<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COMMERCIAL METALS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 75-0725338
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
(214) 689-4300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID M. SUDBURY
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
(214) 689-4300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
WILLIAM R. HAYS, III J. KENNETH MENGES, JR., P.C.
ROBERT R. KIBBY AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
HAYNES AND BOONE, LLP 1700 PACIFIC AVENUE
3100 NATIONSBANK PLAZA SUITE 4100
901 MAIN STREET DALLAS, TEXAS 75201
DALLAS, TEXAS 75202-3789 (214) 969-2800
(214) 651-5000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of the Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities....................... $200,000,000 100% $200,000,000 $59,000
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 13, 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1998
<TABLE>
<S> <C> <C>
LOGO $100,000,000
LOGO
% NOTES DUE , 2008
</TABLE>
------------------------
Interest on the Notes is payable on and of each year,
commencing , 1999. 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........................................... % % %
Total.............................................. $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest from , 1998.
(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 $225,000 payable by the Company.
------------------------
The Notes offered hereby 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 , 1998 through the facilities of
the Depositary against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
------------------------
The date of this Prospectus Supplement is , 1998.
<PAGE> 3
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 THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
THE COMPANY
The following summary is qualified in its entirety by the more detailed
information and financial statements incorporated by reference in the
Prospectus.
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 1997, CMC derived
approximately 68% of its operating profit from its Manufacturing segment,
approximately 10% from its Recycling segment, and approximately 22% from its
Marketing and Trading segment.
The Company's Manufacturing segment includes four steel minimills, 20 steel
fabrication plants, four steel joist plants, four fence post manufacturing
plants, eight metals recycling plants, a heat treating plant, two railcar
rebuilding facilities, 12 concrete related product warehouses, two industrial
products supply companies, a rail salvage company and a copper tube mill. Steel
manufacturing capacity of approximately 2 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 700,000 tons. The
Company's copper tube mill with 50 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 1.4 million
tons of scrap metal in fiscal 1997. 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 1.4 million tons of
steel products in 1997.
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 5.82% to 5.9%, which at May
31, 1998 were $98 million and had maturities ranging from one day to four
months. The Company intends to utilize the remaining net proceeds, if any, for
general corporate purposes.
S-2
<PAGE> 4
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of May 31, 1998 and as adjusted to give effect to the sale of the
Notes offered hereby and the application of the net proceeds to repay
outstanding borrowings as described under "Use of Proceeds." This table should
be read in conjunction with the Company's consolidated financial statements and
the notes thereto, which are incorporated by reference in the Prospectus.
<TABLE>
<CAPTION>
AS OF MAY 31, 1998
----------------------
AS
ACTUAL ADJUSTED
------ --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Short-term debt
Commercial paper(1)....................................... $ 40,000 $ -0-
Notes payable(1).......................................... 58,000 -0-
Current maturities of long-term debt(1)................... 11,487 9,487
-------- --------
Total short-term debt.................................. $109,487 $ 9,487
======== ========
Long-term debt(2)
7.20% notes due 2005...................................... $100,000 $100,000
6.80% notes due 2007...................................... 50,000 50,000
8.49% notes due 2001...................................... 21,428 21,428
8.75% note due 1999....................................... 2,141 2,141
Other..................................................... 229 229
Notes offered hereby(3)................................... -0- 100,000
-------- --------
Total long-term debt................................... $173,798 $273,798
======== ========
Stockholders' equity
Common stock(4)........................................... $ 52,224 $ 52,224
Additional paid-in capital................................ 13,236 13,236
Retained earnings......................................... 315,595 315,595
-------- --------
Total stockholders' equity............................. $381,055 $381,055
======== ========
Total capitalization................................... $664,340 $664,340
======== ========
</TABLE>
- ---------------
(1) The amounts set forth in the table are as of May 31, 1998. The actual
amounts repaid will vary depending upon the respective amounts of short-term
debt outstanding at the time of repayment.
(2) See notes to the Company's consolidated financial statements for additional
information concerning long-term debt.
(3) Does not include expenses in connection with the issuance of the Notes
offered hereby.
(4) Does not include approximately 1,726,103 shares subject to options at May
31, 1998.
S-3
<PAGE> 5
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data presented below for, and as of the end of, each
of the years in the five year period ended August 31, 1997, are derived from the
consolidated financial statements of the Company. This summary should be read in
conjunction with the Company's Annual Report on Form 10-K including the selected
financial data and consolidated financial statements and notes thereto. The
information presented below for, and as of the end of, each of the fiscal years
in the three-year period ended August 31, 1997 is derived from the Company's
Annual Report on Form 10-K which is incorporated by reference in the Prospectus.
The balance sheet and income statement information as of May 31, 1998 and
1997 and for the nine months then ended has been derived from the Company's
unaudited financial statements, which, in the opinion of management, include all
adjustments (consisting of normally recurring accruals) that the Company
considers necessary for a fair presentation of the financial position and
results of operations at those dates and for those periods. The results of
operations for the first nine months of fiscal 1998 are not necessarily
indicative of the results to be expected for the full fiscal year.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED AUGUST 31, ENDED MAY 31,
-------------------------------------------------------------- -----------------------
1997 1996 1995 1994 1993 1998 1997
---- ---- ---- ---- ---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues............................... $2,258,388 $2,322,363 $2,116,779 $1,666,234 $1,568,506 $1,724,778 $1,646,362
Cost of goods sold..................... 1,963,970 2,030,080 1,856,867 1,476,347 1,399,137 1,488,881 1,430,261
Selling, general and administrative
expenses............................. 175,106 161,941 148,524 109,566 97,550 144,153 131,537
Depreciation and amortization.......... 43,720 41,599 38,134 30,143 27,361 34,722 32,634
Interest expense....................... 14,637 15,822 15,246 9,271 9,397 13,117 11,055
Earnings before income taxes........... 60,955 72,921 58,008 40,907 35,061 43,905 40,875
Net earnings........................... 38,605 46,024 38,208 26,170 21,661 27,792 25,888
Net earnings per share basic(1)........ 2.58 3.06 2.51 1.80 1.50 1.88 1.73
Net earnings per share diluted(1)...... 2.53 3.01 2.47 1.76 1.46 1.84 1.69
FINANCIAL DATA
Working capital........................ $ 307,132 $ 275,410 $ 265,723 $ 175,119 $ 183,465 $ 263,622 $ 250,497
Property, plant and equipment -- net... 247,261 222,710 209,739 156,808 139,323 300,208 241,300
Total assets........................... 839,061 766,756 748,103 604,877 541,961 985,115 825,034
Long-term debt......................... 185,211 146,506 158,004 72,061 76,737 173,798 135,228
Total debt............................. 196,713 158,000 177,301 168,825 122,564 283,285 207,030
Stockholders' equity................... 354,872 335,133 303,164 242,773 235,421 381,055 342,129
Capital expenditures................... 70,955 47,982 39,311 48,152 37,613 87,669 51,225
FINANCIAL RATIOS
Long-term debt as % of total
capitalization(2).................... 33.0% 29.1% 32.9% 21.6% 23.5% 30.2% 27.1%
Ratio of earnings to fixed
charges(3)........................... 4.3 4.9 4.2 4.2 4.0 3.7 4.0
</TABLE>
- ---------------
(1) Restated in accordance with SFAS No. 128 (Earnings Per Share).
(2) Total capitalization includes stockholders' equity, long-term debt and
non-current deferred income taxes.
(3) For a description of the computation of the ratio of earnings to fixed
charges, see "Ratio of Earnings to Fixed Charges" in the Prospectus.
S-4
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RECENT FINANCIAL RESULTS
The following discussion of financial results is qualified in its entirety
by and should be read together with the more detailed information and financial
statements incorporated by reference in the Prospectus.
SEGMENT OPERATING DATA
The Company considers its businesses to be organized into three segments:
(i) Manufacturing, (ii) Recycling, and (iii) Marketing and Trading. Revenues and
operating profit by business segment are shown in the following table (in
millions):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
AUGUST 31, ENDED MAY 31,
---------------- --------------
1997 1996 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Manufacturing...................................... $1,083 $1,018 $884 $ 781
Recycling.......................................... 485 464 318 341
Marketing and Trading.............................. 758 890 571 573
Operating profit:
Manufacturing...................................... 54.8 61.8 48.3 38.1
Recycling.......................................... 7.6 12.1 (.4) 3.6
Marketing and Trading.............................. 17.6 17.7 12.6 13.8
</TABLE>
The LIFO method of inventory valuation increased net earnings for the nine
months ended May 31, 1998 $1.1 million (7 cents per share) compared to a
decrease of $952,000 (6 cents per share) last year.
NINE MONTHS ENDED MAY 31, 1998 COMPARED TO NINE MONTHS ENDED MAY 31, 1997
MANUFACTURING
The Manufacturing segment includes the CMC Steel Group and Howell Metal
Company.
Revenues and operating profit for the segment were significantly ahead of
last year's comparable period. The nine month period resulted in all time record
shipments of tonnage for the Steel Group. Howell Metal Company had satisfactory
results but below the nine month period last year, although shipments also were
a record.
Selling prices were lower at the beginning of the period, but recovered and
combined with record shipments produced a 35% increase in operating profit for
the Steel Group for the nine month period. Mill tonnage shipped at approximately
1.48 million was 7% ahead of last year's nine month period.
The four minimills showed an 18% increase in operating profit led by SMI
Steel, Inc. ("SMI-Alabama") and SMI Steel-Arkansas ("SMI-Arkansas"), both with
increases in excess of 24%; particularly notable is the turnaround in
profitability of SMI-South Carolina which has been profitable the entire period.
The profit at Structural Metals, Inc. ("SMI-Texas") is level with last year, a
strong performance as last year's results included a $1.7 million nonrecurring
insurance recovery.
Operating profit in the Company's steel fabrication businesses doubled with
strong results in virtually all product areas. The Company's structural
fabrication units, as well as the joist plants and concrete related product
warehouses, had especially good results. Fabricated shipments of 602,000 tons
compare favorably with 500,000 tons in the prior year.
Steel Group computer migration project expense was $6.2 million compared
with $4.4 million in the same period last year. The increase was due mainly to
higher consulting costs. The project is scheduled to be completed in mid-1999
and, among other objectives, is addressing year 2000 considerations; quarterly
costs are anticipated to drop to $1.5 million in future quarters. Pension
S-5
<PAGE> 7
settlement costs of $2.7 million were incurred during the nine month period
compared with $1.5 million for the same nine month period in the prior year and
will conclude in the fiscal fourth quarter.
The Company has a record $125 million capital plan for fiscal 1998,
primarily at the steel mills. Construction of the new rolling mill and ancillary
equipment at SMI-South Carolina and a new finishing line at SMI-Alabama are on
schedule.
Strong residential construction markets have maintained good demand for
plumbing tube. Margins were weaker in the early months of the year but improved
some in the third quarter. Copper tube shipments increased 11% over the nine
months last year. Production is 4% ahead of last year's rate.
RECYCLING
The Recycling segment's revenues and gross margins declined significantly
because of a sharply reduced average sales price. This resulted in a modest loss
compared with a profit in the year ago period. Increases in processing costs
associated with new capacity failed to bring in sufficient margin increases. The
segment was also negatively impacted by rail service problems in the Southwest.
Steel scrap prices began the year at fairly stable levels, but began to tumble
at the end of the third quarter. Nonferrous markets were notably weaker.
Aluminum margins were lower all period compared to last year; copper prices were
at recent year lows. The Asian economic troubles are the driving force; global
prices were lower than otherwise, and reduced demand for American origin scrap
products is creating more raw material supply for the domestic markets. Ferrous
scrap shipped increased 10% to 940,000 tons, but nonferrous shipments declined
8% to 148,000 tons. Total volume of scrap processed, including the Steel Group
processing plants, reached 1.4 million tons.
A new shredder in Jacksonville, Florida and a new shear in Odessa, Texas
will come online in the fourth fiscal quarter. In April 1998, the segment
restructured its management into five regions to improve the effectiveness in
scrap sourcing, asset utilization and processing operations.
MARKETING AND TRADING
Revenues for the Marketing and Trading segment were even with last year,
although operating profit declined slightly. This was a remarkable performance
considering the collapse of traditional Far East markets and a LIFO credit in
the prior period. Most of the Asian markets did a complete reversal and induced
a shift in trade flows. Purchases from the Far East increased significantly and
resulted in steel trading incurring only a marginal decrease in operating
profits. Business in Europe increased but sales to customary Asian markets
continued at a sharply reduced rate. Profitability in steel marketing and
distribution increased. Nonferrous metal product tonnage increased, particularly
in aluminum. Activity for ores, minerals and industrial materials continued
solid, but off from the prior period.
OTHER
The Marketing and Trading segment in conjunction with the corporate office
has begun the implementation of updated financial and management information
systems. Among other system improvements, year 2000 considerations are being
addressed. Project completion is anticipated in the summer of 1999. Current
estimates of total costs range between $3.5 to $4 million pretax.
FISCAL 1997 COMPARED TO FISCAL 1996
MANUFACTURING
The Manufacturing segment includes the CMC Steel Group and Howell Metal
Company.
S-6
<PAGE> 8
The Steel Group achieved record sales and tons melted, rolled and shipped
for fiscal 1997; however, operating profits were held back by computer migration
costs, termination of a defined benefit plan, and the startup costs of a new
joist facility.
Shipments by the four minimills increased 11% to 1.93 million tons over
fiscal 1996 while fabricated shipments increased 6% to 690,000 tons over fiscal
1996. A decrease of $4 per ton to $321 per ton for average mill prices combined
with slightly higher fabrication prices of $656 per ton resulted in a 7%
increase in revenues to over $1 billion for fiscal 1997.
Steel Group revenues were $1 billion for fiscal 1997, compared with $949
million in fiscal 1996. Operating profit for the Steel Group was $48.6 million,
or 15% lower than in fiscal 1996. Computer migration costs totalled $6 million,
and pension expense included a $541,000 curtailment loss for termination of the
Company's last defined benefit plan. The Company's fourth joist plant, which
opened in Nevada in June 1997, had startup costs of $2.8 million, all of which
were expensed as incurred.
For fiscal 1997, SMI-Texas set new records for shipments and production and
SMI-Alabama had record profits. Most notable was SMI-South Carolina's turnaround
from a very weak performance in fiscal 1996 to break even for fiscal 1997. Steel
fabrication profits were only half of fiscal 1996's strong results due to delays
on larger structural jobs, generally lower margins, and the joist plant startup
costs.
In January 1997, the Company acquired the assets of a heat treating plant
in Pennsylvania. The purchase price was not significant to the Company. The
operation was profitable for the remainder of fiscal 1997.
Howell Metal Company operating profit was up 40% from fiscal 1996 based on
6% higher shipments and increased productivity. Late in fiscal 1997, margins
came under pressure due to imports from Mexico and reduced housing starts.
RECYCLING
Although revenues increased 4%, the Recycling segment reported a 37%
decrease in operating profit in fiscal 1997 compared to fiscal 1996. The largest
single factor was a LIFO charge in fiscal 1997 versus a credit in fiscal 1996
resulting in a change in LIFO expense of $4.7 million. Gross margins on
nonferrous scrap improved, but ferrous margins were less than in fiscal 1996
because of lower volume. Shipments amounted to 1.15 million tons of ferrous
scrap and 212,000 tons of nonferrous scrap, down 2% in total from fiscal 1996
(excludes scrap tons processed by the six Steel Group processing plants). Rail
service disruption, especially in the Southwest, was a problem during fiscal
1996.
Domestic demand for scrap was good, while exports were slack, except to
Mexico. Average steel scrap prices were down slightly from fiscal 1996. Aluminum
prices were a bit higher while copper prices were 9% lower than in fiscal 1996.
The consolidation within the scrap industry accelerated during fiscal 1997
with major acquisitions pursued at what the Company believes are overvaluations.
The Company made an acquisition in fiscal 1997 of a complementary processing
facility in Midland/Odessa, Texas, which was not significant to its overall
operations. The synergism of the combined operations fueled a turnaround in
profitability for the location.
MARKETING AND TRADING
Operating income for the Marketing and Trading segment was consistent with
fiscal 1996, although revenues were down 15%. For fiscal 1997, the segment had
pretax LIFO income of $2.0 million compared to an expense of $324,000 in fiscal
1996.
S-7
<PAGE> 9
Steel trading margins were pressured by intensely competitive global
markets, diminished buying by China and continuing exports from the CIS. The
Southeast Asian markets, wracked in the latter stages of fiscal 1997 with severe
financial downturns, were particularly weak. The steel and nonferrous marketing
and distribution businesses achieved good results with just-in-time delivery and
other warehousing programs, especially in Australia. Similar programs in the
United Kingdom reversed the poor results of fiscal 1996. Trading operations
located in the U.S., which import substantial quantities into North America, had
excellent results. Semi-fabricated metals and minerals and chemicals had
equivalent results to fiscal 1996. New steel products surpassed fiscal 1996.
In the second half of fiscal 1997, a steel supply contract was consummated
with Essar Steel Ltd. ("Essar") in India, and CMC Trading AG, a subsidiary of
the Company, will market over $100 million of steel products for Essar from
fiscal 1997 through fiscal 2000. At year end of fiscal 1997, a similar but
smaller arrangement was concluded with a mill in China for performance during
fiscal 1998. The Tokyo office was converted to an exclusive representative
agency arrangement, and a small office was opened in Germany to facilitate steel
imports.
S-8
<PAGE> 10
BUSINESS
The following description of the Company's business is qualified in its
entirety by and should be read together with the more detailed information and
financial statements incorporated by reference in the Prospectus.
The Company considers its businesses to be organized into three segments:
(i) Manufacturing, (ii) Recycling, and (iii) Marketing and Trading. The
Company's activities are primarily concerned with metals related activities. See
the Consolidated Financial Statements incorporated by reference in the
Prospectus for additional information concerning these segments.
CMC was incorporated in 1946 in Delaware as a successor to a secondary
metals recycling business that had been in existence since approximately 1915.
The Company maintains executive offices at 7800 Stemmons Freeway, Dallas, Texas
75247 (telephone 214/689-4300). The terms "Company" or "CMC" as used herein
include Commercial Metals Company and its consolidated subsidiaries.
THE MANUFACTURING SEGMENT
The Manufacturing segment is the Company's dominant and most rapidly
expanding segment in terms of assets employed, capital expenditures, operating
profit and number of employees. It consists of two entities, the CMC Steel Group
and the Howell Metal Company subsidiary, a manufacturer of copper tubing. The
Steel Group is by far the more significant entity in this segment, with
subsidiaries operating four steel minimills, 20 steel fabricating plants, four
steel joist manufacturing plants, four fence post manufacturing plants, eight
metals recycling plants, a heat treating plant, two railcar rebuilding
facilities, 12 warehouse stores, which sell supplies and equipment to the
concrete installation trade, two industrial products supply companies and a rail
salvage company.
The Company endeavors to operate all of its minimills at full capacity in
order to minimize product costs. Increases in capacity and productivity are
continuously emphasized through both operating and capital improvements. The
steel minimill business is capital intensive, with substantial capital
expenditures required on a regular basis to remain competitive as a low cost
producer. Over the past three fiscal years, approximately $108 million, or 68%,
of the Company's total capital expenditures have been for minimill projects.
This emphasis on productivity improvements is reflected in a generally increased
number of tons of steel melted, rolled and shipped from the minimills during
each of the last five years and nine months ended May 31, 1998 as follows:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED MAY 31, ENDED MAY 31, FISCAL FISCAL FISCAL FISCAL FISCAL
1998 1997 1997 1996 1995(1) 1994 1993
------------- ------------- ------ ------ ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Tons Melted............... 1,428 1,304 1,755 1,561 1,532 1,122 1,001
Tons Rolled............... 1,282 1,170 1,581 1,477 1,487 1,207 1,009
Tons Shipped.............. 1,483 1,388 1,926 1,730 1,531 1,247 1,138
</TABLE>
- ---------------
(1) Includes SMI-South Carolina, which was acquired in November, 1994.
The Company's largest steel minimill, SMI-Texas, is located at Seguin,
Texas, near San Antonio. SMI-Texas manufactures steel reinforcing bars, angles,
rounds, channels, flats, and special sections used primarily in highways,
reinforced concrete structures and manufacturing. This minimill has been
continually modernized and has a very broad product line.
SMI-Alabama, a subsidiary of CMC that owns and operates a steel minimill in
Birmingham, Alabama, was acquired in 1983. A substantial program to modernize
and improve productivity at SMI-Alabama was implemented, with over $113 million
of capital expenditures from acquisition through 1997.
S-9
<PAGE> 11
SMI-Alabama manufactures primarily larger size products than SMI-Texas,
such as mid-size structurals, including angles, channels, up to eight inch wide
flange beams and special bar quality rounds and flats.
SMI-South Carolina has an annual melting capacity of approximately 500,000
tons and rolling capacity of approximately 350,000 tons. Reinforcing bar is
SMI-South Carolina's primary product line. In July, 1997, the Company began a
$70 million capital expenditure, the largest single project in the Company's
history, to replace SMI-South Carolina's existing rolling mill with a new
state-of-the-art rolling mill. The new rolling mill will have a capacity of over
700,000 tons with a substantially broader product line and is expected to be
completed in February, 1999.
The SMI-Texas, SMI-Alabama and SMI-South Carolina mills consist of melt
shops with electric arc furnaces that melt the steel scrap, continuous casting
facilities to shape the molten metal into billets, reheating furnaces, rolling
mills, mechanical cooling beds, finishing facilities and supporting facilities.
The mills utilize both a Company-owned fleet of trucks and private haulers to
transport finished products to customers and Company-owned fabricating shops.
Mill capacity at SMI-Texas and SMI-Alabama is approximately 750,000 and 500,000
tons per year, respectively.
The primary raw material for SMI-Texas, SMI-Alabama and SMI-South Carolina
is secondary (scrap) ferrous metal purchased primarily from suppliers generally
within a 300 mile radius of each mill. A portion of the ferrous raw material,
generally less than half, is supplied from Company-owned recycling plants. The
supply of scrap is believed to be adequate to meet future needs, but has
historically been subject to significant price fluctuations. All three of these
mills consume large amounts of electricity and natural gas, both of which are
believed to be readily available at competitive prices.
Operations began in 1987 at a fourth, much smaller mill located near
Magnolia, Arkansas, SMI-Arkansas. No melting facilities are located at
SMI-Arkansas, because this mill utilizes as its raw material rail salvaged from
abandoned railroads for rerolling and, on occasion, billets from Company
minimills or other suppliers. The rail or billets are heated in a reheat furnace
and processed on a rolling mill and finished at facilities similar to, but on a
smaller scale, than the other mills. SMI-Arkansas' finished product is primarily
metal fence post stock, small diameter reinforcing bar and sign posts with some
high quality round and flat products being rolled. Fence post stock is
fabricated into metal fence posts at Company-owned facilities at the Magnolia
mill site, San Marcos, Texas, Brigham City, Utah, and West Columbia, South
Carolina. Because this mill does not include melting facilities, it is dependent
on an adequate supply of competitively priced billets or used rail, the
availability of which fluctuates with the pace of railroad abandonments, rate of
rail replacement by railroads and demand for used rail from domestic and foreign
rail rerolling mills. Capacity at SMI-Arkansas is approximately 150,000 tons per
year.
The Steel Group's processing facilities are engaged in the fabrication of
reinforcing and structural steel, steel warehousing, joist manufacturing, fence
post manufacturing and railcar repair and rebuilding. Steel fabrication capacity
now exceeds 700,000 tons. Steel for fabrication may be obtained from unrelated
vendors as well as Company owned mills. Fabrication activities are conducted at
various locations in Texas in the cities of Beaumont, Buda (near Austin), Corpus
Christi, Dallas, Houston, San Marcos, Seguin, Victoria, and Waco, as well as
Baton Rouge and Slidell, Louisiana; Magnolia and Hope, Arkansas; Brigham City,
Utah; Starke, Florida and Fallon, Nevada. The Owen acquisition in fiscal year
1995 added fabrication facilities in Cayce, Columbia, and Taylors, South
Carolina; Whitehouse, Florida; Lawrenceville, Georgia; Gastonia, North Carolina
and Fredericksburg, Virginia. Fabricated steel products are used primarily in
the construction of commercial and non-commercial buildings, industrial plants,
power plants, highways, arenas, stadiums, and dams. Sales of fabricated steel
are generally made in response to bid solicitation from construction contractors
or owners on a competitive bid basis and less frequently on a negotiated basis.
The SMI-Owen structural steel operations have historically been active in large
projects such as high rise office towers, stadiums, convention centers and
hospitals.
S-10
<PAGE> 12
Safety Railway Service, with locations in Victoria, Texas, and Tulsa,
Oklahoma, repairs, rebuilds and provides custom maintenance with some
manufacturing of railroad freight cars owned by railroad companies and private
industry. That work is obtained primarily on a bid and contract basis and may
include maintenance of the cars. Secondary metals recycling plants in Austin,
Texas, and Cayce, South Carolina, each with two smaller feeder facilities
nearby, operate as part of the Steel Group due to the predominance of secondary
ferrous metals sales to the nearby SMI minimills. The Cayce recycling plant
installed and began operating a new automobile shredder during 1997 at a cost of
approximately $5 million. A new shredder began operations at the SMI-Texas mill
in June 1998, replacing the shredder in Austin, Texas. These recycling plants
have an aggregate annual capacity in excess of 400,000 tons.
The joist manufacturing facility, SMI Joist Company, headquartered in Hope,
Arkansas, manufactures steel joists and decking for roof supports using steel
obtained primarily from the Steel Group's minimills. SMI Joist expanded
operations with the Owen acquisition, obtaining smaller joist plants in Starke,
Florida and Cayce, South Carolina. During 1997, SMI-Joist Nevada, located in
Fallon, Nevada, started production of joists to supply western markets. Joist
consumers are typically construction contractors or large chain store owners.
Joists are generally made to order and sales, which may include custom design
and fabrication, are primarily obtained on a competitive bid basis.
The Company sells concrete related supplies including the sale or rental of
equipment to the concrete installation trade at eleven warehouse locations in
Texas and one in Lawrenceville, Georgia. This business operates under the
Shepler's name. The Owen acquisition added a similar but smaller operation which
emphasizes a broader industrial product supply in Columbia, South Carolina and a
second location opened in Cayce, South Carolina during 1996.
In January 1997, the operating assets of Allegheny Heat Treating, Inc.
("AHT"), of Chicora, Pennsylvania, were purchased. AHT is the Steel Group's
entry into the steel heat treating business. AHT performs heat treating on a
tolling basis and works closely with SMI-Alabama and other mills that sell
specialized heat treated steel for customer specific use, primarily in original
or special equipment manufacturing.
The copper tube minimill operated by Howell Metal Company is located in New
Market, Virginia. It manufactures copper water, air conditioning and
refrigeration tubing in straight lengths and coils for use in commercial,
industrial and residential construction. Its customers, largely equipment
manufacturers and wholesale plumbing supply firms, are located primarily east of
the Mississippi River. High quality copper scrap supplemented occasionally by
virgin copper ingot, is the raw material used in the melting and casting of
billets. The scrap is readily available subject to rapid price fluctuations
generally related to the price or supply of virgin copper. A small portion of
the scrap is supplied by the Company's metal recycling yards. Howell's
facilities include melting, casting, piercing, extruding, drawing, finishing and
other departments. Capacity is approximately 50 million pounds per year. Demand
for copper tube is dependent mainly on the level of new residential construction
and renovation.
No single customer purchases ten percent or more of the Manufacturing
segment's production. The nature of certain stock products sold in the
Manufacturing segment are, with the exception of the steel fabrication and joist
jobs, not characteristic of a long lead time order cycle. Orders for other stock
products are generally filled promptly from inventory or near term production.
As a result, the Company does not believe backlog levels are a significant
factor in evaluating most operations. Backlog in the CMC Steel Group at 1997
year-end was approximately $261.5 million. Backlog at 1996 year-end was
approximately $195.8 million.
THE RECYCLING SEGMENT
The Recycling segment is engaged in processing secondary (scrap) metals for
further recycling into new metal products. This segment consists of the
Company's 40 secondary metals
S-11
<PAGE> 13
processing division's recycling plants (excluding eight such facilities operated
by the CMC Steel Group as a part of the Manufacturing segment).
The Company's metal recycling plants purchase ferrous and nonferrous
secondary or scrap metals, processed and unprocessed, in a variety of forms.
Sources of metals for recycling include manufacturing and industrial plants,
metal fabrication plants, electric utilities, machine shops, factories,
railroads, refineries, shipyards, ordinance depots, demolition businesses,
automobile salvage and wrecking firms. Numerous small secondary metals
collection firms are also, in the aggregate, major suppliers.
These plants processed and shipped approximately 1.37 million tons of scrap
metal during 1997, down slightly from 1.4 million the prior year. Ferrous metals
comprised the largest tonnage of metals recycled at approximately 1.16 million
tons, approximately 41,000 tons less than the prior year, followed by
approximately 212,000 tons compared to 199,000 in 1996, of nonferrous metals,
primarily aluminum, copper and stainless steel. The Company also purchased and
sold an additional 213,000 tons of metals processed by other metal recycling
facilities. With the exception of precious metals, practically all metals
capable of being recycled are processed by these plants. The CMC Steel Group's
eight metals recycling facilities processed and shipped an additional 344,000
tons of primarily ferrous scrap metal during 1997.
The metal recycling plants generally consist of an office and warehouse
building equipped with specialized equipment for processing both ferrous and
nonferrous metal. Most of the larger plants are equipped with scales, shears,
baling presses, briquetting machines, conveyors and magnetic separators. Two
locations have extensive equipment for mechanically processing large quantities
of insulated wire to segregate metallic content. All ferrous processing centers
are equipped with either presses, shredders or hydraulic shears, locomotive and
crawler cranes and railway tracks to facilitate shipping and receiving. The
segment operates six large shredding machines capable of pulverizing obsolete
automobiles or other ferrous metal scrap, including operation of a sixth
shredder which began during June 1998 in Jacksonville, Florida. Two additional
shredders are operated by the Manufacturing segment's recycling facilities. A
typical recycling plant includes several acres of land used for receiving,
sorting, processing and storage of metals. Several recycling plants devote a
small portion of their site or a nearby location for display and sales of metal
products considered reusable for their original purpose.
Recycled metals are sold to steel mills and foundries, aluminum sheet and
ingot manufacturers, brass and bronze ingot makers, copper refineries and mills,
brass mills, secondary lead smelters, specialty steel mills, high temperature
alloy manufacturers and other consumers. Sales of material processed through the
Company's recycling plants are coordinated through the Recycling segment's
office in Dallas. Export sales are negotiated through the Company's network of
foreign offices as well as the Dallas office.
No single source of material or customer of the Recycling segment
represents a material part of purchases or revenues. The Recycling segment
competes with other secondary processors and primary nonferrous metals
producers, both domestic and foreign, for sales of nonferrous materials.
Consumers of nonferrous scrap metals often have the capability to utilize
primary or "virgin" ingot processed by mining companies interchangeably with
secondary metals. The prices for nonferrous scrap metals are normally closely
related to but generally less than, the prices of the primary or "virgin" metal
producers. Ferrous scrap is the primary raw material for electric arc furnaces
such as those operated by the Company's steel minimills. Relatively high prices
and the need for low residual elements in the melting process have recently
caused some minimills to supplement purchases of scrap metal with direct reduced
iron and pig iron for certain product lines.
THE MARKETING AND TRADING SEGMENT
The Marketing and Trading segment buys and sells, through a network of
trading offices located around the globe, steel, nonferrous metals, specialty
metals, chemicals, industrial minerals,
S-12
<PAGE> 14
ores, concentrates, ferroalloys, and other basic industrial materials. The
products are purchased primarily from producers in domestic and foreign markets.
On occasion these materials are purchased from trading companies or industrial
consumers with surplus supplies. Long-term contracts, spot market purchases and
trading or barter transactions are all utilized to obtain materials. A large
portion of these transactions involve fabricated semi-finished or finished
product.
Customers for these materials include industrial concerns such as the
steel, nonferrous metals, metal fabrication, chemical, refractory and
transportation sectors. Sales are generally made directly to consumers through
and with coordination of offices in Dallas; New York City; Englewood Cliffs, New
Jersey; Los Angeles; four locations in Australia; Singapore; Zug, Switzerland;
Hong Kong; Surrey, United Kingdom; and Moscow. During 1997, the Company closed
the Tokyo office, now utilizing an exclusive agent, and opened offices in
Sandbach, United Kingdom and Bergisch Gladbach, Germany. The Company also
maintains representative offices in Bangkok, Sao Paulo, Seoul, and Beijing, as
well as agents in other significant international markets. These offices form a
network for the exchange of information on the materials marketed by the Company
as well as servicing sources of supply and purchasers. In most transactions the
Company acts as principal and often as a marketing representative. The Company
utilizes agents when appropriate and occasionally acts as broker. The Company
participates in transactions in practically all major markets of the world where
trade by American-owned companies is permitted.
This segment focuses on the marketing of physical products as contrasted to
traders of commodity futures contracts who frequently do not take delivery of
the commodity. Sophisticated global communications and the development of easily
accessible, although not always accurate, quoted market prices for many products
has resulted in the Company emphasizing creative service functions for both
sellers and buyers. Actual physical market pricing and trend information, as
contrasted with sometimes more speculative metal exchange market information,
technical information and assistance, financing, transportation and shipping
(including chartering of vessels), storage, warehousing, just in time delivery,
insurance, hedging and the ability to consolidate smaller purchases and sales
into larger, more cost efficient transactions are examples of the services
offered. The Company attempts to limit its exposure to price fluctuations by
offsetting purchases with concurrent sales and entering into foreign exchange
contracts as hedges of trade receivables and payables denominated in foreign
currencies. The Company does not, as a matter of policy, speculate on changes in
the markets and hedges only firm commitments, not anticipated transactions.
During the year over 1.4 million tons of steel products were sold by the
Marketing and Trading segment. The Zug office of CMC Trading AG consummated a
trade financing steel supply contract with Essar of Hazira, India, to market
over $100 million of steel products. The Australian operations maintain
warehousing facilities for just in time delivery of steel and industrial
products and expanded into heat treating services for certain steel products
during 1997.
S-13
<PAGE> 15
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 % Notes due , 2008 (the "Notes") will be limited to
$100,000,000 aggregate principal amount and will mature on , 2008. 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 , 1998, or the most recent interest
payment date to which interest has been paid or provided for, payable
semi-annually on and of each year, beginning ,
1999, to the person in whose name a Note (or any predecessor Note) is registered
at the close of business on the or , 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
Trust Company, as the Depositary (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 of 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-14
<PAGE> 16
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-15
<PAGE> 17
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. ....................................... $
BancAmerica Robertson Stephens..............................
Chase Securities Inc. ......................................
Lehman Brothers Inc. .......................................
Morgan Stanley & Co. Incorporated...........................
------------
Total............................................. $100,000,000
============
</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 the public
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 % 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 % 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.
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 and its affiliates. The
Chase Manhattan Bank, the Trustee, is an affiliate of Chase Securities Inc. and
is a lender to the Company under certain short term bank facilities. Bank of
America National Trust and Savings Association, which is an affiliate of
BancAmerica Robertson
S-16
<PAGE> 18
Stephens, is also a lender to the Company. Each of The Chase Manhattan Bank and
Bank of America National Trust and Savings Association will receive a portion of
the amounts repaid with the net proceeds from the sale of the Notes. See "Use of
Proceeds." Because more than 10% of the net proceeds from the sale of the Notes
will be paid to an affiliate of a member of the National Association of
Securities Dealers, Inc. (the "NASD") who is participating in the sale of the
Notes, the sale of the Notes is being made in compliance with Rule 2720 of the
NASD Conduct Rules.
S-17
<PAGE> 19
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 13, 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1998
<TABLE>
<S> <C> <C>
LOGO $100,000,000
LOGO
MEDIUM-TERM NOTES, SERIES A
DUE FROM MONTHS TO YEARS FROM DATE OF ISSUE
</TABLE>
------------------------
The Company may offer from time to time its Medium-Term Notes, Series A, due
from months to years from the date of issue, as selected by the purchaser
and agreed to by the Company, at an aggregate initial public offering price not
to exceed $100,000,000, or its equivalent in another currency or composite
currency.
The Notes may be denominated in U.S. dollars or in such foreign currencies
or composite currencies as may be designated by the Company at the time of
offering. The specific currency or composite currency, interest rate (if any),
issue price and maturity date of any Note will be set forth in the related
Pricing Supplement to this Prospectus Supplement. Unless otherwise specified in
the applicable Pricing Supplement, Notes denominated in other than U.S. dollars
or ECUs will not be sold in, or to residents of, the country issuing the
Specified Currency. See "Description of Notes."
Interest on the Fixed Rate Notes, unless otherwise specified in the
applicable Pricing Supplement, will be payable each and and at
maturity. Interest on the Floating Rate Notes or Indexed Notes will be payable
on the dates specified therein and in the applicable Pricing Supplement.
Floating Rate Notes will bear interest at a rate determined by reference to the
Commercial Paper Rate, Prime Rate, LIBOR, Treasury Rate, CD Rate or Federal
Funds Rate, as adjusted by a Spread and/or Spread Multiplier, if any, applicable
to such Notes. Zero Coupon Notes will not bear interest.
Unless a Redemption Commencement Date or Repayment Date is specified in the
applicable Pricing Supplement, the Notes will not be redeemable or repayable
prior to their Stated Maturity. If a Redemption Commencement Date or Repayment
Date is so specified, the Notes will be redeemable at the option of the Company
or repayable at the option of the Holder as described herein.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
offered hereby will be issued in global or definitive form in a minimum
denomination of $100,000 or, in the case of Notes denominated in foreign
currencies or composite currencies, the appropriate equivalent of $100,000 in
the Specified Currency, as specified in the applicable Pricing Supplement. A
global Note representing Book-Entry Notes will be registered in the name of The
Depository Trust Company, or its nominee, which will act as Depositary.
Interests in Book-Entry Notes will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to
participants' interests) and its participants. Except as described herein,
owners of beneficial interests in a global Note will not be considered the
Holders thereof and will not be entitled to receive physical delivery of Notes
in definitive form, and no global Note will be exchangeable except for another
global Note of the denomination and terms to be registered in the name of the
Depositary or its nominee. See "Description of Notes."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
--------- -------------- -------------
<S> <C> <C> <C>
Per Note.......................... % %- % %- %
Total(4).......................... $ $ -$ $ -$
</TABLE>
- ---------------
(1) Notes will be issued at 100% of their principal amount, unless otherwise
specified in the applicable Pricing Supplement.
(2) The Company will pay the Agents a commission of from % to %, depending
on maturity, of the principal amount of any Notes sold through them as
Agents (or sold to such Agents as principal in circumstances in which no
other discount is agreed). The Company may sell Notes to any Agent at a
discount or premium for resale to one or more investors at varying prices
related to prevailing market prices at the time of resale, as determined by
such Agent, or at a fixed public offering price. The Company has agreed to
indemnify the Agents against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Supplemental Plan of
Distribution."
(3) Before deducting estimated expenses of $100,000 payable by the Company,
including approximately $30,000 of estimated expenses of the Agents to be
reimbursed by the Company.
(4) Or the equivalent thereof in foreign currencies or composite currencies.
------------------------
Offers to purchase the Notes are being solicited, on a reasonable efforts
basis, from time to time by the Agents on behalf of the Company. Notes may be
sold to the Agents on their own behalf at negotiated discounts. The Company
reserves the right to sell the Notes directly on its own behalf. The Company
also reserves the right to withdraw, cancel or modify the offering contemplated
hereby without notice. No termination date for the offering of the Notes has
been established. The Company or the soliciting Agent may reject any order in
whole or in part. See "Supplemental Plan of Distribution."
GOLDMAN, SACHS & CO.
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
------------------------
The date of this Prospectus Supplement is , 1998.
<PAGE> 20
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION."
Unless otherwise indicated, currency amounts in this Prospectus Supplement
or any Pricing Supplement hereto are stated in United States dollars ("$,"
"dollars" or "U.S. $").
S-2
<PAGE> 21
DESCRIPTION OF NOTES
GENERAL
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 accompanying Prospectus, to which description reference is hereby made.
Unless different terms or additional terms are specified in the applicable
Pricing Supplement, the Notes will have the terms described below. References to
interest payments and interest-related information do not apply to Zero Coupon
Notes (as defined below).
The Notes will be issued pursuant to the Indenture dated as of July 31,
1995 (the "Indenture") between the Company and The Chase Manhattan Bank, as
Trustee (the "Trustee"). The Notes are issuable by the Company from time to time
up to an aggregate initial offering price of $100,000,000 (or the equivalent
thereof in any other currency or currencies or currency units). The Notes will
represent unsecured, unsubordinated debt of the Company and will rank equally
with all other unsecured and unsubordinated debt of the Company. The Notes
constitute a separate series for purposes of the Indenture. The Indenture does
not limit the aggregate principal amount of Debt Securities that may be issued
thereunder. The following summary of certain provisions of the Indenture does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all of the provisions of the Indenture, including the
definitions therein of certain terms.
The applicable Pricing Supplement will specify any redemption or repayment
terms applicable to the Notes. See "Redemption and Repayment" below.
Unless otherwise specified in the applicable Pricing Supplement and unless
previously redeemed, a Note will mature on the date ("Stated Maturity") that is
specified on the face thereof and in the applicable Pricing Supplement. Unless
otherwise specified in the applicable Pricing Supplement, the term "Market Day"
means (a) with respect to any Note (other than any LIBOR Note), any Business
Day, and (b) with respect to any LIBOR Note, any Business Day which is also a
London Market Day. Unless otherwise specified in the applicable Pricing
Supplement, the term "Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday that is (i) not a day on which banking institutions in The
City of New York generally are authorized or obligated by law or executive order
to close and (ii) if the Note is denominated in a Specified Currency (as defined
below) other than U.S. dollars, not a day on which banking institutions are
authorized or obligated by law or executive order to close in the financial
center of the country issuing the Specified Currency (or, in the case of
European Currency Units ("ECUs"), is not a day designated as an ECU
Non-Settlement Day by the ECU Banking Association or otherwise generally
regarded in the ECU interbank market as a day on which payment in ECUs shall not
be made). Unless otherwise specified in the applicable Pricing Supplement, the
term "London Market Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
Each Note will be denominated in a currency, composite currency or basket
of currencies (each a "Specified Currency") as specified on the face thereof and
in the applicable Pricing Supplement, which may include U.S. dollars or any
other currency, composite currency or basket of currencies set forth in the
applicable Pricing Supplement. Purchasers of the Notes are required to pay for
them by delivery of the requisite amount of the Specified Currency to the
applicable agent, unless other arrangements have been made. Unless otherwise
specified in the applicable Pricing Supplement, payments on the Notes will be
made in the applicable Specified Currency; provided that, at the election of the
Holder thereof and in certain circumstances at the option of the Company,
payments on Notes denominated in other than U.S. dollars may be made in U.S.
dollars. See "Payment of Principal and Interest." The term "Holder" means, with
respect to any Note as of any time, the person in whose name such Note is
registered at such time in the security register for the Notes maintained by the
Company and does not include the owner of a beneficial interest in a Book-Entry
Note as described under "Book-Entry Notes" below.
S-3
<PAGE> 22
Notes denominated in U.S. dollars will be initially issued in denominations
of $100,000 and integral multiples of $1,000 in excess thereof, and Notes
denominated in other than U.S. dollars will be initially issued in denominations
of the amount of the Specified Currency for such Note equivalent, at the noon
buying rate for cable transfers in The City of New York for such Specified
Currency (the "Exchange Rate") on the first Business Day next preceding the date
on which the Company accepts the offer to purchase such Note, to $100,000 and
integral multiples of $1,000 in excess thereof. Unless otherwise agreed by the
Company, Notes issued upon transfer of or in exchange for other Notes will be
issued only in denominations of $100,000 and integral multiples of $1,000 in
excess thereof (or the equivalent thereof in the Specified Currency for each
Note).
Notes will be sold in individual issues of Notes, each of which will have
such interest rate or interest rate formula, if any, Stated Maturity and date of
original issuance as may be specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, each Note will
bear interest at either (i) a fixed rate (a "Fixed Rate Note"), which may be
zero in the case of Notes issued at a discount from the principal amount payable
at maturity thereof (a "Zero Coupon Note") or (ii) a floating rate (a "Floating
Rate Note") determined by reference to the interest rate formula, which may be
adjusted by adding or subtracting the Spread or multiplying by the Spread
Multiplier (each term as defined below under "Floating Rate Notes").
The Notes may be issued as Original Issue Discount Notes. An Original Issue
Discount Note is a Note, including any Zero Coupon Note, which is issued at a
price lower than the principal amount thereof and which provides that upon
redemption or acceleration of the maturity thereof an amount less than the
principal thereof shall become due and payable. In the event of redemption or
acceleration of the maturity of an Original Issue Discount Note, the amount
payable to the Holder of such Note upon such redemption or acceleration will be
determined in accordance with the terms of the Note, but will be an amount less
than the amount payable at the Stated Maturity of such Note. In addition, a Note
issued at a discount may, for United States federal income tax purposes, be
considered an original issue discount note, regardless of the amount payable
upon redemption or acceleration of maturity of such Note. See "United States
Taxation -- United States Holders -- Original Issue Discount" below.
Certain Notes ("Indexed Notes") may be issued with the principal amount
payable at maturity, and/or the amount of interest payable on an interest
payment date, to be determined by reference to one or more currencies (including
baskets of currencies), one or more commodities (including baskets of
commodities), one or more securities (including baskets of securities) and/or
any other index as set forth in the applicable Pricing Supplement. Holders of
Indexed Notes may receive a principal amount at maturity that is greater than or
less than the face amount (but not less than zero) of such Notes depending upon
the value at maturity of the applicable index. With respect to any Indexed Note,
information as to the methods for determining the principal amount payable at
maturity and/or the amount of interest payable on an interest payment date, as
the case may be, as to any one or more currencies (including baskets of
currencies), commodities (including baskets of commodities), securities
(including baskets of securities) or other indices to which principal or
interest is indexed, as to any additional foreign exchange or other risks or as
to any additional tax considerations may be set forth in the applicable Pricing
Supplement. See "Risks Relating to Indexed Notes."
The Pricing Supplement relating to each Note will describe one or more of
the following terms: (i) the Specified Currency with respect to such Note (and,
if such Specified Currency is other than U.S. dollars, certain other terms
relating to such Note, including the authorized denominations); (ii) the price
(expressed as a percentage of the aggregate principal amount thereof) at which
such Note will be issued; (iii) the date on which such Note will be issued; (iv)
the date on which such Note will mature; (v) whether such Note is a Fixed Rate
Note or a Floating Rate Note; (vi) if such Note is a Fixed Rate Note, the rate
per annum at which such Note will bear interest, if any, and the interest
payment date or dates, if different from those set forth below under "Fixed Rate
Notes"; (vii) if such Note is a Floating Rate Note, the interest rate basis (the
"Interest Rate Basis") for
S-4
<PAGE> 23
each such Floating Rate Note, which will be (a) the Commercial Paper Rate, in
which case such Note will be a Commercial Paper Rate Note, (b) the Prime Rate,
in which case such Note will be a Prime Rate Note, (c) the London Inter-Bank
Offered Rate ("LIBOR"), in which case such Note will be a LIBOR Note, (d) the
Treasury Rate, in which case such Note will be a Treasury Rate Note, (e) the
Constant Maturity Treasury ("CMT") Rate, in which case such Note will be a CMT
Rate Note, (f) the CD Rate, in which case such Note will be a CD Rate Note, (g)
the Federal Funds Rate, in which case such Note will be a Federal Funds Rate
Note, or (h) such other interest rate formula as is set forth in such Pricing
Supplement, and, if applicable, the Calculation Agent, the Index Maturity, the
Spread or Spread Multiplier, the Maximum Rate, the Minimum Rate, the Initial
Interest Rate, the Interest Payment Dates, the Regular Record Dates, the
Calculation Date, the Interest Determination Date and the Interest Reset Date
with respect to such Floating Rate Note; (viii) whether such Note is an Original
Issue Discount Note and, if so, the yield to maturity; (ix) whether such Note is
an Indexed Note and, if so, the principal amount (or formula to calculate such
principal amount) thereof payable at maturity, or the amount of interest payable
on an interest payment date, as determined by reference to any applicable index,
in addition to certain other information relating to the Indexed Note; (x)
whether such Note may be redeemed at the option of the Company (other than as
described below in the first paragraph under "Redemption and Repayment"), or
repaid at the option of the Holder, prior to Stated Maturity and, if so, the
Redemption Commencement Date, Repayment Date, Redemption Prices, Redemption
Period and other provisions relating to such redemption or repayment (all as
described below under "Redemption and Repayment"); (xi) whether such Note will
be represented by a Certificated Note or a Book-Entry Note (each as defined
below); and (xii) any other terms of such Note not inconsistent with the
provisions of the Indenture.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Notes may be issued in certificated registered form without coupons
("Certificated Notes"). Notes also may be issued in the form of one or more
master or global Notes registered in the name of a depositary or its nominee
("Book-Entry Notes") and as such may be subject to the special restrictions and
Procedures referred to below under "Book-Entry Notes."
Each Certificated Note will be exchangeable for a like aggregate principal
amount of Certificated Notes of authorized denominations and of like tenor and
form. If any Certificated Note is subject to partial redemption, the unredeemed
portion of such Note redeemed in part will be exchangeable for Certificated
Notes of authorized denominations and of like tenor and form. Each Certificated
Note authenticated and delivered upon any transfer or exchange of the whole or
any part of any other Note will carry all the rights, if any, to interest
accrued and unpaid and to accrue that were carried by the whole or such part of
such other Note.
Each Certificated Note may be presented for registration of transfer (with
the form of transfer endorsed thereon duly executed) or exchange at the
corporate trust office of the Trustee or at the office of any transfer agent
that is designated by the Company for such purpose with respect to the Notes and
referred to in the applicable Pricing Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Unless otherwise specified in an applicable Pricing Supplement, such
transfer or exchange will be effected upon the Trustee or such transfer agent,
as the case may be, being satisfied with the documents of title and identity of
the person making the request, and subject to such reasonable regulations as the
Company may from time to time agree upon with the Trustee and any transfer
agent.
The Company has initially appointed as security registrar and transfer
agent the Trustee acting through its corporate trust office in the Borough of
Manhattan, The City of New York. Any additional transfer agents initially
designated by the Company for any Notes will be named in the applicable Pricing
Supplement. The Company reserves the right to vary or terminate the appointment
of the Trustee as security registrar or of any transfer agent or to appoint
additional or other registrars or transfer agents or to approve any change in
the office through which any registrar or any transfer
S-5
<PAGE> 24
agent acts, provided that there will be at all times a registrar and transfer
agent in the Borough of Manhattan, The City of New York.
Unless otherwise indicated in the applicable Pricing Supplement, in the
event of a redemption of the Notes in part, the Company will not be required (i)
to register the transfer of or exchange any Notes during a period beginning at
the opening of business 15 days before, and continuing until, the date notice is
given identifying the Notes to be redeemed, or (ii) to register the transfer of
or exchange any Notes, or any portion thereof, called for redemption.
BOOK-ENTRY NOTES
Upon issuance, Book-Entry Notes may be represented by a single master
security (the "Master Security") or by individual global securities each
representing Book-Entry Notes having the same terms ("Global Securities"). The
Master Security and any Global Security will be deposited with, or on behalf of,
the depositary and registered in the name of the depositary or its nominee.
Book-Entry Notes will not be exchangeable for Certificated Notes at the option
of the Holder and, except as set forth below, will not otherwise be issuable in
definitive form. Unless otherwise specified in the applicable Pricing
Supplement, The Depository Trust Company ("DTC") will be the depositary.
With respect to any Book-Entry Note denominated in a Specified Currency
other than U.S dollars, DTC currently has elected to have payments of principal
(and premium, if any) and interest on such Note made in U.S. dollars unless
notified by any of its Participants (as defined below) through which an interest
in such Note is held that it elects to receive such payment of principal (or
premium, if any) or interest in such Specified Currency. Unless otherwise
specified in the applicable Pricing Supplement, a Beneficial Owner of Book-Entry
Notes denominated in a Specified Currency other than U.S. dollars electing to
receive payments of principal or any premium or interest in a currency other
than U.S. dollars must notify the Participant through which its interest is held
on or prior to the applicable Record Date, in the case of a payment of interest,
and on or prior to the sixteenth day prior to the maturity date, in the case of
principal or premium, of such Beneficial Owner's election to receive all or a
portion of such payment in such Specified Currency. Such Participant must notify
DTC of such election on or prior to the third Business Day after such Record
Date or after such sixteenth day. DTC will notify the Trustee of such election
on or prior to the fifth Business Day after such Record Date or after such
sixteenth day. If complete instructions are received by the Participant and
forwarded by the Participant to DTC, and by DTC to the Trustee, on or prior to
such dates, the Beneficial Owner will receive payments in the Specified
Currency.
DTC has advised the Company 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. 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. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations. 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.
Purchases of Book-Entry Notes under the DTC system must be made by or
through Direct Participants. Upon the issuance by the Company of Book-Entry
Notes represented by the Master Security or by any Global Security, the
depositary will credit, on its book-entry system, the respective principal
amounts of the Book-Entry Notes represented by the Master Security or such
S-6
<PAGE> 25
Global Security to the accounts of Participants. The accounts to be credited
shall be designated by the agent of the Company with respect to such Book-Entry
Notes, by certain other agents of the Company or by the Company if such
Book-Entry Notes are offered and sold directly by the Company. The ownership
interest of each actual purchaser of each Book-Entry Note (a "Beneficial Owner")
will be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in Book-Entry
Notes are expected to be effected by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Book Entry Notes, except
as set forth below. To facilitate subsequent transfers, all Book-Entry Notes
deposited by Participants with DTC will be registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of Book-Entry Notes with DTC and
their registration in the name of Cede & Co. will not effect any change in
beneficial ownership. The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in Book-Entry Notes
represented by the Master Security or by any Global Security.
So long as the depositary for the Master Security or any Global Security,
or its nominee, is the registered owner of the Master Security or such Global
Security, the depositary or its nominee, as the case may be, will be considered
the sole owner or Holder of the Book-Entry Notes represented by such Master
Security or such Global Security for all purposes of such Notes and for all
purposes under the Indenture.
With respect to any Book-Entry Note, unless the depositary therefor has
notified the Company that it is unwilling or unable to continue as depositary
therefor, the depositary has ceased to be a clearing agency registered under the
Securities Exchange Act of 1934, the Company has delivered to the Trustee a
written notice that all Book-Entry Notes shall be exchangeable, an Event of
Default (as defined below under "Events of Default") has occurred and is
continuing with respect to the Notes represented thereby or as otherwise set
forth in the applicable Pricing Supplement, owners of beneficial interests in
such Book-Entry Note will not be entitled to have the Notes represented thereby
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes in exchange therefor and will not be considered
to be the owners or Holders of any Notes represented thereby under the Indenture
or such Book-Entry Note. Unless and until it is exchanged in whole or in part
for individual certificates evidencing the Book-Entry Notes represented thereby,
the Master Security or any Global Security may not be transferred except as a
whole by the depositary for the Master Security or such Global Security to a
nominee of such depositary or by a nominee of such depositary to such depositary
or another nominee of such depositary or by the depositary or any nominee to a
successor depositary or any nominee of such successor.
The Company expects that conveyance of notices and other communications by
DTC to Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. In addition, neither DTC nor
Cede & Co. will consent or vote with respect to Notes. The Company has been
advised that DTC's usual procedure is to mail an omnibus proxy to the Company as
soon as possible after the record date with respect to such consent or vote. The
omnibus proxy would assign Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Notes are credited on such record date
(identified in a listing attached to the omnibus proxy).
Settlement for Book-Entry Notes will be made by the purchasers thereof in
immediately available funds. As long as the depositary continues to make its
same-day funds settlement system available to the Company, all payments of
principal of (and premium, if any) and interest on a Book-
S-7
<PAGE> 26
Entry Note held by the depositary or its nominee will be made by the Company in
immediately available funds.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearinghouse or next-day funds. In contrast, Book-Entry Notes will
trade in the depositary's same-day funds settlement system, and secondary market
trading activity in those securities 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 Book-Entry Notes.
Payments of principal of (and premium, if any) and interest, if any, on the
Book-Entry Notes represented by a Master Security or by a Global Security
registered in the name of the depositary or its nominee will be made by the
Company through the Trustee to the depositary or its nominee, as the case may
be, as the registered owner of such Master Security or such Global Security.
Neither the Company nor 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 any Master Security or any Global Security or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company has been advised that DTC will credit the accounts of Direct
Participants with payment in amounts proportionate to their respective holdings
in any Master Security or Global Security as shown on the records of DTC. The
Company has been advised that DTC's practice is to credit Direct Participants'
accounts on the applicable payment date unless DTC has reason to believe that it
will not receive payment on such date. The Company expects that payments by
Participants to Beneficial Owners will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers. Such payments will be the responsibility of such
Participants.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, each Fixed
Rate Note (except any Zero Coupon Note) will bear interest from its date of
issue or from the most recent Interest Payment Date to which interest on such
Note has been paid or duly provided for, at the fixed rate per annum stated on
the face thereof and in the applicable Pricing Supplement until the principal
thereof is paid or made available for payment. Unless otherwise provided in the
applicable Pricing Supplement, interest on a Fixed Rate Note will be payable
semiannually each and (each an "Interest Payment Date") and
at maturity or upon earlier redemption or repayment. Each payment of interest in
respect of an Interest Payment Date will include interest accrued to but
excluding such Interest Payment Date. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed on
the basis of a 360-day year of twelve 30-day months. Interest will be payable on
each Interest Payment Date and at maturity as specified below under "Payment of
Principal and Interest."
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from its date of issue or from
the most recent Interest Payment Date to which interest on such Note has been
paid or duly provided for or if the applicable Interest Reset Dates are weekly,
from the day following the most recent Regular Record Date, at the rate per
annum determined pursuant to the interest rate formula stated therein and in the
applicable Pricing Supplement until the principal thereof is paid or made
available for payment. Interest will be payable on each Interest Payment Date
and at maturity as specified below under "Payment of Principal and Interest."
The interest rate for each Floating Rate Note will be determined by
reference to an interest rate formula which may be adjusted by adding or
subtracting the Spread and/or multiplying by the Spread Multiplier. A Floating
Rate Note may also have either or both of the following: (a) a
S-8
<PAGE> 27
maximum numerical interest rate limitation, or ceiling, on the rate of interest
which may accrue during any interest period (a "Maximum Rate") and (b) a minimum
numerical interest rate limitation, or floor, on the rate of interest which may
accrue during any interest period (a "Minimum Rate"). The "Spread" is the number
of basis points specified in the applicable Pricing Supplement as being
applicable to the interest rate for such Note and the "Spread Multiplier" is the
percentage specified in the applicable Pricing Supplement as being applicable to
the interest rate for such Note. "Index Maturity" means, with respect to a
Floating Rate Note, the period to maturity of the instrument or obligation on
which the interest rate formula is based, as specified in the applicable Pricing
Supplement. The calculation agent (the "Calculation Agent") will be specified in
the applicable Pricing Supplement with respect to the Floating Rate Notes.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually, annually or otherwise as specified in
the applicable Pricing Supplement (each an "Interest Reset Date"). Unless
otherwise specified in the applicable Pricing Supplement, the Interest Reset
Date will be, in the case of Floating Rate Notes which reset daily, each Market
Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly (except as otherwise provided in the next succeeding
paragraph), the Tuesday of each week; in the case of Floating Rate Notes which
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which reset semi-annually, the
third Wednesday of two months of each year as specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset annually,
the third Wednesday of one month of each year as specified in the applicable
Pricing Supplement; provided, however, that (a) the interest rate in effect from
the date of issue to the first Interest Reset Date with respect to a Floating
Rate Note will be the Initial Interest Rate (as set forth in the applicable
Pricing Supplement) and (b) except as otherwise specified in the applicable
Pricing Supplement, with respect to Floating Rate Notes that reset daily or
weekly, the interest rate in effect for each day following the second Market Day
prior to an Interest Payment Date to, but excluding, such Interest Payment Date,
and for each day following the second Market Day prior to the maturity date,
shall be the rate in effect on such second Market Day. If any Interest Reset
Date for any Floating Rate Note would otherwise be a day that is not a Market
Day with respect to such Floating Rate Note, the Interest Reset Date for such
Floating Rate Note shall be postponed to the next day that is a Market Day with
respect to such Floating Rate Note, except that, in the case of a LIBOR Note, if
such Market Day is in the next succeeding calendar month, such Interest Reset
Date shall be the immediately preceding Market Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
for a Prime Rate Note (the "Prime Rate Interest Determination Date"), for a CD
Rate Note (the "CD Rate Interest Determination Date"), for a CMT Rate Note (the
"CMT Rate Interest Determination Date") and for a Federal Funds Rate Note (the
"Federal Funds Rate Interest Determination Date") will be the Interest Reset
Date. The Interest Determination Date pertaining to an Interest Reset Date for a
LIBOR Note (the "LIBOR Interest Determination Date") will be the second London
Market Day preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note (the "Treasury
Interest Determination Date") will be the day of the week in which such Interest
Reset Date falls on which Treasury bills would normally be auctioned. Treasury
bills are usually sold at auction on the Monday of each week, unless that day is
a legal holiday, in which case the auction is usually held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week, and the Interest
Reset Date in such next succeeding week will be the Monday in such week. If an
auction date shall fall on any Interest Reset Date for a Treasury Rate Note,
then such Interest Reset Date shall instead be the first Market Day
S-9
<PAGE> 28
immediately following such auction date. The Interest Determination Date for any
other Floating Rate Note will be as specified in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date" pertaining to any Interest Determination Date will be the
earlier of (i) the tenth calendar day after such Interest Determination Date,
or, if such day is not a Market Day, the next succeeding Market Day or (ii) the
Market Day immediately preceding the applicable Interest Payment Date or the
maturity date, as the case may be.
All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded upwards, if necessary, to the next higher
one hundred-thousandth of a percentage point (e.g., 9.876541% (or .09876541)
being rounded to 9.87655% (or .0987655)), and all U.S. dollar amounts used in or
resulting from such calculations will be rounded to the nearest cent (with one-
half cent or more being rounded upwards).
In addition to any maximum interest rate which may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on the
Floating Rate Notes will in no event be higher than the maximum rate permitted
by New York law, as the same may be modified by United States law of general
application. Under present New York law, the maximum rate of interest is 25% per
annum on a simple interest basis, with certain exceptions. The limit does not
apply to Floating Rate Notes in which $2,500,000 or more has been invested.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate which will become effective on the next Interest Reset Date with
respect to such Floating Rate Note. The Calculation Agent's determination of any
interest rate will be final and binding in the absence of manifest error.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any), and will be payable on the dates, specified on the face of
the Commercial Paper Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Reset Date, the
Money Market Yield (calculated as described below) of the per annum rate for the
relevant Commercial Paper Interest Determination Date for commercial paper
having the specified Index Maturity as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)"), under the heading "Commercial Paper." In the event
that such rate is not so published prior to 3:00 P.M., New York City time, on
the relevant Calculation Date, then the Commercial Paper Rate with respect to
such Interest Reset Date shall be the Money Market Yield of such rate on such
Commercial Paper Interest Determination Date for commercial paper having the
specified Index Maturity as published by the Federal Reserve Bank of New York in
its daily statistical release, "Composite 3:30 P.M. Quotations for U.S.
Government Securities," or any successor publication published by the Federal
Reserve Bank of New York ("Composite Quotations"), under the heading "Commercial
Paper -- Nonfinancial" (with an Index Maturity of one month or three months
being deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively). If by 3:00 P.M., New York City time, on such Calculation Date
such rate is not yet published in either H.15(519) or Composite Quotations, the
Commercial Paper Rate with respect to such Interest Reset Date shall be
calculated by the Calculation Agent and shall be the Money Market Yield of the
arithmetic mean of the offered per annum rates, as of 11:00 A.M., New York City
time, on such Commercial Paper Interest Determination Date, of three leading
dealers of U.S. dollar commercial paper in The City of New York selected by the
Calculation Agent for U.S. dollar commercial paper of the specified Index
Maturity placed for an industrial issuer whose bond rating is "Aa," or the
equivalent, from a
S-10
<PAGE> 29
nationally recognized statistical rating agency; provided, however, that if
fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Commercial Paper Rate with respect to
such Interest Reset Date will be the Commercial Paper Rate in effect on the day
prior to such Commercial Paper Interest Determination Date (or, if the Initial
Interest Rate is then in effect, the Commercial Paper Rate will be the Initial
Interest Rate and will not be adjusted by any Spread and/or Spread Multiplier).
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
<TABLE>
<S> <C>
360 X D
Money Market Yield = 100 X 360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to, if the Index
Maturity approximately corresponds to the length of the period for which such
rate is being determined, the actual number of days in such period and,
otherwise, the actual number of days in the period from, and including, the
Interest Reset Date to, but excluding, the day that numerically corresponds to
such Interest Reset Date (or, if there is not any such numerically corresponding
day, the last day) in the calendar month that is the number of months
corresponding to the specified Index Maturity after the month in which such
Interest Reset Date falls.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any), and
will be payable on the dates, specified on the face of the Prime Rate Note and
in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Reset Date, the rate set forth for the
relevant Prime Rate Interest Determination Date in H.15(519) under the heading
"Bank Prime Loan." In the event that such rate is not published prior to 3:00
P.M., New York City time, on the relevant Calculation Date, then the Prime Rate
with respect to such Interest Reset Date will be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the display
designated as page "NYMF" on the Reuters Monitor Money Rates Service (or such
other page as may replace the NYMF page on that service for the purpose of
displaying prime rates or base lending rates of major United States banks)
("Reuters Screen NYMF Page") as such bank's prime rate or base lending rate as
in effect for such Prime Rate Interest Determination Date. If fewer than four
such rates appear on the Reuters Screen NYMF Page on such Prime Rate Interest
Determination Date, the Prime Rate with respect to such Interest Reset Date will
be the arithmetic mean of the prime rates or base lending rates (quoted on the
basis of the actual number of days in the year divided by a 360-day year) as of
the close of business on such Prime Rate Interest Determination Date of three
major banks in The City of New York selected by the Calculation Agent; provided,
however, that if fewer than three banks selected as aforesaid by the Calculation
Agent are quoting as mentioned in this sentence, the Prime Rate with respect to
such Interest Reset Date will be the Prime Rate in effect on the day prior to
such Prime Rate Interest Determination Date (or, if the Initial Interest Rate is
then in effect, the Prime Rate will be the Initial Interest Rate and will not be
adjusted by any Spread or Spread Multiplier).
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any), and will be
payable on the dates, specified on the face of the LIBOR Note and in the
applicable Pricing Supplement.
S-11
<PAGE> 30
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR,
with respect to any Interest Reset Date, will be determined by the Calculation
Agent in accordance with the following provisions:
(i) On the relevant LIBOR Interest Determination Date, LIBOR will be
determined on the basis of the offered rate for deposits in U.S. dollars
having the specified Index Maturity, commencing on the second London Market
Day immediately following such LIBOR Interest Determination Date, which
appears on the display designated as Page 3750 on the Dow Jones Telerate
Service (or such other page as may replace Page 3750 on that service for
the purpose of displaying London interbank offered rates of major banks)
("Telerate Page 3750") as of 11:00 A.M., London time. If no such offered
rate appears, LIBOR with respect to such Interest Reset Date will be
determined as described in (ii) below.
(ii) With respect to any LIBOR Interest Determination Date on which no
such offered rate for the applicable Index Maturity appears on Telerate
Page 3750 as described in (i) above, LIBOR will be determined on the basis
of the rates at approximately 11:00 A.M., London time, on such LIBOR
Interest Determination Date at which deposits in U.S. dollars having the
specified Index Maturity are offered to prime banks in the London interbank
market by four major banks in the London interbank market selected by the
Calculation Agent commencing on the second London Market Day immediately
following such LIBOR Interest Determination Date and in a principal amount
equal to an amount that in the Calculation Agent's judgment is
representative for a single transaction in such market at such time (a
"Representative Amount"). The Calculation Agent will request the principal
London office of each of such banks to provide a quotation of its rate. If
at least two such quotations are provided, LIBOR with respect to such
Interest Reset Date will be the arithmetic mean of such quotations. If
fewer than two quotations are provided, LIBOR with respect to such Interest
Reset Date will be the arithmetic mean of the rates quoted at approximately
11:00 A.M., New York City time, on such Interest Reset Date by three major
banks in The City of New York, selected by the Calculation Agent, for loans
in U.S. dollars to leading European banks having the specified Index
Maturity commencing on the Interest Reset Date and in a Representative
Amount; provided, however, that if fewer than three banks selected as
aforesaid by the Calculation Agent are quoting as mentioned in this
sentence, LIBOR with respect to such Interest Reset Date will be the LIBOR
in effect on such LIBOR Interest Determination Date (or, if the Initial
Interest Rate is then in effect, LIBOR will be the Initial Interest Rate
and will not be adjusted by any Spread or Spread Multiplier).
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any), and will be payable on the dates, specified on the face of the Treasury
Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Reset Date, the rate for the auction
on the relevant Treasury Interest Determination Date of direct obligations of
the United States ("Treasury bills") having the specified Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities/Treasury
Bills/Auction Average (investment)" or, if not so published by 3:00 P.M., New
York City time, on the relevant Calculation Date, the Bond Equivalent Yield (as
defined below) of the auction average rate for such auction as otherwise
announced by the United States Department of the Treasury. In the event that the
results of such auction of Treasury bills having the specified Index Maturity
are not published or reported as provided above by 3:00 P.M., New York City
time, on such Calculation Date, or if no such auction is held for such week,
then the Treasury Rate shall be the rate set forth in H.15(519) for the relevant
Treasury Interest Determination Date for the specified Index Maturity under the
heading "U.S. Government Securities/Treasury Bills/Secondary Market." In the
event such rate is not so published by 3:00 P.M., New York City time, on the
relevant Calculation Date, the
S-12
<PAGE> 31
Treasury Rate with respect to such Interest Reset Date shall be calculated by
the Calculation Agent and shall be the Bond Equivalent Yield of the arithmetic
mean of the secondary market bid rates as of approximately 3:30 P.M., New York
City time, on such Treasury Interest Determination Date, of three primary United
States government securities dealers in The City of New York selected by the
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if fewer than
three such dealers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the Treasury Rate with respect to such Interest
Reset Date will be the Treasury Rate in effect on such Treasury Interest
Determination Date (or, if the Initial Interest Rate is then in effect, the
Treasury Rate will be the Initial Interest Rate and will not be adjusted by any
Spread or Spread Multiplier).
"Bond Equivalent Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
<TABLE>
<S> <C>
D X N
Bond Equivalent Yield = 100 X 360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for Treasury bills (or, in the case of a
CMT Rate Note, Treasury Notes), quoted on a bank discount basis and expressed as
a decimal; "N" refers to 365 or 366, as the case may be; and "M" refers to, if
the Index Maturity approximately corresponds to the length of the period for
which such rate is being determined, the actual number of days in such period
and, otherwise, the actual number of days in the period from, and including, the
Interest Reset Date to, but excluding, the day that numerically corresponds to
that Interest Reset Date (or, if there is not any such numerically corresponding
day, the last day) in the calendar month that is the number of months
corresponding to the specified Index Maturity after the month in which that
Interest Reset Date occurs.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and the Spread or Spread Multiplier, if any), and will
be payable on the dates, specified on the face of the CMT Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Reset Date, the treasury constant maturity
rate for direct obligations of the United States ("Treasury Notes") on the
relevant CMT Rate Interest Determination Date for the relevant Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities/Treasury
Constant Maturities." In the event that such rate is not published by 3:00 P.M.,
New York City time, on the relevant Calculation Date, the CMT Rate will be the
Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates
as of approximately 3:30 P.M., New York City time, on such CMT Rate Interest
Determination Date of three primary United States government securities dealers
in The City of New York selected by the Calculation Agent for the issue of
Treasury Notes with a remaining maturity closest to the Index Maturity;
provided, however, that if fewer than three dealers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the CMT Rate with
respect to such Interest Reset Date will be the CMT Rate in effect on the day
prior to such CMT Rate Interest Determination Date (or, if the Initial Interest
Rate is then in effect, the CMT Rate will be the Initial Interest Rate and will
not be adjusted by any Spread or Spread Multiplier).
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any), and will
be payable on the dates, specified on the face of the CD Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Reset Date, the rate for the relevant CD
Rate Interest Determination Date for
S-13
<PAGE> 32
negotiable certificates of deposit having the specified Index Maturity as
published in H.15(519) under the heading "CDs (Secondary Market)." In the event
that such rate is not published prior to 3:00 P.M., New York City time, on the
relevant Calculation Date, then the CD Rate with respect to such Interest Reset
Date shall be the rate on such CD Rate Interest Determination Date for
negotiable certificates of deposit having the specified Index Maturity as
published in Composite Quotations under the heading "Certificates of Deposit."
If by 3:00 P.M., New York City time, on such Calculation Date such rate is not
published in either H.15(519) or Composite Quotations, the CD Rate with respect
to such Interest Reset Date shall be calculated by the Calculation Agent and
shall be the arithmetic mean of the secondary market offered rates, as of 10:00
A.M., New York City time, on such CD Rate Interest Determination Date, of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The
City of New York selected by the Calculation Agent for negotiable U.S. dollar
certificates of deposit of major United States money market banks with a
remaining maturity closest to the specified Index Maturity and in a
Representative Amount; provided, however, that if fewer than three dealers
selected as aforesaid by the Calculation Agent are quoting as mentioned in this
sentence, the CD Rate with respect to such Interest Reset Date will be the CD
Rate in effect on the day prior to such CD Rate Interest Determination Date (or,
if the Initial Interest Rate is then in effect, the CD Rate will be the Initial
Interest Rate and will not be adjusted by any Spread or Spread Multiplier).
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any), and will be payable on the dates, specified on the face of
the Federal Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Reset Date, the rate on the
relevant Federal Funds Rate Interest Determination Date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)." In the
event that such rate is not published prior to 3:00 P.M., New York City time, on
the relevant Calculation Date, then the Federal Funds Rate with respect to such
Interest Reset Date will be the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or Composite
Quotations, the Federal Funds Rate with respect to such Interest Reset Date
shall be calculated by the Calculation Agent and shall be the arithmetic mean of
the rates, as of 9:00 A.M., New York City time, on such Federal Funds Rate
Interest Determination Date, for the last transaction in overnight U.S. dollar
Federal Funds arranged by three leading brokers of U.S. dollar Federal Funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if fewer than three brokers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the Federal Funds
Rate with respect to such Interest Reset Date will be the Federal Funds Rate in
effect on the day prior to such Federal Funds Rate Interest Determination Date
(or, if the Initial Interest Rate is then in effect, the Federal Funds Rate will
be the Initial Interest Rate and will not be adjusted by any Spread or Spread
Multiplier).
PAYMENT OF PRINCIPAL AND INTEREST
Payments of principal of (and premium, if any) and interest on all
Book-Entry Notes will be payable in accordance with the procedures of the
depositary and its Participants in effect from time to time as described under
"Book-Entry Notes" above. Unless otherwise specified in the applicable Pricing
Supplement, payments of principal of (and premium, if any) and interest on all
Fixed Rate Notes and Floating Rate Notes which are Certificated Notes will be
made in the applicable Specified Currency. Notwithstanding the foregoing,
payments of principal of (and premium, if any) and interest on Notes denominated
in other than U.S. dollars will nevertheless be made in U.S. dollars (i) with
respect to any Certificated Notes, at the option of the Holders thereof under
the procedures
S-14
<PAGE> 33
described in the two following paragraphs and (ii) with respect to any Notes, at
the option of the Company in the case of imposition of exchange controls or
other circumstances beyond the control of the Company as described in the last
paragraph under this heading. In the case of an Indexed Note, the amount of
principal payable on such Note may be determined by reference to an index or
formula described in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, and except
as provided in the next paragraph, payments of principal (and premium, if any)
and interest with respect to any Certificated Note denominated in other than
U.S. dollars will be made in U.S. dollars if the registered Holder of such Note
on the relevant Regular Record Date or at maturity, as the case may be, has
transmitted a written request for such payment in U.S. dollars to the Trustee at
its Corporate Trust Office in The City of New York on or prior to such Regular
Record Date or the date 15 days prior to maturity, as the case may be. Such
request may be in writing (mailed or hand delivered) or by telecopier. Any such
request made with respect to any Certificated Note by a registered Holder will
remain in effect with respect to any further payments of principal (and premium,
if any) and interest with respect to such Note payable to such Holder, unless
such request is revoked on or prior to the relevant Regular Record Date or the
date 15 days prior to maturity, as the case may be. Holders of Certificated
Notes denominated in other than U.S. dollars whose Notes are registered in the
name of a broker or nominee should contact such broker or nominee to determine
whether and how an election to receive payments in U.S. dollars may be made.
Unless otherwise specified in the applicable Pricing Supplement, the U.S.
dollar amount to be received by a Holder of a Note (including a Book-Entry Note)
denominated in other than U.S. dollars who elects to receive payment in U.S.
dollars will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent (as defined below) as of 11:00 A.M., New
York City time, on the second Business Day next preceding the applicable payment
date from three recognized foreign exchange dealers (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer of the Specified
Currency for U.S. dollars for settlement on such payment date in the aggregate
amount of the Specified Currency payable to all Holders of Notes electing to
receive U.S. dollar payments and at which the applicable dealer commits to
execute a contract. If three such bid quotations are not available on the second
Business Day preceding the date of payment of principal (and premium, if any) or
interest with respect to any Note, such payment will be made in the Specified
Currency. All currency exchange costs associated with any payment in U.S.
dollars on any such Note will be borne by the Holder thereof by deductions from
such payment. Unless otherwise provided in the applicable Pricing Supplement,
Goldman, Sachs & Co. will be the Exchange Rate Agent (the "Exchange Rate Agent")
with respect to the Notes.
Interest will be payable to the person in whose name a Note is registered
at the close of business on the Regular Record Date next preceding each Interest
Payment Date; provided, however, that interest payable at maturity will be
payable to the person to whom principal shall be payable. The first payment of
interest on any Note originally issued between a Regular Record Date and an
Interest Payment Date will be made on the Interest Payment Date following the
next succeeding Regular Record Date to the registered owner on such next
succeeding Regular Record Date. Unless otherwise indicated in the applicable
Pricing Supplement, the "Regular Record Date" with respect to any Floating Rate
Note or Fixed Rate Note shall be the date 15 calendar days prior to each
Interest Payment Date, whether or not such date shall be a Market or Business
Day.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
which reset daily, on the dates specified in the applicable Pricing Supplement;
in the case of Floating Rate Notes which reset weekly, on the third Wednesday of
March, June, September and December of each year; in the case of Floating Rate
Notes which reset monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year (as indicated in
the applicable Pricing Supplement); in the case of Floating Rate Notes which
reset quarterly, on the third Wednesday of March, June, September and December
of each year; in the case of Floating Rate Notes which reset semi-annually, on
the third Wednesday of the two months of each year specified in the applicable
S-15
<PAGE> 34
Pricing Supplement; and in the case of Floating Rate Notes which reset annually,
on the third Wednesday of the month specified in the applicable Pricing
Supplement (each an "Interest Payment Date"); and, in each case, at maturity.
Payments of interest on any Fixed Rate Note or Floating Rate Note with
respect to any Interest Payment Date or at maturity will include interest
accrued to but excluding such Interest Payment Date and such maturity date, as
the case may be.
With respect to a Floating Rate Note, accrued interest from the date of
issue or from the last date to which interest has been paid or duly provided for
is calculated by multiplying the face amount of such Floating Rate Note by an
accrued interest factor. Such accrued interest factor is computed by adding the
interest factor calculated for each day from the date of issue, or from the last
date to which interest has been paid or duly provided for, to but excluding the
date for which accrued interest is being calculated. The interest factor
(expressed as a decimal) for each such day is computed by dividing the interest
rate (expressed as a decimal) applicable to such date by 360, in the case of
Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, CD Rate Notes or
Federal Funds Rate Notes, or by the actual number of days in the year, in the
case of Treasury Rate Notes or CMT Rate Notes.
Except as set forth above in the third paragraph under "Floating Rate
Notes" or in the applicable Pricing Supplement, the interest rate with respect
to a Floating Rate Note in effect on each day shall be (i) if such day is an
Interest Reset Date, the interest rate determined with respect to such Interest
Reset Date or (ii) if such day is not an Interest Reset Date, the interest rate
determined with respect to the most recent Interest Reset Date.
If any Interest Payment Date for any Fixed Rate Note would fall on a day
that is not a Market Day, the interest payment shall be postponed to the next
day that is a Market Day, and no interest on such payment shall accrue for the
period from and after the Interest Payment Date. If the maturity date or any
earlier redemption or repayment date of a Fixed Rate Note would fall on a day
that is not a Market Day, the payment of principal, premium, if any, and
interest otherwise due on such day will be made on the next succeeding Market
Day, and no interest on such payment shall accrue for the period from and after
such maturity, redemption or repayment date, as the case may be.
If any Interest Payment Date for any Floating Rate Note (other than an
Interest Payment Date which is the maturity date or earlier redemption or
repayment date for such Note) would fall on a day that is not a Market Day with
respect to such Floating Rate Note, such Interest Payment Date will be the
following day that is a Market Day with respect to such Floating Rate Note,
except that, in the case of a LIBOR Note, if such Market Day is in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding day that is a Market Day with respect to such LIBOR Note (and interest
shall accrue to, but excluding, such Interest Payment Date as rescheduled). If
the maturity date or any earlier redemption or repayment date of a Floating Rate
Note would fall on a day that is not a Market Day, the payment of principal,
premium, if any, and interest otherwise due on such day will be made on the next
succeeding Market Day, and no interest on such payment shall accrue for the
period from and after such maturity, redemption or repayment date, as the case
may be.
Payment of the principal of (and premium, if any) and any interest due with
respect to any Certificated Note at maturity to be made in U.S. dollars will be
made in immediately available funds upon surrender of such Note at the Corporate
Trust Office of the Trustee in the Borough of Manhattan, The City of New York,
provided that the Certificated Note is presented to the Paying Agent in time for
the Paying Agent to make such payments in such funds in accordance with its
normal procedures. Payments of interest with respect to any Certificated Note to
be made in U.S. dollars other than at maturity will be made by check mailed to
the address of the person entitled thereto as it appears in the Security
Register or by wire transfer to such account as may have been appropriately
designated by such person as provided in such Note.
S-16
<PAGE> 35
Unless otherwise specified in the applicable Pricing Supplement, payments
of interest and principal (and premium, if any) with respect to any Certificated
Note to be made in a Specified Currency other than U.S. dollars will be made by
wire transfer of immediately available funds to such account with a bank located
in the country issuing the Specified Currency (or, with respect to Certificated
Notes denominated in ECU, to an ECU account) or other jurisdiction acceptable to
the Company and the Trustee as shall have been designated at least five Business
Days prior to the Interest Payment Date or Stated Maturity, as the case may be,
by the registered Holder of such Note on the relevant Regular Record Date or
maturity, provided that, in the case of payment of principal (and premium, if
any) and any interest due at maturity, the Note is presented to the Paying Agent
in time for the Paying Agent to make such payments in such funds in accordance
with its normal procedures. Such designation shall be made by filing the
appropriate information with the Trustee at its Corporate Trust Office in the
Borough of Manhattan, The City of New York, and, unless revoked, any such
designation made with respect to any Certificated Note by a registered Holder
will remain in effect with respect to any further payments with respect to such
Note payable to such Holder. If a payment with respect to any such Note cannot
be made by wire transfer because the required designation has not been received
by the Trustee on or before the requisite date or for any other reason, a notice
will be mailed to the Holder at its registered address requesting a designation
pursuant to which such wire transfer can be made and, upon the Trustee's receipt
of such a designation, such payment will be made within five Business Days of
such receipt. The Company will pay any administrative costs imposed by banks in
connection with making payments by wire transfer, but any tax, assessment or
governmental charge imposed upon payments will be borne by the Holders of the
Certificated Notes in respect of which payments are made.
If the principal of (and premium, if any) or interest on any Note is
payable in other than U.S. dollars and such Specified Currency (other than ECUs)
is not available due to the imposition of exchange controls or other
circumstances beyond the control of the Company, the Company will be entitled to
satisfy its obligations to the Holder of such Note by making such payment
(including any such payment at maturity) in U.S. dollars on the basis of the
most recently available Exchange Rate. If the principal of (and premium, if any)
and interest on any Note is payable in ECUs, and the ECU is not available due to
the imposition of exchange controls or other circumstances beyond the control of
the Company or the ECU is used neither as the unit of account of the European
Communities nor as the currency of the European Union, the Company will be
entitled to satisfy its obligations to the Holder of such Note by making such
payment (including any such payment at maturity) as described under "Foreign
Currency Risks -- Notes Denominated in ECUs." Any payment made under such
circumstances in such a manner will not constitute an Event of Default under any
Note or the Indenture.
REDEMPTION AND REPAYMENT
The Notes will not be subject to any sinking fund and, unless an initial
date on which a Note may be redeemed by the Company (a "Redemption Commencement
Date") or a date on which a Note may be repayable at the option of a holder
thereof (a "Repayment Date") is specified in the applicable Pricing Supplement,
will not be redeemable or repayable prior to their stated maturity. If a
Redemption Commencement Date or Repayment Date is so specified with respect to
any Note, the applicable Pricing Supplement will also specify one or more
redemption or repayment prices (expressed as a percentage of the principal
amount of such Note) ("Redemption Prices" or "Repayment Prices," respectively)
and the redemption or repayment period or periods ("Redemption Periods" or
"Repayment Periods," respectively) during which such Redemption Prices or
Repayment Prices shall apply. Unless otherwise specified in the Pricing
Supplement, any such Note shall be redeemable at the option of the Company or
repayable at the option of the holder thereof (as specified in such Pricing
Supplement) at any time on or after such specified Redemption Commencement Date
or Repayment Date, as the case may be, at the specified Redemption Price or
Repayment Price applicable to the Redemption Period or Repayment Period during
which such Note is to be redeemed or repaid, together with interest accrued to
the redemption or repayment date.
S-17
<PAGE> 36
With respect to the redemption of Global Securities, the Depositary advises that
if less than all of the Notes with like tenor or terms are to be redeemed, the
particular interests (in integral multiples of $1,000) in the Book-Entry Notes
representing the Notes to be redeemed shall be selected by the Depository's
impartial lottery procedures.
In the event that the option of the holder to elect repayment described
above is deemed to be a "tender offer" within the meaning of Rule 14e-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company will comply with Rule 14e-1 as then in effect to the extent applicable.
RISKS RELATING TO INDEXED NOTES
IN ADDITION TO POTENTIAL FOREIGN CURRENCY RISKS AS DESCRIBED BELOW UNDER
"FOREIGN CURRENCY RISKS," AN INVESTMENT IN INDEXED NOTES PRESENTS CERTAIN
SIGNIFICANT RISKS NOT ASSOCIATED WITH OTHER TYPES OF SECURITIES. CERTAIN RISKS
ASSOCIATED WITH A PARTICULAR INDEXED NOTE MAY BE SET FORTH MORE FULLY IN THE
APPLICABLE PRICING SUPPLEMENT. INDEXED NOTES MAY PRESENT A HIGH LEVEL OF RISK,
AND INVESTORS IN CERTAIN INDEXED NOTES MAY LOSE THEIR ENTIRE INVESTMENT.
The treatment of Indexed Notes for United States federal income tax
purposes is often unclear due to the absence of any authority specifically
addressing the issues presented by any particular Indexed Note. Accordingly,
investors in Indexed Notes should, in general, be capable of independently
evaluating the federal income tax consequences applicable in their particular
circumstances of purchasing an Indexed Note.
LOSS OF PRINCIPAL OR INTEREST
The principal amount of an Indexed Note payable at maturity, and/or the
amount of interest payable on an interest payment date, will be determined by
reference to one or more currencies (including baskets of currencies), one or
more commodities (including baskets of commodities), one or more securities
(including baskets of securities) and/or any other index (each an "Index"). The
direction and magnitude of the change in the value of the relevant Index will
determine either or both the principal amount of an Indexed Note payable at
maturity or the amount of interest payable on an interest payment date. The
terms of a particular Indexed Note may or may not include a guaranteed return of
a percentage of the face amount at maturity or a minimum interest rate.
Accordingly, the Holder of an Indexed Note may lose all or a portion of the
principal invested in an Indexed Note and may receive no interest thereon.
VOLATILITY
Certain Indices are highly volatile. The expected principal amount payable
at maturity of, or the interest rate on, an Indexed Note based on a volatile
Index may vary substantially from time to time. Because the principal amount
payable at the maturity of, or interest payable on, an Indexed Note is generally
calculated based on the value of the relevant Index on a specified date or over
a limited period of time, volatility in the Index increases the risk that the
return on the Indexed Notes may be adversely affected by a fluctuation in the
level of the relevant Index.
The volatility of an Index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets, any of which could adversely affect the value of an Indexed
Note.
AVAILABILITY AND COMPOSITION OF INDICES
Certain Indices reference several different currencies, commodities,
securities or other financial instruments. The compiler of such an Index
typically reserves the right to alter the composition of the Index and the
manner in which the value of the Index is calculated. Such an alteration may
result in a decrease in the value of or return on an Indexed Note which is
linked to such Index.
S-18
<PAGE> 37
An Index may become unavailable due to such factors as war, natural
disasters, cessation of publication of the Index, or suspension of or disruption
in trading in the currency or currencies, commodity or commodities, security or
securities or other financial instrument or instruments comprising or underlying
such Index. If an Index becomes unavailable, the determination of principal of
or interest on an Indexed Note may be delayed or an alternative method may be
used to determine the value of the unavailable Index. Alternative methods of
valuation are generally intended to produce a value similar to the value
resulting from reference to the relevant Index. However, it is unlikely that
such alternative methods of valuation will produce values identical to those
which would be produced were the relevant Index to be used. An alternative
method of valuation may result in a decrease in the value of or return on an
Indexed Note.
Certain Indexed Notes are linked to Indices which are not commonly utilized
or have been recently developed. The lack of a trading history may make it
difficult to anticipate the volatility or other risks to which such a Note is
subject. In addition, there may be less trading in such Indices or instruments
underlying such Indices, which could increase the volatility of such Indices and
decrease the value of or return on Indexed Notes relating thereto.
FOREIGN CURRENCY RISKS
GENERAL
THIS PROSPECTUS SUPPLEMENT AND THE APPLICABLE PRICING SUPPLEMENT DO NOT
DESCRIBE ALL THE RISKS OF AN INVESTMENT IN THE NOTES DENOMINATED IN OTHER THAN
U.S. DOLLARS. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN THE NOTES DENOMINATED IN A
CURRENCY (INCLUDING ANY COMPOSITE CURRENCY) OTHER THAN U.S. DOLLARS. SUCH NOTES
ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
THE INFORMATION SET FORTH IN THIS PROSPECTUS SUPPLEMENT IS DIRECTED TO
PROSPECTIVE PURCHASERS WHO ARE UNITED STATES RESIDENTS, AND THE COMPANY
DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS WHO ARE RESIDENTS
OF COUNTRIES OTHER THAN THE UNITED STATES WITH RESPECT TO ANY MATTERS THAT MAY
AFFECT THE PURCHASE, HOLDING OR RECEIPT OF PAYMENTS OF PRINCIPAL OF (AND
PREMIUM, IF ANY) AND INTEREST ON THE NOTES. SUCH PERSONS SHOULD CONSULT THEIR
OWN FINANCIAL AND LEGAL ADVISORS WITH REGARD TO SUCH MATTERS.
The information set forth below is by necessity incomplete and prospective
purchasers of Foreign Currency Notes should consult their own financial and
legal advisors with respect to any matters that may affect the purchase or
holding of a Foreign Currency Note in a Specified Currency (as defined below).
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in other than U.S. dollars
entails significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies or composite currencies and the
possibility of the imposition or modification of foreign exchange controls by
either the U.S. or foreign governments. Such risks generally depend on factors
over which the Company has no control, such as economic and political events and
the supply of and demand for the relevant currencies. In recent years, rates of
exchange between the U.S. dollar and certain foreign currencies have been highly
volatile and such volatility may be expected in the future. Fluctuations in any
particular exchange rate that have occurred in the past are not necessarily
indicative, however, of fluctuations in the rate that may occur during the term
of any Note. Depreciation of the Specified Currency in which a Note is
denominated against the U.S. dollar could result in a decrease in the effective
yield of such Note and, in certain circumstances, could result in a loss to the
investor on a U.S. dollar basis.
S-19
<PAGE> 38
Governments have imposed from time to time and may in the future impose
exchange controls which could affect exchange rates as well as the availability
of the Specified Currency at a Note's maturity or on any other payment date in
respect thereof. Even if there are no actual exchange controls, it is possible
that the Specified Currency for any particular Note would not be available on
any one or more days on which payment is due in respect of such Note. In that
event, the Company will be entitled to make all payments due in respect of such
Note on any such payment date (including maturity) in U.S. dollars on the basis
of the most recently available Exchange Rate. See "Description of
Notes -- Payment of Principal and Interest" above.
Unless otherwise indicated in the applicable Pricing Supplement, payments
on Notes made in a Specified Currency other than U.S. dollars may be made, at
the Company's option, from an account with a bank located in the country issuing
the Specified Currency (or, with respect to Notes denominated in ECUs, from an
ECU account). See "Description of Notes -- Payment of Principal and Interest."
Except as otherwise indicated in the applicable Pricing Supplement or as
permitted by applicable law, Notes denominated in other than U.S. dollars or
ECUs will not be sold in, or to residents of, the country issuing the Specified
Currency in which particular Notes are denominated.
GOVERNING LAW AND JUDGMENTS
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York. A judgment for money in an action based
on a Note denominated in a foreign currency or currency unit in a federal or
state court in the United States ordinarily would be enforced in the United
States only in United States dollars. The date used to determine the rate of
conversion of the currency or currency unit in which any particular Note is
denominated into United States dollars will depend upon various factors,
including which court renders the judgment. Under Section 27 of the New York
Judiciary Law, a state court in the State of New York rendering a judgment on a
Note denominated in a foreign currency would be required to render such judgment
in the specified currency, and such judgment would be converted into United
States dollars at the exchange rate prevailing on the date of entry of the
judgment.
NOTES DENOMINATED IN ECUS
VALUE OF THE ECU
Except as otherwise provided below, the value of the ECU for the purpose of
any Notes denominated in ECUs, as referred to in Article 109G and 109L.4 of the
Treaty establishing the European Community, as amended (the "EC Treaty"), is
equal to the value of the ECU that is at present used as the unit of account of
the European Communities and which is from time to time valued on the basis of
specified amounts of the currencies of the member states of the European
Community as shown below.
Pursuant to Council Regulation (EC) No. 3320/94 of 22 December, 1994, the
ECU is at present defined as the sum of the following components:
<TABLE>
<S> <C>
0.6242 German mark 0.130 Luxembourg franc
0.08784 Pound sterling 0.1976 Danish krone
1.332 French Francs 0.008552 Irish Pound
151.8 Italian Lire 1.440 Greek drachmas
0.2198 Dutch guilder 6.885 Spanish pesetas
3.301 Belgian francs 1.393 Portuguese escudos
</TABLE>
Article 109G of the EC Treaty, as amended by the Treaty on European Union,
is applicable from November 1, 1993. This Article provides: "The currency
composition of the ECU shall not be changed. From the start of the third stage,
the value of the ECU shall be irrevocably fixed in accordance with Article
109L.4." Changes as to the nature or composition of the ECU may be made
S-20
<PAGE> 39
by the European Community in conformity with the provisions of the EC Treaty.
References herein to the ECU shall be deemed to be references to the ECU as so
changed.
CHOICE OF COMPONENT CURRENCIES FOR FUTURE PAYMENTS
With respect to any payment date in respect of Notes denominated in ECUs on
which the ECU is not available due to the imposition of exchange controls or
other circumstances beyond the control of the Company or the ECU is used neither
as the unit of account of the European Communities nor as the currency of the
European Union, the Exchange Rate Agent shall, without liability on its part,
choose a component currency of the ECU (the "chosen currency") in which all
payments due on that payment date with respect to such Notes shall be made.
Notice of the chosen currency selected by the Exchange Rate Agent shall, where
practicable, be given to Holders of Notes as set forth above under "Description
of Notes -- Payment of Principal and Interest." The amount of each payment in
the chosen currency shall be computed on the basis of the equivalent of the ECU
in that currency, determined as set forth herein as of the fourth Business Day
prior to the date on which such payment is due.
CHOICE OF COMPONENT CURRENCY FOR PAYMENTS ALREADY DUE
On the first Business Day on which the ECU is not available due to the
imposition of exchange controls or other circumstances beyond the control of the
Company or the ECU is used neither as the unit of account of the European
Communities nor as the currency of the European Union, the Exchange Rate Agent
shall, without liability on its part, choose a component currency of the ECU
(the "chosen currency") in which all payments of principal, interest or other
amounts in respect of Notes denominated in ECU having a payment date prior
thereto but not yet presented for payment are to be made. The amount of each
payment in the chosen currency shall be computed on the basis of the equivalent
of the ECU in that currency, determined as set forth herein as of such first
Business Day.
DETERMINATION OF EQUIVALENT IN COMPONENT CURRENCY
The equivalent of the ECU in the relevant chosen currency as of any date
(the "Day of Valuation") shall be determined on the following basis by the
Exchange Rate Agent. The component currencies of the ECU for this purpose (the
"Components") shall be the currency amounts which were components of the ECU
when the ECU was most recently used as the unit of account of the European
Communities. The equivalent of the ECU in the chosen currency shall be
calculated by first aggregating the U.S. dollar equivalents of the Components
and then, using the rate used for determining the U.S. dollar equivalent of the
Component in the chosen currency as set forth below, calculating the equivalent
in the chosen currency of such aggregate amount in U.S. dollars.
U.S. DOLLAR EQUIVALENT OF COMPONENT CURRENCIES
The U.S. dollar equivalent of each of the Components shall be determined by
the Exchange Rate Agent, on the basis of the middle spot delivery quotations
prevailing at 2:30 P.M. (Luxembourg time) on the Day of Valuation of one or more
leading banks, as selected by the Exchange Rate Agent (following consultation,
if practicable, with the Company), in the country of issue of the Component in
question.
NO DIRECT QUOTATION FOR COMPONENT CURRENCY
If no direct quotations are available for a Component as of a Day of
Valuation from any of the banks selected by the Exchange Rate Agent for this
purpose because foreign exchange markets are closed in the country of issue of
that currency or for any other reason, the most recent direct quotations for
that currency obtained by the Exchange Rate Agent shall be used in computing the
equivalents of the ECU on such Day of Valuation; provided, however, that such
most recent
S-21
<PAGE> 40
quotations may be used only if they were prevailing in the country of issue not
more than two Business Days before such Day of Valuation. Beyond such period of
two Business Days, the Exchange Rate Agent shall determine the U.S. dollar
equivalent of such Component on the basis of cross rates derived from the middle
spot delivery quotations for such component currency and for the U.S. dollar
prevailing at 2:30 P.M. (Luxembourg time) on such Day of Valuation of one or
more leading banks, as selected by the Exchange Rate Agent (following
consultation, if practicable, with the Company), in a country other than the
country of issue of such Component. Within such period of two Business Days, the
Exchange Rate Agent shall determine the U.S. dollar equivalent of such Component
on the basis of such cross rates if the Exchange Rate Agent judges that the
equivalent so calculated is more representative than the U.S. dollar equivalent
calculated on the basis of such most recent direct quotations. Unless otherwise
specified by the Exchange Rate Agent, if there is more than one market for
dealing in any Component by reason of foreign exchange regulations or for any
other reason, the market to be referred to in respect of such currency shall be
that upon which a non-resident issuer of securities denominated in such currency
would purchase such currency in order to make payments in respect of such
securities.
EXCHANGE RATE AGENT
All determinations made by the Exchange Rate Agent shall be at its sole
discretion (except to the extent expressly provided herein or in the applicable
Pricing Supplement that any determination is subject to approval by the Company)
and, in the absence of manifest error, shall be conclusive for all purposes and
binding on Holders of the Notes and the Company, and the Exchange Rate Agent
shall have no liability therefor.
UNITED STATES TAXATION
The following summary of the principal United States federal income tax
consequences of the ownership of Notes deals only with Notes held as capital
assets by initial purchasers, and not with Notes held by special classes of
investors, such as dealers in securities or currencies, banks, tax-exempt
organizations, life insurance companies, investors that hold Notes that are a
hedge or that are hedged against currency risks or that are part of a straddle
or conversion transaction, or investors whose functional currency is not the
U.S. dollar. Moreover, the summary deals only with Notes that are due to mature
30 years or less from the date on which they are issued. The United States
federal income tax consequences of ownership of Notes that are due to mature
more than 30 years from their date of issue will be discussed in the applicable
Pricing Supplement.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), its legislative history, existing and proposed regulations thereunder,
published rulings and court decisions, all as currently in effect and all
subject to change at any time, perhaps with retroactive effect. Prospective
purchasers of Notes should consult their own tax advisors concerning the
consequences, in their particular circumstances, under the Code and the laws of
any other taxing jurisdiction, of the ownership of Notes.
UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Interest on a Note, whether payable in U.S. dollars or a currency,
composite currency or basket of currencies other than U.S. dollars (a "foreign
currency"), other than interest on a "Discount Note" that is not "qualified
stated interest" (each as defined below under "Original Issue
Discount -- General"), will be taxable to a United States Holder as ordinary
income at the time it is received or accrued, depending on the United States
Holder's method of accounting for tax purposes. A United States Holder is a
beneficial owner who or that is (i) a citizen or resident of the United States,
(ii) a domestic corporation or (iii) otherwise subject to United States federal
income taxation on a net income basis in respect of a Note.
S-22
<PAGE> 41
If an interest payment is denominated in, or determined by reference to, a
foreign currency, the amount of income recognized by a cash basis United States
Holder will be the U.S. dollar value of the interest payment, based on the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined by
reference to, a foreign currency in accordance with either of two methods. Under
the first method, the amount of income accrued will be based on the average
exchange rate in effect during the interest accrual period (or, with respect to
an accrual period that spans two taxable years, the part of the period within
the taxable year). Upon receipt of the interest payment (including a payment
attributable to accrued but unpaid interest upon the sale or retirement of a
Note) denominated in, or determined by reference to, a foreign currency, the
United States Holder will recognize ordinary income or loss measured by the
difference between the average exchange rate used to accrue interest income and
the exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
Under the second method, the United States Holder may elect to determine
the amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period (or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year). Additionally, if a payment of interest is
actually received within five business days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such accrued interest into U.S. dollars at the exchange rate
in effect on the day of actual receipt. Any such election will apply to all debt
instruments held by the United States Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the United
States Holder, and will be irrevocable without the consent of the Internal
Revenue Service (the "Service").
ORIGINAL ISSUE DISCOUNT
General. A Note, other than a Note with a term of one year or less (a
"short-term Note"), will be treated as issued at an original issue discount (a
"Discount Note") if the excess of the Note's "stated redemption price at
maturity" over its issue price is more than a "de minimis amount" (as defined
below). Generally, the issue price of a Note will be the first price at which a
substantial amount of Notes included in the issue of which the Note is a part is
sold to other than bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers. The
stated redemption price at maturity of a Note is the total of all payments
provided by the Note that are not payments of "qualified stated interest." A
qualified stated interest payment is generally any one of a series of stated
interest payments on a Note that are unconditionally payable at least annually
at a single fixed rate (with certain exceptions for lower rates paid during some
periods) applied to the outstanding principal amount of the Note. Special rules
for "Variable Rate Notes" (as defined below under "Original Issue
Discount -- Variable Rate Notes") are described below under "Original Issue
Discount -- Variable Rate Notes."
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not a Discount Note. Unless the
election described below under "Election to Treat All Interest as Original Issue
Discount" is made, a United States Holder of a Note with de minimis original
issue discount must include such de minimis original issue discount in income as
stated principal payments on the Note are made. The includible amount with
respect to each such payment will equal the product of the total amount of the
Note's de minimis original issue discount and a fraction, the numerator of which
is the amount of the principal payment made and the denominator of which is the
stated principal amount of the Note.
S-23
<PAGE> 42
United States Holders of Discount Notes having a maturity of more than one
year from their date of issue must include original issue discount ("OID") in
income calculated on a constant-yield method before the receipt of cash
attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Note. The amount of OID
includible in income by a United States Holder of a Discount Note is the sum of
the daily portions of OID with respect to the Discount Note for each day during
the taxable year or portion of the taxable year on which the United States
Holder holds such Discount Note ("accrued OID"). The daily portion is determined
by allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. Accrual periods with respect to a Note may be
of any length selected by the United States Holder and may vary in length over
the term of the Note as long as (i) no accrual period is longer than one year
and (ii) each scheduled payment of interest or principal on the Note occurs on
either the final or first day of an accrual period. The amount of OID allocable
to an accrual period equals the excess of (a) the product of the Discount Note's
adjusted issue price at the beginning of the accrual period and such Note's
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the sum of the payments of qualified stated interest on the Note allocable
to the accrual period. The "adjusted issue price" of a Discount Note at the
beginning of any accrual period is the issue price of the Note increased by (x)
the amount of accrued OID for each prior accrual period and decreased by (y) the
amount of any payments previously made on the Note that were not qualified
stated interest payments. For purposes of determining the amount of OID
allocable to an accrual period, if an interval between payments of qualified
stated interest on the Note contains more than one accrual period, the amount of
qualified stated interest payable at the end of the interval (including any
qualified stated interest that is payable on the first day of the accrual period
immediately following the interval) is allocated pro rata on the basis of
relative lengths to each accrual period in the interval, and the adjusted issue
price at the beginning of each accrual period in the interval must be increased
by the amount of any qualified stated interest that has accrued prior to the
first day of the accrual period but that is not payable until the end of the
interval. The amount of OID allocable to an initial short accrual period may be
computed using any reasonable method if all other accrual periods other than a
final short accrual period are of equal length. The amount of OID allocable to
the final accrual period is the difference between (x) the amount payable at the
maturity of the Note (other than any payment of qualified stated interest) and
(y) the Note's adjusted issue price as of the beginning of the final accrual
period.
Acquisition Premium. A United States Holder that purchases a Note for an
amount less than or equal to the sum of all amounts payable on the Note after
the purchase date, other than payments of qualified stated interest, but in
excess of its adjusted issue price (as determined above under "Original Issue
Discount -- General") (any such excess being "acquisition premium") and that
does not make the election described below under "Election to Treat All Interest
as Original Issue Discount" is permitted to reduce the daily portions of OID by
a fraction, the numerator of which is the excess of the United States Holder's
adjusted basis in the Note immediately after its purchase over the adjusted
issue price of the Note, and the denominator of which is the excess of the sum
of all amounts payable on the Note after the purchase date, other than payments
of qualified stated interest, over the Note's adjusted issue price.
Market Discount. A Note, other than a short-term Note, will be treated as
purchased at a market discount (a "Market Discount Note") if (i) the amount for
which a United States Holder purchased the Note is less than the Note's issue
price (as determined above under "Original Issue Discount -- General") and (ii)
the Note's stated redemption price at maturity or, in the case of a Discount
Note, the Note's "revised issue price," exceeds the amount for which the United
States Holder purchased the Note by at least 1/4 of 1 percent of such Note's
stated redemption price at maturity or revised issue price, respectively,
multiplied by the number of complete years to the Note's maturity. If such
excess is not sufficient to cause the Note to be a Market Discount Note, then
such excess constitutes "de minimis market discount" and such Note is not
subject to the rules discussed in the following paragraphs. The Code provides
that, for these purposes, the "revised
S-24
<PAGE> 43
issue price" of a Note generally equals its issue price, increased by the amount
of any OID that has accrued on the Note.
Any gain recognized on the maturity or disposition of a Market Discount
Note will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively, a United States
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Note. Such an election shall apply to all debt
instruments with market discount acquired by the electing United States Holder
on or after the first day of the first taxable year to which the election
applies. This election may not be revoked without the consent of the Internal
Revenue Service (the "Service").
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on a
constant-yield method. Such an election shall apply only to the Note with
respect to which it is made and may not be revoked without the consent of the
Service. A United States Holder of a Market Discount Note that does not elect to
include market discount in income currently generally will be required to defer
deductions for interest on borrowings allocable to such Note in an amount not
exceeding the accrued market discount on such Note until the maturity or
disposition of such Note.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase
price of a Note is attributable to pre-issuance accrued interest, (ii) the first
stated interest payment on the Note is to be made within one year of the Note's
issue date and (iii) the payment will equal or exceed the amount of preissuance
accrued interest, then the United States Holder may elect to decrease the issue
price of the Note by the amount of pre-issuance accrued interest. In that event,
a portion of the first stated interest payment will be treated as a return of
the excluded pre-issuance accrued interest and not as an amount payable on the
Note.
Notes Subject to Contingencies Including Optional Redemption. In general,
if a Note provides for an alternative payment schedule or schedules applicable
upon the occurrence of a contingency or contingencies and the timing and amounts
of the payments that comprise each payment schedule are known as of the issue
date, the yield and maturity of the Note are determined by assuming that the
payments will be made according to the Note's stated payment schedule. If,
however, based on all the facts and circumstances as of the issue date, it is
more likely than not that the Note's stated payment schedule will not occur,
then, in general, the yield and maturity of the Note are computed based on the
payment schedule most likely to occur. The Company's determination of the
applicable payment schedule is binding on all holders of a Note unless such
holder explicitly discloses to the Service that its determination differs from
that of the Company.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company has an unconditional
option or options to redeem a Note, or the holder has an unconditional option or
options to cause a Note to be repurchased, prior to the Note's stated maturity,
then (i) in the case of an option or options of the Company, the Company will be
deemed to exercise or not exercise an option or combination of options in the
manner that minimizes the yield on the Note and (ii) in the case of an option or
options of the holder, the holder will be deemed to exercise or not exercise an
option or combination of options in the manner that maximizes the yield on the
Note. For purposes of those calculations, the yield on the Note is determined by
using (i) any date on which the Note may be redeemed or repurchased as the
maturity date and (ii) the amount payable on such date in accordance with the
terms of the Note as the principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the Note
is repaid as a result of a change in circumstances and solely for purposes of
the accrual of OID, the yield and maturity of the Note are redetermined by
treating the Note as reissued on the date of the change in circumstances for an
amount equal to the Note's adjusted issue price on that date.
S-25
<PAGE> 44
Election to Treat All Interest as Original Issue Discount. A United States
Holder may elect to include in gross income all interest that accrues on a Note
using the constant-yield method described above under the heading "Original
Issue Discount -- General," with the modifications described below. For purposes
of this election, interest includes stated interest, OID, de minimis original
issue discount, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium (described below under
"Notes Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal its cost to the
electing United States Holder, the issue date of the Note will be the date of
its acquisition by the electing United States Holder, and no payments on the
Note will be treated as payments of qualified stated interest. This election
will generally apply only to the Note with respect to which it is made and may
not be revoked without the consent of the Service. If this election is made with
respect to a Note with amortizable bond premium, then the electing United States
Holder will be deemed to have elected to apply amortizable bond premium against
interest with respect to all debt instruments with amortizable bond premium
(other than debt instruments the interest on which is excludible from gross
income) held by the electing United States Holder as of the beginning of the
taxable year in which the Note with respect to which the election is made is
acquired or thereafter acquired. The deemed election with respect to amortizable
bond premium may not be revoked without the consent of the Service.
If the election to apply the constant-yield method to all interest on a
Note is made with respect to a Market Discount Note, then the electing United
States Holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
Variable Rate Notes. A "Variable Rate Note" is a Note that: (i) has an
issue price that does not exceed the total noncontingent principal payments by
more than the lesser of (1) the product of (x) the total noncontingent principal
payments, (y) the number of complete years to maturity from the issue date and
(z) .015, or (2) 15 percent of the total noncontingent principal payments, and
(ii) provides for stated interest compounded or paid at least annually at (1)
one or more "qualified floating rates," (2) a single fixed rate and one or more
qualified floating rates, (3) a single "objective rate" or (4) a single fixed
rate and a single objective rate that is a "qualified inverse floating rate."
A qualified floating rate or objective rate in effect at any time during
the term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no earlier
than 3 months prior to the first day on which that value is in effect and no
later than 1 year following that first day.
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the Note
is denominated or (ii) it is equal to the product of such a rate and either (a)
a fixed multiple that is greater than .65 but not more than 1.35, or (b) a fixed
multiple greater than .65 but not more than 1.35, increased or decreased by a
fixed rate. If a Note provides for two or more qualified floating rates that (i)
are within .25 percent of each other on the issue date or (ii) can reasonably be
expected to have approximately the same values throughout the term of the Notes,
the qualified floating rates together constitute a single qualified floating
rate. A rate is not a qualified floating rate, however, if the rate is subject
to certain restrictions (including caps, floors, governors, or other similar
restrictions) unless such restrictions are fixed throughout the term of the Note
or are not reasonably expected to affect the yield on the Note significantly.
An "objective rate" is a rate, other than a qualified floating rate, that
is determined using a single, fixed formula and that is based on (i) one or more
qualified floating rates, (ii) one or more rates each of which would be a
qualified floating rate for a debt instrument denominated in a
S-26
<PAGE> 45
currency other than the currency in which the debt instrument is denominated,
(iii) the yield or changes in the price of one or more actively traded items of
personal property other than stock or debt of the issuer or a related party, or
(iv) a combination of the rates described in clauses (i)-(iii) above. A variable
rate is not an objective rate, however, if it is reasonably expected, as of the
Note's issue date, that the average value of the rate during the first half of
the Note's term will be either significantly less than or significantly greater
than the average value of the rate during the final half of the Note's term. An
objective rate is a "qualified inverse floating rate" if (i) the rate is equal
to a fixed rate minus a qualified floating rate and (ii) the variations in the
rate can reasonably be expected to inversely reflect contemporaneous variations
in the cost of newly borrowed funds.
If interest on a Note is stated at a fixed rate for an initial period of
less than one year followed by either a qualified floating rate or an objective
rate for a subsequent period and (i) the fixed rate and the qualified floating
rate or objective rate have values on the issue date of the Note that do not
differ by more than .25 percent or (ii) the value of the qualified floating rate
or objective rate is intended to approximate the fixed rate, the fixed rate and
the qualified floating rate or the objective rate constitute a single qualified
floating rate or objective rate.
Under these rules, Commercial Paper Rate Notes, Prime Rate Notes, LIBOR
Notes, Treasury Rate Notes, CMT Rate Notes, CD Rate Notes, and Federal Funds
Rate Notes will generally be treated as Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a
single qualified floating rate or objective rate, all stated interest on the
Note is qualified stated interest and the amount of OID, if any, is determined
by using, in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date of the qualified floating rate or qualified
inverse floating rate, or, in the case of any other objective rate, a fixed rate
that reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or a single objective rate, and also does not provide
for interest payable at a fixed rate (other than at an initial fixed rate
described in the third preceding paragraph), the amount of interest and OID
accruals on the Note are generally determined by (i) determining a fixed rate
substitute for each variable rate provided under the Variable Rate Note
(generally, the value of each variable rate as of the issue date or, in the case
of an objective rate that is not a qualified inverse floating rate, a rate that
reflects the reasonably expected yield on the Note), (ii) constructing the
equivalent fixed rate debt instrument (using the fixed rate substitutes
described above), (iii) determining the amount of qualified stated interest and
OID with respect to the equivalent fixed rate debt instrument, and (iv) making
the appropriate adjustments for actual variable rates during the applicable
accrual period.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at an
initial fixed rate described in the fourth preceding paragraph), the amount of
interest and OID accruals are determined as in the immediately preceding
paragraph with the modification that the Variable Rate Note is treated, for
purposes of the first three steps of the determination, as if it provided for a
qualified floating rate (or a qualified inverse floating rate, as the case may
be) rather than the fixed rate. The qualified floating rate (or qualified
inverse floating rate) replacing the fixed rate must be such that the fair
market value of the Variable Rate Note as of the issue date would be
approximately the same as the fair market value of an otherwise identical debt
instrument that provides for the qualified floating rate (or qualified inverse
floating rate) rather than the fixed rate.
Short-Term Notes. In general, an individual or other cash basis United
States Holder of a short-term Note is not required to accrue OID (as specially
defined below for the purposes of this paragraph) for United States federal
income tax purposes unless it elects to do so (but may be required to include
any stated interest in income as the interest is received). Accrual basis United
States Holders and certain other United States Holders, including banks,
regulated investment
S-27
<PAGE> 46
companies, dealers in securities, common trust funds, United States Holders who
hold Notes as part of certain identified hedging transactions, certain
pass-through entities and cash basis United States Holders who so elect, are
required to accrue OID on short-term Notes on either a straight-line basis or
under the constant-yield method (based on daily compounding), at the election of
the United States Holder. In the case of a United States Holder not required and
not electing to include OID in income currently, any gain realized on the sale
or retirement of the short-term Note will be ordinary income to the extent of
the OID accrued on a straight-line basis (unless an election is made to accrue
the OID under the constant-yield method) through the date of sale or retirement.
United States Holders who are not required and do not elect to accrue OID on
short-term Notes will be required to defer deductions for interest on borrowings
allocable to short-term Notes in an amount not exceeding the deferred income
until the deferred income is realized.
For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Note, including stated interest, are included
in the short-term Note's stated redemption price at maturity.
Foreign Currency Discount Notes. OID for any accrual period on a Discount
Note that is denominated in, or determined by reference to, a foreign currency
will be determined in the foreign currency and then translated into U.S. dollars
in the same manner as stated interest accrued by an accrual basis United States
Holder, as described above under "Payments of Interest." Upon receipt of an
amount attributable to OID (whether in connection with a payment of interest or
the sale or retirement of a Note), a United States Holder may recognize ordinary
income or loss.
NOTES PURCHASED AT A PREMIUM
A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium,"
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the Note's yield to
maturity) to such year. In the case of a Note that is denominated in, or
determined by reference to, a foreign currency, amortizable bond premium will be
computed in units of foreign currency, and amortizable bond premium will reduce
interest income in units of the foreign currency. At the time amortized bond
premium offsets interest income, exchange gain or loss (taxable as ordinary
income or loss) is realized measured by the difference between exchange rates at
that time and at the time of the acquisition of the Note. Any election to
amortize bond premium shall apply to all bonds (other than bonds the interest on
which is excludible from gross income) held by the United States Holder at the
beginning of the first taxable year to which the election applies or thereafter
acquired by the United States Holder, and is irrevocable without the consent of
the Service. See also "Original Issue Discount -- Election to Treat All Interest
as Original Issue Discount."
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost, increased by the amount of any OID or market discount included in
the United States Holder's income with respect to the Note and the amount, if
any, of income attributable to de minimis original issue discount and de minimis
market discount included in the United States Holder's income with respect to
the Note, and reduced by (i) the amount of any payments that are not qualified
stated interest payments, and (ii) the amount of any amortizable bond premium
applied to reduce interest on the Note. The U.S. dollar cost of a Note purchased
with a foreign currency will generally be the U.S. dollar value of the purchase
price on the date of purchase or, in the case of Notes traded on an "established
securities market," as defined in the applicable Treasury Regulations, that are
purchased by a cash basis United States Holder (or an accrual basis United
States Holder that so elects), on the settlement date of the purchase.
S-28
<PAGE> 47
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on the
sale or retirement and the tax basis of the Note. The amount realized on a sale
or retirement for an amount in foreign currency will be the U.S. dollar value of
such amount on the date of sale or retirement or, in the case of Notes traded on
an established securities market sold by a cash basis United States Holder (or
an accrual basis United States Holder that so elects), on the settlement date of
the sale. Except to the extent described above under "Original Issue
Discount -- Short-Term Notes" or "Original Issue Discount -- Market Discount" or
described in the next succeeding paragraph or attributable to accrued but unpaid
interest, gain or loss recognized on the sale or retirement of a Note will be
capital gain or loss and will be long-term capital gain or loss if the Note was
held for more than one year.
Gain or loss recognized by a United States Holder on the sale or retirement
of a Note that is attributable to changes in exchange rates will be treated as
ordinary income or loss. However, exchange rate gain or loss is taken into
account only to the extent of total gain or loss realized on the transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
Foreign currency received as interest on a Note or on the sale or
retirement of a Note will have a tax basis equal to its U.S. dollar value at the
time such interest is received or at the time of such sale or retirement.
Foreign currency that is purchased will generally have a tax basis equal to the
U.S. dollar value of the foreign currency on the date of purchase. Any gain or
loss recognized on a sale or other disposition of a foreign currency (including
its use to purchase Notes or upon exchange for U.S. dollars) will be ordinary
income or loss.
INDEXED NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Indexed Notes that are
not subject to the rules governing Variable Rate Notes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder who or that is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership, estate or trust, in either case not subject to United
States federal income tax on a net income basis in respect of a Note. Under
present United States federal income and estate tax law and subject to the
discussion of backup withholding below:
(i) payments of principal, premium and interest (including OID) by the
Company or any of its paying agents to any holder of a Note who or which is
a United States Alien Holder will not be subject to United States federal
withholding tax if, in the case of interest or OID, (a) the beneficial
owner of the Note does not actually or constructively own 10% or more of
the voting stock of the Company, (b) the beneficial owner of the Note is
not a controlled foreign corporation that is related to the Company through
stock ownership, (c) either (A) the beneficial owner of the Note certifies
to the Company or its agent, under penalties of perjury, that it is not a
United States Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note on behalf of the beneficial
owner certifies to the Company or its agent under penalties of perjury that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof, and (d) the Note is not subject to the rules of
Section 871(h)(4) of the Code dealing with payments contingent upon certain
factors relating to the Company or a person related to the Company;
S-29
<PAGE> 48
(ii) a United States Alien Holder of a Note will not be subject to
United States federal withholding tax on any gain realized on the sale or
exchange of a Note; and
(iii) a Note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's
gross estate for purposes of the United States federal estate tax as a
result of the individual's death if (a) the individual did not actually or
constructively own 10% or more of the voting stock of the Company, and (b)
the income on the Note would not have been effectively connected with a
United States trade or business of the individual at the individual's
death, provided that if the Note is subject to the rules of Section
871(h)(4) of the Code dealing with payments contingent upon certain factors
relating to the Company or a person related to the Company, an appropriate
portion (as determined in a manner to be prescribed by the Internal Revenue
Service) of the value of such Note will be included in the individual's
gross estate, and provided that the Note was issued with an initial term of
184 days or more.
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Holders. In general, information reporting requirements will
apply to payments of principal, premium and interest on a Note and the proceeds
of the sale of a Note before maturity within the United States to, and to the
accrual of OID on a Discount Note with respect to, non-corporate United States
Holders, and "backup withholding" at a rate of 31% will apply to such payments
and to payments of OID if the United States Holder fails to provide an accurate
taxpayer identification number or to report all interest and dividends required
to be shown on its federal income tax returns.
United States Alien Holders. Information reporting and backup withholding
will not apply to payments of principal, premium and interest (including OID)
made by the Company or a paying agent to a United States Alien Holder on a Note
if the certification described in clause (i)(c) under "United States Alien
Holders" above is received, provided that the payor does not have actual
knowledge that the holder is a United States person.
Payments of the proceeds from the sale by a United States Alien Holder of a
Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Note to or through the United States office of a
broker is subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution Agreement
dated as of , 1998, the Notes are being offered on a continuing basis
by the Company through Goldman, Sachs & Co., BancAmerica Robertson Stephens,
Chase Securities Inc., Lehman Brothers Inc. (including its affiliate Lehman
Government Securities Inc.) and Morgan Stanley & Co. Incorporated (the
"Agents"), who have agreed to use their reasonable efforts to solicit purchases
of the Notes. The Company will have the sole right to accept offers to purchase
Notes and may reject any proposed purchase of Notes in whole or in part. The
Agents will have the right, in their discretion reasonably exercised, to reject
any proposed offer to purchase Notes in whole or in part. The Company will pay
the Agents commissions of from % to % of the principal amount of
Notes, depending upon maturity, for sales made through them as Agents.
S-30
<PAGE> 49
In connection with any offering, the Agents 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
Agents 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 Agents
involve the sale by the Agents of a greater number of Notes than they are
required to purchase from the Company in the offering. The Agents 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 Agents if such
Notes are repurchased by the Agents 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 Company may also sell Notes to each of the Agents acting as principal
for their own accounts at a discount to be agreed upon at the time of sale, or
the purchasing Agents may receive from the Company a commission or discount
equivalent to that set forth on the cover page hereof in the case of any such
principal transaction in which no other discount is agreed. Such Notes may be
resold at prevailing market prices, or at prices related thereto, at the time of
such resale, as determined by the Agents. The Company reserves the right to sell
Notes directly to persons other than the Agents on its own behalf. No commission
will be payable on any Notes sold directly by the Company.
In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer may include all or part of the discount to
be received from the Company. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity. After the initial public offering of Notes to be resold to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Act"). The
Company has agreed to indemnify each of the Agents against certain liabilities,
including liabilities under the Act. The Company has agreed to reimburse the
Agents for certain expenses.
The Agents may sell to or through dealers who may resell to investors, and
the Agents may pay all or part of their discount or commission to such dealers.
Such dealers may be deemed to be "underwriters" within the meaning of the Act.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately available
funds in The City of New York.
In the ordinary course of their respective businesses, the Agents and their
affiliates have engaged and may in the future engage in commercial banking and
investment banking transactions with the Company and its affiliates.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the liquidity of the trading market for the Notes.
S-31
<PAGE> 50
SUBJECT TO COMPLETION, DATED AUGUST 13, 1998
<TABLE>
<S> <C> <C>
$200,000,000
LOGO
LOGO
</TABLE>
Debt Securities
------------------------
The Company may from time to time offer unsecured Debt Securities
consisting of debentures, notes and/or other unsecured evidences of indebtedness
in one or more series at an aggregate initial offering price not to exceed
$200,000,000 (or the equivalent in any other currency or composite currency).
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 a composite currency), 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., BancAmerica Robertson Stephens,
Chase Securities Inc., Lehman Brothers Inc., Morgan Stanley & Co. Incorporated,
or may be a group of underwriters represented by firms including Goldman, Sachs
& Co., BancAmerica Robertson Stephens, Chase Securities Inc., Lehman Brothers
Inc., or Morgan Stanley & Co. Incorporated. Goldman, Sachs & Co., BancAmerica
Robertson Stephens, Chase Securities Inc., Lehman Brothers Inc., and Morgan
Stanley & Co. Incorporated may also act as agents. See "Plan of Distribution."
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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
GOLDMAN, SACHS & CO.
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
------------------------
The date of this Prospectus is , 1998.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF ANY SUCH STATE.
<PAGE> 51
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 THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
AVAILABLE INFORMATION
The Company is subject to the information and 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 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 can be inspected and copied at
prescribed rates at the public reference facility referenced above and at the
Commission's regional offices at 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 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 (the
"Securities Act"). 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, 1997;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1997;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998; and
4. The Company's Quarterly Report on Form 10-Q for the quarter ended May
31, 1998;
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,
2
<PAGE> 52
Commercial Metals Company, 7800 Stemmons Freeway, Dallas, Texas 75247, telephone
number (214) 689-4300.
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 1997, CMC derived
approximately 68% of its operating profit from its Manufacturing segment,
approximately 10% from its Recycling segment, and approximately 22% from its
Marketing and Trading segment.
The Company's Manufacturing segment includes four steel minimills, 20 steel
fabrication plants, four steel joist plants, four fence post manufacturing
plants, eight metals recycling plants, a heat treating plant, two railcar
rebuilding facilities, 12 concrete related product warehouses, two industrial
products supply companies, a rail salvage company, and a copper tube mill. Steel
manufacturing capacity of over 2 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 700,000 tons. The Company's
copper tube mill with 50 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 1.4 million
tons of scrap metal in fiscal 1997. 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 1.4 million tons of
steel products in 1997.
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
FISCAL YEAR ENDED AUGUST 31, MAY 31,
- ---------------------------- ------------------
1997 1996 1995 1994 1993 1998 1997
- ---- ---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
4.3 4.9 4.2 4.2 4.0 3.7 4.0
</TABLE>
3
<PAGE> 53
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 $2.9, $0.8 and
$0.5 million in fiscal 1997, $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
and $2.0, $0.4 and $0.4 million in fiscal 1993, and amounted to $2.3, $1.0 and
$0.4 million and $2.2, $0.3 and $0.4 million in the first nine months of fiscal
1998 and 1997, 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, 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. This Prospectus or 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
4
<PAGE> 54
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 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 that provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof 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
5
<PAGE> 55
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
participants) 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. 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
6
<PAGE> 56
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 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 contin-
7
<PAGE> 57
gency 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)
"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. (Section 101)
"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 (i) 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, (ii)
Capital Lease Obligations payable on a date more than one year from the date of
the determination thereof, (iii) 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 (i) or (ii) of others (but not
including contingent liabilities on customers' receivables sold with recourse),
and (iv) amendments, renewals, extensions and refundings of any obligations of
the type described in the foregoing clauses (i), (ii) or (iii). (Section 101)
"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. (Section 101)
"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
8
<PAGE> 58
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 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 (i) any Funded Debt of a Principal Subsidiary owing to the Company or
another Principal Subsidiary, (ii) 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 (iii) any extension, renewal or
refunding in whole or in part (without increase in amount) of any Funded Debt
(a) of a Principal Subsidiary as aforementioned, (b) of a Principal Subsidiary
outstanding at the date of the Indenture or (c) 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 Debt 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
(i) 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
Debt Securities or (ii) 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: (a) the retirement of its
Funded Debt, (b) the purchase of other property or assets which will (I)
constitute Principal Property and (II) have an aggregate value of at least the
consideration paid for such property or assets or (c) 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 (I) between the Company and Principal
Subsidiaries of the Company or (II) 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,
9
<PAGE> 59
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 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) the 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: (i) failure to pay principal of, or premium, if
any, on any Debt Security of that series when due; (ii) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(iii) failure to deposit any sinking fund payment, when due, in respect to any
Debt Securities of that series; (iv) 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), continuing for 60 days after written notice as provided in the
Indenture; (v) 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; (vi) certain events of bankruptcy,
insolvency or reorganization; and (vii) 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 of 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
10
<PAGE> 60
constitutes an Event of Default with respect to any other series of Debt
Securities issued thereunder. (Section 501) The notice referred to in clauses
(iv) and (v) 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 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)
11
<PAGE> 61
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
Debt Security affected thereby, (i) change the Stated Maturity of the principal
of, or any installment of principal or interest on any Debt Security, (ii)
reduce the principal amount of or the rate of interest or the premium (if any)
on any Debt Security or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon acceleration, (iii) change
the place or currency of payment of principal of or interest or the premium (if
any) on any Debt Security, (iv) 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, (v) reduce the above-stated percentage in principal
amount of Outstanding Debt Securities of any series the consent of whose Holders
is required for any such supplemental indenture or (vi) reduce the above-stated
percentage of Outstanding Debt Securities of any series the consent of whose
Holders is required 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 (i) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling, or (ii)
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
12
<PAGE> 62
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 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 the full faith and credit of the United States
of America is pledged. (Section 101)
13
<PAGE> 63
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., BancAmerica Robertson Stephens,
Chase Securities Inc., Lehman Brothers Inc., Morgan Stanley & Co. Incorporated,
or a group of underwriters represented by firms including Goldman, Sachs & Co.,
BancAmerica Robertson Stephens, Chase Securities Inc., 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.
In connection with the offering, underwriters may purchase and sell the
Debt Securities in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by 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 Debt Securities, and short
positions created by underwriters involve the sale by underwriters of a greater
number of Debt Securities than they are required to purchase from the Company in
the offering. Underwriters also may impose a penalty bid, whereby selling
concessions allowed to broker-dealers in respect of the Debt Securities sold in
the offering may be reclaimed by underwriters if such Debt Securities are
repurchased by underwriters in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Debt Securities, 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.
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 Securities 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.
14
<PAGE> 64
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, LLP,
Dallas, Texas. Certain legal matters will be passed upon for Goldman, Sachs &
Co., BancAmerica Robertson Stephens, Chase Securities Inc., Lehman Brothers
Inc., and Morgan Stanley & Co. Incorporated, by Akin, Gump, Strauss, Hauer &
Feld, L.L.P., Dallas, Texas.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this Prospectus by reference 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 in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
15
<PAGE> 65
- ----------------------------------------------------------
- ----------------------------------------------------------
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
The Company.............................. S-2
Use of Proceeds.......................... S-2
Capitalization........................... S-3
Selected Consolidated Financial Data..... S-4
Management's Discussion and Analysis of
Recent Financial Results............... S-5
Business................................. S-9
Description of Notes..................... S-14
Underwriting............................. S-16
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............................ 15
Experts.................................. 15
</TABLE>
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
$100,000,000
LOGO
% NOTES
DUE , 2008
------------------------
LOGO
------------------------
GOLDMAN, SACHS & CO.
BANCAMERICA
ROBERTSON STEPHENS
CHASE SECURITIES INC.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
- ----------------------------------------------------------
- ----------------------------------------------------------
<PAGE> 66
- ----------------------------------------------------------
- ----------------------------------------------------------
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
Description of Notes..................... S-3
Risks Relating to Indexed Notes.......... S-18
Foreign Currency Risks................... S-19
United States Taxation................... S-22
Supplemental Plan of Distribution........ S-30
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............................ 15
Experts.................................. 15
</TABLE>
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
$100,000,000
LOGO
MEDIUM-TERM NOTES, SERIES A
------------------------
LOGO
------------------------
GOLDMAN, SACHS & CO.
BANCAMERICA
ROBERTSON STEPHENS
CHASE SECURITIES INC.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
- ----------------------------------------------------------
- ----------------------------------------------------------
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 59,000
Rating Agency Fees.......................................... 92,500
Fees and Expenses of Trustee................................ 5,500
Legal Fees and Expenses..................................... 50,000
Blue Sky Fees and Expenses (including legal fees)........... 20,000
Accounting Fees and Expenses................................ 35,000
Printing Expenses........................................... 50,000
Miscellaneous Expenses...................................... 13,000
--------
TOTAL............................................. $325,000
========
</TABLE>
All of the above expenses except the registration fees are estimated. All
of such expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. Section 145 of the Delaware General
Corporation Law generally provides that a corporation is empowered to indemnify
any person who is made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that he is or was a director, officer,
employee or agent of the Company or is or was serving, at the request of the
Company, in any of such capacities of another corporation or other enterprise,
if such director, officer, employee or agent acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 describes in
detail the right of the Company to indemnify any such person. The Certificate of
Incorporation of the Company and indemnification agreements between the Company
and each of its officers and directors provide generally for indemnification of
all such directors, officers and agents to the fullest extent permitted under
law. The Company's Certificate of Incorporation eliminates the liability of
directors to the fullest extent permitted under law. The Company's directors and
officers currently are covered by directors' and officers' liability insurance.
Reference is also made to the indemnification provisions contained in the
Underwriting Agreement and the Distribution Agreement (forms of which are being
filed as Exhibits 1.1 and 1.2 hereto, respectively) with respect to undertakings
to indemnify the Company, its directors, officers and controlling persons within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"),
against certain liabilities, including liabilities under the Securities Act or
otherwise.
For the undertaking with respect to indemnification, see Item 17 herein.
II-1
<PAGE> 68
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
*1.2 Form of Distribution Agreement.
4.1 Form of Indenture (the "Indenture") between the Company and
The Chase Manhattan Bank (the "Trustee") (filed as Exhibit
4.1 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 (No. 33-60809) and incorporated herein
by reference).
*5.1 Opinion of Haynes and Boone, LLP as to the validity of Debt
Securities to be offered.
*12.1 Statement regarding computation of ratios of earnings to
fixed charges.
*23.1 Consent of Haynes and Boone, LLP, contained in the opinion
filed as Exhibit 5.1.
*23.2 Consent of Deloitte & Touche LLP.
*24.1 Power of Attorney appears on the signature page hereof.
*25.1 Form T-1 Statement of Eligibility and Qualification of the
Trustee.
</TABLE>
- ---------------
* Filed herewith
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<PAGE> 69
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on the 13th day of August,
1998.
COMMERCIAL METALS COMPANY
By: /s/ STANLEY A. RABIN
----------------------------------
Stanley A. Rabin
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Lawrence A. Engels and David M. Sudbury,
his or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign, execute and file with the
Securities and Exchange Commission and any state securities regulatory board or
commission any documents relating to the proposed issuance and registration of
the securities offered pursuant to this Registration Statement on Form S-3 under
the Securities Act of 1933, including any amendment or amendments relating
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as he or she might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done.
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form S-3 has been signed by the following persons on
behalf of the Registrant in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ALBERT A. EISENSTAT Director August 11, 1998
- -----------------------------------------------------
Albert A. Eisenstat
/s/ MOSES FELDMAN Director August 11, 1998
- -----------------------------------------------------
Moses Feldman
/s/ LAURENCE E. HIRSCH Director August 11, 1998
- -----------------------------------------------------
Laurence E. Hirsch
/s/ A. LEO HOWELL Vice President and Director August 11, 1998
- -----------------------------------------------------
A. Leo Howell
/s/ WALTER F. KAMMANN Director August 11, 1998
- -----------------------------------------------------
Walter F. Kammann
/s/ RALPH E. LOEWENBERG Director August 11, 1998
- -----------------------------------------------------
Ralph E. Loewenberg
/s/ DOROTHY G. OWEN Director August 11, 1998
- -----------------------------------------------------
Dorothy G. Owen
</TABLE>
II-3
<PAGE> 70
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CHARLES B. PETERSON Director August 11, 1998
- -----------------------------------------------------
Charles B. Peterson
/s/ STANLEY A. RABIN President, Chief Executive Officer August 13, 1998
- ----------------------------------------------------- and Director
Stanley A. Rabin
/s/ MARVIN SELIG CMC Steel Group Chairman, Chief August 11, 1998
- ----------------------------------------------------- Executive Officer and Director
Marvin Selig
/s/ LAWRENCE A. ENGELS Vice President, Treasurer and August 13, 1998
- ----------------------------------------------------- Chief Financial Officer
Lawrence A. Engels (Principal Financial Officer)
/s/ WILLIAM B. LARSON Controller (Principal Accounting August 13, 1998
- ----------------------------------------------------- Officer)
William B. Larson
</TABLE>
II-4
<PAGE> 71
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
*1.2 Form of Distribution Agreement.
4.1 Form of Indenture (the "Indenture") between the Company and
The Chase Manhattan Bank (the "Trustee") (filed as Exhibit
4.1 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 (No. 33-60809) and incorporated herein
by reference).
*5.1 Opinion of Haynes and Boone, LLP as to the validity of Debt
Securities to be offered.
*12.1 Statement regarding computation of ratios of earnings to
fixed charges.
*23.1 Consent of Haynes and Boone, LLP, contained in the opinion
filed as Exhibit 5.1.
*23.2 Consent of Deloitte & Touche LLP.
*24.1 Power of Attorney appears on the signature page hereof.
*25.1 Form T-1 Statement of Eligibility and Qualification of the
Trustee.
</TABLE>
- ---------------
* Filed herewith
<PAGE> 1
EXHIBIT 1.1
COMMERCIAL METALS COMPANY
Debt Securities
_______________________________________
Underwriting Agreement
_______________, 1998
Goldman, Sachs & Co.
BancAmerica Robertson Stephens
Chase Securities Inc.
Lehman Brothers
Morgan Stanley & Co. Incorporated
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
From time to time Commercial Metals Company, a Delaware corporation
(the "Company"), proposes to enter into one or more Pricing Agreements (each a
"Pricing Agreement") in the form of Annex I hereto, with such additions and
deletions as the parties thereto may determine, and, subject to the terms and
conditions stated herein and therein, to issue and sell to the firms named in
Schedule I to the applicable-Pricing Agreement (such firms constituting the
"Underwriters" with respect to such Pricing Agreement and the securities
specified therein) certain of its debt securities (the "Securities") specified
in Schedule II to such Pricing Agreement (with respect to such Pricing
Agreement, the "Designated Securities").
The terms and rights of any particular issuance of Designated
Securities shall be as specified in the Pricing Agreement relating thereto and
in or pursuant to the indenture (the "Indenture") identified in such Pricing
Agreement.
1. Particular sales of Designated Securities may be made from time to
time to the Underwriters of such Securities, for whom the firms designated as
representatives of the Underwriters of such Securities in the Pricing Agreement
relating thereto will act as representatives (the "Representatives"). The term
"Representatives" also refers to a single firm acting as sole representative of
the Underwriters and to an Underwriter or Underwriters who act without any firm
being designated as its or their representatives. This Underwriting Agreement
shall not be construed as an obligation of the Company to sell any of the
Securities or as an obligation of any of the Underwriters to purchase the
Securities. The obligation of the Company to issue and sell any of the
Securities and the obligation of any of the Underwriters to purchase any of the
Securities shall be evidenced by the Pricing Agreement with respect to the
Designated Securities specified therein. Each Pricing Agreement shall specify
the aggregate principal amount of such Designated Securities, the initial public
offering price of such Designated Securities, the purchase price to the
Underwriters of such Designated Securities, the names of the Underwriters of
such
<PAGE> 2
Designated Securities, the names of the Representatives of such Underwriters and
the principal amount of such Designated Securities to be purchased by each
Underwriter and shall set forth the date, time and manner of delivery of such
Designated Securities and payment therefor. The Pricing Agreement shall also
specify (to the extent not set forth in the Indenture and the registration
statement and prospectus with respect thereto) the terms of such Designated
Securities. A Pricing Agreement shall be in the form of an executed writing
(which may be in counterparts), and may be evidenced by an exchange of
telegraphic communications or any other rapid transmission device designed to
produce a written record of communications transmitted. The obligations of the
Underwriters under this Agreement and each Pricing Agreement shall be several
and not joint.
2. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. __________)
in respect of the Securities has been filed with the Securities and
Exchange Commission (the "Commission"); such registration statement and
any post-effective amendment thereto, each in the form heretofore
delivered or to be delivered to the Representatives and, excluding
exhibits to such registration statement, but including all documents
incorporated by reference in the prospectus contained therein, to the
Representatives for each of the other Underwriters, have been declared
effective by the Commission in such form; no other document with
respect to such registration statement or document incorporated by
reference therein has heretofore been filed or transmitted for filing
with the Commission (other than prospectuses, if any, filed pursuant to
Rule 424(b) of the rules and regulations of the Commission under the
Securities Act of 1933, as amended (the "Act"), each in the form
heretofore delivered to the Representatives); and no stop order
suspending the effectiveness of such registration statement has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary base prospectus or
preliminary supplemental prospectus relating to the Notes included in
such registration statement or filed with the Commission pursuant to
Rule 424(a) under the Act, is hereinafter called a "Preliminary
Prospectus"; the various parts of such registration statement,
including all exhibits thereto and the documents incorporated by
reference in the prospectus contained in the registration statement at
the time such part of the registration statement became effective but
excluding Form T-1, each as amended at the time such part of the
registration statement became effective, are hereinafter collectively
called the "Registration Statement"; the prospectus relating to the
Securities, in the form in which it has most recently been filed, or
transmitted for filing, with the Commission on or prior to the date of
this Agreement, being hereinafter called the "Prospectus"; any
reference herein to any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include the documents incorporated by
reference therein pursuant to the applicable form under the Act, as of
the date of such Preliminary Prospectus or Prospectus, as the case may
be; any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include
any documents filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and incorporated by reference in
such Preliminary Prospectus or Prospectus, as the case may be; any
reference to any amendment to the
2
<PAGE> 3
Registration Statement shall be deemed to refer to and include any
annual report of the Company filed pursuant to Sections 13(a) or 15(d)
of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration
Statement; and any reference to the Prospectus as amended or
supplemented shall be deemed to refer to the Prospectus as amended or
supplemented in relation to the applicable Designated Securities in the
form in which it is filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof, including any
documents incorporated by reference therein as of the date of such
filing);
(b) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed
and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter of
Designated Securities through the Representatives expressly for use in
the Prospectus as amended or supplemented relating to such Securities;
(c) The Registration Statement and the Prospectus conform, and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act") and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented relating
to such Securities;
(d) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or
3
<PAGE> 4
from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectus;
and, once the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any
change in the capital stock (except pursuant to the exercise of
qualified stock options authorized and issued at the date hereof and
purchases by employees of the Company pursuant to the Company's
employee stock purchase plan as existing on the date hereof) or any
increase in long-term debt of the Company or any of its subsidiaries in
excess of $10,000,000, or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(e) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority
to own its properties and conduct its business as described in the
Prospectus;
(f) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable;
(g) The Securities have been duly authorized, and, when
Designated Securities are issued pursuant to the Indenture and
delivered pursuant to this Agreement and the Pricing Agreement with
respect to such Designated Securities, such Designated Securities will
have been duly executed, authenticated, issued and delivered and will
constitute valid and legally binding obligations of the Company
entitled to the benefits provided by the Indenture, which will be
substantially in the form filed as an exhibit to the Registration
Statement; the Indenture has been duly authorized and duly qualified
under the Trust Indenture Act and, at the Time of Delivery for such
Designated Securities (as defined in Section 4 hereof), the Indenture
will constitute a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Indenture conforms, and the Designated Securities
will conform, to the descriptions thereof contained in the Prospectus
as amended or supplemented with respect to such Designated Securities;
(h) The issue and sale of the Securities and the compliance by
the Company with all of the provisions of the Securities, the
Indenture, this Agreement and any Pricing Agreement, and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of. or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company is
bound or to which any of the property or assets of the Company is
subject (except for such breaches, violations or defaults that would
not have a material adverse effect on the financial position or results
of operations of the Company), nor will such action result in any
violation of
4
<PAGE> 5
the provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Securities or
the consummation by the Company of the transactions contemplated by
this Agreement or any Pricing Agreement or the Indenture, except such
as have been, or will have been prior to the Time of Delivery, obtained
under the Act and the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Underwriters;
(i) The statements set forth in the Prospectus under the
captions "Description of Debt Securities" and "Description of Notes",
insofar as they purport to constitute a summary of the terms of the
Securities, and under the captions "Supplemental Plan of Distribution"
and "Underwriting", insofar as they purport to describe the provisions
of the laws and documents referred to therein, are accurate, complete
and fair;
(j) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound;
(k) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually
or in the aggregate have a material adverse effect on the current or
future consolidated financial position, stockholders' equity or results
of operations of the Company and its subsidiaries; and, to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(l) The Company is not and, after giving effect to the
offering and sale of the Securities, will not be an "investment
company" or an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended
(the "Investment Company Act");
(m) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(n) Deloitte & Touche LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder; and
5
<PAGE> 6
(o) Other than as set forth in the Registration Statement, the
Company and its subsidiaries (i) are in compliance with any and all
applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment
or hazardous and toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval,
except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or
approvals would not, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
3. Upon the execution of the Pricing Agreement applicable to any
Designated Securities and authorization by the Representatives of the release of
such Designated Securities, the several Underwriters propose to offer such
Designated Securities for sale upon the terms and conditions set forth in the
Prospectus as amended or supplemented.
4. Designated Securities to be purchased by each Underwriter pursuant
to the Pricing Agreement relating thereto, in the form specified in such Pricing
Agreement, and in such authorized denominations and registered in such names as
the Representatives may request upon at least forty-eight hours' prior notice to
the Company, shall be delivered by or on behalf of the Company to the
Representatives for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor by wire transfer of
immediately available funds as specified in such Pricing Agreement, payable to
the order of the Company in the funds specified in such Pricing Agreement, all
in the manner and at the place and time and date specified in such Pricing
Agreement or at such other place and time and date as the Representatives and
the Company may agree upon in writing, such time and date being herein called
the "Time of Delivery" for such Securities.
5. The Company agrees with each of the Underwriters of any Designated
Securities:
(a) To prepare the Prospectus as amended or supplemented in
relation to the applicable Designated Securities in a form reasonably
approved by the Representatives and to file such Prospectus pursuant to
Rule 424(b) under the Act not later than the Commission's close of
business on the second business day following the execution and
delivery of the Pricing Agreement relating to the applicable Designated
Securities or, if applicable, such earlier time as may be required by
Rule 424(b); to make no further amendment or any supplement to the
Registration Statement or Prospectus as amended or supplemented after
the date of the Pricing Agreement relating to such Securities and prior
to the Time of Delivery for such Securities which shall be disapproved
by the Representatives for such Securities promptly after reasonable
notice thereof; to advise the Representatives promptly of any such
amendment or supplement after such Time of Delivery and furnish the
Representatives with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed by
the Company with
6
<PAGE> 7
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act for so long as the delivery of a prospectus is required in
connection with the offering or sale of such Securities, and during
such same period to advise the Representatives, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
with the Commission, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
prospectus relating to the Securities, of the suspension of the
qualification of such Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending
or supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any such
stop order or of any such order preventing or suspending the use of any
prospectus relating to the Securities or suspending any such
qualification, to promptly use its reasonable best efforts to obtain
the withdrawal of such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify such Securities for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of such Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time on the business
day next succeeding the date of this Agreement and from time to time,
to furnish the Underwriters with copies of the Prospectus in New York
City as amended or supplemented in such quantities as the
Representatives may reasonably request, and, if the delivery of a
prospectus is required at any time in connection with the offering or
sale of the Securities and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such same period to amend
or supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to comply
with the Act, the Exchange Act or the Trust Indenture Act, to notify
the Representatives and upon their request to file such document and to
prepare and furnish without charge to each Underwriter and to any
dealer in securities as many copies as the Representatives may from
time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings
7
<PAGE> 8
statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of
the Company, Rule 158); and
(e) During the period beginning from the date of the Pricing
Agreement for such Designated Securities and continuing to and
including the later of (i) the termination of trading restrictions for
such Designated Securities, as notified to the Company by the
Representatives and (ii) the Time of Delivery for such Designated
Securities, not to offer, sell, contract to sell or otherwise dispose
of any debt securities of the Company which mature more than one year
after such Time of Delivery and which are substantially similar to such
Designated Securities, without the prior written consent of the
Representatives.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Securities under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, any Pricing Agreement, any
Indenture, any Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities for offering and sale
under state securities laws as provided in Section 5(b) hereof, including the
fees and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky and Legal Investment Surveys;
(iv) any fees charged by securities rating services for rating the Securities;
(v) any filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; (vi) the cost of preparing the Securities; (vii) the fees and
expenses of any trustee under the Indenture (the "Trustee") and any agent of any
Trustee and the fees and disbursements of counsel for any Trustee in connection
with any Indenture and the Securities; and (viii) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters of any Designated Securities
under the Pricing Agreement relating to such Designated Securities shall be
subject, in the discretion of the Representatives, to the condition that all
representations and warranties and other statements of the Company in or
incorporated by reference in the Pricing Agreement relating to such Designated
Securities are, at and as of the Time of Delivery for such Designated
Securities, true and correct, the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed, and the
following additional conditions:
8
<PAGE> 9
(a) The Prospectus as amended or supplemented in relation to
the applicable Designated Securities shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period
prescribed for such filing by the rules and regulations under the Act
and in accordance with Section 5(a) hereof; no stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to the Representatives' reasonable satisfaction;
(b) Counsel for the Underwriters shall have furnished to the
Representatives such opinion or opinions (a draft of each such opinion
in attached as Annex II(a) hereto), dated the Time of Delivery for such
Designated Securities, with respect to the matters covered in
paragraphs (i), (ii), (iv), (v), (vi), (x), (xi), (xiii) and (xiv) of
subsection (c) below as well as such other related matters as the
Representatives may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Counsel for the Company satisfactory to the
Representatives (which shall include the Company's general counsel)
shall have furnished to the Representatives their written opinion (a
draft of such opinion is attached as Annex II(b) hereto), dated the
Time of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, with corporate
power and authority to own its properties and conduct its
business as described in the Prospectus as amended or
supplemented;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus as amended or supplemented and all
of the issued shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and
non-assessable;
(iii) To the best of such counsel's knowledge and
other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is the subject which,
if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the consolidated financial
position, stockholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of such
counsel's knowledge, no such proceedings are threatened by
governmental authorities or others;
9
<PAGE> 10
(iv) This Agreement and the Pricing Agreement with
respect to the Designated Securities have been duly
authorized, executed and delivered by the Company;
(v) The Designated Securities have been duly
authorized and executed by the Company and, when authenticated
by the Trustee in accordance with the terms of the Indenture
and delivered to and paid for by the Underwriters pursuant to
the Pricing Agreement, will have been duly issued and
delivered by the Company and will constitute valid and legally
binding obligations of the Company entitled to the benefits
provided by the Indenture; and the Designated Securities and
the Indenture conform to the descriptions thereof in the
Prospectus as amended or supplemented;
(vi) The Indenture has been duly authorized, executed
and delivered by the parties thereto and constitutes a valid
and legally binding instrument, enforceable against the
Company in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and the
Indenture has been duly qualified under the Trust Indenture
Act;
(vii) The issue and sale of the Designated Securities
and the compliance by the Company with all of the provisions
of the Designated Securities, the Indenture, this Agreement
and the Pricing Agreement with respect to the Designated
Securities and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known
to such counsel to which the Company is a party or by which
the Company is bound or to which any of the property or assets
of the Company is subject, except to the extent such conflict,
breach or violation will not have a material adverse effect on
the Company or on any of the transactions contemplated
hereunder, nor will such actions result in any violation of
the provisions of the Certificate of Incorporation or By-laws
of the Company or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its
properties;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale
of the Designated Securities or the consummation by the
Company of the transactions contemplated by this Agreement or
such Pricing Agreement or the Indenture, except such as have
been obtained under the Act and the Trust Indenture Act and
such consents, approvals, authorizations, orders,
registrations or qualifications as may be required under state
securities or Blue Sky law and by the National Association of
Securities Dealers, Inc. in connection with the purchase and
distribution of the Designated Securities by the Underwriters;
10
<PAGE> 11
(ix) To the best of such counsel's knowledge, neither
the Company nor any of its subsidiaries is in violation of its
By-laws or Certificate of Incorporation;
(x) The statements set forth in the Prospectus under
the captions "Description of Debt Securities", and
"Description of Notes" insofar as they purport to constitute a
summary of the terms of the Securities, under the caption
"United States Taxation", insofar as they purport to describe
the provisions of the laws and documents referred to therein,
are accurate, complete and fair;
(xi) The Company is not an "investment company" or an
entity "controlled" by an investment company", as such terms
are defined in the Investment Company Act;
(xii) The documents incorporated by reference in the
Prospectus as amended or supplemented (other than the
financial statements and financial data and related schedules
therein, if any, as to which such counsel need express no
opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all
material respects with the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder; and such counsel has no reason to
believe that any of such documents, when they became effective
or were so filed, as the case may be, contained, in the case
of a registration statement which became effective under the
Act, an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or,
in the case of other documents which were filed under the Act
or the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made when
such documents were so filed, not misleading;
(xiii) The Registration Statement and the Prospectus
as amended or supplemented and any further amendments and
supplements thereto made by the Company prior to the Time of
Delivery for the Designated Securities (other than the
financial statements and financial data and related schedules
therein, if any, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Act and the Trust Indenture Act and the
rules and regulations thereunder; and
(xiv) although they do not assume any responsibility
for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus,
except for those referred to in the opinion in subsection (x)
of this Section 7(c), such counsel has no reason to believe
that, as of its effective date, the Registration Statement or
any further amendment thereto made by the Company prior to the
Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need
express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading or that, as of its date, the Prospectus as
amended or supplemented or any further amendment or supplement
thereto made by the Company prior to the Time of Delivery
(other than the financial statements and related schedules
therein, as to which such counsel need express no opinion)
contained an untrue
11
<PAGE> 12
statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not
misleading or that, as of the Time of Delivery, either the
Registration Statement or the Prospectus as amended or
supplemented or any further amendment or supplement thereto
made by the Company prior to the Time of Delivery (other
than the financial statements and related schedules therein,
as to which such counsel need express no opinion) contains
an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in
the light of the circumstances under which they were made,
not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or any contracts
or other documents of a character required to be filed as an
exhibit to the Registration Statement or required to be
incorporated by reference into the Prospectus as amended or
supplemented or required to be described in the Registration
Statement or the Prospectus as amended or supplemented which
are not filed or incorporated by reference or described as
required;
(d) On the date of the Pricing Agreement for such Designated
Securities at a time prior to the execution of the Pricing Agreement
with respect to such Designated Securities and at the Time of Delivery
for such Designated Securities, the independent accountants of the
Company who have certified the financial statements of the Company and
its subsidiaries included or incorporated by reference in the
Registration Statement shall have furnished to the Representatives a
letter, dated the effective date of the Registration Statement or the
date of the most recent report filed with the Commission containing
financial statements and incorporated by reference in the Registration
Statement, if the date of such report is later than such effective
date, and a letter dated such Time of Delivery, respectively, to the
effect set forth in Annex II hereto, and with respect to such letter
dated such Time of Delivery, as to such other matters as the
Representatives may reasonably request and in form and substance
satisfactory to the Representatives (the executed copy of the letter
delivered prior to the execution of this Agreement is attached as Annex
l(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of delivery is attached as Annex l(b)
hereto);
(e) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus as
amended prior to the date of the Pricing Agreement relating to the
Designated Securities any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or
12
<PAGE> 13
decree, otherwise than as set forth or contemplated in the Prospectus
as amended prior to the date of the Pricing Agreement relating to the
Designated Securities, and (ii) since the respective dates as of which
information is given in the Prospectus as amended prior to the date of
the Pricing Agreement relating to the Designated Securities there shall
not have been any change in the capital stock (except pursuant to the
exercise of stock options authorized and issued at the date hereof and
purchases by employees of the Company pursuant to the Company's
employee stock purchase plan as existing on the date hereof) or
increase in long-term debt of the Company or any of its subsidiaries in
excess of $10,000,000 or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus as amended prior to the date of the
Pricing Agreement relating to the Designated Securities, the effect of
which, in any such case described in Clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Designated Securities on the terms and in the manner
contemplated in the Prospectus as first amended or supplemented
relating to the Designated Securities;
(f) On or after the date of the Pricing Agreement relating to
the Designated Securities (i) no downgrading shall have occurred in the
rating accorded the Company's debt securities or preferred stock by any
"nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the
Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities or
preferred stock;
(g) On or after the date of the Pricing Agreement relating to
the Designated Securities there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension
or material limitation in trading in the Company's securities on the
New York Stock Exchange; (iii) a general moratorium on commercial
banking activities declared by either Federal or New York State
authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of
a national emergency or war, if the effect of any such event specified
in this clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to-proceed with the public offering or the
delivery of the Designated Securities on the terms and in the manner
contemplated in the Prospectus as first amended or supplemented
relating to the Designated Securities;
(h) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
and
(i) The Company shall have furnished or caused to be furnished
to the Representatives at the Time of Delivery for the Designated
Securities a certificate or certificates of officers of the Company
satisfactory to the Representatives as to the accuracy of the
representations and warranties of the Company herein at and as of
13
<PAGE> 14
such Time of Delivery, as to the performance by the Company of all of
its obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (e) of
this Section and as to such other matters as the Representatives may
reasonably request.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any preliminary prospectus
supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Securities, or
any amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as
such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, any preliminary prospectus supplement, the
Registration Statement, the Prospectus as amended or supplemented and
any other prospectus relating to the Securities, or any such amendment
or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter of Designated
Securities through the Representatives expressly for use in the
Prospectus as amended or supplemented relating to such Securities.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the
Company may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus,
any preliminary prospectus supplement, the Registration Statement, the
Prospectus as amended or supplemented and any other prospectus relating
to the Securities, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in any Preliminary Prospectus,
any preliminary prospectus supplement, the Registration Statement, the
Prospectus as amended or supplemented and any other prospectus relating
to the Securities, or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by
such Underwriter through the Representatives expressly for use therein;
and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
14
<PAGE> 15
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify
the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and, after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of other counsel or
any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to,
any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified party is an actual or potential party to such action or
claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to
act. by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters of the Designated
Securities on the other from the offering of the Designated Securities
to which such loss, claim, damage or liability (or action in respect
thereof) relates. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company on the one hand and the
Underwriters of the Designated Securities on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received
by the Company on the one hand and such Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from
such offering (before deducting expenses) received by the Company bear
to the total underwriting discounts and commissions received by
15
<PAGE> 16
such Underwriters. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one
hand or such Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant
to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the applicable Designated Securities
underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11 (f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of the
Underwriters of Designated Securities in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations with respect to such Securities and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if
any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in
addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to
each officer and director of the Company and to each person, if any,
who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Designated Securities which it has agreed to purchase under the
Pricing Agreement relating to such Designated Securities, the
Representatives may in their discretion arrange for themselves or
another party or other parties to purchase such Designated Securities
on the terms contained herein. If within thirty-six hours after such
default by any Underwriter the Representatives do not arrange for the
purchase of such Designated Securities, then the Company shall be
entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to the
Representatives to purchase such Designated Securities on such terms.
In the event that, within the respective prescribed period, the
Representatives notify the Company that they have so arranged for the
purchase of such Designated Securities, or the Company notifies the
Representatives that it has so arranged for the purchase of such
Designated Securities, the Representatives or
16
<PAGE> 17
the Company shall have the right to postpone the Time of Delivery for
such Designated Securities for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus as amended or supplemented, or
in any other documents or arrangements, and the Company agrees to file
promptly any amendments or supplements to the Registration Statement or
the Prospectus which in the opinion of the Representatives may thereby
be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like
effect as if such person had originally been a party to the Pricing
Agreement with respect to such Designated Securities.
(b) If, after giving effect to any arrangements for the
purchase of the Designated Securities of a defaulting Underwriter or
Underwriters by the Representatives and the Company as provided in
subsection (a) above, the aggregate principal amount of such Designated
Securities which remains unpurchased does not exceed one-eleventh of
the aggregate principal amount of the Designated Securities, then the
Company shall have the right to require each non-defaulting Underwriter
to purchase the principal amount of Designated Securities which such
Underwriter agreed to purchase under the Pricing Agreement relating to
such Designated Securities and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the
principal amount of Designated Securities which such Underwriter agreed
to purchase under such Pricing Agreement) of the Designated Securities
of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing, herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Designated Securities of a defaulting Underwriter or
Underwriters by the Representatives and the Company as provided in
subsection (a) above, the aggregate principal amount of Designated
Securities which remains unpurchased exceeds one-eleventh of the
aggregate principal amount of the Designated Securities. as referred to
in subsection (b) above, or if the Company shall not exercise the right
described in subsection (b) above to require non-defaulting
Underwriters to purchase Designated Securities of a defaulting
Underwriter or Underwriters, then the Pricing Agreement relating to
such Designated Securities shall thereupon terminate, without liability
on the part of any non-defaulting Underwriter or the Company, except
for the expenses to be borne by the Company and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Securities.
17
<PAGE> 18
11. If any Pricing Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Underwriter
with respect to the Designated Securities covered by such Pricing Agreement
except as provided in Sections 6 and 8 hereof; but, if for any other reason
Designated Securities are not delivered by or on behalf of the Company as
provided herein, the Company will reimburse the Underwriters through the
Representatives for all out-of-pocket expenses approved in writing by the
Representatives, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of such Designated Securities, but the Company shall then be under no
further liability to any Underwriter with respect to such Designated Securities
except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, the Representatives of the Underwriters
of Designated Securities shall act on behalf of each of such Underwriters, and
the parties hereto shall be entitled to act and rely upon any statement,
request, notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement and each Pricing Agreement shall be binding upon,
and inure solely to the benefit of, the Underwriters, the Company and, to the
extent provided in Sections 8, and 10 hereof, the officers and directors of the
Company and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement or any such Pricing Agreement. No purchaser of any of the Securities
from any Underwriter shall be deemed a successor or assign by reason merely of
such purchase.
14. Time shall be of the essence of each Pricing Agreement. As used
herein, "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement and each Pricing Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
16. This Agreement and each Pricing Agreement may be executed by any
one or more of the parties hereto and thereto in any number of counterparts,
each of which shall be deemed to be an original, but all such respective
counterparts shall together constitute one and the same instrument.
18
<PAGE> 19
If the foregoing is in accordance with your understanding, please sign
and return to us six counterparts hereof.
Very truly yours,
Commercial Metals Company
By:____________________________________
Name:
Title:
Accepted as of the date hereof: By:_____________________________
Goldman, Sachs & Co. Name
Title
By:___________________________________
Goldman, Sachs & Co.
BancAmerica Robertson Stephens
By:___________________________________
Name:
Title:
Chase Securities Inc.
By:___________________________________
Name:
Title:
Lehman Brothers
By:___________________________________
Name:
Title:
Morgan Stanley & Co. Incorporated
By:___________________________________
Name:
Title:
19
<PAGE> 20
Pricing Agreement
Goldman, Sachs & Co.
BancAmerica Robertson Stephens
Chase Securities Inc.
Lehman Brothers
Morgan Stanley & Co. Incorporated
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004.
, 1998
Ladies and Gentlemen:
Commercial Metals Company, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein and in the
Underwriting Agreement, dated ______________, 1998 (the "Underwriting
Agreement"), between the Company on the one hand and Goldman, Sachs & Co.,
BancAmerica Robertson Stephens, Chase Securities Inc., Lehman Brothers and
Morgan Stanley & Co. Incorporated, on the other hand, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") the Securities
specified in Schedule II hereto (the Designated Securities"). Each of the
provisions of the Underwriting Agreement is incorporated herein by reference in
its entirety, and shall be deemed to be a part of this Agreement to the same
extent as if such provisions had been set forth in full herein; and each of the
representations and warranties set forth therein shall be deemed to have been
made at and as of the date of this Pricing Agreement, except that each
representation and warranty which refers to the Prospectus in Section 2 of the
Underwriting Agreement shall be deemed to be a representation or warranty as of
the date of the Underwriting Agreement in relation to the Prospectus (as therein
defined), and also a representation and warranty as of the date of this Pricing
Agreement in relation to the Prospectus as amended or supplemented relating to
the Designated Securities which are the subject of this Pricing Agreement. Each
reference to the Representatives herein and in the provisions of the
Underwriting Agreement so incorporated by reference shall be deemed to refer to
you. Unless otherwise defined herein, terms defined in the Underwriting
Agreement are used herein as therein defined. The Representatives designated to
act on behalf of the Representatives and on behalf of each of the Underwriters
of the Designated Securities pursuant to Section 12 of the Underwriting
Agreement and the address of the Representatives referred to in such Section 12
are set forth at the end of Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the time and place
and at the purchase price to the Underwriters set forth in Schedule II hereto,
the principal amount of Designated Securities set forth opposite the name of
such Underwriter in Schedule I hereto.
<PAGE> 21
If the foregoing is in accordance with your understanding, please sign
and return to us six counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitutes a binding agreement between each of the
Underwriters and the Company. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is or will be pursuant to the
authority set forth in a form of Agreement among Underwriters, the form of which
shall be submitted to the Company for examination upon request, but without
warranty on the part of the Representatives as to the authority of the signers
thereof.
Very truly yours,
Commercial Metals Company
By:____________________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
By:___________________________________
Goldman, Sachs & Co.
BancAmerica Robertson Stephens
By:___________________________________
Name:
Title:
Chase Securities Inc.
By:___________________________________
Name:
Title:
Lehman Brothers
By:___________________________________
Name:
Title:
Morgan Stanley & Co. Incorporated
By:___________________________________
Name:
Title:
2
<PAGE> 22
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Designated
Securities to be
Purchased
---------------
Underwriter
-----------
<S> <C>
Goldman, Sachs & Co. $
BancAmerica Robertson Stephens $
Chase Securities Inc. $
Lehman Brothers $
Morgan Stanley & Co. Incorporated $
Total $
================
</TABLE>
3
<PAGE> 23
SCHEDULE II:
Title of Designated Securities:
Aggregate principal amount:
[$]
Price to Public:
% of the principal amount of the Designated Securities, plus accrued
interest [, if any,] from to and accrued amortization [, if
any,] from to
Purchase Price by Underwriters:
% of the principal amount of the Designated Securities, plus accrued
interest from to [and accrued amortization [, if any,]
from to ]
Form of Designated Securities:
Book-entry only form represented by one or more global securities
deposited with The Depository Trust Company ("DTC") or its designated
custodian, to be made available for checking by the Representatives at
least twenty-four hours prior to the Time of Delivery at the office of
DTC.
Specified funds for payment of purchase price:
New York Clearing House (same day) funds
Time of Delivery:
a.m. (New York City time), , 1998
Indenture:
Indenture dated _______________, 1998, between the Company and The
Chase Manhattan Bank, N.A., as Trustee
Maturity:
Interest Rate:
Interest Payment Dates:
[months and dates, commencing ___________________, 19___]
Redemption Provisions:
[No provisions for redemption]
4
<PAGE> 24
Sinking Fund Provisions:
[No sinking fund provisions]
Defeasance provisions:
Closing location for delivery of Designated Securities:
Additional Closing Conditions:
Names and addresses of Representatives:
Designated Representatives:
Address for Notices, etc.:
5
<PAGE> 1
DRAFT OF AUGUST 13, 1998
COMMERCIAL METALS COMPANY
$100,000,000
MEDIUM-TERM NOTES, SERIES A
DISTRIBUTION AGREEMENT
____________, 1998
Goldman, Sachs & Co.
BancAmerica Robertson Stephens
Chase Securities Inc.
Lehman Brothers
Morgan Stanley & Co. Incorporated
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Commercial Metals Company, a Delaware corporation (the "Company"), proposes
to issue and sell from time to time its Medium-Term Notes (the "Securities") in
an aggregate amount up to $100,000,000 and agrees with you (the "Agent") as set
forth in this Agreement.
Subject to the terms and conditions stated herein and to the reservation by
the Company of the right to sell Securities directly on its own behalf, the
Company hereby (i) appoints each Agent as an agent of the Company for the
purpose of soliciting and receiving offers to purchase Securities from the
Company pursuant to Section 2(a) hereof and (ii) agrees that, except as
otherwise contemplated herein, whenever it determines to sell Securities
directly to any Agent as principal, it will enter into a separate agreement
(each, a "Terms Agreement"), substantially in the form of Annex I hereto,
relating to such sale in accordance with Section 2(b) hereof. This
Distribution Agreement shall not be construed to create either an obligation on
the part of the Company to sell any Securities or an obligation of the Agents
to purchase Securities as principal.
The Securities will 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"). The Securities shall have the maturity ranges,
interest rates, if any, redemption provisions and other terms set forth in the
Prospectus referred to below as it may be amended or supplemented from time to
time. The Securities will be issued, and the terms and rights thereof
established, from time to time by the Company in accordance with the Indenture.
I-1
<PAGE> 2
1. The Company represents and warrants to, and agrees with, each Agent
that:
(a) A registration statement on Form S-3 (File No. 33-________) in
respect of the Securities has been filed with the Securities and Exchange
Commission (the "Commission"); such registration statement and any
post-effective amendment thereto, each in the form heretofore delivered or
to be delivered to such Agent, excluding exhibits to such registration
statement, but including all documents incorporated by reference in the
prospectus included therein, have been declared effective by the Commission
in such form; no other document with respect to such registration statement
or document incorporated by reference therein has heretofore been filed or
transmitted for filing with the Commission (other than the prospectuses, if
any, filed pursuant to Rule 424(b) of the rules and regulations of the
Commission under the Act, each in the form heretofore delivered to the
Agents); and no stop order suspending the effectiveness of such
registration statement has been issued and no proceeding for that purpose
has been initiated or threatened by the Commission (any preliminary base
prospectus or preliminary supplemental prospectus included in such
registration statement or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Act, are
hereinafter called a "Preliminary Prospectus"; the various parts of such
registration statement, including all exhibits thereto and the documents
incorporated by reference in the prospectus contained in the registration
statement at the time such part of the registration statement became
effective but excluding Form T-1, each as amended at the time such part of
the registration statement became effective, is hereinafter collectively
called the "Registration Statement"; the prospectus (including, if
applicable, any prospectus supplement) relating to the Securities, in the
form in which it has most recently been filed, or transmitted for filing,
with the Commission on or prior to the date of this Agreement, is
hereinafter called the "Prospectus"; any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to the
applicable form under the Act, as of the date of such Preliminary
Prospectus or Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or the Prospectus,
including any supplement to the Prospectus that sets forth only the terms
of a particular issue of the Securities (a "Pricing Supplement"), shall be
deemed to refer to and include any documents filed after the date of such
Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated therein by reference; any reference to any amendment to the
Registration Statement shall be deemed to refer to and include any annual
report of the Company filed pursuant to Section 13(a) or 15(d) of the
Exchange Act after the effective date of the Registration Statement that is
incorporated by reference in the Registration Statement; and any reference
to the Prospectus as amended or supplemented shall be deemed to refer to
and include the Prospectus as amended or supplemented (including by the
applicable Pricing Supplement filed in accordance with Section 4(a) hereof)
in relation to Securities to be sold pursuant to this Agreement, in the
form filed or transmitted for filing with the Commission pursuant to Rule
424(b) under the Act and in accordance with Section 4(a) hereof, including
any documents incorporated by reference therein as of the date of such
filing);
(b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus, or any further amendment or supplement
thereto, when such documents become effective or are filed with the
Commission, as the case may be, will conform
I-2
<PAGE> 3
in all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(c) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission thereunder
and do not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by any Agent expressly for use in the Prospectus as amended or supplemented
to relate to a particular issuance of Securities;
(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock (except for
changes pursuant to the exercise of qualified stock options authorized and
issued at the date hereof and purchases by employees of the Company
pursuant to the Company's employee stock purchase plan existing on the date
hereof) or any increase in long-term debt of the Company or any of its
subsidiaries in excess of $10,000,000, or any material adverse change, or
any development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(e) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus;
(f) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable;
(g) The Securities have been duly authorized, and, when issued
pursuant to the Indenture and delivered pursuant to this Agreement and any
Terms Agreement, will have been duly executed, authenticated, issued and
delivered and will constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture, which will be
substantially in the form filed as an exhibit to the Registration
Statement; the Indenture has been duly authorized and duly qualified under
the Trust Indenture Act and constitutes a valid and legally binding
instrument, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles; and the Indenture conforms and the
I-3
<PAGE> 4
Securities of any particular issuance of Securities will conform to the
descriptions thereof contained in the Prospectus as amended or supplemented
to relate to such issuance of Securities;
(h) The issue and sale of the Securities, the compliance by the
Company with all of the provisions of the Securities, the Indenture, this
Agreement and any Terms Agreement, and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the property or assets of the
Company is subject (except for such breaches, violations or defaults that
would not have a material adverse effect on the financial position or
results of operations of the Company), nor will such action result in any
violation of the provisions of the Certificate of Incorporation, as
amended, or the By-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with any court or
governmental agency or body is required for the solicitation of offers to
purchase Securities, the issue and sale of the Securities or the
consummation by the Company of the other transactions contemplated by this
Agreement, any Terms Agreement or the Indenture, except such as have been,
or will have been prior to the Commencement Date (as defined in Section 3
hereof), obtained under the Act or the Trust Indenture Act and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
solicitation by such Agent of offers to purchase Securities from the
Company and with purchases of Securities by such Agent as principal, as the
case may be, in each case in the manner contemplated hereby;
(i) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or By-laws or in default in the
performance or observance of any material obligation, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease
or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound;
(j) The statements set forth in the Prospectus under the caption
"Description of Debt Securities" and "Description of Notes", insofar as
they purport to constitute a summary of the terms of the Securities, under
the caption "Taxation", and under the caption "Supplemental Plan of
Distribution", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate, complete and fair;
(k) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or to which any property of the Company or any of
its subsidiaries is subject, which, if determined adversely to the Company
or any of its subsidiaries, would individually or in the aggregate have a
material adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(l) The Company is not, and after giving effect to each offering and
sale of the Securities will not be, an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
I-4
<PAGE> 5
(m) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(n) Immediately after any sale of Securities by the Company hereunder
or under any Terms Agreement, the aggregate amount of Securities which
shall have been issued and sold by the Company hereunder or under any Terms
Agreement and of any debt securities of the Company (other than such
Securities) that shall have been issued and sold pursuant to the
Registration Statement will not exceed the amount of debt securities
registered under the Registration Statement;
(o) Deloitte & Touche LLP who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder; and
(p) Other than as set forth in the Registration Statement, the
Company and its subsidiaries (i) are in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, individually
or in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
2. (a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the
Agent hereby agrees, as agent of the Company, to use its reasonable efforts
to solicit and receive offers to purchase the Securities from the Company
upon the terms and conditions set forth in the Prospectus as amended or
supplemented from time to time. So long as this Agreement shall remain in
effect with respect to any Agent, the Company shall not, without the
consent of such Agent, solicit or accept offers to purchase, or sell, any
debt securities with a maturity at the time of original issuance of 9
months to [ ] except pursuant to this Agreement, any Terms Agreement,
or except pursuant to a private placement not constituting a public
offering under the Act or except in connection with a firm commitment
underwriting pursuant to an underwriting agreement that does not provide
for a continuous offering of medium-term debt securities. However, the
Company reserves the right to sell, and may solicit and accept offers to
purchase, Securities directly on its own behalf in transactions with
persons other than broker-dealers, and, in the case of any such sale not
resulting from a solicitation made by any Agent, no commission will be
payable with respect to such sale. These provisions shall not limit
Section 4(f) hereof or any similar provision included in any Terms
Agreement.
Procedural details relating to the issue and delivery of Securities,
the solicitation of offers to purchase Securities and the payment in each
case therefor shall be as set forth in the Administrative Procedure
attached hereto as Annex II as it may be amended from time to time by
written agreement between the Agent and the Company (the "Administrative
Procedure"). The provisions of the Administrative Procedure shall apply to
all transactions contemplated hereunder other than those made pursuant to a
Terms Agreement. Each Agent and the Company
I-5
<PAGE> 6
agree to perform the respective duties and obligations specifically
provided to be performed by each of them in the Administrative Procedure.
The Company will furnish to the Trustee a copy of the Administrative
Procedure as from time to time in effect.
The Company reserves the right, in its sole discretion, to instruct
the Agent to suspend at any time, for any period of time or permanently,
the solicitation of offers to purchase the Securities. As soon as
practicable, but in any event not later than one business day in New York
City, after receipt of notice from the Company, the Agent will suspend
solicitation of offers to purchase Securities from the Company until such
time as the Company has advised the Agent that such solicitation may be
resumed. During such period, the Company shall not be required to comply
with the provisions of Sections 4(h), 4(i), 4(j) and 4(k). Upon advising
the Agent that such solicitation may be resumed, however, the Company shall
simultaneously provide the documents required to be delivered by Sections
4(h), 4(i), 4(j) and 4(k), and the Agent shall have no obligation to
solicit offers to purchase the Securities until such documents have been
received by the Agent. In addition, any failure by the Company to comply
with its obligations hereunder, including without limitation its
obligations to deliver the documents required by Sections 4(h), 4(i), 4(j)
and 4(k), shall automatically terminate the Agent's obligations hereunder,
including without limitation its obligations to solicit offers to purchase
the Securities hereunder as agent or to purchase Securities hereunder as
principal.
The Company agrees to pay each Agent a commission, at the time of
settlement of any sale of a Security by the Company as a result of a
solicitation made by such Agent, in an amount equal to the
I-6
<PAGE> 7
following applicable percentage of the principal amount of such Security
sold:
<TABLE>
<CAPTION>
Commission
(percentage of
aggregate
principal amount
Range of Maturities of Securities sold)
------------------- -------------------
<S> <C>
From 9 months to less than 1 year .125%
From 1 year to less than 18 months .150%
From 18 months to less than 2 years .200%
From 2 years to less than 3 years .250%
From 3 years to less than 4 years .350%
From 4 years to less than 5 years .450%
From 5 years to less than 6 years .500%
From 6 years to less than 7 years .550%
From 7 years to less than 10 years .600%
From 10 years to less than 15 years .625%
From 15 years to less than 20 years .675%
From 20 years to 30 years .750%
From more than 30 years to less than 50 years .875%
50 years and more 1.000%
</TABLE>
(b) Each sale of Securities to any Agent as principal shall be made
in accordance with the terms of this Agreement and (unless the Company and
such Agent shall otherwise agree) a Terms Agreement which will provide for
the sale of such Securities to, and the purchase thereof by, such Agent; a
Terms Agreement may also specify certain provisions relating to the
reoffering of such Securities by such Agent; the commitment of any Agent to
purchase Securities as principal, whether pursuant to any Terms Agreement
or otherwise, shall be deemed to have been made on the basis of the
representations and warranties of the Company herein contained and shall be
subject to the terms and conditions herein set forth; each Terms Agreement
shall specify the principal amount of Securities to be purchased by any
Agent pursuant thereto, the price to be paid to the Company for such
Securities, any provisions relating to rights of, and default by,
underwriters acting together with such Agent in the reoffering of the
Securities and the time and date and place of delivery of and payment for
such Securities; and such Terms Agreement shall also specify any
requirements for opinions of counsel, accountants' letters and officers'
certificates pursuant to Section 4 hereof. Each Agent proposes to offer
Securities purchased by it as principal for sale at prevailing market
prices or prices related thereto at the time of sale, which may be equal
to, greater than or less than the price at which such Securities are
purchased by such Agent from the Company.
For each sale of Securities to an Agent as principal that is not made
pursuant to a Terms Agreement, the procedural details relating to the issue
and delivery of such Securities and payment therefor shall be as set forth
in the Administrative Procedure. For each such sale of
I-7
<PAGE> 8
Securities to an Agent as principal that is not made pursuant to a Terms
Agreement, the Company agrees to pay such Agent a commission (or grant an
equivalent discount) as provided in Section 2(a) hereof and in accordance
with the schedule set forth therein.
Each time and date of delivery of and payment for Securities to be
purchased by an Agent as principal, whether set forth in a Terms Agreement
or in accordance with the Administrative Procedure, is referred to herein
as a "Time of Delivery".
(c) Each Agent agrees, with respect to any Security denominated in a
currency other than U.S. dollars, as agent, directly or indirectly, not to
solicit offers to purchase, and as principal under any Terms Agreement or
otherwise, directly or indirectly, not to offer, sell or deliver, such
Security in, or to residents of, the country issuing such currency, except
as permitted by applicable laws, regulations, rules, decrees or orders of
any governmental body.
3. The documents required to be delivered pursuant to Section 6 hereof on
the Commencement Date (as defined below) shall be delivered to the Agents at
the offices of New York, New York, at 11:00 a.m., New York City time, on the
date of this Agreement, which date and time of such delivery may be postponed
by agreement between the Agents and the Company but in no event shall be later
than the day prior to the date on which solicitation of offers to purchase
Securities is commenced or on which any Terms Agreement is executed (such time
and date being referred to herein as the "Commencement Date").
4. The Company covenants and agrees with each Agent:
(a) (i) To make no amendment or supplement to the Registration
Statement or the Prospectus (A) prior to the Commencement Date which shall
be disapproved by any Agent promptly after reasonable notice thereof or (B)
after the date of any Terms Agreement or other agreement by an Agent to
purchase Securities as principal and prior to the related Time of Delivery
which shall be disapproved by any Agent party to such Terms Agreement or so
purchasing as principal promptly after reasonable notice thereof (except
for filings of the Company on Form 10-K and Form 10-Q under the Exchange
Act); (ii) to prepare, with respect to any Securities to be sold through or
to such Agent pursuant to this Agreement, a Pricing Supplement with respect
to such Securities in a form previously approved by such Agent and to file
such Pricing Supplement pursuant to Rule 424(b)(3) under the Act not later
than the close of business of the Commission on the fifth business day
after the date on which such Pricing Supplement is first used; (iii) to
make no amendment or supplement to the Registration Statement or
Prospectus, other than any Pricing Supplement, at any time prior to having
afforded each Agent a reasonable opportunity to review and comment thereon;
(iv) to file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Securities, and during such same period to advise such Agent,
promptly after the Company receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or has become
effective or any supplement to the Prospectus or any amended Prospectus has
been filed with the Commission, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
prospectus relating to the Securities, of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such purpose, or
of any request by the Commission for the amendment or supplement of the
Registration Statement or Prospectus or for additional information; and (v)
in the event of the issuance of any such stop order or of any such order
preventing or suspending the use of any
I-8
<PAGE> 9
such prospectus or suspending any such qualification, to use promptly its
best efforts to obtain its withdrawal;
(b) Promptly from time to time to take such action as such Agent may
reasonably request to qualify the Securities for offering and sale under
the securities laws of such jurisdictions as such Agent may request and to
comply with such laws so as to permit the continuance of sales and dealings
therein for as long as may be necessary to complete the distribution or
sale of the Securities; provided, however, that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time on the business day next
succeeding the date of this Agreement and from time to time, to furnish
such Agent with copies of the Registration Statement and each amendment
thereto, with copies of the Prospectus as each time amended or
supplemented, other than any Pricing Supplement (except as provided in the
Administrative Procedure), in the form in which it is filed with the
Commission pursuant to Rule 424 under the Act, and with copies of the
documents incorporated by reference therein, the copies of each of the
above-referenced documents to be delivered in New York City and in such
quantities as such Agent may reasonably request; and, if the delivery of a
prospectus is required at any time in connection with the offering or sale
of the Securities (including Securities purchased from the Company by such
Agent as principal) and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus or
to file under the Exchange Act any document incorporated by reference in
the Prospectus in order to comply with the Act, the Exchange Act or the
Trust Indenture Act, to notify such Agent and request such Agent, in its
capacity as agent of the Company, to suspend solicitation of offers to
purchase Securities from the Company (and, if so notified, such Agent shall
cease such solicitations as soon as practicable, but in any event not later
than one business day later); and if the Company shall decide to amend or
supplement the Registration Statement or the Prospectus as then amended or
supplemented, to so advise such Agent promptly by telephone (with
confirmation in writing) and to prepare and cause to be filed promptly with
the Commission an amendment or supplement to the Registration Statement or
the Prospectus as then amended or supplemented that will correct such
statement or omission or effect such compliance; provided, however, that if
during such same period such Agent continues to own Securities purchased
from the Company by such Agent as principal or such Agent is otherwise
required to deliver a prospectus in respect of transactions in the
Securities, the Company shall promptly prepare and file with the Commission
such an amendment or supplement;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) So long as any Securities are outstanding, to furnish to such
Agent copies of all reports or other communications (financial or other)
furnished to stockholders, and deliver to such Agent (i) as soon as they
are available, copies of any reports and financial statements furnished to
or
I-9
<PAGE> 10
filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the Company
as such Agent may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(f) That, from the date of any Terms Agreement with such Agent or
other agreement by such Agent to purchase Securities as principal and
continuing to and including the later of (i) the termination of the trading
restrictions for the Securities purchased thereunder, as notified to the
Company by such Agent and (ii) the related Time of Delivery, not to offer,
sell, contract to sell or otherwise dispose of any debt securities of the
Company which both mature more than 9 months after such Time of Delivery
and are substantially similar to the Securities, without the prior written
consent of such Agent;
(g) That each acceptance by the Company of an offer to purchase
Securities hereunder (including any purchase by such Agent as principal not
pursuant to a Terms Agreement), and each execution and delivery by the
Company of a Terms Agreement with such Agent, shall be deemed to be an
affirmation to such Agent that the representations and warranties of the
Company contained in or made pursuant to this Agreement are true and
correct as of the date of such acceptance or of such Terms Agreement, as
the case may be, as though made at and as of such date, and an undertaking
that such representations and warranties will be true and correct as of the
settlement date for the Securities relating to such acceptance or as of the
Time of Delivery relating to such sale, as the case may be, as though made
at and as of such date (except that such representations and warranties
shall be deemed to relate to the Registration Statement and the Prospectus
as amended and supplemented relating to such Securities);
(h) That reasonably in advance of each time the Registration
Statement or the Prospectus shall be amended or supplemented (other than by
a Pricing Supplement), each time a document filed under the Act or the
Exchange Act is incorporated by reference into the Prospectus, and each
time the Company sells Securities to such Agent as principal pursuant to a
Terms Agreement and such Terms Agreement specifies the delivery of an
opinion or opinions by Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel
to the Agents, as a condition to the purchase of Securities pursuant to
such Terms Agreement, the Company shall furnish to such counsel such papers
and information as they may reasonably request to enable them to furnish to
such Agent the opinion or opinions referred to in Section 6(b) hereof;
(i) That each time the Registration Statement or the Prospectus shall
be amended or supplemented (other than by a Pricing Supplement), each time
a document filed under the Act or the Exchange Act is incorporated by
reference into the Prospectus and each time the Company sells Securities to
such Agent as principal pursuant to a Terms Agreement and such Terms
Agreement specifies the delivery of an opinion under this Section 4(i) as a
condition to the purchase of Securities pursuant to such Terms Agreement,
the Company shall furnish or cause to be furnished forthwith to such Agent
a written opinion of Haynes and Boone, L.L.P., counsel for the Company, or
other counsel for the Company satisfactory to such Agent (including,
without limitation, general counsel of the Company), dated the date of such
amendment, supplement, incorporation or Time of Delivery relating to such
sale, as the case may be, in form satisfactory to such Agent, to the effect
that such Agent may rely on the opinion of such counsel referred to in
Section 6(c) hereof which was last furnished to such Agent to the same
extent as though it were dated the date of such letter authorizing reliance
(except that the statements in such last
I-10
<PAGE> 11
opinion shall be deemed to relate to the Registration Statement and the
Prospectus as amended and supplemented to such date) or, in lieu of such
opinion, an opinion of the same tenor as the opinion of such counsel
referred to in Section 6(c) hereof but modified to relate to the
Registration Statement and the Prospectus as amended and supplemented to
such date;
(j) That each time the Registration Statement or the Prospectus shall
be amended or supplemented and each time that a document filed under the
Act or the Exchange Act is incorporated by reference into the Prospectus,
in either case to set forth financial information included in or derived
from the Company's consolidated financial statements or accounting records,
and each time the Company sells Securities to such Agent as principal
pursuant to a Terms Agreement and such Terms Agreement specifies the
delivery of a letter under this Section 4(j) as a condition to the purchase
of Securities pursuant to such Terms Agreement, the Company shall cause the
independent certified public accountants who have certified the financial
statements of the Company and its subsidiaries included or incorporated by
reference in the Registration Statement forthwith to furnish such Agent a
letter, dated the date of such amendment, supplement, incorporation or Time
of Delivery relating to such sale, as the case may be, in form satisfactory
to such Agent, of the same tenor as the letter referred to in Section 6(d)
hereof but modified to relate to the Registration Statement and the
Prospectus as amended or supplemented to the date of such letter, with such
changes as may be necessary to reflect changes in the financial statements
and other information derived from the accounting records of the Company,
to the extent such financial statements and other information are available
as of a date not more than five business days prior to the date of such
letter; provided, however, that, with respect to any financial information
or other matter, such letter may reconfirm as true and correct at such date
as though made at and as of such date, rather than repeat, statements with
respect to such financial information or other matter made in the letter
referred to in Section 6(d) hereof which was last furnished to such Agent;
(k) That each time the Registration Statement or the Prospectus shall
be amended or supplemented (other than by a Pricing Supplement), each time
a document filed under the Act or the Exchange Act is incorporated by
reference into the Prospectus and each time the Company sells Securities to
such Agent as principal and the applicable Terms Agreement specifies the
delivery of a certificate under this Section 4(k) as a condition to the
purchase of Securities pursuant to such Terms Agreement, the Company shall
furnish or cause to be furnished forthwith to such Agent a certificate,
dated the date of such supplement, amendment, incorporation or Time of
Delivery relating to such sale, as the case may be, in such form and
executed by such officers of the Company as shall be satisfactory to such
Agent, to the effect that the statements contained in the certificates
referred to in Section 6(i) hereof which were last furnished to such Agent
are true and correct at such date as though made at and as of such date
(except that such statements shall be deemed to relate to the Registration
Statement and the Prospectus as amended and supplemented to such date) or,
in lieu of such certificate, certificates of the same tenor as the
certificates referred to in said Section 6(i) but modified to relate to the
Registration Statement and the Prospectus as amended and supplemented to
such date; and
(l) To offer to any person who has agreed to purchase Securities from
the Company as the result of an offer to purchase solicited by such Agent
the right to refuse to purchase and pay for such Securities if, on the
related settlement date fixed pursuant to the Administrative Procedure, any
condition set forth in Section 6(a), 6(e), 6(f) or 6(g) hereof shall not
have been satisfied (it being understood that the reasonable judgment of
such person with respect to the impracticability or inadvisability of such
purchase of Securities shall be substituted, for purposes of this Section
4(l), for the respective judgments of an Agent with respect to certain
matters referred to in such
I-11
<PAGE> 12
Sections 6(e) and 6(g), and that such Agent shall have no duty or
obligation whatsoever to exercise the judgment permitted under such
Sections 6(e) and 6(g) on behalf of any such person).
5. The Company covenants and agrees with each Agent that the Company will
pay or cause to be paid the following: (i) the fees, disbursements and expenses
of the Company's counsel and accountants in connection with the registration of
the Securities under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus, the Prospectus and any Pricing Supplements and all other amendments
and supplements thereto and the mailing and delivering of copies thereof to
such Agent; (ii) the fees, disbursements and expenses of counsel for the Agents
in connection with the establishment of the program contemplated hereby, any
opinions to be rendered by such counsel hereunder and under any Terms Agreement
and the transactions contemplated hereunder and under any Terms Agreement;
(iii) the cost of printing, producing or reproducing this Agreement, any Terms
Agreement, any Indenture, any Blue Sky and Legal Investment Memoranda, closing
documents (including any compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Securities;
(iv) all expenses in connection with the qualification of the Securities for
offering and sale under state securities laws as provided in Section 4(b)
hereof, including the fees and disbursements of counsel for the Agents in
connection with such qualification and in connection with the Blue Sky and
legal investment surveys; (v) any fees charged by securities rating services
for rating the Securities; (vi) any filing fees incident to, and the fees and
disbursements of counsel for the Agents in connection with, any required review
by the National Association of Securities Dealers, Inc. of the terms of the
sale of the Securities; (vii) the cost of preparing the Securities; (viii) the
fees and expenses of any Trustee and any agent of any Trustee and any transfer
or paying agent of the Company and the fees and disbursements of counsel for
any Trustee or such agent in connection with any Indenture and the Securities;
(ix) any advertising expenses connected with the solicitation of offers to
purchase and the sale of Securities so long as such advertising expenses have
been approved by the Company; and (x) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. Except as provided in Sections 7
and 8 hereof, each Agent shall pay all other expenses it incurs.
6. The obligation of any Agent, as agent of the Company, at any time
("Solicitation Time") to solicit offers to purchase the Securities and the
obligation of any Agent to purchase Securities as principal, pursuant to any
Terms Agreement or otherwise, shall in each case be subject, in such Agent's
discretion, to the condition that all representations and warranties and other
statements of the Company herein (and, in the case of an obligation of an Agent
under a Terms Agreement, in or incorporated by reference in such Terms
Agreement) are true and correct at and as of the Commencement Date and any
applicable date referred to in Section 4(k) hereof that is prior to such
Solicitation Time or Time of Delivery, as the case may be, and at and as of
such Solicitation Time or Time of Delivery, as the case may be, the condition
that prior to such Solicitation Time or Time of Delivery, as the case may be,
the Company shall have performed all of its obligations hereunder theretofore
to be performed, and the following additional conditions:
(a) (i) With respect to any Securities sold at or prior to
such Solicitation Time or Time of Delivery, as the case may be, the
Prospectus as amended or supplemented (including the Pricing Supplement)
with respect to such Securities shall have been filed with the Commission
pursuant to Rule 424(b) under the Act within the applicable time period
prescribed for such filing by the rules and regulations under the Act and
in accordance with Section 4(a) hereof; (ii) no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and (iii)
I-12
<PAGE> 13
all requests for additional information on the part of the Commission shall
have been complied with to the reasonable satisfaction of such Agent;
(b) Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel to the
Agents, shall have furnished to such Agent (i) such opinion or opinions (a
draft of each such opinion is attached as Annex II(a) hereto), dated the
Commencement Date, with respect to the matters covered in paragraphs (i),
(ii), (iv), (vi), (x), (xi), (xiii) and (xiv) of subsection (c) below, as
well as such other related matters as such Agent may reasonably request,
and (ii) if and to the extent requested by such Agent, with respect to each
applicable date referred to in Section 4(h) hereof that is on or prior to
such Solicitation Time or Time of Delivery, as the case may be, an opinion
or opinions, dated such applicable date, to the effect that such Agent may
rely on the opinion or opinions which were last furnished to such Agent
pursuant to this Section 6(b) to the same extent as though it or they were
dated the date of such letter authorizing reliance (except that the
statements in such last opinion or opinions shall be deemed to relate to
the Registration Statement and the Prospectus as amended and supplemented
to such date) or, in any case, in lieu of such an opinion or opinions, an
opinion or opinions of the same tenor as the opinion or opinions referred
to in clause (i) but modified to relate to the Registration Statement and
the Prospectus as amended and supplemented to such date; and in each case
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Haynes and Boone, L.L.P., counsel for the Company, or
other counsel for the Company satisfactory to such Agent (which may include
the Company's general counsel), shall have furnished to such Agent their
written opinions (a draft of each such opinion is attached as Annex II(b)
hereto), dated the Commencement Date and each applicable date referred to
in Section 4(i) hereof that is on or prior to such Solicitation Time or
Time of Delivery, as the case may be, in form and substance satisfactory to
such Agent, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority
to own its properties and conduct its business as described in the
Prospectus as amended or supplemented;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus as amended or supplemented, and all of the
issued shares of capital stock of the Company, have been duly and
validly authorized and issued and are fully paid and non-assessable;
(iii) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or to which any property of the Company or any of its
subsidiaries is subject which, if determined adversely to the Company
or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and to the best of such counsel's knowledge, no such
proceedings are threatened by governmental authorities or by others;
(iv) This Agreement and any applicable Terms Agreement have
been duly authorized, executed and delivered by the Company;
I-13
<PAGE> 14
(v) The Securities have been duly authorized and executed by
the Company, and when authenticated by the Trustee in accordance with
the terms of the Indenture and delivered to and paid for by the
Agents, will have been duly issued by and delivered by the Company and
will constitute valid and legally binding obligations of the Company
entitled to the benefits provided by the Indenture; and the Indenture
conforms and the Securities will conform to the descriptions thereof
in the Prospectus as amended or supplemented;
(vi) The Indenture has been duly authorized, executed and
delivered by the parties thereto and constitutes a valid and legally
binding instrument, enforceable against the Company in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
Indenture has been duly qualified under the Trust Indenture Act;
(vii) The issue and sale of the Securities, the compliance by
the Company with all of the provisions of the Securities, the
Indenture, this Agreement and any applicable Terms Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Company is a party or by
which the Company is bound or to which any of the property or assets
of the Company is subject, except to the extent that such conflict,
breach or violation will not have a material adverse effect on the
Company or on any of the transactions contemplated hereunder, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation, as amended, of the Company or the
By-laws of the Company or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over the Company or any of its properties;
(viii) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body
is required for the solicitation of offers to purchase Securities, the
issue and sale of the Securities or the consummation by the Company of
the other transactions contemplated by this Agreement, any applicable
Terms Agreement, or the Indenture, except such as have been obtained
under the Act and the Trust Indenture Act and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws and by the National
Association of Securities Dealers, Inc. in connection with the
solicitation by the Agents of offers to purchase Securities from the
Company and with purchases of Securities by an Agent as principal, as
the case may be, in each case in the manner contemplated hereby;
(ix) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws;
(x) The statements set forth in the Prospectus under the
caption "Description of Debt Securities" and "Description of Notes",
insofar as they purport to constitute a summary of the terms of the
Securities, under the caption "United States Taxation", insofar as
they purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair;
I-14
<PAGE> 15
(xi) The Company is not and, after giving effect to the
offering and sale of the Securities, will not be an "investment
company" or an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act;
(xii) The documents incorporated by reference in the Prospectus
(other than the financial statements and financial data and related
schedules therein, if any, as to which such counsel need express no
opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder; and such counsel has no reason to believe that any of such
documents, when they became effective or were so filed, as the case
may be, contained, in the case of a registration statement which
became effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, in the
case of other documents which were filed under the Act or the Exchange
Act with the Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such documents were so filed, not misleading;
(xiii) The Registration Statement and the Prospectus as amended
and supplemented and any further amendments and supplements thereto
made by the Company prior to the date of such opinion (other than the
financial statements and financial data and related schedules, if any,
therein, as to which such counsel need express no opinion) comply as
to form in all material respects with the requirements of the Act and
the Trust Indenture Act and the rules and regulations thereunder; and
(xiv) although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (x) of this Section 6(c), such counsel
has no reason to believe that, as of its effective date, the
Registration Statement or any further amendment or supplement thereto
made by the Company prior to the date of such opinion (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of the date of such opinion, the Prospectus as
amended or supplemented or any further amendment or supplement thereto
made by the Company prior to the date of such opinion (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact necessary to make
the statements therein, in light of the circumstances in which they
were made, not misleading; and they do not know of any amendment to
the Registration Statement required to be filed or any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by reference
into the Prospectus as amended or supplemented or required to be
described in the Registration Statement or the Prospectus as amended
or supplemented which are not filed or incorporated by reference or
described as required;
(d) Not later than 10:00 a.m., New York City time, on the
Commencement Date and on each applicable date referred to in Section 4(j)
hereof that is on or prior to such Solicitation Time or Time of Delivery,
as the case may be, the independent certified public accountants who have
certified the financial statements of the Company and its subsidiaries
included or incorporated by
I-15
<PAGE> 16
reference in the Registration Statement shall have furnished to such Agent
a letter, dated the Commencement Date or such applicable date, as the case
may be, in form and substance satisfactory to such Agent, to the effect set
forth in Annex III hereto; (the executed copy of the letter delivered prior
to the execution of this Agreement is attached as Annex I(a) hereto and a
draft of the form of the letter to be delivered on the effective date of
any post-effective amendment to the Registration Statement and as of each
Time of delivery is attached as Annex I(b) hereto)
(e) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus as amended or
supplemented prior to the date of the Pricing Supplement relating to the
Securities to be delivered at the relevant Time of Delivery any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus as amended or supplemented prior to the
date of the Pricing Supplement relating to the Securities to be delivered
at the relevant Time of Delivery and (ii) since the respective dates as of
which information is given in the Prospectus as amended or supplemented
prior to the date of the Pricing Supplement relating to the Securities to
be delivered at the relevant Time of Delivery there shall not have been any
change in the capital stock (except pursuant to the exercise of stock
options authorized and issued at the date hereof and purchases by employees
of the Company pursuant to the Company's employee stock purchase plan as
existing on the date hereof) or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus as amended or supplemented prior to the date of the Pricing
Supplement relating to the Securities to be delivered at the relevant Time
of Delivery, the effect of which, in any such case described in Clause (i)
or (ii), is in the judgment of such Agent so material and adverse as to
make it impracticable or inadvisable to proceed with the solicitation by
such Agent of offers to purchase Securities from the Company or the
purchase by such Agent of Securities from the Company as principal, as the
case may be, on the terms and in the manner contemplated in the Prospectus
as amended or supplemented prior to the date of the Pricing Supplement
relating to the Securities to be delivered at the relevant Time of
Delivery;
(f) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the Company's securities on the New York
Stock Exchange; (iii) a general moratorium on commercial banking activities
in New York declared by either Federal or New York State authorities; or
(iv) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the effect of any such event specified in this Clause (iv) in the judgment
of such Agent makes it impracticable or inadvisable to proceed with the
solicitation of offers to purchase Securities or the purchase of the
Securities from the Company as principal pursuant to
I-16
<PAGE> 17
the applicable Terms Agreement or otherwise, as the case may be, on the
terms and in the manner contemplated in the Prospectus;
(h) The Company shall have complied with the provisions of Section
4(c) hereof with respect to the furnishing of the documents described
therein on the New York Business Day next succeeding the date of this
Agreement; and
(i) The Company shall have furnished or caused to be furnished to
such Agent certificates of officers of the Company dated the Commencement
Date and each applicable date referred to in Section 4(k) hereof that is on
or prior to such Solicitation Time or Time of Delivery, as the case may be,
in such form and executed by such officers of the Company as shall be
satisfactory to such Agent, as to the accuracy of the representations and
warranties of the Company herein at and as of the Commencement Date or such
applicable date, as the case may be, as to the performance by the Company
of all of its obligations hereunder to be performed at or prior to the
Commencement Date or such applicable date, as the case may be, as to the
matters set forth in subsections (a) and (e) of this Section 6, and as to
such other matters as such Agent may reasonably request.
7. (a) The Company will indemnify and hold harmless each Agent
against any losses, claims, damages or liabilities, joint or several, to
which such Agent may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the Prospectus, the Prospectus as amended or
supplemented or any other prospectus relating to the Securities, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and will reimburse such Agent for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that
the Company shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement,
the Prospectus, the Prospectus as amended or supplemented or any other
prospectus relating to the Securities, or any such amendment or supplement,
in reliance upon and in conformity with written information furnished to
the Company by such Agent expressly for use therein.
(b) Each Agent will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement,
the Prospectus, the Prospectus as amended or supplemented or any other
prospectus relating to the Securities, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement, the Prospectus, the Prospectus as
amended or supplemented or any other prospectus relating to the Securities,
or any such amendment or supplement, in reliance upon and in conformity
with written information furnished to the Company by such Agent expressly
for use therein; and will reimburse the Company for any legal
I-17
<PAGE> 18
or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified
party, effect the settlement or compromise of, or consent to the entry of
any judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to
such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and each Agent on the other from the offering of the Securities to
which such loss, claim, damage or liability (or action in respect thereof)
relates. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party
failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company on the
one hand and each Agent on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and each Agent on the other shall be deemed to be in the same
proportion as the total net proceeds from the sale of Securities (before
deducting expenses) received by the Company bear to the total commissions
or discounts received by such Agent in respect thereof. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading relates to
information supplied by the Company on the one hand or by any Agent on the
other and the parties' relative intent, knowledge, access to information
and opportunity
I-18
<PAGE> 19
to correct or prevent such statement or omission. The Company and each
Agent agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by per capita allocation or
by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), an Agent shall not be required to
contribute any amount in excess of the amount by which the total public
offering price at which the Securities purchased by or through it were sold
exceeds the amount of any damages which such Agent has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company under this Section 7 shall
be in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any,
who controls any Agent within the meaning of the Act; and the obligations
of each Agent under this Section 7 shall be in addition to any liability
which such Agent may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
8. Each Agent, in soliciting offers to purchase Securities from the
Company and in performing the other obligations of such Agent hereunder (other
than in respect of any purchase by an Agent as principal, pursuant to a Terms
Agreement or otherwise), is acting solely as agent for the Company and not as
principal. Each Agent will make reasonable efforts to assist the Company in
obtaining performance by each purchaser whose offer to purchase Securities from
the Company was solicited by such Agent and has been accepted by the Company,
but such Agent shall not have any liability to the Company as a result of this
sentence in the event such purchase is not consummated for any reason. If the
Company shall default on its obligation to deliver Securities to a purchaser
whose offer it has accepted, the Company shall (i) hold each Agent harmless
against any loss, claim or damage arising from or as a result of such default
by the Company and (ii) notwithstanding such default, pay to the Agent that
solicited such offer any commission to which it would be entitled in connection
with such sale.
9. The respective indemnities, agreements, representations, warranties
and other statements by any Agent and the Company set forth in or made pursuant
to this Agreement shall remain in full force and effect regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Agent or any controlling person of any Agent, or the Company, or any
officer or director or any controlling person of the Company, and shall survive
each delivery of and payment for any of the Securities.
10. The provisions of this Agreement relating to the solicitation of
offers to purchase Securities from the Company may be suspended or terminated
at any time by the Company or by any Agent upon the giving of written notice of
such suspension or termination to such Agent or the Company, as the case may
be. In the event of any suspension or termination this Agreement shall remain
in full force and effect with respect to the rights and obligations of any
party which have previously accrued or which relate to Securities which are
already issued, agreed to be issued or the subject of a pending offer at the
time of such suspension or termination and in any event, this
I-19
<PAGE> 20
Agreement shall remain in full force and effect insofar as the fourth paragraph
of Section 2(a), and Sections 4(d), 4(e), 5, 7, 8 and 9 hereof are concerned.
11. Except as otherwise specifically provided herein or in the
Administrative Procedure, all statements, requests, and notices hereunder shall
be in writing, or by telephone if promptly confirmed in writing, and if to
Goldman, Sachs & Co. shall be sufficient in all respects when delivered or sent
by facsimile transmission or registered mail to 85 Broad Street, New York, New
York 10004, Facsimile Transmission No. (212) 357-8680, Attention: Credit
Department, Credit Control--Medium-Term Notes and if to the Company shall be
sufficient in all respects when delivered or sent by facsimile transmission or
registered mail to 7800 Stemmons Freeway, Dallas, Texas 75247, Facsimile
Transmission No. (214) 689- 4326.
12. This Agreement and any Terms Agreement shall be binding upon, and
inure solely to the benefit of, each Agent and the Company, and to the extent
provided in Sections 7, 8 and 9 hereof, the officers and directors of the
Company and any person who controls any Agent or the Company, and their
respective personal representatives, successors and assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement or
any Terms Agreement. No purchaser of any of the Securities through or from any
Agent hereunder shall be deemed a successor or assign by reason merely of such
purchase.
13. Time shall be of the essence in this Agreement and any Terms
Agreement. As used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
14. This Agreement and any Terms Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
15. This Agreement and any Terms Agreement may be executed by any one or
more of the parties hereto and thereto in any number of counterparts, each of
which shall be an original, but all of such respective counterparts shall
together constitute one and the same instrument.
I-20
<PAGE> 21
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, whereupon this letter and the acceptance
by you thereof shall constitute a binding agreement between the Company and you
in accordance with its terms.
Very truly yours,
Commercial Metals Company
By:
-----------------------------
Name:
Title:
Accepted in New York, New York,
as of the date hereof:
Goldman Sachs & Co.
By:
------------------------------
Goldman, Sachs & Co.
I-21
<PAGE> 22
ANNEX I
COMMERCIAL METALS COMPANY
[Title of Security]
Terms Agreement
_______________________, 19____
Goldman, Sachs & Co.
BancAmerica Robertson Stephens
Chase Securities Inc.
Lehman Brothers
Morgan Stanley & Co. Incorporated
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Commercial Metals Company (the "Company") proposes, subject to the
terms and conditions stated herein and in the Distribution Agreement, dated
_______________________, 19___ (the "Distribution Agreement"), between the
Company on the one hand and Goldman, Sachs & Co., BancAmerica Robertson
Stephens, Chase Securities Inc., Lehman Brothers, Morgan Stanley & Co.
Incorporated (the "Agents") on the other, to issue and sell to the Agents the
securities specified in the Schedule hereto (the "Purchased Securities"). Each
of the provisions of the Distribution Agreement not specifically related to the
solicitation by the Agents, as agents of the Company, of offers to purchase
Securities is incorporated herein by reference in its entirety, and shall be
deemed to be part of this Terms Agreement to the same extent as if such
provisions had been set forth in full herein. Nothing contained herein or in
the Distribution Agreement shall make any party hereto an agent of the Company
or make such party subject to the provisions therein relating to the
solicitation of offers to purchase Securities from the Company, solely by
virtue of its execution of this Terms Agreement. Each of the representations
and warranties set forth therein shall be deemed to have been made at and as of
the date of this Terms Agreement, except that each representation and warranty
in Section 1 of the Distribution Agreement which makes reference to the
Prospectus shall be deemed to be a representation and warranty as of the date
of the Distribution Agreement in relation to the Prospectus (as therein
defined), and also a representation and warranty as of the
I-1
<PAGE> 23
date of this Terms Agreement in relation to the Prospectus as amended and
supplemented to relate to the Purchased Securities.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Purchased Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Distribution Agreement incorporated herein by reference, the Company agrees to
issue and sell to the Agents and the Agents agree to purchase from the Company
the Purchased Securities, at the time and place, in the principal amount and at
the purchase price set forth in the Schedule hereto.
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon acceptance hereof by you
this letter and such acceptance hereof, including those provisions of the
Distribution Agreement incorporated herein by reference, shall constitute a
binding agreement between you and the Company.
Commercial Metals Company
By:
------------------------------
Name:
Title:
Accepted:
Goldman Sachs & Co.
By:
------------------------------
Goldman, Sachs & Co.
I-2
<PAGE> 24
SCHEDULE TO ANNEX I
Title of Purchased Securities:
[ %] Medium-Term Notes[, SERIES ....]
Aggregate Principal Amount:
$_____________________
[PRICE TO PUBLIC:]
Purchase Price by Goldman, Sachs & Co.
% of the principal amount of the Purchased Securities[, PLUS ACCRUED
INTEREST FROM _________________ TO __________________________] [AND ACCRUED
AMORTIZATION, IF ANY, FROM ___________________________ TO _________________]
Method of and Specified Funds for Payment of Purchase Price:
[BY CERTIFIED OR OFFICIAL BANK CHECK OR CHECKS, PAYABLE TO THE ORDER OF THE
COMPANY, IN NEW YORK CLEARING HOUSE FUNDS]
[BY WIRE TRANSFER TO A BANK ACCOUNT SPECIFIED BY THE COMPANY IN [NEXT DAY]
[IMMEDIATELY AVAILABLE] FUNDS]
Indenture:
Indenture, dated as of __________________________, 19___, between the
Company and ______________________________, as Trustee
Time of Delivery:
Closing Location for Delivery of Securities:
Maturity:
Interest Rate:
[ %]
Interest Payment Dates:
[MONTHS AND DATES]
I-3
<PAGE> 25
Documents to be Delivered:
The following documents referred to in the Distribution Agreement shall be
delivered as a condition to the Closing:
(1) The opinion or opinions of counsel to the Agents referred to in
Section 4(h).
(2) The opinion of counsel to the Company referred to in Section 4(i).
(3) The accountants' letter referred to in Section 4(j).
(4) The officers' certificate referred to in Section 4(k).
Other Provisions (including Syndicate Provisions, if applicable):
I-4
<PAGE> 26
ANNEX II
COMMERCIAL METALS COMPANY
ADMINISTRATIVE PROCEDURE
This Administrative Procedure relates to the Securities defined in the
Distribution Agreement, dated ___________________________, 19____ (the
"Distribution Agreement"), between Commercial Metals Company (the "Company")
and Goldman, Sachs & Co., BancAmerica Robertson Stephens, Chase Securities
Inc., Administrative Procedure is attached as Annex II. Defined terms used
herein and not defined herein shall have the meanings given such terms in the
Distribution Agreement, the Prospectus as amended or supplemented or the
Indenture.
The procedures to be followed with respect to the settlement of sales of
Securities directly by the Company to purchasers solicited by an Agent, as
agent, are set forth below. The terms and settlement details related to a
purchase of Securities by an Agent, as principal, from the Company will be set
forth in a Terms Agreement pursuant to the Distribution Agreement, unless the
Company and such Agent otherwise agree as provided in Section 2(b) of the
Distribution Agreement, in which case the procedures to be followed in respect
of the settlement of such sale will be as set forth below. An Agent, in
relation to a purchase of a Security by a purchaser solicited by such Agent, is
referred to herein as the "Selling Agent" and, in relation to a purchase of a
Security by such Agent as principal other than pursuant to a Terms Agreement,
as the "Purchasing Agent".
The Company will advise each Agent in writing of those persons with whom
such Agent is to communicate regarding offers to purchase Securities and the
related settlement details.
Each Security will be issued only in fully registered form and will be
represented by either a global security (a "Global Security") delivered to the
Trustee, as agent for The Depository Trust Company (the "Depositary") and
recorded in the book-entry system maintained by the Depositary (a "Book-Entry
Security") or a certificate issued in definitive form (a "Certificated
Security") delivered to a person designated by an Agent, as set forth in the
applicable Pricing Supplement. An owner of a Book-Entry Security will not be
entitled to receive a certificate representing such a Security, except as
provided in the Indenture.
Book-Entry Securities will be issued in accordance with the Administrative
Procedure set forth in Part I hereof, and Certificated Securities will be
issued in accordance with the Administrative Procedure set forth in Part II
hereof.
II-1
<PAGE> 27
PART I: ADMINISTRATIVE PROCEDURE FOR BOOK-ENTRY SECURITIES
In connection with the qualification of the Book-Entry Securities for
eligibility in the book-entry system maintained by the Depositary, the Trustee
will perform the custodial, document control and administrative functions
described below, in accordance with its respective obligations under a Letter
of Representation from the Company and the Trustee to the Depositary, dated the
date hereof, and a Medium-Term Note Certificate Agreement between the Trustee
and the Depositary, dated as of ________________________, 19___ (the
"Certificate Agreement"), and its obligations as a participant in the
Depositary, including the Depositary's Same-Day Funds Settlement System
("SDFS").
Posting Rates by the Company:
The Company and the Agents will discuss from time to time the rates of
interest per annum to be borne by and the maturity of Book-Entry Securities
that may be sold as a result of the solicitation of offers by an Agent. The
Company may establish a fixed set of interest rates and maturities for an
offering period ("posting"). If the Company decides to change already posted
rates, it will promptly advise the Agents to suspend solicitation of offers
until the new posted rates have been established with the Agents.
Acceptance of Offers by the Company:
Each Agent will promptly advise the Company by telephone or other
appropriate means of all reasonable offers to purchase Book-Entry Securities,
other than those rejected by such Agent. Each Agent may, in its discretion
reasonably exercised, reject any offer received by it in whole or in part.
Each Agent also may make offers to the Company to purchase Book-Entry
Securities as a Purchasing Agent. The Company will have the sole right to
accept offers to purchase Book-Entry Securities and may reject any such offer
in whole or in part.
The Company will promptly notify the Agent or Purchasing Agent, as the case
may be, of its acceptance or rejection of an offer to purchase Book-Entry
Securities. If the Company accepts an offer to purchase Book-Entry Securities,
it will confirm such acceptance in writing to the Selling Agent or Purchasing
Agent, as the case may be, and the Trustee.
Communication of Sale Information to the Company by Agent and Settlement
Procedures:
A. After the acceptance of an offer by the Company, the Selling Agent or
Purchasing Agent, as the case may be, will communicate promptly, but in no
event later than the time set forth under "Settlement Procedure Timetable"
below, the following details of the terms of such offer (the "Sale
Information") to the Company by telephone (confirmed in writing) or by
facsimile transmission or other acceptable written means:
(1) Principal Amount of Book-Entry Securities to be purchased;
(2) If a Fixed Rate Book-Entry Security, the interest rate and
initial interest payment date;
(3) Trade Date;
(4) Settlement Date;
(5) Maturity Date;
(6) Specified Currency and, if the Specified Currency is other
than U.S. dollars, the applicable Exchange Rate for such
Specified Currency (it being understood that
II-2
<PAGE> 28
currently the Depositary accepts deposits of Global
Securities denominated in U.S. dollars only);
(7) Indexed Currency, the Base Rate and the Exchange Rate
Determination Date, if applicable;
(8) Issue Price;
(9) Selling Agent's commission or Purchasing Agent's discount,
as the case may be;
(10) Net Proceeds to the Company;
(11) If a redeemable Book-Entry Security, such of the following
as are applicable:
(i) Redemption Commencement Date,
(ii) Initial Redemption Price (% of par), and
(iii) Amount (% of par) that the Redemption Price
shall decline (but not below par) on each
anniversary of the Redemption Commencement
Date;
(12) If a Floating Rate Book-Entry Security, such of the
following as are applicable:
(i) Interest Rate Basis,
(ii) Index Maturity,
(iii) Spread or Spread Multiplier,
(iv) Maximum Rate,
(v) Minimum Rate,
(vi) Initial Interest Rate,
(vii) Interest Reset Dates,
(viii) Calculation Dates,
(ix) Interest Determination Dates,
(x) Interest Payment Dates,
(xi) Regular Record Dates, and
(xii) Calculation Agent;
(13) Name, address and taxpayer identification number of the
registered owner(s);
(14) Denomination of certificates to be delivered at
settlement;
(15) Book-Entry Security or Certificated Security; and
(16) Selling Agent or Purchasing Agent.
B. After receiving the Sale Information from the Selling Agent or
Purchasing Agent, as the case may be, the Company will communicate such Sale
Information to the Trustee by facsimile transmission or other acceptable
written means. The Trustee will assign a CUSIP number to the Global Security
from a list of CUSIP numbers previously delivered to the Trustee by the Company
representing such Book-Entry Security and then advise the Company and the
Selling Agent or Purchasing Agent, as the case may be, of such CUSIP number.
C. The Trustee will enter a pending deposit message through the
Depositary's Participant Terminal System, providing the following settlement
information to the Depositary, and the Depositary shall forward such
information to such Agent and Standard & Poor's Corporation:
1 The applicable Sale Information;
2 CUSIP number of the Global Security representing such
Book-Entry Security;
3 Whether such Global Security will represent any other
Book-Entry Security (to the extent known at such time);
II-3
<PAGE> 29
4 Number of the participant account maintained by the Depositary
on behalf of the Selling Agent or Purchasing Agent, as the
case may be;
5 The interest payment period; and
6 Initial Interest Payment Date for such Book-Entry Security,
number of days by which such date succeeds the record date for
the Depositary's purposes (or, in the case of Floating Rate
Securities which reset daily or weekly, the date five calendar
days immediately preceding the applicable Interest Payment
Date and, in the case of all other Book-Entry Securities, the
Regular Record Date, as defined in the Security) and, if
calculable at that time, the amount of interest payable on
such Interest Payment Date.
D. The Trustee will complete and authenticate the Global Security
previously delivered by the Company representing such Book-Entry Security.
E. The Depositary will credit such Book-Entry Security to the Trustee's
participant account at the Depositary.
F. The Trustee will enter an SDFS deliver order through the Depositary's
Participant Terminal System instructing the Depositary to (i) debit such
Book-Entry Security to the Trustee's participant account and credit such
Book-Entry Security to such Agent's participant account and (ii) debit such
Agent's settlement account and credit the Trustee's settlement account for an
amount equal to the price of such Book-Entry Security less such Agent's
commission. The entry of such a deliver order shall constitute a
representation and warranty by the Trustee to the Depositary that (a) the
Global Security representing such Book-Entry Security has been issued and
authenticated and (b) the Trustee is holding such Global Security pursuant to
the Certificate Agreement.
G. Such Agent will enter an SDFS deliver order through the Depositary's
Participant Terminal System instructing the Depositary (i) to debit such
Book-Entry Security to such Agent's participant account and credit such
Book-Entry Security to the participant accounts of the Participants with
respect to such Book-Entry Security and (ii) to debit the settlement accounts
of such Participants and credit the settlement account of such Agent for an
amount equal to the price of such Book-Entry Security.
H. Transfers of funds in accordance with SDFS deliver orders described in
Settlement Procedures "F" and "G" will be settled in accordance with SDFS
operating procedures in effect on the settlement date.
I. Upon confirmation of receipt of funds, the Trustee will transfer to
the account of the Company maintained at [Name of Bank], New York, New York, or
such other account as the Company may have previously specified to the Trustee,
in funds available for immediate use in the amount transferred to the Trustee
in accordance with Settlement Procedure "F".
J. Upon request, the Trustee will send to the Company a statement setting
forth the principal amount of Book-Entry Securities outstanding as of that date
under the Indenture.
K. Such Agent will confirm the purchase of such Book-Entry Security to
the purchaser either by transmitting to the Participants with respect to such
Book-Entry Security a confirmation order or orders through the Depositary's
institutional delivery system or by mailing a written confirmation to such
purchaser.
II-4
<PAGE> 30
L. The Depositary will, at any time, upon request of the Company or the
Trustee, promptly furnish to the Company or the Trustee a list of the names and
addresses of the participants for whom the Depositary has credited Book-Entry
Securities.
Preparation of Pricing Supplement:
If the Company accepts an offer to purchase a Book-Entry Security, it will
prepare a Pricing Supplement reflecting the terms of such Book-Entry Security
and arrange to have delivered to the Selling Agent or Purchasing Agent, as the
case may be, at least ten copies of such Pricing Supplement, not later than
5:00 p.m., New York City time, on the Business Day following the Trade Date (as
defined below), or if the Company and the purchaser agree to settlement on the
Business Day following the date of acceptance of such offer, not later than
noon, New York City time, on such date. The Company will arrange to have ten
Pricing Supplements filed with the Commission not later than the close of
business of the Commission on the third Business Day following the date on
which such Pricing Supplement is first used.
Delivery of Confirmation and Prospectus to Purchaser by Selling Agent:
The Selling Agent will deliver to the purchaser of a Book-Entry Security a
written confirmation of the sale and delivery and payment instructions. In
addition, the Selling Agent will deliver to such purchaser or its agent the
Prospectus as amended or supplemented (including the Pricing Supplement) in
relation to such Book-Entry Security prior to or together with the earlier of
the delivery to such purchaser or its agent of (a) the confirmation of sale or
(b) the Book-Entry Security.
Date of Settlement:
The receipt by the Company of immediately available funds in payment for a
Book-Entry Security and the authentication and issuance of the Global Security
representing such Book-Entry Security shall constitute "settlement" with
respect to such Book-Entry Security. All orders of Book-Entry Securities
solicited by a Selling Agent or made by a Purchasing Agent and accepted by the
Company on a particular date (the "Trade Date") will be settled on a date (the
"Settlement Date") which is the third Business Day after the Trade Date
pursuant to the "Settlement Procedure Timetable" set forth below, unless the
Company and the purchaser agree to settlement on another Business Day which
shall be no earlier than the next Business Day after the Trade Date.
Settlement Procedure Timetable:
For orders of Book-Entry Securities solicited by a Selling Agent and
accepted by the Company for settlement on the third Business Day after the
Trade Date, Settlement Procedures "A" through "I" set forth above shall be
completed as soon as possible but not later than the respective times (New York
City time) set forth below:
II-5
<PAGE> 31
<TABLE>
<CAPTION>
SETTLEMENT
PROCEDURE TIME
--------- ----
<S> <C> <C>
A 5:00 p.m. on the Business Day following the Trade Date or 10:00 a.m. on the Business
Day prior to the Settlement Date, whichever is earlier
B 12:00 noon on the second Business Day immediately preceding the Settlement Date
C 2:00 p.m. on the second Business Day immediately preceding the Settlement Date
D 9:00 a.m. on the Settlement Date
E 10:00 a.m. on the Settlement Date
F-G 2:00 p.m. on the Settlement Date
H 4:45 p.m. on the Settlement Date
I 5:00 p.m. on the Settlement Date
</TABLE>
If the initial interest rate for a Floating Rate Book-Entry Security has
not been determined at the time that Settlement Procedure "A" is completed,
Settlement Procedures "B" and "C" shall be completed as soon as such rate has
been determined but no later than 2:00 p.m. on the second Business Day
immediately preceding the Settlement Date. Settlement Procedure "H" is subject
to extension in accordance with any extension of Fedwire closing deadlines and
in the other events specified in the SDFS operating procedures in effect on the
Settlement Date.
If settlement of a Book-Entry Security is rescheduled or canceled, the
Trustee, upon obtaining knowledge thereof, will deliver to the Depositary,
through the Depositary's Participant Terminal System, a cancellation message to
such effect by no later than 2:00 p.m. on the Business Day immediately
preceding the scheduled Settlement Date.
Failure to Settle:
If the Trustee fails to enter an SDFS deliver order with respect to a
Book-Entry Security pursuant to Settlement Procedure "F", the Trustee may
deliver to the Depositary, through the Depositary's Participant Terminal
System, as soon as practicable a withdrawal message instructing the Depositary
to debit such Book-Entry Security to the Trustee's participant account,
provided that the Trustee's participant account contains a principal amount of
the Global Security representing such Book-Entry Security that is at least
equal to the principal amount to be debited. If a withdrawal message is
processed with respect to all the Book-Entry Securities represented by a Global
Security, the Trustee will mark such Global Security "canceled", make
appropriate entries in the Trustee's records and send such canceled Global
Security to the Company. The CUSIP number assigned to such Global Security
shall, in accordance with CUSIP Service Bureau procedures, be canceled and not
immediately reassigned. If a withdrawal message is processed with respect to
one or more, but not all, of the Book-Entry Securities represented by a Global
Security, the Trustee will exchange such Global Security for two Global
Securities, one of which shall represent such Book-Entry Security or Securities
and shall be canceled immediately after issuance and the other of which shall
represent the remaining Book-Entry Securities previously represented by the
surrendered Global Security and shall bear the CUSIP number of the surrendered
Global Security.
If the purchase price for any Book-Entry Security is not timely paid to the
participants with respect to such Book-Entry Security by the beneficial
purchaser thereof (or a person, including an indirect participant in the
Depositary, acting on behalf of such purchaser), such participants and, in
II-6
<PAGE> 32
turn, the Agent for such Book-Entry Security may enter deliver orders through
the Depositary's Participant Terminal System debiting such Book-Entry Security
to such participant's account and crediting such Book-Entry Security to such
Agent's account and then debiting such Book-Entry Security to such Agent's
participant account and crediting such Book-Entry Security to the Trustee's
participant account and shall notify the Company and the Trustee thereof.
Thereafter, the Trustee will (i) immediately notify the Company of such order
and the Company shall transfer to such Agent funds available for immediate use
in an amount equal to the price of such Book-Entry Security which was credited
to the account of the Company maintained at the Trustee in accordance with
Settlement Procedure I, and (ii) deliver the withdrawal message and take the
related actions described in the preceding paragraph. If such failure shall
have occurred for any reason other than default by the applicable Agent to
perform its obligations hereunder or under the Distribution Agreement, the
Company will reimburse such Agent on an equitable basis for the loss of its use
of funds during the period when the funds were credited to the account of the
Company.
Notwithstanding the foregoing, upon any failure to settle with respect to a
Book-Entry Security, the Depositary may take any actions in accordance with its
SDFS operating procedures then in effect. In the event of a failure to settle
with respect to one or more, but not all, of the Book-Entry Securities to have
been represented by a Global Security, the Trustee will provide, in accordance
with Settlement Procedure "D", for the authentication and issuance of a Global
Security representing the other Book-Entry Securities to have been represented
by such Global Security and will make appropriate entries in its records. The
Company will, from time to time, furnish the Trustee with a sufficient quantity
of Securities.
PART II: ADMINISTRATIVE PROCEDURE FOR CERTIFICATED SECURITIES
Posting Rates by Company:
The Company and the Agents will discuss from time to time the rates of
interest per annum to be borne by and the maturity of Certificated Securities
that may be sold as a result of the solicitation of offers by an Agent. The
Company may establish a fixed set of interest rates and maturities for an
offering period ("posting"). If the Company decides to change already posted
rates, it will promptly advise the Agents to suspend solicitation of offers
until the new posted rates have been established with the Agents.
Acceptance of Offers by Company:
Each Agent will promptly advise the Company by telephone or other
appropriate means of all reasonable offers to purchase Certificated Securities,
other than those rejected by such Agent. Each Agent may, in its discretion
reasonably exercised, reject any offer received by it in whole or in part.
Each Agent also may make offers to the Company to purchase Certificated
Securities as a Purchasing Agent. The Company will have the sole right to
accept offers to purchase Certificated Securities and may reject any such offer
in whole or in part.
The Company will promptly notify the Selling Agent or Purchasing Agent, as
the case may be, of its acceptance or rejection of an offer to purchase
Certificated Securities. If the Company accepts an offer to purchase
Certificated Securities, it will confirm such acceptance in writing to the
Selling Agent or Purchasing Agent, as the case may be, and the Trustee.
II-7
<PAGE> 33
Communication of Sale Information to Company by Agent:
After the acceptance of an offer by the Company, the Selling Agent or
Purchasing Agent, as the case may be, will communicate the following details of
the terms of such offer (the "Sale Information") to the Company by telephone
(confirmed in writing) or by facsimile transmission or other acceptable written
means:
1 Principal Amount of Certificated Securities to be purchased;
2 If a Fixed Rate Certificated Security, the interest rate and
initial interest payment date;
3 Trade Date;
4 Settlement Date;
5 Maturity Date;
6 Specified Currency and, if the Specified Currency is other
than U.S. dollars, the applicable Exchange Rate for such
Specified Currency;
7 Indexed Currency, the Base Rate and the Exchange Rate
Determination Date, if applicable;
8 Issue Price;
9 Selling Agent's commission or Purchasing Agent's discount, as
the case may be;
10 Net Proceeds to the Company;
11 If a redeemable Certificated Security, such of the following
as are applicable:
(i) Redemption Commencement Date,
(ii) Initial Redemption Price (% of par), and
(iii) Amount (% of par) that the Redemption Price shall
decline (but not below par) on each anniversary of
the Redemption Commencement Date;
12 If a Floating Rate Certificated Security, such of the
following as are applicable:
(i) Interest Rate Basis,
(ii) Index Maturity,
(iii) Spread or Spread Multiplier,
(iv) Maximum Rate,
(v) Minimum Rate,
(vi) Initial Interest Rate,
(vii) Interest Reset Dates,
(viii) Calculation Dates,
(ix) Interest Determination Dates,
(x) Interest Payment Dates,
(xi) Regular Record Dates, and
(xii) Calculation Agent;
13 Name, address and taxpayer identification number of the
registered owner(s);
14 Denomination of certificates to be delivered at settlement;
15 Book-Entry Security or Certificated Security; and
16 Selling Agent or Purchasing Agent.
Preparation of Pricing Supplement by Company:
If the Company accepts an offer to purchase a Certificated Security, it
will prepare a Pricing Supplement reflecting the terms of such Certificated
Security and arrange to have delivered to the Selling Agent or Purchasing
Agent, as the case may be, at least ten copies of such Pricing Supplement, not
later than 5:00 p.m., New York City time, on the Business Day following the
Trade Date, or if the Company and the purchaser agree to settlement on the date
of acceptance of such
II-8
<PAGE> 34
offer, not later than noon, New York City time, on such date. The Company will
arrange to have ten Pricing Supplements filed with the Commission not later
than the close of business of the Commission on the third Business Day
following the date on which such Pricing Supplement is first used.
Delivery of Confirmation and Prospectus to Purchaser by Selling Agent:
The Selling Agent will deliver to the purchaser of a Certificated Security
a written confirmation of the sale and delivery and payment instructions. In
addition, the Selling Agent will deliver to such purchaser or its agent the
Prospectus as amended or supplemented (including the Pricing Supplement) in
relation to such Certificated Security prior to or together with the earlier of
the delivery to such purchaser or its agent of (a) the confirmation of sale or
(b) the Certificated Security.
Date of Settlement:
All offers of Certificated Securities solicited by a Selling Agent or made
by a Purchasing Agent and accepted by the Company will be settled on a date
(the "Settlement Date") which is the third Business Day after the date of
acceptance of such offer, unless the Company and the purchaser agree to
settlement (a) on another Business Day after the acceptance of such offer or
(b) with respect to an offer accepted by the Company prior to 10:00 a.m., New
York City time, on the date of such acceptance.
Instruction from Company to Trustee for Preparation of Certificated Securities:
After receiving the Sale Information from the Selling Agent or Purchasing
Agent, as the case may be, the Company will communicate such Sale Information
to the Trustee by telephone (confirmed in writing) or by facsimile transmission
or other acceptable written means.
The Company will instruct the Trustee by facsimile transmission or other
acceptable written means to authenticate and deliver the Certificated
Securities no later than 2:15 p.m., New York City time, on the Settlement Date.
Such instruction will be given by the Company prior to 3:00 p.m., New York City
time, on the Business Day immediately preceding the Settlement Date unless the
Settlement Date is the date of acceptance by the Company of the offer to
purchase Certificated Securities in which case such instruction will be given
by the Company by 11:00 a.m., New York City time.
Preparation and Delivery of Certificated Securities by Trustee and Receipt of
Payment Therefor:
The Trustee will prepare each Certificated Security and appropriate
receipts that will serve as the documentary control of the transaction.
In the case of a sale of Certificated Securities to a purchaser solicited
by a Selling Agent, the Trustee will, by 2:15 p.m., New York City time, on the
Settlement Date, deliver the Certificated Securities to the Selling Agent for
the benefit of the purchaser of such Certificated Securities against delivery
by the Selling Agent of a receipt therefor. On the Settlement Date the Selling
Agent will deliver payment for such Certificated Securities in immediately
available funds to the Company in an amount equal to the issue price of the
Certificated Securities less the Selling Agent's commission; provided that the
Selling Agent reserves the right to withhold payment for which it has not
received funds from the purchaser. The Company shall not use any proceeds
advanced by a Selling Agent to acquire securities.
II-9
<PAGE> 35
In the case of a sale of Certificated Securities to a Purchasing Agent, the
Trustee will, by 2:15 p.m., New York City time, on the Settlement Date, deliver
the Certificated Securities to the Purchasing Agent against delivery of payment
for such Certificated Securities in immediately available funds to the Company
in an amount equal to the issue price of the Certificated Securities less the
Purchasing Agent's discount.
Failure of Purchaser to Pay Selling Agent:
If a purchaser (other than a Purchasing Agent) fails to make payment to the
Selling Agent for a Certificated Security, the Selling Agent will promptly
notify the Trustee and the Company thereof by telephone (confirmed in writing)
or by facsimile transmission or other acceptable written means. The Selling
Agent will immediately return the Certificated Security to the Trustee.
Immediately upon receipt of such Certificated Security by the Trustee, the
Company will return to the Selling Agent an amount equal to the amount
previously paid to the Company in respect of such Certificated Security. The
Company will reimburse the Selling Agent on an equitable basis for its loss of
the use of funds during the period when they were credited to the account of
the Company.
The Trustee will cancel the Certificated Security in respect of which the
failure occurred, make appropriate entries in its records and, unless otherwise
instructed by the Company, destroy the Certificated Security.
II-10
<PAGE> 36
ANNEX III
ACCOUNTANTS' LETTER
Pursuant to Sections 4(j) and 6(d), as the case may be, of the Distribution
Agreement, the Company's independent certified public accountants shall furnish
letters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules audited (and, if
applicable, financial forecasts and/or pro forma financial
information) examined by them and included or incorporated by
reference in the Registration Statement or the Prospectus comply as to
form in all material respects with the applicable accounting
requirements of the Act or the Exchange Act, as applicable, and the
related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or
condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as
indicated in their reports thereon, copies of which have been
furnished to the Agents;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which have been
separately furnished to the Agents; and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to
in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Exchange Act and the related published rules and regulations,
nothing came to their attention that caused them to believe that the
unaudited condensed consolidated financial statements do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published
rules and regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of
the Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the
III-1
<PAGE> 37
corresponding amounts (after restatement where applicable) in the
audited consolidated financial statements for five such fiscal years
which were included or incorporated by reference in the Company's
Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does not
conform in all material respects with the disclosure requirements of
Items 301, 302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus and/or included or
incorporated by reference in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus
or included in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited
condensed financial statements referred to in clause (A) and any
unaudited income statement data and balance sheet items included
in the Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the basis for
the audited financial statements included or incorporated by
reference in the Company's Annual Report on Form 10-K for the most
recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus
do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the published
rules
III-2
<PAGE> 38
and regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the compilation
of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on the
date of the latest balance sheet included or incorporated by
reference in the Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders'
equity or other items specified by the Agents, or any increases in
any items specified by the Agents, in each case as compared with
amounts shown in the latest balance sheet included or incorporated
by reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus
to the specified date referred to in Clause (E) there were any
decreases in consolidated net revenues or operating profit or the
total or per share amounts of consolidated net income or other
items specified by the Agents, or any increases in any items
specified by the Agents, in each case as compared with the
comparable period of the preceding year and with any other period
of corresponding length specified by the Agents, except in each
case for decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the audit referred to in their report(s)
included or incorporated by reference in the Prospectus and the
limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an audit in
accordance with generally accepted auditing standards, with respect to
certain amounts, percentages and financial information specified by
the Agents which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus
(excluding documents incorporated by reference), or in Part II of, or
in exhibits and schedules to, the Registration Statement specified by
the Agents or in documents incorporated by reference in the Prospectus
specified by the Agents, and have compared certain of such amounts,
percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in
agreement.
All references in this Annex III to the Prospectus shall be deemed to refer
to the Prospectus (including the documents incorporated by reference therein)
as defined in the Distribution Agreement as of the Commencement Date referred
to in Section 6(d) thereof and to the Prospectus as amended or supplemented
(including the documents incorporated by reference therein) as of the date of
the amendment, supplement, incorporation or the Time of Delivery relating to
the Terms Agreement requiring the delivery of such letter under Section 4(j)
thereof.
III-3
<PAGE> 1
EXHIBIT 5.1
[HAYNES AND BOONE, LLP LOGO]
August 13, 1998
Commercial Metals Company
7800 Stemmons Freeway
Dallas, Texas 75247
Re: Registration of $200,000,000 in aggregate principal amount of
notes consisting of $100,000,000 of Notes Due 2008 and
$100,000,000 of Medium-Term Notes
Gentlemen:
We have acted as special counsel to Commercial Metals Company, a
Delaware corporation (the "Company"), in connection with the registration and
sale under the Securities Act of 1933, as amended (the "Securities Act"), of up
to $200,000,000 in aggregate principal amount of notes consisting of
$100,000,000 of Notes Due 2008 (the "Notes Due 2008") and $100,000,000 of
Medium-Term Notes (the "Medium-Term Notes") pursuant to an Indenture dated July
31, 1995, by and between The Chase Manhattan Bank (the "Trustee") and the
Company (the "Indenture"). For purposes of this opinion, the Notes Due 2008 and
the Medium-Term Notes shall be referred to collectively as the "Notes". The
Notes are being registered pursuant to a Registration Statement on Form S-3
filed with the Securities and Exchange Commission under the Securities Act of
1933, as subsequently amended or supplemented (the Registration Statement, as
amended or supplemented, is hereinafter referred to as the "Registration
Statement"). The Notes Due 2008 are being sold to Goldman, Sachs & Co.,
BancAmerica Robertson Stephens, Chase Securities Inc., Lehman Brothers Inc. and
Morgan Stanley & Co. Incorporated (the "Underwriters") pursuant to an
Underwriting Agreement to be entered into between the Company and the
Underwriters (the "Underwriting Agreement"), and the Medium-Term Notes may be
sold by the Underwriters as agents of the Company pursuant to a Distribution
Agreement to be entered into between the Underwriters and the Company (the
<PAGE> 2
[HAYNES AND BOONE, LLP LOGO]
Commercial Metals Company
August 13, 1998
Page - 2 -
"Distribution Agreement"). The Medium-Term Notes may be sold from time to time
to the Underwriters and/or other purchasers pursuant to the terms of the
Distribution Agreement.
In connection therewith, we have examined and relied upon the original,
or copies certified to our satisfaction, of (i) the Certificate of Incorporation
and the Bylaws of the Company; (ii) minutes and records of the corporate
proceedings of the Company with respect to the issuance by the Company of the
Notes; (iii) the Registration Statement and all exhibits thereto; (iv) the forms
of Underwriting Agreement and Distribution Agreement; (v) the Indenture; and
(vi) such other documents and instruments as we have deemed necessary for the
expression of the opinions contained herein.
In making the foregoing examinations, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified or photostatic copies thereof and the authenticity of the originals
of such latter documents. As to various questions of fact material to this
opinion, where such facts have not been independently established, and as to the
content and form of the Certificate of Incorporation, the Bylaws, certain
minutes, records, resolutions and other documents or writings of the Company, we
have relied, to the extent we have deemed reasonably appropriate, upon
representations or certificates of officers, directors and agents of the
Company, upon documents, records and instruments furnished to us by the Company,
without independent check or verification of their accuracy, and upon
governmental officials. In rendering the opinions expressed below, we have
assumed (i) that the Underwriting Agreement and the Distribution Agreement will
be executed in substantially the same forms submitted to us and (ii) that the
Indenture constitutes the legal, valid and binding obligation of the Trustee.
Based upon the foregoing, and having due regard for such legal
considerations as we deem relevant, we are of the opinion that when the Notes
have been duly executed and delivered by the Company, authenticated by the
Trustee and issued in accordance with the terms of the Indenture, the Notes will
be valid and legally binding obligations of the Company, enforceable in
accordance with their terms except as enforceability may be limited by (1)
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect affecting the rights of creditors generally, (2)
provisions of applicable law pertaining to the voidability of preferential or
fraudulent transfers and conveyances and (3) the fact that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. In rendering the opinions expressed
<PAGE> 3
[HAYNES AND BOONE, LLP LOGO]
Commercial Metals Company
August 13, 1998
Page - 3 -
herein, we express no opinion as to the enforceability of provisions of the
Indenture and the Notes to the extent that such provisions (i) state that the
delay or omission of the Trustee or of any holder of any Note in the exercise of
any right or remedy accruing upon any Event of Default (as defined in the
Indenture) will not impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein or (ii) state that the
invalidity, illegality or unenforceability of any provision of the Indenture or
the Notes will not affect or impair the validity, legality or enforceability of
the remaining provisions of the Indenture or the Notes, as applicable, to the
extent that the enforcement of the remaining provisions would frustrate the
fundamental intent of the parties to such documents. In addition, certain other
provisions of the Notes may be unenforceable in whole or in part under the laws
(including judicial decisions) of the State of New York or the United States of
America; provided, however, that the inclusion of any such provisions and any
limitations imposed by such laws on the enforceability of the Notes will not
affect the validity or enforceability as a whole of any of the Notes and will
not prevent the holders thereof from the ultimate realization of the practical
rights and benefits afforded by such documents, except for the economic
consequences of any judicial, administrative or other procedural delay which may
result from the application of any such law.
With respect to the Indenture, we advise you that the Indenture has been
qualified under the Trust Indenture Act of 1939, as amended.
The opinions expressed above are specifically limited to the laws of the
State of New York, the General Corporation Laws, as amended, of the State of
Delaware, and the federal laws of the United States of America.
This opinion (i) is rendered solely for your benefit in connection with
the issuance of the Notes, (ii) may not be used or relied upon by any other
person and may not be disclosed, quoted, filed with a governmental agency or
otherwise referred to without our prior written consent, (iii) is rendered as of
the date hereof, and we undertake no, and hereby disclaim any kind of,
obligation to advise you of any change or any new developments that might affect
any matters or opinions set forth herein, and (iv) is limited to the matters
stated herein and no opinions may be inferred or implied beyond the matters
expressly stated herein.
<PAGE> 4
[HAYNES AND BOONE, LLP LOGO]
Commercial Metals Company
August 13, 1998
Page - 4 -
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and the
references to our firm under the caption "Legal Matters" in the Prospectus
forming a part of such Registration Statement.
Very truly yours,
/s/ HAYNES AND BOONE, LLP
-------------------------
Haynes and Boone, LLP
<PAGE> 1
EXHIBIT 12.1
Commercial Metals Company
Summary of Fixed Charge Coverage Ratios (in thousands, except ratios)
<TABLE>
<CAPTION>
Fiscal year ended August 31 Nine months ended May 31
------------------------------------------------------------------ ------------------------
1997 1996 1995 1994 1993 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Pretax income 60,995 72,921 58,008 40,907 35,061 43,905 40,875
Adjustments to earnings:
Interest expense 14,637 15,822 15,246 9,271 9,397 13,117 11,055
Amortization of capitalized
interest 517 485 577 440 406 439 360
Rent Expense 2,874 2,611 2,651 2,029 1,998 2,255 2,151
Total earnings 79,023 91,839 76,482 52,647 46,862 59,716 54,441
Fixed charges:
Interest expense 14,637 15,822 15,246 9,271 9,397 13,117 11,055
Interest capitalized 804 320 149 1,176 411 972 250
Rent expense 2,874 2,611 2,651 2,029 1,998 2,255 2,151
Total fixed charges 18,315 18,753 18,046 12,476 11,806 16,344 13,456
Ratio of earnings to fixed
charges 4.3 4.9 4.2 4.2 4.0 3.7 4.0
</TABLE>
Pro forma information is not applicable as the ratio of earnings to fixed
charges varies by less than 10%.
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Commercial Metals Company on Form S-3 of our reports dated October 15, 1997,
appearing in the Annual Report on Form 10-K of Commercial Metals Company for the
year ended August 31, 1997 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Dallas, Texas
August 13, 1998
<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
COMMERCIAL METALS COMPANY
(Exact name of obligor as specified in its charter)
DELAWARE 75-0725338
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
(Address of principal executive offices) (Zip Code)
--------------------------------------------
DEBT SECURITIES
(Title of the indenture securities)
- --------------------------------------------------------------------------------
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany,
New York 12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 12th day of August, 1998.
THE CHASE MANHATTAN BANK
By /s/ TIMOTHY E. BURKE
--------------------------------------
Timothy E. Burke
Second Vice President
- 3 -
<PAGE> 4
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1998, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ............................................... $ 12,037
Interest-bearing balances ....................................... 4,054
Securities:
Held to maturity securities........................................... 2,340
Available for sale securities......................................... 50,134
Federal funds sold and securities purchased under
agreements to resell ............................................ 24,982
Loans and lease financing receivables:
Loans and leases, net of unearned income....... $127,958
Less: Allowance for loan and lease losses...... 2,797
Less: Allocated transfer risk reserve ......... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve .......................................... 125,161
Trading Assets ....................................................... 61,820
Premises and fixed assets (including capitalized
leases).......................................................... 2,961
Other real estate owned .............................................. 347
Investments in unconsolidated subsidiaries and
associated companies............................................. 242
Customers' liability to this bank on acceptances
outstanding ..................................................... 1,380
Intangible assets .................................................... 1,549
Other assets ......................................................... 11,727
---------
TOTAL ASSETS ......................................................... $ 298,734
=========
</TABLE>
-4-
<PAGE> 5
<TABLE>
<S> <C> <C>
LIABILITIES
Deposits
In domestic offices ............................................... $ 96,682
Noninterest-bearing ........................... $ 38,074
Interest-bearing .............................. 58,608
In foreign offices, Edge and Agreement,
subsidiaries and IBF's ............................................ 72,630
Noninterest-bearing ........................... $ 3,289
Interest-bearing .............................. 69,341
Federal funds purchased and securities sold under agree-
ments to repurchase ............................................. 42,735
Demand notes issued to the U.S. Treasury ............................. 872
Trading liabilities .................................................. 45,545
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less ................... 4,454
With a remaining maturity of more than one year
through three years....................................... 231
With a remaining maturity of more than three years............... 106
Bank's liability on acceptances executed and outstanding.............. 1,380
Subordinated notes and debentures .................................... 5,708
Other liabilities .................................................... 11,295
TOTAL LIABILITIES .................................................... 281,638
---------
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock ......................................................... 1,211
Surplus (exclude all surplus related to preferred stock)............. 10,291
Undivided profits and capital reserves ............................... 5,579
Net unrealized holding gains (losses)
on available-for-sale securities ..................................... (1)
Cumulative foreign currency translation adjustments .................. 16
TOTAL EQUITY CAPITAL ................................................. 17,096
---------
TOTAL LIABILITIES AND EQUITY CAPITAL ................................. $ 298,734
=========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
