<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 033-60809
================================================================================
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 26, 1995
<TABLE>
<S> <C> <C>
LOGO $50,000,000
COMMERCIAL METALS COMPANY
6.80% NOTES DUE AUGUST 1, 2007
</TABLE>
------------------------
Interest on the Notes is payable on February 1 and August 1 of each year,
commencing February 1, 1998. The Notes are not redeemable prior to maturity and
do not provide for a sinking fund. The Notes are unsecured obligations of the
Company and will rank on a parity with all other unsecured and unsubordinated
debt of the Company. See "Description of Notes." The indenture pursuant to which
the Notes will be issued contains no restrictions on the Company's ability to
incur indebtedness. See "Description of Debt Securities" in the Prospectus
accompanying this Prospectus Supplement.
The Notes will be issued only in fully registered form and will be
represented by Book-Entry Notes registered in the name of a nominee of The
Depository Trust Company, as Depositary. Settlement for the Notes will be made
in immediately available funds. Interests in Book-Entry Notes will be shown on
and transfers thereof will be effected only through records maintained by the
Depositary and its participants. Except as described herein under "Description
of Notes -- Book-Entry Notes," owners of beneficial interests in Book-Entry
Notes will not be considered holders thereof and will not be entitled to receive
physical delivery of Notes in definitive form. So long as the Notes are
represented by Book-Entry Notes registered in the name of the Depositary or its
nominee, the Notes will trade in the Depositary's Same-Day Funds Settlement
System, and secondary market trading activity in the Notes will settle in
immediately available funds. So long as the Notes are represented by Book-Entry
Notes, all payments of principal and interest will be made by the Company in
immediately available funds. See "Description of Notes -- Same-Day Settlement
and Payment."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ -------------
<S> <C> <C> <C>
Per Note...................................... 100.000% .650% 99.350%
Total......................................... $50,000,000 $325,000 $49,675,000
</TABLE>
- ---------------
(1) Plus accrued interest from August 1, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $75,000 payable by the Company.
------------------------
The Notes are offered severally by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the Notes will be
made on or about August 4, 1997 through the facilities of the Depositary against
payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
------------------------
The date of this Prospectus Supplement is July 30, 1997.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THIS OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act of 1933, as amended. This Prospectus Supplement and the
Prospectus do not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Commission. Copies of such material and the Registration Statement can
be obtained upon written request from the Public Reference Section of the
Commission, at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549,
at prescribed rates. In addition, such reports, proxy and information statements
and other information and the Registration Statement can be inspected and copied
at the public reference facility referenced above and at the Commission's
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York
10048 or on the internet at http://www.sec.gov. Such reports, proxy statements
and other information concerning the Company and the Registration Statement can
also be inspected and copied at the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used to repay
short-term commercial paper and bank borrowings utilized for working capital
purposes that bear interest at rates ranging from 5.83% to 5.93%, which at May
31, 1997 were $60.3 million. The Company intends to utilize the remaining net
proceeds, if any, for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED AUGUST 31, MAY 31,
- ---------------------------- ------------------
1996 1995 1994 1993 1992 1997 1996
- ---- ---- ---- ---- ---- -------- --------
<C> <C> <C> <C> <C> <C> <C>
4.9 4.2 4.2 4.0 2.7 4.1 4.7
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
are divided by fixed charges. For this purpose, earnings consist of net earnings
plus income taxes, interest expense, such portion of rent expense as is
representative of the interest factor and amortization expense of capitalized
interest. Fixed charges consist of interest expense, such portion of rent
expense and capitalized interest. Such portion of rent expense, capitalized
interest and amortization of capitalized interest amounted to $2.6, $0.3 and
$0.5 million in fiscal 1996, $2.7, $0.1 and $0.6 million in fiscal 1995, $2.0,
$1.2 and $0.4 million in fiscal 1994, $2.0, $0.4 and $0.4 million in fiscal 1993
and $1.9, $0.1 and $0.4 million in fiscal 1992, and amounted to $2.2, $0.3 and
$0.4 million and $1.9, $0.2 and $0.4 million in the first nine months of fiscal
1997 and 1996, respectively.
S-2
<PAGE> 3
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
in the Prospectus, to which description reference is hereby made. Certain terms
not defined in this description are defined in the Prospectus.
GENERAL
The 6.80% Notes due August 1, 2007 (the "Notes") will be limited to
$50,000,000 aggregate principal amount and will mature on August 1, 2007. The
Notes will be issued only in the form of one or more Global Securities (as
defined below) in minimum denominations of $100,000 and integral multiples of
$1,000 in excess thereof. See "Book-Entry Notes" below. The Notes are not
redeemable prior to maturity and are not entitled to any sinking fund. The Notes
will be unsecured and unsubordinated obligations of the Company and will rank on
a parity with all other unsecured and unsubordinated debt of the Company.
INTEREST
The Notes will bear interest at the rate set forth on the cover page of
this Prospectus Supplement from August 1, 1997, or the most recent interest
payment date to which interest has been paid or provided for, payable
semi-annually on February 1 and August 1 of each year, beginning February 1,
1998, to the person in whose name a Note (or any predecessor Note) is registered
at the close of business on the January 15 or July 15, as the case may be, next
preceding such interest payment date.
BOOK-ENTRY NOTES
The Notes will be issued in whole or in part in the form of one or more
permanent Global Securities deposited with, or on behalf of, the Depositary, and
registered in the name of a nominee of the Depositary. Except under the limited
circumstances described in the Prospectus under "Description of Debt
Securities -- Book-Entry Debt Securities," owners of beneficial interests in
Global Securities will not be entitled to physical delivery of Notes in
certificated form. Global Securities may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or to a successor of the
Depositary or its nominee.
The Depositary has advised the Company that the Depositary 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. The Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions, such as
transfers and pledges, among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movements of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. The
rules applicable to the Depositary and its participants are on file with the
Securities and Exchange Commission.
S-3
<PAGE> 4
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. So long as the Notes are in the form of Book-Entry Notes, all
payments of principal and interest will be made by the Company in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
are expected to trade in the Depositary's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the Notes will therefore be
required by the Depositary to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Notes.
S-4
<PAGE> 5
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase from the
Company, the respective principal amounts of the Notes set forth opposite its
name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
<S> <C>
Goldman, Sachs & Co. ....................................... $25,000,000
Lehman Brothers Inc. ....................................... 12,500,000
Morgan Stanley & Co. Incorporated........................... 12,500,000
-----------
Total............................................. $50,000,000
===========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to retail
purchasers at the initial public offering price set forth on the cover page of
this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of 0.40% of the principal amount of such Notes. The
Underwriters may allow, and such dealers may reallow, to certain brokers and
dealers, a concession not to exceed 0.25% of the principal amount of such Notes.
After the Notes are released for sale to the public, the offering prices and
other selling terms may from time to time be varied by the Underwriters.
In connection with the offering, the Underwriters may purchase and sell the
Notes in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created by the
Underwriters in connection with the offering. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Notes; and short positions created by the
Underwriters involve the sale by the Underwriters of a greater number of Notes
than they are required to purchase from the Company in the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the Notes sold in the offering may be reclaimed
by the Underwriters if such Notes are repurchased by the Underwriters in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Notes, which may be higher than the
price that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
in the over-the-counter market or otherwise.
The Notes 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 Notes but are not obligated to do so and may discontinue
market making with respect to the Notes at any time without notice. No assurance
can be given as to the liquidity of the trading markets for the Notes.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
This offering is being made pursuant to Article III, Section 44(c)(8) of
the Rules of Fair Practice of the National Association of Securities Dealers.
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with the Company.
S-5
<PAGE> 6
<TABLE>
<S> <C> <C>
[COMMERCIAL METALS $150,000,000
COMPANY LOGO] COMMERCIAL METALS COMPANY LOGO
</TABLE>
Debt Securities
------------------------
Commercial Metals Company ("CMC" or the "Company") may from time to time
offer unsecured debt securities consisting of debentures, notes and/or other
unsecured evidences of indebtedness (the "Debt Securities") in one or more
series in an aggregate principal amount not to exceed $150,000,000 (or the
equivalent in foreign denominated currency or units based on or relating to
currencies). The Debt Securities may be offered as a separate series in amounts,
at prices and on terms to be determined at the time of sale. An accompanying
Prospectus Supplement will set forth, with regard to the series of Debt
Securities in respect of which this Prospectus is being delivered, the title and
the terms of the Debt Securities, including the aggregate principal amount,
authorized denominations (which may be in United States dollars, in any other
currency or in units based on or relating to currencies), maturity, rate (which
may be fixed or variable), if any, and time of payment of any interest, any
redemption, extension or early repayment terms, any provision for sinking fund
payments, any index, formula or other method used to determine the amount of
principal, premium, if any, or interest, the net proceeds to the Company and
other specific terms relating to the offering and sale of such series of Debt
Securities.
The Company may sell the Debt Securities to or through underwriters and may
also sell Debt Securities directly to other purchasers or through agents. Such
underwriters may include Goldman, Sachs & Co., Lehman Brothers, Morgan Stanley &
Co. Incorporated or may be a group of underwriters represented by firms
including Goldman, Sachs & Co., Lehman Brothers, or Morgan Stanley & Co.
Incorporated. Goldman, Sachs & Co., Lehman Brothers and Morgan Stanley & Co.
Incorporated may also act as agents. The accompanying Prospectus Supplement sets
forth the names of any underwriters or agents involved in the sale of the Debt
Securities in respect to which this Prospectus is being delivered, the principal
amounts, if any, to be purchased by underwriters or agents and the compensation,
if any, of such underwriters or agents.
------------------------
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 Debt Securities unless accompanied by a Prospectus Supplement.
------------------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
------------------------
The date of this Prospectus is July 26, 1995.
<PAGE> 7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission, at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549,
at prescribed rates. In addition, such reports, proxy and information statements
and other information can be inspected and copied at the public reference
facility referenced above and at the Commission's regional offices at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621-2511 and 7 World Trade Center, New York, New York 10048. Such
reports, proxy statements and other information concerning the Company can also
be inspected and copied at the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1994;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1994;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1995;
4. The Company's Quarterly Report on Form 10-Q for the quarter ended May
31, 1995;
5. The Company's Current Report on Form 8-K dated November 30, 1994; and
6. The Company's Current Report on Form 8-K dated January 27, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(e), 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 Debt Securities shall be deemed to be
incorporated by reference in this Prospectus and shall be deemed a part hereof
from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for all purposes to the extent that
a statement contained in this Prospectus, or in any other subsequently filed
document which is also, or is deemed to be, incorporated by reference, modifies
or replaces such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Prospectus, except as so modified or
superseded. The Company will provide without charge to each person to whom this
Prospectus has been delivered, on written or oral request of such person, a copy
(without exhibits, unless such exhibits are specifically incorporated by
reference into such documents) of any or all documents incorporated by reference
in this Prospectus. Requests for such copies should be addressed to Secretary,
Commercial Metals Company, 7800 Stemmons Freeway, Dallas, Texas 75247, telephone
number (214) 689-4300.
2
<PAGE> 8
THE COMPANY
Commercial Metals Company ("CMC" or the "Company") manufactures, recycles
and markets steel and metal products. Steel and steel-related products represent
over 75% of the Company's business. During fiscal 1994, CMC derived
approximately 65% of its operating profit from the Manufacturing segment,
approximately 9% from its Recycling segment, approximately 23% from its
Marketing and Trading segment, and approximately 3% from its Financial Services
segment.
The Company's Manufacturing segment includes four steel minimills, 19 steel
fabrication plants, three steel joist plants, three fence post manufacturing
plants, two railcar rebuilding facilities, seven concrete related product
warehouses, an industrial products supplier and a copper tube mill. Steel
manufacturing capacity of over 1.7 million tons includes reinforcing bars, light
and mid-size structurals, angles, channels, beams, special bar quality rounds
and flats, squares and special sections used in the construction, manufacturing,
steel fabrication and warehousing, and original equipment manufacturing
industries. Steel fabrication capacity is over 500,000 tons. The Company's
copper tube mill with 45 million pounds of capacity manufactures copper water
tube and air conditioning and refrigeration tubing.
The Company's Recycling segment is one of the largest processors of scrap
nonferrous metals and one of the largest regional processors of ferrous metals
in the United States. CMC's recycling plants processed and shipped 1.2 million
tons of scrap metal in fiscal 1994. Recycled metals provide substantial savings
in energy compared to producing metal from virgin raw materials.
The Company's Marketing and Trading segment buys and sells steel, primary
and secondary metals and industrial raw materials through a global network of
offices which provide technical information, financing, chartering, storage,
insurance and hedging. The Company does not, as a matter of policy, speculate on
changes in the commodities markets. This segment sold over 1.7 million tons of
steel products in 1994.
The Company's Financial Services segment provides international commercial
banking services to its Marketing and Trading segment and to other unaffiliated
businesses.
The Company's principal executive offices are located at 7800 Stemmons
Freeway, Dallas, Texas 75247, and its telephone number is (214) 689-4300.
USE OF PROCEEDS
Except as may be set forth in an applicable Prospectus Supplement
accompanying this Prospectus, the net proceeds from the sale of the Debt
Securities offered hereby will be used to refinance certain debt and for other
general corporate purposes. Pending such applications, the funds may be used to
reduce short-term borrowings or may be invested in short-term marketable
securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY
FISCAL YEAR ENDED AUGUST 31, 31,
- ---------------------------- ----------------------
1994 1993 1992 1991 1990 1995 1994
- ---- ---- ---- ---- ---- ---------- ----------
<C> <C> <C> <C> <C> <C> <C>
4.2 4.0 2.7 2.5 4.7 4.2 3.8
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
are divided by fixed charges. For this purpose, earnings consist of net earnings
plus income taxes, interest expense, such portion of rent expense as is
representative of the interest factor and amortization expense of capitalized
interest. Fixed charges consist of interest expense, such portion of rent
expense and
3
<PAGE> 9
capitalized interest. Such portion of rent expense, capitalized interest and
amortization of capitalized interest amounted to $2.0, $1.2 and $0.4 million in
fiscal 1994, $2.0, $0.4 and $0.4 million in fiscal 1993, $1.9, $0.1 and $0.4
million in fiscal 1992, $2.0, $1.0 and $0.3 million in fiscal 1991 and $1.8,
$0.3 and $0.1 million in fiscal 1990, and amounted to $1.8, $0.1 and $0.4
million and $1.5, $1.2 and $0.3 million in the first nine months of fiscal 1995
and 1994, respectively.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture, dated as of July
31, 1995 (the "Indenture"), between the Company and The Chase Manhattan Bank,
N.A., as Trustee (the "Trustee"). A copy of such Indenture is filed as an
exhibit to the Registration Statement. The following statements relating to the
Debt Securities and the Indenture are summaries of provisions contained therein
and do not purport to be complete. The provisions of the Indenture referred to
in the following summaries are incorporated herein by reference and the
summaries are qualified in their entirety thereby. Capitalized terms not
otherwise defined herein shall have the respective meanings given to them in the
Indenture. Section numbers set forth below refer to provisions of the Indenture.
The following sets forth certain general terms and provisions of the Debt
Securities offered hereby. The particular terms of the Debt Securities offered
by any Prospectus Supplement will be described in such Prospectus Supplement
relating to the Debt Securities offered thereby.
GENERAL
The Debt Securities will be unsecured obligations of the Company and will
rank on a parity with all other unsecured and unsubordinated debt of the
Company.
The Indenture does not limit the amount of the Debt Securities that may be
issued thereunder and provides that Debt Securities may be issued thereunder
from time to time in one or more series. The Prospectus Supplement will describe
the following terms, as applicable, of each series of Debt Securities: (1) the
title of the Debt Securities; (2) any limit on the aggregate principal amount of
the Debt Securities; (3) the date or dates on which the Debt Securities will
mature; (4) the rate or rates (which may be fixed or variable) at which the Debt
Securities will bear interest, if any, and the date or dates from which such
interest will accrue; (5) the dates on which such interest, if any, will be
payable and the Regular Record Dates for such Interest Payment Dates; (6) any
mandatory or optional sinking fund or analogous provisions; (7) the price at
which, the periods within which, and the terms and conditions upon which the
Debt Securities may, pursuant to any optional or mandatory redemption
provisions, be redeemed at the option of the Company; (8) the terms and
conditions upon which the Debt Securities may be repayable prior to final
maturity at the option of the Holder thereof (which option may be conditional);
(9) the portion of the principal amount of the Debt Securities, if other than
the principal amount thereof, payable upon acceleration of maturity thereof;
(10) certain Events of Default under the Indenture; (11) if other than in United
States dollars, the currency or currencies, including composite currencies, of
payment of principal of and premium, if any, and interest on the Debt Securities
(and federal income tax consequences and other special considerations applicable
to any such Debt Securities denominated in a currency or currencies other than
United States dollars); (12) any index used to determine the amount of payments
of principal of and premium, if any, and interest, if any on the Debt
Securities; (13) if the Debt Securities will be issuable only in the form of a
Global Security as described under "Book-Entry Debt Securities," the Depositary
or its nominee with respect to the Debt Securities and the circumstances under
which the Global Security may be registered for transfer or exchange in the name
of a Person other than the Depositary or its nominee; and (14) any other
specific terms of the Debt Securities. (Section 301)
Unless otherwise indicated in the Prospectus Supplement relating to Debt
Securities, principal of and premium, if any, and interest, if any, on the Debt
Securities will be payable, and transfers
4
<PAGE> 10
thereof will be registrable, at the office or agency of the Trustee in New York
City, New York provided that, at the option of the Company, payment of interest
may be made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register. (Sections 301, 305 and 1002) Any payment of
principal and premium, if any, and interest, if any, required to be made on an
Interest Payment Date, Redemption Date or at Stated Maturity which is not a
Business Day at any Place of Payment need not be made at such Place of Payment
on such day, but may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date, Redemption Date or at
Stated Maturity, as the case may be, and no interest shall accrue for the period
from and after such Interest Payment Date, Redemption Date or Stated Maturity.
(Section 113)
Unless otherwise indicated in the Prospectus Supplement relating to the
Debt Securities of any series, the Debt Securities will be issued only in
registered form, without coupons, in denominations of $100,000 or any integral
multiple thereof. (Section 302) No service charge will be made for any transfer
or exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Section 305)
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount from their
stated principal amount. In addition, under proposed Treasury Regulations it is
possible that Debt Securities which are offered and sold at their stated
principal amount would, under certain circumstances, be treated as issued at an
original issue discount for federal income tax purposes. Federal income tax
consequences and other special considerations applicable to any such Original
Issue Discount Securities (or other Debt Securities treated as issued at an
original issue discount) will be described in the Prospectus Supplement relating
thereto. "Original Issue Discount Security" means any security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof upon the occurrence of an
Event of Default and the continuation thereof. (Section 101)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more registered global securities (the "Global Securities"). The
specific terms of the depositary arrangement with respect to any Debt Securities
of any series will be described in the Prospectus Supplement relating to such
series. The Company anticipates that the following provisions will apply to all
depositary arrangements.
Each Global Security will be deposited with, or on behalf of, a Depositary
identified in the Prospectus Supplement (the "Depositary") and registered in the
name of the Depositary or a nominee thereof. Unless and until it is exchanged in
whole or in part for Debt Securities in certificated form, no Global Security
may be transferred except as a whole by the Depositary to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary. Debt
Securities in certificated form will not be issued in exchange for Global
Securities except under the circumstances described herein.
Upon the issuance of a Global Security and the deposit of such Global
Security with the Depositary, the Depositary will credit, on its book-entry
registration and transfer system, the respective principal amounts of the Debt
Securities represented by such Global Security to the accounts of institutions
that have accounts with such Depositary or its nominee ("participants"). The
account to be credited will be designated by any dealers, underwriters or agents
participating in the distribution of such Debt Securities. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that may hold such interests through participants. Ownership of
beneficial interests in a Global Security will be shown on, and the transfer of
such ownership will be effected only through, records maintained by the
Depositary (with respect to interests of partici-
5
<PAGE> 11
pants) and by participants or persons that hold through 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 certificated form. Such limits and laws may impair the
ability to own or transfer beneficial interests in a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Debt Securities represented by such
Global Security for all purposes under the Indenture referred to in the
Prospectus. Except as set forth below, owners of beneficial interests in a
Global Security will not be entitled to have Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of such Debt Securities in certificated form and will
not be considered the owners or holders thereof under the Indenture.
Accordingly, each person owning a beneficial interest in a Global Security must
rely on the procedures of the Depositary for such Global Security and, if such
person is not a participant, on the procedures of the participant through which
such person owns its interest, to exercise any rights of a holder under the
Indenture. The Company understands that under existing industry practices, if
the Company requests any action of holders or if an owner of a beneficial
interest in a Global Security desires to give or take any action which a holder
is entitled to give or take under the Indenture, the Depositary for such Global
Security would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners holding
through them.
Principal and interest payments 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 or
holder of such Global Security. None of the Company, the Trustee or any other
agent of the Company or the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in such Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary for any Debt Securities represented
by a Global Security, upon receipt of any payment of principal or interest in
respect of such Global Security, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Security as shown on the records of such
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 registered in "street name," and will be the responsibility of such
participants.
If the Depositary for any Debt Securities represented by a Global Security
is at any time unwilling or unable to continue as depositary, or if at any time
the Depositary ceases to be a clearing agency registered under the Exchange Act,
and a successor depositary is not appointed by the Company within 90 days or if
there shall have occurred and be continuing an Event of Default (as defined in
the Indenture) or an event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default with respect to such Debt Securities,
then the Company will issue such Debt Securities in certificated form in
exchange for the Global Security representing the Debt Securities. In addition,
the Company may at any time and in its sole discretion determine not to have any
Debt Securities represented by one or more Global Securities and, in such event,
will issue such Debt Securities in certificated form in exchange for the Global
Security representing the Debt Securities. In any such instance, an owner of a
beneficial interest in a Global Security will be entitled to physical delivery
of such Debt Securities in certificated form equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name.
Unless otherwise specified in the Prospectus Supplement, Debt Securities issued
in certificated form will be issued as
6
<PAGE> 12
registered securities in minimum denominations of $100,000 and integral
multiples of $1,000 in excess thereof.
LIMITATION ON LIENS
The Indenture provides that the Company may not, and may not permit any
Principal Subsidiary of the Company to, incur or suffer to exist any Lien upon
any Principal Property, or upon any shares of stock of any Principal Subsidiary
of the Company (whether such Principal Property or shares were owned as of the
date of such Indenture or thereafter acquired), to secure any Debt without
making, or causing such Principal Subsidiary to make, effective provision for
securing the Debt Securities issued under such Indenture equally and ratably
with (or prior to) such Debt, unless after giving effect thereto, the sum of (A)
the principal amount of Debt secured by all Liens incurred after the date of
such Indenture and otherwise prohibited by such Indenture and (B) the
Attributable Debt of all Sale and Leaseback Transactions entered into after the
date of such Indenture and otherwise prohibited by such indenture does not
exceed 10% of Consolidated Net Tangible Assets. The foregoing restrictions will
not apply to Liens existing at the date of such Indenture or to (i) Liens
securing only the Debt Securities issued under such Indenture; (ii) Liens in
favor of only the Company; (iii) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Principal Subsidiary of the Company (but only to the extent such Liens cover
such property); (iv) Liens on property existing immediately prior to the time of
acquisition thereof (and not in anticipation of the financing of such
acquisition); (v) any Lien upon a Principal Property (including any property
that becomes a Principal Property after acquisition thereof) to secure Debt
incurred for the purpose of financing all or any part of the purchase price or
the cost of construction or improvement thereof incurred within 270 days after
the later of the purchase thereof and the completion of construction or
improvements thereon; (vi) Liens to secure Debt incurred to extend, renew,
refinance or refund Debt secured by any Lien referred to in the foregoing
clauses (i) to (v); and (vii) any Lien securing Debt owing by the Company to a
wholly owned Principal Subsidiary of the Company. (Section 1007)
"Attributable Debt" means the present value (discounted at the per annum
rate of interest publicly announced by Bank of America National Trust & Savings
Association as its "Reference Rate" or "Prime Rate", provided, that if Bank of
America National Trust & Savings Association is no longer announcing a Reference
Rate or Prime Rate, the per annum rate of interest shall be the Prime Rate most
recently published in The Wall Street Journal, in either case compounded
monthly) of the obligations for rental payments required to be paid during the
remaining term of any lease of more than 12 months. (Section 101)
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other indebtedness arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability on
the face of a balance sheet of such Person in accordance with generally accepted
accounting principles. The stated maturity of such obligation, as of any date
(the "measurement date"), shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date after the measurement
date upon which such lease may be terminated by the lessee, at its sole option,
without payment of a penalty. (Section 101)
"Consolidated Net Tangible Assets" means the net book value of all assets
of the Company and its Consolidated Subsidiaries, excluding any amounts carried
as assets for shares of capital stock held in treasury, debt discount and
expense, goodwill, patents, trademarks and other intangible assets, less all
liabilities of the Company and its Consolidated Subsidiaries (except Funded
Debt, minority interests in Consolidated Subsidiaries, deferred taxes and
general contingency reserves of the Company and its Consolidated Subsidiaries),
which in each case would be included on a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the date of determination, all
as determined on a consolidated basis in accordance with generally accepted
accounting principles. (Section 101)
7
<PAGE> 13
"Consolidated Tangible Net Worth" means the total stockholders' equity of
the Company and its Consolidated Subsidiaries, calculated in accordance with
generally accepted accounting principles and reflected on the most recent
balance sheet of the Company, excluding any amounts carried as assets for shares
of capital stock held in treasury, debt discount and expense, goodwill, patents,
trademarks and other intangible assets.
"Debt" means (without duplication), with respect to any Person, (i) every
obligation of such Person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
every reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such Person
and (iv) every obligation of the type referred to in clauses (i) through (iii)
of another Person the payment of which such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor, guarantor or
otherwise (but only, in the case of clause (iv), to the extent such Person has
guaranteed or is responsible or liable for such obligations). (Section 101)
"Funded Debt" means (a) all Debt of the Company and each Principal
Subsidiary maturing on, or renewable or extendable at the option of the obligor
to, a date more than one year from the date of the determination thereof, (b)
Capital Lease Obligations payable on a date more than one year from the date of
the determination thereof, (c) guarantees, direct or indirect, and other
contingent obligations of the Company and each Principal Subsidiary of the
Company in respect of, or to purchase or otherwise acquire or be responsible or
liable for (through the investment of funds or otherwise), any obligations of
the type described in the foregoing clauses (a) or (b) of others (but not
including contingent liabilities on customers' receivables sold with recourse),
and (d) amendments, renewals, extensions and refundings of any obligations of
the type described in the foregoing clauses (a), (b) or (c).
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, security interest, lien,
encumbrance, or other security arrangement of any kind or nature whatsoever on
or with respect to such property or assets (including any conditional sale or
other title retention agreement having substantially the same economic effect as
any of the foregoing). (Section 101)
"Principal Property" means any facility (together with the land on which it
is erected and fixtures comprising a part thereof) used primarily for
manufacturing, processing, research, warehousing or distribution, owned or
leased by the Company or a Subsidiary of the Company and having a net book value
in excess of 3% of Consolidated Net Tangible Assets, other than any such
facility or portion thereof which is a pollution control facility financed by
state or local government obligations or is not of material importance to the
total business conducted or assets owned by the Company and its Subsidiaries as
an entirety, or any assets or properties acquired with Net Available Proceeds
(defined below) from a Sale and Leaseback Transaction that are irrevocably
designated by the Company or a Subsidiary as a Principal Property, which
designation shall be made in writing to the Trustee. (Section 101)
"Principal Subsidiary" means any Subsidiary of the Company that owns or
leases a Principal Property or owns or controls stock which under ordinary
circumstances has the voting power to elect a majority of the Board of Directors
of a Principal Subsidiary.
"Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any Principal Property that within 12 months
of the start of such lease and after the Reference Date, has been or is being
sold, conveyed, transferred or otherwise disposed of by such Person 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 property. The term
of such arrangement, as of any date (the "measurement date"), shall end on the
date of the last payment of rent or any other amount due under such arrangement
on or prior to the first date after the measurement date on which such
arrangement may be terminated by the lessee, at its sole option, without payment
of a penalty. "Sale
8
<PAGE> 14
Transaction" means any such sale, conveyance, transfer or other disposition. The
"Reference Date" means, for any property that becomes a Principal Property, the
270th day after the date of the acquisition, completion of construction and
commencement of operation of such property. (Section 101)
"Subsidiary of the Company" 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 the voting power to
elect a majority of the board of directors of such corporation.
LIMITATION ON FUNDED DEBT OF PRINCIPAL SUBSIDIARIES
The Indenture provides that the Company will not permit any Principal
Subsidiary to incur or assume, directly or indirectly, any Funded Debt unless
immediately after giving effect thereto and the receipt and application of the
proceeds thereof, the aggregate principal amount of all outstanding Funded Debt
of all Principal Subsidiaries other than Funded Debt owing to the Company or
another directly or indirectly wholly-owned Subsidiary does not exceed 30% of
Consolidated Tangible Net Worth. The provisions of this limitation shall not
prevent (a) any Funded Debt of a Principal Subsidiary owing to the Company or
another Principal Subsidiary, (b) any Funded Debt from a mortgage permitted
under the provisions described in clauses (i) through (vii) in the first
paragraph under "Limitation on Liens," or (c) any extension, renewal or
refunding in whole or in part (without increase in amount) of any Funded Debt
(i) of a Principal Subsidiary as aforementioned, (ii) of a Principal Subsidiary
outstanding at the date of the Indenture or (iii) of any corporation outstanding
at the time it becomes a Principal Subsidiary.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Restrictions on Sales and Leasebacks. Unless otherwise provided in the
Prospectus Supplement with respect to any series of the Securities, neither the
Company nor any Principal Subsidiary of the Company may enter into any Sale and
Leaseback Transaction, the completion of construction and commencement of full
operation of which has occurred more than 270 days prior thereto, unless (a) the
Company or such Principal Subsidiary of the Company could incur a mortgage on
such property under the restrictions described above under "Limitations on
Liens" in an amount equal to the Attributable Debt with respect to the Sale and
Leaseback Transaction without equally and ratably securing the Securities or (b)
the Company or a Principal Subsidiary of the Company, within 270 days, applies
the Net Available Proceeds from the Sale and Leaseback Transaction to any
combination of the following: (i) the retirement of its Funded Debt, (ii) the
purchase of other property or assets which will (a) constitute Principal
Property and (b) have an aggregate value of at least the consideration paid for
such property or assets or (iii) Capital Expenditures with respect to any
existing Principal Property (subject to credits for certain voluntary
retirements of Funded Debt). This restriction will not apply to any Sale and
Leaseback Transaction (a) between the Company and Principal Subsidiaries of the
Company or (b) involving the taking back of a lease for a period of less than
three years. (Section 1008)
"Net Available Proceeds" from any Sale and Leaseback Transaction by any
Person means cash or readily marketable cash equivalents received (including by
way of sale or discounting of a note, installment receivable or other
receivable, but excluding any other consideration received in the form of
assumption by the acquiree of indebtedness or obligations relating to the
properties or assets that are the subject of such Sale and Leaseback Transaction
or received in any other noncash form) therefrom by such Person, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred and all federal, state, provincial, foreign and local taxes required to
be accrued as a liability as a consequence of such Sale and Leaseback
Transaction, (ii) all payments made by such Person or its subsidiaries on any
indebtedness which is secured in whole or in part by any such properties and
assets in accordance with the terms of any Lien upon or with respect to any such
properties and assets or which must, by the terms of such
9
<PAGE> 15
Lien or in order to obtain a necessary consent to such Sale and Leaseback
Transaction or by applicable law, be repaid out of the proceeds from such Sale
and Leaseback Transaction, and (iii) all distributions and other payments made
to minority interest holders in subsidiaries of such Person or joint ventures as
a result of such Sale Transaction. (Section 101)
RESTRICTIONS ON MERGER AND SALE OF ASSETS
The Indenture provides that the Company may not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and the Company may not permit any
Person to consolidate with or merge into the Company or convey, transfer or
lease its properties and assets substantially as an entirety to the Company,
unless: (i) the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall expressly assume the due and punctual payment
of the principal of and interest on all the Debt Securities issued under the
Indenture and the performance or observance of every covenant of the Indenture
on the part of the Company to be performed or observed; (ii) immediately after
giving effect to such transaction and treating any indebtedness which becomes an
obligation of the Company or any Principal Subsidiary of the Company as a result
of such transaction as having been incurred by the Company or such Principal
Subsidiary of the Company at the time of such transaction, no Event of Default
under the Indenture, and no event which, after notice or lapse of time or both,
would become an Event of Default under the Indenture, shall have happened and be
continuing; and (iii) if, as a result of any such transaction, property or
assets of the Company or any Principal Subsidiary of the Company would become
subject to a Lien which would not be permitted by the limitations on Liens
contained in the Indenture, the Company or, if applicable, the successor to the
Company, as the case may be, shall take such steps as shall be necessary
effectively to secure the Debt Securities issued under the Indenture equally and
ratably with (or prior to) Debt secured by such Lien. (Section 801)
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
Debt Securities of any series: (a) failure to pay principal of, or premium, if
any, on any Debt Security of that series when due; (b) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(c) failure to deposit any sinking fund payment, when due, in respect to any
Debt Securities of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a covenant the performance of which is
dealt with specifically elsewhere in the Indenture or which has been included in
the Indenture solely for the benefit of series of Debt Securities other than
that series), continued for 60 days after written notice as provided in the
Indenture; (e) failure to pay when due (after applicable grace periods as
provided in the Indenture) the principal of, or the acceleration of, any
indebtedness for money borrowed by the Company or any Principal Subsidiary of
the Company having an aggregate principal amount outstanding in excess of an
amount equal to 3% of Consolidated Net Tangible Assets, if such indebtedness is
not discharged, or such acceleration is not annulled, within 10 days after
written notice as provided in the Indenture; (f) certain events in bankruptcy,
insolvency or reorganization; and (g) any other Event of Default provided with
respect to Debt Securities of that series. No Event of Default with respect to a
particular series of Debt Securities issued under the Indenture (except as to
such events in bankruptcy, insolvency or reorganization or the failure to pay
when due indebtedness having an aggregate principal amount outstanding in excess
of an amount equal to 3% of Consolidated Net Tangible Assets) necessarily
constitutes an Event of Default with respect to any other series of Debt
Securities issued thereunder. (Section 501) The notice referred to in clauses
(d) and (e) may be given by the Trustee under the Indenture or by the Holders of
at least 25% in aggregate principal amount of the Outstanding Debt Securities of
that series. (Section 501) In case an Event of Default under the Indenture shall
occur and be continuing, then, subject to the provisions of the Indenture and
the
10
<PAGE> 16
Trust Indenture Act of 1939, as amended, (the "Trust Indenture Act"), relating
to the duties of the Trustee under the Indenture, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Section 603) The Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of any
series shall have the right, subject to such provisions for indemnification of
the Trustee to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee under the Indenture or exercising any
trust or power conferred on the Trustee with respect to Debt Securities of that
series. (Section 512)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding shall occur and be continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of that series may, by a notice in writing to the
Company (and to the Trustee if given by Holders), declare to be due and payable
immediately the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms of that series) of all Debt Securities of that series.
However, at any time after such a declaration of acceleration with respect to
Debt Securities of any series has been made, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the Holders of a
majority in the principal amount of Outstanding Debt Securities of that series
may, subject to certain conditions, rescind and annul such acceleration if all
Events of Default, other than the non-payment of accelerated principal, with
respect to Debt Securities of that series have been cured or waived as provided
in the indenture. (Section 502) For information as to waiver of defaults, see
"Modification and Waiver" herein. Reference is made to the Prospectus Supplement
relating to any series of Debt Securities which are Original Issue Discount
Securities for the particular provisions relating to acceleration of a portion
of the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
No Holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default with respect to Debt Securities
of that series and unless also the Holders of at least 25% in aggregate
principal amount of the Outstanding Debt Securities of that series shall have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of that series a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days. (Section 507)
However, such limitations do not apply to a suit instituted by a Holder of any
Debt Security for enforcement of payment of the principal of (and premium, if
any) and any interest on such Debt Security on or after the respective due dates
expressed in such Debt Security. (Section 508)
The Company will be required to furnish to the Trustee annually a statement
as to whether the Company is in default in the performance and observance of any
of the terms, provisions and conditions of the Indenture. (Section 1009) The
Indenture provides that the Trustee may withhold notice to the Holders of Debt
Securities of any series of any default (except in payment of principal, any
premium, interest or any sinking fund payments) with respect to Debt Securities
of such series if it considers it in the interest of the Holders of Debt
Securities of such series to do so. (Section 602)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of each series affected by
such modifications or amendments; provided, however, that no such modification
or amendment may, without the consent of the Holder of each such Outstanding
11
<PAGE> 17
Debt Security affected thereby, (a) change the Stated Maturity of the principal
of, or any installment of interest on any Debt Security, (b) reduce the
principal amount of or the premium (if any) or interest on, any Debt Security or
reduce the amount of principal an Original Issue Discount Security that would be
due and payable upon acceleration, (c) change the place or currency of payment
of principal of, or the premium (if any) or interest on, any Debt Security, (d)
impair the right to institute suit for the enforcement of any payment with
respect to any Debt Security on or after the Stated Maturity thereof, (e) reduce
the above-stated percentage of Outstanding Debt Securities of any series
necessary to modify or amend the Indenture or (f) reduce the percentage of
aggregate principal amount of Outstanding Debt Securities of any series
necessary for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults thereunder. (Section 902)
The Company may, in the circumstances permitted by the Trust Indenture Act,
set any day as the record date for the purpose of determining the Holders of
Debt Securities of any series issued under the Indenture entitled to give or
take any request, demand, authorization, direction, notice, consent, waiver or
other action as provided or permitted by the Indenture. (Section 104)
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned, compliance
by the Company with the covenants limiting Liens and Sale and Leaseback
Transactions contained in the Indenture. (Section 1010) The Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of any
series may on behalf of the Holders of all Debt Securities of that series waive
any past default under the Indenture with respect to that series except a
default in the payment of the principal of (or premium, if any) or any interest
on any Debt Security of that series or in respect of a provision which under the
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Debt Security of that series affected. (Section 513)
For purposes of the Indenture, the Debt Securities of any series
"Outstanding" thereunder are deemed to exclude those held by Persons that
control, are controlled by or are under common control with the Company,
provided that any Person who does not own, directly or indirectly, more than 5%
of the outstanding voting securities of the Company will not be deemed to
control the Company. (Section 101)
DEFEASANCE
Defeasance and Discharge. The Indenture provides that the Company may
elect to deposit or cause to be deposited with the Trustee as trust funds in
trust, for the benefit of the Holders of Outstanding Debt Securities of any
series, money and/or U.S. Government Obligations sufficient to pay and discharge
the principal of (and premium, if any) and any interest on and any mandatory
sinking fund payments in respect of the Debt Securities of such series on the
Stated Maturity of such payments in accordance with the terms of the Indenture
and such Debt Securities, and thereby be discharged from its obligations with
respect to Outstanding Debt Securities of that series (hereinafter called
"Defeasance") on and after the date that (among other things) the Company
provides to the Trustee certain evidence that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling, or (B)
there has been a change in the applicable Federal income tax law, in each case
to the effect that the Holders of such Outstanding Debt Securities of that
series will not recognize gain or loss for Federal income tax purposes as a
result of the deposit, Defeasance and discharge to be effected with respect to
such Debt Securities and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would be the case if such
deposit, Defeasance and discharge were not to occur. For this purpose, such
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by such Outstanding Debt Securities of such
series and to have satisfied all its other obligations under the Debt Securities
of that series and the Indenture insofar as the Debt Securities of that series
are concerned, except for certain continuing administrative responsibilities. In
the event of any such Defeasance, Holders of Debt Securities of such series
12
<PAGE> 18
would be able to look only to such trust for payment of principal of (and
premium, if any) and any interest on and any mandatory sinking fund payments in
respect of the Debt Securities of that series. (Section 403)
Covenant Defeasance. The Indenture provides that the Company may elect to
deposit or cause to be deposited with the Trustee as trust funds in trust, for
the benefit of the Holders of Outstanding Debt Securities of any series, money
and/or U.S. Government Obligations sufficient to pay and discharge the principal
(and premium, if any) of and any interest on and any mandatory sinking fund
payments in respect of the Debt Securities of such series on the stated maturity
of such payments in accordance with the terms of the Indenture and such Debt
Securities, and thereby (i) be released from its obligations with respect to the
Debt Securities of such series under Section 1005 (Maintenance of Properties),
Section 1006 (Payment of Taxes and Other Claims), Section 1007 (Limitation on
Liens), Section 1008 (Limitation on Sale and Leaseback Transactions) and Section
801 (Consolidation, Merger, Conveyance, Transfer or Lease) of the Indenture and
(ii) have the occurrence of any event specified in (A) Section 501(4) (defaults
in performance, or breach, of covenants and warranties under the Indenture) with
respect to any of Sections 1005 through 1008, inclusive, and Section 801, and
(B) Section 501(5) (defaults under other obligations of the Company) not be
deemed to be or result in an Event of Default, in each case with respect to the
Outstanding Debt Securities of such series (hereinafter called "Covenant
Defeasance"), on and after the date that (among other things) the Company
provides to the Trustee certain evidence that the Holders of Outstanding Debt
Securities of such series will not recognize gain or loss for Federal income tax
purposes as a result of the deposit and Covenant Defeasance to be effected with
respect to such Debt Securities and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would be the case if
such deposit and Covenant Defeasance were not to occur. For this purpose, such
Covenant Defeasance means that the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such specified Section (to the extent so specified in the case of Section
501(4)), whether directly or indirectly by reason of any reference elsewhere in
the Indenture to any such Section or by reason of any reference in any such
Section to any other provision of the Indenture or in any other document, but
the remainder of the Indenture and such Debt Securities of that series shall be
unaffected thereby. The obligations of the Company under the Indenture and the
Debt Securities of that series other than with respect to the covenants referred
to above and the Events of Default other than the Events of Default referred to
above shall remain in full force and effect. (Section 404)
The term "U.S. Government Obligations" means any security that is a direct
obligation, or is subject to an unconditional guarantee, of the United States of
America for the payment of which full faith and credit of the United States of
America is pledged. (Section 101)
13
<PAGE> 19
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters, and also
may sell Debt Securities directly to other purchasers or through agents. Such
underwriters may include Goldman, Sachs & Co., Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated or a group of underwriters represented by firms
including Goldman, Sachs & Co., Lehman Brothers Inc., and Morgan Stanley & Co.
Incorporated, and such firms may also act as agents.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on the
resale of Debt Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act of 1933 (the "Act"). Any such underwriter
or agent will be identified, and any such compensation received from the Company
will be described, in the Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Act.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Debt Securities from the Company pursuant to
contracts providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. The obligations of any purchaser under any such contract will be
subject to the condition that the purchase of the offered Debt Securities shall
not at the time of delivery be prohibited under the laws of the jurisdiction to
which such purchaser is subject. The underwriters and such other agents will not
have any responsibility in respect to the validity or performance of such
contracts.
The expected time of delivery of the Debt Securities in respect of which
this Prospectus is delivered is set forth in the accompanying Prospectus
Supplement.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the Debt Securities
offered hereby will be passed upon for the Company by Haynes and Boone, L.L.P.,
Dallas, Texas. Certain legal matters will be passed upon for Goldman, Sachs &
Co., Lehman Brothers and Morgan Stanley & Co. Incorporated by Akin, Gump,
Strauss, Hauer & Feld, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries incorporated by reference in this
Prospectus, and elsewhere in the Registration Statement from the Company's
Annual Report on Form 10-K, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated herein in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
14
<PAGE> 20
==========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR ANY OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Available Information.................... S-2
Use of Proceeds.......................... S-2
Ratio of Earnings to Fixed Charges....... S-2
Description of Notes..................... S-3
Underwriting............................. S-5
PROSPECTUS
Available Information.................... 2
Incorporation of Certain Information
by Reference........................... 2
The Company.............................. 3
Use of Proceeds.......................... 3
Ratio of Earnings to Fixed Charges....... 3
Description of Debt Securities........... 4
Plan of Distribution..................... 14
Legal Matters............................ 14
Experts.................................. 14
</TABLE>
==========================================================
==========================================================
$50,000,000
COMMERCIAL METALS COMPANY
6.80% NOTES
DUE AUGUST 1, 2007
------------------------
[COMMERCIAL METALS COMPANY LOGO]
------------------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
==========================================================
