<PAGE> 1
Filed Pursuant to Rule 424(B)(2)
Registration No. 033-65055
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 11, 1996)
$250,000,000
BROWING-FERRIS INDUSTRIES, INC.
6.08% MARKET VALUE PUT SECURITIES(SM) ("MVPS"(SM))
---------------------
THE PRINCIPAL TERMS OF THE OFFERING:
- - Interest Rate: 6.08% until January 18, 2000.
- - Interest Payment Dates: January 18 and July 15, until January 18, 2000.
- - YOU MUST TENDER ALL OF YOUR MVPS ON JANUARY 18, 2000 THROUGH THE BOOK-ENTRY
SYSTEM OF DTC, FOR PURCHASE OR REPURCHASE AT A PRICE EQUAL TO 100% OF THEIR
PRINCIPAL AMOUNT. THE TENDER WILL BE AUTOMATIC. You must sell your MVPs to The
First National Bank of Chicago as the call holder at 100% of their principal
amount if the call holder chooses to purchase the MVPs. If the call holder
does not purchase the MVPs for any reason on January 18, 2000, you must sell
your MVPs to the Company at 100% of their principal amount.
- - If the call holder chooses to purchase the MVPs, the Company may choose to
have the MVPs remarketed by the call holder to other purchasers for an interim
period of up to 26 weeks. During the interim period, if any, the interest rate
on the MVPs will be reset weekly. At the end of the interim period, if any,
holders of the MVPs must sell their MVPs to the call holder at 100% of their
principal amount.
- - The MVPs are scheduled to mature on January 18, 2002 but that maturity date
will be extended by the length of any interim period.
- - If the call holder elects to purchase the MVPs, the Company has the right to
redeem the MVPs from the call holder on January 18, 2000 and at the end of any
interim period. The Company will not be able to redeem the MVPs at any time
prior to January 18, 2000. After January 18, 2000 or, if the MVPs are
remarketed for an interim period, after the interim period, the Company may
redeem some or all of the MVPs at any time.
- - If the call holder purchases the MVPs on January 18, 2000 or, if the MVPs are
remarketed for an interim period, at the end of the interim period, First
Chicago Capital Markets, Inc., as the calculation agent, will set a new
interest rate to the maturity date on the MVPs. The call holder will then
remarket the MVPs and the Company will pay interest at that new rate until the
MVPs mature.
- - The MVPs are senior unsecured debt securities.
- - The MVPs will be traded only in book-entry form. You will not receive
certificates for the MVPs.
- - The MVPs will be issued in minimum denominations of $1,000, and in multiples
of $1,000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The underwriters will sell the MVPs to the public at varying prices
relating to prevailing market prices at the time of sale. The Company will
receive net proceeds of 100.43% of the principal amount of the MVPs sold, which
equals aggregate net proceeds of $251,075,000 before deducting expenses.
---------------------
The underwriters are offering the MVPs subject to various conditions. The
underwriters expect to deliver the MVPs to purchasers on or about January 15,
1999.
---------------------
FIRST CHICAGO CAPITAL MARKETS, INC.
(A BANK ONE COMPANY)
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
January 12, 1999
- ---------------
"Market Value Put securities" and "MVPs" are service marks owned by First
Chicago Capital Markets, Inc.
<PAGE> 2
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS
SUPPLEMENT.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company................................................. S-3
Selected Financial Data..................................... S-4
Use of Proceeds............................................. S-6
Description of the MVPs..................................... S-6
Certain United States Federal Income Tax Considerations..... S-15
ERISA Considerations........................................ S-18
Underwriting................................................ S-19
Legal Matters............................................... S-20
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
The Company................................................. 3
Application of Proceeds..................................... 3
Description of Debt Securities.............................. 3
Capital Stock............................................... 12
Description of Warrants..................................... 14
Description of Stock Purchase Contracts and Stock Purchase
Units..................................................... 15
Plan of Distribution........................................ 16
Legal Opinions.............................................. 16
Experts..................................................... 17
</TABLE>
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THE COMPANY
Browning-Ferris Industries, Inc. is one of the largest publicly held
companies that provides waste services in the United States and Canada. The
Company, through its subsidiaries and affiliates,
- collects,
- transports,
- treats and/or processes,
- recycles and
- disposes of
commercial, residential and municipal solid wastes and industrial wastes. The
Company also engages in
- waste-to-energy conversion,
- medical waste services,
- portable restroom services and
- municipal and commercial sweeping operations.
The Company also provides waste services outside of North America, principally
in Europe, through its equity ownership in SITA, S.A., a publicly traded,
Paris-based subsidiary of Suez Lyonnaise des Eaux, S.A.
Our principal place of business is located at 757 N. Eldridge, Houston,
Texas 77079. The telephone number is (281) 870-8100 and the mailing address is
P.O. Box 3151, Houston, Texas 77253. The term "Company" refers to our company,
Browning-Ferris Industries, Inc., and our subsidiaries, affiliates and
predecessors, unless the context otherwise requires.
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SELECTED FINANCIAL DATA
The following is a summary of certain consolidated financial information
regarding the Company for the periods indicated. The selected financial
information set forth below for the years ended September 30, 1994 through 1998
is summarized or prepared from the Company's audited consolidated financial
statements for such periods. The data presented below should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto incorporated by reference herein. See "Incorporation of Certain
Documents by Reference" in the accompanying prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS EXCEPT FOR RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Revenues.................................... $4,746 $5,783 $5,779 $5,779 $4,315
Income before special charges (credits),
extraordinary items and cumulative
effects of changes in accounting
principles............................... $ 336 $ 333 $ 273 $ 385 $ 284
Income (loss) before extraordinary items and
cumulative effects of changes in
accounting principles.................... $ 349 $ 284 $ (89) $ 385 $ 284
Net income (loss)........................... $ 339 $ 265 $ (101) $ 385 $ 279
Income (loss) per share (diluted) --
Income (loss) before extraordinary items
and cumulative effects of changes in
accounting principles.................. $ 1.93(1) $ 1.39(2) $(0.45)(3) $ 1.92 $ 1.52
Net income (loss)........................ $ 1.87(4) $ 1.30(5) $(0.51)(6) $ 1.92 $ 1.49(7)
Cash dividends per common share............. $ 0.76 $ 0.70 $ 0.68 $ 0.68 $ 0.68
CASH FLOW DATA:
Capital expenditures........................ $ 525 $ 495 $ 935 $ 930 $ 694
Cash flows from operating activities........ $ 734 $ 999 $ 857 $1,030 $ 694
BALANCE SHEET DATA:
Property and equipment, net................. $2,812 $3,567 $3,921 $3,722 $3,050
Total assets................................ $4,999 $6,678 $7,601 $7,460 $5,797
Senior long-term debt, excluding current
maturities............................... $1,793 $1,675 $2,767 $1,666 $ 714
Convertible subordinated debentures......... $-- $-- $-- $ 745 $ 745
Common stockholders' equity................. $1,413 $2,661 $2,510 $2,742 $2,392
OTHER DATA:
Ratio of earnings to fixed charges(8)....... 3.81(9) 2.98(10) 1.02(11) 4.04 4.25
</TABLE>
- ---------------
(1) $1.86 per share before the after-tax effect of special credits of $.07 per
share recorded in fiscal 1998 related to estimated gains from the sale in
March 1998 of substantially all of the Company's operations outside of
North America to SITA, S.A. and the divestiture of certain North American
operations.
(2) $1.63 per share before the after-tax effect of special charges of $.24 per
share recorded in fiscal 1997 related to the cumulative foreign currency
translation losses associated with the sale of Italian operations and for
anticipated losses related to decisions to divest additional
underperforming or non-core business operations and assets located
primarily in the United Kingdom, the Netherlands and the United States.
These losses were offset partially by net gains arising largely from
divestitures completed in fiscal 1997, principally in North America.
(3) $1.37 per share before the after-tax effect of special charges of $1.81 per
share recorded in fiscal 1996 related to decisions to sell the Company's
Italian operations, divest certain domestic and international non-core
business assets and operations and close certain recycling facilities not
expected to achieve
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desired performance objectives. The remainder of the special charges
related to the writedown of the Company's investment in the Azusa,
California landfill to fair value.
(4) Includes extraordinary loss of $1 million, net of tax ($.01 per share) in
fiscal 1998 related to the loss on redemption of debt of an unconsolidated
affiliate of the Company, and cumulative effects of changes in accounting
principles of $10 million, net of tax ($.05 per share) related to the
expensing of certain business process reengineering costs as required by a
new accounting pronouncement offset partially by the gain associated with
the change in the Company's method of accounting for the recognition of
value changes in its employee retirement plan.
(5) Includes extraordinary losses of $18 million, net of tax ($.09 per share)
associated with losses on redemption of debt in fiscal 1997.
(6) Includes extraordinary loss of $12 million, net of tax ($.06 per share)
associated with the loss on redemption of debt in fiscal 1996.
(7) Includes extraordinary charge of $5 million, net of tax ($.03 per share)
related to the loss on early retirement of debt in fiscal 1994.
(8) For the purposes of computing the ratio of earnings to fixed charges,
"earnings" has been calculated by adding to the caption "income before
income taxes, minority interest, extraordinary items and cumulative effects
of changes in accounting principles", fixed charges, excluding capitalized
interest, and by deducting undistributed earnings of affiliates less than
50% owned. "Fixed charges" consists of interest expense whether capitalized
or expensed, amortization of debt costs, and the portion of rents
representing the interest factor which the Company generally considers to
be one-third of rental expense. The interest expense portion of fixed
charges includes interest expense and interest costs capitalized related to
the Company's proportionate share of 50%-owned unconsolidated subsidiaries.
(9) Excluding the effects of the fiscal 1998 special credits of $21 million,
the ratio of earnings to fixed charges for fiscal 1998 was 3.71.
(10) Excluding the effects of the fiscal 1997 special charges of $82 million,
the ratio of earnings to fixed charges for fiscal 1997 was 3.31.
(11) Excluding the effects of the fiscal 1996 special charges of $447 million,
the ratio of earnings to fixed charges for fiscal 1996 was 2.77.
S-5
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USE OF PROCEEDS
The entire net proceeds received by the Company from the sale of the MVPs
will be applied to repayment of a portion of the Company's commercial paper
balances. On December 31, 1998 the weighted average interest rate of such
indebtedness was 6.03%. The proceeds from the commercial paper were used for
repurchases of the Company's common stock and for working capital.
DESCRIPTION OF THE MVPS
The MVPs are to be issued as a series of senior debt securities under a
Restated Indenture, dated as of September 1, 1991 (the "Senior Indenture"),
between the Company and Chase Bank of Texas, National Association (formerly
known as Texas Commerce Bank National Association, as successor trustee to First
City, Texas-Houston, National Association, which was formerly First City
National Bank of Houston), as trustee (the "Trustee"), which is more fully
described in the accompanying prospectus. The following description of the terms
of the MVPs offered hereby (referred to in the accompanying prospectus as the
"Offered Debt Securities") supplements the description of the general terms and
provisions of the Debt Securities (as defined in the accompanying prospectus)
set forth in the accompanying prospectus. If these descriptions are
inconsistent, then the description in this prospectus supplement shall govern.
GENERAL
The MVPs will be limited to $250,000,000 aggregate principal amount. The
MVPs will be senior unsecured obligations of the Company and will rank equally
with all other existing and future unsecured and unsubordinated indebtedness of
the Company. At September 30, 1998, the Company had approximately $1.8 billion
of senior indebtedness. The Company is a holding company, and therefore the MVPs
will be effectively subordinated to all liabilities (including trade payables)
of the Company's subsidiaries.
The MVPs are scheduled to mature on January 18, 2002. However, the MVPs
will mature on a later date in the event of an Interim Period (as defined
below). See "--Mandatory Tender of MVPs; Calculation of Interest and
Remarketing--Remarketing Dates; Adjustment of Maturity Date." The date on which
the MVPs mature is referred to herein as the Maturity Date.
If The First National Bank of Chicago (the "Call Holder") elects to
remarket the MVPs, then the MVPs will be subject to mandatory tender to the Call
Holder, for purchase at 100% of the principal amount thereof on January 18, 2000
(the "Remarketing Date") and, in the event of the Interim Period, on the
Additional Remarketing Date (as defined below) on the terms and subject to the
conditions described herein. See "--Mandatory Tender of MVPs; Calculation of
Interest and Remarketing" below. If the Call Holder does not elect to exercise
its right to remarket the MVPs on the Remarketing Date, or for any reason does
not purchase all of the MVPs on either the Remarketing Date or the Additional
Remarketing Date, if applicable, then the Company is required to repurchase all
of the MVPs from the holders thereof at 100% of the principal amount thereof
plus accrued interest, if any, on the applicable date. See "--Repurchase" below.
Upon the exercise by the Call Holder of its right to remarket the MVPs as
described herein, the MVPs are redeemable from the Call Holder on the
Remarketing Date and, in the event of an Interim Period, on the Additional
Remarketing Date at the option of the Company on the terms described below. In
addition, after the Remarketing Date (if such date is not the Interim Period
Remarketing Date) or the Additional Remarketing Date (in the event of the
Interim Period), the MVPs shall be subject to redemption by the Company, in
whole or in part, on the terms discussed below. See "--Redemption" below.
The MVPs will bear interest at the annual interest rate of 6.08% per annum
to but excluding the Remarketing Date. The Remarketing Date and, if that date is
designated as the "Interim Period Remarketing Date" as described below under
"--Mandatory Tender of MVPs; Calculation of Interest and
Remarketing--Remarketing Dates; Adjustment of Maturity Date," the Additional
Remarketing Date thereafter, will be the remarketing dates for the MVPs. If the
Call Holder remarkets the MVPs, then, on and after each applicable remarketing
date, the MVPs will bear interest at the rate determined by the Calculation
Agent in
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accordance with the procedures set forth under "--Mandatory Tender of MVPs;
Calculation of Interest and Remarketing--Determination of Applicable Interest
Rate" below.
Interest on the MVPs accruing during the period from and including January
15, 1999 to but excluding the Remarketing Date will be payable semi-annually on
January 18 and July 15 of each year, commencing July 15, 1999. Interest on the
MVPs accruing from the Remarketing Date (if such date is not the Interim Period
Remarketing Date) or the Additional Remarketing Date (if the Remarketing Date is
the Interim Period Remarketing Date) will be payable semi-annually on each day
that is a six-month anniversary of such date. Interest on the MVPs accruing
during the period from and including the Remarketing Date (if that date is the
Interim Period Remarketing Date) to but excluding the Additional Remarketing
Date (the "Interim Period"), if applicable, will be payable only on the
Additional Remarketing Date. Each day on which interest is scheduled to be paid
is herein referred to as an "Interest Payment Date." Interest will be payable on
each Interest Payment Date to the persons in whose name the MVPs are registered,
subject to certain exceptions, on the fifteenth calendar day immediately
preceding the related Interest Payment Date except that, in the case of the
Interest Payment Date relating to the Interim Period, interest will be payable
to the persons to whom principal is payable on the Additional Remarketing Date.
"Business Day" means any day other than a Saturday, a Sunday or a day on which
banking institutions in The City of New York, Houston, Texas or Chicago,
Illinois are authorized or obligated by law, regulation or executive order to
close and, in the case of the determination of the Reference Rate (as defined
below) that is based upon deposits in U.S. dollars in London, the City of
London.
The amount of interest payable on the MVPs for any period will be computed
on the basis of a 360-day year consisting of twelve 30-day months, except that
interest accruing during the Interim Period, if any, will be computed on the
basis of the actual number of days in such period over a 360-day year. Interest
payable on any Interest Payment Date and at the Maturity Date or date of earlier
redemption or repurchase will be the amount of interest accrued from and
including the most recent Interest Payment Date to which interest has been paid
or duly provided for (or from and including January 15, 1999 if no interest has
been paid or duly provided for with respect to the MVPs) to but excluding such
Interest Payment Date or the Maturity Date or date of redemption or repurchase,
as the case may be. In the event that any Interest Payment Date or Maturity Date
or date of redemption or repurchase of the MVPs falls on a day that is not a
Business Day, payment will be made on the next succeeding Business Day with the
same force and effect as if it were paid on the date such payment was due, and
no interest will accrue on the amount so payable for the period from and after
such Interest Payment Date or Maturity Date or date of redemption or repurchase
of the MVPs.
The MVPs will be issued in the form of one or more registered global
securities and will be deposited with, or on behalf of, The Depository Trust
Company ("DTC") and registered in the name of DTC or its nominee. See
"--Book-Entry System" below and "Description of Debt Securities--Provisions
Applicable to Both Senior and Subordinated Debt Securities--Global Securities"
in the accompanying prospectus. Settlement for the MVPs will be made in
immediately available funds and the MVPs will trade in DTC's Same-Day Funds
Settlement System until maturity. Secondary market trading activity in the MVPs
will therefore settle in immediately available funds. All payments of principal
and interest will be made by the Company in immediately available funds.
Although the U. S. federal income tax treatment of the MVPs is not certain,
the terms of the MVPs provide that the Company and all holders of the MVPs agree
to treat the MVPs as fixed rate debt instruments that mature on the Remarketing
Date for United States federal income tax purposes. See "Certain United States
Federal Income Tax Considerations."
MANDATORY TENDER OF MVPS; CALCULATION OF INTEREST AND REMARKETING
The following description sets forth the terms and conditions of the
calculation of the Interim Period Interest Rate (as defined below), the Interest
Rate to Maturity (as defined below) and the remarketing of the MVPs, if the Call
Holder elects to purchase the MVPs for remarketing.
MANDATORY TENDER
If the Call Holder gives notice to the Company and the Trustee on a
Business Day not later than five Business Days prior to the Remarketing Date
(the "Notification Date") of its intention to purchase all of the
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outstanding MVPs for remarketing, all outstanding MVPs will be automatically
tendered to the Call Holder for purchase on the Remarketing Date and, if such
date is designated as the Interim Period Remarketing Date, the Additional
Remarketing Date thereafter, except in the circumstances described under
"--Repurchase" below. The purchase price of the MVPs will be equal to 100% of
the principal amount thereof.
If the Call Holder elects to remarket the MVPs, the obligation of the Call
Holder to purchase the MVPs on any remarketing date is subject to several
conditions set forth in the Remarketing and Interest Calculation Agreement (as
defined below). In addition, the Call Holder may terminate the Remarketing and
Interest Calculation Agreement at any time upon the occurrence of certain events
set forth therein. See "--The Call Holder and the Calculation Agent."
From and including the Remarketing Date (if such date is not the Interim
Period Remarketing Date) or the Additional Remarketing Date (if the Remarketing
Date is the Interim Period Remarketing Date), the MVPs will bear interest at the
Interest Rate to Maturity, determined as set forth under "--Determination of
Applicable Interest Rate." During the Interim Period, if any, the MVPs will bear
interest at the Interim Period Interest Rate determined as set forth under
"--Determination of Applicable Interest Rate." If for any reason the Call Holder
does not purchase all outstanding MVPs on any remarketing date, the Company will
be required to repurchase all of the MVPs from the holders thereof at a price
equal to the principal amount thereof plus all accrued and unpaid interest, if
any, on the MVPs to such remarketing date. See "--Repurchase" below.
When the MVPs are tendered for remarketing on any remarketing date, the
Call Holder will be required by the terms of the Remarketing and Interest
Calculation Agreement to sell the MVPs to the Reference Corporate Dealer (as
defined below) or Reference Money Market Dealer (as defined below), as the case
may be, submitting the lowest firm, committed bid in accordance with the
procedures relating to the applicable remarketing.
REMARKETING DATES; ADJUSTMENT OF MATURITY DATE
If the Call Holder gives notice of its intention to purchase the MVPs on
January 18, 2000, then not later than 4:00 p.m., New York City time, on the
fourth Business Day prior to January 18, 2000, the Company, after consultation
with the Call Holder, may notify the Call Holder, the Trustee and DTC by
telephone, confirmed in writing, that it elects for an Interim Period resulting
in January 18, 2000 being designated the Interim Period Remarketing Date (the
"Interim Period Remarketing Date"). The Company will be eligible to make such
notification if at such time its senior unsecured debt is rated at least "Baa3"
by Moody's Investors Service, Inc. and "BBB-" by Standard & Poor's Ratings
Services (or the equivalent thereof by each such rating agency) at the time of
such notification or if the Call Holder waives this requirement in its sole
discretion. If the Company does not provide such notification, January 18, 2000
will be the only remarketing date and the Maturity Date will be January 18,
2002. If the Company provides such notification, then (i) the Additional
Remarketing Date will be one of the 26 following one-week anniversary dates of
January 18, 2000 (or if any such day is not a Business Day, the next succeeding
Business Day) designated by the Company not later than the fifth Business Day
prior to such one-week anniversary date (the "Additional Remarketing Date")
except that, if the Company fails to so designate the Additional Remarketing
Date, the Additional Remarketing Date will be the date that is the 26th week
anniversary of January 18, 2000 (or if such day is not a Business Day, the next
following Business Day) and (ii) the Maturity Date of the MVPs will be the date
that is the two-year anniversary of the Additional Remarketing Date (whether or
not a Business Day).
DETERMINATION OF APPLICABLE INTEREST RATE
From and including the Remarketing Date (if such date is not the Interim
Period Remarketing Date) or the Additional Remarketing Date (if the Remarketing
Date is designated the Interim Period Remarketing Date) to but excluding the
Maturity Date, the MVPs will bear interest at the Interest Rate to Maturity.
During the Interim Period, if any, the MVPs will bear interest at the Interim
Period Interest Rate.
Determination of Interest Rate to Maturity. First Chicago Capital Markets,
Inc., as calculation agent (the "Calculation Agent"), shall determine the
interest rate the MVPs will bear from the Remarketing Date
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(if such date is not the Interim Period Remarketing Date) or the Additional
Remarketing Date (if the Remarketing Date is designated the Interim Period
Remarketing Date) to the Maturity Date (the "Interest Rate to Maturity"). The
Calculation Agent shall make this determination on the third Business Day
immediately preceding the Remarketing Date or the Additional Remarketing Date,
as the case may be (the "Determination Date"), by soliciting by 3:30 p.m., New
York City time, the Reference Corporate Dealers for firm committed bids,
expressed as a spread over the Base Rate, to purchase all outstanding MVPs at
the Dollar Price (as defined below), and by selecting the lowest such firm,
committed bid (regardless of whether each of the Reference Corporate Dealers
actually submits bids). The Interest Rate to Maturity will be equal to the sum
of 4.68% (the "Base Rate") plus the Applicable Spread (as defined below). The
Interest Rate to Maturity announced by the Calculation Agent as a result of such
process will be quoted to the nearest one hundred-thousandth (0.00001) of one
percent per annum and, absent manifest error, will be binding and conclusive
upon the holders of the MVPs, the Call Holder, the Company and the Trustee.
"Applicable Spread" means the lowest bid, expressed as a spread (in the
form of a percentage or in basis points) above the Base Rate, obtained by the
Calculation Agent on the Determination Date from the bids quoted by up to five
Reference Corporate Dealers for the full aggregate principal amount of the MVPs
at the Dollar Price, but assuming (i) an issue date equal to the Remarketing
Date (if such date is not the Interim Period Remarketing Date) or the Additional
Remarketing Date (in the event of an Interim Period), with settlement on such
date without accrued interest, (ii) a maturity date equal to the Maturity Date
of the MVPs, and (iii) a stated annual interest rate, payable semi-annually,
equal to the Base Rate plus the spread bid by the applicable Reference Corporate
Dealer.
"Dollar Price" means, with respect to the MVPs, the present value, as of
the Remarketing Date, of the Remaining Scheduled Payments (as defined below)
discounted to the Remarketing Date, on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months), at the Treasury Rate (as defined
below), except that in the case of the Additional Remarketing Date, the Dollar
Price will be the Adjusted Dollar Price (as defined below).
"Adjusted Dollar Price" means, with respect to the Additional Remarketing
Date, the Dollar Price as of the Remarketing Date (determined by the Calculation
Agent on the third Business Day prior to the Remarketing Date) plus the product
of (i) such Dollar Price less the aggregate principal amount of the MVPs
outstanding as of the Remarketing Date, (ii) the weighted average per annum
Interim Period Interest Rate for the Interim Period, and (iii) the number of
days in the Interim Period divided by 360.
"Reference Corporate Dealer" means each of First Chicago Capital Markets,
Inc., its successors and four other leading dealers of publicly traded debt
securities of the Company to be chosen by the Call Holder.
"Treasury Rate" means the annual rate equal to the semi-annual equivalent
yield to maturity or interpolated (on a 30/360 day count basis) yield to
maturity on the Determination Date of the Comparable Treasury Issue (as defined
below) for value on the Remarketing Date, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price (as defined below).
"Comparable Treasury Issue" means the United States Treasury security
selected by the Calculation Agent as having an actual or interpolated maturity
on the Determination Date comparable to the remaining term of the MVPs.
"Comparable Treasury Price" means (a) the offer price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) on the third
Business Day prior to the Remarketing Date, as set forth on Telerate Page 500
(as defined below), adjusted to reflect settlement on the Remarketing Date if
prices quoted on Telerate Page 500 are for settlement on any date other than the
Remarketing Date, or (b) if such page (or any successor page) is not displayed
or does not contain such offer price on such Business Day, (i) the average of
five Reference Treasury Dealer Quotations (as defined below) for such
Remarketing Date, excluding the highest and lowest of such Reference Treasury
Dealer Quotations (unless there is more than one highest or lowest quotation, in
which case only one such highest and/or lowest quotation shall be excluded), or
(ii) if the
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Calculation Agent obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated as "Telerate Page 500" on
Bridge Telerate, Inc. (or such other page as may replace Telerate Page 500 on
such service) or such other service displaying the offer prices specified in (a)
above as may replace Bridge Telerate, Inc. The Calculation Agent shall have the
discretion to select the time at which the Comparable Treasury Price is
determined on the third Business Day prior to the Remarketing Date.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer, the offer price for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) for settlement
on the Remarketing Date quoted in writing to the Calculation Agent by such
Reference Treasury Dealer by 3:30 p.m. on the third Business Day prior to the
Remarketing Date.
"Reference Treasury Dealer" means each of First Chicago Capital Markets,
Inc., Chase Securities Inc., NationsBanc Montgomery Securities LLC, Goldman,
Sachs & Co. and Morgan Stanley & Co. Incorporated and their respective
successors; provided, however, that if any of the foregoing or their affiliates
shall cease to be a primary U.S. Government securities dealer (a "Primary
Treasury Dealer"), the Calculation Agent shall substitute therefor another
Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to the MVPs, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only and assuming (i) a maturity date equal to
January 18, 2002, and (ii) that the Company did not elect the Remarketing Date
to be the Interim Period Remarketing Date.
Determination of Interim Period Interest Rate. The interest rate for the
Interim Period, if any, will be reset on each Interest Reset Date (as defined
below) during the Interim Period and will be equal to the Reference Rate (as
defined below) in respect of the applicable Interest Reset Date plus the Basic
Spread (as defined below), in each case as calculated by the Calculation Agent
(the "Interim Period Interest Rate"). The Wednesday of each week during the
Interim Period will be an "Interest Reset Date." The "Interest Determination
Date" applicable to an Interest Reset Date will be the second Business Day
preceding such Interest Reset Date. The interest rate in effect from and
including the Interim Period Remarketing Date (which is the first day of the
Interim Period) to but excluding the first Interest Reset Date during such
Interim Period will be determined as if the Interim Period Remarketing Date were
an Interest Reset Date and the Interest Determination Date for such Interest
Reset Date were the second Business Day prior to the Interim Period Remarketing
Date.
The "Reference Rate" means, with respect to the Interim Period, one of the
following reference rates selected by the Company and notified to the
Calculation Agent no later than four Business Days prior to the Interim Period
Remarketing Date: (i) the per annum rate for deposits in U.S. dollars for a
period of one week shown on Telerate page 3750 (or any successor page) at 11:00
a.m., London time, on the applicable Interest Determination Date, (ii) the per
annum rate equal to the average of the federal funds rates shown on Telerate
page 5 (or any successor page) as of 11:00 a.m., New York City time, on the
applicable Interest Determination Date and each of the four Business Days prior
to such Interest Determination Date, or (iii) the one-week "AA" non-financial
commercial paper rate shown on the Internet world wide web page of the Board of
Governors of the Federal Reserve System at www.bog.frb.fed.us/releases/CP/ (or
any successor page) as of 11:00 a.m., New York City time, on the applicable
Interest Determination Date. If the reference rate on the applicable designated
page (or successor page) is not published on the specified page by the specified
time on the applicable date or dates, then the reference rate determined as of
the applicable Interest Determination Date will be the reference rate in effect
on such Interest Determination Date.
The "Basic Spread" will be the lowest firm commitment bid expressed as a
spread (in the form of a percentage or a number of basis points (plus or minus))
with respect to the Reference Rate, obtained by the Calculation Agent on the
third Business Day prior to the Interim Period Remarketing Date from the bids
quoted from up to five Reference Money Market Dealers on such date for the full
aggregate principal amount of the MVPs at a dollar price equal to par, but
assuming (i) that the purchase date is the Interim Period
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Remarketing Date, with settlement on such date without accrued interest, (ii)
that the maturity date is the day that is 26 weeks from the Interim Period
Remarketing Date, (iii) that the MVPs are callable by the Call Holder on a
weekly basis after the Interim Period Remarketing Date, (iv) that the MVPs will
be repurchased by the Company at par on the day that is 26 weeks from the
Interim Period Remarketing Date if not previously called by the Call Holder, and
(v) a stated annual interest rate, payable on the Additional Remarketing Date,
equal to the Reference Rate plus the spread bid by the applicable Reference
Money Market Dealer.
"Reference Money Market Dealers" means each of First Chicago Capital
Markets, Inc., Chase Securities Inc., NationsBanc Montgomery Securities LLC,
Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated and their respective
successors; provided, however, that if any of the foregoing or its affiliates
shall cease to be a leading dealer of publicly traded debt securities of the
Company and a leading dealer in money market instruments (a "Primary Money
Market Dealer"), the Calculation Agent shall substitute therefor another Primary
Money Market Dealer.
The Interim Period Interest Rate and the amount of interest payable on the
Additional Remarketing Date shall each be determined by the Calculation Agent
and, absent manifest error, shall be binding and conclusive upon the beneficial
owners and holders of the MVPs, the Call Holder, the Company and the Trustee.
NOTIFICATION OF RESULTS; SETTLEMENT
If the Call Holder has previously notified the Company and the Trustee on
the Notification Date of its intention to purchase all MVPs tendered to the Call
Holder on January 18, 2000, the Calculation Agent will notify the Company, the
Trustee and DTC by telephone, confirmed in writing, by 4:00 p.m., New York City
time, on the Determination Date, of the Interest Rate to Maturity. If January
18, 2000 is the Interim Period Remarketing Date, the Calculation Agent will
provide the Company, the Trustee and DTC notice in accordance with the preceding
sentence, on the second Business Day prior to January 18, 2000, of the Interim
Period Interest Rate which will initially be in effect.
All of the outstanding MVPs will be automatically delivered to the account
of the Trustee by book-entry through DTC, pending payment of the purchase price
therefor, on the applicable remarketing date.
The Call Holder will make, or cause the Trustee to make, payment to DTC by
the close of business on the applicable remarketing date against delivery
through DTC of the MVPs, of the purchase price for all of the MVPs tendered. The
purchase price of the MVPs will be equal to 100% of the principal amount
thereof. If the Call Holder does not purchase all of the MVPs on any remarketing
date, then the Company is obligated to make or cause to be made such payment for
all of the MVPs, as described below under "--Repurchase." In any case, the
Company will make, or cause the Trustee to make, payment of interest due on any
remarketing date to holders of MVPs by book-entry through DTC by the close of
business on such remarketing date.
The tender and settlement procedures described above may be modified
without the consent of the holders of the MVPs to the extent required by DTC or,
if the book-entry system is no longer available for the MVPs at the time of any
remarketing, to the extent required to facilitate the tendering and remarketing
of MVPs in certificated form. In addition, the Call Holder may modify without
the consent of the holders of the MVPs the tender and settlement procedures set
forth above in order to facilitate the tender and settlement process.
As long as DTC's nominee holds the certificates representing any MVPs in
the book-entry system of DTC, no certificates for such MVPs will be delivered by
or to any selling beneficial owner to reflect any transfer of such MVPs effected
in a remarketing. In addition, under the terms of the MVPs and the Remarketing
and Interest Calculation Agreement, the Company has agreed that (i) it will use
its best efforts to maintain the MVPs in book-entry form with DTC or any
successor thereto and to appoint a successor depository to the extent necessary
to maintain the MVPs in book-entry form and (ii) it will waive any discretionary
right it otherwise has under the Senior Indenture to cause the MVPs to be issued
in certificated form.
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For further information with respect to transfers and settlement through
DTC, see "--Book-Entry System" below, and "Description of Debt
Securities--Provisions Applicable to Both Senior and Subordinated Debt
Securities--Global Securities" in the accompanying prospectus.
THE CALL HOLDER AND THE CALCULATION AGENT
On or prior to the date of issuance of the MVPs, the Company, the Call
Holder and the Calculation Agent will enter into a Remarketing and Interest
Calculation Agreement (the "Remarketing and Interest Calculation Agreement")
which will provide for the MVPs to be remarketed substantially on the terms
described below and under "--Mandatory Tender of MVPs; Calculation of Interest
and Remarketing." Neither the Call Holder nor the Calculation Agent will receive
any fees or reimbursement of expenses from the Company in connection with the
remarketing.
The Company will agree to indemnify each of the Call Holder and the
Calculation Agent against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"), arising out of or in
connection with their duties under the Remarketing and Interest Calculation
Agreement.
If the Call Holder elects to remarket the MVPs as described herein, the
obligation of the Call Holder to purchase MVPs from holders thereof will be
subject to several conditions set forth in the Remarketing and Interest
Calculation Agreement. Such conditions will include the condition that the
Calculation Agent shall have received by the required time on any remarketing
date at least one firm committed bid to purchase all of the MVPs and that a
Reference Corporate Dealer or Reference Money Market Dealer shall not fail to
purchase the MVPs from the Call Holder on any such remarketing date. In
addition, the Remarketing and Interest Calculation Agreement will provide for
its termination by the Call Holder on or before the Remarketing Date (if such
date is not an Interim Period Remarketing Date) or the Additional Remarketing
Date (in the event of an Interim Period), upon the occurrence of certain events.
The Remarketing and Interest Calculation Agreement will also provide that each
of the Call Holder and Calculation Agent may resign at any time, such
resignation to be effective ten days after the delivery to the Company and the
Trustee of notice of such resignation. The Company shall have the right, but not
the obligation, to appoint a successor Call Holder; provided, however, that the
Call Holder may appoint a successor Calculation Agent in the event of the
resignation of the Calculation Agent in the absence of a concurrent resignation
of the Call Holder.
As a result of these conditions and termination rights and the Call
Holder's right to resign, holders of MVPs cannot be assured that their MVPs will
be purchased by the Call Holder in connection with a mandatory tender. No Holder
of any MVPs shall have any rights or claims under the Remarketing and Interest
Calculation Agreement or against the Call Holder or the Calculation Agent as a
result of the Call Holder not purchasing such MVPs. If the Call Holder does not
purchase all of the MVPs on the applicable remarketing date, the Company will be
required to purchase on such remarketing date all of the MVPs at a price equal
to 100% of the principal amount thereof plus accrued interest, if any. See
"--Repurchase" below.
The Call Holder or the Calculation Agent, in an individual or any other
capacity, may buy, sell, hold and deal in any of the MVPs. The Call Holder may
exercise any vote or join in any action which any holder of MVPs may be entitled
to exercise or take with like effect as if it did not act in any capacity under
the Remarketing and Interest Calculation Agreement. The Call Holder and the
Calculation Agent, in an individual capacity, either as principal or agent, may
also engage in or have an interest in any financial or other transaction with
the Company as freely as if they did not act in any capacity under the
Remarketing and Interest Calculation Agreement.
REPURCHASE
If the Call Holder for any reason does not purchase all of the MVPs on the
applicable remarketing date, the Company shall repurchase on such remarketing
date all of the MVPs, at a price equal to 100% of the principal amount of the
MVPs plus all accrued and unpaid interest, if any, on such MVPs to (but
excluding) such remarketing date.
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REDEMPTION
If the Call Holder has elected to remarket the MVPs in accordance with the
terms of the Remarketing and Interest Calculation Agreement, then not later than
four Business Days immediately preceding the applicable remarketing date, the
Company may irrevocably elect to exercise its right to redeem the outstanding
MVPs, in whole but not in part, from the Call Holder on such remarketing date at
the Optional Redemption Price.
The "Optional Redemption Price" shall be the sum of (i) the greater of (a)
100% of the principal amount of the MVPs and (b) the Dollar Price (which if such
remarketing date is the Additional Remarketing Date, will equal the Adjusted
Dollar Price), plus (ii) in the case of either (a) or (b), accrued and unpaid
interest on the principal amount being redeemed to the date of payment in
respect of such redemption.
Provided that the MVPs have not been repurchased or redeemed as described
above, the MVPs will be redeemable, in whole or from time to time in part, at
the option of the Company after the Remarketing Date (if such date is not the
Interim Period Remarketing Date) or the Additional Remarketing Date (in the
event of the Interim Period) at a redemption price equal to the greater of (i)
100% of the principal amount of the MVPs to be redeemed and (ii) an amount
(determined by the Quotation Agent (as defined below)) equal to the sum of the
present values of the remaining scheduled payments of principal and interest on
the MVPs to be redeemed (not including any portion of such payments of interest
accrued as of the date of redemption) discounted to the date of redemption on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined below) plus 15 basis points, plus, in
either case, accrued interest thereon to the date of redemption.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term of the MVPs to be redeemed that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of such
MVPs.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (ii) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of such Quotations, such average in any
case to be determined by the Quotation Agent, or (iii) if only one Reference
Treasury Dealer Quotation is received, such Quotation.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Company.
"Reference Treasury Dealer" means (i) each of First Chicago Capital
Markets, Inc., Chase Securities Inc., NationsBanc Montgomery Securities LLC,
Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated and their respective
successors; provided, however, that if any of the foregoing shall cease to be a
primary U.S. Government securities dealer (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer, and (ii) any
other Primary Treasury Dealer(s) selected by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Quotation Agent, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the MVPs to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the MVPs or portions thereof
called
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for redemption. If less than all of the MVPs are to be redeemed, the MVPs (or
portions thereof) to be redeemed shall be selected by the Trustee by such method
as the Trustee shall deem fair and appropriate.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company at any time after the later of the Remarketing Date, or, in the
event of the Interim Period, the Additional Remarketing Date, may satisfy its
obligations with respect to payments of principal of and interest on the MVPs by
depositing in trust with the Trustee money or U.S. government obligations or a
combination thereof sufficient to make such payments when due. All obligations
of the Company with respect to the MVPs and the Senior Indenture insofar as they
relate to the MVPs will be discharged and terminated (except as to the Company's
obligations to compensate, reimburse and indemnify the Trustee pursuant to the
Senior Indenture) only if (i) such deposit is sufficient to pay when due the
principal of and interest on all outstanding MVPs, and (ii) the Company delivers
to the Trustee an opinion of counsel to the effect that the holders of the MVPs
will not recognize income, gain or loss for U.S. federal income tax purposes as
a result of such treatment of such holder's principal and interest payments on
the MVPs (such opinion must be based on a ruling of the Internal Revenue Service
or a change in U.S. federal income tax law occurring after the date hereof,
since such a result would not occur under current tax law). In the event of any
such defeasance, holders of the MVPs would be able to look only to such trust
fund for payments of principal of and interest on the MVPs until maturity.
BOOK-ENTRY SYSTEM
The MVPs will be issued in the form of one or more fully registered global
securities that will be deposited with, or on behalf of, DTC and registered in
the name of DTC's nominee. The provisions described under "Description of Debt
Securities--Provisions Applicable to Both Senior and Subordinated Debt
Securities--Global Securities" in the accompanying prospectus will apply to the
MVPs.
DTC has advised the Company and the underwriters of the MVPs as follows:
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. DTC Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc. and the National Association of Securities Dealers,
Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Payments of principal of and premium, if any, and interest on the MVPs
will be made to Cede & Co., as nominee of DTC. DTC's practice is to credit
Direct Participants' accounts on the related payment date in accordance
with their respective holdings shown on DTC's records. Payments by
Participants to beneficial owners of the MVPs will be governed by standing
instructions and customary practices, as is 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 Participant and not of DTC,
the Trustee or any Paying Agent under the Senior Indenture, or the Company,
subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal and interest to Cede & Co. is the
responsibility of the Company or the Trustee or any Paying Agent,
disbursement of such payments to
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Direct Participants shall be the responsibility of DTC, and disbursement of
such payments to the beneficial owners of the MVPs shall be the
responsibility of Direct and Indirect Participants. DTC may decide to
discontinue providing its services as securities depository with respect to
the MVPs at any time by giving notice to the Company or the Trustee. Under
such circumstances, in the event that a successor securities depository is
not appointed by the Company within 90 days, MVPs certificates are required
to be printed and delivered.
Neither the Company, the Trustee, any paying agent nor any registrar
for the MVPs will have any responsibility or liability for any aspect of
the records maintained by DTC relating to, or payments made on account of
beneficial ownership interests in, MVPs represented in global form, or for
maintaining, supervising or receiving any records relating to such
beneficial ownership interests maintained by DTC.
DTC management is aware that some computer applications, systems, and
the like for processing data ("Systems") that are dependent upon calendar
dates, including dates before, on, and after January 1, 2000, may encounter
"Year 2000 problems." DTC has informed its Participants and other members
of the financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the
timely payment of distributions (including principal and interest payments)
to securityholders, book-entry deliveries, and settlement of trades within
DTC continue to function appropriately. This program includes a technical
assessment and a remediation plan, each of which is complete. Additionally,
DTC's plan includes a testing phase, which is expected to be completed
within appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and
their agents, as well as DTC's Direct and Indirect Participants, third
party vendors from whom DTC licenses software and hardware, and third party
vendors on whom DTC relies for information or the provision of services,
including telecommunication and electrical utility service providers, among
others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services
to: (i) impress upon them the importance of such services being Year 2000
compliant; and (ii) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition,
DTC is in the process of developing such contingency plans as it deems
appropriate.
According to DTC, the foregoing information with respect to DTC has
been provided to the Industry for informational purposes only and is not
intended to serve as a representation, warranty, or contract modification
of any kind.
GOVERNING LAW
THE SENIOR INDENTURE AND THE MVPS WILL BE GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a general discussion of the principal U.S. federal income
tax consequences of the purchase, ownership and disposition of the MVPs to
initial holders purchasing MVPs at the "issue price." The "issue price" of an
MVPs will equal the first price to the public (not including bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers) at which a substantial amount of
the MVPs is sold for money. This summary is based upon laws, regulations,
rulings and decisions currently in effect, all of which are subject to change at
any time (which change may be retroactive) or possible differing
interpretations. Moreover, it deals only with purchasers who hold MVPs as
"capital assets" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"), and does not purport to deal with persons in
special tax situations, such as financial institutions, insurance companies,
regulated investment companies, tax-exempt entities, dealers in securities or
currencies, persons
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holding MVPs as a hedge against currency risk or as a position in a "straddle,"
"conversion" or another integrated transaction for tax purposes, or U.S. Holders
(as defined below) whose functional currency is not the U.S. dollar. In
addition, this discussion only addresses the U.S. federal income tax
consequences of the MVPs until the Remarketing Date. This discussion does not
address any state, local or foreign tax consequences and does not discuss all
aspects of U.S. federal income taxation that might be relevant to a specific
holder in light of its particular investment or tax circumstances. PERSONS
CONSIDERING THE PURCHASE OF THE MVPS SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR
SITUATIONS AS WELL AS ANY CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE MVPS ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a beneficial owner of an MVPs
that is, for U.S. federal income tax purposes, (i) a citizen or resident of the
United States (including certain former citizens and former long-term
residents), (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 (other than a partnership that is not treated as a United States person
under any applicable Treasury regulations), (iii) an estate whose income is
subject to U.S. federal income tax regardless of its source, (iv) a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust, or (v) any other
person whose income or gain in respect of the MVPs is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of MVPs that is not a U.S. Holder.
The U.S. federal income tax treatment of debt obligations such as the MVPs
is not certain. Because the MVPs are subject to mandatory tender or repurchase
by the Company on the Remarketing Date, the Company intends to treat the MVPs,
for U.S. federal income tax purposes, as maturing on the Remarketing Date and,
should the Call Holder elect to remarket the MVPs, as being reissued on any
remarketing date. By purchasing the MVPs, a holder agrees to follow such
treatment for U.S. federal income tax purposes.
TAX TREATMENT OF THE MVPS
Assuming the characterization of the MVPs set forth above, the following
tax consequences should result with respect to U.S. Holders.
INTEREST INCOME
Interest on the MVPs would generally be taxable as ordinary income for U.S.
federal income tax purposes when received or accrued by a U.S. Holder in
accordance with its regular method of tax accounting. The Company does not
anticipate that the initial issuance of the MVPs would result in original issue
discount ("OID"), generally defined as the excess of the stated redemption price
at the maturity of an MVPs over its issue price. However, if an MVPs is issued
with OID, or is deemed by the Internal Revenue Service (the "IRS") to have been
issued with OID and such OID is greater than the statutory de minimis amount
(generally, 1/4 of one percent of the MVPs' stated redemption price at the
Remarketing Date multiplied by the number of complete years to the Remarketing
Date from its issue date), the holder of such MVPs would be required to include
such OID in income as ordinary interest income as it accrues under a constant
yield method in advance of receipt of the cash payments attributable to such
income, regardless of such holder's regular method of tax accounting.
GAIN OR LOSS ON SALE, EXCHANGE OR RETIREMENT
Upon the sale, exchange or retirement of an MVPs, a U.S. Holder generally
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (other than amounts representing
accrued and unpaid interest) and such U.S. Holder's adjusted basis in the MVPs.
Such adjusted tax basis in the MVPs generally will equal the U.S. Holder's
initial investment in the MVPs, increased by any OID included in the U.S.
Holder's income with respect to the MVPs, and reduced by the
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amount of any payments, other than qualified stated interest payments, received
and amortizable bond premium, if any, taken with respect to the MVPs. Such gain
or loss generally will be capital gain or loss.
Capital gains of individuals derived with respect to capital assets held
for more than one year are eligible for reduced rates of taxation depending upon
the holding period of such capital assets. The deductibility of capital losses
is subject to certain limitations.
ALTERNATIVE U.S. FEDERAL INCOME TAX TREATMENT
There can be no assurance that the IRS will agree with, or that a court
will uphold, the Company's intended treatment of the MVPs. Among other
possibilities, the IRS could seek to treat the MVPs as maturing on the Maturity
Date, in which event (i) the issue price of the MVPs would be treated as
including the value of the mandatory tender right, and (ii) the MVPs would be
subject to the Treasury regulations relating to contingent payment debt
obligations (the "Contingent Payment Regulations"). Under the Contingent Payment
Regulations, the Company would be required to construct a projected payment
schedule for the MVPs, based upon the Company's current borrowing costs for
comparable debt instruments of the Company, from which an estimated yield on the
MVPs would be calculated. A U.S. Holder would be required to include in income
original issue discount in an amount equal to the product of the adjusted issue
price of the MVPs at the beginning of each interest accrual period and the
estimated yield of the MVPs. In general, for these purposes, an MVPs' adjusted
issue price would equal the MVPs' issue price increased by the interest
previously accrued on the MVPs, and reduced by all payments made on the MVPs. As
a result of the application of the Contingent Payment Regulations, it is
possible that a U.S. Holder would be required to include interest in income in
excess of actual cash payments received for certain taxable years.
In addition, the character of any gain or loss, upon the sale or exchange
of an MVPs (including a sale pursuant to the mandatory tender on the Remarketing
Date) by a U.S. Holder, will likely differ if the MVPs were treated as
contingent payment obligations. Any such taxable gain generally would be treated
as ordinary income. Any such taxable loss generally would be ordinary to the
extent of previously accrued original issue discount, and any excess would
generally be treated as capital loss.
TREATMENT OF NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to U.S. federal income taxes on
payments of principal, premium (if any) or interest (including original issue
discount and accruals under the Contingent Payment Debt Regulations, if any) on
an MVPs, unless such non-U.S. Holder owns actually or constructively 10% or more
of the total combined voting power of the Company, is a controlled foreign
corporation related to the Company through actual or constructive stock
ownership, or is a bank receiving interest described in section 881(c)(3)(A) of
the Code. To qualify for exemption from taxation, the last United States payor
in the chain of payment prior to payment to a non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a statement
that (i) is signed by the beneficial owner of the MVPs under penalties of
perjury, (ii) certifies that such owner is not a U.S. Holder, and (iii) provides
the name and address of the beneficial owner. The statement may be made on an
IRS Form W-8 or a substantially similar form, and the beneficial owner must
inform the Withholding Agent of any change in the information on the statement
within 30 days of such change. If an MVPs is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution. Under applicable Treasury regulations, the statement requirement
referred to above may also be satisfied with other documentary evidence for
interest paid after December 31, 1999, with respect to an offshore account or
through certain foreign intermediaries.
Generally, a non-U.S. Holder will not be subject to U.S. federal income tax
on any amount which constitutes gain upon retirement or disposition of an MVPs,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax adviser in this
regard.
S-17
<PAGE> 18
The MVPs will not be includable in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the MVPs
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at a rate of 31% may apply to
payments made in respect of the MVPs to registered owners who are not "exempt
recipients" and who fail to provide certain identifying information (such as the
registered owner's taxpayer identification number) in the required manner.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. Payments made in respect
of the MVPs to a U.S. Holder must be reported to the IRS, unless the U.S. Holder
is an exempt recipient or otherwise establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of an MVPs to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient, or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient, or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status normally would be made on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
holder of MVPs would be allowed as a refund or a credit against such holder's
U.S. federal income tax liability provided the required information is furnished
to the IRS.
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisers regarding the New Regulations.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA), (b) plans described in section 4975(e)(1) of
the Code, including individual retirement accounts or Keogh plans, (c) any
entities whose underlying assets include plan assets by reason of a plan's
investment in such entities (each a "Plan") and (d) persons who have certain
specified relationships to such Plans ("Parties-in-Interest" under ERISA and
"Disqualified Persons" under the Code). Moreover, based on the reasoning of the
United States Supreme Court in John Hancock Life Ins. v. Harris Trust and Sav.
Bank, 510 U.S. 86 (1993), an insurance company's general account may be deemed
to include assets of the Plans investing in the general account (e.g., through
the purchase of an annuity contract). ERISA also imposes certain duties on
persons who are fiduciaries of Plans subject to ERISA and prohibits certain
transactions between a Plan and Parties-in-Interest or Disqualified Persons with
respect to such Plans.
The Company and the Call Holder, because of their activities or the
activities of their respective affiliates, may be considered to be
Parties-in-Interest or Disqualified Persons with respect to certain Plans. If
the MVPs are acquired by a Plan with respect to which the Company or the Call
Holder is, or subsequently becomes, a Party-in-Interest or Disqualified Person,
the purchase, holding or sale of MVPs to the Call Holder could be deemed to be a
direct or indirect violation of the Prohibited Transaction rules of ERISA and
the Code unless
S-18
<PAGE> 19
such transaction were subject to one or more statutory or administrative
exemptions such as Prohibited Transaction Class Exemption ("PTCE") 75-1, which
exempts certain transactions involving employee benefit plans and certain
broker-dealers, reporting dealers and banks; PTCE 90-1, which exempts certain
transactions between insurance company pooled separate accounts and
Parties-in-Interest or Disqualified Persons; PTCE 91-38, which exempts certain
transactions between bank collective investment funds and Parties-in-Interest or
Disqualified Persons; PTCE 84-14, which exempts certain transactions effected on
behalf of a Plan by a "qualified professional asset manager;" PTCE 95-60, which
exempts certain transactions between insurance company general accounts and
Parties-in-Interest or Disqualified Persons; or PTCE 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager." Even if the conditions specified in one or more of these exemptions
are met, the scope of relief provided by these exemptions will not necessarily
cover all acts that might be construed as prohibited transactions.
Accordingly, prior to making an investment in the MVPs, a Plan should
determine whether the Company or the Call Holder is a Party-in-Interest or
Disqualified Person with respect to such Plan and, if so, whether such
transaction is subject to one or more statutory or administrative exemptions,
including those described above.
Prior to making an investment in the MVPs, Plans should consult with their
legal advisors concerning the impact of ERISA and the Code and the potential
consequences of such investment with respect to their specific circumstances.
Moreover, each Plan fiduciary should take into account, among other
considerations, whether the fiduciary has the authority to make the investment
on behalf of the Plan; whether the investment constitutes a direct or indirect
transaction with a Party-in-Interest or a Disqualified Person; and whether under
the general fiduciary standards of investment procedure and diversification an
investment in the MVPs is appropriate for the Plan, taking into account the
overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement (the "Underwriting Agreement") relating to the MVPs offered hereby,
the Company has agreed to sell to each of the underwriters named below (the
"Underwriters"), and each of the Underwriters has severally agreed to purchase
from the Company, the respective principal amount of the MVPs set forth opposite
its name below, at a price equal to 99.85% of the principal amount thereof. In
addition, in consideration for the right to require the mandatory tender of all
outstanding MVPs as described above, First Chicago Capital Markets, Inc.
("FCCM") will pay to the Company, on the same date that it pays the purchase
price for the MVPs, an amount equal to .58% of the principal amount of the MVPs.
Such right, upon delivery of the MVPs, will be assigned to the Call Holder by
FCCM.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT OF MVPS
- ----------- --------------
<S> <C>
First Chicago Capital Markets, Inc......................... $125,000,000
Chase Securities Inc....................................... 62,500,000
NationsBanc Montgomery Securities LLC...................... 62,500,000
------------
Total............................................ $250,000,000
</TABLE>
The net proceeds to the Company will be $251,075,000, or 100.43% of the
principal amount of the MVPs, before deducting expenses payable by the Company
estimated to be $250,000. The Underwriters propose to offer the MVPs to the
public at varying prices based on prevailing market rates at the time of resale.
The Underwriters may effect such transactions by selling the MVPs to or through
dealers, and such dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriters and/or the
purchasers of the MVPs for whom they may act as agent. The Underwriters and any
dealers that participate with the Underwriters in the distribution of the MVPs
may be deemed to be underwriters, and any discounts or commissions received by
them and any profit on the resale of the MVPs by them may be deemed to be
underwriting discounts or commissions.
S-19
<PAGE> 20
The MVPs are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
make a market in the MVPs but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the MVPs.
In connection with the offering, the Underwriters may engage in
transactions that maintain or otherwise affect the price of the MVPs.
Specifically, the Underwriters may overallot in connection with the offering,
creating a short position. In addition, the Underwriters may bid for, and
purchase, MVPs in the open market to cover short positions. Any of these
activities may maintain the market price of the MVPs above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof. See also
"Plan of Distribution" in the accompanying prospectus. The Company has also
agreed to pay all fees and expenses of the Underwriters' counsel.
From time to time in the ordinary course of their respective businesses,
the Underwriters and their respective affiliates have engaged in and may in the
future engage in commercial and/or investment banking transactions with the
Company and its affiliates. Affiliates of each of the Underwriters are lending
banks under an unsecured variable interest rate bank credit agreement with the
Company. In addition, Marc J. Shapiro, Vice Chairman of The Chase Manhattan
Corporation and The Chase Manhattan Bank, which are affiliates of Chase
Securities Inc., and Marina v.N. Whitman, a director of The Chase Manhattan
Corporation and The Chase Manhattan Bank, are directors of the Company. Chase
Bank of Texas, National Association, the Trustee, is an affiliate of Chase
Securities Inc.
LEGAL MATTERS
Certain legal matters, including the legality of the MVPs being offered
hereby, are being passed upon for the Company by Fulbright & Jaworski L.L.P.,
Houston, Texas. The validity of the MVPs offered hereby will be passed upon for
the Underwriters by Vinson & Elkins L.L.P., Houston, Texas. Vinson & Elkins
L.L.P. has represented the Company in various legal matters from time to time.
Brown & Wood LLP, New York, New York is acting as special counsel for the
Underwriters with respect to the MVPs.
S-20
<PAGE> 21
PROSPECTUS
BFI LOGO
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
Browning-Ferris Industries, Inc. (the "Company") may offer and sell from
time to time, either jointly or separately, at prices and on terms to be
determined at or prior to the time of sale, up to an aggregate initial offering
price of not more than $1,142,227,500 (or, if applicable, the equivalent thereof
in other currencies) of its (i) unsecured debt securities ("Debt Securities")
consisting of debentures, notes and/or other unsecured evidences of indebtedness
in one or more series, (ii) shares of preferred stock, without par value
("Preferred Stock"), in one or more series, (iii) shares of common stock, par
value $.16 2/3 per share ("Common Stock"), (iv) Warrants ("Warrants") to
purchase Debt Securities, Preferred Stock or Common Stock, (v) Stock Purchase
Contracts ("Stock Purchase Contracts") to purchase Preferred Stock or Common
Stock or (vi) Stock Purchase Units ("Stock Purchase Units"), each representing
ownership of a Stock Purchase Contract and Debt Securities or debt obligations
of third parties, including U.S. Treasury securities, securing the holder's
obligation to purchase the Preferred Stock or Common Stock under the Stock
Purchase Contract (the Debt Securities, Preferred Stock, Common Stock, Warrants,
Stock Purchase Contracts and Stock Purchase Units are collectively referred to
as "Securities").
Specific terms of the Securities ("Offered Securities") in respect of which
this Prospectus is being delivered will be set forth in an accompanying
Prospectus Supplement ("Prospectus Supplement"), together with the terms of the
offering of the Offered Securities and the initial price and net proceeds to the
Company from the sale thereof. The Prospectus Supplement will set forth with
regard to the particular Offered Securities, without limitation, the following:
(i) in the case of Debt Securities, the specific designation, aggregate
principal amount, ranking as senior or subordinated debt, authorized
denomination, maturity, rate or rates of interest (or method of calculation
thereof) and dates for payment thereof, any exchangeability, conversion,
redemption, prepayment or sinking fund provisions, and the currency or
currencies or currency unit or currency units in which principal, premium, if
any, or interest, if any, is payable, (ii) in the case of Preferred Stock, the
designation, number of shares, liquidation preference per share, initial public
offering price, dividend rate (or method of calculation thereof), dates on which
dividends shall be payable and dates from which dividends shall accrue, any
redemption or sinking fund provisions, any voting rights, and any conversion or
exchange rights, (iii) in the case of Common Stock, the number of shares of
Common Stock and the terms of the offering and sale thereof, (iv) in the case of
Warrants, the number and terms thereof, the designation and number of Securities
issuable upon their exercise, the exercise price, the terms of the offering and
sale thereof and, where applicable, the duration and detachability thereof, (v)
in the case of Stock Purchase Contracts, the designation and number of shares of
Preferred Stock or Common Stock issuable thereunder, the purchase price of the
Preferred Stock or Common Stock, the date or dates on which the Preferred Stock
or Common Stock is required to be purchased by the holders of the Stock Purchase
Contracts, any periodic payments required to be made by the Company to the
holders of the Stock Purchase Contract or visa versa, and the terms of the
offering and sale thereof, and (vi) in the case of Stock Purchase Units, the
specific terms of the Stock Purchase Contracts and any Debt Securities or debt
obligations of third parties securing the holder's obligation to purchase the
Preferred Stock or Common Stock under the Stock Purchase Contracts, and the
terms of the offering and sale thereof.
The Company may sell the Securities directly, through agents designated
from time to time or through underwriters or dealers. If any agents of the
Company or any underwriters or dealers are involved in the sale of the
Securities, the names of such agents, underwriters or dealers and any applicable
commissions and discounts will be set forth in the 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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
This Prospectus may not be used to consummate sales of the Securities
unless accompanied by a Prospectus Supplement.
------------------------
THE DATE OF THIS PROSPECTUS IS JANUARY 11, 1996
<PAGE> 22
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING MADE
HEREBY AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OTHER PERSON.
THIS PROSPECTUS AND THE 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 JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR
RESPECTIVE DATES.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission may be inspected at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the following Regional Offices
of the Commission: New York Regional Office, Seven World Trade Center, New York,
New York 10048; and Chicago Regional Office, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy statements and other information can also be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005, at the offices of the Chicago Stock Exchange, Inc., 440 S. LaSalle
Street, Chicago, Illinois 60605, and at the offices of the Pacific Stock
Exchange, Inc., 301 Pine Street, San Francisco, California 94104.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement for further information with respect to the
Company and the Securities offered hereby. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed with the Commission by the
Company pursuant to the Exchange Act, are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995;
(b) The Company's Current Report on Form 8-K dated January 24, 1995,
as amended, relating to the acquisition by the Company of Attwoods plc,
including the consolidated financial statements of Attwoods plc for the
year ended July 31, 1994 and the unaudited pro forma combined statement of
operations of the Company for the year ended September 30, 1994; and
(c) The Company's Current Report on Form 8-K dated March 2, 1995,
including the unaudited pro forma combined statement of operations of the
Company for the quarter ended December 31, 1994.
2
<PAGE> 23
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange 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 the Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be 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
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in the accompanying Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Copies of all documents incorporated by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
in such documents) will be provided without charge to each person, including any
beneficial owner, who receives a copy of this Prospectus on the written request
of such person addressed to the Secretary's Department, Browning-Ferris
Industries, Inc., P.O. Box 3151, Houston, Texas 77253, or upon the oral request
of such person directed to the Secretary's Department at (713) 870-7027.
THE COMPANY
The Company is one of the largest publicly held companies that engages,
through its subsidiaries and affiliates, in providing waste services. The
Company collects, transports, treats and/or processes, recycles and disposes of
commercial, residential and municipal solid wastes and industrial wastes. The
Company is also involved in waste-to-energy conversion, medical waste services,
portable restroom services and municipal and commercial sweeping operations. The
Company (including unconsolidated affiliates) operates in approximately 450
locations in North America and approximately 320 locations outside of North
America, and employs approximately 43,000 persons. In addition to operations in
the United States, Canada and Puerto Rico, the Company owns interests in
subsidiaries or affiliates with operations in Australia, the Dominican Republic,
Finland, Germany, Hong Kong, Italy, Israel, Kuwait, the Netherlands, New
Zealand, Spain, Switzerland and the United Kingdom.
The term "Company" refers to Browning-Ferris Industries, Inc., a Delaware
corporation, and its subsidiaries, affiliates and predecessors unless the
context requires otherwise. The Company's executive offices are located at 757
N. Eldridge, Houston, Texas 77079. The Company's mailing address is P.O. Box
3151, Houston, Texas 77253, and its telephone number is (713) 870-8100.
APPLICATION OF PROCEEDS
Unless otherwise indicated in a Prospectus Supplement with respect to the
proceeds from the sale of the particular Securities to which such Prospectus
Supplement relates, the net proceeds to be received by the Company from the sale
of the Securities will be added to the Company's general funds and are expected
to be applied to reduce certain outstanding debt and for general corporate
purposes, including capital expenditures and acquisitions.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate ("Offered Debt Securities"). The particular terms of the Offered Debt
Securities and the extent to which such general provisions may apply will be
described in a Prospectus Supplement relating to such Offered Debt Securities.
The Debt Securities will be general unsecured obligations of the Company
and will constitute either senior debt securities or subordinated debt
securities. In the case of Debt Securities that will be senior debt securities
("Senior Debt Securities" and "Offered Senior Debt Securities"), the Debt
Securities will be issued under a Restated Indenture dated as of September 1,
1991 (the "Senior Indenture"), between the Company
3
<PAGE> 24
and Texas Commerce Bank National Association, as Trustee (successor trustee to
First City, Texas-Houston, National Association, which was formerly First City
National Bank of Houston) (the "Senior Trustee"). In the case of Debt Securities
that will be subordinated debt securities ("Subordinated Debt Securities" and
"Offered Subordinated Debt Securities"), the Debt Securities will be issued
under an Indenture dated as of August 1, 1987, as amended (the "Subordinated
Indenture"), between the Company and The Bank of New York, as Trustee (successor
trustee to NationsBank of Texas, National Association, which was successor
trustee to First RepublicBank Houston, National Association) (the "Subordinated
Trustee"). The Senior Indenture and the Subordinated Indenture are sometimes
referred to herein individually as an "Indenture" and collectively as the
"Indentures". The Senior Trustee and the Subordinated Trustee are sometimes
referred to herein individually as a "Trustee" and collectively as the
"Trustees". The statements under this caption relating to the Debt Securities
and the Indentures are summaries only and do not purport to be complete. Such
summaries make use of terms defined in the Indentures. Wherever such terms are
used herein or particular provisions of the Indentures are referred to, such
terms or provisions, as the case may be, are incorporated by reference as part
of the statements made herein, and such statements are qualified in their
entirety by such reference. Certain defined terms in the Indentures are
capitalized herein. The references below apply to the section numbers in each of
the Indentures, unless otherwise indicated. Both the Senior Indenture and the
Subordinated Indenture, and the Securities issued thereunder, are governed by
Texas law.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
GENERAL. The Indentures do not limit the aggregate principal amount of the
Debt Securities issuable thereunder or of any particular series of the Debt
Securities and provide that Debt Securities may be issued thereunder from time
to time in one or more series with the same or various maturities at par, at a
premium or at a discount. Offered Debt Securities bearing no interest or
interest at a rate which at the time of issuance is below market rate ("Original
Issue Discount Securities") will be sold at a discount (which may be
substantial) from their stated principal amount. Federal income tax consequences
and other special considerations applicable to any such Original Issue Discount
Securities will be described in the Prospectus Supplement relating thereto.
Other than as may be set forth in any Prospectus Supplement, the Indentures and
the Debt Securities will not contain any covenants or other provisions that are
intended to afford holders of the Debt Securities special protection in the
event of a highly leveraged transaction by the Company.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities: (i) the title and the limit on the aggregate
principal amount of Offered Debt Securities; (ii) the percentage of the
principal amount at which the Offered Debt Securities will be sold; (iii) the
date or dates on which the principal of (and premium, if any, on) the Offered
Debt Securities will be payable; (iv) the rate or rates (which may be fixed or
variable) per annum, if any, at which the Offered Debt Securities will bear
interest or the method of determining such rate or rates; (v) the date or dates
from which such interest, if any, shall accrue, the date or dates on which such
interest, if any, will be payable and the regular record date for interest
payable on any payment date; (vi) the place or places where the principal of
(and premium, if any) and interest, if any, on the Offered Debt Securities will
be payable; (vii) the terms for redemption or early payment, if any, including
any mandatory or optional sinking fund or analogous provision; (viii) the
principal amount of any Offered Debt Securities that are Original Issue Discount
Securities, which would be payable upon declaration of acceleration of the
maturity of the Offered Debt Securities; (ix) any modifications of the Events of
Default or covenants of the Company contained in the Indenture pertaining to the
Offered Debt Securities; (x) information with respect to book-entry procedures,
if any; (xi) as to Subordinated Debt Securities only, whether the offered
Subordinated Debt Securities are convertible into Common Stock of the Company
and, if so, the initial conversion price; and (xii) any other terms of the
Offered Debt Securities not inconsistent with the Indenture under which they are
issued. (Section 301)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of and any premium and interest on the Offered Debt Securities will be
payable, and the Offered Debt Securities will be exchangeable and transfer
thereof will be registrable, at the corporate trust office of the Trustee or at
the office of each paying agent, if any, identified in the Prospectus Supplement
with respect to the Offered Debt Securities; provided that, at the option of the
Company, payment of any interest may be made by check
4
<PAGE> 25
mailed to the address of the Person entitled thereto as it appears in the
Security Register. The Corporate Trust Office of the Senior Trustee is located
at 712 Main Street, Houston, Texas 77002, and the Corporate Trust Office of the
Subordinated Trustee is located at 10161 Centurion Parkway, Jacksonville,
Florida 32256. (Sections 301, 305 and 1002)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued in only fully registered form without
coupons in denominations of $1,000 or any integral multiple thereof, and no
service charge will be made for any transfer or exchange of such Offered Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. (Sections 302
and 305)
GLOBAL SECURITIES. The Offered Debt Securities of a series may be issued in
whole or in part in the form of one or more global securities ("Global
Securities") that will be issued to and registered in the name of the depositary
(the "Depositary") identified in the Prospectus Supplement, or its nominee,
relating to such series. Global Securities may be issued only in
fully-registered form and in either temporary or permanent form. Unless and
until a Global Security is exchanged in whole or in part for the individual Debt
Securities represented thereby, such Global Security may not be transferred
except as a whole by the Depositary to its nominee 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 Depositary or nominee of such
successor Depositary. (Section 305)
The specific terms of the depositary arrangement with respect to a series
of Offered Debt Securities will be described in the Prospectus Supplement
relating to such series. The Company anticipates that the following provisions
will generally apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the individual Debt Securities represented by such Global
Security to the accounts of persons that have accounts with the Depositary. Such
accounts shall be designated by the dealers, underwriters or agents with respect
to such Debt Securities or by the Company if such Debt Securities are offered
and sold directly by the Company. Ownership of beneficial interests in a Global
Security will be limited to persons that have accounts with the Depositary
("Participants") or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depositary or its nominee (with respect to interests of Participants) and
the records of Participants (with respect to interests of persons other than
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, such registered owner will be considered the sole owner or
holder of the Debt Securities represented by such Global Security for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have any of the
individual Debt Securities represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of any
such Debt Securities in definitive form and will not be considered the owners or
holders thereof under the Indenture.
Payments of principal of and premium, if any, and interest, if any, on Debt
Securities represented by a Global Security 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 Global Security representing such
Debt Securities. None of the Company, the Trustee, any Paying Agent or the
Security Registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Global Security for such Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects the Depositary or its nominee, immediately upon receipt
of any payment of principal, premium or interest in respect of a Global
Security, will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global
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Security as shown on the records of the Depositary or its nominee. The Company
also expects that payments by Participants to owners of beneficial interests in
such Global Security held through such Participants will be governed by standing
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".
Such payments will be the sole responsibility of such Participants. The Company
has no control over the practices of the Depositary or the Participants and
there can be no assurance that these practices will not be changed.
If the Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security representing such
series of Debt Securities. In addition, the Company may at any time and in its
sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Debt Securities, determine not to have any Debt
Securities of a series represented by one or more Global Securities and, in such
event, will issue individual Debt Securities of such series in exchange for the
Global Security representing such series of Debt Securities. Further, if there
shall have occurred and be continuing an Event of Default, or an event which,
with the giving of notice or lapse of time, or both, would constitute an Event
of Default with respect to any series of Debt Securities represented by a Global
Security, such Global Security shall be exchangeable for individual Debt
Securities of such series. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to a physical delivery of
individual Debt Securities of the series represented by such Global Security
equal in principal amount to such beneficial interest and to have such Debt
Securities registered in its name. Individual Debt Securities of such series so
issued will be issued in denominations, unless otherwise specified by the
Company, of $1,000 and integral multiples thereof.
CONSOLIDATION, MERGER AND SALE OF ASSETS. Each Indenture provides that the
Company, without the consent of the holders of any of the outstanding Debt
Securities, may consolidate with or merge into any other corporation or transfer
or lease its assets substantially as an entirety to any Person or may acquire or
lease the assets of any Person substantially as an entirety or may permit any
corporation to merge into the Company provided that (i) the successor is a
corporation organized under the laws of any domestic jurisdiction; (ii) the
successor corporation, if other than the Company, assumes the Company's
obligations under the Indenture and the Debt Securities issued thereunder; (iii)
after giving effect to the transaction, no Event of Default and no event which,
after notice or lapse of time, or both, would become an Event of Default, shall
have occurred and be continuing; and (iv) certain other conditions are met.
(Section 801)
MODIFICATION OF THE INDENTURES. Each Indenture provides that the Company
and the Trustee may, without the consent of any holders of Debt Securities,
enter into supplemental indentures for the purposes, among other things, of
adding to the Company's covenants, adding additional Events of Default,
establishing the form or terms of Debt Securities, curing ambiguities or
inconsistencies in the Indenture or making any other provisions with respect to
matters arising under the Indenture if such action shall not adversely affect
the interests of the holders of any series of Debt Securities in any material
respect or to change or eliminate any of the provisions of the Indenture with
respect to a series of Debt Securities if such series is not then outstanding.
(Section 901)
Each Indenture also contains provisions permitting the Company, with the
consent of the holders of not less than a majority in principal amount of the
outstanding Debt Securities of the affected series, to execute supplemental
indentures adding any provisions to or changing or eliminating any of the
provisions of the Indenture or modifying the rights of the holders of the Debt
Securities of such series, except that no such supplemental indenture may,
without the consent of the holders of all of the outstanding Debt Securities
affected thereby, among other things: (i) change the maturity of the principal
of or any installment of principal or interest on any of the Debt Securities;
(ii) reduce the principal amount thereof or the rate of interest, if any,
thereon or any premium payable on the redemption thereof; (iii) reduce the
amount of the principal of Original Issue Discount Securities payable on any
date; (iv) change the place of payment where, or the coin or currency in which,
any of the Debt Securities or any premium or interest thereon is payable; (v)
impair the right to institute suit for the enforcement of any such payment on or
after the applicable maturity date; (vi) reduce the percentage in principal
amount of the Debt Securities of any outstanding series the consent of the
holders of which is required for any such supplemental indenture or for any
waiver of
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compliance with certain provisions of, or of certain defaults under, the
Indenture; (vii) as to the Subordinated Indenture only, adversely affect the
right to convert the Subordinated Debt Securities (if convertible) or modify the
subordination provisions of the Subordinated Indenture in a manner adverse to
the holders of Subordinated Debt Securities; or (viii) with certain exceptions,
modify the foregoing requirements. (Section 902)
EVENTS OF DEFAULT, NOTICE AND WAIVER. Unless otherwise indicated in the
Prospectus Supplement relating to a particular series of Debt Securities, an
Event of Default with respect to any series of Debt Securities is defined in
each Indenture to be a (i) default for 30 days in the payment of any installment
of interest upon any of the Debt Securities of such series when due; (ii)
default in the payment of principal of (or premium, if any, on) any of the Debt
Securities of such series when due; (iii) default in the making or satisfaction
of any sinking fund payment when the same becomes due by the terms of the Debt
Securities of such series; (iv) default by the Company in the performance, or
breach, of any of its other covenants in the Indenture which shall not have been
remedied for a period of 60 days after notice by the Trustee or the holders of
at least 25% in principal amount of the Debt Securities of such series; (v)
certain events of bankruptcy, insolvency or reorganization of the Company; and
(vi) such other events as may be specified for each series. (Section 501)
A default under other indebtedness of the Company or any of its
subsidiaries will not be a default under either Indenture, and an Event of
Default under one series of Debt Securities will not necessarily be an Event of
Default under another series of Debt Securities issued under the same Indenture.
Each Indenture provides that if an Event of Default specified therein with
respect to any outstanding series of Debt Securities issued thereunder shall
have occurred and be continuing, either the Trustee or the holders of not less
than 25% in principal amount of the Debt Securities of such series may declare
the principal (or, if the Debt Securities of such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified by
the terms of such series) of all of the Debt Securities of such series to be
immediately due and payable. Such declaration may be rescinded if certain
conditions are satisfied. (Section 502)
Each Indenture also provides that the holders of not less than a majority
in principal amount of the Debt Securities of any outstanding 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, with
respect to the Debt Securities of such series, provided that the Trustee may
take any other proper action not inconsistent with such direction and may
decline to act if such direction is contrary to law or to the Indenture or would
involve the Trustee in personal liability. (Section 512)
In addition, each Indenture also provides that the holders of not less than
a majority in principal amount of the Debt Securities of any outstanding series
thereunder may on behalf of the holders of all of the Debt Securities of such
series waive any past default with respect to such series and its consequences,
except a default (i) in the payment of the principal of (or premium, if any) or
interest on any of the Debt Securities of such series or (ii) in respect of a
covenant or provision of the Indenture which, under the terms thereof, cannot be
modified or amended without the consent of the holders of all of the Debt
Securities of such series. (Section 513)
Each Indenture contains provisions entitling the Trustee, subject to the
duty of the Trustee during an Event of Default in respect of any series of Debt
Securities issued thereunder to act with the required standard of care, to be
indemnified by the holders of the Debt Securities of such series before
proceeding to exercise any right or power under the Indenture at the request of
the holders of the Debt Securities of such series. (Sections 601 and 603)
Each Indenture also provides that the Trustee will, within 90 days after
the occurrence of a default in respect of any series of Debt Securities issued
thereunder give to the holders of the Debt Securities of such series notice of
all uncured and unwaived defaults known to it; provided, however, that, except
in the case of a default in the payment of the principal of, (or premium, if
any) or interest on, or any sinking fund installment with respect to, any Debt
Securities of such series, the Trustee will be protected in withholding such
notice if it
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in good faith determines that the withholding of such notice is in the interest
of the holders of the Debt Securities of such series; and provided further, that
such notice shall not be given until at least 30 days after the occurrence of an
Event of Default regarding the performance or breach of any covenant or warranty
of the Company under the Indenture other than for the payment of the principal
of, (or premium, if any) or interest on, or any sinking fund installment with
respect to, any of the Debt Securities of such series. The term default for the
foregoing purpose only means any event which is, or after notice or lapse of
time, or both, would become, an Event of Default with respect to the Debt
Securities of such series. (Section 602)
Each Indenture requires the Company to file annually with the Trustee a
certificate, executed by an officer of the Company, indicating whether the
Company has fulfilled all of its obligations or is in default under certain
covenants under the Indenture. (Section 1004)
PROVISIONS APPLICABLE TO SENIOR DEBT SECURITIES
GENERAL. The Senior Debt Securities will be unsecured obligations of the
Company issued under the Senior Indenture and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company.
LIMITATIONS ON LIENS. The Senior Indenture does not contain any covenant
restricting the amount of indebtedness which may be incurred by the Company or
any of its Subsidiaries. The Senior Indenture, however, provides, in general,
that except as provided in this and in the following paragraph, the Company will
not, and will not permit any Restricted Subsidiary to, issue, assume or
guarantee any Debt secured by a Lien upon any Principal Property of the Company
or any Restricted Subsidiary or upon any shares of stock or Debt of any
Restricted Subsidiary (whether such Principal Property, shares of stock or Debt
are now owned or hereafter acquired) without in any such case effectively
providing concurrently with the issuance, assumption or guaranty of any such
Debt that the Senior Debt Securities (together with, if the Company shall so
determine, any other indebtedness of or guaranty by the Company or such
Restricted Subsidiary then existing or thereafter created which is not
subordinate to the Senior Debt Securities) shall be secured equally and ratably
with (or, at the option of the Company, prior to) such Debt, so long as such
Debt shall be so secured; provided, however, that the foregoing restrictions
shall not apply to Debt secured by: (1) Liens on property, shares of stock or
indebtedness of any corporation existing at the time such corporation becomes a
Restricted Subsidiary; (2) Liens on any property (including shares of stock or
Debt) existing at the time of acquisition thereof or securing the payment of all
or any part of the purchase price or construction cost thereof or securing any
Debt incurred prior to, at the time of or within 180 days after, the acquisition
of such property or the completion of any such construction for the purpose of
financing all or any part of the purchase price or construction cost thereof;
(3) Liens on any property to secure all or any part of the cost of development,
operation, construction, alteration, repair or improvement of all or any part of
such property, or to secure Debt incurred prior to, at the time of or within 180
days after, the completion of such development, operation, construction,
alteration, repair or improvement for the purpose of financing all or any part
of such cost; (4) Liens which secure Debt owing by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary or by the Company to a
Restricted Subsidiary; (5) Liens securing indebtedness of a corporation which
becomes a successor of the Company by reason of a consolidation, merger or any
conveyance, transfer or lease of the properties and assets of the Company
substantially as an entirety; (6) Liens on property of the Company or a
Restricted Subsidiary in favor of governmental authorities to secure partial,
progress, advance or other payments or to secure any indebtedness incurred for
the purpose of financing all or any part of the purchase price or the cost of
construction of the property subject to such Liens, or in favor of any trustee
or mortgagee for the benefit of holders of indebtedness of any such entity
incurred for any such purpose; (7) Liens incurred in connection with pollution
control, sewage or solid waste disposal, industrial revenue or similar
financing; (8) Liens existing at January 15, 1985; and (9) any extension,
renewal or replacement (or successive extensions, renewals or replacements), in
whole or in part, of any Lien referred to in the foregoing clauses (1) to (8),
inclusive, or of any Debt secured thereby; provided that such extension, renewal
or replacement Lien shall be limited to all or any part of the same property
that secured the Lien extended, renewed or replaced (plus any improvements on
such property) and shall secure no larger amount of Debt than that existing at
the time of such extension, renewal or replacement. (Section 1005)
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The Company and any one or more Restricted Subsidiaries may issue, assume
or guarantee Debt secured by a Lien which would otherwise be subject to the
foregoing restrictions if at the time it does so (the "Incurrence Time") such
Debt plus all other Debt of the Company and its Restricted Subsidiaries secured
by a Lien which would otherwise be subject to the foregoing restrictions (not
including Debt permitted to be secured as described in clauses (1) through (9)
in the preceding paragraph), plus the aggregate Attributable Debt (determined as
of the Incurrence Time) of Sale and Leaseback Transactions (other than Sale and
Leaseback Transactions described in clauses (a) and (b) of the paragraph under
the caption "Limitation on Sale and Leaseback Transactions" herein) entered into
after January 15, 1985 and in existence at the Incurrence Time (less the
aggregate amount of proceeds of such Sale and Leaseback Transactions which shall
have been applied as described in clause (d) of the paragraph under the caption
"Limitation on Sale and Leaseback Transactions" herein), does not exceed 10% of
the Consolidated Net Tangible Assets. (Section 1005)
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Senior Indenture
provides, in general, that the Company will not itself, and will not permit any
Restricted Subsidiary to, enter into any arrangements with any bank, insurance
company or other lender or investor (other than the Company or another
Restricted Subsidiary) providing for the leasing as lessee by the Company or any
such Restricted Subsidiary of any Principal Property (except a lease for a
temporary period not to exceed three years by the end of which it is intended
the use of such Principal Property by the lessee will be discontinued), which
was or is owned by the Company or a Restricted Subsidiary and which has been or
is to be sold or transferred by the Company or a Restricted Subsidiary, more
than 180 days after the completion of construction and commencement of full
operation thereof by the Company or such Restricted Subsidiary, to such lender
or investor or to any person to whom funds have been or are to be advanced by
such lender or investor on the security of such Principal Property (herein
called a "Sale and Leaseback Transaction") unless: (a) the Company or such
Restricted Subsidiary would (at the time of entering into such arrangement) be
entitled, as described in clauses (1) through (9) of the first paragraph under
the caption "Limitations on Liens" herein, without equally and ratably securing
the Senior Debt Securities, to issue, assume or guarantee indebtedness secured
by a Lien on such Principal Property, or (b) such Sale and Leaseback Transaction
relates to a landfill or other waste disposal site (excluding any plant or
similar facility located thereon) owned by the Company or such Restricted
Subsidiary or which the Company or such Restricted Subsidiary has the right to
use, or (c) the Attributable Debt of the Company and its Restricted Subsidiaries
in respect of such Sale and Leaseback Transaction and all other Sale and
Leaseback Transactions entered into after January 15, 1985 (other than such Sale
and Leaseback Transactions as are referred to in clauses (a), (b) or (d) of this
paragraph), plus the aggregate principal amount of Debt secured by Liens on
Principal Properties then outstanding (excluding any such Debt secured by Liens
described in clauses (1) through (9) of the first paragraph under the caption
"Limitations on Liens" herein) which do not equally and ratably secure the
Senior Debt Securities, would not exceed 10% of Consolidated Net Tangible Assets
or (d) the Company, within 180 days after the sale or transfer, applies or
causes a Restricted Subsidiary to apply (subject to certain reductions described
in the Senior Indenture) an amount equal to the greater of the net proceeds of
such sale or transfer or fair market value of the Principal Property so sold and
leased back at the time of entering into such Sale and Leaseback Transaction to
the retirement of Senior Debt Securities or other indebtedness of the Company
(other than indebtedness subordinated to the Senior Debt Securities) or
indebtedness of a Restricted Subsidiary, for money borrowed, having a stated
maturity more than 12 months from the date of such application or which is
extendible at the option of the obligor thereon to a date more than 12 months
from the date of such application. (Section 1006)
DEFINITIONS. Certain terms used in the above described restrictions are
given the following definitions in Section 101 of the Senior Indenture:
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, as of any particular time, the present value (discounted at the rate
of interest implicit in the terms of the lease involved in such Sale and
Leaseback Transaction, as determined in good faith by the Company) of the
obligation of the lessee thereunder for net rental payments (excluding,
however, any amounts required to be paid by such lessee, whether or not
designated as rent or additional rent, on account of maintenance and
repairs,
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services, insurance, taxes, assessments, water rates and similar charges or
any amounts required to be paid by such lessee thereunder contingent upon
monetary inflation or the amount of sales, maintenance and repairs,
insurance, taxes, assessments, water rates or similar charges) during the
remaining term of such lease (including any period for which such lease has
been extended or may, at the option of the lessor, be extended).
"Consolidated Net Tangible Assets" means the aggregate amount of
assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles and (b)
all current liabilities, all as reflected in the Company's latest audited
consolidated balance sheet contained in the Company's most recent annual
report to its stockholders prior to the time as of which "Consolidated Net
Tangible Assets" shall be determined.
"Debt" means indebtedness for borrowed money.
"Lien" means any mortgage, pledge, security interest, lien or other
encumbrance.
"Principal Property" means any waste processing, waste disposal or
resource recovery plant or similar facility located within the United
States of America (other than its territories and possessions and Puerto
Rico) and owned by, or leased to, the Company or any Restricted Subsidiary,
except (a) any such plant or facility (i) owned or leased jointly or in
common with one or more persons other than the Company and its
Subsidiaries, in which the interest of the Company and its Restricted
Subsidiaries does not exceed 50%, or (ii) which the Board of Directors
determines in good faith is not of material importance to the total
business conducted, or assets owned, by the Company and its Subsidiaries as
an entirety, or (b) any portion of any such plant or facility which the
Board of Directors determines in good faith not to be of material
importance to the use or operation thereof.
"Restricted Subsidiary" means any Subsidiary substantially all the
property of which is located, or substantially all the business of which is
carried on, within the United States of America (excluding its territories
and possessions and Puerto Rico).
"Subsidiary" means any corporation of which the Company directly or
indirectly owns or controls stock which under ordinary circumstances (not
dependent upon the happening of a contingency) has voting power to elect a
majority of the board of directors of such corporation.
DEFEASANCE. If so provided in the Prospectus Supplement accompanying the
Offered Senior Debt Securities, the Company may discharge its indebtedness and
its obligations under the Senior Indenture with respect to such series by
depositing funds or obligations issued or guaranteed by the United States of
America with the Senior Trustee. The Prospectus Supplement will more fully
describe the provisions, if any, relating to such discharge. (Section 403)
REGARDING THE SENIOR TRUSTEE. The Senior Trustee is a lending bank under an
unsecured variable interest rate bank credit agreement with the Company. The
Company has and may from time to time in the future have other banking
relationships with the Senior Trustee in the ordinary course of business. Marc
J. Shapiro, a director of the Company, is also the President and Chief Executive
Officer of the Senior Trustee and an executive officer of Chemical Banking
Corporation, the parent corporation of the Senior Trustee. William D.
Ruckelshaus, Chairman of the Board of Directors of the Company, is also an
advisory director of the Senior Trustee. Marina v.N. Whitman, a director of the
Company, is also a director of Chemical Banking Corporation.
PROVISIONS APPLICABLE TO SUBORDINATED DEBT SECURITIES
GENERAL. The Subordinated Debt Securities will be unsecured obligations of
the Company to be issued under the Subordinated Indenture, and will be
subordinate in right of payment to certain other indebtedness of the Company as
described under "Subordination".
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SUBORDINATION. The Subordinated Debt Securities will be subordinate and
junior in right of payment, as set forth in the Subordinated Indenture, to the
prior payment in full of all Senior Debt of the Company. "Senior Debt" is
defined in the Subordinated Indenture as the principal of (and premium, if any)
and interest on any indebtedness, whether outstanding at the date of the
Subordinated Indenture or thereafter created or incurred, which is for (a) money
borrowed by the Company, (b) obligations of the Company evidencing the purchase
price for acquisitions by the Company or a subsidiary other than in the ordinary
course of business, (c) money borrowed by others and assumed or guaranteed by
the Company, (d) capitalized lease obligations of the Company, (e) obligations
under performance guarantees, support agreements and other agreements in the
nature thereof relating to the obligations of any subsidiary of the Company with
respect to waste-to-energy facilities and (f) renewals, extensions, refundings,
amendments and modifications of any indebtedness, of the kind described in the
foregoing clauses (a), (b), (c), (d) and (e) or of the instruments creating or
evidencing such indebtedness, unless, in each case, by the terms of the
instrument creating or evidencing such indebtedness or such renewal, extension,
refunding, amendment and modification, it is provided that such indebtedness is
not senior in right of payment to the Subordinated Debt Securities. (Section
1311)
In the event of any distribution of assets of the Company upon its
dissolution, winding up, liquidation or reorganization, the holders of Senior
Debt shall first be paid in full in respect of principal, premium (if any) and
interest before any such payments are made on account of the Subordinated Debt
Securities. In addition, in the event that (a) the Subordinated Debt Securities
or any other debt securities issued under the Subordinated Indenture are
declared due and payable because of an Event of Default (other than under the
circumstances described in the preceding sentence) or (b) any default by the
Company has occurred and is continuing in the payment of principal, premium (if
any), sinking funds or interest on any Senior Debt, then no payment shall be
made on account of principal, premium (if any), sinking funds or interest on the
Subordinated Debt Securities until all such payments due in respect of such
Senior Debt have been paid full. (Sections 1301 and 1304)
By reason of such subordination, creditors of the Company who are not
holders of Senior Debt may, subject to any subordination provisions that may be
applicable to such creditors, recover more ratably than holders of the
Subordinated Debt Securities.
As of September 30, 1995, the Company had outstanding approximately $1.8
billion principal amount of indebtedness which would constitute "Senior Debt".
The Company also has unused lines of credit for up to a maximum of $1.7 billion
at November 30, 1995. The amount of Senior Debt may change in the future, and
the Subordinated Indenture contains no limitations on the incurrence of Senior
Debt.
CONVERSION. The Subordinated Indenture provides that a series of
Subordinated Debt Securities may be convertible into Common Stock. The following
provisions will apply to convertible Subordinated Debt Securities unless
otherwise provided in the Prospectus Supplement for such series of Subordinated
Debt Securities.
The holder of any convertible Subordinated Debt Securities will have the
right, exercisable at any time prior to maturity, subject to prior redemption by
the Company, to convert any portion of such Subordinated Debt Securities that is
$1,000 in principal amount or any integral multiple thereof, into shares of
Common Stock at the conversion price or conversion rate set forth in the
Prospectus Supplement, subject to adjustment.
In certain events, the conversion price or conversion rate will be subject
to adjustment as set forth in the Subordinated Indenture. Such events include
the issuance of shares of Common Stock as a dividend or distribution on the
Common Stock; subdivisions, combinations and reclassifications of the Common
Stock; the fixing of a record date for the issuance to all holders of Common
Stock of rights or warrants entitling the holders thereof (for a period expiring
within 45 days of the record date) to subscribe for or purchase shares of Common
Stock at a price per share less than the then current market price per share of
Common Stock (as determined pursuant to the Subordinated Indenture); and the
fixing of a record date for the distribution to all holders of Common Stock of
evidences of indebtedness or assets (excluding cash dividends paid from surplus)
of the Company or subscription rights or warrants (other than those referred to
above). No adjustment of the conversion price or conversion rate will be
required unless an adjustment would require a cumulative increase or decrease of
at least 1% in such price or rate. (Section 1404)
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Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based on the then
current market price for the Common Stock. Upon conversion, no adjustments will
be made for accrued interest or dividends, and, accordingly, convertible
Subordinated Debt Securities surrendered for conversion between the record date
for an interest payment and the interest payment date (except convertible
Subordinated Debt Securities called for redemption on a redemption date during
such period) must be accompanied by payment of an amount equal to the interest
thereon which the registered holder is to receive. (Sections 1403 and 1405)
In the case of any reclassification or change in the outstanding shares of
Common Stock, any consolidation or merger of the Company (with certain
exceptions) or any conveyance, transfer or lease of the property and assets of
the Company substantially as an entirety, the holder of convertible Subordinated
Debt Securities, after the consolidation, merger, conveyance, transfer or lease,
will have the right to convert such convertible Subordinated Debt Securities
into the kind and amount of securities, cash and other property which the holder
would have been entitled to receive upon or in connection with such
consolidation, merger, conveyance, transfer or lease, if the holder had held the
Common Stock issuable upon conversion of such convertible Subordinated Debt
Securities immediately prior to such consolidation, merger, conveyance, transfer
or lease. (Section 1406)
REGARDING THE SUBORDINATED TRUSTEE. The Company may from time to time in
the future have other banking relationships with the Subordinated Trustee in the
ordinary course of business.
CAPITAL STOCK
Pursuant to its Restated Certificate of Incorporation, the Company is
authorized to issue (i) 400,000,000 shares of Common Stock, $.16 2/3 par value
and (ii) 25,000,000 shares of Preferred Stock, without par value, of which
4,000,000 shares have been designated by the Board of Directors as Series A
Participating Preferred Stock which may be issued upon the exercise of Rights
(hereinafter defined) associated with the Common Stock as discussed below.
On June 1, 1988, the Board of Directors of the Company declared a dividend
distribution of one right (a "Right") on each share of Common Stock outstanding
at the close of business on June 13, 1988, and in connection therewith entered
into a Rights Agreement, dated as of June 1, 1988 (as amended, the "Rights
Agreement") with Texas Commerce Bank National Association (subsequently
succeeded by First Chicago Trust Company of New York) as Rights Agent. In
addition, the Board authorized the issuance of one Right with respect to each
share of Common Stock that becomes outstanding between June 13, 1988 and the
earliest of the dates on which separate Right certificates are distributed or
the Rights expire or are redeemed. The Rights distribution was not taxable to
stockholders.
When exercisable, each Right will entitle the registered holder to purchase
one one-hundredth of a share of Series A Participating Preferred Stock at an
exercise price of $110.00, subject to adjustment. The Rights will not be
exercisable prior to the expiration of the Company's right to redeem the Rights.
The Company is entitled to redeem the Rights at $.05 per Right (subject to
adjustment) up to and including the tenth business day (twentieth business day
if the Board of Directors so determines) after the acquisition by a person of
beneficial ownership of shares of the Company's stock having 10% or more of the
general voting power of the Company. The Rights will expire on June 13, 1998,
unless earlier redeemed.
In general, the Rights Agreement provides that if the Company is acquired
in a merger or other business combination transaction on or at any time after
the date on which a person obtains ownership of stock having 10% more of the
Company's general voting power ("Stock Acquisition Date"), provision must be
made prior to the consummation of such transaction to entitle each holder of a
Right (except as provided in the Plan) to purchase at the exercise price a
number of the acquiring company's common shares having a market value
(determined as provided in the Rights Agreement) at the time of such transaction
of two times the exercise price of the Right. The Rights Agreement also provides
that in the event of (i) the acquisition of the Company on or at any time after
the Stock Acquisition Date in a merger or other business combination transaction
in which the Company's Common Stock remains outstanding and unchanged, (ii)
certain self-
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dealing transactions by a 10% or greater stockholder, (iii) the acquisition by a
person of at least 15% of the general voting power of the Company or (iv) an
increase in the ownership interest of a 10% or greater stockholder by more than
1% as a result of the occurrence of any of certain events specified in the
Rights Agreement, then, in each such case, each holder of a Right (except as
provided in the Rights Agreement) will have the right to receive, upon payment
of the exercise price, a number of shares of Series A Participating Preferred
Stock having a market value (determined as provided in the Rights Agreement) at
the time of such transaction of two times the exercise price of a Right.
Certain provisions in the Company's Restated Certificate of Incorporation
and By-laws may have the effect of delaying, deferring or preventing a change in
control of the Company. These provisions require that the Company's Board of
Directors be divided into three classes that are elected for staggered
three-year terms; provide that stockholders may act only at annual or special
meetings and may not act by written consent; provide that special meetings of
stockholders may be called only by the Board of Directors; authorize the
directors of the Company to determine the size of the Board of Directors;
require that stockholder nominations for directors be made to the Directors and
Corporate Governance Committee of the Company prior to a meeting of
stockholders; provide that directors may be removed only for cause and only by a
supermajority vote (80% of shares outstanding) of the stockholders (a
"Supermajority Vote"), including a majority in interest of the holders
("Minority Holders") of voting stock held by persons other than any person who,
together with its affiliates and associates, owns more than 10% of the voting
stock; provide for certain minimum price and procedural requirements in
connection with certain business combinations, in the absence of which the
business combination would require approval by a Supermajority Vote, including a
majority in interest of the Minority Holders; require a Supermajority Vote,
including a majority in interest of the Minority Holders, for the amendment of
any of the foregoing provisions unless approved by a majority of the Board of
Directors in certain events; and authorize the Board of Directors to establish
one or more series of Preferred Stock, without any further stockholder approval,
having rights, preferences, privileges and limitations that could impede or
discourage the acquisition of control of the Company.
DESCRIPTION OF COMMON STOCK. At December 14, 1995, 212,660,643 shares of
Common Stock were issued and outstanding and approximately 46 million shares
were reserved for issuance (i) pursuant to the Company's Dividend Reinvestment
Plan and employee benefit plans (including stock option plans), (ii) upon
conversion of debentures, (iii) pursuant to outstanding stock purchase contracts
and (iv) in connection with the acquisition of businesses and properties in the
normal course of business. Subject to the dividend preferences of any
outstanding shares of Preferred Stock, all shares of Common Stock are entitled
to participate in such dividends as may be declared by the Board of Directors
out of assets available for such payment. Holders of Common Stock are entitled
to one vote for each share held. All outstanding shares are, and shares issuable
hereunder will be, validly issued, fully paid and nonassessable. Holders of
Common Stock have no cumulative voting rights or preemptive rights. In the event
of a liquidation, dissolution or winding up of the Company, holders of Common
Stock are entitled to share ratably in the distribution of assets remaining
after payment of debts and expenses and of any preference due to holders of any
preferred stock of the Company then outstanding. As described above, one Right
will be issued in respect of each share of Common Stock issued before the
earliest of the dates on which separate Right certificates are distributed or
the Rights expire or are redeemed.
The Common Stock Transfer Agent and Registrar is First Chicago Trust
Company of New York, Stock Transfer Department, Mail Suite 4694, Post Office Box
2536, Jersey City, New Jersey 07303-2536.
DESCRIPTION OF PREFERRED STOCK. Under the Company's Restated Certificate of
Incorporation, the Board of Directors may provide for the issuance of up to
25,000,000 shares of Preferred Stock in one or more series. The rights,
preferences, privileges and restrictions, including liquidation preferences, of
the Preferred Stock of each series will be fixed or designated by the Board of
Directors pursuant to a certificate of designation without any further vote or
action by the Company's stockholders. The issuance of Preferred Stock could have
the effect of delaying, deferring or preventing a change in control of the
Company. Upon issuance against full payment of the purchase price therefor,
shares of Preferred Stock offered hereby will be fully paid and nonassessable.
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<PAGE> 34
The specific terms of a particular series of Preferred Stock offered hereby
will be described in a Prospectus Supplement relating to such series and will
include the following:
(i) The maximum number of shares to constitute the series and the
distinctive designation thereof;
(ii) The annual dividend rate, if any, on shares of the series,
whether such rate is fixed or variable or both, the date or dates from
which dividends will begin to accrue or accumulate and whether dividends
will be cumulative;
(iii) Whether the shares of the series will be redeemable and, if so,
the price at and the terms and conditions on which the shares of the series
may be redeemed, including the time during which shares of the series may
be redeemed and any accumulated dividends thereon that the holders of
shares of the series shall be entitled to receive upon the redemption
thereof;
(iv) The liquidation preference, if any, applicable to shares of the
series;
(v) Whether the shares of the series will be subject to operation of a
retirement or sinking fund and, if so, the extent and manner in which any
such fund shall be applied to the purchase or redemption of the shares of
the series for retirement or for other corporate purposes, and the terms
and provisions relating to the operation of such fund;
(vi) The terms and conditions, if any, on which the shares of the
series shall be convertible into, or exchangeable for, shares of any other
class or classes of capital stock of the Company or any series of any other
class or classes, or of any other series of the same class, including the
price or prices or the rate or rates of conversion or exchange and the
method, if any, of adjusting the same;
(vii) The voting rights, if any, on the shares of the series; and
(viii) Any other preferences and relative, participating, optional or
other special rights or qualifications, limitations or restrictions
thereof.
DESCRIPTION OF WARRANTS
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants") and Warrants to purchase Common Stock or Preferred
Stock ("Stock Warrants"). Warrants may be issued independently of or together
with any other Securities and may be attached to or separate from such
Securities. Each series of Warrants will be issued under a separate Warrant
Agreement (each a "Warrant Agreement") to be entered into between the Company
and a Warrant Agent ("Warrant Agent"). The Warrant Agent will act solely as an
agent of the Company in connection with the Warrant of such series and will not
assume any obligation or relationship of agency for or with holders or
beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Further terms of the Warrants and
the applicable Warrant Agreement will be set forth in the applicable Prospectus
Supplement.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of any Debt
Warrants, including the following: (i) the title of such Debt Warrants; (ii) the
offering price for such Debt Warrants, if any; (iii) the aggregate number of
such Debt Warrants; (iv) the designation and terms of the Debt Securities
purchasable upon exercise of such Debt Warrants; (v) if applicable, the
designation and terms of the Securities with which such Debt Warrants are issued
and the number of such Debt Warrants issued with each such Security; (vi) if
applicable, the date from and after which such Debt Warrants and any Securities
issued therewith will be separately transferable; (vii) the principal amount of
Debt Securities purchasable upon exercise of a Debt Warrant and the price at
which such principal amount of Debt Securities may be purchased upon exercise;
(viii) the date on which the right to exercise such Debt Warrants shall commence
and the date on which such right shall expire; (ix) if applicable, the minimum
or maximum amount of such Debt Warrants that may be exercised at any one time;
(x) whether the Debt Warrants represented by the Debt Warrant certificates or
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<PAGE> 35
Debt Securities that may be issued upon exercise of the Debt Warrants will be
issued in registered or bearer form; (xi) information with respect to book-entry
procedures, if any; (xii) the currency, currencies or currency units in which
the offering price, if any, and the exercise price are payable; (xiii) if
applicable, a discussion of certain United States federal income tax
considerations; (xiv) the antidilution provisions of such Debt Warrants, if any;
(xv) the redemption or call provisions, if any, applicable to such Debt
Warrants; and (xvi) any additional terms of the Debt Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such Debt
Warrants.
STOCK WARRANTS
The applicable Prospectus Supplement will describe the terms of any Stock
Warrants, including the following: (i) the title of such Stock Warrants; (ii)
the offering price of such Stock Warrants, if any; (iii) the aggregate number of
such Stock Warrants; (iv) the designation and terms of the Common Stock or
Preferred Stock purchasable upon exercise of such Stock Warrants; (v) if
applicable, the designation and terms of the Securities with which such Stock
Warrants are issued and the number of such Stock Warrants issued with each such
Security; (vi) if applicable, the date from and after which such Stock Warrants
and any Securities issued therewith will be separately transferrable; (vii) the
number of shares of Common Stock or Preferred Stock purchasable upon exercise of
a Stock Warrant and the price at which such shares may be purchased upon
exercise; (viii) the date on which the right to exercise such Stock Warrants
shall commence and the date on which such right shall expire; (ix) if
applicable, the minimum or maximum amount of such Stock Warrants that may be
exercised at any one time; (x) the currency, currencies or currency units in
which the offering price, if any, and the exercise price are payable; (xi) if
applicable, a discussion of certain United States federal income tax
considerations; (xii) the antidilution provisions of such Stock Warrants, if
any; (xiii) the redemption or call provisions, if any, applicable to such Stock
Warrants; and (xiv) any additional terms of such Stock Warrants, including
terms, procedures and limitations relating to the exchange and exercise of such
Stock Warrants.
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, consisting of contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Common Stock or Preferred Stock at a
future date or dates. The price per share of Preferred Stock or Common Stock may
be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. The Stock Purchase Contracts may be issued separately or as a part of
units ("Stock Purchase Units") consisting of a Stock Purchase Contract and Debt
Securities or debt obligations of third parties, including U.S. Treasury
securities, securing the holders' obligations to purchase the Preferred Stock or
the Common Stock under the Purchase Contracts. The Stock Purchase Contracts may
require the Company to make periodic payments to the holders of the Stock
Purchase Units or visa versa, and such payments may be unsecured or prefunded on
some basis. The Stock Purchase Contracts may require holders to secure their
obligations thereunder in a specified manner.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will not purport to be complete and will be qualified in its entirety
by reference to the Stock Purchase Contracts, and, if applicable, collateral
arrangements and depositary arrangements, relating to such Stock Purchase
Contracts or Stock Purchase Units.
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<PAGE> 36
PLAN OF DISTRIBUTION
The Company may sell the Securities being offered hereby in and/or outside
the United States (i) through underwriters or a group of underwriters or
dealers, (ii) through agents designated from time to time or (iii) directly to
purchasers.
If an underwriter or underwriters are utilized in the sale, the Company
will enter into an underwriting agreement with such underwriters at the time of
sale to them, and the names of the underwriters and the terms and conditions of
the transaction (including underwriting discounts and commissions and other
items constituting underwriting compensation and discounts and commissions to be
allowed or paid to any dealers) will be set forth in the Prospectus Supplement,
which will be used by the underwriters to make sales of the Offered Securities
in respect of which this Prospectus is delivered to the public. The underwriters
may be entitled, under the underwriting agreement, to indemnification by the
Company against certain civil liabilities, including liabilities under the
Securities Act. Only underwriters named in the Prospectus Supplement are deemed
to be underwriting in connection with the Offered Securities in respect of which
such Prospectus Supplement and this Prospectus are delivered and any firms not
named therein are not parties to the underwriting agreement in respect of such
Offered Securities and will have no direct or indirect participation in the
underwriting thereof, although they may participate in the distribution of such
Securities under circumstances where they may be entitled to a dealer's
commission.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters to solicit offers by certain institutions to purchase Offered
Securities from the Company at the price set forth in the Prospectus Supplement
pursuant to delayed delivery contracts for payment and delivery at a future
date. The Prospectus Supplement will set forth the commission payable to the
underwriters for solicitation of such contracts.
Offers to purchase Offered Securities may be solicited directly by the
Company or by agents designated by the Company from time to time. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment. Agents may be
entitled under agreements which may be entered into with the Company to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act.
If an agent or agents are utilized in the sale, such persons may be deemed
to be "underwriters", and any discounts, commissions or concessions received by
them from the Company or any profit on the resale of Offered Securities by them
may be deemed to be underwriting discounts and commissions under the Securities
Act. Any such person who may be deemed to be an underwriter and any such
compensation received from the Company will be described in the Prospectus
Supplement.
The time and place for delivery of the Offered Securities in respect of
which this Prospectus is delivered are set forth in the Prospectus Supplement.
LEGAL OPINIONS
The legality of the Securities to be offered hereby will be passed upon for
the Company by Fulbright & Jaworski L.L.P., 1301 McKinney Street, Houston, Texas
77010, and for any underwriters or agents of a particular issue of Offered
Securities, by Vinson & Elkins L.L.P., 1001 Fannin Street, First City Tower,
Houston, Texas 77002 or by other counsel identified in the relevant Prospectus
Supplement as passing on the same for any such underwriters and agents. Vinson &
Elkins L.L.P. has represented the Company in various legal matters from time to
time.
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EXPERTS
The consolidated financial statements and schedule included in the Annual
Report of the Company on Form 10-K for the year ended September 30, 1995
incorporated herein by reference, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein by reference in reliance upon the authority
of said firm as experts in giving said report.
The consolidated financial statements of Attwoods plc included in the
Company's Current Report on Form 8-K dated January 24, 1995 incorporated herein
by reference have been audited by Binder Hamlyn, Chartered Accountants,
Registered Auditors, as indicated in their report with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in giving said report.
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$250,000,000
BFI LOGO
6.08% MARKET VALUE PUT SECURITIES(SM) ("MVPS"(SM))
---------------------
PROSPECTUS SUPPLEMENT
---------------------
FIRST CHICAGO CAPITAL MARKETS, INC.
(A BANK ONE COMPANY)
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
JANUARY 12, 1999
"MARKET VALUE PUT SECURITIES" AND
"MVPS" ARE SERVICE MARKS OWNED BY
FIRST CHICAGO CAPITAL MARKETS, INC.
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