsprint at the company's North Pacific Paper Corporation mill and markets it
to West Coast and Japanese newspaper publishers; Paper, which manufactures and
markets a range of both coated and uncoated fine papers through paper merchants
and printers; Containerboard Packaging, which manufactures linerboard and
corrugating medium, which is primarily used in the production of corrugated
packaging, and manufactures and markets industrial and agricultural packaging;
Paperboard, which manufactures and markets bleached paperboard, used for
production of liquid containers, to West Coast and Pacific Rim customers;
Recycling, which operates an extensive wastepaper collection system and markets
it to company mills and worldwide customers; and Chemicals, which produces
chlorine, caustic and tall oil, which are used principally by the company's
pulp, paper and packaging operations.
In 1993, the Personal Care Products business, which manufactured disposable
diapers sold under the private-label brands of many of North America's largest
retailers, was sold through an initial public offering of stock. The company and
SCA Packaging Europe BV formed a joint venture in 1996 to pursue opportunities
to build or buy containerboard packaging facilities to serve manufacturers of
consumer and industrial products in Asia.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales:
Pulp $ 954 $1,616 $1,012 $ 823 $ 711
Newsprint 451 508 356 322 326
Paper 803 1,001 664 648 673
Paperboard and containerboard 281 325 240 255 321
Packaging 1,921 1,863 1,495 1,302 1,323
Recycling 140 266 121 77 93
Chemicals 63 63 45 32 31
Personal care products -- -- -- -- 514
Miscellaneous products 35 40 133 120 117
- ----------------------------------------------------------------------
$4,648 $5,682 $4,066 $3,579 $4,109
======================================================================
Approximate contributions
to earnings $ 307 $1,181 $ 211 $ 61 $ 251
======================================================================
</TABLE>
REAL ESTATE
The company, through its real estate subsidiary, Weyerhaeuser Real Estate
Company, is engaged in developing single-family housing and residential lots for
sale, including the development of master-planned communities. Operations are
mainly concentrated in selected metropolitan areas in Southern California,
Nevada, Washington, Texas, Maryland and Virginia.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994 1993 1992
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales and revenues:
Single-family units $573 $ 563 $686 $615 $569
Multi-family units 12 -- 26 30 4
Residential lots 76 60 65 43 39
Commercial lots 50 29 7 41 6
Commercial buildings 43 4 35 3 5
Acreage 25 36 20 27 20
Other 25 31 72 70 47
- ------------------------------------------------------------
$804 $ 723 $911 $829 $690
=============================================================
Approximate contributions
to earnings (1) $ 35 $(231) $ 7 $ 18 $ 13
=============================================================
</TABLE>
(1) After a special charge of $232 million to dispose of certain real estate
assets in 1995.
44
<PAGE>
FINANCIAL SERVICES
The company, through its financial services subsidiary, Weyerhaeuser Financial
Services, Inc., is involved in a range of financial services. The principal
operating unit is Weyerhaeuser Mortgage Company (WMC), which has origination
offices in 19 states, with a servicing portfolio of $4.4 billion covering
approximately 46,000 loans throughout the country. Mortgages are resold in the
secondary market through mortgage-backed securities to financial institutions
and investors. Through its insurance services organization, it also offers a
broad line of property, life and disability insurances. GNA Corporation, a
subsidiary that specialized in the sale of life insurance annuities and mutual
funds to the customers of financial institutions, was sold in April 1993. The
company has signed an agreement for the sale of WMC. Revenues and operating
earnings of WMC are not material to the company.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales and revenues:
Interest $ 70 $ 76 $ 84 $ 110 $ 144
Investment income 1 3 2 116 452
Loan origination and
servicing fees 100 84 88 127 103
Premiums 9 9 10 14 21
Other revenues 25 24 22 34 112
- ----------------------------------------------------------------------
$ 205 $ 196 $ 206 $ 401 $ 832
======================================================================
Approximate contributions
to earnings (1) $ 8 $ (46) $ 11 $ 76 $ 68
======================================================================
</TABLE>
(1) After a special charge of $58 million to dispose of certain real estate
assets in 1995 and a $42 million gain on sale of GNA Corporation in 1993.
CORPORATE AND OTHER
Corporate and other includes wholesale nursery and garden supply products, which
are sold primarily to retailers and landscapers by the company's sales force;
marine transportation; and general corporate expense. The company has offered
for sale its wholly owned wholesale nursery and garden supply products
subsidiary, Shemin Nurseries, Inc. The sale of this business is expected to
close in the first half of 1997. Revenues and operating earnings of these
operations are not material to the company.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994 1993 1992
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 217 $ 256 $ 223 $ 269 $ 220
===================================================================
Approximate contributions
to earnings (1) $(183) $(217) $(142) $ (46) $(107)
===================================================================
</TABLE>
(1)After a $70 million gain on disposal of infant diaper business in 1993.
ENVIRONMENTAL MATTERS
In 1990 the northern spotted owl was listed as a threatened species under the
Endangered Species Act (ESA). In 1992 the marbled murrelet was listed as a
threatened species under the ESA, and in 1996 the Umpqua River Cutthroat Trout
was listed as a threatened species. Certain Snake River salmon runs have been
listed as threatened or endangered under the ESA. The National Marine Fisheries
Service has proposed listing coho salmon that spawn in Oregon coastal rivers as
a threatened species. Petitions have been filed to list certain Pacific
Northwest salmon runs, steelhead trout, bull trout and other fish populations as
threatened or endangered under the ESA. A consequence of these listings has
been, and a consequence of future listings may be, reductions in the sale and
harvest of timber on federal timberlands in the Pacific Northwest. Requirements
to protect habitat for threatened and endangered species on non-federal
timberlands has resulted, and may in the future result, in restrictions on
timber harvest on some non-federal timberlands in the Pacific Northwest,
including some timberlands of the company. The listing of the red-cockaded
woodpecker as an endangered species under the ESA had some impact on the harvest
of public and private timber in the southeastern United States, but has had
little impact on the company's operations. Other ESA-listed species (e.g.,
American burying beetle and gopher tortoise) occur on or near some of the
company's southern timberlands, but have had little impact on the company's
operations. Other federal ESA listings, or designations of fish and wildlife
species as endangered, threatened or otherwise sensitive under various state
laws, could impact future timber harvests on some of the company's timberlands
and could impact timber supply and prices in some regions. In addition,
statutory
45
<PAGE>
requirements with respect to the protection of wetlands may affect future
harvest and forest management practices on some of the company's timberlands,
particularly in southeastern states.
In April 1994, the Clinton administration adopted its plan with respect to
management of federal timberlands in the Pacific Northwest. This plan has
reduced timber sales from certain federal lands in western Washington, western
Oregon and northern California by more than 75 percent from harvest levels in
the 1980s. Subsequently, the Clinton administration has begun similar planning
efforts and adopted interim timber sale policies for federal timberlands in the
intermountain west and certain other regions. These reductions in federal timber
sales have seriously reduced log supplies to many independent sawmills that have
been important suppliers of wood chips to the company's pulp and paper mills in
Washington and Oregon. Alternative sources of wood chips and recycled fiber have
become available, and some companies have reduced manufacturing capacity or
production levels in response to reduced federal timber harvests. The company
does not anticipate that reductions in federal timber harvests will require
significant curtailments of capacity or production at its current manufacturing
facilities.
The administration also has stated that reduced timber harvest on federal lands
will provide the opportunity to clarify the uncertainty surrounding federal
policies for protection of northern spotted owls on some private lands. On
February 7, 1995, the administration proposed a special rule to clarify federal
harvest restrictions on some private lands in Washington and California. The
company believes that the regulatory changes might ultimately allow it to
harvest fee timber in some areas where it has not been operating because of
uncertainties regarding regulations intended to protect the northern spotted
owl. Whether those regulatory changes will be implemented is uncertain. If those
regulatory changes are not implemented, the company might not harvest some
timber that it otherwise might harvest in 1997 and 1998.
Because those regulatory changes may not be implemented, and in order to avoid
existing uncertainty under the ESA, the company, in February 1995, developed a
Habitat Conservation Plan (HCP) and obtained from the U.S. Fish and Wildlife
Service an Incidental Take Permit with respect to northern spotted owls on
approximately 209,000 acres of its Oregon coastal timberlands. That HCP
establishes a protocol for the harvest of timber and the protection of the
northern spotted owl on those timberlands and is expected to remain in effect
for at least 50 years. In December 1996, the company applied for an Incidental
Take Permit covering approximately 400,000 acres of company timberlands in
western Oregon. If the related HCP and Implementation Agreement are approved and
that permit is issued by the U.S. Fish and Wildlife Service and the National
Marine Fisheries Service, the company would be authorized to "take" all species
currently listed or proposed for listing under the ESA (including the northern
spotted owl), and all or most species that may become listed in the future, in
the course of conducting timber harvest and other forest management and land use
activities on those lands. Pursuant to both of those HCPs, there are limits on
the amount of land covered by the HCPs that can be transferred unless the U.S.
Fish and Wildlife Service approves the transfer or the new owner agrees to be
bound by the HCP and related documents. In 1996 the company obtained from the
U.S. Fish and Wildlife Service an Incidental Take Permit for the American
burying beetle covering approximately 25,000 acres of lands in Oklahoma that it
acquired from the United States in an exchange with the U.S. Forest Service and
certain nearby lands that the company already owned. The company also has
entered into agreements with the U.S. Fish and Wildlife Service to reduce
uncertainties under the ESA with respect to red-cockaded woodpeckers on some of
its timberlands in North Carolina and northern spotted owls on some of its
timberlands in Washington.
The company believes the most effective way to manage its timberlands for the
growth and harvest of timber and the protection of wildlife and fish habitat is
to develop plans for the management of timber and other resources on those lands
and obtain approval of those plans from the appropriate federal or state
agencies. Accordingly, the company is seeking to develop HCPs or other
arrangements with federal and state fish and wildlife agencies for some other
parts of its Pacific Northwest timberlands that would address the protection of
wildlife and fish habitat for both listed and non-listed species.
Forest practice acts in some of the states in which the company has timber
increasingly impact present or future harvest and forest management activities.
For example, forest practice acts in Washington and Oregon limit the size of
clearcuts, require that some timber be left unharvested in riparian areas and
sometimes in other areas to protect water quality, fish habitat and wildlife,
regulate construction of forest roads and conduct of other forest management
activities, require reforestation following timber harvest, and contain
procedures for state agencies to review and approve proposed forest practice
activities. Other state and some local governments regulate certain forest
practices through various permit programs. Each of the states in which the
company owns timberlands has developed "best management practices" (BMPs) to
reduce the impacts of forest practices on water quality and aquatic habitats.
Additional and more stringent regulations and regulatory programs may be adopted
by various state and local governments. These current or future forest practice
acts, BMPs and other programs may reduce the volumes of timber that can be
harvested, increase operating and administrative costs, and make it more
difficult to
46
<PAGE>
respond to rapid changes in markets, extreme weather or other unexpected
circumstances. However, the company does not anticipate that it will be
disproportionately affected by these programs as compared with typical owners of
comparable timberlands or that these programs will significantly disrupt its
planned operations over large areas or for extended periods.
In addition, the company participates in the Sustainable Forestry Initiative(R)
sponsored by the American Forest & Paper Association, a code of conduct designed
to supplement government regulatory programs with voluntary landowner
initiatives to further protect certain public resources and values. Compliance
with the Sustainable Forestry Initiative(R) may require some increases in
operating costs.
The combination of the forest management and harvest restrictions and impacts
described in the preceding paragraphs has increased operating costs, resulted in
changes in the value of timber and logs from the company's Pacific Northwest
timberlands, and contributed to increases in the prices paid for wood products
and wood chips during periods of high demand. The company does not know whether
these effects will continue. One additional effect may be the continuation of
some reduced usage of, and some substitution of other products for, lumber and
plywood.
The company does not believe that the restrictions and impacts described in the
above paragraphs have had, or in 1997 or 1998 will have, a significant effect on
the company's total harvest of timber, although they may have such an effect in
the future.
In addition to the foregoing, the company is subject to federal, state or
provincial and local air, water and land pollution control, solid and hazardous
waste management, disposal and remediation laws and regulations in all areas in
which it has operations, and to market demands with respect to chemical content
of some products and use of recycled fiber. Compliance with these laws,
regulations and demands usually involves capital expenditures as well as
operating costs. The company cannot easily quantify future amounts of capital
expenditures required to comply with these laws, regulations and demands, or the
impact on operating costs, because in some instances compliance standards have
not been developed or have not become final or definitive. In addition,
compliance with standards frequently serves other purposes such as extension of
facility life, increase in capacity, changes in raw material requirements, or
increase in economic value of assets or products. While it is difficult to
isolate the environmental component of most manufacturing capital projects, the
company estimates that capital expenditures for environmental compliance were
approximately $76 million (9 percent of total capital expenditures excluding
acquisitions) in 1996. Based on its understanding of current regulatory
requirements, the company expects that expenditures will range from $60 million
to $75 million (8 to 10 percent of total capital expenditures) in 1997 and 1998.
The company is involved in the environmental investigation or remediation of
numerous sites, including 43 superfund sites where the company has been named as
a potentially responsible party. Some of the sites are on property presently or
formerly owned by the company where the company has the sole obligation to
remediate the site or shares that obligation with one or more parties, and
others are third-party sites involving several parties who have a joint and
several obligation to remediate the site. The company's liability with respect
to these sites ranges from insignificant at some sites to substantial at others,
depending on the quantity, toxicity and nature of materials deposited by the
company at the site and, with respect to some sites, the number and economic
viability of the other responsible parties.
The company spent approximately $25 million in 1996 and expects to spend $21
million in 1997 on environmental remediation of these sites. It is the company's
policy to accrue for environmental remediation costs when it is determined that
it is probable that such an obligation exists and the amount of the obligation
can be reasonably estimated. Based on currently available information and
analysis, the company believes that it is reasonably possible that costs
associated with all identified sites may exceed current accruals by amounts that
may prove insignificant or that could range, in the aggregate, up to
approximately $120 million over several years. This estimate of the upper end of
the range of reasonably possible additional costs is much less certain than the
estimates upon which accruals are currently based and utilizes assumptions less
favorable to the company among the range of reasonably possible outcomes.
An Environmental Protection Agency (EPA) regulation under Title 5 of the Clean
Air Act requires additional operating permits at many of the company's
manufacturing operations. The company will continue to prepare the permit
applications in 1997 and anticipates that it will be able to obtain the
necessary permits.
The EPA published proposed regulations on December 17, 1993, known as the
"cluster rules," which would establish maximum achievable control technology
standards for non-combustion sources under the Clean Air Act, and the
development of revised wastewater effluent limitations under the Clean Water
Act. The original proposal has been modified on two occasions, and a modified
proposal is presently expected to be adopted in 1997. If the cluster rules are
adopted as currently proposed, they will require the company to commit
additional capital to further reduce air emissions and wastewater discharges by
2000. Depending on the final limits contained in the rules ultimately adopted by
the EPA, the estimates of that additional capital range from $90 million to $230
million, which will further increase the annual percentage of the company's
total capital expenditures devoted to environmental compliance.
47
<PAGE>
FINANCIAL REVIEW
RESULTS OF OPERATIONS
1996 COMPARED WITH 1995
Consolidated net sales and revenues were $11.1 billion in 1996, a decrease of 6
percent from the record $11.8 billion posted in 1995. This decrease is the net
of a $1 billion decrease in the pulp, paper and packaging segment and an
increase of $309 million for timberlands and wood products. Pulp, paper,
corrugated packaging and recycled products experienced material unfavorable
price variances offset, in part, by favorable volume variances in the packaging
business related to the acquisition of nine facilities in late 1995. Wood
products benefited from favorable price and volume variances in lumber.
Net earnings for 1996 were $463 million, or $2.34 per common share, compared
with record earnings of $799 million, or $3.93 per common share, in 1995. The
1995 earnings were net of an after-tax special charge of $184 million ($290
million pretax), or 90 cents per common share, within the real estate and
financial services segments. Lower prices in the pulp, paper and packaging
segment, which were in sharp contrast with the record 1995 levels, accounted for
the decline in 1996 earnings.
The timberlands and wood products segment operating earnings were $805 million,
comparable to 1995 earnings of $808 million, as it benefited from strong demand
in the United States and Japan. Tight supplies and disruptions related to
countervailing duties on imports from Canada contributed to strong lumber
results. The panel markets have been negatively impacted by the excess capacity
of oriented strand board as new facilities came on line in 1996.
The pulp, paper and packaging segment reported operating earnings of $307
million in 1996 compared with a record performance of $1.2 billion in 1995. The
downturn in pulp and paper prices, which began in the fourth quarter of 1995 as
customers cut back on purchases in order to reduce excess inventories, continued
as prices were significantly lower than last year.
The combined real estate and financial services segments earned $43 million from
operations in 1996 compared with $13 million, before the special charge, in
1995. Real estate benefited from several major commercial project closings and
increased residential property sales along with reduced costs as the result of
the disposition of certain impaired properties. Improved financial services
results reflected the sale of capitalized servicing rights and increased loan
originations in the company's mortgage banking business.
Weyerhaeuser's cost of products sold, as a percentage of sales, increased to 75
percent in 1996 compared with 69 percent in 1995, reflecting the significant
decline in pulp, paper and packaging pricing. Additionally, inventory turnover
rates were lower in 1996 compared with the higher rates experienced in the peak
price periods of 1995.
Real estate and financial services segments costs and operating expenses in 1996
rose 7 percent over the 1995 level, consistent with the 10 percent increase in
revenues from year to year. The decline in depreciation and amortization was
directly related to the disposition of certain impaired assets and sale of
substantially all of the capitalized servicing rights in the mortgage banking
business. Selling, general and administrative expenses increased over 1995
primarily due to the opening of additional branch offices in 1996 by the
mortgage banking business.
Other income (expense) is an aggregation of both recurring and occasional non-
operating income and expense items and, as a result, may fluctuate from period
to period. No individual income or expense item in 1996 was significant in
relation to net earnings.
1995 COMPARED WITH 1994
The company's consolidated net sales and revenues increased 13 percent to a
record $11.8 billion in 1995 compared with $10.4 billion in 1994. The pulp,
paper and packaging segment accounted for $5.7 billion of this record
performance, 40 percent over its sales of $4.1 billion in 1994, with strong
year-to-year improvement in all product lines. These markets weakened in the
fourth quarter, and this weakness persisted in 1996 as customers continued to
reduce inventories. The timberlands and wood products segment sales of $4.9
billion approximated 1994's. The real estate and financial services segments had
combined sales of $919 million, down from the prior year's $1.1 billion, largely
attributable to declines in single-family home sales.
The company also achieved record earnings of $799 million, or $3.93 per common
share, in 1995, which was 36 percent over the $589 million, or $2.86 per common
share, recorded in 1994. The 1995 earnings were net of an after-tax charge of
$184 million ($290 million pretax), or 90 cents per common share, within the
real estate and financial services segments. The 1994 earnings included a net
contribution of $.03 per common share for the return of countervailing duty by
the U.S. government against Canadian lumber imports and the expected cost of
postretirement benefits for Canadian employees.
48
<PAGE>
Operating earnings in the timberlands and wood products segment were $808
million, down from the record $1 billion for the previous year. This was
attributable to price declines primarily in softwood lumber, caused by a drop in
domestic housing starts.
The pulp, paper and packaging segment posted record operating earnings of $1.2
billion in 1995 compared with $211 million earned in 1994. Significant price
improvement over the prior year and ongoing improvements in operations were the
key factors in recovery in this segment.
The company's real estate and financial services segments recorded a combined
operating loss of $277 million for the year after reflecting a $290 million
charge to operations. The majority of the charge was a direct result of the
company's decision to accelerate the disposition of certain real estate assets
previously held for development and use. The remainder of the charge resulted
from the application of those provisions of Statement of Financial Accounting
Standards (SFAS) No. 121 relating to the valuation of assets held for future use
where estimated undiscounted future cash flows from those assets did not exceed
the carrying value of those assets. Before these actions, the combined segments
earned $13 million compared with $18 million in 1994.
Weyerhaeuser's cost of products sold as a percentage of net sales decreased to
69 percent in 1995 compared with 73 percent in 1994. The company continued to
benefit from its mill modernization program and implementation of its business
improvement plans, offset in part by the costs associated with higher sales
activity, principally in the pulp, paper and packaging segment. Depreciation
expense increased over the prior year as a result of the completion and start-up
of several mill modernization projects in late 1994 in the pulp, paper and
packaging segment. The expansion of the company's Performance Share Plan to
include all employees was the major contributor to the $109 million increase in
selling, general and administrative expenses. Contributions made by the company
into this plan are invested in company stock on behalf of each employee. The
size of the contribution, if any, is decided by the board of directors each year
on the basis of that year's profits and the company's performance relative to
its competition.
Excluding the revaluation charge, the decrease in costs and operating expenses
of the real estate and financial services segments are in line with the reduced
sales activity.
Other income (expense) is an aggregation of both recurring and occasional non-
operating income and expense items and, as a result, may fluctuate from period
to period. No individual income or expense item in 1995 was significant in
relation to net earnings.
Weyerhaeuser's interest expense incurred was up $34 million over the prior year
as a result of prefunding 1995 debt maturities that were due late in the year as
well as an increase in the company's combined long- and short-term debt levels.
Capitalized interest was $16 million less than the prior year as mill
modernization projects at Longview, Washington, and Plymouth, North Carolina,
were completed.
1994 COMPARED WITH 1993
The company's 1994 consolidated sales and revenues were $10.4 billion, a 9
percent increase over the $9.5 billion reported in 1993. Net earnings were $589
million, or $2.86 per common share, compared with 1993 net earnings of $579
million, or $2.83 per common share. 1994 earnings included the return of
countervailing duty by the U.S. government against Canadian lumber imports and
the expected cost of postretirement benefits for Canadian employees. The net
effect of these two items contributed $.03 per common share. 1993 earnings
included gains of $132 million, or $.65 per common share, from the sale of
assets and extinguishment of debt, and a $15 million, or $.08 per common share,
charge to earnings to reflect the revised 1993 federal corporate tax rate in the
company's deferred tax accounts.
The continuation in 1994 of the company's major modernization projects, started
in 1993, accounted for the significant increase in capitalized interest from
year to year.
The significant changes from 1993 in other income were attributable to the $70
million pretax gain on the disposal of the company's investment in the infant
diaper business and the real estate and financial services pretax gain of $42
million on the sale of GNA Corporation, both in 1993.
The timberlands and wood products segment posted record operating earnings of $1
billion in 1994, which was a 16 percent increase over the $891 million reported
in 1993. Sales for this segment were $5 billion, up 12 percent over the $4.5
billion reported in 1993. This segment posted record performances during 1994 as
the businesses continued to accomplish their business improvement plans, timber
supplies remained tight and markets remained strong throughout the year.
The pulp, paper and packaging segment's 1994 operating earnings were $211
million, up substantially from 1993's $61 million. This segment reported sales
of $4.1 billion for the year, an increase of 14 percent over the $3.6 billion in
1993. Strong demand coupled with continued price improvement over the prior year
in both the domestic and export pulp, paper and packaging markets were the key
factors in this recovery.
49
<PAGE>
The combined real estate and financial services segments earned $18 million in
1994 compared with 1993 earnings of $94 million, which included a pretax gain of
$42 million on the sale of GNA Corporation as well as one quarter of GNA
operating results.
BUSINESS IMPROVEMENT PLANS
In 1994 business improvement plans were developed to improve the annual pretax
earnings of the company by $600 million by the end of 1997. Given the volatility
of prices in many of the company's product lines and changing material and labor
costs, the improvement plans were developed, stated and are being tracked in
1994 dollars. The year-to-year impact of these plans will obviously vary as
prices and costs change each year.
These plans were developed by each unit of the company and did not require any
major capital investment. They focused on the manageable variables at each
operating unit that have the greatest impact on profitability, i.e., production
volume, manufacturing cost, product mix and controllable overhead.
The company achieved improvements totaling $120 million and $276 million, as
measured in 1994 dollars, in 1996 and 1995, respectively. The rate of
improvement slowed in 1996 as weak pulp and paper markets resulted in periodic
production curtailments that negatively impacted productivity. With market
conditions expected to improve, the company still anticipates achieving the $600
million goal by the end of 1997.
The annualized improvements realized and expected to be realized over the 1995
to 1997 period, in 1994 dollars, with 1998 as the first full year of benefit,
are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
Total
1997 sustainable
Dollar amounts in millions 1995 1996 goal goal
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Pulp, paper and
packaging $146 $ 49 $105 $300
Timberlands and
wood products 130 71 99 300
- --------------------------------------------------------------
$276 $120 $204 $600
==============================================================
</TABLE>
The breakdown of the $600 million in improvements by source and business
segment, in 1994 dollars, is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Timberlands Pulp,
and Wood Paper and
Products Packaging Total
- ------------------------------------------------------------
<S> <C> <C> <C>
Dollar amounts in millions
Incremental volume $ 115 $ 152 $ 267
Manufacturing cost
reduction 90 87 177
Higher-value mix 81 54 135
Overhead savings 14 7 21
- ------------------------------------------------------------
$ 300 $ 300 $ 600
============================================================
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The company is committed to the maintenance of a sound, conservative capital
structure. This commitment is based upon two considerations: the obligation to
protect the underlying interests of its shareholders and lenders, and the desire
to have access, at all times, to major financial markets.
The important elements of the policy governing the company's capital structure
are as follows:
. To view separately the capital structures of Weyerhaeuser Company,
Weyerhaeuser Real Estate Company and Weyerhaeuser Financial Services, Inc.,
given the very different nature of their assets and business activities.
The amount of debt and equity associated with the capital structure of each
will reflect the basic earnings capacity, real value and unique liquidity
characteristics of the assets dedicated to that business.
. The combination of maturing short-term debt and the structure of long-term
debt will be managed judiciously to minimize liquidity risk. Long-term debt
maturities are shown in Note 12 of Notes to Financial Statements.
OPERATIONS
In 1996 the company generated $1.3 billion of cash flow from operations before
changes in working capital compared with $1.9 billion in 1995. Net earnings
provided by Weyerhaeuser were $434 million, down $547 million from the $981
million provided in 1995 due primarily to the decline of prices for pulp, paper
and corrugated packaging products in the current year.
The real estate and financial services segments provided $29 million from net
earnings in 1996 compared with a net loss of $182 million in 1995. Included in
the 1995 net loss was a pretax, non-cash charge of $290 million resulting from
the company's decision to accelerate the disposition of certain real estate
assets previously
50
<PAGE>
held for development and use along with the application of those provisions of
SFAS No. 121 relating to the valuation of assets held for future use when
estimated undiscounted future cash flows from the assets did not exceed the
carrying value of those assets.
Cash flow from operations before changes in working capital by business segment
was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------
Dollar amounts in millions 1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
Timberlands and wood
products $ 1,045 $ 1,026 $ 1,226
Pulp, paper and packaging 665 1,567 530
Real estate 41 23 16
Financial services 57 46 33
Corporate and other (546) (806) (545)
- --------------------------------------------------------
$ 1,262 $ 1,856 $ 1,260
========================================================
</TABLE>
Weyerhaeuser's cash flow from changes in net working capital during the year was
$41 million with increases in inventories and prepaids along with reductions in
accrued liabilities and accounts payable being partially offset by a decrease in
receivables.
The majority of the $82 million of funds provided from working capital in the
real estate and financial services segments came from decreases in real estate
and land inventories and mortgages held for sale, as sales exceeded
originations.
INVESTING
Capital expenditures, excluding acquisitions, were $879 million compared with
$996 million in 1995. They are currently expected to approximate $750 million,
excluding acquisitions, in 1997; however, these expenditures could be increased
or decreased as a consequence of future economic conditions.
The company spent $448 million in 1996 for the acquisition of private commercial
timberlands and two lumber mills in the southern United States. In 1995 the
company acquired three hardwood lumber mills and timber and timberlands in the
Pacific Northwest, nine corrugated packaging plants and five recycling
collection facilities using $77 million of cash and $46 million of the company's
treasury common shares.
Recent capital spending, excluding acquisitions, has been in the following
areas:
<TABLE>
<CAPTION>
- --------------------------------------------------
Dollar amounts in millions 1996 1995 1994
- --------------------------------------------------
<S> <C> <C> <C>
Timberlands and wood
products $ 418 $446 $ 257
Pulp, paper and packaging 415 501 794
Corporate and other 46 49 51
- -------------------------------------------------
$ 879 $996 $1,102
=================================================
</TABLE>
Proceeds from the sale of property and equipment included $33 million received
for the production facilities and logging equipment in the sale of the company's
Klamath Falls manufacturing and timberlands operations. The timberlands portion
of this transaction involved like-kind exchanges for other timberlands in the
southern United States.
In 1996 the company's financial services segment's mortgage banking business
provided funds from the sale of substantially all of its capitalized servicing
rights and remaining adjustable-rate mortgages plus reduction in assets pledged
as collateral for the collateralized mortgage obligation (CMO) bonds. The sale
of adjustable-rate mortgages had commenced in 1995.
FINANCING
Weyerhaeuser's long-term debt grew approximately $500 million during the year
with the major activity being a $637 million increase in net commercial paper
borrowings and a $33 million sale of industrial revenue bonds offset, in part,
by the payment of $115 million of the company's medium-term notes and $40
million of fixed-rate debt. As a result, the company's long-term debt as a
percent of shareholders' equity increased to 77 percent at the end of 1996
compared with 67 percent a year earlier.
The combined real estate and financial services segments utilized funds received
from the sale of impaired assets, capitalized servicing rights and adjustable-
rate mortgages to reduce net borrowings by $312 million.
The company paid $317 million in cash dividends in 1996 compared with $306
million in 1995. The increase is attributable to the quarterly dividend rate
being raised from 30 cents to 40 cents effective with the second quarter of
1995, resulting in an annualized rate of $1.60 per common share. Although common
share dividends have exceeded the company's target payout ratio in recent years,
it is our intent, over time, to pay dividends to our common shareholders in a
range of 35 to 45 percent of common share earnings.
The company repurchased $45 million of common shares during the year as a part
of the 10 million share repurchase program, which commenced in the second
quarter of 1995, bringing the total acquired to 9.6 million shares. In 1996 the
company's board of directors authorized an increase of 1 million shares in the
repurchase program, bringing the authorized total to 11 million, to offset
shares issued in conjunction with a recent acquisition.
To ensure its ability to meet future commitments, Weyerhaeuser Company,
Weyerhaeuser Real Estate Company and Weyerhaeuser Mortgage Company, a subsidiary
of Weyerhaeuser Financial Services, Inc., have established unused bank lines of
credit in the maximum aggregate sum of approximately $2.1 billion. None of the
entities is a guarantor of the borrowings of the others under any of these
credit facilities.
51
<PAGE>
CONTINGENCIES
The company is a party to legal proceedings and environmental matters generally
incidental to its business. Although the final outcome of any legal proceeding
or environmental matter is subject to a great many variables and cannot be
predicted with any degree of certainty, the company presently believes that the
ultimate outcome resulting from these proceedings and matters would not have a
material effect on the company's current financial position, liquidity or
results of operations; however, in any given future reporting period, such
proceedings or matters could have a material effect on results of operations.
ACCOUNTING MATTERS
PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," to provide
accounting and reporting guidance for transfers and servicing of financial
assets and extinguishments of liabilities. The statement uses the "financial-
components approach" in which, after a transfer of financial assets, an entity
would recognize all financial assets and services it controls and all
liabilities it has incurred and remove financial assets and liabilities from the
balance sheet when control is surrendered or when they are extinguished,
respectively. It is to be applied to transfers and servicing of financial assets
and extinguishment of liabilities occurring after December 31, 1996. This
statement will supersede several previous statements, including SFAS No. 122,
"Accounting for Mortgage Servicing Rights -- an amendment of FASB Statement No.
65," which the company had implemented in 1995. In 1996, the FASB issued SFAS
No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement
No. 125 -- an amendment of FASB Statement No. 125," which deferred for one year
the effective date of certain provisions. The company believes that the future
adoption of these statements will not have a significant impact on results of
operations or financial position.
ACCOUNTING AND REPORTING STANDARDS COMMITTEE
During the year, the Accounting and Reporting Standards Committee, comprised of
four outside directors, reviewed with the company's management and with its
independent public accountants the scope and results of the company's internal
and external audit activities and the adequacy of the company's internal
accounting controls. The committee also reviewed current and emerging accounting
and reporting requirements and practices affecting the company.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF WEYERHAEUSER COMPANY:
We have audited the accompanying consolidated balance sheets of Weyerhaeuser
Company (a Washington corporation) and subsidiaries as of December 29, 1996, and
December 31, 1995, and the related consolidated statements of earnings, cash
flows and shareholders' interest for each of the three years in the period ended
December 29, 1996. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Weyerhaeuser Company and
subsidiaries as of December 29, 1996, and December 31, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 29, 1996, in conformity with generally accepted accounting
principles.
Seattle, Washington,
February 6, 1997 ARTHUR ANDERSEN LLP
52
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
- ------------------------------------------------------------
For the three-year period ended
December 29, 1996
Dollar amounts in millions
except per-share figures 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Net sales and revenues:
Weyerhaeuser $10,105 $10,869 $ 9,281
Real estate and financial services 1,009 919 1,117
- ------------------------------------------------------------
Net sales and revenues 11,114 11,788 10,398
- ------------------------------------------------------------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 7,610 7,516 6,819
Depreciation, amortization and
fee stumpage 601 580 504
Selling, general and
administrative expenses 702 724 615
Research and development expenses 54 51 47
Taxes other than payroll and
income taxes 151 155 151
- ------------------------------------------------------------
9,118 9,026 8,136
- ------------------------------------------------------------
Real estate and financial services:
Costs and operating expenses 726 681 851
Depreciation and amortization 16 41 30
Selling, general and
administrative expenses 173 139 152
Taxes other than payroll and
income taxes 11 8 9
Charge for impairment of
long-lived assets (Note 1) -- 290 --
- ------------------------------------------------------------
926 1,159 1,042
- ------------------------------------------------------------
Total costs and expenses 10,044 10,185 9,178
- ------------------------------------------------------------
Operating income 1,070 1,603 1,220
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 273 271 237
Less interest capitalized 21 20 36
Other income (expense),
net (Note 3) (58) (71) (42)
Real estate and financial services:
Interest expense incurred 132 140 154
Less interest capitalized 65 76 78
Other income (expense),
net (Note 3) 27 27 19
- ------------------------------------------------------------
Earnings before income taxes 720 1,244 920
Income taxes (Note 4) 257 445 331
- ------------------------------------------------------------
Net earnings $ 463 $ 799 $ 589
============================================================
Per common share (Note 1):
Net earnings $ 2.34 $ 3.93 $ 2.86
- ------------------------------------========================
Dividends paid $ 1.60 $ 1.50 $ 1.20
============================================================
</TABLE>
See notes on pages 59 through 77.
53
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- --------------------------------------------------------------
December 29, December 31,
Dollar amounts in millions 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
ASSETS
Weyerhaeuser
Current assets:
Cash and short-term
investments (Note 1) $ 33 $ 34
Receivables, less allowances
of $7 and $9 902 976
Inventories (Note 7) 1,001 960
Prepaid expenses 289 265
- ------------------------------------------------------------
Total current assets 2,225 2,235
Property and equipment (Note 8) 7,007 6,717
Construction in progress 417 509
Timber and timberlands at cost,
less fee stumpage charged
to disposals 1,073 666
Other assets and deferred charges 246 232
- ------------------------------------------------------------
10,968 10,359
- ------------------------------------------------------------
Real estate and financial services
Cash and short-term investments,
including restricted deposits
of $18 and $22 38 50
Receivables, less discounts and
allowances of $9 and $7 99 92
Mortgage notes held
for sale (Note 13) 334 332
Mortgage loans receivable, less
discounts and allowances
of $7 and $2 (Note 13) 133 155
Mortgage-backed certificates and
other pledged financial instruments
(Notes 1 and 13) 154 185
Real estate in process of development
and for sale (Note 9) 680 776
Land being processed for development 719 688
Investments in and advances to joint
ventures and limited partnerships,
less reserves of $27 and $38 115 113
Rental properties, less
accumulated depreciation 150 184
Other assets 206 319
- ------------------------------------------------------------
2,628 2,894
- ------------------------------------------------------------
Total assets $13,596 $13,253
============================================================
</TABLE>
See notes on pages 59 through 77.
54
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
December 29, December 31,
Dollar amounts in millions 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS'
INTEREST
Weyerhaeuser
Current liabilities:
Notes payable $ 16 $ 24
Current maturities of
long-term debt 80 125
Accounts payable (Note 1) 725 747
Accrued liabilities (Note 10) 662 707
- ------------------------------------------------------------
Total current liabilities 1,483 1,603
Long-term debt (Notes 12 and 13) 3,546 2,983
Deferred income taxes (Note 4) 1,324 1,196
Deferred pension and other
liabilities (Notes 5 and 6) 493 509
Minority interest in subsidiaries 113 111
Commitments and contingencies
(Note 14)
- ------------------------------------------------------------
6,959 6,402
- ------------------------------------------------------------
Real estate and financial services
Notes payable and commercial
paper (Note 11) 245 338
Long-term debt (Notes 12 and 13) 1,537 1,753
Other liabilities 251 274
Commitments and contingencies
(Note 14)
- ------------------------------------------------------------
2,033 2,365
- ------------------------------------------------------------
Total liabilities 8,992 8,767
- ------------------------------------------------------------
Shareholders' interest (Note 16):
Common shares: authorized
400,000,000 shares, issued
206,072,890 shares,
$1.25 par value 258 258
Other capital 407 415
Cumulative translation adjustment (93) (90)
Retained earnings 4,372 4,226
Treasury common shares, at cost:
7,736,601 and 7,302,878 (340) (323)
- ------------------------------------------------------------
Total shareholders' interest 4,604 4,486
- ------------------------------------------------------------
Total liabilities and
shareholders' interest $13,596 $13,253
============================================================
</TABLE>
55
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Real Estate and
For the three-year period Consolidated Weyerhaeuser Company Financial Services
ended December 29, 1996 -------------------------------------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994 1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash flows provided by operations:
Net earnings (loss) $ 463 $ 799 $ 589 $ 434 $ 981 $ 576 $ 29 $ (182) $ 13
Non-cash charges to income:
Depreciation, amortization
and fee stumpage 617 621 534 601 580 504 16 41 30
Deferred income taxes, net 181 103 127 121 183 115 60 (80) 12
Charge for impairment of
long-lived assets -- 290 -- -- -- -- -- 290 --
Changes in working capital:
Accounts receivable 67 (33) (125) 75 (60) (126) (8) 27 1
Inventories, prepaid expenses,
real estate and land 68 (159) (6) (30) (148) (12) 98 (11) 6
Mortgage notes held for sale and
mortgage loans receivable 19 (18) 360 -- -- -- 19 (18) 360
Other liabilities (113) (102) 198 (86) (82) 272 (27) (20) (74)
(Gain) loss on disposition
of assets 1 43 10 8 43 15 (7) -- (5)
Other (5) 12 (7) 20 14 (20) (25) (2) 13
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operations 1,298 1,556 1,680 1,143 1,511 1,324 155 45 356
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing in
the business:
Property and equipment (829) (928) (1,061) (820) (915) (1,047) (9) (13) (14)
Timber and timberlands (50) (68) (41) (50) (68) (41) -- -- --
Property and equipment and timber
and timberlands from acquisitions (448) (77) -- (448) (77) -- -- -- --
Mortgage securities acquired (4) (13) (64) -- -- -- (4) (13) (64)
Proceeds from sale of:
Property and equipment (Note 15) 74 19 44 61 19 20 13 -- 24
Businesses -- -- 14 -- -- -- -- -- 14
Mortgage securities 106 25 139 -- -- -- 106 25 139
Other (13) 204 (297) (52) (50) (49) 39 254 (248)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing in
the business (1,164) (838) (1,266) (1,309) (1,091) (1,117) 145 253 (149)
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing
activities:
Sale of debentures and notes 142 723 174 12 583 22 130 140 152
Sale of industrial revenue bonds 33 150 134 33 150 134 -- -- --
Notes and commercial paper
borrowings, net 534 (439) (143) 637 (159) (83) (103) (280) (60)
Cash dividends on common shares (317) (306) (247) (317) (306) (247) -- -- --
Payments on debentures, notes,
bank credit agreements,capital
leases and CMO bonds (513) (661) (362) (174) (480) (49) (339) (181) (313)
Purchase of treasury common shares (45) (379) -- (45) (379) -- -- -- --
Exercise of stock options 20 19 16 20 19 16 -- -- --
Other (1) (4) (2) (1) (4) (2) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing
activities (147) (897) (430) 165 (576) (209) (312) (321) (221)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash
and short-term investments (13) (179) (16) (1) (156) (2) (12) (23) (14)
Cash and short-term investments at
beginning of year 84 263 279 34 190 192 50 73 87
- -----------------------------------------------------------------------------------------------------------------------------
Cash and short-term investments at
end of year $ 71 $ 84 $ 263 $ 33 $ 34 $ 190 $ 38 $ 50 $ 73
=============================================================================================================================
Cash paid during the year for:
Interest, net of
amount capitalized $ 322 $ 302 $ 279 $ 255 $ 236 $ 201 $ 67 $ 66 $ 78
=============================================================================================================================
Income taxes $ 168 $ 332 $ 141 $ 188 $ 346 $ 92 $ (20) $ (14) $ 49
=============================================================================================================================
</TABLE>
See notes on pages 59 through 77.
56
<PAGE>
Consolidated Statement of Shareholders' Interest
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
For the three-year period ended
December 29, 1996
Dollar amounts in millions 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Common stock issued:
Balance at end of year $ 258 $ 258 $ 258
- ----------------------------------------------------------------
Other capital:
Balance at beginning of year 415 416 411
Stock options exercised (8) (3) 5
Other transactions (net) -- 2 --
- ----------------------------------------------------------------
Balance at end of year 407 415 416
- ----------------------------------------------------------------
Cumulative translation adjustment:
Balance at beginning of year (90) (107) (73)
Translation adjustment (3) 17 (34)
- ----------------------------------------------------------------
Balance at end of year (93) (90) (107)
- ----------------------------------------------------------------
Retained earnings:
Balance at beginning of year 4,226 3,733 3,391
Net earnings 463 799 589
Cash dividends on common shares (317) (306) (247)
- ----------------------------------------------------------------
Balance at end of year 4,372 4,226 3,733
- ----------------------------------------------------------------
Common stock held in treasury:
Balance at beginning of year (323) (10) (21)
Purchases of treasury common shares (45) (379) --
Stock options exercised 28 22 11
Used in acquisition of capital assets -- 44 --
- ----------------------------------------------------------------
Balance at end of year (340) (323) (10)
- ----------------------------------------------------------------
Total shareholders' interest:
Balance at end of year $ 4,604 $ 4,486 $ 4,290
================================================================
Shares of common stock (in thousands):
Issued at end of year 206,073 206,073 206,073
- ----------------------------------------------------------------
In treasury:
Balance at beginning of year 7,303 455 984
Purchases of treasury common shares 1,086 8,494 --
Stock options exercised (642) (648) (529)
Used in acquisition of
capital assets (10) (998) --
- ----------------------------------------------------------------
Balance at end of year 7,737 7,303 455
- ----------------------------------------------------------------
Outstanding at end of year 198,336 198,770 205,618
================================================================
</TABLE>
See notes on pages 59 through 77.
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the three-year period ended December 29, 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Weyerhaeuser
Company and all of its majority-owned domestic and foreign subsidiaries.
Significant intercompany transactions and accounts are eliminated.
Certain of the consolidated financial statements and notes to financial
statements are presented in two groupings: (1) Weyerhaeuser Company
(Weyerhaeuser, or the company), which is principally engaged in the growing and
harvesting of timber and the manufacture, distribution and sale of forest
products, and (2) real estate and financial services, which includes
Weyerhaeuser Real Estate Company (WRECO), which is involved in real estate
development and con-struction, and Weyerhaeuser Financial Services, Inc. (WFS),
whose principal subsidiary is Weyerhaeuser Mortgage Company (WMC). GNA
Corporation, a subsidiary of WFS, was sold in April 1993.
NATURE OF OPERATIONS
The company's principal business segments, which account for the majority of
sales, earnings and the asset base, are:
. Timberlands and wood products, which is engaged in the management of 5.3
million acres of company-owned forestland in the United States and 22.9
million acres of forestland in Canada under long-term licensing
arrangements (of which 15 million acres are considered to be productive
forestland) and the production of a full line of solid wood products that
are sold primarily through the company's own sales organizations to
wholesalers, retailers and industrial users in North America, the Pacific
Rim and Europe.
. Pulp, paper and packaging, which manufactures and sells pulp, newsprint,
paper, paperboard and containerboard in North American, Pacific Rim and
European markets, and packaging products for the domestic markets, and
which operates an extensive wastepaper recycling system that serves company
mills and worldwide markets.
FISCAL YEAR-END
The company's fiscal year ends on the last Sunday of the year. Fiscal year 1995
had 53 weeks, and fiscal years 1996 and 1994 had 52 weeks.
ACCOUNTING PRONOUNCEMENTS IMPLEMENTED
In 1995, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which requires companies to change what they disclose about their
employee stock-based compensation plans, recommends that they change the
accounting for these plans to a fair-value based method and requires those
companies that do not change their accounting to disclose what their earnings
and earnings per share would have been if they had changed. The company will
continue to account for these plans using the method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25 and has conformed to the
disclosure requirements of SFAS No. 123 for fiscal years 1995 and 1996. Note 17
discusses the company's stock-based compensation plan relative to the
requirements of SFAS No. 123.
PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," to provide
accounting and reporting guidance for transfers and servicing of financial
assets and extinguishments of liabilities. The statement uses the "financial-
components approach" in which, after a transfer of financial assets, an entity
would recognize all financial assets and services it controls and all
liabilities it has incurred and remove financial assets and liabilities from the
balance sheet when control is surrendered or when they are extinguished,
respectively. It is to be applied to transfers and servicing of financial assets
and extinguishment of liabilities occurring after December 31, 1996. This
statement will supersede several previous statements, including SFAS No. 122,
"Accounting for Mortgage Servicing Rights -- an amendment of FASB Statement No.
65," which the company had implemented in 1995. In 1996, the FASB issued SFAS
No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement
No. 125 -- an amendment of FASB Statement No. 125," which deferred for one year
the effective date of certain provisions. The company believes that the future
adoption of these statements will not have a significant impact on results of
operations or financial position.
58
<PAGE>
NET EARNINGS PER COMMON SHARE
Net earnings per common share are based on the weighted average number of common
shares outstanding during the respective periods. Average common equivalent
shares (stock options) outstanding have not been included, as the computation
would not be dilutive. Weighted average common shares outstanding were
198,318,000, 203,525,000 and 205,543,000 for the years ended December 29, 1996,
December 31, 1995, and December 25, 1994, respectively.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
The company has, where appropriate, estimated the fair value of financial
instruments. These fair value amounts may be significantly affected by the
assumptions used, including the discount rate and estimates of cash flow.
Accordingly, the estimates presented are not necessarily indicative of the
amounts that could be realized in a current market exchange. Where these
estimates approximate carrying value, no separate disclosure of fair value is
shown.
Financial instruments that potentially subject the company to concentrations of
credit risk consist primarily of mortgage notes held for sale or investment and
mortgage loans receivable, of which $417 million and $457 million are in the
western geographical region of the United States at December 29, 1996, and
December 31, 1995, respectively.
DERIVATIVES
The company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. They are used to manage well-defined
interest rate and foreign exchange risks. These include:
. Foreign exchange contracts, which are hedges for foreign denominated
accounts receivable and accounts payable, have gains or losses recognized
at settlement date.
. Interest rate swaps entered into with major banks or financial institutions
in which the company pays a fixed rate and receives a floating rate with
the interest payments being calculated on a notional amount. The premiums
received by the company on the sale of these swaps are treated as deferred
income and amortized against interest expense over the term of the
agreements.
. Hedging transactions entered into by the company's mortgage banking
subsidiary to protect both the completed loan inventory and loans in
process against changes in interest rates. The financial instruments used
to manage interest rate risk are forward sales commitments, interest rate
futures and options. Hedging gains and losses realized during the
commitment and warehousing period are deferred to the extent of unrealized
gains on the related mortgage loans held for sale.
The company is exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments but does not expect any
counterparties to fail to meet their obligations. The company deals only with
highly rated counterparties. The notional amounts of these derivative financial
instruments are $807 million and $891 million at December 29, 1996, and December
31, 1995, respectively. These notional amounts do not represent amounts
exchanged by the parties and, thus, are not a measure of exposure to the company
through its use of derivatives. The exposure in a derivative contract is the net
difference between what each party is required to pay based on the contractual
terms against the notional amount of the contract, such as interest rates or
exchange rates. The use of derivatives does not have a significant effect on the
company's results of operations or its financial position.
CASH AND SHORT-TERM INVESTMENTS
For purposes of cash flow and fair value reporting, short-term investments with
original maturities of 90 days or less are considered as cash equivalents.
Short-term investments are stated at cost, which approximates market.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost includes labor,
materials and production overhead. The last-in, first-out (LIFO) method is used
to cost the majority of domestic raw materials, in process and finished goods
inventories. LIFO inventories were $296 million and $305 million at December 29,
1996, and December 31, 1995, respectively. The balance of domestic raw material
and product inventories, all materials and supplies inventories, and all foreign
inventories is costed at either the first-in, first-out (FIFO) or moving average
cost methods. Had the FIFO method been used to cost all inventories, the amounts
at which product inventories are stated would have been $239 million and $267
million greater at December 29, 1996, and December 31, 1995, respectively.
PROPERTY AND EQUIPMENT
The company's property accounts are maintained on an individual asset basis.
Betterments and replacements of major units are capitalized. Maintenance,
repairs and minor replacements are expensed. Depreciation is
59
<PAGE>
provided generally on the straight-line or unit-of-production method at rates
based on estimated service lives. Amortization of logging railroads and truck
roads is provided generally as timber is harvested and is based upon rates
determined with reference to the volume of timber estimated to be removed over
such facilities.
The cost and related depreciation of property sold or retired is removed from
the property and allowance for depreciation accounts and the gain or loss is
included in earnings.
TIMBER AND TIMBERLANDS
Timber and timberlands are carried at cost less fee stumpage charged to
disposals. Fee stumpage is the cost of standing timber and is charged to fee
timber disposals as fee timber is harvested, lost as the result of casualty or
sold. Depletion rates used to relieve timber inventory are determined with
reference to the net carrying value of timber and the related volume of timber
estimated to be recoverable. Timber carrying costs are expensed as incurred. The
cost of timber harvested is included in the carrying values of raw material and
product inventories, and in the cost of products sold as these inventories are
disposed of.
ACCOUNTS PAYABLE
The company's banking system provides for the daily replenishment of major bank
accounts as checks are presented for payment. Accordingly, there were negative
book cash balances of $164 million and $149 million at December 29, 1996, and
December 31, 1995, respectively. Such balances result from outstanding checks
that had not yet been paid by the bank and are reflected in accounts payable in
the consolidated balance sheets.
INCOME TAXES
Deferred income taxes are provided to reflect temporary differences between the
financial and tax bases of assets and liabilities using presently enacted tax
rates and laws.
PENSION PLANS
The company has pension plans covering most of its employees. The U.S. plan
covering salaried employees provides pension benefits based on the employee's
highest monthly earnings for five consecutive years during the final 10 years
before retirement. Plans covering hourly employees generally provide benefits of
stated amounts for each year of service. Contributions to U.S. plans are based
on funding standards established by the Employee Retirement Income Security Act
of 1974 (ERISA).
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the company provides certain health
care and life insurance benefits for some retired employees and accrues the
expected future cost of these benefits for its current eligible retirees and
some employees. All of the company's salaried employees and some hourly
employees may become eligible for these benefits when they retire.
RECLASSIFICATIONS
Certain reclassifications have been made to conform prior years' data to the
current format.
REAL ESTATE AND FINANCIAL SERVICES
Real estate held for sale is stated at the lower of cost or fair value. The
determination of fair value is based on appraisals and market pricing of
comparable assets, when available, or the discounted value of estimated future
cash flows from these assets. Real estate held for development is stated at cost
to the extent it does not exceed the estimated undiscounted future net cash
flows, in which case, it is carried at fair value.
In 1995, the company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
companies to change their method of valuing long-lived assets. The company's
decision to accelerate the disposition of certain real estate assets previously
held for development and use along with the implementation of this pronouncement
resulted in a $290 million charge to operations in the third quarter of 1995.
The majority of the charge was a direct result of the company's decision to
accelerate the disposition of those assets. The remainder of the charge resulted
from the application of those provisions of SFAS No. 121 relating to the
valuation of assets held for future use where estimated undiscounted future cash
flows from those assets did not exceed the carrying value of those assets.
The company's evaluation of each asset first considered the availability of
appraisal information, then comparable sales information, and finally discounted
estimated cash flows. Because appraisal information was very limited for the
assets evaluated, the majority of the assets were valued based upon comparable
sales data or discounted estimated cash flows. The discount rate considered
applicable market conditions and risks associated with each asset. In those
cases where a discount rate was used, it was 20 percent. Subsequent sales have
demonstrated that the valuation assumptions used were reasonable. The company is
continuing with its original plans to dispose of most of the affected assets
over a two-year period. The carrying value of the affected assets at December
29, 1996, and December 31, 1995, was approximately $141 million and $291
million, respectively.
Prior to its implementation of SFAS No. 121, the company recorded its inventory,
assets held for development and for sale, at the lower of cost or net realizable
value. Net realizable value was determined based upon the estimated selling
price in the ordinary
60
<PAGE>
course of business less estimated costs of completion to include holding costs
during construction and costs of disposal. If carrying cost exceeded net
realizable value, a valuation allowance was provided.
The company's financial services businesses are engaged in the mortgage banking
industry, hold mortgage-backed certificates and other financial instruments
pledged as collateral for collateralized mortgage obligation (CMO) bonds, and
also offer insurance services (see Note 12).
The company's mortgage banking business was servicing mortgage loans, which had
an aggregated principal balance of approximately $4.4 billion at December 29,
1996.
Mortgage notes held for sale are stated at the lower of cost or market, which is
computed by the aggregate method (unrealized losses are offset by unrealized
gains).
Mortgage-backed certificates are carried at par value, adjusted for any
unamortized discount or premium. Management's intent is to hold these
certificates until maturity. These certificates and other financial instruments
are pledged as collateral for the CMO bonds and are held by banks as trustees.
Principal and interest collections are used to meet the interest payments and
reduce the outstanding principal balance of the bonds.
The CMO bonds are the obligation of the issuer, and neither the company nor any
affiliated company has guaranteed or is otherwise obligated with respect to the
bonds. They are carried at amortized cost. Discounts and premiums are amortized
using a method that approximates the effective interest method over their
estimated lives.
NOTE 2. FOREIGN OPERATIONS AND EXPORT SALES
The following net assets, net sales and earnings before income taxes, related to
operations outside the United States, principally Canada, are included in the
company's consolidated financial statements:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Dollar amounts December 29, December 31, December 25,
in millions 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net assets:
Working capital $ 160 $ 72 $ 29
Timber-cutting rights 5 2 2
Property and equipment, net 930 894 826
Other assets 35 40 42
- ----------------------------------------------------------------
1,130 1,008 899
Other liabilities (262) (253) (235)
- ----------------------------------------------------------------
Net assets $ 868 $ 755 $ 664
================================================================
<CAPTION>
- ------------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 1,316 $ 1,582 $ 1,390
- ------------------------------------------------------------------
Earnings before income taxes:
Foreign entities $ 106 $ 392 $ 268
U.S. entities with foreign activity 5 18 23
- ------------------------------------------------------------------
</TABLE>
The company is engaged in the sale of products for export from the United
States. These sales consist principally of pulp, newsprint, paperboard,
containerboard, logs, lumber and wood chips to Japan; pulp, containerboard,
lumber and plywood to Europe; and logs to China and Korea. The following table
compares the company's export sales from the United States to customers in Japan
and elsewhere with its total net sales and revenues.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Export sales from the United States:
Customers in Japan $ 1,185 $ 1,173 $ 1,034
Customers outside Japan 573 763 506
- -----------------------------------------------------------------
Total export sales 1,758 1,936 1,540
- -----------------------------------------------------------------
Total net sales and revenues $11,114 $11,788 $10,398
=================================================================
</TABLE>
61
<PAGE>
NOTE 3. OTHER INCOME (EXPENSE), NET
Other income (expense), net, is an aggregation of both recurring and occasional
non-operating income and expense items and, as a result, may fluctuate from
period to period. No individual income or expense item for the three-year period
ended December 29, 1996, was significant in relation to net earnings.
NOTE 4. INCOME TAXES
Earnings before income taxes are comprised of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Domestic earnings $ 614 $ 852 $ 652
Foreign earnings 106 392 268
- ----------------------------------------------------------------
$ 720 $1,244 $ 920
================================================================
</TABLE>
Provisions for income taxes include the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $ 41 $ 177 $ 84
Deferred 166 92 114
- ------------------------------------------------------------------
207 269 198
- ------------------------------------------------------------------
State:
Current 2 31 17
Deferred 16 4 7
- ------------------------------------------------------------------
18 35 24
- ------------------------------------------------------------------
Foreign:
Current 33 134 103
Deferred (1) 7 6
- ------------------------------------------------------------------
32 141 109
- ------------------------------------------------------------------
$ 257 $ 445 $ 331
==================================================================
</TABLE>
A reconciliation between the federal statutory tax rate and the company's
effective tax rate follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax on income 35% 35% 35%
State income taxes, net of federal tax benefit 2 2 2
All other, net (1) (1) (1)
- ------------------------------------------------------------------
Effective income tax rate 36% 36% 36%
==================================================================
</TABLE>
The net deferred income tax (liabilities) assets include the following
components:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Dollar amounts December 29, December 31,
in millions 1996 1995
- -----------------------------------------------------------------
<S> <C> <C> <C>
Current (included in
prepaid expenses) $ 84 $ 75
Noncurrent (1,324) (1,196)
Real estate and financial services
(included in other assets) 12 72
- -----------------------------------------------------------------
Total $ (1,228) $ (1,049)
=================================================================
</TABLE>
62
<PAGE>
The deferred tax (liabilities) assets are comprised of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Dollar amounts December 29, December 31,
in millions 1996 1995
- -----------------------------------------------------------------
<S> <C> <C> <C>
Depreciation $ (1,303) $ (1,220)
Depletion (143) (115)
Capitalized interest and taxes --
real estate development (76) (77)
Other (178) (140)
- -----------------------------------------------------------------
Total deferred tax (liabilities) (1,700) (1,552)
- -----------------------------------------------------------------
Pension and retiree health care 125 121
Charges for impairment of
long-lived assets 56 93
Environmental and other reserves 17 50
Alternative minimum tax credit
carryforward 46 20
Other 228 219
- -----------------------------------------------------------------
Total deferred tax assets 472 503
- -----------------------------------------------------------------
$ (1,228) $ (1,049)
=================================================================
</TABLE>
As of December 29, 1996, the company has available approximately $46 million of
alternative minimum tax credit carryforward, which does not expire, and foreign
tax credit carryforwards of $1 million, $4 million, $1 million and $1 million
expiring in 1998, 1999, 2000 and 2001, respectively.
The company intends to reinvest undistributed earnings of certain foreign
subsidiaries; therefore, no U.S. taxes have been provided. These earnings
totaled approximately $792 million at the end of 1996. While it is not
practicable to determine the income tax liability that would result from
repatriation, it is estimated that withholding taxes payable upon repatriation
would approximate $47 million.
NOTE 5. PENSION PLANS
Net annual pension cost (income) includes the following components:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during
the period $ 49 $ 37 $ 43
Interest cost on projected
benefit obligation 111 104 96
Actual return on plan assets (414) (466) (9)
Net amortization and deferrals 254 323 (121)
Pension expense due to sales,
closures and other 2 -- --
- -----------------------------------------------------------------
$ 2 $ (2) $ 9
=================================================================
</TABLE>
The assumptions used were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.75% 7.75% 8.75%
Rate of increase in compensation levels 4.5% 4.5% 4.5%
Expected long-term rate of return
on plan assets 11.5% 11.5% 11.5%
- -----------------------------------------------------------------
</TABLE>
63
<PAGE>
The following table sets forth the plans' funded status and amounts recognized
in the company's consolidated balance sheet for its U.S. and Canadian pension
plans:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 29, 1996 December 31, 1995
------------------------- --------------------------
Assets Accu- Assets Accu-
Exceed mulated Exceed mulated
Accu- Benefits Accu- Benefits
Dollar amounts mulated Exceed mulated Exceed
in millions Benefits Assets Total Benefits Assets Total
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accumulated
benefit
obligation:
Vested $1,337 $ 17 $1,354 $ 1,254 $ 28 $1,282
Non-vested 29 -- 29 27 -- 27
- ----------------------------------------------------------------------
$1,366 $ 17 $1,383 $ 1,281 $ 28 $1,309
======================================================================
Projected benefit
obligation $1,498 $ 30 $1,528 $ 1,413 $ 34 $1,447
Fair value of
plan assets (1,933) (22) (1,955) (1,627) (24) (1,651)
Unrecognized
prior service
cost (58) (10) (68) (57) (12) (69)
Unrecognized
net gain 539 2 541 316 5 321
Unrecognized net
transition asset 27 (1) 26 32 (2) 30
- ----------------------------------------------------------------------
Accrued/(prepaid)
pension cost $ 73 $ (1) $ 72 $ 77 $ 1 $ 78
======================================================================
</TABLE>
The assets of the U.S. and Canadian pension plans, as of December 29, 1996, and
December 31, 1995, consist of a highly diversified mix of equity, fixed income
and real estate securities.
Approximately 1,740 employees are covered by union administered multi-employer
pension plans to which the company makes negotiated contributions based
generally on fixed amounts per hour per employee. Contributions to these plans
were $5 million in 1996, $7 million in 1995 and $7 million in 1994.
NOTE 6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company sponsors defined benefit postretirement plans for its U.S. employees
that provide medical and life insurance coverage as follows:
. Two salaried retiree medical plans that cover substantially all salaried
employees who retire under the company's retirement plan and their spouses.
Plan I covers those retired or eligible to retire as of January 1, 1990,
and provides full health coverage. Plan II includes those salaried
employees not eligible for Plan I, under which the company provides a fixed
dollar amount per year of service toward the premium, with the retiree
paying the remainder. The company reserves the right to revise the fixed
dollar amount.
. An hourly retiree medical plan that covers approximately 3,600 active
hourly employees and their spouses. For some, the coverage stops at age 65,
while others have lifetime coverage. In some units the retiree must pay a
portion of the premium, while in others the company pays the full cost.
There are approximately 1,800 retired hourly employees and their spouses
currently covered under these programs.
. A salaried retiree life insurance plan that starts at 80 percent of salary
at retirement and reduces to six thousand dollars in 20 percent increments.
Approximately 4,400 persons who are retired or were eligible to retire as
of December 31, 1991, are subject to a different schedule.
. An hourly retiree life insurance plan in which approximately 11,000 active
hourly employees are eligible and approximately 2,000 hourly retirees have
coverage. Most of these are covered by fixed dollar amount coverage that is
graded down after retirement. Some units have pay-related insurance on
which the company pays the full cost.
Weyerhaeuser sponsors various defined contribution plans for U.S. salaried and
hourly employees. The basis for determining plan contributions varies by plan.
The amounts charged to operations and contributed to the plans for participating
employees were $32 million and $28 million in 1996 and 1995, respectively.
The company sponsors three defined benefit and two defined contribution
postretirement plans for its Canadian employees that provide medical and life
insurance. Collectively, 310 retired employees are covered and 281 active
employees are eligible for coverage in these five plans as of year-end 1996.
64
<PAGE>
The following table sets forth the U.S. and Canadian plans' combined accrued
postretirement benefit obligation as of December 29, 1996, and December 31,
1995:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Dollar amounts December 29, December 31,
in millions 1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees:
Health $ 102 $ 119
Life 25 22
Fully eligible and other active
plan participants:
Health 86 87
Life 14 12
- -----------------------------------------------------------------
227 240
Unrecognized actuarial gain 31 9
- -----------------------------------------------------------------
Accrued postretirement benefit obligation $ 258 $ 249
=================================================================
</TABLE>
Net annual postretirement benefit costs included the following components:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Dollar amounts in millions 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Service cost benefits attributed to
service during the period:
Health $ 4 $ 3 $ 4
Life 1 -- 1
Interest cost on accumulated
postretirement benefit obligation:
Health 13 16 16
Life 3 3 2
Amortization of gain -- health (1) (1) --
- ----------------------------------------------------------------
Net postretirement benefit cost $ 20 $ 21 $ 23
================================================================
</TABLE>
For measurement purposes, a 10.5, 8.5 and 8.0 percent annual rate of increase in
the per capita cost of covered health care benefits was assumed for 1994, 1995
and 1996, respectively. Beginning in 1997, the rate is assumed to decrease by
0.5 percent annually to a level of 5.5 percent for the year 2001 and all years
thereafter. The effect of a one percent increase in the assumed health care cost
trend rates would increase the accumulated postretirement benefit obligation as
of December 29, 1996, by 10.3 percent, and the aggregate of the service and
interest cost components of net annual postretirement benefit cost for 1996 by
12.9 percent.
Other assumptions used were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.75% 7.75% 8.5%
Rate of increase in compensation levels:
Salaried 4.5% 4.5% 4.5%
Hourly 3.0% 3.0% 3.0%
- -----------------------------------------------------------------
</TABLE>
NOTE 7. INVENTORIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Dollar amounts December 29, December 31,
in millions 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Logs and chips $ 120 $ 173
Lumber, plywood and panels 148 135
Pulp, newsprint and paper 202 158
Containerboard, paperboard and packaging 108 107
Other products 146 117
Materials and supplies 277 270
- ----------------------------------------------------------------
$ 1,001 $ 960
================================================================
</TABLE>
65
<PAGE>
NOTE 8. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Dollar amounts December 29, December 31,
in millions 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
Property and equipment, at cost:
Land $ 158 $ 167
Buildings and improvements 1,686 1,582
Machinery and equipment 9,713 9,253
Rail and truck roads and other 596 615
- ----------------------------------------------------------------
12,153 11,617
Less allowance for depreciation
and amortization 5,146 4,900
- ----------------------------------------------------------------
$ 7,007 $ 6,717
================================================================
</TABLE>
NOTE 9. REAL ESTATE IN PROCESS OF DEVELOPMENT AND FOR SALE
Properties held by the company's real estate and financial services businesses
include:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Dollar amounts December 29, December 31,
in millions 1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
Dwelling units $ 198 $ 234
Residential lots 264 212
Commercial lots 135 136
Commercial projects 31 125
Acreage 49 68
Other inventories 3 1
- -----------------------------------------------------------------
$ 680 $ 776
=================================================================
</TABLE>
NOTE 10. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Dollar amounts December 29, December 31,
in millions 1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Payroll -- wages and salaries,
incentive awards, retirement
and vacation pay $ 279 $ 265
Taxes -- Social Security and real
and personal property 57 50
Interest 79 82
Accrued income taxes 51 117
Other 196 193
- -----------------------------------------------------------------
$ 662 $ 707
=================================================================
</TABLE>
66
<PAGE>
NOTE 11. SHORT-TERM DEBT
BORROWINGS
Real estate and financial services short-term borrowings were $245 million with
a weighted average interest rate of 4.7 percent at December 29, 1996, and $338
million with a weighted average interest rate of 4.3 percent at December 31,
1995.
LINES OF CREDIT
The company has short-term bank credit lines that provide for borrowings of up
to the total amount of $375 million and $725 million, all of which was available
to the company, WRECO and WMC at December 29, 1996, and December 31, 1995,
respectively. No portion of these lines has been availed of by the company,
WRECO or WMC at December 29, 1996, or December 31, 1995. None of the entities
referred to herein is a guarantor of the borrowings of the others.
WMC has short-term special credit lines that provide for borrowings of up to
$230 million at December 29, 1996, and December 31, 1995. Borrowings against
these lines were $54 million and $115 million as of December 29, 1996, and
December 31, 1995, respectively.
NOTE 12. LONG-TERM DEBT
DEBT
Weyerhaeuser long-term debt, including the current portion, is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Dollar amounts December 29, December 31,
in millions 1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
8 3/8% debentures due 2007 $ 150 $ 150
7.50% debentures due 2013 250 250
7.25% debentures due 2013 250 250
7 1/8% debentures due 2023 250 250
9.05% notes due 2003 200 200
7.28% note -- 40
8 1/2% debentures due 2025 300 300
7.95% debentures due 2025 250 250
Industrial revenue bonds, rates from
2.45% (variable) to 10.0% (fixed),
due 1997-2028 746 717
Medium-term notes, rates from
6.43% to 8.91%, due 1997-2005 313 428
Commercial paper/credit agreements 889 252
Other 28 21
- -------------------------------------------------------------------
$3,626 $3,108
===================================================================
Portion due within one year $ 80 $ 125
===================================================================
</TABLE>
Long-term debt maturities during the next five years are (millions):
<TABLE>
- ----------------------------------------------------------------
<S> <C>
1997 $ 80
1998 10
1999 974
2000 99
2001 78
- ----------------------------------------------------------------
</TABLE>
67
<PAGE>
Real estate and financial services long-term debt, including the current
portion, is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Dollar amounts December 29, December 31,
in millions 1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Notes payable, unsecured; weighted
average interest rates
are approximately 6.4% and 7.3% $ 735 $ 780
Bank and other borrowings, unsecured;
weighted average interest rates are
approximately 5.5% and 5.7% 380 505
Notes payable, secured; weighted average
interest rate is approximately 8.5% 41 46
Collateralized mortgage obligation bonds 133 159
Commercial paper/credit agreement 248 263
- -------------------------------------------------------------------
$1,537 $1,753
===================================================================
Portion due within one year $ 723 $ 145
===================================================================
</TABLE>
Long-term debt maturities during the next five years are (millions):
<TABLE>
- -----------------------------------------------------------------
<S> <C>
1997 $723
1998 179
1999 127
2000 126
2001 172
- -----------------------------------------------------------------
</TABLE>
LINES OF CREDIT
At December 29, 1996, the company's lines of credit include a five-year
competitive advance and revolving credit facility agreement entered into in 1994
with a group of banks that provides for borrowings of up to the total amount of
$1.55 billion, all of which can be availed of by the company, and $1 billion,
which can be availed of by WMC. Borrowings are at LIBOR or other such interest
rates as mutually agreed to between the borrower and lending banks.
At December 29, 1996, and December 31, 1995, WMC had $25 million and $35
million, respectively, outstanding against a one-year evergreen credit
commitment entered into in 1990.
WMC has a revolving credit agreement with a bank to provide for: (1) borrowings
of up to $35 million for two years at prime rate, LIBOR or such other rate as
may be agreed upon by WMC and the banks, (2) a commitment fee based on the
unused credit, and (3) conversion of the note as of July 1, 1999, to a five-year
term loan payable in equal quarterly installments. At December 29, 1996, there
was no portion outstanding, while at December 31, 1995, $20 million was
outstanding under this revolving credit agreement.
WFS has a revolving credit agreement that provides for: (1) borrowings of up to
$450 million at December 29, 1996, and $525 million at December 31, 1995, at
LIBOR or other such rates as may be agreed upon by WFS and the banks, and (2) a
commitment fee on the unused portion of the credit. $355 million and $450
million were outstanding under this facility at December 29, 1996, and December
31, 1995, respectively. To the extent that these credit commitments expire more
than one year after the balance sheet date and are unused, an equal amount of
commercial paper is classifiable as long term debt. Amounts so classified are
shown in the tables in this note.
No portion of these lines has been availed of by the company, WRECO, WMC or WFS
at December 29, 1996, or December 31, 1995, except as noted.
The company's compensating balance agreements were not significant.
68
<PAGE>
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
December 29, 1996 December 31, 1995
----------------- -----------------
Carrying Fair Carrying Fair
Dollar amounts in millions Value Value Value Value
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weyerhaeuser:
Financial liabilities:
Long-term debt (including
current maturities) $3,626 $3,809 $3,108 $3,469
- ------------------------------------------------------------------
Real estate and financial services:
Financial assets:
Mortgage notes held for sale 334 335 332 332
Mortgage loans receivable 133 126 155 138
Mortgage-backed certificates and
other pledged financial
instruments 154 165 185 193
Financial liabilities:
Long-term debt (including
current maturities) 1,537 1,553 1,753 1,792
- ------------------------------------------------------------------
</TABLE>
The methods and assumptions used to estimate fair value of each class of
financial instruments for which it is practicable to estimate that value are as
follows:
. Long-term debt, including real estate and financial services, is
estimated based on quoted market prices for the same issues or on the discounted
value of the future cash flows expected to be paid using incremental rates of
borrowing for similar liabilities.
. Mortgage notes held for sale are estimated using the quoted market
prices for securities backed by similar loans adjusted for differences in loan
characteristics. The estimated fair value is net of related hedge instruments,
which were estimated based upon quoted market prices for securities.
. Mortgage loans receivable are estimated based on the discounted value
of estimated future cash flows using current rates for loans with similar terms
and risks.
. Mortgage-backed certificates and other pledged financial instruments
are estimated using the quoted market prices for securities backed by similar
loans and restricted deposits held at cost.
NOTE 14. LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
On November 2, 1992, an action was filed against the company in the Circuit
Court for the First Judicial District of Hinds County, Mississippi, on behalf of
a purported class of riparian property owners in Mississippi and Alabama whose
properties are located on the Tennessee Tombigbee Waterway, Aliceville Lake,
Cedar Creek and the Magoway Creek. The complaint seeks $1 billion in
compensatory and punitive damages for diminution in property value, personal
injuries and mental anguish allegedly resulting from the discharge of purported
hazardous substances, including dioxins and furans, by the company's pulp and
paper mill in Columbus, Mississippi, and the alleged fraudulent concealments of
such discharge. The complaint also seeks an injunction prohibiting future
releases and the removal of hazardous substances allegedly released in the past.
On August 20, 1993, a companion action was filed in Greene County, Alabama, on
behalf of a similar purported class of riparian owners with essentially the same
claims as the Mississippi case. By order dated April 5, 1995, venue of the
Alabama action was transferred to Sumter County, Alabama. On January 20, 1995,
the court in the Alabama action certified a class of all persons who, as of the
date the action commenced, were riparian owners, lessees and licensees of
properties located on the Tennessee Tombigbee Waterway in Greene, Sumter,
Pickens and Marengo counties, Alabama, and Lowndes and Noxubee counties,
Mississippi, to determine whether the company is liable to the members of the
class for compensatory and/or punitive damages and to determine the amount of
punitive damages, if any, to be awarded to the class as a whole. By order dated
April 12, 1995, as orally amended on February 1, 1996, the geographical
boundaries of the class were amended to run from below the Columbus mill's
wastewater discharge pipe to just above the confluence of the Black Warrior
River and the Tennessee Tombigbee Waterway. The class is estimated to range from
approximately 1,000 to 1,500 members. In late July 1996, the company reached an
agreement to settle both the Mississippi action and the Alabama action for $2.5
million. The agreement is subject to the approval of the court in the Alabama
action.
In November 1996, an action was filed against the company in Superior Court for
King County, Washington, on behalf of a purported class of all individuals and
entities that own property in the United States on which exterior hardboard
siding manufactured
69
<PAGE>
by the company has been installed since 1980. The action alleges the company has
manufactured and distributed defective hardboard siding and has breached express
warranties and consumer protection statutes in its sale of hardboard siding. The
action seeks compensatory damages, including prejudgment interest, and seeks
damages for the cost of replacing siding that rots subsequent to the entry of
any judgment. In January 1997, an action was filed, also in Superior Court for
King County, Washington, on behalf of a purported class of all individuals,
proprietorships, partnerships, corporations and other business entities in the
United States on whose homes, condominiums, apartment complexes or commercial
buildings hardboard siding manufactured by the company has been installed. The
action alleges the company has breached express and implied warranties in its
sale of hardboard siding and also has violated the Consumer Protection Act of
the state of Washington. The action seeks damages, prejudgment interest, costs
and reasonable attorney fees. The company is a defendant in approximately
fifteen other hardboard siding cases, one of which purports to be a class action
on behalf of purchasers of single- or multi-family residences in Nebraska that
contain the company's hardboard siding.
ENVIRONMENTAL
It is the company's policy to accrue for environmental remediation costs when it
is determined that it is probable that such an obligation exists and the amount
of the obligation can be reasonably estimated. Based on currently available
information and analysis, the company believes that it is reasonably possible
that costs associated with all identified sites may exceed current accruals by
amounts that may prove insignificant or that could range, in the aggregate, up
to approximately $120 million over several years. This estimate of the upper end
of the range of reasonably possible additional costs is much less certain than
the estimates upon which accruals are currently based, and utilizes assumptions
less favorable to the company among the range of reasonably possible outcomes.
In estimating both its current accruals for environmental remediation and the
possible range of additional future costs, the company has assumed that it will
not bear the entire cost of remediation of every site to the exclusion of other
known potentially responsible parties who may be jointly and severally liable.
The ability of other potentially responsible parties to participate has been
taken into account, based generally on each party's financial condition and
probable contribution on a per-site basis. No amounts have been recorded for
potential recoveries from insurance carriers.
The company is a party to legal proceedings and environmental matters generally
incidental to its business. Although the final outcome of any legal proceeding
or environmental matter is subject to a great many variables and cannot be
predicted with any degree of certainty, the company presently believes that the
ultimate outcome resulting from these proceedings and matters, including those
described above, would not have a material effect on the company's current
financial position, liquidity or results of operations; however, in any given
future reporting period, such proceedings or matters could have a material
effect on results of operations.
OTHER ITEMS
The company's capital expenditures, excluding acquisitions, have averaged about
$912 million in recent years but are expected to approximate $750 million in
1997; however, the 1997 expenditure level could be increased or decreased as a
consequence of future economic conditions.
During the normal course of business, the company's real estate and financial
services subsidiaries have entered into certain financial commitments comprised
primarily of agreements to fund up to $159 million in mortgage loans at fixed
and floating prices, guarantees made on $56 million of partnership borrowings,
and limited recourse obligations associated with $1.1 billion of sold mortgage
loans. The fair value of the recourse on these loans is estimated to be $7
million, which is based upon market spreads for sales of similar loans without
recourse or estimates of the credit risk of the associated recourse obligation.
NOTE 15. PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT
In 1996, the company sold its Klamath Falls, Oregon, hardboard, particleboard
and plywood manufacturing operations; 600,000 acres of predominantly pine
timberlands; and its nursery and seed orchard facilities. Proceeds from the sale
of the property and equipment in this transaction amounted to $33 million. The
resulting gain on this transaction was not material to the company's pretax
income. The timberlands portion of this transaction involved a like-kind
exchange for other timberlands, primarily private commercial timberlands in
southeastern Louisiana and southern Mississippi previously owned by Cavenham
Forest Industries.
70
<PAGE>
NOTE 16. SHAREHOLDERS' INTEREST
PREFERRED AND PREFERENCE SHARES
The company is authorized to issue:
. 7,000,000 preferred shares having a par value of $1.00 per share, of
which none were issued and outstanding at December 29, 1996, and December 31,
1995; and
. 40,000,000 preference shares having a par value of $1.00 per share, of
which none were issued and outstanding at December 29, 1996, and December 31,
1995.
The preferred and preference shares may be issued in one or more series with
varying rights and preferences including dividend rates, redemption rights,
conversion terms, sinking fund provisions, values in liquidation and voting
rights. When issued, the outstanding preferred and preference shares rank senior
to outstanding common shares as to dividends and assets available on
liquidation.
The company has reserved but not issued 2,000,000 shares of cumulative
preference shares, fourth series, for the exercise of the rights described under
the Shareholder Rights Plan.
SHAREHOLDER RIGHTS PLAN
In December 1986, the company adopted, and in February 1989 amended, a
Shareholder Rights Plan (the "Plan") and declared a dividend distribution of
0.6667 right on each outstanding common share. Each right entitles its holder to
purchase after the distribution date and until December 1996 one one-hundredth
of a share of the company's cumulative preference shares, fourth series, at a
price of $70, subject to adjustment. The distribution date is the earlier of 20
business days after the announcement that a person or group has acquired 20
percent or more of Weyerhaeuser's outstanding common shares or 20 business days
after a person or group commences a tender or exchange offer that could result
in the person or group owning 20 percent or more of the company's outstanding
common shares. Following the distribution date, if anyone owning 20 percent or
more of the company's outstanding common shares merges with the company, with
the company as the survivor, and the company's common shares are not changed or
exchanged, or engages in certain self-dealing transactions with the company, or
if an event occurs that results in such 20 percent owner's interest being
increased by more than one percent (e.g., a reverse stock split), or if anyone
acquires 30 percent or more of the company's outstanding common shares, each
right holder, other than such person or group, will be able, upon payment of the
right's exercise price, to acquire shares of the company's common stock or other
securities or assets having an aggregate market value equal to twice the right's
purchase price. If, after the company announces that someone owns 20 percent or
more of the company's outstanding common shares, the company is acquired in a
merger or other business combination, and the company is not the survivor, or
the company engages in a merger or other business combination transaction in
which the company is the surviving corporation but the company's common shares
are changed or exchanged, or if 50 percent of the company's earning power or
assets is sold in one or several related transactions, each right holder, other
than any 20 percent shareholder, will receive shares of the acquiring company's
common stock having a market value equal to twice the right's exercise price.
Subject to certain time periods and conditions, the Plan may be amended and the
rights may be redeemed at a price of $.05 per right, subject to adjustment. The
Plan terminated, in accordance with its provisions, in December 1996.
NOTE 17. STOCK-BASED COMPENSATION PLAN
The company's Long-Term Incentive Compensation Plan (the "Plan") was approved at
the 1992 Annual Meeting of Shareholders. The Plan provides for the purchase of
the company's common stock at its market price on the date of grant by certain
key officers and other employees of the company and its subsidiaries who are
selected from time to time by the Compensation Committee of the Board of
Directors. No more than 10 million shares may be issued under the Plan. The term
of options granted under the Plan may not exceed 10 years from the grant date.
Grantees are 25 percent vested after one year, 50 percent after two years, 75
percent after three years, and 100 percent after four years.
71
<PAGE>
The company accounts for all options under APB Opinion No. 25 and related
interpretations, under which no compensation has been recognized. Had
compensation costs for the Plan been determined consistent with SFAS No. 123,
net income and earnings per share would have been reduced to the following pro
forma amounts:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Net income (in millions):
As reported $463 $799
Pro forma 454 791
Earnings per share:
As reported $2.34 $3.93
Pro forma 2.29 3.88
- --------------------------------------------------------------
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to options
granted prior to fiscal year 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Risk-free interest rate 5.81% 7.47%
Expected life 6.4 years 6.4 years
Expected volatility 25.61% 26.27%
Expected dividend yield 3.48% 4.05%
- --------------------------------------------------------------
</TABLE>
Changes in the number of shares subject to option are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------
<S> <C> <C> <C>
Shares (in thousands):
Outstanding, beginning of year 5,972 5,687 5,177
Granted 1,222 1,155 1,312
Exercised 925 859 623
Forfeited 26 11 178
Expired -- -- 1
- --------------------------------------------------------------
Outstanding, end of year 6,243 5,972 5,687
- --------------------------------------------------------------
Exercisable, end of year 5,022 4,817 4,375
- --------------------------------------------------------------
Weighted average
exercise price:
Outstanding, beginning of year $38.17 $36.27 $32.32
Granted 45.94 39.47 47.53
Exercised 32.11 27.34 28.06
Forfeited 43.46 40.10 33.16
Expired -- -- 19.96
Outstanding, end of year 40.56 38.17 36.27
Weighted average grant date
fair value of options 11.40 10.41 N/A
- --------------------------------------------------------------
</TABLE>
871 of the 6,243 options outstanding at December 29, 1996, have exercise prices
between $20 and $35, with a weighted average exercise price of $25.29 and a
weighted average remaining contractual life of 3.24 years. All of these options
are exercisable. The remaining 5,372 options have exercise prices between $35
and $49, with a weighted average exercise price of $43.04 and a weighted average
remaining contractual life of 7.32 years. 4,150 of these options are
exercisable; their weighted average exercise price is $42.18.
NOTE 18. BUSINESS SEGMENTS
The company is principally engaged in the growing and harvesting of timber and
the manufacture, distribution and sale of forest products. The four principal
business segments are timberlands and wood products (including softwood lumber,
plywood and veneer; composite panels; oriented strand board; logs; chips;
timber; doors; hardwood lumber and plywood; and treated products); pulp, paper
and packaging (including pulp, newsprint, paper, containerboard, paperboard,
packaging, recycling and chemicals); real estate development and construction;
and financial services.
The timber-based businesses involve a high degree of integration among timber
operations; building materials conversion facilities; and pulp, newsprint,
paper, container board and paperboard primary manufacturing and secondary
conversion facilities, including extensive transfers of raw materials, semi-
finished materials and end products between and among these groups. Accounting
for segment profitability involves allocations of joint raw materials and
conversion costs and the use of transfer prices that attempt to approximate
current market values.
72
<PAGE>
The following table sets forth an analysis of the company's operations by the
four principal business segments:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Dollar amounts
in millions 1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Sales to and revenues from
unaffiliated customers:
Timberlands and wood products $ 5,240 $ 4,931 $ 4,992
Pulp, paper and packaging 4,648 5,682 4,066
Real estate 804 723 911
Financial services 205 196 206
Corporate and other 217 256 223
- -----------------------------------------------------------------
11,114 11,788 10,398
--------------------------
Intersegment sales and revenues:
Timberlands and wood products 322 558 357
Pulp, paper and packaging 88 168 82
Corporate and other 35 33 31
- -----------------------------------------------------------------
445 759 470
--------------------------
Total sales and revenues 11,559 12,547 10,868
Eliminations (445) (759) (470)
- -----------------------------------------------------------------
$11,114 $11,788 $10,398
=================================================================
Approximate contribution (charge) to
earnings (1)(2):
Timberlands and wood products $ 805 $ 808 $ 1,034
Pulp, paper and packaging 307 1,181 211
Real estate 35 (231) 7
Financial services 8 (46) 11
Corporate and other (183) (217) (142)
- -----------------------------------------------------------------
972 1,495 1,121
Interest expense (338) (347) (315)
Less capitalized interest 86 96 114
- -----------------------------------------------------------------
Earnings before income taxes 720 1,244 920
Income taxes (257) (445) (331)
- -----------------------------------------------------------------
$ 463 $ 799 $ 589
=================================================================
Depreciation, amortization and
fee stumpage:
Timberlands and wood products $ 227 $ 211 $ 189
Pulp, paper and packaging 355 350 302
Real estate 4 5 7
Financial services 12 36 23
Corporate and other 19 19 13
- -----------------------------------------------------------------
$ 617 $ 621 $ 534
=================================================================
Capital expenditures (including
acquisitions):
Timberlands and wood products $ 866 $ 508 $ 257
Pulp, paper and packaging 415 562 794
Real estate 2 10 10
Financial services 7 3 4
Corporate and other 37 36 37
- -----------------------------------------------------------------
$ 1,327 $ 1,119 $ 1,102
=================================================================
Assets:
Timberlands and wood products $ 3,658 $ 2,940 $ 2,713
Pulp, paper and packaging 6,721 6,797 6,283
Real estate 1,578 1,543 1,716
Financial services 1,050 1,362 1,730
Corporate and other 1,184 1,151 1,439
- -----------------------------------------------------------------
14,191 13,793 13,881
Eliminations (595) (540) (723)
- -----------------------------------------------------------------
$13,596 $13,253 $13,158
=================================================================
</TABLE>
(1) 1995 "approximate contribution to earnings" includes special charges of
$232 million and $58 million for real estate and financial services,
respectively, to dispose of certain real estate assets.
(2) Interest expense of $67 million, $64 million and $76 million in 1996, 1995
and 1994, respectively, is included in the determination of "approximate
contribution to earnings" for financial services.
73
<PAGE>
NOTE 19. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Dollar amounts
in millions except First Second Third Fourth
per-share figures Quarter Quarter Quarter Quarter Year
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales:
1996 $2,605 $2,886 $2,852 $2,771 $11,114
1995 (1) 2,686 3,009 3,037 3,056 11,788
Operating income:
1996 287 262 286 235 1,070
1995 (2) 419 482 247 455 1,603
Earnings before
income taxes:
1996 222 161 187 150 720
1995 (2) 328 386 149 381 1,244
Net earnings:
1996 142 103 120 98 463
1995 (2) 207 246 95 251 799
Net earnings per
common share:
1996 .72 .52 .60 .50 2.34
1995 (2) 1.00 1.21 .47 1.25 3.93
Dividends per common share:
1996 .40 .40 .40 .40 1.60
1995 .30 .40 .40 .40 1.50
Market prices -- high/low:
1996 49 1/2 - 39 15/16
49 7/8 - 41 3/4
48 1/4 - 39 1/2
48 1/8 - 43 7/8
49 7/8 - 39 1/2
1995 42 5/8 - 36 7/8
47 3/8 - 37 1/2
50 3/8 - 44 3/4
48 - 40 7/8
50 3/8 - 36 7/8
- ------------------------------------------------------------------
</TABLE>
(1) 1995 net sales of $2,745, $3,074 and $3,112 as previously reported in Form
10-Q for the first, second and third quarters, respectively, have been revised
to properly reflect the recording of intercompany sales and related cost of
sales.
(2) 1995 third quarter results include a special pretax charge of $290 million,
or $184 million after-tax ($.90 per common share), to dispose of certain real
estate assets.
74
<PAGE>
NOTE 20. HISTORICAL SUMMARY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Dollar amounts
in millions except
per-share figures 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per common share:
Net earnings (loss) from
continuing operations,
before extraordinary
item and effect of
accounting changes: $ 2.34 3.93 2.86 2.58 1.83 (.50) 1.87 1.56 2.68 2.12 1.27
Extraordinary item (2) $ -- -- -- .25 -- -- -- -- -- -- --
Effect of accounting
changes $ -- -- -- -- -- (.30) -- -- -- -- --
-------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 2.34 3.93 2.86 2.83 1.83 (.80) 1.87 1.56 2.68 2.12 1.27
=======================================================================================================
Dividends paid $ 1.60 1.50 1.20 1.20 1.20 1.20 1.20 1.20 1.15 .90 .87
Shareholders' interest
(end of year) $ 23.21 22.57 20.86 19.34 17.85 17.25 19.21 18.55 18.14 16.54 14.82
Financial position:
Total assets:
Weyerhaeuser $10,968 10,359 9,750 9,087 8,566 7,551 7,556 7,371 6,983 6,418 5,889
Real estate and
financial services $ 2,628 2,894 3,408 3,670 9,720 9,435 8,800 8,605 8,401 6,499 5,083
-------------------------------------------------------------------------------------------------------
$13,596 13,253 13,158 12,757 18,286 16,986 16,356 15,976 15,384 12,917 10,972
=======================================================================================================
Long-term debt (net of
current portion):
Weyerhaeuser:
Long-term debt $ 3,546 2,983 2,713 2,998 2,659 2,195 2,168 1,502 1,644 1,540 1,412
Capital lease obli-
gations $ 2 2 -- -- -- -- 7 23 37 51 63
Convertible subordi-
nated debentures $ -- -- -- -- 193 193 193 -- -- -- --
Limited recourse
income debenture $ -- -- -- -- 188 204 204 204 198 181 172
------------------------------------------------------------------------------------------------------
$ 3,548 2,985 2,713 2,998 3,040 2,592 2,572 1,729 1,879 1,772 1,647
======================================================================================================
Real estate and
financial services:
Long-term debt $ 814 1,608 1,873 2,086 2,411 2,421 2,637 2,006 2,318 2,130 1,699
=======================================================================================================
Redeemable preferred and
preference shares
(thousands):
Weyerhaeuser $ -- -- -- -- -- -- -- -- -- -- 14,700
Shareholders' interest $ 4,604 4,486 4,290 3,966 3,646 3,489 3,864 4,148 4,044 3,714 3,251
Percent earned on
shareholders' interest 10.2% 18.2% 14.3% 15.2% 10.4% (4.4)% 9.8% 8.3% 14.6% 12.8% 8.4%
Operating results:
Net sales and revenues:
Weyerhaeuser $10,105 10,869 9,281 8,315 7,744 7,167 7,447 8,355 7,861 6,988 5,650
Real estate and
financial services $ 1,009 919 1,117 1,230 1,522 1,606 1,619 1,826 1,467 1,397 1,241
----------------------------------------------------------------------------------------------------
$11,114 11,788 10,398 9,545 9,266 8,773 9,066 10,181 9,328 8,385 6,891
====================================================================================================
Net earnings (loss) from
continuing operations
before extraordinary
item and effect of
accounting changes:
Weyerhaeuser $ 434 981 576 459 332 (25) 340 377 516 379 180
Real estate and
financial services $ 29 (182)(1) 13 68 40 (76) 54 (36) 50 68 97
----------------------------------------------------------------------------------------------------
$ 463 799 589 527 372 (101)(3) 394 341(4) 566 447 277
Extraordinary item (2) $ -- -- -- 52 -- -- -- -- -- -- --
Effect of accounting
changes $ -- -- -- -- -- (61) -- -- -- -- --
---------------------------------------------------------------------------------------------------
Net earnings (loss) $ 463 799 589 579 372 (162) 394 341 566 447 277
===================================================================================================
Statistics (unaudited):
Number of employees 39,661 39,431 36,665 36,748 39,022 38,669 40,621 45,214 46,976 45,123 41,757
Salaries and wages $ 1,494 1,779 1,610 1,585 1,580 1,476 1,531 1,563 1,423 1,277 1,143
Employee benefits $ 358 408 357 347 323 321 318 325 292 250 225
Total taxes $ 559 736 618 577 443 173 446 403 511 467 310
Timberlands (thousands
of acres):
U.S. fee ownership 5,326 5,302 5,587 5,512 5,592 5,488 5,592 5,664 5,775 5,813 5,904
Long-term license
arrangements 22,863 22,866 17,849 17,845 18,828 13,491 13,491 13,324 13,324 12,064 12,064
Number of shareholder
accounts at year-end:
Common 22,528 23,446 24,131 25,282 26,334 26,937 28,187 29,847 30,379 32,535 31,682
Preferred -- -- -- -- -- -- -- 12 25 26 1,825
Preference -- -- -- -- -- -- -- 443 351 106 7
Average common and common
equivalent shares
outstanding (thousands) 198,318 203,525 205,543 204,866 203,373 201,578 203,673 204,331 207,785 202,544 195,456
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1995 results reflect a special charge for disposal of certain real estate
assets of $290 million less related tax effect of $106 million, or $184 million.
(2) 1993 results reflect an extraordinary net gain as a result of extinguishing
certain debt obligations of $86 million less related tax effect of $34 million,
or $52 million.
(3) 1991 results reflect restructuring and other charges of $445 million less
related tax effect of $162 million, or $283 million.
(4) 1989 results reflect net special items charges of $401 million less related
tax effect of $141 million, or $260 million.
75
<PAGE>
EXHIBIT 13(b)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the thirteen weeks ended March 30, 1997 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 1-4825
WEYERHAEUSER COMPANY
A Washington Corporation (IRS Employer Identification
No. 91-0470860)
Tacoma, Washington 98477
Telephone (253) 924-2345
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
Common Shares ($1.25 par value) Chicago Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
The number of shares outstanding of the registrant's class of common stock, as
of May 2, 1997 was 198,242,115 common shares ($1.25 par value).
<PAGE>
Weyerhaeuser Company
-2-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Index to Form 10-Q Filing
For the Thirteen Weeks Ended March 30, 1997
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Earnings 3
Consolidated Balance Sheet 4-5
Consolidated Statement of Cash Flows 6-7
Notes to Financial Statements 9-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16-20
Part II. Other Information
Item 1. Legal Proceedings 20-22
Item 2. Changes in Securities (not applicable)
Item 3. Defaults upon Senior Securities (not applicable)
Item 4. Submission of Matters to a Vote
of Security Holders (not applicable)
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K 22
</TABLE>
The financial information included in this report has been prepared in
conformity with accounting practices and methods reflected in the financial
statements included in the annual report (Form 10-K) filed with the Securities
and Exchange Commission for the year ended December 29, 1996. Though not
examined by independent public accountants, the financial information reflects,
in the opinion of management, all adjustments necessary to present a fair
statement of results for the interim periods indicated. The results of
operations for the thirteen week period ending March 30, 1997 should not be
regarded as necessarily indicative of the results that may be expected for the
full year.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
WEYERHAEUSER COMPANY
By /s/ K. J. Stancato
-----------------------------
K. J. Stancato
Duly Authorized Officer and
Principal Accounting Officer
May 9, 1997
<PAGE>
Weyerhaeuser Company
-3-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED EARNINGS
For the thirteen week periods
ended March 30, 1997 and March 31, 1996
(Dollar amounts in millions except per share figures)
(Unaudited)
<TABLE>
<CAPTION>
March 30, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Net sales and revenues:
Weyerhaeuser $2,394 $2,373
Real estate and financial services 214 232
------- -------
Net sales and revenues 2,608 2,605
------- -------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 1,888 1,739
Depreciation, amortization and fee stumpage 161 142
Selling, general and administrative expenses 152 178
Research and development expenses 13 14
Taxes other than payroll and income taxes 37 37
Charge for closure or disposition of facilities 49 --
------- -------
2,300 2,110
------- -------
Real estate and financial services:
Costs and operating expenses 153 164
Depreciation and amortization 4 5
Selling, general and administrative expenses 45 37
Taxes other than payroll and income taxes 2 2
------- -------
204 208
------- -------
Total costs and expenses 2,504 2,318
------- -------
Operating income 104 287
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 69 65
Less interest capitalized 4 6
Other income (expense), net (2) 7
Real estate and financial services:
Interest expense incurred 33 34
Less interest capitalized 18 18
Other income (expense), net 11 3
------- -------
Earnings before income taxes 33 222
Income taxes (Note 2) 12 80
------- -------
Net earnings $ 21 $ 142
======= =======
Per common share (Note 1):
Net earnings $ .10 $ .72
======= =======
Dividends paid $ .40 $ .40
======= =======
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
-4-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED BALANCE SHEET
March 30, 1997 and December 29, 1996
(Dollar amounts in millions)
<TABLE>
<CAPTION>
March 30, Dec. 29,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
- ------
Weyerhaeuser
Current assets:
Cash and short-term investments (Note 1) $ 38 $ 33
Receivables, less allowances 954 902
Inventories (Note 3) 1,079 1,001
Prepaid expenses 304 289
------- -------
Total current assets 2,375 2,225
Property and equipment (Note 4) 6,887 7,007
Construction in progress 445 417
Timber and timberlands at cost, less fee
stumpage charged to disposals 1,078 1,073
Other assets and deferred charges 236 246
------- -------
11,021 10,968
------- -------
Real estate and financial services
Cash and short-term investments,
including restricted deposits 49 38
Receivables, less discounts and allowances 88 99
Mortgage notes held for sale 410 334
Mortgage loans receivable 119 133
Mortgage-backed certificates and
other pledged financial instruments 149 154
Real estate in process of development
and for sale 693 680
Land being processed for development 758 719
Investments in and advances to joint ventures
and limited partnerships, less reserves 106 115
Rental properties, less accumulated depreciation 149 150
Other assets 132 206
------- -------
2,653 2,628
------- -------
Total assets $13,674 $13,596
======= =======
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
-5-
<TABLE>
<CAPTION> March 30, Dec. 29,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' interest
- --------------------------------------
Weyerhaeuser
Current liabilities:
Notes payable $ 13 $ 16
Current maturities of long-term debt 61 80
Accounts payable (Note 1) 728 725
Accrued liabilities (Note 5) 583 662
------- -------
Total current liabilities 1,385 1,483
Long-term debt (Note 7) 3,751 3,546
Deferred income taxes 1,324 1,324
Deferred pension and other liabilities 493 493
Minority interest in subsidiaries 114 113
Commitments and contingencies (Note 9) -- --
------- -------
7,067 6,959
------- -------
Real estate and financial services
Notes payable and commercial paper 269 245
Long-term debt (Note 7) 1,577 1,537
Other liabilities 215 251
Commitments and contingencies (Note 9) -- --
------- -------
2,061 2,033
------- -------
Total liabilities 9,128 8,992
------- -------
Shareholders' interest (Note 8)
Common shares: authorized 400,000,000 shares,
issued 206,072,890 shares, $1.25 par value 258 258
Other capital 405 407
Cumulative translation adjustment (101) (93)
Retained earnings 4,313 4,372
Treasury common shares, at cost:
7,483,170 and 7,736,601 (329) (340)
------- -------
Total shareholders' interest 4,546 4,604
------- -------
Total liabilities and shareholders'interest $13,674 $13,596
======= =======
</TABLE>
<PAGE>
Weyerhaeuser Company
-6-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
________________
CONSOLIDATED STATEMENT OF CASH FLOWS
For the thirteen week periods ended March 30, 1997 and March 31, 1996
(Dollar amounts in millions)
(Unaudited)
<TABLE>
<CAPTION>
Consolidated
-------------------
March 30, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Cash provided by (used for) operations:
Net earnings $ 21 $ 142
Non-cash charges to income:
Depreciation, amortization and fee stumpage 165 147
Deferred income taxes, net 7 50
Charge for closure or disposition of facilities 49 --
Decrease (increase) in working capital:
Accounts receivable (48) (51)
Inventories, prepaid expenses, real estate
and land (147) (134)
Mortgage notes held for sale and
mortgage loans receivable (60) (138)
Accounts payable and accrued liabilities (73) (201)
Loss on disposition of assets 11 11
Loss on disposition of a business 8 --
Other (7) (20)
----- -----
Cash (used for) operations (74) (194)
----- -----
Cash provided by (used for) investing activities:
Property and equipment (109) (182)
Timber and timberlands (20) (239)
Mortgage and investment security acquired (1) (2)
Proceeds from sale of:
Property and equipment 3 2
Mortgage and investment securities 6 83
A business 12 --
Other 24 14
----- -----
Cash provided by (used for) investing activities (85) (324)
----- -----
Cash provided by (used for) financing activities:
Issuances of debt 8 5
Notes and commercial paper borrowings, net 296 679
Cash dividends on common shares (80) (79)
Payments on debt (57) (66)
Purchase of treasury common shares -- (34)
Exercise of stock options 9 8
Other (1) --
----- -----
Cash provided by financing activities 175 513
----- -----
Net increase (decrease) in cash and
short-term investments 16 (5)
Cash and short-term investments at beginning of year 71 84
----- -----
Cash and short-term investments at end of period $ 87 $ 79
===== =====
Cash paid (received) during the period for:
Interest, net of amount capitalized $ 120 $ 116
===== =====
Income taxes $ 6 $ 90
===== =====
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
-7-
<TABLE>
<CAPTION>
Real Estate and
Weyerhaeuser Financial Services
------------------- -------------------
March 30, March 31, March 30, March 31,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash provided by (used for) operations:
Net earnings $ 17 $ 137 $ 4 $ 5
Non-cash charges to income:
Depreciation, amortization and fee stumpage 161 142 4 5
Deferred income taxes, net -- 27 7 23
Charge for closure or disposition of facilities 49 -- -- --
Decrease (increase) in working capital:
Accounts receivable (54) 10 6 (61)
Inventories, prepaid expenses, real estate
and land (94) (172) (53) 38
Mortgage notes held for sale and
mortgage loans receivable -- -- (60) (138)
Accounts payable and accrued liabilities (72) (209) (1) 8
Loss on disposition of assets 11 11 -- --
Loss on disposition of a business 8 -- -- --
Other (28) (9) 21 (11)
------ ----- ----- -----
Cash (used for) operations (2) (63) (72) (131)
------ ----- ----- -----
Cash provided by (used for) investing activities:
Property and equipment (108) (181) (1) (1)
Timber and timberlands (20) (239) -- --
Mortgage and investment security acquired -- -- (1) (2)
Proceeds from sale of:
Property and equipment 3 2 -- --
Mortgage and investment securities -- -- 6 83
A business 12 -- -- --
Other 9 (4) 15 18
------ ----- ----- -----
Cash provided by (used for) investing activities (104) (422) 19 98
------ ----- ----- -----
Cash provided by (used for) financing activities:
Issuances of debt 2 5 6 --
Notes and commercial paper borrowings, net 208 625 88 54
Cash dividends on common shares (80) (79) -- --
Payments on debt (27) (46) (30) (20)
Purchase of treasury common shares -- (34) -- --
Exercise of stock options 9 8 -- --
Other (1) -- -- --
------ ----- ----- -----
Cash provided by financing activities 111 479 64 34
------ ----- ----- -----
Net increase (decrease) in cash and
short-term investments 5 (6) 11 1
Cash and short-term investments at beginning of year 33 34 38 50
------ ----- ----- -----
Cash and short-term investments at end of period $ 38 $ 28 $ 49 $ 51
====== ===== ===== =====
Cash paid (received) during the period for:
Interest, net of amount capitalized $ 104 $ 100 $ 16 $ 16
====== ===== ===== =====
Income taxes $ 44 $ 107 $ (38) $ (17)
====== ===== ===== =====
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
-8-
This page intentionally left blank.
<PAGE>
Weyerhaeuser Company
-9-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
NOTES TO FINANCIAL STATEMENTS
For the thirteen week periods ended March 30, 1997 and March 31, 1996
Note 1: Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of Weyerhaeuser
Company and all of its majority-owned domestic and foreign subsidiaries.
Significant intercompany transactions and accounts are eliminated.
Certain of the consolidated financial statements and notes to financial
statements are presented in two groupings: (1) Weyerhaeuser Company
(Weyerhaeuser, or the company), which is principally engaged in the growing and
harvesting of timber and the manufacture, distribution and sale of forest
products, and (2) real estate and financial services, which includes
Weyerhaeuser Real Estate Company (WRECO), which is involved in real estate
development and construction, and Weyerhaeuser Financial Services, Inc. (WFS),
whose principal subsidiary is Weyerhaeuser Mortgage Company (WMC).
Nature of Operations
The company's principal business segments, which account for the majority of
sales, earnings and the asset base, are:
. Timberlands and wood products, which is engaged in the management of 5.3
million acres of company-owned and .3 million acres of leased forestland in
the United States and 22.9 million acres of forestland in Canada under long-
term licensing arrangements and the production of a full line of solid wood
products that are sold primarily through the company's own sales organizations
to wholesalers, retailers and industrial users in North America, the Pacific
Rim and Europe.
. Pulp, paper and packaging, which manufactures and sells pulp, newsprint,
paper, paperboard and containerboard in North American, Pacific Rim and
European markets, and packaging products for the domestic markets, and which
operates an extensive wastepaper recycling system that serves company mills
and worldwide markets.
Accounting Pronouncements Implemented
In 1996, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," to provide
accounting and reporting guidance for transfers and servicing of financial
assets and extinguishments of liabilities and SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125 -- an amendment
of FASB Statement No. 125," which deferred for one year the effective date of
certain provisions. The company's adoption of SFAS No. 125 in the first quarter
of 1997 did not, and the subsequent adoption of SFAS No. 127 will not, have a
significant impact on results of operations or financial position.
In 1996, the American Institute of Certified Public Accountants issued Statement
of Position 96-1, "Environmental Remediation Liabilities." This statement, which
provides guidance on the recognition and disclosure of environmental
liabilities, is effective for fiscal years beginning after December 15, 1996.
The adoption of this statement in 1997 first quarter did not have a significant
impact on the company's results of operations or financial position.
Prospective Accounting Pronouncements
In 1997 first quarter, the FASB issued the following statements:
. SFAS No. 128, "Earnings per Share," which supersedes APB Opinion No. 15,
"Earnings per Share," and is effective for financial statements issued after
December 15, 1997. This statement replaces the presentation of primary
earnings per share (EPS) with a presentation of basic EPS, which excludes
dilution and is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding for the period.
Diluted EPS, which is computed similarly to fully diluted EPS pursuant to APB
Opinion No. 15, reflects the potential
<PAGE>
Weyerhaeuser Company
-10-
dilution that would occur if securities or other contracts to issue common
stock were exercised or converted to common stock or resulted in the issuance
of common stock that would then share in the earnings of the entity.
If SFAS No. 128 were implemented for the current quarter, the reported EPS
would be as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
March 30, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Basic earnings per share $ .10 $ .72
Diluted earnings per share $ .10 $ .72
</TABLE>
Options to purchase 1,217,350 shares of common stock at $45.94 per share were
outstanding during the thirteen week period ended March 31, 1996. These
options were not included in the computation of diluted EPS because the
options' exercise price was greater than the average market price of common
shares during the period.
. SFAS No. 129, "Disclosure of Information about Capital Structure," which is
effective for financial statements for periods ending after December 15, 1997,
continues the existing requirements to disclose the pertinent rights and
privileges of all securities other than common stock, but expands the number
of companies subject to portions of its requirements. The company's current
capital structure will not require any additional disclosures as a result of
this pronouncement.
Net Earnings Per Common Share
Net earnings per common share are based on the weighted average number of common
shares outstanding during the respective periods. Average common equivalent
shares (stock options) outstanding have not been included, as the computation
would not be dilutive. Weighted average common shares outstanding were
198,515,503 and 198,195,035 at March 30, 1997, and March 31, 1996, respectively.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Derivatives
The company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. They are used to manage well-defined
interest rate and foreign exchange risks. These include:
. Foreign exchange contracts, which are hedges for foreign denominated accounts
receivable and payable, have gains or losses recognized at settlement date.
. Interest rate swaps entered into with major banks or financial institutions in
which the company pays a fixed rate and receives a floating rate with the
interest payments being calculated on a notional amount. The premiums received
by the company on the sale of these swaps are treated as deferred income and
amortized against interest expense over the term of the agreements.
. Hedging transactions entered into by the company's mortgage banking subsidiary
to protect both the completed loan inventory and loans in process against
changes in interest rates. The financial instruments used to manage interest
rate risk are forward sales commitments, interest rate futures and options.
Hedging gains and losses realized during the commitment and warehousing period
are deferred to the extent of unrealized gains on the related mortgage loans
held for sale.
The company is exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments but does not expect any
counterparties to fail to meet their obligations. The company deals only with
highly rated counterparties.
<PAGE>
Weyerhaeuser Company
-11-
The notional amounts of these derivative financial instruments are $1 billion
and $807 million at March 30, 1997, and December 29, 1996, respectively. These
notional amounts do not represent amounts exchanged by the parties and, thus,
are not a measure of exposure to the company through its use of derivatives. The
exposure in a derivative contract is the net difference between what each party
is required to pay based on the contractual terms against the notional amount of
the contract, such as interest rates or exchange rates. The use of derivatives
does not have a significant effect on the company's results of operations or its
financial position.
Cash and Short-Term Investments
For purposes of cash flow and fair value reporting, short-term investments with
original maturities of 90 days or less are considered as cash equivalents.
Short-term investments are stated at cost, which approximates market.
Inventories
Inventories are stated at the lower of cost or market. Cost includes labor,
materials and production overhead. The last-in, first-out (LIFO) method is used
to cost the majority of domestic raw materials, in process and finished goods
inventories. LIFO inventories were $302 million and $296 million at March 30,
1997, and December 29, 1996, respectively. The balance of domestic raw material
and product inventories, all materials and supplies inventories, and all foreign
inventories is costed at either the first-in, first-out (FIFO) or moving average
cost methods. Had the FIFO method been used to cost all inventories, the amounts
at which product inventories are stated would have been $236 million and $239
million greater at March 30, 1997, and December 29, 1996, respectively.
Property and Equipment
The company's property accounts are maintained on an individual asset basis.
Betterments and replacements of major units are capitalized. Maintenance,
repairs and minor replacements are expensed. Depreciation is provided generally
on the straight-line or unit-of-production method at rates based on estimated
service lives. Amortization of logging railroads and truck roads is provided
generally as timber is harvested and is based upon rates determined with
reference to the volume of timber estimated to be removed over such facilities.
The cost and related depreciation of property sold or retired is removed from
the property and allowance for depreciation accounts and the gain or loss is
included in earnings.
Timber and Timberlands
Timber and timberlands are carried at cost less fee stumpage charged to
disposals. Fee stumpage is the cost of standing timber and is charged to fee
timber disposals as fee timber is harvested, lost as the result of casualty or
sold. Depletion rates used to relieve timber inventory are determined with
reference to the net carrying value of timber and the related volume of timber
estimated to be recoverable. Timber carrying costs are expensed as incurred. The
cost of timber harvested is included in the carrying values of raw material and
product inventories, and in the costs of products sold as these inventories are
disposed of.
Accounts Payable
The company's banking system provides for the daily replenishment of major bank
accounts as checks are presented. Accordingly, there were negative book cash
balances of $154 million and $164 million at March 30, 1997, and December 29,
1996, respectively. Such balances result from outstanding checks that had not
yet been paid by the bank and are reflected in accounts payable in the
consolidated balance sheets.
Income Taxes
Deferred income taxes are provided to reflect temporary differences between the
financial and tax bases of assets and liabilities using presently enacted tax
rates and laws.
<PAGE>
Weyerhaeuser Company
-12-
Pension Plans
The company has pension plans covering most of its employees. The U.S. plan
covering salaried employees provides pension benefits based on the employee's
highest monthly earnings for five consecutive years during the final ten years
before retirement. Plans covering hourly employees generally provide benefits of
stated amounts for each year of service. Contributions to U.S. plans are based
on funding standards established by the Employee Retirement Income Security Act
of 1974 (ERISA).
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the company provides certain health
care and life insurance benefits for some retired employees and accrues the
expected future cost of these benefits for its current eligible retirees and
some employees. All of the company's salaried employees and some hourly
employees may become eligible for these benefits when they retire.
Reclassifications
Certain reclassifications have been made to conform prior years' data to the
current format.
Real Estate and Financial Services
Real estate held for sale is stated at the lower of cost or fair value. The
determination of fair value is based on appraisals and market pricing of
comparable assets, when available, or the discounted value of estimated future
cash flows from these assets. Real estate held for development is stated at cost
to the extent it does not exceed the estimated undiscounted future net cash
flows, in which case, it is carried at fair value.
The company's financial services businesses are engaged in the mortgage banking
industry, hold mortgage-backed certificates and other financial instruments
pledged as collateral for collateralized mortgage obligation (CMO) bonds, and
also offer insurance services.
The company's mortgage banking business was servicing mortgage loans, which had
an aggregated principal balance of approximately $4.3 billion and $4.4 billion
at March 30, 1997, and December 29, 1996, respectively.
Mortgage notes held for sale are stated at the lower of cost or market, which is
computed by the aggregate method (unrealized losses are offset by unrealized
gains).
Mortgage-backed certificates are carried at par value, adjusted for any
unamortized discount or premium. Management's intent is to hold these
certificates until maturity. These certificates and other financial instruments
are pledged as collateral for the CMO bonds and are held by banks as trustees.
Principal and interest collections are used to meet the interest payments and
reduce the outstanding principal balance of the bonds.
The CMO bonds are the obligation of the issuer, and neither the company nor any
affiliated company has guaranteed or is otherwise obligated with respect to the
bonds. They are carried at amortized cost. Discounts and premiums are amortized
using a method that approximates the effective interest method over their
estimated lives.
<PAGE>
Weyerhaeuser Company
-13-
Note 2: Income Taxes
<TABLE>
<CAPTION>
Provisions for income taxes include the following: Thirteen Weeks Ended
--------------------
March 30, March 31,
Dollar amounts in millions 1997 1996
---------- ---------
<S> <C> <C>
Federal:
Current $ 3 $ 19
Deferred 6 50
---- ----
9 69
---- ----
State:
Current -- 3
Deferred 1 4
---- ----
1 7
---- ----
Foreign:
Current 2 8
Deferred -- (4)
---- ----
2 4
---- ----
Total $ 12 $ 80
==== ====
</TABLE>
Income tax provisions for interim periods are based on the current best estimate
of the effective tax rate expected to be applicable for the full year. The
effective tax rate reflects anticipated tax credits, foreign taxes and other tax
planning alternatives.
For the periods ended March 30, 1997, and March 31, 1996, the company's
provision for income taxes as a percent of earnings before income taxes is
greater than the 35% federal statutory rate due principally to the effect of
state income taxes. The effective tax rates for the thirteen week periods ended
March 30, 1997, and March 31, 1996, were 37% and 36%, respectively.
Deferred taxes are provided for the temporary differences between the financial
and tax bases of assets and liabilities, applying presently enacted tax rates
and laws. The major sources of these temporary differences include depreciable
and depletable assets, real estate, restructuring reserves, and pension and
retiree health care liabilities.
Note 3: Inventories
<TABLE>
<CAPTION>
March 30, Dec. 29,
1997 1996
Dollar amounts in millions --------- --------
<S> <C> <C>
Logs and chips $ 153 $ 120
Lumber, plywood and panels 176 148
Pulp, newsprint and paper 212 202
Containerboard, paperboard and packaging 112 108
Other products 139 146
Materials and supplies 287 277
------ ------
$1,079 $1,001
====== ======
</TABLE>
<PAGE>
Weyerhaeuser Company
-14-
Note 4: Property and Equipment
<TABLE>
<CAPTION>
March 30, Dec. 29,
1997 1996
Dollar amounts in millions --------- --------
<S> <C> <C>
Property and equipment, at cost:
Land $ 159 $ 158
Buildings and improvements 1,663 1,686
Machinery and equipment 9,681 9,713
Rail and truck roads and other 596 596
------- -------
12,099 12,153
Less allowance for depreciation
and amortization 5,212 5,146
------- -------
$ 6,887 $ 7,007
======= =======
</TABLE>
Note 5: Accrued Liabilities
<TABLE>
<CAPTION>
March 30, Dec. 29,
1997 1996
Dollar amounts in millions --------- --------
<S> <C> <C>
Payroll - wages and salaries, incentive awards,
retirement and vacation pay $233 $279
Taxes - social security and real
and personal property 65 57
Interest 40 79
Income taxes 5 51
Other 240 196
---- ----
$583 $662
==== ====
</TABLE>
Note 6: Short-Term Debt
The company has short-term bank credit lines that provide for borrowings of up
to the total amount of $375 million, all of which could be availed of by the
company, WRECO and WMC at March 30, 1997, and December 29, 1996. No portion of
these lines has been availed of by the company, WRECO or WMC at March 30, 1997,
and December 29, 1996. None of the entities referred to herein is a guarantor of
the borrowings of the others.
WMC has short-term special credit lines that provide for borrowings of up to
$230 million at March 30, 1997, and December 29, 1996. Borrowings against these
lines were $52 million and $54 million as of March 30, 1997, and December 29,
1996, respectively.
Note 7: Long-Term Debt
The company's lines of credit include a five-year competitive advance and
revolving credit facility agreement entered into in 1994 with a group of banks
that provides for borrowings of up to the total amount of $1.55 billion, all of
which is available to the company, and $1 billion, which is available to WMC.
Borrowings are at LIBOR or other such interest rates as mutually agreed to
between the borrower and lending banks.
At March 30, 1997, and December 29, 1996, respectively, WMC had $10 million and
$25 million outstanding against a one-year evergreen credit commitment of $35
million entered into in 1990.
WMC has a revolving credit agreement with a bank to provide for: (1) borrowings
of up to $35 million for two years at prime rate, LIBOR or such other rate as
may be agreed upon by WMC and the banks; (2) a commitment fee based on the
unused credit; and (3) conversion of the note as of July 1, 1998, to a five-year
term loan payable in equal quarterly installments.
-14-
<PAGE>
Weyerhaeuser Company
-15-
WFS has a revolving credit facility agreement that provides for: (1) borrowings
of up to $375 million and $450 million at March 30, 1997, and December 29, 1996,
respectively, at LIBOR or other such rates as may be agreed upon by WFS and the
banks; and (2) a commitment fee on the unused portion of the credit facility.
$355 million was outstanding under this facility at both March 30, 1997, and
December 29, 1996.
To the extent that these credit commitments expire more than one year after the
balance sheet date and are unused, an equal amount of commercial paper is
classifiable as long-term debt. Amounts so classified are:
<TABLE>
<CAPTION>
March 30, Dec. 29,
1997 1996
Dollar amounts in millions --------- --------
<S> <C> <C>
Weyerhaeuser $1,098 $889
Real estate and financial services 312 248
</TABLE>
No portion of these lines has been availed of by the company, WRECO, WMC or WFS
at March 30, 1997, and December 29, 1996, except as noted.
Total interest costs incurred by WRECO are capitalized and will ultimately be
accounted for as an element of operating costs.
The company's compensating balance agreements were not significant.
Note 8: Shareholders' Interest
Common shares reserved for stock option plans were 7,211,025 shares at March 30,
1997, and 6,243,102 shares at December 29, 1996.
Note 9: Commitments and Contingencies
The company's capital expenditures, excluding acquisitions, have averaged about
$912 million in recent years, but are expected to be approximately $750 million
in 1997; however, that expenditure level could be increased or decreased as a
consequence of future economic conditions.
The company is a party to legal proceedings and environmental matters generally
incidental to its business. Although the final outcome of any legal proceeding
or environmental matter is subject to a great many variables and cannot be
predicted with any degree of certainty, the company presently believes that the
ultimate outcome resulting from these proceedings and matters would not have a
material effect on the company's current financial position, liquidity or
results of operations; however, in any given future reporting period, such
proceedings or matters could have a material effect on results of operations.
<PAGE>
Weyerhaeuser Company
-16-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales and revenues and earnings before interest expense and income taxes
by segment are:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
March 30, March 31,
Dollar amounts in millions 1997 1996
--------- ----------
<S> <C> <C>
Net sales and revenues:
Timberlands and wood products $1,251 $1,116
Pulp, paper and packaging 1,106 1,217
Real estate 164 183
Financial services 50 49
Corporate and other 37 40
------ ------
$2,608 $2,605
====== ======
Earnings before interest expense and income taxes:
Timberlands and wood products $ 171 $ 152
Pulp, paper and packaging (1) (43) 162
Real estate 5 7
Financial services (2) 1 3
Corporate and other (3) (36) (43)
------ ------
$ 98 $ 281
====== ======
</TABLE>
(1) 1997 results include a special charge of $49 million for the consolidation,
closure or disposition of certain recycling facilities and the permanent
closure of the Longview, Washington corrugated medium machine.
(2) Includes net interest expense of $15 million and $16 million related to the
financial services businesses.
(3) 1997 results include income of $10 million from the net effect of interest
income from the favorable federal income tax decision related to timber
casualty losses incurred in the 1980 eruption of Mount St. Helens, and the
loss incurred in the sale of Shemin Nurseries, a wholesale nursery business
based in Danbury, Connecticut.
Consolidated Results
Net earnings for the 1997 first quarter were $21 million, or 10 cents per common
share, compared with $142 million or 72 cents per common share, in the prior
year. Included in the 1997 results was an after tax special charge of $25
million, or 12 cents per common share. This charge reflects the company's
ongoing efforts to narrow its portfolio and upgrade the quality of assets in the
core businesses. It includes losses from the anticipated consolidation, closure
or disposition of certain recycling facilities, the permanent closure of the
corrugated medium machine at Longview, Washington and the sale of Shemin
Nurseries, a wholesale nursery business based in Danbury, Connecticut. These
losses were offset, in part, by interest income from the favorable federal
income tax decision related to timber casualty losses incurred in the eruption
of Mount St. Helens in 1980.
Consolidated net sales and revenues for the quarter were $2.6 billion, matching
those reported in the same quarter a year earlier. Increases in domestic lumber
volumes and pricing were offset by weaker log exports and lower pricing in
oriented strandboard and most pulp, paper and packaging products.
Timberlands and Wood Products
Operating earnings for the quarter in the timberlands and wood products segment
were $171 million, an increase of 13 percent over the $152 million in the 1996
first quarter.
The segment reported net sales of $1.3 billion in the quarter, up from $1.1
billion a year earlier. Softwood lumber showed gains over the first quarter of
1996 with higher volumes and pricing. These gains were offset, in part, by
weaker export log markets, which were impacted by the stronger US dollar/Yen
exchange rate and lower Japanese housing starts, and by continued weakness in
oriented strandboard prices compared to a year ago.
<PAGE>
Weyerhaeuser Company
-17-
Third party sales and total production volumes for the major products in this
segment for the thirteen weeks ended March 30, 1997, and March 31, 1996, are as
follows:
<TABLE>
<CAPTION>
Third Party Sales Total Production
------------------- -------------------
Thirteen Weeks Thirteen Weeks
Ended Ended
------------------- -------------------
March 30, March 31, March 30, March 31,
Products (in millions) 1997 1996 1997 1996
- ---------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Raw materials--cubic feet 146 132 -- --
Logs--cubic feet -- -- 292 230
Softwood lumber--board feet 1,136 1,010 993 842
Softwood plywood and
veneer--square feet (3/8") 489 484 279 318
Composite panels--square feet (3/4") 143 153 123 137
Oriented strand board--square
feet (3/8") 562 460 426 391
Hardwood lumber--board feet 90 89 85 83
Engineered wood products--lineal feet 27 21 -- --
Hardwood doors (thousands) 168 146 182 146
</TABLE>
Pulp, Paper and Packaging
The pulp, paper and packaging segment's operating earnings were $6 million for
the first quarter of 1997, before the effect of special charges, compared to
$162 million for the first quarter of 1996. Including the $49 million pretax
charge for the consolidation, closure or disposition of certain recycling
facilities and the permanent closure of the Longview, Washington corrugated
medium machine, the segment reported a $43 million operating loss.
The segment's sales were $1.1 billion, down about one percent from the same
quarter last year as prices were lower across most product lines although
volumes were up.
Third party sales and total production volumes for the major products in this
segment for the thirteen weeks ended March 30, 1997, and March 31, 1996, are as
follows:
<TABLE>
<CAPTION>
Third Party Sales Total Production
------------------- -------------------
Thirteen Weeks Thirteen Weeks
Ended Ended
------------------- -------------------
March 30, March 31, March 30, March 31,
Products (in thousands) 1997 1996 1997 1996
- ----------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Pulp--air-dry metric tons 454 397 520 525
Newsprint--metric tons 160 135 173 134
Paper--tons 304 246 284 261
Paperboard--tons 59 46 49 48
Containerboard--tons 99 66 602 564
Packaging--MSF 10,953 10,016 11,465 10,627
Recycling--tons 550 443 929 801
</TABLE>
Real Estate and Financial Services
Real estate and financial services segments earned a combined $6 million in the
current quarter compared to $10 million for the same period last year. The 1996
results included the closing of several major commercial projects.
Costs and Expenses
Weyerhaeuser's first quarter 1997 costs of products sold is up $149 million over
1996, and as a percent of net sales was 79 percent in the current quarter
compared to 73 percent in the 1996 first quarter and 76 percent in the fourth
quarter of 1996, reflecting the significant decline in pulp, paper and packaging
pricing.
Depreciation, amortization and fee stumpage for 1997 first quarter increased $19
million, or 13 percent, over 1996 as new or acquired facilities were added and
optimization, expansion, modernization or upgrade projects were completed at
existing facilities. Non-cash charges to income include a charge of $49 million
for the closure or disposition of facilities.
<PAGE>
Weyerhaeuser Company
-18-
Weyerhaeuser's selling, general and administrative expenses were down $26
million, or 15 percent, from the prior year's first quarter. Cost improvements
in most areas, along with some reductions as a result of divestitures, accounted
for this decrease.
There were no significant changes in costs and expenses for the combined real
estate and financial services segments from period to period.
Other income (expense) is an aggregation of both recurring and occasional non-
operating income and expense items and, as a result, fluctuates from period to
period. Other than the $10 million net income effect of interest income from the
favorable federal income tax decision related to timber casualty losses incurred
in the 1980 eruption of Mount St. Helens and the loss incurred in the sale of
Shemin Nurseries, in the current quarter, no individual income or (expense) item
for the thirteen week periods ended March 30, 1997, and March 31, 1996, was
significant in relation to net earnings.
Liquidity and Capital Resources
General
The company is committed to the maintenance of a sound, conservative capital
structure. This commitment is based upon two considerations: the obligation to
protect the underlying interests of its shareholders and lenders and the desire
to have access, at all times, to all major financial markets.
The important elements of the policy governing the company's capital structure
are as follows:
. To view separately the capital structures of Weyerhaeuser Company,
Weyerhaeuser Real Estate Company and Weyerhaeuser Financial Services, Inc.,
given the very different nature of their assets and business activities. The
amount of debt and equity associated with the capital structure of each will
reflect the basic earnings capacity, real value and unique liquidity
characteristics of the assets dedicated to that business.
. The combination of maturing short-term debt and the structure of long-term
debt will be managed judiciously to minimize liquidity risk.
Operations
Weyerhaeuser's net cash used by operations was $2 million in the first quarter
of 1997 compared to a use of $63 million in the first quarter of 1996.
In the current quarter, funds were provided from net income of $17 million along
with $161 million from depreciation, amortization and fee stumpage and the $49
million non-cash charge for closure or disposition of facilities. Working
capital, net of the effects of the sale of a business, used funds of $220
million in the quarter with significant items being increases of $54 million in
accounts receivable and $78 million in inventories, spread across all product
lines, and a decrease of $72 million in accounts payable and accrued
liabilities, primarily payroll, interest and income taxes. The product inventory
turnover rate increased to 10.9 turns in the quarter, up slightly from the
fourth quarter of 1996; but a significant increase from the 8.7 turns in the
first quarter of 1996.
In the same quarter of 1996, significant items creating a working capital
increase of $371 million were $132 million in increased inventory and a
reduction of $218 million in accounts payable and accrued liabilities.
The net cash used by operations in the combined real estate and financial
services segments in the current quarter was $72 million, including $53 million
for real estate and land purchases and development. An increase of $138 million
in mortgages held for sale, as originations exceeded sales, was the principal
use of cash by operations in the first quarter of the previous year.
Earnings before interest expense and income taxes plus non-cash charges for the
thirteen week periods ended March 30, 1997, and March 31, 1996, were $224
million and $198 million, respectively, for the timberlands and wood products
segment, and $111 million and $252 million, respectively, for the pulp, paper
and packaging segment.
<PAGE>
Weyerhaeuser Company
-19-
Investing
Capital expenditures for the quarter were $129 million compared to $421 million,
which included $231 million for the acquisition of southern U.S. timber and
timberlands, in the same period last year. The 1997 spending by segment was $57
million for timberlands and wood products, $68 million for the pulp, paper and
packaging segment and $4 million for other segments. The company currently
anticipates capital expenditures, excluding acquisitions, to approximate $750
million for the year. However, this expenditure level could increase or decrease
as a consequence of future economic conditions.
The cash needed to meet these and other company needs is generated from internal
cash flow and short-term borrowing.
The company also received $12 million in proceeds from the sale of the wholesale
nursery business in the 1997 first quarter.
The combined real estate and financial services segments had minimal net cash
flows from investing activities in the 1997 first quarter; however, in the same
quarter of 1996, proceeds from the sale of capitalized servicing rights and
adjustable rate mortgages generated proceeds of $83 million.
Financing
During the quarter, Weyerhaeuser increased commercial paper borrowings by $208
million while paying down debt of $27 million, accounting for the majority of
the $183 million increase in debt. This increase along with a decrease in
shareholders' equity, caused the company's debt to total capital ratio to
increase from 37.9 percent at December 1996, and 38.9 percent at March 31, 1996,
to 39.3 percent at the end of the current quarter.
The increase in the 1996 first quarter was due primarily to issuances of $675
million in notes and commercial paper.
The net increase of $64 million in real estate and financial services segments'
long-term debt was primarily from $94 million of commercial paper borrowings,
used to fund the increase in mortgage notes held for sale, and real estate
purchase and development activities, offset in part by a $30 million pay down of
debt.
During the first quarter of 1997, the company paid $80 million in cash dividends
compared to $79 million in 1996 first quarter.
In the 1996 first quarter, the company repurchased $34 million of common shares
as a part of the 11 million share repurchase program.
Other Items
On April 10, the company announced an agreement to purchase a 51 percent
interest in an existing New Zealand joint venture located in the northern end of
the South Island. The company will pay $185 million for timber, land and related
assets, plus an additional amount for net working capital at closing. The
forested area of the joint venture consists of 148,000 acres of Crown Forest
License cutting rights and approximately 45,000 acres of freehold land. The
company will become responsible for the management and marketing activities of
the joint venture. The acquisition is subject to approvals by the New Zealand
government and the investors in RII New Zealand Forests I Inc., which hold the
remaining 49 percent interest in the joint venture.
The company announced it has reached an agreement to sell its wholly owned
subsidiary, Weyerhaeuser Mortgage Company, to WMC Acquisition Co., an entity
formed by Apollo Management, L.P., and Spring Mountain Escrow, Inc. The
transaction is expected to close in the second quarter of 1997, subject to
regulatory approvals and other contingencies. The company expects this
transaction to have a material favorable effect on operating results and cash
flow if it closes.
<PAGE>
Weyerhaeuser Company
-20-
Contingencies
The company is a party to legal proceedings and environmental matters generally
incidental to its business. Although the final outcome of any legal proceeding
or environmental matter is subject to a great many variables and cannot be
predicted with any degree of certainty, the company presently believes that the
ultimate outcome resulting from these proceedings and matters would not have a
material effect on the company's current financial position, liquidity or
results of operations; however, in any given future reporting period such
proceedings or matters could have a material effect on results of operations.
Part II. Other Information
Item 1. Legal Proceedings
Trial began in May 1992 in a federal income tax refund case that the company
filed in July 1989 in the United States Claims Court. The complaint contended
that the company overpaid federal income taxes in 1977 through 1983. The alleged
overpayments resulted from the disallowance of certain timber casualty losses
and certain deductions claimed by the company arising from export transactions.
The refund sought was approximately $29 million, plus statutory interest from
the dates of the alleged overpayments. The company settled the portion of the
case relating to export transactions and received a tax refund of approximately
$10 million, plus statutory interest. In September 1994, the United States Court
of Federal Claims (successor to the United States Claims Court) issued an
opinion on the casualty loss issues which resulted in the allowance of
additional tax refunds of approximately $2 million, plus statutory interest.
Both the company and the government appealed the decision. On August 2, 1996,
the Court of Appeals for the Federal Circuit issued its opinion on the remaining
timber casualty loss issues, ruling in favor of the company on both the
company's appeal and the government's appeal. The United States Supreme Court
denied the government's request for certiorari on January 21, 1997.
On March 6, 1992, the company filed a complaint in the Superior Court for King
County, Washington, against a number of insurance companies. The complaint seeks
a declaratory judgment that the insurance companies named as defendants are
obligated under the terms and conditions of the policies sold by them to the
company to defend the company and to pay, on the company's behalf, certain
claims asserted against the company. The claims relate to alleged environmental
damage to third-party sites and to some of the company's own property to which
allegedly toxic material was delivered or on which allegedly toxic material was
placed in the past. Since December 1992, the company has agreed to settlements
with all but one of the defendants. The remaining defendant provided first layer
excess coverage during a three year period. That defendant's liability on groups
of sites is being tried in phases. Two trials against the remaining defendant,
affecting nine sites, began in October 1994 and February 1996 and resulted in
verdicts assigning 100 percent clean-up responsibility to the defendant on three
sites, partial responsibility on three others and a finding of no liability as
to the remaining three. The trial court has ruled that the primary policy has
been exhausted and imposed an obligation on the remaining defendant to provide a
defense on one of the sites, a ruling that may be expanded to include other
sites. After voluntary dismissal on 6 sites, trial for the remaining 10 sites
has been set for June 1997.
The company received from the Lane County, Oregon Regional Air Pollution Control
Authority (LRAPA) a draft Notice of Violation which seeks penalties for alleged
Prevention of Significant Deterioration (PSD) violations at the company's
Springfield, Oregon, particleboard operations. LRAPA informed the company in
July 1995 that it will withdraw its draft Notice of Violation (NOV) and will not
seek fines or penalties. On September 15, 1995, however, LRAPA issued a revised
draft NOV (the Revised Draft NOV), which alleged that the Springfield
particleboard facility had violated a condition of its Air Contaminant Discharge
Permit. The allegations in the Revised Draft NOV are based upon the same facts
and circumstances relied upon by LRAPA in the prior draft NOV. The company has
contested LRAPA's issuance of the Revised Draft NOV. On June 8, 1996, the
company and LRAPA entered into a Stipulated Final Order (SFO) to resolve all
past and ongoing alleged PSD issues, contested matters and alleged violations
associated with extended hours of operation at the Springfield particleboard
facility. In exchange for a full resolution of all past and ongoing contested
matters, the company agreed to pay a total civil penalty of $19.5 thousand, of
which $7.5 thousand was paid directly to LRAPA. The remaining $12 thousand civil
penalty was suspended. The company also agreed to implement a Supplemental
Environmental Project (SEP) consisting of the funding of the preparation of a
nitrogen oxides (Nox) emission inventory for Lane County. The emission inventory
will be conducted by an outside environmental consultant at a cost not to exceed
$40 thousand.
<PAGE>
Weyerhaeuser Company
-21-
PART II
Item 1. Legal Proceedings - Continued
- --------------------------------------
The company conducted a review of its 10 major pulp and paper facilities to
evaluate the facilities' compliance with federal PSD regulations. The results of
the reviews were disclosed to seven state agencies and the Environmental
Protection Agency (EPA) during 1994 and 1995. At the Cosmopolis, Washington,
Columbus, Mississippi, and Flint River, Georgia, facilities, the state
regulatory agencies agreed with the company's conclusions regarding the status
of each facility. For the Cosmopolis facility, the Washington Department of
Ecology agreed the changes made at the facility did not require PSD review. For
the Columbus and Flint River facilities, the states concluded the original PSD
permits issued to the facilities require updating. The company will update
emissions data for the Columbus and Flint River facilities as part of the Title
V permitting process. No penalties were assessed for the issues identified at
Columbus and Flint River. Agreements resolving the alleged PSD issues have been
reached with the states of Washington, Oklahoma and North Carolina, as noted
below. No issues were identified at the company's Rothschild, Wisconsin,
facility. In April 1995, EPA Region X issued a NOV to the company and to North
Pacific Paper Corporation (NORPAC), a joint venture in which the company has an
80 percent ownership interest. The NOV addresses alleged PSD violations at
NORPAC's Longview, Washington, newsprint manufacturing facility. A settlement
resolving alleged PSD issues at the Longview/NORPAC complex was reached with the
State of Washington on January 26, 1996. On November 14, 1995, the company
entered into a settlement with the State of Oklahoma to resolve alleged PSD
violations at the company's Valliant, Oklahoma, containerboard manufacturing
facility. The company also entered into Special Orders by Consent with the State
of North Carolina to resolve alleged PSD issues at the New Bern, North Carolina,
pulp mill and the Plymouth, North Carolina, pulp and paper complex. No decision
has been made by the LRAPA concerning alleged PSD and permit violations at the
company's Springfield, Oregon, containerboard manufacturing facility.
The Washington Department of Ecology investigated the accidental release of
chorine, chlorine dioxide and noncondensable gasses in July 1994 at the
company's pulp mill in Longview, and issued a $10 thousand penalty for the
chlorine release and a $5 thousand penalty for the noncondensable gasses release
which have been paid by the company. In June 1995, EPA issued an Administrative
Complaint against the company, seeking penalties of $225 thousand and alleging a
failure to timely report the chlorine release. The company settled the matter on
January 21, 1997, agreeing to pay a penalty of $68 thousand and to perform
supplemental environmental projects in the amount of $110 thousand. On September
25, 1996, the company learned that the EPA has commenced a preliminary criminal
investigation of the incident, and in late November learned that the
investigation had been discontinued.
The Washington Department of Ecology issued a $10 thousand penalty to the
company because of three accidental chlorine releases which occurred at the
company's pulp mill in Longview on March 18, 1996, which has been paid. The EPA
is also investigating.
The Washington Department of Ecology has issued a notice of violation and a $40
thousand penalty because of an accidental spill of an estimated 8,700 gallons of
crude sulfate turpentine on January 27, 1997, at the company's pulp and paper
operations in Longview. The EPA is also investigating.
On April 9, 1993, the company entered into a SFO with the Oregon Department of
Environmental Quality (DEQ) for alleged air emissions in excess of permit levels
and PSD noncompliance at the company's North Bend, Oregon, containerboard
facility. The SFO established a compliance schedule for installing control
technology. A Supplemental SFO assessed a $247 thousand initial penalty and a
$500 per day stipulated penalty until compliance was demonstrated. On November
15, 1995, DEQ issued a letter, indicating that the company had satisfied the
requirements of the SFO and Supplemental SFO. No further penalties were assessed
against the company. Termination of the SFO will occur after issuance of the
federal air operating permit to the North Bend containerboard facility. The
North Bend containerboard facility received its federal air operating permit on
July 1, 1996.
On June 20, 1996, the Wisconsin Department of Natural Resources (WDNR) issued a
NOV for alleged air violations at the Marshfield, Wisconsin, wood products
manufacturing facility. No penalty was assessed in the NOV. The NOV was referred
to the Wisconsin Department of Justice (WDOJ) for enforcement action on July 2,
1996. The WDOJ accepted the referral. Settlement negotiations with WDNR and WDOJ
are ongoing.
On October 2, 1996, the WDNR conducted an inspection of a building demolition
project at the company's Marshfield, Wisconsin facility. The WDNR noted several
potential non-compliance issues in the work performed by the asbestos abatement
subcontractor retained for the project. Upon learning of the issues observed by
WDNR, the company removed the asbestos abatement subcontractor from the
plantsite. The WDNR and EPA Region V are reviewing the work performed to
evaluate whether an enforcement action should be brought against the asbestos
abatement subcontractor, the general contractor, and/or the company.
<PAGE>
Weyerhaeuser Company
-22-
PART II
Item 1. Legal Proceedings - Continued
- --------------------------------------
On November 2, 1992, an action was filed against the company in the Circuit
Court for the First Judicial District of Hinds County, Mississippi, on behalf of
a purported class of riparian property owners in Mississippi and Alabama whose
properties are located on the Tennessee Tombigbee Waterway, Aliceville Lake,
Cedar Creek and the Magoway Creek. The complaint seeks $1 billion in
compensatory and punitive damages for diminution in property value, personal
injuries and mental anguish allegedly resulting from the discharge of purported
hazardous substances, including dioxins and furans, by the company's pulp and
paper mill in Columbus, Mississippi, and the alleged fraudulent concealments of
such discharge. The complaint also seeks an injunction prohibiting future
releases and the removal of hazardous substances allegedly released in the past.
On August 20, 1993, a companion action was filed in Greene County, Alabama, on
behalf of a similar purported class of riparian owners with essentially the same
claims as the Mississippi case. By order dated April 5, 1995, venue of the
Alabama action was transferred to Sumter County, Alabama. On January 20, 1995,
the court in the Alabama action certified a class of all persons who, as of the
date the action commenced, were riparian owners, lessees and licensees of
properties located on the Tennessee Tombigbee Waterway in Greene, Sumter,
Pickens and Marengo counties, Alabama, and Lowndes and Noxubee counties,
Mississippi, to determine whether the company is liable to the members of the
class for compensatory and/or punitive damages and to determine the amount of
punitive damages, if any, to be awarded to the class as a whole. By order dated
April 12, 1995, as orally amended on February 1, 1996, the geographical
boundaries of the class were amended to run from below the Columbus mill's
wastewater discharge pipe to just above the confluence of the Black Warrior
River and the Tennessee Tombigbee Waterway. The class is estimated to range from
approximately 1,000 to 1,500 members. In late July, 1996, the company reached an
agreement to settle both the Mississippi action and the Alabama action for $2.5
million. The agreement is subject to the approval of the court in the Alabama
action.
In November 1996, an action was filed against the company in Superior Court for
King County, Washington, on behalf of a purported class of all individuals and
entities that own property in the United States on which exterior hardboard
siding manufactured by the company has been installed since 1980. The action
alleges the company has manufactured and distributed defective hardboard siding
and has breached express warranties and consumer protection statutes in its sale
of hardboard siding. The action seeks compensatory damages, including
prejudgment interest, and seeks damages for the cost of replacing siding that
rots subsequent to the entry of any judgment. In January 1997, an action was
filed, also in Superior Court for King County, Washington, on behalf of a
purported class of all individuals, proprietorships, partnerships, corporations,
and other business entities in the United States on whose homes, condominiums,
apartment complexes or commercial buildings hardboard siding manufactured by the
company has been installed. The action alleges the company has breached express
and implied warranties in its sale of hardboard siding and also has violated the
Consumer Protection Act of the State of Washington. The action seeks damages,
prejudgment interest, costs and reasonable attorney fees. The company is a
defendant in approximately fifteen other hardboard siding cases, one of which
purports to be a class action on behalf of purchasers of single- or multi-family
residences in Nebraska that contain the company's hardboard siding.
The company is also a party to various proceedings relating to the clean-up of
hazardous waste sites under the Comprehensive Environmental Response
Compensation and Liability Act, commonly known as "Superfund," and similar state
laws. The EPA and/or various state agencies have notified the company that it
may be a potentially responsible party with respect to other hazardous waste
sites as to which no proceedings have been instituted against the company. The
company is also a party to other legal proceedings generally incidental to its
business. Although the final outcome of any legal proceeding is subject to a
great many variables and cannot be predicted with any degree of certainty, the
company presently believes that any ultimate outcome resulting from the legal
proceedings discussed herein, or all of them combined, would not have a material
effect on the company's current financial position, liquidity or results of
operations; however, in any given future reporting period, such legal
proceedings could have a material effect on results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) The registrant filed reports on Form 8-K dated January 22, February 24, and
April 15, 1997, reporting information under Item 5, Other Events.
<PAGE>
Weyerhaeuser Company
-23-
This page intentionally left blank.
<PAGE>
EXHIBIT 13(c)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
[X] 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the twenty-six weeks ended June 29, 1997 or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______ to_______
Commission File Number 1-4825
WEYERHAEUSER COMPANY
A Washington Corporation (IRS Employer Identification
No. 91-0470860)
Tacoma, Washington 98477
Telephone (253) 924-2345
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------------------- ----------------------
Common Shares ($1.25 par value) Chicago Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
The number of shares outstanding of the registrant's class of common stock, as
of August 1, 1997 was 199,396,624 common shares ($1.25 par value).
<PAGE>
Weyerhaeuser Company
-2-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Index to Form 10-Q Filing
For the Twenty-six Weeks Ended June 29, 1997
<TABLE>
<CAPTION>
Page No.
-----------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Earnings 3
Consolidated Balance Sheet 4-5
Consolidated Statement of Cash Flows 6-7
Notes to Financial Statements 9-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16-21
Part II. Other Information
Item 1. Legal Proceedings 21-23
Item 2. Changes in Securities (not applicable)
Item 3. Defaults upon Senior Securities (not applicable)
Item 4. Submission of Matters to a Vote
of Security Holders 23
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K 23
</TABLE>
The financial information included in this report has been prepared in
conformity with accounting practices and methods reflected in the financial
statements included in the annual report (Form 10-K) filed with the Securities
and Exchange Commission for the year ended December 29, 1996. Though not
examined by independent public accountants, the financial information reflects,
in the opinion of management, all adjustments necessary to present a fair
statement of results for the interim periods indicated. The results of
operations for the twenty-six week period ending June 29, 1997 should not be
regarded as necessarily indicative of the results that may be expected for the
full year.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
WEYERHAEUSER COMPANY
By /s/ K. J. Stancato
-------------------
K. J. Stancato
Duly Authorized Officer and
Principal Accounting Officer
August 11, 1997
<PAGE>
Weyerhaeuser Company
-3-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
------------------
CONSOLIDATED EARNINGS
For the periods ended
June 29, 1997 and June 30, 1996
(Dollar amounts in millions except per share figures)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Twenty-six
weeks ended weeks ended
----------------- ----------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales and revenues:
Weyerhaeuser $ 2,680 $ 2,643 $ 5,074 $ 5,016
Real estate and financial services 229 243 443 475
------- ------- ------- -------
Net sales and revenues 2,909 2,886 5,517 5,491
------- ------- ------- -------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 2,061 2,024 3,949 3,763
Depreciation, amortization and
fee stumpage 155 146 316 288
Selling, general and
administrative expenses 195 169 347 347
Research and development expenses 15 13 28 27
Taxes other than payroll and
income taxes 38 40 75 77
Charge for closure or disposition
of facilities 15 -- 64 --
------- ------- ------- -------
2,479 2,392 4,779 4,502
------- ------- ------- -------
Real estate and financial services:
Costs and operating expenses 187 184 340 348
Depreciation and amortization 4 4 8 9
Selling, general and
administrative expenses 25 39 70 76
Taxes other than payroll and
income taxes 2 2 4 4
------- ------- ------- -------
218 229 422 437
------- ------- ------- -------
Total costs and expenses 2,697 2,621 5,201 4,939
------- ------- ------- -------
Operating income 212 265 316 552
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 69 72 138 137
Less interest capitalized 4 8 8 14
Other income (expense), net (14) (31) (16) (24)
Real estate and financial services:
Interest expense incurred 28 35 61 69
Less interest capitalized 17 16 35 34
Other income (expense), net 50 10 61 13
------- ------- ------- -------
Earnings before income taxes 172 161 205 383
Income taxes (Note 2) 63 58 75 138
------- ------- ------- -------
Net earnings $ 109 $ 103 $ 130 $ 245
======= ======= ======= =======
Per common share (Note 1):
Net earnings $ .56 $ .52 $ .66 $ 1.24
======= ======= ======= =======
Dividends paid $ .40 $ .40 $ .80 $ .80
======= ======= ======= =======
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
-4-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
------------------
CONSOLIDATED BALANCE SHEET
June 29, 1997 and December 29, 1996
(Dollar amounts in millions)
<TABLE>
<CAPTION>
June 29, Dec. 29,
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Assets
- ------
Weyerhaeuser
Current assets:
Cash and short-term investments (Note 1) $ 18 $ 33
Receivables, less allowances 1,001 902
Inventories (Note 3) 950 1,001
Prepaid expenses 301 289
------- -------
Total current assets 2,270 2,225
Property and equipment (Note 4) 6,848 7,007
Construction in progress 462 417
Timber and timberlands at cost, less fee
stumpage charged to disposals 1,059 1,073
Other assets and deferred charges 231 246
------- -------
10,870 10,968
------- -------
Real estate and financial services
Cash and short-term investments,
including restricted deposits 21 38
Receivables, less discounts and allowances 72 99
Mortgage notes held for sale -- 334
Mortgage loans receivable 70 133
Mortgage-backed certificates and
other pledged financial instruments 141 154
Real estate in process of development and for sale 702 680
Land being processed for development 802 719
Investments in and advances to joint ventures
and limited partnerships, less reserves 111 115
Rental properties, less accumulated depreciation 142 150
Other assets 70 206
------- -------
2,131 2,628
------- -------
Total assets $13,001 $13,596
======= =======
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
-5-
<TABLE>
<CAPTION>
June 29, Dec. 29,
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' interest
- --------------------------------------
Weyerhaeuser
Current liabilities:
Notes payable $ 17 $ 16
Current maturities of long-term debt 10 80
Accounts payable (Note 1) 659 725
Accrued liabilities (Note 5) 600 662
------- -------
Total current liabilities 1,286 1,483
Long-term debt (Note 7) 3,498 3,546
Deferred income taxes 1,351 1,324
Deferred pension and other liabilities 466 493
Minority interest in subsidiaries 117 113
Commitments and contingencies (Note 9) -- --
------- -------
6,718 6,959
------- -------
Real estate and financial services
Notes payable and commercial paper 294 245
Long-term debt (Note 7) 1,197 1,537
Other liabilities 209 251
Commitments and contingencies (Note 9) -- --
------- -------
1,700 2,033
------- -------
Total liabilities 8,418 8,992
------- -------
Shareholders' interest (Note 8)
Common shares: authorized 400,000,000 shares,
issued 206,072,890 shares, $1.25 par value 258 258
Other capital 401 407
Cumulative translation adjustment (101) (93)
Retained earnings 4,344 4,372
Treasury common shares, at cost: 7,254,493
and 7,736,601 (319) (340)
------- -------
Total shareholders' interest 4,583 4,604
------- -------
Total liabilities and shareholders' interest $13,001 $13,596
======= =======
</TABLE>
<PAGE>
Weyerhaeuser Company
-6-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the twenty-six week periods ended June 29, 1997 and June 30, 1996
(Dollar amounts in millions)
(Unaudited)
<TABLE>
<CAPTION>
Real Estate and
Consolidated Weyerhaeuser Financial Services
----------------- ----------------- ------------------
June 29, June 30, June 29, June 30, June 29, June 30,
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash provided by (used for) operations:
Net earnings $ 130 $ 245 $ 94 $ 237 $ 36 $ 8
Non-cash charges to income:
Depreciation, amortization and fee stumpage 324 297 316 288 8 9
Deferred income taxes, net 42 97 28 58 14 39
Charge for closure or disposition of facilities 64 -- 64 -- -- --
Decrease (increase) in working capital:
Accounts receivable (100) (59) (101) (57) 1 (2)
Inventories, prepaid expenses, real estate and land (71) 73 38 (23) (109) 96
Mortgage notes held for sale and mortgage loans
receivable (74) (87) -- -- (74) (87)
Accounts payable and accrued liabilities (108) (263) (124) (250) 16 (13)
Loss on disposition of assets 10 4 10 3 -- 1
(Gain) loss on disposition of a business (37) -- 8 -- (45) --
Other 15 (44) (15) (12) 30 (32)
----- ----- ----- ----- ----- -----
Cash provided by (used for) operations 195 263 318 244 (123) 19
----- ----- ----- ----- ----- -----
Cash provided by (used for) investing activities:
Property and equipment (252) (371) (251) (364) (1) (7)
Timber and timberlands (52) (16) (52) (16) -- --
Property and equipment and timber and timberlands -- (448) -- --
from acquisitions -- (448)
Proceeds from sale of:
Property and equipment 15 12 14 12 1 --
Mortgage and investment securities 15 109 -- -- 15 109
Businesses 204 -- 12 -- 192 --
Intercompany advances -- -- 200 (16) (200) 16
Other 17 (30) 5 (39) 12 9
----- ----- ----- ----- ----- -----
Cash provided by (used for) investing activities (53) (744) (72) (871) 19 127
----- ----- ----- ----- ----- -----
Cash provided by (used for) financing activities:
Issuances of debt 14 6 5 6 9 --
Sale of industrial revenue bonds 38 33 38 33 -- --
Notes and commercial paper borrowings, net 105 855 (83) 899 188 (44)
Cash dividends on common shares (158) (158) (158) (158) -- --
Payments on debt (187) (237) (77) (131) (110) (106)
Purchase of treasury common shares (16) (34) (16) (34) -- --
Exercise of stock options 31 18 31 18 -- --
Other (1) -- (1) -- -- --
----- ----- ----- ----- ----- -----
Cash provided by (used for) financing activities (174) 483 (261) 633 87 (150)
----- ----- ----- ----- ----- -----
Net increase (decrease) in cash and
short-term investments (32) 2 (15) 6 (17) (4)
Cash and short-term investments at beginning of year 71 84 33 34 38 50
----- ----- ----- ----- ----- -----
Cash and short-term investments at end of period $ 39 $ 86 $ 18 $ 40 $ 21 $ 46
===== ===== ===== ===== ===== =====
Cash paid (received) during the period for:
Interest, net of amount capitalized $ 162 $ 157 $ 134 $ 127 $ 28 $ 30
===== ===== ===== ===== ===== =====
Income taxes $ 14 $ 117 $ 52 $ 134 $ (38) $ (17)
===== ===== ===== ===== ===== =====
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
-7-
This page intentionally left blank.
<PAGE>
Weyerhaeuser Company
-8-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
NOTES TO FINANCIAL STATEMENTS
For the twenty-six week periods ended June 29, 1997 and June 30, 1996
Note 1: Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of Weyerhaeuser
Company and all of its majority-owned domestic and foreign subsidiaries.
Significant intercompany transactions and accounts are eliminated.
Certain of the consolidated financial statements and notes to financial
statements are presented in two groupings: (1) Weyerhaeuser Company
(Weyerhaeuser, or the Company), which is principally engaged in the growing and
harvesting of timber and the manufacture, distribution and sale of forest
products, and (2) real estate and financial services, which includes
Weyerhaeuser Real Estate Company (WRECO), which is involved in real estate
development and construction, and Weyerhaeuser Financial Services, Inc. (WFS).
Nature of Operations
The Company's principal business segments, which account for the majority of
sales, earnings and the asset base, are:
. Timberlands and wood products, which is engaged in the management of 5.3
million acres of company-owned and .2 million acres of leased forestland in
the United States and 23.7 million acres of forestland in Canada under long-
term licensing arrangements and the production of a full line of solid wood
products that are sold primarily through the Company's own sales
organizations to wholesalers, retailers and industrial users in North
America, the Pacific Rim and Europe.
. Pulp, paper and packaging, which manufactures and sells pulp, newsprint,
paper, paperboard and containerboard in North American, Pacific Rim and
European markets, and packaging products for the domestic markets, and which
operates an extensive wastepaper recycling system that serves company mills
and worldwide markets.
Accounting Pronouncements Implemented
In 1996, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," to provide
accounting and reporting guidance for transfers and servicing of financial
assets and extinguishments of liabilities and SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125 -- an amendment
of FASB Statement No. 125," which deferred for one year the effective date of
certain provisions. The Company's adoption of SFAS No. 125 in 1997 did not, and
the subsequent adoption of SFAS No. 127 will not, have a significant impact on
results of operations or financial position.
In 1996, the American Institute of Certified Public Accountants issued Statement
of Position 96-1, "Environmental Remediation Liabilities." This statement, which
provides guidance on the recognition and disclosure of environmental
liabilities, is effective for fiscal years beginning after December 15, 1996.
The adoption of this statement in 1997 did not have a significant impact on the
Company's results of operations or financial position.
Prospective Accounting Pronouncements
In 1997 first quarter, the FASB issued the following statements:
. SFAS No. 128, "Earnings per Share," which supersedes APB Opinion No. 15,
"Earnings per Share," and is effective for financial statements issued after
December 15, 1997. This statement replaces the presentation of primary
earnings per share (EPS) with a presentation of basic EPS, which excludes
dilution and is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding for the period.
Diluted EPS, which is computed similarly to fully diluted EPS pursuant to
APB Opinion No. 15, reflects the potential
<PAGE>
Weyerhaeuser Company
-9-
dilution that would occur if securities or other contracts to issue common
stock were exercised or converted to common stock or resulted in the
issuance of common stock that would then share in the earnings of the
entity.
If SFAS No. 128 were implemented for the current year, the reported EPS
would be as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Twenty-six Weeks
Ended Ended
------------------ ------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic earnings per share $ .56 $ .52 $ .66 $ 1.24
Diluted earnings per share $ .55 $ .52 $ .65 $ 1.24
</TABLE>
. Options to purchase 1,216,850 shares at $45.94 per share and 4,700 shares at
$47.13 per share were outstanding during the twenty-six week period ended
June 30, 1996. These options were not included in the computation of diluted
EPS for that period because the option exercise prices were greater than the
average market price of common shares during the period.
. SFAS No. 129, "Disclosure of Information about Capital Structure," which is
effective for financial statements for periods ending after December 15,
1997, continues the existing requirements to disclose the pertinent rights
and privileges of all securities other than common stock, but expands the
number of companies subject to portions of its requirements. The Company's
current capital structure will not require any additional disclosures as a
result of this pronouncement.
Net Earnings Per Common Share
Net earnings per common share are based on the weighted average number of common
shares outstanding during the respective periods. Average common equivalent
shares (stock options) outstanding have not been included, as the computation
would not be dilutive. Weighted average common shares outstanding were
198,459,704 and 198,313,429 at June 29, 1997, and June 30, 1996, respectively.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Derivatives
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. They are used to manage well-defined
interest rate and foreign exchange risks. These include:
. Foreign exchange contracts, which are hedges for foreign denominated
accounts receivable and payable, have gains or losses recognized at
settlement date.
. Interest rate swaps entered into with major banks or financial institutions
in which the Company pays a fixed rate and receives a floating rate with the
interest payments being calculated on a notional amount. The premiums
received by the Company on the sale of these swaps are treated as deferred
income and amortized against interest expense over the term of the
agreements.
<PAGE>
Weyerhaeuser Company
-10-
The Company is exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments but does not expect any
counterparties to fail to meet their obligations. The Company deals only with
highly rated counterparties.
The notional amounts of these derivative financial instruments are $493 million
and $807 million at June 29, 1997, and December 29, 1996, respectively. These
notional amounts do not represent amounts exchanged by the parties and, thus,
are not a measure of exposure to the Company through its use of derivatives. The
exposure in a derivative contract is the net difference between what each party
is required to pay based on the contractual terms against the notional amount of
the contract, such as interest rates or exchange rates. The use of derivatives
does not have a significant effect on the Company's results of operations or its
financial position.
Cash and Short-Term Investments
For purposes of cash flow and fair value reporting, short-term investments with
original maturities of 90 days or less are considered as cash equivalents.
Short-term investments are stated at cost, which approximates market.
Inventories
Inventories are stated at the lower of cost or market. Cost includes labor,
materials and production overhead. The last-in, first-out (LIFO) method is used
to cost the majority of domestic raw materials, in process and finished goods
inventories. LIFO inventories were $240 million and $296 million at June 29,
1997, and December 29, 1996, respectively. The balance of domestic raw material
and product inventories, all materials and supplies inventories, and all foreign
inventories is costed at either the first-in, first-out (FIFO) or moving average
cost methods. Had the FIFO method been used to cost all inventories, the amounts
at which product inventories are stated would have been $245 million and $239
million greater at June 29, 1997, and December 29, 1996, respectively.
Property and Equipment
The Company's property accounts are maintained on an individual asset basis.
Betterments and replacements of major units are capitalized. Maintenance,
repairs and minor replacements are expensed. Depreciation is provided generally
on the straight-line or unit-of-production method at rates based on estimated
service lives. Amortization of logging railroads and truck roads is provided
generally as timber is harvested and is based upon rates determined with
reference to the volume of timber estimated to be removed over such facilities.
The cost and related depreciation of property sold or retired is removed from
the property and allowance for depreciation accounts and the gain or loss is
included in earnings.
Timber and Timberlands
Timber and timberlands are carried at cost less fee stumpage charged to
disposals. Fee stumpage is the cost of standing timber and is charged to fee
timber disposals as fee timber is harvested, lost as the result of casualty or
sold. Depletion rates used to relieve timber inventory are determined with
reference to the net carrying value of timber and the related volume of timber
estimated to be recoverable. Timber carrying costs are expensed as incurred. The
cost of timber harvested is included in the carrying values of raw material and
product inventories, and in the costs of products sold as these inventories are
disposed of.
Accounts Payable
The Company's banking system provides for the daily replenishment of major bank
accounts as checks are presented. Accordingly, there were negative book cash
balances of $114 million and $164 million at June 29, 1997, and December 29,
1996, respectively. Such balances result from outstanding checks that had not
yet been paid by the bank and are reflected in accounts payable in the
consolidated balance sheets.
Income Taxes
Deferred income taxes are provided to reflect temporary differences between the
financial and tax bases of assets and liabilities using presently enacted tax
rates and laws.
<PAGE>
Weyerhaeuser Company
-11-
Pension Plans
The Company has pension plans covering most of its employees. The U.S. plan
covering salaried employees provides pension benefits based on the employee's
highest monthly earnings for five consecutive years during the final ten years
before retirement. Plans covering hourly employees generally provide benefits of
stated amounts for each year of service. Contributions to U.S. plans are based
on funding standards established by the Employee Retirement Income Security Act
of 1974 (ERISA).
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the Company provides certain health
care and life insurance benefits for some retired employees and accrues the
expected future cost of these benefits for its current eligible retirees and
some employees. All of the Company's salaried employees and some hourly
employees may become eligible for these benefits when they retire.
Reclassifications
Certain reclassifications have been made to conform prior years' data to the
current format.
Real Estate and Financial Services
Real estate held for sale is stated at the lower of cost or fair value. The
determination of fair value is based on appraisals and market pricing of
comparable assets, when available, or the discounted value of estimated future
cash flows from these assets. Real estate held for development is stated at cost
to the extent it does not exceed the estimated undiscounted future net cash
flows, in which case, it is carried at fair value.
The Company's financial services businesses hold mortgage-backed certificates
and other financial instruments pledged as collateral for collateralized
mortgage obligation (CMO) bonds, and also offer insurance services.
Mortgage notes held for sale that were outstanding at December 29, 1996 were
stated at the lower of cost or market, which was computed by the aggregate
method (unrealized losses were offset by unrealized gains). As a result of the
sale of the Company's mortgage banking business during the quarter, there were
no mortgage notes held for sale outstanding at June 29, 1997.
Mortgage-backed certificates are carried at par value, adjusted for any
unamortized discount or premium. Management's intent is to hold these
certificates until maturity. These certificates and other financial instruments
are pledged as collateral for the CMO bonds and are held by banks as trustees.
Principal and interest collections are used to meet the interest payments and
reduce the outstanding principal balance of the bonds.
The CMO bonds are the obligation of the issuer, and neither the Company nor any
affiliated company has guaranteed or is otherwise obligated with respect to the
bonds. In 1997, the Company elected to write off the unamortized discounts and
premiums on these instruments and carry them at par value. In 1996 and prior
years, these were carried at amortized costs with discounts and premiums being
amortized using a method that approximated approximated the effective interest
method over their estimated lives.
<PAGE>
Weyerhaeuser Company
-12-
Note 2: Income Taxes
Provisions for income taxes include the following:
<TABLE>
<CAPTION>
Twenty-six
Weeks Ended
------------------
June 29, June 30,
Dollar amounts in millions 1997 1996
-------- --------
<S> <C> <C>
Federal:
Current $ 17 $ 24
Deferred 39 96
---- ----
56 120
---- ----
State:
Current 2 4
Deferred 2 8
---- ----
4 12
---- ----
Foreign:
Current 14 13
Deferred 1 (7)
---- ----
15 6
---- ----
Total $ 75 $138
==== ====
</TABLE>
Income tax provisions for interim periods are based on the current best estimate
of the effective tax rate expected to be applicable for the full year. The
effective tax rate reflects anticipated tax credits, foreign taxes and other tax
planning alternatives.
For the periods ended June 29, 1997, and June 30, 1996, the Company's provision
for income taxes as a percent of earnings before income taxes is greater than
the 35% federal statutory rate due principally to the effect of state income
taxes. The effective tax rates for the twenty-six week periods ended June 29,
1997, and June 30, 1996, were 36.5% and 36%, respectively.
Deferred taxes are provided for the temporary differences between the financial
and tax bases of assets and liabilities, applying presently enacted tax rates
and laws. The major sources of these temporary differences include depreciable
and depletable assets, real estate, restructuring reserves, and pension and
retiree health care liabilities.
Note 3: Inventories
<TABLE>
<CAPTION>
June 29, Dec. 29,
Dollar amounts in millions 1997 1996
--------- --------
<S> <C> <C>
Logs and chips $ 85 $ 120
Lumber, plywood and panels 167 148
Pulp, newsprint and paper 178 202
Containerboard, paperboard and packaging 95 108
Other products 142 146
Materials and supplies 283 277
----- ------
$ 950 $1,001
===== ======
</TABLE>
<PAGE>
Weyerhaeuser Company
-13-
Note 4: Property and Equipment
<TABLE>
<CAPTION>
June 29, Dec. 29,
Dollar amounts in millions 1997 1996
-------- --------
<S> <C> <C>
Property and equipment, at cost:
Land $ 156 $ 158
Buildings and improvements 1,680 1,686
Machinery and equipment 9,744 9,713
Rail and truck roads and other 596 596
------- -------
12,176 12,153
Less allowance for depreciation
and amortization 5,328 5,146
------- -------
$ 6,848 $ 7,007
======= =======
</TABLE>
Note 5: Accrued Liabilities
<TABLE>
<CAPTION>
June 29, Dec. 29,
Dollar amounts in millions 1997 1996
-------- --------
<S> <C> <C>
Payroll - wages and salaries, incentive awards,
retirement and vacation pay $ 271 $ 279
Taxes - social security and real and personal property 64 57
Interest 76 79
Income taxes 24 51
Other 165 196
------- -------
$ 600 $ 662
======= =======
</TABLE>
Note 6: Short-Term Debt
The Company has short-term bank credit lines that provide for borrowings of up
to the total amount of $375 million, all of which could be availed of by the
company and WRECO at June 29, 1997, and borrowings of up to the total amount of
$375 million, all of which could be availed of by the company, WRECO and
Weyerhaeuser Mortgage Company (WMC) at December 29, 1996. No portion of these
lines has been availed of by the Company or WRECO at June 29, 1997, and none
were availed of by the company, WRECO or WMC at December 29, 1996. None of the
entities referred to herein is a guarantor of the borrowings of the others.
WMC had short-term special credit lines that provided for borrowings of up to
$230 million at December 29, 1996. Borrowings against these lines were $54
million as of December 29, 1996.
Note 7: Long-Term Debt
The Company's lines of credit include a five-year competitive advance and
revolving credit facility agreement entered into in 1994 with a group of banks
that provides for borrowings of up to the total amount of $1.55 billion, all of
which is available to the company. Borrowings are at LIBOR or other such
interest rates as mutually agreed to between the borrower and lending banks.
At December 29, 1996, WMC had $25 million outstanding against a one-year
evergreen credit commitment of $35 million entered into in 1990.
WFS has a revolving credit facility agreement that provides for: (1) borrowings
of up to $350 million and $450 million at June 29, 1997, and December 29, 1996,
respectively, at LIBOR or other such rates as may be agreed upon by WFS and the
banks; and (2) a commitment fee on the unused portion of the credit facility.
$330 million and $355 million were outstanding under this facility at June 29,
1997, and December 29, 1996, respectively.
<PAGE>
Weyerhaeuser Company
-14-
At December 29, 1996, WMC had a revolving credit agreement with a bank to
provide for: (1) borrowings of up to $35 million for two years at prime rate,
LIBOR or such other rate as may be agreed upon by WMC and the banks; (2) a
commitment fee based on the unused credit; and (3) conversion of the note as of
July 1, 1998, to a five-year term loan payable in equal quarterly installments.
To the extent that these credit commitments expire more than one year after the
balance sheet date and are unused, an equal amount of commercial paper is
classifiable as long-term debt. Amounts so classified are:
<TABLE>
<CAPTION>
June 29, Dec. 29,
Dollar amounts in millions 1997 1996
-------- --------
<S> <C> <C>
Weyerhaeuser $807 $889
Real estate and financial services -- 248
</TABLE>
No portion of these lines has been availed of by the company, WRECO or WFS at
June 29, 1997, and none was availed of by the company, WRECO, WMC or WFS at
December 29, 1996, except as noted.
Total interest costs incurred by WRECO are capitalized and will ultimately be
accounted for as an element of operating costs.
The Company's compensating balance agreements were not significant.
Note 8: Shareholders' Interest
Common shares reserved for stock option plans were 6,529,301 shares at June 29,
1997, and 6,243,102 shares at December 29, 1996.
Note 9: Commitments and Contingencies
The Company's capital expenditures, excluding acquisitions, have averaged about
$912 million in recent years, but are expected to be approximately $750 million
in 1997; however, that expenditure level could be increased or decreased as a
consequence of future economic conditions.
The Company is a party to legal proceedings and environmental matters generally
incidental to its business. Although the final outcome of any legal proceeding
or environmental matter is subject to a great many variables and cannot be
predicted with any degree of certainty, the Company presently believes that the
ultimate outcome resulting from these proceedings and matters would not have a
material effect on the Company's current financial position, liquidity or
results of operations; however, in any given future reporting period, such
proceedings or matters could have a material effect on results of operations.
<PAGE>
Weyerhaeuser Company
-15-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales and revenues and earnings before interest expense and income taxes by
segment are:
<TABLE>
<CAPTION>
Thirteen Weeks Twenty-six Weeks
Ended Ended
------------------ ------------------
June 29, June 30, June 29, June 30,
Dollar amounts in millions 1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales and revenues:
Timberlands and wood products $1,505 $1,368 $2,756 $2,484
Pulp, paper and packaging 1,144 1,201 2,250 2,418
Real estate 202 195 366 378
Financial services 27 48 77 97
Corporate and other 31 74 68 114
------ ------ ------ ------
$2,909 $2,886 $5,517 $5,491
====== ====== ====== ======
Earnings before interest expense
and income taxes:
Timberlands and wood products(1) $ 211 $ 217 $ 382 $ 369
Pulp, paper and packaging(2) 22 35 (21) 197
Real estate 2 2 7 9
Financial services(3) (4) 48 4 49 7
Corporate and other(5) (46) (33) (82) (76)
------ ------ ------ -------
$ 237 $ 225 $ 335 $ 506
====== ====== ====== =======
</TABLE>
(1) 1997 second quarter and year-to-date results include a charge of $15 million
associated with the closure of the Plymouth, North Carolina plywood
facility.
(2) 1997 year-to-date results include a special charge of $49 million for the
consolidation, closure or disposition of certain recycling facilities and
the permanent closure of the Longview, Washington corrugated medium machine.
(3) 1997 second quarter and year-to-date results include a gain of $45 million
from the sale of the Company's wholly owned subsidiary, Weyerhaeuser
Mortgage Company, based in Woodland Hills, California.
(4) Includes net interest expense of $11 million and $19 million for thirteen
weeks and $26 million and $35 million for twenty-six weeks related to the
financial services businesses.
(5) 1997 year-to-date results include pretax income of $10 million from the net
effect of interest income from the favorable federal income tax decision
related to timber casualty losses incurred in the eruption of Mount St.
Helens in 1980 and the loss incurred in the sale of Shemin Nurseries, a
wholesale nursery business based in Danbury, Connecticut.
Consolidated Results
Consolidated net earnings for the second quarter were $109 million, or 56 cents
per common share, compared with $103 million or 52 cents per common share, in
the same quarter last year. Included in the 1997 results was a special after-tax
income item of $19 million, or 9 cents per common share, which was the net of
the gain on the sale of Weyerhaeuser Mortgage Company, and the costs associated
with plans to close the Plymouth, North Carolina plywood facility. These
transactions are a part of the Company's ongoing effort to narrow its focus and
upgrade the quality of the assets of its core businesses.
Net sales and revenues for the quarter were $2.9 billion, unchanged from the
comparable quarter a year ago. Increases in domestic lumber volumes and pricing
over the 1996 first quarter were offset by weaker log exports and lower pricing
in oriented strandboard and most pulp, paper and packaging products.
<PAGE>
Weyerhaeuser Company
-16-
Year-to-date earnings were $130 million, or 66 cents per common share,
contrasted to the $245 million and $1.24 per common share reported a year
earlier. 1997 includes a net charge of $5.7 million, or 3 cents per common share
for the effect of special items year-to-date. In addition to the special items
recognized in the current quarter, the current year results included losses from
restructuring in the recycling business, the permanent closure of a corrugated
medium machine and the sale of the wholesale nursery business, which were
offset, in part, by interest income from the favorable federal income tax
decision related to timber casualty losses incurred in the eruption of Mount St.
Helens in 1980.
Net sales for the first half were $5.5 billion, unchanged from last year.
Timberlands and Wood Products
The quarter's operating earnings in the timberlands and wood products segment,
including the $15 million charge associated with the plywood mill closure, were
$211 million, compared with $217 million in the 1996 second quarter.
Net sales in this segment were $1.5 billion in the quarter, up from $1.4 billion
a year earlier and the $1.3 billion reported in the first quarter. The continued
strong performance of the domestic softwood lumber market over the comparable
periods of 1996 helped moderate the weakness in oriented strandboard prices
compared to a year ago. Export log volumes were up 30 percent over the first
quarter; however, realizations continue to be unfavorably impacted by the
stronger US dollar/Yen exchange rate.
Third party sales and total production volumes for the major products in this
segment for the thirteen weeks and twenty-six weeks ended June 29, 1997, and
June 30, 1996, respectively, are as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Twenty-six Weeks
Ended Ended
------------------ ------------------
Third party sales volumes June 29, June 30, June 29, June 30,
(millions) 1997 1996 1997 1996
- ------------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Raw materials--cubic feet 150 146 296 278
Softwood lumber--board feet 1,320 1,237 2,456 2,247
Softwood plywood and
veneer--square feet (3/8") 556 590 1,045 1,074
Composite panels--square feet
(3/4") 148 171 291 324
Oriented strand board--square
feet (3/8") 632 535 995 1,194
Hardwood lumber--board feet 97 92 187 181
Engineered wood products--
lineal feet 39 33 66 54
Hardwood doors (thousands) 179 168 347 314
Total production volumes
(millions)
- ------------------------------
Logs--cubic feet 219 213 494 443
Softwood lumber--board feet 1,030 973 2,023 1,815
Softwood plywood and
veneer--square feet (3/8") 288 328 567 646
Composite panels--square feet
(3/4") 126 155 249 292
Oriented strand board--square
feet (3/8") 510 414 996 805
Hardwood lumber--board feet 90 90 175 173
Hardwood doors (thousands) 182 166 364 312
</TABLE>
Pulp, Paper and Packaging
The quarter's operating earnings in the pulp, paper and packaging segment were
$22 million, lower than the $35 million for the second quarter of 1996, but up
significantly from the $6 million, before special items, reported in the 1997
first quarter.
Segment sales for the quarter were $1.1 billion, down slightly from the $1.2
billion in the same quarter last year as year-to-year price declines in most
products were offset, in part, by higher volumes.
<PAGE>
Weyerhaeuser Company
-17-
Third party sales and total production volumes for the major products in this
segment for the thirteen weeks and twenty-six weeks ended June 29, 1997, and
June 30, 1996, respectively, are as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Twenty-six Weeks
Ended Ended
------------------ ------------------
Third party sales volumes June 29, June 30, June 29, June 30,
(thousands) 1997 1996 1997 1996
- ------------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Pulp--air-dry metric tons 515 528 969 925
Newsprint--metric tons 173 169 333 304
Paper--tons 278 246 582 492
Paperboard--tons 56 56 115 102
Containerboard--tons 104 81 203 147
Packaging--MSF 11,640 10,872 22,593 20,888
Recycling--tons 580 516 1,130 959
Total production volumes
(thousands)
- ------------------------------
Pulp--air-dry metric tons 479 436 999 961
Newsprint--metric tons 173 161 346 295
Paper--tons 273 240 557 501
Paperboard--tons 60 53 109 101
Containerboard--tons 588 598 1,190 1,162
Packaging--MSF 12,155 11,319 23,620 21,946
Recycling--tons 924 882 1,853 1,683
</TABLE>
Real Estate and Financial Services
Real estate and financial services segments earned a combined pre-tax income of
$50 million in the current quarter, including the $45 million gain on the sale
of Weyerhaeuser Mortgage Company, compared to $6 million for the same period
last year. The reduction of 6 percent in revenues from 1996 second quarter
reflects the sale of the mortgage banking business early in the current year's
quarter. The 1996 year-to-date results included the sale of several major
commercial real estate projects.
Costs and Expenses
Weyerhaeuser's cost of products sold for the quarter as a percent of net sales
was 77 percent in the current quarter, unchanged from the 1996 second quarter,
as sales were relatively comparable in both periods. This is down from the 79
percent reported in the 1997 first quarter.
Depreciation, amortization and fee stumpage for the quarter were up marginally,
and 10 percent year-to-date, over 1996 as new or acquired facilities were added
and optimization, expansion, modernization or upgrade projects were completed at
existing facilities. Non-cash charges to income related to closure or
disposition of facilities were $15 million for the quarter and $64 million year-
to-date.
Costs and expenses for the combined real estate and financial services segments
were lower from period to period as a result of the mortgage banking business
sale.
Other income (expense) is an aggregation of both recurring and occasional income
and expense items and, as a result, fluctuates from period to period. Individual
income (expense) items significant in relation to net earnings were:
. The gain of $45 million from the sale of the mortgage banking business by
the financial services segment in the current quarter, and
. The Weyerhaeuser year-to-date $10 million net effect of interest income from
the favorable federal income tax decision related to timber casualty losses
incurred in the eruption of Mount St. Helens in 1980, and the loss incurred
in the sale of the wholesale nursery business.
There were no significant items in the comparable periods of 1996.
<PAGE>
Weyerhaeuser Company
-18-
Liquidity and Capital Resources
General
The Company is committed to the maintenance of a sound, conservative capital
structure. This commitment is based upon two considerations: the obligation to
protect the underlying interests of its shareholders and lenders and the desire
to have access, at all times, to all major financial markets.
The important elements of the policy governing the Company's capital structure
are as follows:
. To view separately the capital structures of Weyerhaeuser Company,
Weyerhaeuser Real Estate Company and Weyerhaeuser Financial Services, Inc.,
given the very different nature of their assets and business activities. The
amount of debt and equity associated with the capital structure of each will
reflect the basic earnings capacity, real value and unique liquidity
characteristics of the assets dedicated to that business.
. The combination of maturing short-term debt and the structure of long-term
debt will be managed judiciously to minimize liquidity risk.
Operations
Weyerhaeuser's net cash provided by operations was $318 million in the first
half of 1997 compared to $244 million provided in the same period of 1996.
For the current year, funds were provided from net income of $94 million along
with $316 million from depreciation, amortization and fee stumpage and $64
million of non-cash charges for the closure or disposition of facilities.
Working capital, net of the effects of the sale of a business, increased by $187
million year-to-date. Significant use of funds were an increase of $101 million
in accounts receivable, primarily trade receivables and a decrease of $124
million in accounts payable and accrued liabilities, primarily trade payables
and income taxes. Funds were sourced, in part, by a $38 million decrease in
inventories as logs and chips and all pulp, paper and packaging inventories were
down from year-end levels, while wood products stocks were up. Product inventory
turnover rate improved to 12.5 turns in the quarter, up significantly from 10.9
turns in the first quarter of 1997 and 10.4 turns in the second quarter of 1996.
For the same period of 1996, the majority of the $330 million working capital
increase was attributable to a reduction of $250 million in accounts payable and
accrued liabilities.
The net cash used by operations in the combined real estate and financial
services segments year-to-date was $123 million, including uses of a net $109
million for real estate and land purchases and development and a net $74 million
for mortgages held for sale, as originations exceeded sales.
Earnings before interest expense and income taxes plus non-cash charges for the
twenty-six week periods ended June 29, 1997, and June 30, 1996 were $500 million
and $480 million, respectively, for the timberlands and wood products segment,
and $169 million and $364 million, respectively, for the pulp, paper and
packaging segment. Earnings before interest and income taxes of $197 million
this year compared to a loss of $21 million last year was the primary driver in
the increase from period to period for the pulp, paper and packaging segment.
Investing
Capital expenditures for the first half were $304 million compared to $387
million, excluding acquisitions, in the same period of 1996. Acquisition of
southern U.S. timber and timberlands and two sawmills accounted for spending of
$448 million in the first half of 1996. The 1997 spending by segment was $147
million for timberlands and wood products, $149 million for the pulp, paper and
packaging segment and $8 million for other segments. The Company currently
anticipates capital expenditures, excluding acquisitions, to approximate $750
million for the year. However, this expenditure level could increase or decrease
as a consequence of future economic conditions.
The cash needed to meet these and other company needs is generated from internal
cash flow and short-term borrowing.
Proceeds from sale of businesses totaled $204 million in the first half of 1997
with $192 million from the sale of the mortgage banking business and $12 million
from the sale of the wholesale nursery business.
<PAGE>
Weyerhaeuser Company
-19-
Financing
During the first six months of 1997, Weyerhaeuser decreased long-term debt by
$118 million with funds being used to pay down $77 million of long-term debt and
$83 million of commercial paper borrowings while sourcing $38 million from the
sale of industrial revenue bonds. The Company's total debt to equity ratio at
the end of the current quarter was 36.7 percent, down from the prior quarter's
39.3 percent and 37.9 percent at December 1996.
The increase in the 1996 first half was due primarily to issuances of $899
million in notes and commercial paper, offset, in part, by debt payments of $131
million.
In the real estate and financial services segments, financing activities
provided a net $87 million made up of increases in commercial paper of $188
million and other debt of $9 million to support property purchases and
construction activity, offset in part, by debt paydown of $110 million.
During the first half of both 1997 and 1996, the Company paid $158 million in
cash dividends.
In the second quarter of 1997, the Company repurchased $16 million of common
shares as a part of the 11 million share repurchase program. In the first half
of 1996, $34 million was used to repurchase shares.
Subsequent Events
On July 1, 1997, the Company completed the purchase of a 51 percent interest in
an existing New Zealand joint venture located in the northern end of the South
Island. The Company paid $185 million for timber, land and related assets, plus
an additional amount for the net working capital at closing. The forested area
of the joint venture consists of 148,000 acres of Crown Forest License cutting
rights and approximately 45,000 acres of freehold land. The Company will be
responsible for the management and marketing activities of the joint venture.
RII New Zealand Forests I Inc. continues to hold the remaining 49 percent
interest in the joint venture.
On July 10, 1997, the Company announced the closing of the sale of Saskatoon
Chemicals Ltd. to a subsidiary of Sterling Chemicals Holdings, Inc. The sales
price, which is subject to post-closing adjustments, will approximate $65
million. The Company expects the gain on the sale to have a material effect on
its third quarter earnings. This sale is part of a continuing effort to tighten
the Company's focus on its core businesses.
On July 8, 1997, the Company and Nippon Paper Industries Co., Ltd. announced the
signing of a memorandum of understanding restructuring their North Pacific Paper
Corporation (NORPAC) joint venture. Under the agreement, the Company and Nippon
Paper each will own 50 percent of NORPAC. The Company currently owns 80 percent
of the joint venture with Nippon Paper holding the remaining 20 percent
interest. Marketing responsibilities are unchanged. The agreement is subject to
several contingencies, including approvals by the respective boards. The company
expects this transaction to have a material positive effect on its cash flow in
the quarter in which it closes.
On July 30, 1997, the Company issued 6.95 percent debentures in the amount of
$300 million which will be due August 1, 2017. The net proceeds to be received
by the Company from the sale of these debentures will be added to the Company's
general funds and will be used for general corporate purposes, including working
capital, capital expenditures and reduction of the Company's commercial paper
backed by a long-term credit agreement. Pending such application, the net
proceeds may be invested in marketable securities.
Other Items
Weyerhaeuser, like all other companies using computers and microprocessors, is
faced with the task of addressing the Year 2000 problem over the next two years.
The Year 2000 challenge arises from the nearly universal practice in the
computer industry of using two digits rather than four digits to designate the
calendar year (e.g., DD/MM/YY). This can lead to incorrect results when computer
software performs arithmetic operations, comparisons or data field sorting
involving years later than 1999. The Company has embarked on a comprehensive
approach to identify where this problem may occur in its information technology,
manufacturing, and facilities systems. The Company plans to modify or replace
its affected systems in a manner that will minimize any detrimental effects on
operations. While it is not possible, at present, to quantify the overall cost
of this work, the Company presently believes that the ultimate outcome resulting
from this work will not have a material effect on the Company's current
financial position, liquidity or results of operations; however, in any given
future reporting period such costs could have a material effect on results of
operations.
<PAGE>
Weyerhaeuser Company
-20-
Contingencies
The Company is a party to legal proceedings and environmental matters generally
incidental to its business. Although the final outcome of any legal proceeding
or environmental matter is subject to a great many variables and cannot be
predicted with any degree of certainty, the Company presently believes that the
ultimate outcome resulting from these proceedings and matters would not have a
material effect on the Company's current financial position, liquidity or
results of operations; however, in any given future reporting period such
proceedings or matters could have a material effect on results of operations.
Part II. Other Information
Item 1. Legal Proceedings
Trial began in May 1992 in a federal income tax refund case that the company
filed in July 1989 in the United States Claims Court. The complaint contended
that the Company overpaid federal income taxes in 1977 through 1983. The alleged
overpayments resulted from the disallowance of certain timber casualty losses
and certain deductions claimed by the Company arising from export transactions.
The refund sought was approximately $29 million, plus statutory interest from
the dates of the alleged overpayments. The Company settled the portion of the
case relating to export transactions and received a tax refund of approximately
$10 million, plus statutory interest. In September 1994, the United States Court
of Federal Claims (successor to the United States Claims Court) issued an
opinion on the casualty loss issues which resulted in the allowance of
additional tax refunds of approximately $2 million, plus statutory interest.
Both the Company and the government appealed the decision. On August 2, 1996,
the Court of Appeals for the Federal Circuit issued its opinion on the remaining
timber casualty loss issues, ruling in favor of the Company on both the
Company's appeal and the government's appeal. The United States Supreme Court
denied the government's request for certiorari on January 21, 1997. The case is
on remand to the United States Court of Federal Claims to apply the decision of
the Court of Appeals for the Federal Circuit.
On March 6, 1992, the Company filed a complaint in the Superior Court for King
County, Washington, against a number of insurance companies. The complaint
sought a declaratory judgment that the insurance companies were obligated to
defend the Company and to pay, on the Company's behalf, certain claims relating
to alleged environmental damage from toxic substances to sites owned by third
parties and the company. The Company subsequently agreed to settlements with all
but one of the defendants. The remaining defendant provided first layer excess
coverage during a three year period. That defendant's liability on groups of
sites is being tried in three phases. Two trials against the remaining
defendant, affecting nine sites, began in October 1994 and February 1996,
respectively, and resulted in verdicts assigning 100 percent clean-up
responsibility to the defendant on three sites, partial responsibility on three
others and a finding of no liability as to the remaining three. The remaining
issue to be determined by the trial court is what, if any, credit will be given
for settlement payments received by the other defendants. With respect to the
remaining sites, a voluntary dismissal was taken on 6 sites, and the defendant's
offer of judgment on the final 10 sites was accepted in June 1997.
The Company conducted a review of its 10 major pulp and paper facilities to
evaluate the facilities' compliance with federal Prevention of Significant
Deterioration (PSD) regulations. The results of the reviews were disclosed to
seven state agencies and the Environmental Protection Agency (EPA) during 1994
and 1995. At the Cosmopolis, Washington, Columbus, Mississippi, and Flint River,
Georgia, facilities, the state regulatory agencies agreed with the Company's
conclusions regarding the status of each facility. For the Cosmopolis facility,
the Washington Department of Ecology agreed the changes made at the facility did
not require PSD review. For the Columbus and Flint River facilities, the states
concluded the original PSD permits issued to the facilities require updating.
The Company will update emissions data for the Columbus and Flint River
facilities as part of the Title V permitting process. No penalties were assessed
for the issues identified at Columbus and Flint River. Agreements resolving the
alleged PSD issues have been reached with the states of Washington, Oklahoma and
North Carolina, as noted below. No issues were identified at the Company's
Rothschild, Wisconsin, facility. In April 1995, EPA Region X issued a Notice of
Violation (NOV) to the Company and to North Pacific Paper Corporation (NORPAC),
a joint venture in which the Company has an 80 percent ownership interest. The
NOV addresses alleged PSD violations at NORPAC's Longview, Washington, newsprint
manufacturing facility. A settlement resolving alleged PSD issues at the
Longview/NORPAC complex was reached with the State of Washington on January 26,
1996. On November 14, 1995, the Company entered into a settlement with the State
of Oklahoma to resolve alleged PSD violations at the Company's Valliant,
Oklahoma, containerboard manufacturing facility. The Company also entered into
Special Orders by Consent with the State of North Carolina to resolve alleged
PSD issues at the New Bern, North Carolina, pulp mill and the Plymouth, North
Carolina, pulp and paper complex. No decision has been made by the Lane County
Oregon Regional Air Pollution Control Authority concerning alleged PSD and
permit violations at the Company's Springfield, Oregon, containerboard
manufacturing facility.
<PAGE>
Weyerhaeuser Company
-21-
PART II
Item 1. Legal Proceedings - Continued
- --------------------------------------
The Washington Department of Ecology issued a $10 thousand penalty to the
company because of three accidental chlorine releases which occurred at the
Company's pulp mill in Longview on March 18, 1996, which has been paid. The EPA
is also investigating.
The Washington Department of Ecology has issued a NOV and a $40 thousand penalty
because of an accidental spill of an estimated 8,700 gallons of crude sulfate
turpentine on January 27, 1997, at the Company's pulp and paper operations in
Longview. The EPA is also investigating.
On June 20, 1996, the Wisconsin Department of Natural Resources (WDNR) issued a
NOV for alleged air violations at the Marshfield, Wisconsin, wood products
manufacturing facility. No penalty was assessed in the NOV. The NOV was referred
to the Wisconsin Department of Justice (WDOJ) for enforcement action on July 2,
1996. Settlement negotiations with WDNR and WDOJ are ongoing. The company
expects a stipulated judgment and order resolving all issues will be executed on
or before August 31, 1997.
On October 2, 1996, the WDNR conducted an inspection of a building demolition
project at the Company's Marshfield, Wisconsin facility. The WDNR noted several
potential non-compliance issues in the work performed by the asbestos abatement
subcontractor retained for the project. Upon learning of the issues observed by
WDNR, the Company removed the asbestos abatement subcontractor from the
plantsite. The WDNR and EPA Region V are reviewing the work performed to
evaluate whether an enforcement action should be brought against the asbestos
abatement subcontractor, the general contractor, and/or the company.
On November 2, 1992, an action was filed against the Company in the Circuit
Court for the First Judicial District of Hinds County, Mississippi, on behalf of
a purported class of riparian property owners in Mississippi and Alabama whose
properties are located on the Tennessee Tombigbee Waterway, Aliceville Lake,
Cedar Creek and the Magoway Creek. The complaint sought $1 billion in
compensatory and punitive damages for diminution in property value, personal
injuries and mental anguish allegedly resulting from the discharge of purported
hazardous substances, including dioxins and furans, by the Company's pulp and
paper mill in Columbus, Mississippi, and the alleged fraudulent concealments of
such discharge. The complaint also sought an injunction prohibiting future
releases and the removal of hazardous substances allegedly released in the past.
On August 20, 1993, a companion action was filed in Greene County, Alabama, on
behalf of a similar purported class of riparian owners with essentially the same
claims as the Mississippi case. By order dated April 5, 1995, venue of the
Alabama action was transferred to Sumter County, Alabama. On January 20, 1995,
the court in the Alabama action certified a class of all persons who, as of the
date the action commenced, were riparian owners, lessees and licensees of
properties located on the Tennessee Tombigbee Waterway in Greene, Sumter,
Pickens and Marengo counties, Alabama, and Lowndes and Noxubee counties,
Mississippi, to determine whether the Company is liable to the members of the
class for compensatory and/or punitive damages and to determine the amount of
punitive damages, if any, to be awarded to the class as a whole. By order dated
April 12, 1995, as orally amended on February 1, 1996, the geographical
boundaries of the class were amended to run from below the Columbus mill's
wastewater discharge pipe to just above the confluence of the Black Warrior
River and the Tennessee Tombigbee Waterway. The class is estimated to range from
approximately 1,000 to 1,500 members. In late July, 1996, the Company reached an
agreement to settle both the Mississippi action and the Alabama action for $2.5
million. On May 8, 1997, after a fairness hearing, the Alabama court entered an
order approving the settlement of the class action.
In November 1996, an action was filed against the Company in Superior Court for
King County, Washington, on behalf of a purported class of all individuals and
entities that own property in the United States on which exterior hardboard
siding manufactured by the Company has been installed since 1980. The action
alleges the Company has manufactured and distributed defective hardboard siding
and has breached express warranties and consumer protection statutes in its sale
of hardboard siding. The action seeks compensatory damages, including
prejudgment interest, and seeks damages for the cost of replacing siding that
rots subsequent to the entry of any judgment. In January 1997, an action was
filed, also in Superior Court for King County, Washington, on behalf of a
purported class of all individuals, proprietorships, partnerships, corporations,
and other business entities in the United States on whose homes, condominiums,
apartment complexes or commercial buildings hardboard siding manufactured by the
company has been installed. The action alleges the Company has breached express
and implied warranties in its sale of hardboard siding and also has violated the
Consumer Protection Act of the State of Washington. The action seeks damages,
prejudgment interest, costs and reasonable attorney fees. The Company is a
defendant in approximately twenty-one other hardboard siding cases, two of which
purport to be class actions on behalf of purchasers of single- or multi-family
residences that contain the Company's hardboard siding, one in Nebraska and one
in Iowa.
<PAGE>
Weyerhaeusen Company
-22-
PART II
Item 1. Legal Proceedings - Continued
- --------------------------------------
On August 7, 1997, the Company entered a plea of guilty to a misdemeanor
violation of the Migratory Bird Treaty Act in the U.S. District Court, Western
District of Washington, at Tacoma. The misdemeanor violation involved the
accidental poisoning of a hawk and an owl in the course of starling pest control
at the Company's Longview, Washington pulp mill. The Company and the Department
of Justice agreed to a disposition of the misdemeanor which involved an
undertaking by the Company to conduct a starling control research project at its
Longview mill.
The Company is also a party to various proceedings relating to the clean-up of
hazardous waste sites under the Comprehensive Environmental Response
Compensation and Liability Act, commonly known as "Superfund," and similar state
laws. The EPA and/or various state agencies have notified the Company that it
may be a potentially responsible party with respect to other hazardous waste
sites as to which no proceedings have been instituted against the company. The
company is also a party to other legal proceedings generally incidental to its
business. Although the final outcome of any legal proceeding is subject to a
great many variables and cannot be predicted with any degree of certainty, the
company presently believes that any ultimate outcome resulting from the legal
proceedings discussed herein, or all of them combined, would not have a material
effect on the Company's current financial position, liquidity or results of
operations; however, in any given future reporting period, such legal
proceedings could have a material effect on results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Matters voted upon and votes cast at the annual meeting of shareholders of
Weyerhaeuser Company held on Tuesday, April 15, 1997 were:
. The reelection of John W. Creighton, Jr. and W. John Driscoll and the
election of Rt. Hon. Donald F. Mazankowski to the board of directors.
<TABLE>
<CAPTION>
For Withheld
----------- ---------
<S> <C> <C>
Creighton 178,746,488 2,292,540
Driscoll 178,680,511 2,358,517
Mazankowski 178,407,674 2,631,354
</TABLE>
<TABLE>
<CAPTION>
For Against Abstain Broker Non-votes
----------- ----------- --------- ----------------
<S> <C> <C> <C> <C>
Shareholder proposal
relating to the CERES
Principles 11,499,599 151,510,483 8,353,231 9,675,715
Shareholder proposal
relating to directors'
compensation 12,391,451 157,183,538 1,788,323 9,675,716
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) The registrant filed reports on Form 8-K dated January 22, February 24,
April 15, May 23, June 19, July 1, July 9, July 11, and July 17, 1997,
reporting information under Item 5, Other Events.
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 6, 1997
included (or incorporated by reference) in Weyerhaeuser Company's Form 10-K for
the year ended December 29, 1996 and to all references to our Firm included in
this registration statement.
ARTHUR ANDERSEN LLP
Seattle, Washington
September 30, 1997
<PAGE>
EXHIBIT 25
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
WEYERHAEUSER COMPANY
(Exact name of obligor as specified in its charter)
WASHINGTON 91-0470860
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
TACOMA, WASHINGTON 98477
(Address of principal executive offices) (Zip Code)
---------------------------------------------
DEBT SECURITIES
(Title of the indenture securities)
-------------------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 22nd day of September, 1997.
THE CHASE MANHATTAN BANK
By /s/ P. KELLY
---------------------
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<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business June 30, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .................................................... $ 13,892
Interest-bearing balances ............................................ 4,282
Securities: ..............................................................
Held to maturity securities................................................ 2,857
Available for sale securities.............................................. 34,091
Federal Funds sold and securities purchased under
agreements to resell ................................................. 29,970
Loans and lease financing receivables:
Loans and leases, net of unearned income $124,827
Less: Allowance for loan and lease losses 2,753
Less: Allocated transfer risk reserve ......... 13
--------
Loans and leases, net of unearned income,
allowance, and reserve ............................................... 122,061
Trading Assets ............................................................ 56,042
Premises and fixed assets (including capitalized
leases)............................................................... 2,904
Other real estate owned ................................................... 306
Investments in unconsolidated subsidiaries and
associated companies.................................................. 232
Customers' liability to this bank on acceptances
outstanding .......................................................... 2,092
Intangible assets ......................................................... 1,532
Other assets .............................................................. 10,448
--------
TOTAL ASSETS .............................................................. $280,709
========
</TABLE>
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<PAGE>
LIABILITIES
<TABLE>
<S> <C>
Deposits
In domestic offices ..................................................... $ 91,249
Noninterest-bearing ..............................................$38,157
Interest-bearing ................................................. 53,092
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ............................................................... 70,192
Noninterest-bearing ..............................................$ 3,712
Interest-bearing ................................................ 66,480
Federal funds purchased and securities sold under agree-
ments to repurchase .......................................................... 35,185
Demand notes issued to the U.S. Treasury ..................................... 1,000
Trading liabilities .......................................................... 42,307
Other Borrowed money (includes mortgage indebtedness and obligations under
calitalized leases):
With a remaining maturity of one year or less ........................... 4,593
With a remaining maturity of more than one year .
through three years............................................... 260
With a remaining maturity of more than three years....................... 146
Bank's liability on acceptances executed and outstanding 2,092
Subordinated notes and debentures ............................................ 5,715
Other liabilities............................................................. 11,373
TOTAL LIABILITIES ............................................................ 264,112
EQUITY CAPITAL
Perpetual Preferred stock and related surplus 0
Common stock ................................................................. 1,211
Surplus (exclude all surplus related to preferred stock)..................... 10,283
Undivided profits and capital reserves ....................................... 5,280
Net unrealized holding gains (Losses)
on available-for-sale securities ............................................. (193)
Cumulative foreign currency translation adjustments .......................... 16
TOTAL EQUITY CAPITAL ......................................................... 16,597
--------
TOTAL LIABILITIES AND EQUITY CAPITAL ......................................... $280,709
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
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