<PAGE>
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-53191
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 11, 1998)
U.S. $750,000,000
[LOGO OF CSX CORPORATION]
MEDIUM-TERM NOTES, SERIES C
DUE 9 MONTHS OR LONGER FROM DATE OF ISSUE
--------------
CSX Corporation (the "Company" or "CSX") may offer from time to time its
medium-term notes which are issuable in one or more series and may be offered
and sold either in the United States or outside the United States or both
simultaneously. The Medium-Term Notes, Series C (the "Notes", which term
shall, unless otherwise indicated, include Foreign Currency Notes and Indexed
Notes), offered by this Prospectus Supplement are offered in the United States
and may be denominated in U.S. dollars or such foreign currencies or currency
units (a "Specified Currency") as may be designated by CSX at the time of
offering (the "Foreign Currency Notes"). The Notes may also be issued with the
principal amount thereof payable at Maturity to be determined by reference to
an index (e.g., currencies or currency units or financial indices ("Indexed
Notes")), as specified in the accompanying Supplement to this Prospectus
Supplement (the "Pricing Supplement"). The Notes are offered in an aggregate
initial offering price of up to U.S. $750,000,000 (including, in the case of
Foreign Currency Notes, the equivalent thereof at the Market Exchange Rate on
the applicable trade dates in a Specified Currency), subject to reduction as a
result of the sale by CSX of other Securities, including the sale outside the
United States of any other series of medium-term notes. See "Description of
Notes" and "Supplemental Plan of Distribution." Each Note will mature on any
day 9 months or longer from its date of original issuance (each an "Issue
Date"), as selected by the initial purchaser and agreed to by CSX. The Notes
may be subject to optional redemption, or may obligate CSX to redeem or
purchase the Notes pursuant to sinking fund or analogous provisions or at the
option of the Holder thereof, in each case as indicated in the applicable
Pricing Supplement. See "Description of Notes--General." The Notes will be
issued in fully registered form in denominations of U.S. $1,000 and integral
multiples of U.S. $1,000 in excess thereof, or, in the case of Foreign
Currency Notes, in the denominations indicated in the applicable Pricing
Supplement. Unless otherwise indicated in an applicable Pricing Supplement, a
Foreign Currency Note will not be sold in, or to a resident of, the country of
the Specified Currency in which such Note is denominated. See "Special
Provisions Relating to Foreign Currency Notes."
The interest rate or interest rate index, if any, the Specified Currency,
issue price, Stated Maturity, Interest Payment Dates and redemption or sinking
fund provisions, if any, and any other terms applicable to each Note and
established by CSX at the time of issuance of such Note will be indicated in
the applicable Pricing Supplement. Unless otherwise indicated in the
applicable Pricing Supplement, the Notes, except Zero-Coupon Notes, will bear
interest at a fixed rate or a rate or rates determined by reference to the
Commercial Paper Rate, LIBOR, the Treasury Rate, the CD Rate, the Federal
Funds Effective Rate, the Prime Rate, the CMT Rate or other rate index, as
indicated in the applicable Pricing Supplement. Zero-Coupon Notes will be
issued at a discount from the principal amount payable at Maturity thereof,
and Holders (as defined in the Indenture, which in turn is defined below) of
such Notes will not receive periodic payments of interest. Interest rates or
interest rate indices are subject to change by CSX from time to time, but no
such change will affect any Note already issued or as to which an offer to
purchase has been accepted by CSX.
Unless otherwise indicated in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable semi-annually on March 1 and September 1 of
each year and at maturity and interest on Floating Rate Notes will be payable
on the dates described under "Description of Notes--Floating Rate Notes."
(continued on next page)
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note......... 100% .125%--.750% 99.875%--99.250%
- -------------------------------------------------------------------------------
Total(4)......... $750,000,000 $937,500--$5,625,000 $749,062,500--$744,375,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Unless otherwise indicated in a Pricing Supplement, Notes will be issued
at 100% of their principal amount.
(2) CSX will pay Chase Securities Inc., BancAmerica Securities, Inc., Credit
Suisse First Boston Corporation, Goldman, Sachs & Co., Lehman Brothers
Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated, NationsBanc Montgomery
Securities LLC and Salomon Smith Barney Inc., as agents (the "Agents"), a
commission ranging from .125% to .750% of the principal amount of any
Note, depending on its Stated Maturity, sold through any such Agent.
Commissions with respect to Notes with Stated Maturities in excess of 30
years that are sold through an Agent will be negotiated between the
Company and such Agent at the time of such sale. CSX also may sell Notes
to any Agent, as principal, for resale to one or more investors at varying
prices relating to prevailing market prices at the time of resale, as
determined by such Agent, or at a fixed price as agreed between CSX and
such Agent.
(3) Before deducting expenses payable by CSX estimated at $425,000.
(4) Or the equivalent thereof in a specified currency or currency unit.
--------------
THE NOTES MAY BE OFFERED ON A CONTINUOUS BASIS BY CSX THROUGH THE AGENTS,
EACH OF WHICH HAS AGREED OR WILL AGREE TO USE ITS BEST EFFORTS TO SOLICIT
OFFERS TO PURCHASE THE NOTES. CSX MAY ALSO SELL NOTES TO ANY AGENT ACTING AS
PRINCIPAL FOR RESALE TO ONE OR MORE INVESTORS. CSX ALSO HAS RESERVED THE RIGHT
TO SELL NOTES DIRECTLY TO INVESTORS ON ITS OWN BEHALF. NO COMMISSION WILL BE
PAYABLE NOR WILL A DISCOUNT BE ALLOWED ON ANY DIRECT SALES BY CSX. CSX
RESERVES THE RIGHT TO WITHDRAW, CANCEL OR MODIFY THE OFFER MADE HEREBY WITHOUT
NOTICE. CSX OR ANY AGENT MAY REJECT ANY OFFER TO PURCHASE NOTES, IN WHOLE OR
IN PART. SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION."
CHASE SECURITIES INC.
BANCAMERICA SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY
The Date of this Prospectus Supplement is September 30, 1998
<PAGE>
(continued from previous page)
Notes may be issued in definitive form or may be represented by one or more
permanent Global Notes, as specified in the applicable Pricing Supplement,
which will be deposited with or on behalf of The Depository Trust Company, as
Depositary (the "Depositary"), or its nominee (each beneficial interest in a
permanent Global Note being referred to herein as a "Book-Entry Note").
Ownership of Book-Entry Notes will be limited to institutions which have
accounts with the Depositary ("participants") or persons that may hold
interests through participants. Ownership of Book-Entry Notes by persons that
hold through participants will only be evidenced by, and the transfer of that
ownership interest within such participant will be effected only through,
records maintained by such participant. Except as described under "Description
of Notes--Book-Entry Notes", owners of Book-Entry Notes will not be entitled
to receive physical delivery of Notes in definitive form and will not be
considered the Holders thereof.
IN CONNECTION WITH AN OFFERING OF NOTES MADE HEREBY, CERTAIN PERSONS
PARTICIPATING IN SUCH OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE,
MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES OFFERED HEREBY, INCLUDING
OVERALLOTMENT, STABILIZING TRANSACTIONS AND SHORT COVERING TRANSACTIONS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION".
S-2
<PAGE>
CSX CORPORATION
CSX Corporation, headquartered in Richmond, Virginia, is a Fortune 500
transportation company providing multimodal freight transportation and
contract logistics services around the world. CSX's unique combination of
rail, container-shipping, intermodal and logistics services offers shippers
global reach unmatched by any other freight transportation company. The
Company's goal, advanced at each of its business units, is to provide
efficient, competitive transportation and related services for customers and
to deliver superior value to CSX shareholders. See "CSX Corporation" in the
accompanying Prospectus.
USE OF PROCEEDS
It is expected that substantially all of the net proceeds from the sale of
the Notes offered hereby will be used to refinance the portion of the
Company's outstanding commercial paper that is classified as long-term debt.
At June 26, 1998, the Company had approximately $2.3 billion of commercial
paper outstanding, including $1.5 billion which was classified as long-term
debt based on the Company's ability and intent to maintain the debt
outstanding for more than one year. At June 26, 1998, the weighted average
maturity of the Company's outstanding commercial paper was approximately 29
days and the weighted average interest rate was approximately 5.78%. The
balance, if any, of the net proceeds will be used for general corporate
purposes, which may include capital expenditures, working capital
requirements, implementation of work force reductions, improvements in
productivity and other cost reductions at the Company's major transportation
units.
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 Debt Securities set forth
in the accompanying Prospectus, to which description reference is hereby made.
Capitalized terms not defined herein have the meanings assigned to such terms
in the accompanying Prospectus and the Indenture (as defined below). The
following description of the Notes will apply to such Notes, unless otherwise
specified in the applicable Pricing Supplement.
GENERAL
The Notes offered hereby will be issued under the Indenture, dated as of
August 1, 1990 between CSX and The Chase Manhattan Bank, as Trustee (the
"Trustee"), as supplemented by a First Supplemental Indenture dated as of June
15, 1991, a Second Supplemental Indenture dated as of May 6, 1997 and a Third
Supplemental Indenture dated as of April 22, 1998 (such Indenture, as so
supplemented, is herein referred to as the "Indenture") referred to in the
accompanying Prospectus. The Indenture does not limit the amount of other debt
that may be incurred by CSX. CSX may, from time to time, without the consent
of the Holders of Notes, provide for issuance of Notes or other Debt
Securities under the Indenture in addition to the U.S. $750,000,000 aggregate
initial offering price of Notes offered hereby.
The Notes constitute a single series for purposes of the Indenture and are
currently limited to an aggregate initial offering price of up to U.S.
$750,000,000 (including, in the case of Foreign Currency Notes, the equivalent
thereof at the Market Exchange Rate on the applicable trade dates, in a
Specified Currency), subject to reduction as the result of the sale by CSX of
other Debt Securities, including the sale outside the United States of any
other series of medium-term notes, or, provided that no such reduction will
affect any Note already issued or as to which an offer to purchase has been
accepted by CSX, by or pursuant to action of CSX's Board of Directors. See
"Supplemental Plan of Distribution" below. The foregoing limit, however, may
be increased by CSX if in the future it determines that it may wish to sell
additional Notes. The "Market Exchange Rate" for any Specified
S-3
<PAGE>
Currency means the noon buying rate in The City of New York for cable
transfers for such Specified Currency as certified for customs purposes by the
Federal Reserve Bank of New York. The following description of the particular
terms of the Notes applies to definitive Notes and to any permanent Global
Note or Notes representing Book-Entry Notes, but does not apply to Book-Entry
Notes. For a description of special provisions that apply to Book-Entry Notes,
see "Book-Entry Notes" below.
The Notes will be unsecured obligations of the Company and will rank pari
passu with all other unsecured and unsubordinated indebtedness of the Company.
Each Note will mature on any day 9 months or longer from its Issue Date, as
selected by the initial purchaser and agreed to by CSX, as specified in the
applicable Pricing Supplement.
The Notes will be issuable only in fully registered form and the Notes,
other than Foreign Currency Notes, will be issuable only in denominations of
U.S. $1,000 and integral multiples of U.S. $1,000 in excess thereof. For a
description of the denominations of Foreign Currency Notes, see "Special
Provisions Relating to Foreign Currency Notes" below.
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 amount payable at the Stated Maturity thereof and which
provides that upon redemption or acceleration of the Maturity thereof an
amount less than the principal amount payable at the Stated Maturity thereof
and determined in accordance with the terms thereof shall become due and
payable. Original Issue Discount Notes, as well as certain other Notes offered
hereunder, may, for United States federal income tax purposes, be considered
"Discount Notes." The principal United States federal income tax consequences
of the ownership of Discount Notes are described under "United States
Taxation--United States Holders--Original Issue Discount" in the accompanying
Prospectus. A "Zero Coupon Note" means a Note that does not bear interest
prior to Maturity.
The Notes may be issued as Indexed Notes, 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 of such Notes
depending upon the fluctuation of the relative value, rate or price of the
specified index. Specific information pertaining to the method for determining
the principal, premium or interest payable in respect of such Notes, a
historical comparison of the relative value, rate or price of the specified
index and the face amount of the Indexed Note, any risk factors, and certain
additional tax considerations will be described in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of and any
premium and interest on such Notes will be made in U.S. dollars in the manner
described in this Prospectus Supplement and in the accompanying Prospectus
under the caption "Description of Debt Securities--Payment and Paying Agents."
If any of the Notes are to be denominated in a Specified Currency, additional
information pertaining to the terms of such Notes and other matters of
interest to the Holders thereof, including any risk factors, will be described
in the applicable Pricing Supplement. See "Special Provisions Relating to
Foreign Currency Notes" and "United States Taxation" in the accompanying
Prospectus.
Payments of principal of and any premium and interest payable at Maturity on
a Note denominated in U.S. dollars will be made in immediately available funds
at the offices of The Chase Manhattan Bank, as Paying Agent, in the Borough of
Manhattan, The City of New York, provided that 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. With respect to payments on Foreign
Currency Notes at Maturity, see "Special Provisions Relating to Foreign
Currency Notes" below.
The Notes may be presented for registration of transfer or exchange at the
offices of The Chase Manhattan Bank, as Security Registrar, in the Borough of
Manhattan, The City of New York.
S-4
<PAGE>
For a description of the rights attaching to each series of Debt Securities
under the Indenture, see "Description of Debt Securities" in the accompanying
Prospectus.
The provisions of the Indenture described under "Description of Debt
Securities--Defeasance and Covenant Defeasance" in the accompanying Prospectus
apply to the Notes.
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The applicable Pricing Supplement
will indicate if the Notes will be redeemable prior to Maturity and the terms
on which such Notes will be redeemable at the option of the Company. If so
specified, the Notes will be subject to redemption at the option of the
Company on and after a specified date prior to its Stated Maturity in whole or
from time to time in part in increments of U.S. $1,000 or such other minimum
denomination specified in such Pricing Supplement (provided that any remaining
principal amount thereof shall be at least $1,000 or such minimum
denomination), at a specified price or prices (which may include a premium),
together with unpaid interest accrued to the date of redemption, on notice
given not more than 60 nor less than 30 calendar days prior to the date of
redemption and in accordance with the provisions of the Indenture.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASES BY THE COMPANY
The applicable Pricing Supplement will indicate if the Notes will be
repayable at the option of the Holders thereof on a date specified prior to
Maturity and, unless otherwise specified in the Pricing Supplement, such Notes
shall be repayable at a price equal to 100% of the principal amount thereof,
together with unpaid interest accrued to the date of repayment. On and after
such date of repayment, interest will cease to accrue on such Notes or any
portion thereof tendered for repayment. On or before such date of repayment,
the Company shall deposit with the Trustee or a Paying Agent money sufficient
to pay the principal of and any accrued interest on such Notes to be tendered
for repayment.
In order for such a Note to be repaid, the Trustee must receive at least 30
days but not more than 60 days prior to the repayment date (i) such Note with
the form entitled "Option of Holder to Elect Purchase" on the reverse of such
Note duly completed or (ii) facsimile transmission or a letter from a member
of a national securities exchange or the National Association of Securities
Dealers, Inc. or a commercial bank or trust company in the United States
setting forth the name of the Holder of such Note, the principal amount of
such Note, the principal amount of such Note to be repaid, the certificate
number or a description of the tenor and terms of such Note, a statement that
the option to elect repayment is being exercised thereby, and a guarantee that
such Note to be repaid, together with the duly completed form entitled "Option
of Holder to Elect Purchase" on the reverse of such Note, will be received by
the Trustee not later than the fifth Business Day after the date of such
facsimile transmission or letter; however, such facsimile transmission or
letter shall only be effective if such Note and duly completed form are
received by the Trustee by such fifth Business Day. Unless otherwise specified
in the applicable Pricing Supplement, exercise of the repayment option by the
Holder of a Note will be irrevocable unless waived by the Company. The
repayment option may be exercised by the Holder of a Note for less than the
entire principal amount of the Note, but in that event, the principal amount
of the Note remaining outstanding after repayment must be in an authorized
denomination and the denomination or denominations of the Note or Notes to be
issued to the Holder for the portion of the principal amount of such Note
surrendered that is not to be repaid must be specified.
If a Note is represented by a Global Note, the Depositary's nominee will be
the sole Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's
nominee will timely exercise a right to repayment with respect to a particular
Note, the beneficial owner of such Note must instruct the broker or other
participant or indirect participant (as defined below) through which it holds
an interest in such Note to notify the Depositary of its desire to exercise a
right to repayment. Different firms have different deadlines for accepting
instructions from their customers. Accordingly, each beneficial owner should
consult the broker or other direct participant or indirect participant through
which it
S-5
<PAGE>
holds an interest in a Note in order to ascertain the deadline by which such
instruction must be given in order for timely notice to be delivered to the
Depositary.
If applicable, the Company will comply with the provisions of Rule 13e-4,
Rule 14e-1 and any other tender offer rules under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), if required, and will file Schedule
13E-4 or any other schedule, if required, and comply with any other applicable
securities laws or regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
INTEREST
Each Note, except a Zero-Coupon Note, will bear interest from and including
its Issue Date or from and including the most recent Interest Payment Date (or
in the case of a Floating Rate Note with daily or weekly Interest Reset Dates,
the day following the most recent Regular Record Date) with respect to which
interest on such Note (or any predecessor Note) has been paid or duly provided
for at the fixed rate per annum, or at the rate per annum determined pursuant
to the interest rate index specified in the applicable Pricing Supplement,
until the principal thereof is paid or made available for payment. Interest
will be payable in arrears on each Interest Payment Date and at Maturity.
Interest will be payable generally to the Person in whose name a Note (or any
predecessor 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
second Interest Payment Date following the Issue Date of such Note to the
registered owner on the Regular Record Date immediately preceding such
Interest Payment Date.
Each Note, except a Zero-Coupon Note, will bear interest at either (a) a
fixed rate or rates (a "Fixed Rate Note") or (b) a variable rate determined by
reference to an interest rate index (a "Floating Rate Note"), which may be
adjusted by adding or subtracting the Spread (as defined below) or multiplying
by the Spread Multiplier (as defined below), unless otherwise indicated in the
applicable Pricing Supplement. Holders of Zero-Coupon Notes will receive no
periodic payments of interest on such Notes.
Interest rates or interest rate indices are subject to change by CSX from
time to time, but no such change will affect any Note already issued or as to
which an offer to purchase has been accepted by CSX.
In addition to any maximum interest rate which may be applicable to any
Note, the interest rate on the 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.
FIXED RATE NOTES
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Note. Unless
otherwise indicated in the applicable Pricing Supplement, the Interest Payment
Dates for Fixed Rate Notes will be March 1 and September 1 of each year and at
Maturity and the Regular Record Dates for Fixed Rate Notes will be the
February 15 or August 15, as the case may be, next preceding the March 1 and
September 1 Interest Payment Dates. Unless otherwise indicated in the
applicable Pricing Supplement, interest payments for Fixed Rate Notes shall be
the amount of interest accrued to but excluding the relevant Interest Payment
Date. Interest on such Notes will be computed on the basis of a 360-day year
of twelve 30-day months.
If any Interest Payment Date or the Maturity of a Fixed Rate Note falls on a
day that is not a Business Day, the required payment of principal, premium, if
any, or interest will be made on the next succeeding Business
S-6
<PAGE>
Day with the same force and effect as if made on the date such payment was
due, and no interest will accrue on such payment for the period from and after
such Interest Payment Date or the Maturity, as the case may be, to the date of
such payment on the next succeeding Business Day.
FLOATING RATE NOTES
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis for such Floating Rate Note. Such index may
be: (a) the Commercial Paper Rate, in which case such Note will be a
"Commercial Paper Rate Note"; (b) LIBOR, in which case such Note will be a
"LIBOR Note"; (c) the Treasury Rate, in which case such Note will be a
"Treasury Rate Note"; (d) the Certificate of Deposit Rate, in which case such
Note will be a "CD Rate Note"; (e) the Federal Funds Effective Rate, in which
case such Note will be a "Federal Funds Rate Note"; (f) the Prime Rate, in
which case such Note will be a "Prime Rate Note"; (g) the CMT Rate, in which
case such Note will be a "CMT Rate Note"; or (h) such other interest rate
index as is set forth in such Pricing Supplement. The applicable Pricing
Supplement for a Floating Rate Note also will specify the Spread or Spread
Multiplier, if any, and the maximum or minimum interest rate limitation, if
any, applicable to such Note. "Spread" means the number of basis points
specified in the applicable Pricing Supplement as being applicable to the
interest rate for a particular Floating Rate Note and "Spread Multiplier"
means the percentage specified in the applicable Pricing Supplement as being
applicable to the interest rate for a particular Floating Rate Note. In
addition, such Pricing Supplement will particularize for each Floating Rate
Note the following terms, if applicable: Calculation Dates; Initial Interest
Rate; Interest Payment Dates; Regular Record Dates; Index Maturity; Interest
Determination Dates; and Interest Reset Dates (each as defined below). If one
or more of the applicable interest rate basis is LIBOR or the CMT Rate, the
applicable Pricing Supplement will also specify the Index Currency and the
Designated LIBOR Page or the Designated CMT Maturity Index and Designated CMT
Telerate Page, respectively, as such terms are defined below. "Calculation
Date", where applicable, means the date by which the Calculation Agent is to
calculate the interest rate for a Floating Rate Note which shall be the
earlier of (i) the tenth calendar day after the related Interest Determination
Date, or if any such day is not a Market Day (as defined below), the next
succeeding Market Day and (ii) the Market Day preceding the applicable
Interest Payment Date or Maturity, as the case may be. "Market Day" means
(a) with respect to any Note, any day that is not a Saturday or Sunday and
that, in The City of New York, is not a day on which banking institutions
generally are authorized or obligated by law or executive order to close, (b)
with respect to LIBOR Notes only, any such day on which dealings in deposits
in U.S. dollars are transacted in the London interbank market (a "London
Market Day"), and (c) with respect to Foreign Currency Notes only, any day
that, in the Principal Financial Center (as defined below) of the country of
the Specified Currency or, with respect to Foreign Currency Notes denominated
in European Currency Units, Brussels, is not a day on which banking
institutions generally are authorized or obligated by law to close. "Composite
Quotations" means the daily statistical release entitled "Composite 3:30 P.M.
Quotations for U.S. Government Securities", or any successor publication,
published by the Federal Reserve Bank of New York. "Index Maturity" means,
with respect to a Floating Rate Note, the period to maturity of the instrument
or obligation on which the interest rate index is based, as indicated in the
applicable Pricing Supplement. "H.15(519)" means the weekly statistical
release entitled "Statistical Release H.15(519), Selected Interest Rates", or
any successor publication, published by the Board of Governors of the Federal
Reserve System. "Principal Financial Center" means (i) the capital city of the
country issuing the Specified Currency (except as described above with respect
to European Currency Units) or (ii) the capital city of the country to which
the Designated LIBOR Currency relates (or, in the case of European Currency
Units, Luxemburg), as applicable, except, in the case of (i) or (ii) above,
that with respect to U.S. dollars, Australian dollars, Canadian dollars,
Deutsche marks, Dutch guilders, Italian lire and Swiss francs, the "Principal
Financial Center" shall be The City of New York, Sydney, Toronto, Frankfurt,
Amsterdam, Milan (solely in the case of the Specified Currency) and Zurich,
respectively.
If a Floating Rate Note is designated in the applicable Pricing Supplement
as an "Inverse Floating Rate Note," then, except as described below or in the
applicable Pricing Supplement, such Floating Rate Note will bear interest at a
floating interest rate equal to a fixed interest rate minus the rate
determined by reference to the applicable interest rate index (a) plus or
minus the applicable Spread, if any, and/or (b) multiplied by the
S-7
<PAGE>
applicable Spread Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable Pricing Supplement, the interest rate
thereon will not be less than zero. Commencing on the initial Interest Reset
Date, the rate at which interest on such Inverse Floating Rate Note shall be
payable shall be reset as of each Interest Reset Date; provided, however, that
the interest rate in effect for the period, if any, from the date of issue to
the initial Interest Reset Date will be the Initial Interest Rate.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (each, an "Interest Reset
Date"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, the Interest Reset Date will
be as follows: 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, 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 which are
six months apart, 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 the interest rate in effect from the Issue Date of a
Floating Rate Note (or any predecessor Note) to the first Interest Reset Date
will be the Initial Interest Rate (as defined below and as set forth in the
applicable Pricing Supplement). If any Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Market Day, the Interest
Reset Date for such Floating Rate Note shall be the next succeeding Market
Day, 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. "Initial Interest Rate" means the rate at
which a Floating Rate Note will bear interest from its Issue Date to the first
Interest Reset Date, as indicated in the applicable Pricing Supplement.
The Interest Determination Date pertaining to an Interest Reset Date for (a)
a Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), (b) a CD Rate Note (the "CD Interest Determination Date"), (c) a
Federal Funds Rate Note (the "Federal Funds Interest Determination Date"), (d)
a Prime Rate Note (the "Prime Interest Determination Date") or (e) a CMT Rate
Note (the "CMT Rate Interest Determination Date") will be the second Market
Day preceding the Interest Reset Date with respect to such Note. 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 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. 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 immediately
following such auction date.
A Floating Rate Note may have either or both of the following: (a) a maximum
numerical interest rate limitation, or ceiling, on the rate of interest which
may accrue during any interest period and (b) a minimum numerical interest
rate limitation, or floor, on the rate of interest which may accrue during any
interest period.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, the Interest Payment Dates for Floating Rate Notes will be,
in the case of Floating Rate Notes that reset daily, weekly or that reset
monthly, the third Wednesday of each month or 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 that reset quarterly,
the third Wednesday of March, June, September and December of each year; in
the case of Floating Rate Notes that reset semi-annually, the third Wednesday
of the two months of each year that are six months apart specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes that
reset annually, the third Wednesday of the month specified in the applicable
Pricing Supplement, and in each case, at
S-8
<PAGE>
Maturity. If an Interest Payment Date with respect to any Floating Rate Note
would otherwise be a day that is not a Market Day, such Interest Payment Date
will be the next succeeding Market Day, except that in the case of a LIBOR
Note, if such day is in the next succeeding calendar month, such Interest
Payment Date will be the immediately preceding Market Day. The "Regular Record
Date" with respect to Floating Rate Notes shall be the date 15 calendar days
prior to each Interest Payment Date, whether or not such date shall be a
Market Day. If the Maturity of a Floating Rate Note falls on a day that is not
a Market Day, the required payment of principal, premium, if any, and interest
will be made on the next succeeding Market Day with the same force and effect
as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after the Maturity to the date of such
payment on the next succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, interest
payments for a Floating Rate Note shall be the amount of interest accrued from
and including each Interest Payment Date (or from and including the Issue Date
in which case no interest has been paid) to, but excluding, the next
succeeding Interest Payment Date or Maturity, as the case may be.
Accrued interest on any Floating Rate Note from its Issue Date 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 Issue Date or from the last
date to which interest has been paid or duly provided for, as the case may be,
to the date for which accrued interest is being calculated. The interest
factor for each such day is computed by dividing the interest rate applicable
to such date by 360, in the case of Commercial Paper Rate Notes, LIBOR Notes,
CD Rate Notes, Federal Funds Rate Notes and Prime Rate Notes, or by the actual
number of days in the year, in the case of Treasury Rate Notes and CMT Rate
Notes.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation on Floating Rate Notes will be
rounded, if necessary, to the nearest one-hundred thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544%
(or .09876544) being rounded to 9.87654% (or .0987654)), and all dollar
amounts used in or resulting from such calculation on Floating Rate Notes will
be rounded to the nearest cent (with one-half cent being rounded upwards).
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if then determined,
the interest rate which will become effective as a result of a determination
made for the next succeeding Interest Reset Date with respect to such Floating
Rate Note. The "Calculation Agent" means the agent appointed by CSX to
calculate interest rates as described below for Floating Rate Notes. Unless
otherwise provided in an applicable Pricing Supplement, the Calculation Agent
will be The Chase Manhattan Bank.
COMMERCIAL PAPER RATE NOTES
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread or
Spread Multiplier, if any) specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as described below) of the rate
quoted on a discount basis on such date for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper--Nonfinancial." If such rate is
not published prior to 3:00 P.M., New York City time, on the related
Calculation Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on such Commercial Paper Interest Determination Date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published in Composite Quotations under the heading "Commercial
Paper." If such rate is neither published in H.15(519) or in Composite
Quotations by 3:00 P.M., New York City time, on the related
S-9
<PAGE>
Calculation Date, then the Commercial Paper Rate on such Commercial Paper
Interest Determination Date will be calculated by the Calculation Agent and
shall be the Money Market Yield of the arithmetic mean of the offered rates,
as of 11:00 A.M., New York City time, on that Commercial Paper Interest
Determination Date, of three leading dealers of commercial paper in The City
of New York selected by the Calculation Agent for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement placed for a
non-financial entity whose senior unsecured bond rating is "AA", or the
equivalent, from a nationally recognized rating agency; provided, however,
that if the dealers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Rate will be the Commercial
Paper Rate in effect on such Commercial Paper Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
D X 360
Money Market Yield = ---------------- X 100
360 - (D X M)
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 the actual number
of days in the interest period for which interest is being calculated.
LIBOR NOTES
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined in accordance with the following provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR will be
either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the Designated
LIBOR Page by its terms provides only for a single rate, in which case such
single rate shall be used) for deposits in the Index Currency having the
Index Maturity specified in such Pricing Supplement, commencing on the
applicable Interest Reset Date, that appear (or, if only a single rate is
required as aforesaid, appears) on the Designated LIBOR Page as of 11:00
A.M., London time, on such LIBOR Interest Determination Date, or (b) if
"LIBOR Telerate" is specified in the applicable Pricing Supplement or if
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Pricing Supplement as the method for calculating LIBOR, the rate for
deposits in the Index Currency having the Index Maturity specified in such
Pricing Supplement, commencing on such Interest Reset Date, that appears on
the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If fewer than two such offered rates appear,
or if no such rate appears, as applicable, LIBOR on such LIBOR Interest
Determination Date will be determined in accordance with the provisions
described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as specified in clause (i) above, the Calculation
Agent will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity specified in the applicable Pricing Supplement, commencing on the
applicable Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If
at least two quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable Principal Financial Center, on
such
S-10
<PAGE>
LIBOR Interest Determination Date by three major banks in such Principal
Financial Center selected by the Calculation Agent for loans in the Index
Currency to leading European banks, having the Index Maturity specified in
the applicable Pricing Supplement and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined as of such LIBOR Interest Determination Date will be LIBOR in
effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no
such currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page or such service (or any
successor service)) for the purpose of displaying the London interbank rates
of major banks for the applicable Index Currency, or (b) if "LIBOR Telerate"
is specified in the applicable Pricing Supplement or neither "LIBOR Reuters"
nor "LIBOR Telerate" is specified in the applicable Pricing Supplement as the
method for calculating LIBOR, the display on Dow Jones Markets Limited (or any
successor service) on page 3750 if the U.S. dollar is the Index Currency or
with respect to any other Index Currency, on the page specified in such
Pricing Supplement (or any other page as may replace such page or such service
(or any successor service)) for the purpose of displaying the London interbank
rates of major banks for the applicable Index Currency.
TREASURY RATE NOTES
Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any) specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the
rate from the most recent auction of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable
Pricing Supplement as published in H.15(519) under the heading "Treasury
Bills--Auction Average (Investment)" or, if not so published by 3:00 P.M., New
York City time, on the related Calculation Date, the auction average rate of
such Treasury Bills (expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. If the results of
the auction of Treasury Bills having the Index Maturity specified in the
applicable Pricing Supplement are not reported as provided above by 3:00 P.M.,
New York City time, on such Calculation Date, or if no such auction is held,
then the Treasury Rate will be calculated by the Calculation Agent and will be
a yield to maturity (expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) 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 leading primary United States government securities dealers (which may
include any of the Agents or their affiliates; each, a "Reference Dealer")
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 the Reference Dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate will be the Treasury
Rate in effect on such Treasury Interest Determination Date.
CD RATE NOTES
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any)
specified in the applicable Pricing Supplement.
S-11
<PAGE>
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such
date for negotiable U.S. dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "CDs (Secondary Market)." If such rate is not so
published by 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate will be the rate on such CD Interest Determination Date for
negotiable U.S. dollar certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published in Composite
Quotations under the heading "Certificates of Deposit." If such rate is
neither published in H.15(519) or in Composite Quotations by 3:00 P.M., New
York City time, on the related Calculation Date, the CD Rate on such CD
Interest Determination Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the secondary market offered rates as of 10:00
A.M., New York City time, on such CD Interest Determination Date, of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in
The City of New York (which may include any of the Agents or their affiliates)
selected by the Calculation Agent for negotiable U.S. dollar certificates of
deposit of major United States money center banks of the highest credit
standing (in the market for negotiable U.S. dollar certificates of deposit)
with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement in an amount that is representative for a single
transaction in that market at that time; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the CD Rate will be the CD Rate in effect on such CD Interest
Determination Date.
FEDERAL FUNDS RATE NOTES
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Effective Rate and the Spread
or Spread Multiplier, if any) specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Effective Rate" means, with respect to any Federal Funds Interest
Determination Date, the rate on that date for Federal Funds having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Federal Funds (Effective)." If such rate is not
so published by 9:00 A.M., New York City time, on the related Calculation
Date, then the Federal Funds Effective Rate will be the rate on such Federal
Funds Interest Determination Date as published in Composite Quotations under
the heading "Federal Funds/Effective Rate." If such rate is neither published
in H.15(519) or in Composite Quotations by 3:00 P.M., New York City time, on
the related Calculation Date, then the Federal Funds Effective Rate on such
Federal Funds Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates as of 9:00
A.M., New York City time, on such Federal Funds Interest Determination Date
for the last transaction in overnight Federal Funds arranged by three leading
brokers of Federal Funds transactions in The City of New York (which may
include any of the Agents or their affiliates) selected by the Calculation
Agent; provided, however, that if the brokers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the Federal Funds
Effective Rate will be the Federal Funds Effective Rate in effect on such
Federal Funds Interest Determination Date.
PRIME RATE NOTES
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Interest Determination Date, the
rate on such date as is published in H.15(519) under the heading "Bank Prime
Loan." If such rate is not published prior to 3:00 P.M., New York City time,
on the related Calculation Date, then the Prime Rate shall be the arithmetic
mean of the rates of interest publicly announced by each bank that appears on
the Reuters Screen USPRIME1 Page (as defined below) 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 USPRIME1 Page
for such Prime Rate Interest Determination Date, then the Prime Rate shall be
the arithmetic mean of the prime rates quoted on the basis of the actual
number of days in the year
S-12
<PAGE>
divided by a 360-day year as of the close of business on such Prime Rate
Interest Determination Date by four major money center banks in The City of
New York selected by the Calculation Agent. If fewer than four such quotations
are so provided, then the Prime Rate shall be the arithmetic mean of four
prime 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 as furnished in The City of New York by the major
money center banks, if any, that have provided such quotations and by a
reasonable number of substitute banks or trust companies to obtain four such
prime rate quotations, provided such substitute banks or trust companies are
organized and doing business under the laws of the United States, or any State
thereof, each having total equity capital of at least $500,000,000 and being
subject to supervision or examination by Federal or State authority, selected
by the Calculation Agent to provide such rate or rates; provided, however,
that if the banks or trust companies so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Prime Rate determined as of
such Prime Rate Interest Determination Date will be the Prime Rate in effect
on such Prime Rate Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuter Monitor Money Rates Service (or any successor
service) or such other page as may replace the USPRIME1 Page on the Reuter
Monitor Money Rates Service (or any successor service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
CMT RATE NOTES
Each CMT Rate Note will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread or Spread Multiplier, if any)
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Rate Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page under the caption " . . .
Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . .
Mondays Approximately 3:45 P.M.," under the column for the Designated CMT
Maturity Index for (i) if the Designated CMT Telerate Page is 7055, the rate
on such CMT Rate Interest Determination Date and (ii) if the Designated CMT
Telerate Page is 7052, the weekly or monthly average, as specified in the
applicable Pricing Supplement, for the week or the month, as applicable, ended
immediately preceding the week or month, as applicable, in which the related
CMT Rate Interest Determination Date occurs. If such rate is no longer
displayed on the relevant page or is not displayed by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for
the Designated CMT Maturity Index as published in the relevant H.15(519). If
such rate is no longer published or is not published by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate on such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for
the Designated CMT Maturity Index (or other United States Treasury rate for
the Designated CMT Maturity Index) for the CMT Rate Interest Determination
Date with respect to such Interest Reset Date as may then be published by
either the Board of Governors of the Federal Reserve System or the United
States Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided
by 3:00 P.M., New York City time, on the related Calculation Date, then the
CMT Rate on the CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic
mean of the secondary market closing offer side prices as of approximately
3:30 P.M., New York City time, on such CMT Rate Interest Determination Date
reported, according to their written records, by three Reference Dealers in
The City of New York selected by the Calculation Agent (from five such
Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the United
States ("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not less
than such Designated CMT Maturity Index minus one year. If the Calculation
Agent is unable to obtain three such Treasury Note quotations, the CMT Rate
S-13
<PAGE>
on such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 P.M., New
York City time, on such CMT Rate Interest Determination Date of three
Reference Dealers in The City of New York (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or,
in the event of equality, one of the highest) and the lowest quotation (or, in
the event of equality, one of the lowest)), for Treasury Notes with an
original maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining maturity closest to the Index
Maturity specified in the applicable Pricing Supplement and in an amount that
is representative for a single transaction in that market at that time. If
three or four (and not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean of the
offer prices obtained and neither the highest nor the lowest of such quotes
will be eliminated; provided, however, that if fewer than three Reference
Dealers so selected by the Calculation Agent are quoting as mentioned herein,
the CMT Rate determined as of such CMT Rate Interest Determination Date will
be the CMT Rate in effect on such CMT Rate Interest Determination Date. If two
Treasury Notes with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the Calculation Agent will obtain quotations for the Treasury
Note with the shorter remaining term to maturity and will use such quotations
to calculate the CMT Rate as set forth above.
"Designated CMT Telerate Page" means the display on Dow Jones Markets
Limited (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on that service
(or any successor service) for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519)) for the purpose of displaying Treasury
Constant Maturities as reported in H.15(519). If no such page is specified in
the applicable Pricing Supplement, the Designated CMT Telerate Page shall be
7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either one, two, three, five, seven, 10, 20 or 30
years) specified in the applicable Pricing Supplement with respect to which
the CMT Rate will be calculated. If no such maturity is specified in the
applicable Pricing Supplement, the Designated CMT Maturity Index shall be two
years.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same Issue
Date will be represented by one or more permanent global Notes in definitive,
fully registered form without interest coupons (the "Global Notes"). Each
Global Note representing Book-Entry Notes will be deposited with the Trustee,
as custodian for, and registered in the name of, a nominee of The Depository
Trust Company, as Depositary (the "Depositary"), located in the Borough of
Manhattan, The City of New York.
Ownership of beneficial interests in Book-Entry Notes will be limited to
persons who have accounts with the Depositary ("participants") or persons who
hold interests through participants. Ownership of beneficial interests in
Book-Entry Notes will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary or its nominee
(with respect to interests of participants) and the records of participants
(with respect to persons other than participants). The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the
ability to transfer Book-Entry Notes.
So long as the Depositary, or its nominee, is the registered owner or holder
of a Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Note for all purposes under the Indenture and the Notes. No beneficial owner
of an interest in a Global Note will be able to transfer that interest except
in accordance with the Depositary's applicable procedures, in addition to
those provided for under the Indenture.
S-14
<PAGE>
CSX has been advised by the Depositary that upon the issuance of Global
Notes representing Book-Entry Notes, and the deposit of such Global Notes with
the Depositary, the Depositary will immediately credit, on its book-entry
registration and transfer system, the respective principal amounts of the
Book-Entry Notes represented by such Global Notes to the accounts of
participants. The accounts to be credited shall be designated by the
soliciting Agent, or by CSX, if such Notes are offered and sold directly by
CSX.
Payments of principal of and any premium and interest on Book-Entry Notes
will be made to the Depositary or its nominee, as the case may be, as the
registered owner thereof. Such payments to the Depositary or its nominee, as
the case may be, will be made in immediately available funds at the offices of
The Chase Manhattan Bank, as Paying Agent, in the Borough of Manhattan, The
City of New York, provided that, in the case of payments of principal and any
premium, the Global Notes are presented to the Paying Agent in time for the
Paying Agent to make such payments in such funds in accordance with its normal
procedures. None of CSX, the Trustee or any agent of CSX or the Trustee will
have any responsibility or liability for any aspect of the Depositary's
records or any participant's records relating to or payments made on account
of Book-Entry Notes or for maintaining, supervising or reviewing any of the
Depositary's records or any participant's records relating to such Book-Entry
Notes.
CSX expects that the Depositary or its nominee upon receipt of any payment
of principal of or any premium or interest in respect of a Global Note, will
immediately credit, on its book-entry registration and transfer system,
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Notes
as shown on the records of the Depositary or its nominee. CSX also expects
that payments by participants to owners of beneficial interests in Book-Entry
Notes 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.
Transfers between participants in the Depositary will be effected in the
ordinary way in accordance with the Depositary's rules and will be settled in
same-day funds.
CSX expects that the Depositary will take any action permitted to be taken
by a Holder (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account or
accounts the Depositary interests in a Global Note are credited and only in
respect of such portion of the aggregate principal amount of the Note as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Notes, the Depositary will
exchange the applicable Global Note for Definitive Notes, which it will
distribute to its participants.
CSX understands that the Depositary is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code, and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among participants through electronic book-entry changes in
accounts of its participants and certain other organizations, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including
the Agents), banks, trust companies, clearing corporations, and certain other
organizations, some of whom (or their representatives) own interests in the
Depositary. Indirect 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 ("indirect participants").
Although the Depositary is expected to follow the foregoing procedures in
order to facilitate transfers of interests in a Global Note among participants
of the Depositary, it is under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time. Neither
CSX nor the Trustee will have any responsibility for the performance by the
Depositary or its respective participants or indirect participants of its
respective obligations under the rules and procedures governing their
operations.
S-15
<PAGE>
The Global Notes representing Book-Entry Notes may not be transferred except
as a whole by a nominee of the Depositary to the Depositary or to another
nominee of the Depository, or by the Depository or such nominee to a successor
of the Depositary or a nominee of such successor.
The Global Notes representing Book-Entry Notes are exchangeable for
definitive Notes in registered form, of like tenor and of an equal aggregate
principal amount, only if (x) the Depositary notifies CSX that it is unwilling
or unable to continue as Depositary for such Global Note 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 CSX within 90 days, (y) CSX in
its sole discretion determines that such Book-Entry Notes shall be
exchangeable for definitive Notes in registered form or (z) any event shall
have happened and be continuing which, after notice or lapse of time, or both,
would become an Event of Default with respect to the Notes. Any Global Note
representing Book-Entry Notes that is exchangeable pursuant to the preceding
sentence shall be exchangeable in whole for definitive Notes in registered
form, of like tenor and of an equal aggregate principal amount, in
denominations of U.S. $1,000 and integral multiples of U.S. $1,000 in excess
thereof, or, in the case of Foreign Currency Notes, in the denominations
indicated in the applicable Pricing Supplement. Upon the exchange of a Global
Note for Definitive Notes, such Global Note shall be canceled by the Trustee
and the Definitive Notes shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
participants, any indirect participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such Notes to the persons in whose names
such Notes are so registered and shall recognize such persons as the Holders
thereof.
Except as provided above, owners of Book-Entry Notes will not be entitled to
receive physical delivery of Notes in definitive form and will not be
considered the Holders thereof for any purpose under the Indenture, and no
Global Note representing Book-Entry Notes shall be exchangeable, except for
another Global Note of like denomination and tenor to be registered in the
name of the Depositary or its nominee. Accordingly, each person owning a Book-
Entry Note must rely on the procedures of the Depositary and, if such person
is not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a Holder under such Global
Note or the Indenture. The Indenture provides that the Depositary, as a
Holder, may appoint agents and otherwise authorize participants to give or
take any request, demand, authorization, direction, notice, consent, waiver or
other action which a Holder is entitled to give or take under the Indenture.
CSX understands that under existing industry practices, in the event that CSX
requests any action of Holders or an owner of a Book-Entry Note desires to
give or take any action a Holder is entitled to give or take under the
Indenture, the Depositary would authorize the participants owning the relevant
Book-Entry Notes 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
owning through them.
S-16
<PAGE>
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
The following provisions which apply to Foreign Currency Notes supplement
the description of general terms and provisions of Debt Securities set forth
in the accompanying Prospectus and elsewhere in this Prospectus Supplement.
For a description of certain risks associated with Foreign Currency Notes, see
"Foreign Currency Risks."
The authorized denominations for particular Foreign Currency Notes will be
indicated in the applicable Pricing Supplement.
Specific information pertaining to the foreign currency or currency unit in
which a particular Foreign Currency Note is denominated, including historical
exchange rates, risk factors and a description of the currency or currency
unit and any exchange controls, will be described in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency. If
requested, on or prior to the fifth Market Day preceding the date of delivery
of the Notes, or by such other day as determined by the Agent who presented
such offer to purchase Notes to CSX, such Agent is prepared to arrange for the
conversion of U.S. dollars into the Specified Currency to enable the
purchasers to pay for the Notes. Each such conversion will be made by such
Agent on such terms and subject to such conditions, limitations and charges as
such Agent may from time to time establish in accordance with its regular
foreign exchange practices. All costs of exchange will be borne by the
purchasers of the Foreign Currency Notes.
PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST
The principal of and any premium and interest on Foreign Currency Notes are
payable by CSX in U.S. dollars. Unless otherwise specified in the applicable
Pricing Supplement, the Exchange Rate Agent (as defined below) will obtain the
quotations necessary to convert the amount of all payments of principal of and
any premium and interest on Foreign Currency Notes from the Specified Currency
to U.S. dollars. Unless otherwise specified in the applicable Pricing
Supplement, however, the Holder of a Foreign Currency Note may elect to
receive such payments in the Specified Currency as described below.
Any U.S. dollar amount to be received by a Holder of a Foreign Currency Note
will be based on the highest bid quotation in The City of New York received by
the Exchange Rate Agent at approximately 11:00 A.M., New York City time, on
the second Market Day preceding the applicable payment date from three
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for
U.S. dollars for settlement on such payment date in the aggregate amount of
the Specified Currency payable to all Holders of Foreign Currency Notes
scheduled to receive U.S. dollar payments and at which the applicable dealer
commits to execute a contract. If such bid quotations are not available,
payments will be made in the Specified Currency. All currency exchange costs
will be borne by the Holder of the Foreign Currency Note by deductions from
such payments. "Exchange Rate Agent" means the agent appointed by CSX to
obtain the quotations necessary to convert the amount of principal and any
premium and interest payments on Foreign Currency Notes from the Specified
Currency into U.S. dollars. Unless otherwise indicated in the applicable
Pricing Supplement, the Exchange Rate Agent will be The Chase Manhattan Bank.
Unless otherwise specified in the applicable Pricing Supplement, a Holder of
a Foreign Currency Note may elect to receive payment of the principal of and
any premium and interest on such Note in the Specified Currency by filing a
written request, signature guaranteed, for such payment at the office of The
Chase Manhattan Bank, as Paying Agent, in the Borough of Manhattan, The City
of New York, on or prior to the Regular Record Date or at least sixteen days
prior to Maturity, as the case may be. A Holder of a Foreign Currency Note may
make such election with respect to all principal and any premium and interest
payments and need not file a separate election for each payment. Such election
will remain in effect until changed by written notice to the Paying
S-17
<PAGE>
Agent, but written notice of any such change must be received by the Paying
Agent on or prior to the relevant Regular Record Date or at least sixteen days
prior to Maturity, as the case may be. Any such election or change thereof
will be deemed to be made for all Foreign Currency Notes denominated in such
Specified Currency which are registered in the name of such Holder, unless
such Holder specifies in such written request the particular Foreign Currency
Notes with regard to which such election or change thereof shall not apply.
Holders of Foreign Currency Notes whose Notes are to be held 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 the Specified Currency may be made.
Except as described below, principal of and any premium and interest on
Foreign Currency Notes paid in U.S. dollars will be paid in the manner
specified in the accompanying Prospectus and this Prospectus Supplement for
principal of and any premium and interest on Notes denominated in U.S.
dollars, and principal of and any premium and interest on Foreign Currency
Notes paid in a Specified Currency will be paid by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register. All checks payable in a Specified Currency will be drawn on a bank
office located outside the United States. In addition, payments in U.S.
dollars of principal of and any premium and interest on a Foreign Currency
Note in which the equivalent of U.S. $10,000,000 or more has been invested
may, at the request of the Holder thereof, be made in immediately available
funds at the offices of The Chase Manhattan Bank, as Paying Agent, in the
Borough of Manhattan, The City of New York, provided that, in the case of
payments of principal and any premium, such 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. Also, payments in a Specified Currency
of principal of and any premium and interest on a Foreign Currency Note in
which the equivalent of U.S. $10,000,000 or more has been invested may, at the
request of the Holder thereof, be made by wire transfer to an account with a
bank located in the country of the Specified Currency, as shall have been
designated on or prior to the relevant Regular Record Date or at least sixteen
days prior to Maturity, as the case may be, provided that, in the case of
payments of principal and any premium, the Note is presented at the offices of
The Chase Manhattan Bank, as Paying Agent, in the Borough of Manhattan, The
City of New York in time for the Paying Agent to make such payments in such
funds in accordance with its normal procedures. Any request of a Holder in
accordance with this paragraph must be transmitted to the Paying Agent on or
prior to the relevant Regular Record Date or at least sixteen days prior to
Maturity, as the case may be. Such request may be in writing (mailed or hand
delivered) or by cable, telex or other form of facsimile transmission. Such
Holder may make such election for all principal and any premium and interest
payments and need not file a separate election for each payment. Such election
will remain in effect until revoked by written notice to the Paying Agent but
written notice of any such revocation must be received by the Paying Agent on
or prior to the relevant Regular Record Date or at least sixteen days prior to
Maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of a Global Note or Notes representing Book-Entry Notes
denominated in a Specified Currency that elects to receive payments of
principal, premium or interest in such Specified Currency 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 at least sixteen days
prior to Maturity, in the case of a payment of principal or premium, of such
beneficial owner's election to receive such payment in such Specified
Currency. Such participant must notify the Depositary of such election on or
prior to the third Business Day after such Record Date or at least twelve days
prior to Maturity, as the case may be, and the Depositary will notify the
Paying Agent of such election on or prior to the fifth Business Day after such
Record Date or at least ten days prior to the Maturity Date, as the case may
be. If complete instructions are received by the participant from the
beneficial owner and forwarded by the participant to the Depositary, and by
the Depositary to the Paying Agent, on or prior to such dates, then such
beneficial owner will receive payments in the applicable Specified Currency.
PAYMENT CURRENCY
If a Specified Currency is not available for the payment of principal or any
premium or interest with respect to a Foreign Currency Note due to the
imposition of exchange controls or other circumstances beyond the control
S-18
<PAGE>
of CSX or is no longer used by the government of the country issuing such
Specified Currency for the settlement of transactions by public institutions
of or within the international business community, CSX will be entitled to
satisfy its obligations to Holders of Foreign Currency Notes by making such
payment in U.S. dollars on the basis of the Market Exchange Rate two Business
Days prior to the date of such payment, or if such Market Exchange Rate is not
then available, on the basis of the most recently available Market Exchange
Rate.
If payment in respect of a Foreign Currency Note is required to be made in
any currency unit (e.g., European Currency Unit or Euro), and such currency
unit is unavailable due to the imposition of exchange controls or is no longer
used by the monetary authority issuing such currency unit or other
circumstances beyond the reasonable control of CSX, CSX will be entitled to
satisfy its obligations to the Holder of such Foreign Currency Note by making
such payment in U.S. dollars. The amount of each payment in U.S. dollars shall
be computed by the Exchange Rate Agent on the basis of the equivalent of the
currency unit in U.S. dollars. The component currencies of the currency unit
for this purpose (collectively, the "Component Currencies" and each, a
"Component Currency") shall be the currency amounts that were components of
the currency unit as of the last day on which the currency unit was used. The
equivalent of the currency unit in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Component Currencies. The U.S.
dollar equivalent of each of the Component Currencies shall be determined by
the Exchange Rate Agent on the basis of the most recently available Market
Exchange Rate for each such Component Currency, or as otherwise specified in
the applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in
such single currency equal to the sum of the amounts of the consolidated
Component Currencies expressed in such single currency. If any Component
Currency is divided into two or more currencies, the amount of the original
Component Currency shall be replaced by the amounts of such two or more
currencies, the sum of which shall be equal to the amount of the original
Component Currency.
Any payment made in U.S. dollars under such circumstances where the required
payment is in a Specified Currency other than U.S. dollars will not constitute
an Event of Default under the Indenture with respect to the Notes.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
S-19
<PAGE>
SUPPLEMENTAL PLAN OF DISTRIBUTION
Unless otherwise specified in the applicable Pricing Supplement, the Agents
shall be Chase Securities Inc., BancAmerica Securities, Inc., Credit Suisse
First Boston Corporation, Goldman, Sachs & Co., Lehman Brothers Inc., Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan
Stanley & Co. Incorporated, NationsBanc Montgomery Securities LLC and Salomon
Smith Barney Inc. Under the terms of a Distribution Agreement, dated September
30, 1998 (the "Distribution Agreement"), among CSX and the Agents, the Notes
may be offered on a continuing basis by CSX through the Agents, each of which
has agreed to use its best efforts to solicit purchases of the Notes. CSX will
pay each Agent a commission of from .125% to .750% of the principal amount of
each Note sold through such Agent, depending on its Stated Maturity.
Commissions with respect to Notes with Stated Maturities in excess of 30 years
that are sold through an Agent will be negotiated between the Company and such
Agent at the time of such sale. CSX has reserved the right to sell Notes
directly to investors on its own behalf. No commission will be payable nor
will a discount be allowed on any sales made directly by CSX. CSX will have
the sole right to accept offers to purchase Notes and may reject any such
offer, in whole or in part. Each Agent shall have the right, in its discretion
reasonably exercised, to reject any offer to purchase Notes received by it, in
whole or in part. CSX also may sell Notes to any Agent, acting as principal,
at a discount to be agreed upon at the time of sale, for resale to one or more
investors at varying prices related to prevailing market prices at the time of
such resale, as determined by such Agent or, if so agreed by CSX and the
applicable Agent and specified in the applicable Pricing Supplement, at a
fixed public offering price. The offering price and other selling terms may
from time to time be varied by such Agent.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes, other than Foreign Currency Notes, will be
required to be made in funds immediately available in The City of New York.
With respect to payment of the purchase price of Foreign Currency Notes, see
"Special Provisions Relating to Foreign Currency Notes--General."
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act. CSX has agreed to indemnify the Agents against and contribute
toward certain liabilities, including liabilities under the Securities Act.
CSX has agreed to reimburse the Agents for certain expenses.
In addition to offering Notes through the Agents as described herein, other
Securities that have terms substantially similar to the terms of the Notes
offered hereby (but constituting one or more separate series of Securities for
purposes of the Indenture) may in the future be offered, concurrently with the
offering of the Notes, on a continuing basis outside the United States by CSX.
The aggregate principal amount of Notes offered hereby is subject to reduction
as a result of the sale by CSX of other Securities, including the sale outside
the United States of any other series of medium-term notes.
The Notes will not be listed on any securities exchange, unless otherwise
indicated in the applicable Pricing Supplement, and there can be no assurance
that the Notes offered by this Prospectus Supplement will be sold or that
there will be a secondary market for the Notes.
In connection with certain offerings of the Notes, the Agents may engage in
overallotment, stabilizing transactions and short covering transactions.
Overallotment involves sales in excess of the offering size, which creates a
short position for the Agent(s). Stabilizing transactions involve bids to
purchase the Notes in the open market for the purpose of pegging, fixing or
maintaining the price of the Notes. Short covering transactions involve
purchases of the Notes in the open market after the distribution has been
completed in order to cover short positions. Such stabilizing transactions and
short covering transactions may cause the price of the Notes to be higher than
it would otherwise be in the absence of such transactions. Such activities, if
commenced, may be discontinued at any time.
In the ordinary course of business, the Agents and their affiliates have
engaged in and may in the future engage in investment banking and general
financing and banking transactions with the Company and certain of its
affiliates. In particular, affiliates of certain of the Agents participate in
certain of the Company's credit facilities and,
S-20
<PAGE>
accordingly, if any proceeds from the sale of the Notes are applied by the
Company to repay amounts borrowed under such facilities, such affiliates will
receive their proportionate share of the amounts repaid. The Chase Manhattan
Bank, the Trustee, is an affiliate of Chase Securities Inc.
VALIDITY OF THE NOTES
The validity of the Notes offered hereby will be passed upon for CSX by
McGuire, Woods, Battle & Boothe LLP, Richmond, Virginia. Certain legal matters
will be passed upon for the Agents by Shearman & Sterling, New York, New York.
The opinions of McGuire, Woods, Battle & Boothe LLP and Shearman & Sterling
will be conditioned upon, and subject to certain assumptions regarding, future
action required to be taken by CSX and the Trustee in connection with the
issuance and sale of any particular Note, the specific terms of Notes and
other matters which may affect the validity of Notes but which cannot be
ascertained on the date of such opinions. Robert L. Burrus, Jr., a partner of
McGuire, Woods, Battle & Boothe LLP, is a director of the Company and owns
7,680 shares of the Company's Common Stock.
S-21
<PAGE>
PROSPECTUS
[LOGO OF CSX CORPORATION]
DEBT SECURITIES, PREFERRED STOCK, SECURITIES WARRANTS
AND DEPOSITARY SHARES
CSX Corporation (the "Company" or "CSX") may from time to time offer, issue
and sell its unsecured debt securities, which may be either senior (the
"Senior Debt Securities") or subordinated (the "Subordinated Debt Securities"
and, together with the Senior Debt Securities, the "Debt Securities");
warrants to purchase Debt Securities (the "Debt Warrants"); shares of its
preferred stock, no par value (the "Preferred Stock"), in one or more series;
warrants to purchase Preferred Stock (the "Preferred Stock Warrants"); and
depositary shares (the "Depositary Shares") evidenced by depositary receipts,
for an aggregate initial public offering price of up to $750,000,000 or the
equivalent in foreign currencies, currency units or composite currencies
(each, a "Currency"). The Debt Warrants and the Preferred Stock Warrants are
collectively referred to herein as the "Securities Warrants." The Debt
Securities, Preferred Stock, Depositary Shares and Securities Warrants
(collectively, the "Securities") may be offered independently or together in
any combination for sale directly to purchasers or through dealers,
underwriters or agents to be designated. The Debt Securities and Preferred
Stock may be convertible into or exchangeable for other Securities. The
Securities will be offered to the public at prices and on terms determined at
the time of offering. The Securities may be sold for U.S. dollars or other
Currencies and any amounts payable by the Company in respect of the Securities
may likewise be payable in U.S. dollars or other Currencies.
The Senior Debt Securities will rank on a parity in right of payment with
all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities will be subordinated to all existing and future
Senior Indebtedness (as defined herein) of the Company. See "Description of
Debt Securities."
The Prospectus Supplement accompanying this Prospectus sets forth (where
applicable), with respect to the series or issue of Securities (the "Offered
Securities") for which such Prospectus Supplement is being delivered: the
terms of any Debt Securities offered, including, where applicable, their
title, ranking, aggregate principal amount, maturity, rate of interest (or
method of calculation) and time of payment thereof, any redemption or
repayment terms, the Currency or Currencies in which such Debt Securities will
be denominated or payable, any index, formula or other method pursuant to
which principal, premium, if any, or interest, if any, may be determined, any
conversion or exchange provisions, and other specific terms not described in
this Prospectus; the terms of any Preferred Stock offered, including, where
applicable, the specific designation, number of shares, dividend rate (or
method of calculation) and time of payment (or method of calculation) thereof,
liquidation preference, any redemption or repayment terms, any conversion or
exchange provisions, any voting rights, and other specific terms not described
in this Prospectus; the terms of any Depositary Shares offered which are not
described in this Prospectus, including the fraction of a share of Preferred
Stock represented by each such Depositary Share; the terms of any Securities
Warrants offered, including a description of the Securities for which such
Securities Warrants are exercisable and, where applicable, the exercise price,
detachability, duration and other specific terms not described in this
Prospectus; and the initial public offering price and the net proceeds to the
Company and other specific terms related to the Offered Securities.
This Prospectus may not be used to consummate sales of Securities unless
accompanied or, to the extent permitted by applicable law, preceded by a
Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Securities may be offered through dealers, underwriters or agents
designated from time to time, as set forth in the accompanying Prospectus
Supplement. Net proceeds to the Company will be equal to the purchase price in
the case of a dealer, the public offering price less discount in the case of
an underwriter or the purchase price less commission in the case of an agent--
in each case, less other expenses attributable to the issuance and
distribution of the Securities. The Company may also sell Securities directly
to investors on its own behalf. In the case of sales made directly by the
Company, no commission will be payable. See "Plan of Distribution" for
possible indemnification arrangements for any dealers, underwriters and
agents.
The date of this Prospectus is August 11, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
Commission's Regional Offices in New York (Seven World Trade Center, 13th
Floor, New York, New York 10048), and Chicago (Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661). Copies of these
materials may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, the Commission maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Reports, proxy statements and other information concerning the
Company may also be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005, where the Company's common stock is
listed.
This Prospectus constitutes a part of a Registration Statement on Form S-3,
as amended (the "Registration Statement"), filed by the Company with the
Commission under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus omits certain of the information contained in the
Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the
Securities. Statements contained herein concerning the provisions of any
documents are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
26, 1997, Quarterly Reports on Form 10-Q for the fiscal quarters ended March
27, 1998 and June 26, 1998, and Current Reports on Form 8-K dated April 22,
1998, May 12, 1998 and May 29, 1998 have been filed by the Company with the
Commission and are incorporated herein by reference.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this
Prospectus and prior to the termination of any offering of the Securities made
hereby shall be deemed to be incorporated by reference into this Prospectus
and to be a part of this Prospectus from the respective dates of filing of
such documents. Any statement contained herein or in a document, all or any
part of which is incorporated or deemed to be incorporated by reference
herein, shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement or
document so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute part of this Prospectus. As used herein, the
terms "Prospectus" and "herein" mean this Prospectus, including the documents
incorporated or deemed incorporated by reference, as the same may be amended,
supplemented or otherwise modified from time to time. Statements contained in
this Prospectus as to the contents of any contract or other document referred
to herein do not purport to be complete and are qualified in all respects by
reference to all of the provisions of such contract or other document.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any and all of the documents described above that are incorporated by
reference herein other than exhibits to such documents which are not
specifically incorporated by reference in such documents. Written or telephone
requests should be directed to: Alan A. Rudnick, Vice President--General
Counsel and Corporate Secretary, CSX Corporation, One James Center, 901 East
Cary Street, Richmond, Virginia 23219, telephone number (804) 782-1400.
2
<PAGE>
CSX CORPORATION
CSX Corporation, headquartered in Richmond, Virginia, is a Fortune 500
transportation company providing multimodal freight transportation and
contract logistics services around the world. CSX's unique combination of
rail, container-shipping, intermodal and logistics services offers shippers
global reach unmatched by any other freight transportation company. The
Company's goal, advanced at each of its business units, is to provide
efficient, competitive transportation and related services for customers and
to deliver superior value to CSX shareholders.
The Company's holdings include: CSX Transportation, Inc. ("CSXT"), Sea-Land
Service, Inc. ("Sea-Land"), CSX Intermodal, Inc. ("CSXI"), Customized
Transportation, Inc. ("CTI") and an approximate one-third interest in American
Commercial Lines Holdings LLC ("ACL Holdings"). The Company's non-
transportation interests include: The Greenbrier, the Grand Teton Lodge
Company, and CSX Real Property, Inc. CSX also holds a majority interest in
Yukon Pacific Corporation. In 1997, CSX generated more than $10.6 billion of
operating revenue and nearly $1.6 billion of operating income.
CSXT is a major eastern railroad, providing rail freight transportation over
a network of approximately 18,300 route miles in 20 states in the East,
Midwest and South; and in Ontario, Canada. Headquartered in Jacksonville,
Florida, CSXT accounted for 47% of CSX's operating revenue and 78% of
operating income in 1997.
Sea-Land is the largest U.S.-based ocean carrier and a leader in the global
shipping industry. The carrier operates a fleet of 98 container ships and
approximately 220,000 containers in U.S. and foreign trade and serves 120
ports. In addition, Sea-Land operates 28 marine terminal facilities across its
global network. Headquartered in Charlotte, North Carolina, Sea-Land accounted
for 37% of CSX's operating revenue and 18% of operating income in 1997.
CSXI provides transcontinental intermodal transportation services and
operates a network of dedicated intermodal facilities across North America.
Every week, CSXI runs more than 300 dedicated trains between its 33 terminals.
CSXI contributed 6% of CSX's operating revenue and 3% of operating income in
1997.
CTI is one of the nation's leading third-party logistics providers, offering
inventory management, distribution, warehousing, assembly and just-in-time
delivery services. The fastest growing unit of CSX, CTI provided 4% of CSX's
operating revenue and 1% of operating income in 1997.
ACL Holdings, headquartered in Jeffersonville, Indiana, is a family of
marine companies providing a wide range of services to the shipping public and
other inland waterway carriers. ACL Holdings is a leader in barge
transportation, operating 195 towboats and more than 4,500 barges on U.S. and
South American waterways. Additionally, ACL Holdings operates marine
construction facilities, river terminals and communications services. Prior to
its combination with National Marine (another barge company) in June 1998 to
form ACL Holdings, American Commercial Lines LLC was wholly-owned by CSX and
accounted for 6% of CSX's operating revenue and 4% of operating income in
1997. See "Recent Developments."
Resort holdings include the Mobil Five-Star and AAA Five-Diamond hotel, The
Greenbrier in White Sulphur Springs, West Virginia, and the Grand Teton Lodge
Company in Moran, Wyoming. CSX Real Property, Inc. is responsible for sales,
leasing and development of CSX-owned properties. CSX holds a majority interest
in Yukon Pacific Corporation, which is promoting construction of the Trans-
Alaska Gas System to transport Alaska's North Slope natural gas to Valdez for
export to Asian markets.
The Company was incorporated in Virginia in 1978. The Company's principal
executive offices are located at One James Center, 901 East Cary Street,
Richmond, Virginia 23219 (telephone 804-782-1400). Unless the context
indicates otherwise, references herein to the Company or CSX are to CSX
Corporation and its consolidated subsidiaries.
3
<PAGE>
CONRAIL ACQUISITION
In April 1997, CSX and Norfolk Southern Corporation, a Virginia corporation
("Norfolk Southern"), entered into an agreement providing for their joint
acquisition of Conrail Inc., a Pennsylvania corporation ("Conrail"), and the
allocation of its routes and other assets.
Under the agreement, CSX and Norfolk Southern completed their acquisition of
all outstanding shares of Conrail for $115 per share in cash during the second
quarter of 1997. CSX and Norfolk Southern each possess 50% of the voting and
management rights of a jointly owned acquisition company, and non-voting
equity is divided between the parties to achieve overall economic allocations
of 42% for CSX and 58% for Norfolk Southern. Following approval by the Surface
Transportation Board ("STB") as described below, Conrail's assets will be
segregated within Conrail, and CSX and Norfolk Southern will each benefit from
the operation of a specified portion of the Conrail routes and other assets
through the use of operating arrangements. Certain Conrail assets will be
operated for the joint benefit of CSX and Norfolk Southern.
The total cost of acquiring the outstanding shares of Conrail under the
joint CSX/Norfolk Southern agreement was approximately $9.8 billion. Pursuant
to the agreement, CSX has paid 42%, or approximately $4.1 billion, and Norfolk
Southern has paid 58%, or approximately $5.7 billion, of such cost. Including
its capitalized transaction costs, CSX's total purchase price was
approximately $4.2 billion.
The Conrail shares were placed in a voting trust pending the STB's approval
of the joint acquisition and control of Conrail. CSX and Norfolk Southern
filed an application for control of Conrail with the STB in June 1997. On June
8, 1998, the STB indicated its approval of the acquisition in a public voting
conference, and issued its written decision on July 23, 1998. That decision
became effective on August 22, 1998.
Because of the time required to obtain the necessary labor implementing
agreements and complete the transition planning, CSX does not expect
integrated operations to have a significant effect on operating and financial
results prior to fiscal 1999. The primary impact of the Conrail transaction on
net earnings prior to the integration of operations will be the after-tax
effect of CSX's share of Conrail's net income, reported under the equity
method of accounting, less amortization of the excess purchase price, interest
on debt incurred to acquire the Conrail investment, and acquisition and
transition expenses. Net cash flow prior to operational integration is
expected to be reduced by interest payments on the acquisition debt. At June
26, 1998, the average interest rate on debt incurred to acquire Conrail shares
was approximately 6.8%. The degree of negative impact on net earnings and net
cash flow during 1998 will depend primarily on the net earnings reported by
Conrail, the average interest rate and timing of interest payments on the
related debt, and expenses associated with the acquisition, STB approval and
other transition planning.
RECENT DEVELOPMENTS
On April 20, 1998, CSX announced that it had agreed to convey American
Commercial Lines LLC ("ACL") to a venture formed with Vectura Group, Inc.
("Vectura"). The transaction was consummated on June 30, 1998. In exchange for
ACL, CSX received $695 million in cash and $155 million of securities issued
by the venture, including a 32% common interest in the venture. Vectura
conveyed National Marine, a wholly-owned subsidiary of Vectura, to the
venture.
Upon consummation of the transaction, ACL ceased to be a Principal
Subsidiary (as defined below) of CSX for the purposes of the covenant under
the Indenture restricting liens on the stock and indebtedness of Principal
Subsidiaries. See "Description of Debt Securities--Certain Covenants and
Agreements of the Company--Covenant in the Senior Indenture--Limitation on
Liens on Stock or Indebtedness of the Principal Subsidiaries."
4
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Those statements appear in number of places in this
Prospectus and include statements under "CSX Corporation" regarding the
intent, belief or current expectations of CSX, its directors or its officers
with respect to, among other things: the operational integration of Conrail,
the timing and outcome of regulatory and other approvals related to the joint
acquisition, control and division of Conrail by CSX and Norfolk Southern and
the impact of the Conrail transaction on the financial condition and results
of CSX. Estimates, forecasts and other forward-looking statements included, or
incorporated by reference in, this Prospectus are based on estimates and
assumptions about complex economic and operating factors with respect to
industry performance, general business and economic conditions and other
matters that cannot be predicted accurately and that are subject to
contingencies over which CSX has no control. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors
that could cause the actual results, performance or achievements of CSX to
differ materially from any future results, performance or achievements
expressed or implied by such statements. Certain of those risks, uncertainties
and other important factors that could cause actual results to differ
materially include: future economic conditions in the markets in which CSX and
Conrail operate; financial market conditions; inflation rates; changing
competition; changes in the economic regulatory climate in the U.S. railroad
industry; the ability to eliminate duplicative administrative functions; and
adverse changes in applicable laws, regulations or rules governing
environmental, tax or accounting matters. These forward-looking statements
speak only as of the date of this Prospectus. CSX disclaims any obligation or
undertaking to disseminate any updates or revisions to any such statement to
reflect changes in CSX's expectations or any change in events, conditions or
circumstances on which any such statements are based.
5
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratio of earnings to fixed charges for each of
the fiscal periods indicated is as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL YEARS ENDED
----------------- -------------------------------------------
JUNE 26, JUNE 27, DEC. 26, DEC. 27 DEC. 29, DEC. 30, DEC. 31,
1998 (B) 1997 (B) 1997 (B) 1996 1995 (C) 1994 1993 (D)
-------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed
charges (a)........... 1.8x 2.9x 2.6x 4.0x 3.2x 3.1x 2.3x
</TABLE>
- --------
(a) For purposes of computing the ratio of earnings to fixed charges, earnings
represent earnings before income taxes plus interest expense related to
indebtedness, amortization of debt discount, the interest portion of fixed
rent expense, undistributed earnings of affiliates accounted for using the
equity method and minority interest expense. Fixed charges include
interest on indebtedness (whether expensed or capitalized), amortization
of debt discount and the interest portion of fixed rent expense.
(b) Pre-tax earnings for periods after 1996 include interest on indebtedness
and other expenses associated with the Company's acquisition of a 42%
interest in Conrail. During these periods the Conrail investment was held
in a voting trust pending approval of the joint acquisition, control and
division of Conrail by CSX and Norfolk Southern. Excluding the impact of
the Conrail investment, the ratio of earnings to fixed charges would have
been 3.6x for the six months ended June 26, 1998, 4.2x for the six months
ended June 27, 1997, and 4.4x for the fiscal year ended December 26, 1997.
(c) Operating income for 1995 includes a charge of $257 million to recognize
the estimated costs of initiatives to revise, restructure and consolidate
specific operations and administrative functions at the Company's rail and
container-shipping units. Excluding the impact of the charge, the ratio of
earnings to fixed charges would have been 3.7x.
(d) Operating income for 1993 includes a charge of $93 million to recognize
the estimated costs of restructuring certain operations and functions at
the Company's container-shipping unit. Excluding the impact of the charge,
the ratio of earnings to fixed charges would have been 2.5x.
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used for general
corporate purposes, which may include reduction or refinancing of outstanding
indebtedness, capital expenditures, working capital requirements,
implementation of work force reductions, improvements in productivity and
other cost reductions at the Company's major transportation units, and
redemptions and repurchases of certain outstanding securities. Specific
allocations of the proceeds to such purposes have not been made as of the date
of this Prospectus. The precise amount and timing of the application of
proceeds from the sale of Securities will depend upon the funding requirements
of the Company and the availability and cost of other funds at the time of
such sale. Allocation of the proceeds of a particular series of Securities, or
the principal reasons for the offering if no such allocation has been made,
will be described in the applicable Prospectus Supplement.
6
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Company may issue Debt Securities either separately, or together with,
or upon the conversion of or in exchange for, other Securities. The Debt
Securities are to be either senior unsecured obligations (the "Senior Debt
Securities") of the Company issued in one or more series under an Indenture
(the "Senior Indenture") dated as of August 1, 1990 between the Company and
The Chase Manhattan Bank, as trustee (the "Senior Trustee"), as supplemented
by a First Supplemental Indenture dated as of June 15, 1991, a Second
Supplemental Indenture dated as of May 6, 1997 and a Third Supplemental
Indenture dated as of April 22, 1998, or subordinated unsecured obligations
(the "Subordinated Debt Securities") of the Company issued in one or more
series under an Indenture (the "Subordinated Indenture" and, together with the
Senior Indenture, the "Indentures") to be entered into between the Company and
The Chase Manhattan Bank, as trustee (the "Subordinated Trustee" and, together
with the Senior Trustee, the "Trustees"). A copy of each Indenture has been
filed as an exhibit to, or incorporated by reference in, the Registration
Statement of which this Prospectus is a part.
The summary of certain provisions of the Indentures and the Debt Securities
set forth below and the summary of certain terms of a particular series of
Debt Securities set forth in the applicable Prospectus Supplement do not
purport to be complete and are subject to and are qualified in their entirety
by reference to all of the provisions of the Indentures, which provisions of
the Indentures (including defined terms) are incorporated herein by reference.
Certain capitalized terms used herein and not defined are defined in the
Indentures.
The Debt Securities may be issued from time to time in one or more series of
Senior Debt Securities and one or more series of Subordinated Debt Securities.
The Indentures do not limit the aggregate principal amount of Debt Securities
which may be issued thereunder and provide that Debt Securities of any series
may be issued thereunder up to an aggregate principal amount which may be
authorized from time to time by the Company. The terms of each series of Debt
Securities will be established by or pursuant to a resolution of the Board of
Directors of the Company and set forth or determined in the manner provided in
an Officer's Certificate or by a supplemental indenture. The following
description of Debt Securities summarizes certain general terms and provisions
of the series of Debt Securities to which any Prospectus Supplement may
relate. The particular terms of each series of Debt Securities offered by a
Prospectus Supplement or Prospectus Supplements will be described in such
Prospectus Supplement or Prospectus Supplements relating to such series.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$" or "dollars").
GENERAL
The applicable Prospectus Supplement or Prospectus Supplements will describe
the specific terms of the series of Debt Securities offered thereby, including
(where applicable): (1) the title of such Debt Securities; (2) any limit on
the aggregate principal amount of such Debt Securities; (3) whether such Debt
Securities are to be issuable as Registered Debt Securities or Bearer Debt
Securities or both, whether any of such Debt Securities are to be issuable
initially in temporary global form and whether any of such Debt Securities are
to be issuable in permanent global form; (4) the price or prices (expressed as
a percentage of the aggregate principal amount thereof) at which such Debt
Securities will be issued; (5) the date or dates on which such Debt Securities
will mature; (6) the rate or rates per annum at which such Debt Securities
will bear interest, if any, or the formula pursuant to which such rate or
rates will be determined, and the date or dates from which any such interest
will accrue; (7) the Interest Payment Dates on which any such interest on such
Debt Securities will be payable and the Regular Record Date for any interest
payable on any Registered Debt Securities on any Interest Payment Date; (8)
the Person to whom any interest on any Registered Debt Securities of such
series will be payable, if other than the Person in whose name that Debt
Security (or one or more Predecessor Debt Securities) is registered at the
close of business on the Regular Record Date for such interest, the manner in
which, or the Person to whom, any interest on any Bearer Debt Security of such
series will be payable, if otherwise than upon presentation and surrender of
the coupons appertaining thereto, and the extent to which, or the manner in
which,
7
<PAGE>
any interest payable on a temporary global Debt Security on an Interest
Payment Date will be paid if other than in the manner provided in the relevant
Indenture and the extent to which, or the manner in which, any interest
payable on a permanent global Debt Security on an Interest Payment Date will
be paid; (9) each office or agency where, subject to the terms of the
Indenture as described below under "Payment and Paying Agents," the principal
of and any premium and interest on such Debt Securities will be payable and
each office or agency where, subject to the terms of the Indenture as
described below under "Form, Exchange, Registration and Transfer," such Debt
Securities may be presented for registration of transfer or exchange; (10) the
period or periods within which and the price or prices at which such Debt
Securities may, pursuant to any optional redemption provisions, be redeemed,
in whole or in part, at the option of the Company and the other detailed terms
and conditions of any such optional redemption provisions; (11) the
obligation, if any, of the Company to redeem or purchase such Debt Securities
pursuant to any sinking fund or analogous provisions or at the option of the
Holder thereof and the period or periods within which and the price or prices
at which such Debt Securities will be redeemed or purchased, in whole or in
part, pursuant to such obligation, and the other detailed terms and conditions
of such obligation; (12) the denominations in which any Registered Debt
Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof, and the denomination or denominations in which
Bearer Debt Securities will be issuable, if other than denominations of
$5,000; (13) the currency or currencies, including currency units, in which
payment of principal of and any premium and interest on such Debt Securities
will be payable if other than U.S. dollars and the ability, if any, of the
Company or the Holders of such Debt Securities to have payments made in any
currency other than those in which such Debt Securities are stated to be
payable; (14) whether the amount of payments of principal of, premium, if any,
and interest, if any, on such Debt Securities may be determined with reference
to an index and the manner in which such amounts will be determined (any such
Debt Securities being hereinafter called "Indexed Securities"); (15) the
portion of the principal amount of such Debt Securities which shall be payable
upon acceleration thereof if other than the full principal amount thereof;
(16) any limitation on the application of the terms of the Indenture described
below under "Discharge, Defeasance and Covenant Defeasance;" (17) the terms,
if any, upon which such Debt Securities may be convertible into or
exchangeable for other Securities; (18) whether such Debt Securities will be
Senior Debt Securities or Subordinated Debt Securities; and (19) any other
terms of such Debt Securities not inconsistent with the provisions of the
relevant Indenture. Any such Prospectus Supplement or Prospectus Supplements
will also describe any special provisions for the payment of additional
amounts relating to specified taxes, assessments or other governmental charges
in respect of the Debt Securities of such series and whether the Company has
the option to redeem the affected Debt Securities rather than pay such
additional amounts.
As used in this Prospectus and any Prospectus Supplement relating to the
offering of any Debt Securities, references to the principal of and premium,
if any, and interest, if any, on such Debt Securities will be deemed to
include mention of the payment of additional amounts, if any, required by the
terms of such Debt Securities in such context.
Debt Securities may be issued as Original Issue Discount Debt Securities. An
Original Issue Discount Debt Security is a Debt Security, including any zero-
coupon Debt Security, which is issued at a price lower than the amount payable
upon the Stated Maturity thereof, and which provides that, upon redemption or
acceleration of the Maturity thereof, an amount less than the amount payable
upon the Stated Maturity thereof and determined in accordance with the terms
of such Debt Security shall become due and payable. Special United States
federal income tax considerations applicable to Debt Securities issued at an
original issue discount, including Original Issue Discount Debt Securities,
and special United States tax considerations applicable to any Debt Securities
which are denominated in a currency or currency unit other than United States
dollars are described below under "United States Taxation--Original Issue
Discount."
If the purchase price of any Debt Securities is payable in a Currency other
than U.S. dollars or if principal of, or premium, if any, or interest, if any,
on any of the Debt Securities is payable in any Currency other than U.S.
dollars, the specific terms and other information with respect to such Debt
Securities and such foreign Currency will be specified in the Prospectus
Supplement relating thereto.
8
<PAGE>
Unless otherwise indicated in the applicable Prospectus Supplement,
Registered Debt Securities will be issued in denominations of $1,000 or any
integral multiple thereof, and Bearer Debt Securities will be issued in
denominations of $5,000.
Debt Securities of a series may also be issued under the Indenture upon the
exercise of Debt Warrants issued by the Company. See "Description of Debt
Warrants."
The Indentures do not contain any provisions that may afford the Holders of
Debt Securities of any series protection in the event of a highly leveraged
transaction or other transaction that may occur in connection with a takeover
attempt resulting in a decline in the credit rating of the Debt Securities.
Any such provisions, if applicable to the Debt Securities of any series, will
be described in the Prospectus Supplement or Prospectus Supplements relating
thereto.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Unless otherwise indicated in the applicable Prospectus Supplement, each
series of Debt Securities will be issued in registered form only, without
coupons. The Indentures, however, provide that the Company may also issue Debt
Securities in bearer form only, or in both registered and bearer form. Bearer
Debt Securities shall not be offered, sold, resold or delivered in connection
with their original issuance in the United States or to any United States
person (as defined below) other than offices located outside the United States
of certain United States financial institutions. Purchasers of Bearer Debt
Securities will be subject to certification procedures and may be affected by
certain limitations under United States tax laws. Such procedures and
limitations will be described in the Prospectus Supplement relating to the
offering of the Bearer Debt Securities. Unless otherwise indicated in an
applicable Prospectus Supplement or Prospectus Supplements, Bearer Debt
Securities will have interest coupons attached. The Indentures also will
provide that Debt Securities of a series may be issuable in temporary or
permanent global form. See "Global Debt Securities."
In connection with its sale during the Restricted Period (as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations), no
Euro-Debt Security shall be mailed or otherwise delivered to any location in
the United States or its possessions. Except as may otherwise be provided in
the applicable Prospectus Supplement, a Euro-Debt Security (not including a
Debt Security in temporary global form) may be delivered in connection with
its sale during the Restricted Period only if the person entitled to physical
delivery of such Euro-Debt Security furnishes written certification, in the
form required by the Indenture, to the effect that (i) such Euro-Debt Security
is owned by a person that is not a United States person (as defined under
"Limitations on Issuance of Euro-Debt Securities"), (ii) such Euro-Debt
Security is owned by a United States person that is (A) a foreign branch of a
United States financial institution within the meaning of Section 1.165-
12(c)(1)(v) of the United States Treasury Regulations (a "Financial
Institution") purchasing for its own account or for resale or (B) a United
States person who acquired such Euro-Debt Security through the foreign branch
of a United States Financial Institution and who holds such Euro-Debt Security
through such Financial Institution on the date of such written certification
(and, in either case (A) or (B), the Financial Institution has agreed to
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the
Internal Revenue Code of 1986, as from time to time amended, and the
regulations thereunder), or (iii) such Euro-Debt Security is owned by a United
States or foreign Financial Institution for the purpose of resale during the
Restricted Period. A Financial Institution described in clause (iii) above,
whether or not also described in clause (i) or (ii) above, must certify that
it has not acquired the Euro-Debt Security for purposes of resale directly or
indirectly to a United States person or to any person within the United States
or its possessions. In the case of a Euro-Debt Security in permanent global
form, such certification must be given in connection with the notation of a
beneficial owner's interest therein upon original issuance of such Debt
Security or upon exchange of a portion of a temporary global Debt Security.
See "Limitations on Issuance of Euro-Debt Securities."
At the option of the Holder, subject to the terms of the relevant Indenture,
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series of any authorized
9
<PAGE>
denominations and of a like aggregate principal amount and tenor. In addition,
if Debt Securities of any series are issuable as both Registered Debt
Securities and Bearer Debt Securities, at the option of the Holder, subject to
the terms of the relevant Indenture, Bearer Debt Securities (with all
unmatured coupons, except as provided below, and with all matured coupons in
default) of such series will be exchangeable for Registered Debt Securities of
the same series of any authorized denominations and of a like aggregate
principal amount and tenor. Bearer Debt Securities surrendered in exchange for
Registered Debt Securities between a Regular Record Date or a Special Record
Date and the relevant date for payment of interest shall be surrendered
without the coupon relating to such date for payment of interest and interest
will not be payable in respect of the Registered Debt Security issued in
exchange for such Bearer Debt Security, but will be payable only to the Holder
of such coupon when due in accordance with the terms of the Indenture.
Registered Debt Securities, including Registered Debt Securities received in
exchange for Bearer Debt Securities, may not be exchanged for Bearer Debt
Securities. Each Bearer Debt Security and coupon will bear a legend to the
following effect: "Any United States person who holds this obligation will be
subject to limitations under the United States income tax laws, including the
limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue
Code."
Debt Securities may be presented for exchange as provided above, and
Registered Debt Securities may be presented for registration of transfer (with
the form of transfer endorsed thereon duly executed), at the office of the
Security Registrar or at the office of any transfer agent designated by the
Company for such purpose with respect to any series of Debt Securities and
referred to in an applicable Prospectus Supplement or Prospectus Supplements,
without a service charge and upon payment of any taxes and other governmental
charges as described in the relevant Indenture. Such transfer or exchange will
be effected upon the records of the Security Registrar or such transfer agent,
as the case may be, being satisfied with the documents of title and identity
of the person making the request. The Company has appointed the Trustee as
Security Registrar. If a Prospectus Supplement or Prospectus Supplements refer
to any transfer agents (in addition to the Security Registrar) initially
designated by the Company with respect to any series of Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that, if Debt Securities of a series are issuable solely as Registered
Debt Securities, the Company will be required to maintain a transfer agent in
each Place of Payment for such series and, if Debt Securities of a series are
issuable as Bearer Debt Securities, the Company will be required to maintain
(in addition to the Security Registrar) a transfer agent in a Place of Payment
for such series located outside the United States and its possessions. The
Company may at any time designate additional transfer agents with respect to
any series of Debt Securities.
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange any Debt Security during a
period beginning at the opening of business 15 days before any selection for
redemption of Debt Securities of like tenor and of the series of which such
Debt Security is a part, and ending at the close of business on the earliest
date on which the relevant notice of redemption is deemed to have been given
to all Holders of Debt Securities of like tenor and of such series to be
redeemed; (ii) register the transfer of or exchange any Registered Debt
Security so selected for redemption, in whole or in part, except the
unredeemed portion of any Debt Security being redeemed in part; or (iii)
exchange any Bearer Debt Security so selected for redemption, except to
exchange such Bearer Debt Security for a Registered Debt Security of that
series and like tenor which is immediately surrendered for redemption.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, principal of and any premium and interest on Bearer
Debt Securities will be payable, subject to any applicable laws and
regulations, at the offices of such Paying Agents outside the United States
and its possessions as the Company may designate from time to time or, at the
option of the Holder, by check or by transfer to an account maintained by the
payee with a financial institution located outside the United States and its
possessions. Unless otherwise indicated in an applicable Prospectus Supplement
or Prospectus Supplements, payment of interest on a Bearer Debt Security on
any Interest Payment Date will be made only against surrender to the Paying
Agent of the
10
<PAGE>
coupon relating to such Interest Payment Date. No payment with respect to any
Bearer Debt Security will be made at any office or agency of the Company in
the United States or its possessions or by check mailed to any address in the
United States or its possessions or by transfer to any account maintained with
a financial institution located in the United States or its possessions.
Notwithstanding the foregoing, payments of principal of and any premium and
interest on Bearer Debt Securities denominated and payable in U.S. dollars
will be made at the office of the Paying Agent in the Borough of Manhattan,
The City of New York, if (but only if) payment of the full amount thereof in
U.S. dollars at all offices or agencies outside the United States and its
possessions is illegal or effectively precluded by exchange controls or other
similar restrictions.
Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, principal of and any premium and interest on
Registered Debt Securities will be payable, subject to any applicable laws and
regulations, at the office of such Paying Agent or Paying Agents as the
Company may designate from time to time, except that at the option of the
Company payment of any interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register. Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, payment of interest on a Registered Debt Security on
any Interest Payment Date will be made to the Person in whose name such
Registered Debt Security (or Predecessor Debt Security) is registered at the
close of business on the Regular Record Date for such interest.
Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, the Corporate Trust Office of the Trustee in The City
of New York will be designated as a Paying Agent for the Company for payments
with respect to Debt Securities of each series which are issuable solely as
Registered Debt Securities and as a Paying Agent for payments with respect to
Debt Securities of each series (subject to the limitations described above in
the case of Bearer Debt Securities) which are issuable solely as Bearer Debt
Securities or as both Registered Debt Securities and Bearer Debt Securities.
Any Paying Agents outside the United States and its possessions and any other
Paying Agents in the United States or its possessions initially designated by
the Company for the Debt Securities of each series will be named in an
applicable Prospectus Supplement or Prospectus Supplements. The Company may at
any time designate additional Paying Agents or rescind the designation of any
Paying Agent or approve a change in the office through which any Paying Agent
acts, except that if Debt Securities of a series are issuable solely as
Registered Debt Securities, the Company will be required to maintain a Paying
Agent in each Place of Payment for such series and, if Debt Securities of a
series are issuable as Bearer Debt Securities, the Company will be required to
maintain (i) a Paying Agent in the Borough of Manhattan, The City of New York
for payments with respect to any Registered Debt Securities of the series (and
for payments with respect to Bearer Debt Securities of the series in the
circumstances described above, but not otherwise), and (ii) a Paying Agent in
a Place of Payment located outside the United States and its possessions where
Debt Securities of such series and any coupons appertaining thereto may be
presented and surrendered for payment; provided, however, that if the Debt
Securities of such series are listed on The International Stock Exchange of
the United Kingdom and the Republic of Ireland Limited (the "London Stock
Exchange"), the Luxembourg Stock Exchange or any other stock exchange located
outside the United States and its possessions and such stock exchange shall so
require, the Company will maintain a Paying Agent in London, Luxembourg or any
other required city located outside the United States and its possessions, as
the case may be, for the Debt Securities of such series.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of and any premium or interest on any Debt Security of any series
which remain unclaimed at the end of two years after such principal, premium
or interest shall have become due and payable will be repaid to the Company
and the Holder of such Debt Security or any coupon appertaining thereto will
thereafter look only to the Company for payment thereof.
11
<PAGE>
RANKING OF DEBT SECURITIES; HOLDING COMPANY STRUCTURE
The Senior Debt Securities will be unsecured unsubordinated obligations of
the Company and will rank on a parity in right of payment with all other
unsecured and unsubordinated indebtedness of the Company. The Subordinated
Debt Securities will be unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior
Indebtedness (as defined below) of the Company. See "--Subordination of
Subordinated Debt Securities."
The Debt Securities are obligations exclusively of the Company. The Company
is a holding company, substantially all of whose consolidated assets are held
by its subsidiaries. Accordingly, the cash flow of the Company and the
consequent ability to service its debt, including the Debt Securities, are
largely dependent upon the earnings of such subsidiaries.
Because the Company is a holding company, the Debt Securities will be
effectively subordinated to all existing and future indebtedness, trade
payables, guarantees, lease obligations and letter of credit obligations of
the Company's subsidiaries. Therefore, the Company's rights and the rights of
its creditors, including the Holders of the Debt Securities, to participate in
the assets of any subsidiary upon the latter's liquidation or reorganization
will be subject to the prior claims of such subsidiary's creditors, except to
the extent that the Company may itself be a creditor with recognized claims
against the subsidiary, in which case the claims of the Company would still be
effectively subordinate to any security interest in, or mortgages or other
liens on, the assets of such subsidiary and would be subordinate to any
indebtedness of such subsidiary senior to that held by the Company. Although
certain debt instruments to which the Company and its subsidiaries are parties
impose limitations on the incurrence of additional indebtedness, both the
Company and its subsidiaries retain the ability to incur substantial
additional indebtedness and lease and letter of credit obligations.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on
behalf of, a depositary (the "Depositary") identified in the Prospectus
Supplement relating to such series. Global Debt Securities may be issued in
either registered or bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for individual
certificates evidencing Debt Securities in definitive form represented
thereby, a global Debt Security may not be transferred except as a whole by
the Depositary for such global Debt Security to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of
such Depositary or by such Depositary or any such nominee to a successor of
such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
global Debt Securities and certain limitations and restrictions relating to a
series of global Bearer Debt Securities will be described in the Prospectus
Supplement relating to such series.
REDEMPTION AND REPURCHASE
The Debt Securities of any series may be redeemable at the option of the
Company, may be subject to mandatory redemption pursuant to a sinking fund or
otherwise, or may be subject to repurchase by the Company at the option of the
Holders, in each case upon the terms, at the times and at the prices set forth
in the applicable Prospectus Supplement.
CONVERSION AND EXCHANGE
The terms, if any, on which Debt Securities of any series are convertible
into or exchangeable for Preferred Stock, Depositary Shares or other Debt
Securities will be set forth in the applicable Prospectus Supplement. Such
terms may include provisions for conversion or exchange, either mandatory, at
the option of the Holders or at the option of the Company.
12
<PAGE>
CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY
The Indentures do not limit the amount of indebtedness or lease obligations
that may be incurred by the Company and its subsidiaries. The Indentures do
not contain provisions which would give Holders of the Debt Securities the
right to require the Company to repurchase their Debt Securities in the event
of a decline in the credit rating of the Company's debt securities resulting
from a takeover, recapitalization or similar restructuring.
Covenant in the Senior Indenture--Limitation on Liens on Stock or
Indebtedness of the Principal Subsidiaries
The following covenant will be applicable to Senior Debt Securities but not
to Subordinated Debt Securities. The Senior Indenture provides that the
Company may not, nor may it permit any Subsidiary to, create, assume, incur or
suffer to exist any mortgage, pledge, lien, encumbrance, charge or security
interest of any kind upon any stock or indebtedness, whether owned on the date
of the Senior Indenture or thereafter acquired, of any Principal Subsidiary,
to secure any Obligation (other than the Senior Debt Securities) of the
Company, any Subsidiary or any other Person, without in any such case making
effective provision whereby all of the outstanding Senior Debt Securities (and
other outstanding debt securities issued from time to time pursuant to the
Senior Indenture) shall be directly secured equally and ratably with such
Obligation. This provision does not restrict any other property of the Company
or its Subsidiaries. The Senior Indenture defines "Obligation" as indebtedness
for money borrowed or indebtedness evidenced by a bond, note, debenture or
other evidence of indebtedness; "Principal Subsidiary" as CSXT and Sea-Land;
and "Subsidiary" as a corporation a majority of the outstanding voting stock
of which is owned, directly or indirectly, by the Company or one or more
Subsidiaries, or by the Company and one or more Subsidiaries. The Indentures
do not prohibit the sale by the Company or any Subsidiary of any stock or
indebtedness of any Subsidiary.
Provision in Both Indentures--Consolidation, Merger and Sale of Assets
The following provision will be applicable to both Senior Debt Securities
and Subordinated Debt Securities. Each Indenture provides that the Company
may, without the consent of the Holders of any of the Outstanding Debt
Securities of a series, consolidate with, merge into or transfer its assets
substantially as an entirety to any corporation organized under the laws of
any domestic or foreign jurisdiction, provided that (i) the successor
corporation assumes, by a supplemental indenture, the Company's obligations on
the Debt Securities of each series and under such Indenture, (ii) after giving
effect thereto, no Event of Default, and no event which, after notice or lapse
of time, or both, would become an Event of Default shall have occurred and be
continuing, and (iii) the Company delivers to the relevant Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
transaction and supplemental indenture, if any, comply with the applicable
article of such Indenture and that all conditions precedent therein relating
to such transaction have been complied with.
EVENTS OF DEFAULT
An Event of Default with respect to the Debt Securities of any series is
defined in the relevant Indenture as being a: (a) failure to pay principal of
or any premium on any of the Debt Securities of that series when due; (b)
failure to pay any interest on any Debt Security of that series when due,
continued for 30 days; (c) failure to deposit any sinking fund payment, when
due, in respect of any Debt Security of that series; (d) failure to perform
any other covenant of the Company in the relevant Indenture (other than a
covenant included in such Indenture solely for the benefit of series of Debt
Securities other than that series) continued for 90 days after written notice
as provided in such Indenture; (e) certain events of bankruptcy, insolvency or
reorganization of the Company; or (f) any other Event of Default provided with
respect to Debt Securities of that series.
No Event of Default with respect to any particular series of Debt Securities
necessarily constitutes an Event of Default with respect to any other series
of Debt Securities. Each Indenture provides that the Trustee thereunder may
withhold notice to the Holders of the Debt Securities of any series of the
occurrence of a default with respect to the Debt Securities of such series
(except a default in payment of principal, premium, if any, interest, if any,
or sinking fund payments, if any) if the Trustee considers it in the interest
of the Holders to do so.
13
<PAGE>
Subject to the provisions of the Trust Indenture Act of 1939 requiring each
Trustee, during an Event of Default under the relevant Indenture, to act with
the requisite standard of care, and to the provisions of the relevant
Indenture relating to the duties of the Trustee thereunder in case an Event of
Default shall occur and be continuing, a 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 of Debt Securities of any series or any
related coupons unless such Holders shall have offered to the Trustee
reasonable indemnity. Subject to such provisions for the indemnification of
the relevant Trustee, the Holders of a majority in aggregate principal amount
of the Outstanding Debt Securities of any series will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the relevant Trustee, or exercising any trust or power conferred
on such Trustee, with respect to Debt Securities of that series.
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding shall occur and be continuing, either the relevant Trustee or
the Holders of at least 25% in aggregate principal amount of the Outstanding
Debt Securities of that series may declare the principal of all such
Outstanding Debt Securities, or, if any such Debt Securities are Original
Issue Discount Debt Securities, such lesser amount as may be described in an
applicable Prospectus Supplement or Prospectus Supplements, of all the Debt
Securities of that series to be due and payable immediately. At any time after
a declaration of acceleration with respect to Debt Securities of any series
has been made but before a judgment or decree for payment of money due has
been obtained by the relevant Trustee, the Holders of a majority in aggregate
principal amount of Outstanding Debt Securities of that series may rescind any
declaration of acceleration and its consequences, if all payments due (other
than those due as a result of acceleration) have been made and all Events of
Default have been cured or waived.
No Holder of any Debt Securities of any series or any related coupons will
have any right to institute any proceeding with respect to the relevant
Indenture or for any remedy thereunder, unless such Holder shall have
previously given to the relevant Trustee written notice of a continuing Event
of Default with respect to Debt Securities of that series, 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 relevant Trustee to institute such proceeding as trustee, and such
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. However, such limitations do not apply to a suit
instituted by a Holder of an Outstanding Debt Security of that series for
enforcement of payment of the principal of, or any premium or interest on,
such Debt Security on or after the respective due dates expressed in such Debt
Security.
The Company is required to furnish to the relevant Trustee annually a
statement as to performance or fulfillment of covenants, agreements or
conditions in the relevant Indenture and as to the absence of default.
MEETINGS, MODIFICATION AND WAIVER
Each Indenture contains provisions permitting the Company and the relevant
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
issued under such Indenture and affected by a modification or amendment
(voting as one class), to modify or amend any of the provisions of such
Indenture or of such Debt Securities or the rights of the Holders of such Debt
Securities under such Indenture, provided that no such modification or
amendment shall, without the consent of each Holder of each outstanding Debt
Security affected thereby:
(i) change the Stated Maturity of the principal of, or any instalment of
principal of or interest on, any Debt Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or change any obligation of the Company to pay
additional amounts (except as contemplated and permitted by such
Indenture), or reduce the amount of the principal of an Original Issue
Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof or change the coin or currency in
which any Debt Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date),
14
<PAGE>
(ii) reduce the aforesaid percentage in principal amount of such Debt
Securities, the consent of the Holders of which is required for any such
modification or amendment or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of such Indenture or
certain defaults thereunder and their consequences) or reduce the
requirements for a quorum or voting at a meeting of Holders of such Debt
Securities,
(iii) change any obligation of the Company to maintain an office or
agency in the places and for the purposes required by such Indenture,
(iv) solely in the case of the Subordinated Indenture, modify any of the
provisions of Article Sixteen thereof (relating to subordination of the
Subordinated Debt Securities) or the definition of Senior Indebtedness in a
manner adverse to the Holders of the Subordinated Debt Securities, or
(v) modify any of the above provisions (except as permitted by such
Indenture).
Each Indenture also contains provisions permitting the Company and the
relevant Trustee, without the consent of the Holders of such Debt Securities
issued thereunder, to modify or amend such Indenture in order, among other
things:
(a) to add any additional Events of Default or add to the covenants of
the Company for the benefit of the Holders of all or any series of Debt
Securities issued under such Indenture;
(b) to establish the form or terms of Debt Securities of any series;
(c) to cure any ambiguity, to correct or supplement any provision therein
which may be inconsistent with any other provision therein, or to make any
other provisions with respect to matters or questions arising under such
Indenture which shall not adversely affect the interests of the Holders of
any Debt Securities issued thereunder in any material respect; or
(d) to change or eliminate any of the provisions of such Indenture,
provided that any such change or elimination shall become effective only
when there is no Debt Security Outstanding of any series issued under such
Indenture created prior to the execution of the supplemental indenture
which is entitled to the benefit of such provision.
The Holders of at least a majority in aggregate principal amount of the
Outstanding Debt Securities of a series may, on behalf of the Holders of all
the Debt Securities of that series, waive, insofar as that series is
concerned, compliance by the Company with certain restrictive provisions of
the Indenture, including the covenant described above under "--Certain
Covenants and Agreements of the Company--Covenant in the Senior Indenture--
Limitation on Liens on Stock or Indebtedness of the Principal Subsidiaries."
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Debt Securities of a series may, on behalf of all Holders of Debt
Securities of that series and any coupons appertaining thereto, waive any past
default under the Indenture with respect to Debt Securities of that series,
except a default (a) in the payment of principal of or any premium or interest
on any Debt Security of such series or (b) in respect of a covenant or
provision of the Indenture which cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of such series
affected.
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver
thereunder or are present at a meeting of Holders of Debt Securities for
quorum purposes, (i) the principal amount of an Original Issue Discount Debt
Security that shall be deemed to be Outstanding shall be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof, (ii) the principal
amount of a Debt Security denominated in a foreign currency or currency unit
shall be the U.S. dollar equivalent, determined as of the date of original
issuance of such Debt Security, of the principal amount of such Debt Security
or, in the case of an Original Issue Discount Debt Security, the U.S. dollar
equivalent, determined as of the date of original issuance of such Debt
Security, of the amount determined as provided in (i) above and (iii) any Debt
Security owned by the Company or any other obligor on such Debt Security or
any Affiliate of the Company or such other obligor shall be deemed not to be
outstanding.
15
<PAGE>
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of any or all series. A meeting may be called at any time by
the relevant Trustee, and also, upon request, by the Company or the Holders of
at least 10% in aggregate principal amount of the Outstanding Debt Securities
of such series, in any such case upon notice given in accordance with
"Notices" below and the provisions of such Indenture. Except for any consent
which must be given by the Holder of each Outstanding Debt Security affected
thereby, as described above, any resolution presented at a meeting, or
adjourned meeting duly reconvened, at which a quorum (as described below) is
present may be adopted by the affirmative vote of the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series; provided,
however, that, except for any consent which must be given by the Holder of
each Outstanding Debt Security affected thereby, as described above, any
resolution with respect to any consent, waiver, request, demand, notice,
authorization, direction or other action which may be given by the Holders of
not less than a specified percentage in principal amount of the Outstanding
Debt Securities of a series may be adopted at a meeting, or an adjourned
meeting dully reconvened, at which a quorum is present only by the affirmative
vote of the Holders of not less than such specified percentage in principal
amount of the Outstanding Debt Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of Debt
Securities of any series duly held in accordance with the relevant Indenture
will be binding on all Holders of Debt Securities of that series and the
related coupons. The quorum required for any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent, waiver, request, demand, notice,
authorization, direction or other action which may be given by the Holders of
not less than a specified percentage in principal amount of the Outstanding
Debt Securities of a series, the Persons holding or representing such
specified percentage in principal amount of the Outstanding Debt Securities of
such series will constitute a quorum.
NOTICES
Except as otherwise provided in the Indenture, notices to Holders of Bearer
Debt Securities will be given by publication at least twice in a daily
newspaper of general circulation in The City of New York and in such other
city or cities as may be specified in such Debt Securities. Notices to Holders
of Registered Debt Securities will be given by mail to the addresses of such
Holders as they appear in the Security Register.
TITLE
Title to any Bearer Debt Securities (including Bearer Debt Securities in
temporary global form and in permanent global form) and any coupons
appertaining thereto will pass by delivery. The Company, the Trustee and any
agent of the Company or the Trustee may treat the bearer of any Bearer Debt
Security and the bearer of any coupon and the registered owner of any
Registered Debt Security as the absolute owner thereof (whether or not such
Debt Security or coupon shall be overdue and notwithstanding any notice to the
contrary) for the purpose of making payment and for all other purposes.
REPLACEMENT OF DEBT SECURITIES
Any mutilated Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
Holder upon surrender of such Debt Security to the relevant Trustee. Debt
Securities or coupons that become destroyed, lost or stolen will be replaced
by the Company at the expense of the Holder upon delivery to the relevant
Trustee of evidence of the destruction, loss or theft thereof satisfactory to
the Company and the relevant Trustee; in the case of any coupon which becomes
destroyed, lost or stolen, such coupon will be replaced by issuance of a new
Debt Security in exchange for the Debt Security to which such coupon
appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon, an indemnity satisfactory to the Trustee and the Company may be
required at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued.
16
<PAGE>
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Upon the direction of the Company, either Indenture shall generally cease to
be of further effect with respect to any series of Debt Securities issued
thereunder specified by the Company (subject to the survival of certain
provisions thereof) when (a) the Company has delivered to the relevant Trustee
for cancellation all Debt Securities issued thereunder or (b) all Debt
Securities issued thereunder not theretofore delivered to the relevant Trustee
for cancellation shall have become due and payable, or are by their terms to
become due and payable within one year or are to be called for redemption
within one year, and the Company shall have deposited with the relevant
Trustee as trust funds the entire amount sufficient to pay and discharge at
Stated Maturity or upon redemption the entire indebtedness on all Debt
Securities issued thereunder (and if, in either case, the Company has paid or
caused to be paid all other sums payable under the relevant Indenture with
respect to the Debt Securities of such series by the Company and the Company
has delivered an Officer's Certificate and an Opinion of Counsel each stating
that the requisite conditions have been complied with).
In addition, unless otherwise provided in an applicable Prospectus
Supplement or Prospectus Supplements, the Company may elect with respect to
any series of Debt Securities either (i) to defease and be discharged from any
and all obligations with respect to such Debt Securities (except as otherwise
provided in the relevant Indenture) ("defeasance") or (ii) to be released from
its obligations with respect to such Debt Securities described above under "--
Certain Covenants and Agreements of the Company--Covenant in the Senior
Indenture--Limitation on Liens on Stock or Indebtedness of the Principal
Subsidiaries" (which covenant appears only in the Senior Indenture) and
certain other restrictive covenants in the relevant Indenture and, if
indicated in the applicable Prospectus Supplement, its obligations with
respect to any other covenant applicable to the Debt Securities of such series
("covenant defeasance").
If the Company exercises its defeasance option with respect to any series of
Debt Securities, payment of such Debt Securities may not be accelerated
because of an Event of Default. If the Company exercises its covenant
defeasance option with respect to any series of Debt Securities, payment of
such Debt Securities may not be accelerated because of an Event of Default
related to the covenants noted under clause (ii) of the immediately preceding
paragraph. The Company may exercise its defeasance option with respect to such
Debt Securities notwithstanding its prior exercise of its covenant defeasance
option.
If the Company effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than an Event of Default with
respect to the covenant described above under "--Certain Covenants and
Agreements of the Company--Covenant in the Senior Indenture--Limitation on
Liens on Stock or Indebtedness of the Principal Subsidiaries" (which covenant
appears only in the Senior Indenture and which would no longer be applicable
to such Debt Securities after such covenant defeasance) or with respect to any
other covenant as to which there has been covenant defeasance, the amount of
monies and/or Government Obligations deposited with the applicable Trustee to
effect such covenant defeasance may not be sufficient to pay amounts due on
such Debt Securities at the time of any acceleration resulting from such Event
of Default. However, the Company would remain liable to make payment of such
amounts due at the time of acceleration.
The Company may exercise its defeasance option or its covenant defeasance
option with respect to any series of Debt Securities, only if (a) the Company
irrevocably deposits in trust with the Trustee cash and/or U.S. Government
Obligations for the payment of principal, premium, if any, and interest with
respect to such Debt Securities to maturity or redemption, as the case may be,
and the Company delivers to the relevant Trustee a certificate from a
nationally recognized firm of independent public accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any deposited
money without investment will provide cash at such times and in such amounts
as will be sufficient to pay the principal, premium, if any, and interest when
due with respect to all such Debt Securities to maturity or redemption, as the
case may be, (b) no Event of Default with respect to the Debt Securities of
such series shall have occurred and be continuing (i) on the date of such
deposit or (ii) with respect to certain bankruptcy defaults, at any time
during the period ending on the 123rd day after the date of such
17
<PAGE>
deposit, (c) such defeasance or covenant defeasance does not result in the
trust arising from such deposit to constitute, unless it is qualified as, a
regulated investment company under the Investment Company Act of 1940, as
amended, (d) the defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, the relevant Indenture
or any other agreement or instrument to which the Company is a party or by
which it is bound, (e) the Company delivers to the Trustee an Opinion of
Counsel to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes
as a result of such defeasance or covenant defeasance and will be subject to
United States federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and (f) the Company delivers to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of such Debentures as
contemplated by the Indenture have been complied with. The Opinion of Counsel,
with respect to defeasance, referred to in clause (e) above, must refer to and
be based upon a ruling of the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of
the relevant Indenture.
The Trustee shall hold in trust cash or U.S. Government Obligations
deposited with it as described above and shall apply the deposited cash and
the proceeds from deposited U.S. Government Obligations to the payment of
principal, premium, if any, and interest with respect to such Debentures.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting or restricting such defeasance or covenant defeasance with
respect to the Debt Securities of a particular series.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
CONCERNING THE TRUSTEES
The Trust Indenture Act of 1939 contains limitations on the rights of a
trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. Each Trustee is
permitted to engage in other transactions with the Company and its
subsidiaries from time to time, provided that if such Trustee acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default under the relevant Indenture, or else resign.
The Company and certain of its subsidiaries may from time to time maintain
lines of credit, and have other customary banking and commercial
relationships, with The Chase Manhattan Bank, the Senior Trustee and the
Subordinated Trustee. The Chase Manhattan Bank acts as trustee under the
Senior Indenture and another indenture pursuant to which the Company issued
its 9.64% Medium-Term Note due 2000, 9.50% Notes due 2000, 7.00% Notes due
2000, 7.05% Debentures due 2002, 7.25% Debentures due 2004, 9.00% Debentures
due 2006, 7.45% Debentures due 2007, 9.78% Medium Term Note due 2011, 7.90%
Debentures due 2017, 9.87% Medium-Term Note due 2021, 8.625% Debentures due
2022, 8.10% Debentures due 2022, 7.95% Debentures due 2027, 6.95% Debentures
due 2027, 7.25% Debentures due 2027, 8.30% Debentures due 2032, 6.59% Medium-
Term Notes due 2008, 6.50% Medium-Term Notes due 2008, 6.46% Medium-Term Notes
due 2005, 5.85% Medium-Term Notes due 2001, 6.35% Medium-Term Notes due 2007
and 6.40% Medium-Term Notes due 2008.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
The payment of the principal of, premium, if any, and interest, if any, on
the Subordinated Debt Securities will be subordinated, to the extent and in
the manner set forth in the Subordinated Indenture, in right of payment to the
prior payment in full of all Senior Indebtedness which may at any time and
from time to time be outstanding. Unless otherwise provided in the applicable
Prospectus Supplement with respect to an issue of
18
<PAGE>
Subordinated Debt Securities, in the event of any distribution of assets of
the Company upon any dissolution, winding up, liquidation, reorganization or
other similar proceedings of the Company, (i) all Senior Indebtedness shall
first be paid in full, or such payment shall be provided for, before any
payment on account of the principal of, or premium, if any, or interest, if
any, on the Subordinated Debt Securities is made and (ii) if, notwithstanding
the foregoing, any payment or distribution of assets of the Company is
received by the Subordinated Trustee or the Holders of any of the Subordinated
Debt Securities before all Senior Indebtedness is paid in full, such payment
or distribution will be paid over to the Holders of such Senior Indebtedness
or on their behalf for application to the payment of all such Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been paid
in full or such payment provided for, after giving effect to any concurrent
payment or distribution to the Holders of such Senior Indebtedness. Subject to
the payment in full of all Senior Indebtedness upon any such distribution of
assets of the Company, the Holders of the Subordinated Debt Securities will be
subrogated to the rights of the Holders of the Senior Indebtedness to the
extent of payments made to the Holders of such Senior Indebtedness out of the
distributive share of the Subordinated Debt Securities.
By reason of such subordination, if any distribution of assets of the
Company upon dissolution, winding up, liquidation, reorganization or other
similar proceedings of the Company, (i) Holders of Senior Indebtedness will be
entitled to be paid in full before payments may be made on the Subordinated
Debt Securities and the Holders of Subordinated Debt Securities will be
required to pay over their share of such distribution to the Holders of Senior
Indebtedness until such Senior Indebtedness is paid in full and (ii) creditors
of the Company who are neither Holders of Subordinated Debt Securities nor
holders of Senior Indebtedness may recover less, ratably, than holders of
Senior Indebtedness and may recover more, ratably, than the Holders of the
Subordinated Debt Securities. Furthermore, such subordination may result in a
reduction or elimination of payments to the Holders of Subordinated Debt
Securities. The Subordinated Indenture provides that the subordination
provisions thereof will not apply to any money and securities held in trust
pursuant to the discharge, defeasance and covenant defeasance provisions of
the Subordinated Indenture (see "--Discharge, Defeasance and Covenant
Defeasance" above).
The Subordinated Indenture also provides that no payment on account of the
principal of, or premium, if any, sinking funds, if any, or interest, if any,
on the Subordinated Debt Securities shall be made unless full payment of
amounts then due for the principal of, premium, if any, sinking funds, if any,
and interest, if any, on Senior Indebtedness has been made or duly provided
for.
The Subordinated Indenture defines "Senior Indebtedness" as (a) any
liability of the Company (1) for borrowed money or under any reimbursement
obligation relating to a letter of credit, or (2) evidenced by a bond, note,
debenture or similar instrument, or (3) for obligations to pay the deferred
purchase price of property or services, except trade accounts payable arising
in the ordinary course of business, or (4) for the payment of money relating
to a capitalized lease obligation, or (5) for the payment of money under any
Swap Agreement; (b) any liability of others described in the preceding clause
(a) that the Company has guaranteed or that is otherwise its legal liability;
and (c) any deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (a) and (b) above, unless, in the instrument
creating or evidencing any such liability referred to in clause (a) or (b)
above or any such deferral, renewal, extension or refunding referred to in
clause (c) above or pursuant to which the same is outstanding, it is expressly
provided that such liability, deferral, renewal, extension or refunding is
subordinate in right of payment to all other Indebtedness of the Company or is
not senior or prior in right of payment to the Subordinated Debt Securities or
ranks pari passu with or subordinate to the Subordinated Debt Securities in
right of payment; and provided that the Subordinated Debt Securities shall not
constitute Senior Indebtedness. The Subordinated Indenture defines "Swap
Agreement" as any financial agreement designed to manage the Company's
exposure to fluctuations in interest rates, currency exchange rates or
commodity prices, including without limitation swap agreements, option
agreements, cap agreements, floor agreements, collar agreements and forward
purchase agreements.
If this Prospectus is being delivered in connection with the offering of a
series of Subordinated Debt Securities, the accompanying Prospectus Supplement
or the information incorporated by reference herein will
19
<PAGE>
set forth the approximate amount of Senior Indebtedness outstanding as of a
recent date. There are no limitations in the Subordinated Indenture on the
issuance or incurrence of Senior Indebtedness of the Company.
LIMITATIONS ON ISSUANCE OF EURO-DEBT SECURITIES
United States tax laws and regulations impose certain restrictions on the
issuance of any securities in bearer form. Except as may otherwise be provided
in the Prospectus Supplement applicable thereto, in accordance with the
federal tax laws and regulations of the United States, Euro-Debt Securities
may not, in connection with their offer or sale during the Restricted Period
(as defined above under "Description of Debt Securities--Form, Exchange,
Registration and Transfer"), be offered or sold, directly or indirectly, (i)
to any person in the United States or its possessions (as defined below), or
(ii) to any United States person (as defined below) other than (x) an office
located outside the United States or its possessions of a Financial
Institution (as defined above under "Description of Debt Securities--Form,
Exchange, Registration and Transfer") purchasing for its own account or for
the account of a customer, provided that such Financial Institution agrees in
writing to comply with the requirements of Section 165(j)(3)(A), (B), or (C)
of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder or (y) otherwise as permitted by United States Treasury Regulation
Section 1.163-5(c)(2)(i)(D). Any underwriters, agents and dealers
participating in the offering of Debt Securities must covenant that they will
not offer or sell during the Restricted Period any Euro-Debt Securities to any
person in the United States or its possessions or to any United States person
(other than (x) an office located outside the United States and its
possessions of a Financial Institution or (y) otherwise as permitted by United
States Treasury Regulation Section 1.163-5(c)(2)(i)(D)), and that they will
not deliver Euro-Debt Securities within the United States or its possessions.
In addition, any such underwriters, agents and dealers must covenant that
they have in effect procedures reasonably designed to ensure that their
employees or agents who are directly engaged in selling Euro-Debt Securities
are aware of the above restrictions on the offer or sale of Euro-Debt
Securities. Moreover, Bearer Debt Securities (including a permanent global
Debt Security) and any coupons appertaining thereto will not be delivered in
definitive form or, if prior to delivery in definitive form, interest will not
be paid on any Euro-Debt Securities, unless the Company has received a signed
certificate in writing (or an electronic certificate described in United
States Treasury Regulation Section 1.163-5(c)(2)(i)(D)(3)(ii)) in the form and
to the effect described above under "Description of Debt Securities--Form,
Exchange, Registration and Transfer." Bearer Debt Securities (including a
permanent global Debt Security) and coupons will bear a legend to the
following effect: "Any United States person who holds this obligation will be
subject to limitations under the United States income tax laws, including the
limitations provided in Section 165(j) and 1287(a) of the Internal Revenue
Code." The sections referred to in such legend provide that a United States
person (other than a Financial Institution or a United States person holding
through a Financial Institution) who holds a Bearer Security or coupon will
not be allowed to deduct any loss realized on the sale, exchange or redemption
of such Bearer Security or coupon and any gain (which might otherwise be
characterized as capital gain) recognized on such sale, exchange or redemption
will be treated as ordinary income.
As used herein, "United States person" means a citizen of the United States,
a resident of the United States for federal income tax purposes, a
corporation, partnership or other entity created or organized in or under the
laws of the United States, an estate the income of which is subject to United
States federal income taxation regardless of its source and a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantive decisions of the trust. "United States"
means the United States of America (including the States and the District of
Columbia) and "possessions" of the United States include Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and Northern Mariana
Islands.
20
<PAGE>
DESCRIPTION OF PREFERRED STOCK
The Company may issue shares of its Preferred Stock, in one or more series,
either separately, or together with, or upon the conversion of or in exchange
for, other Securities. The summary of certain provisions of the Preferred
Stock set forth below and the summary of certain terms of a particular series
of Preferred Stock set forth in the applicable Prospectus Supplement do not
purport to be complete and are subject to and qualified in their entirety by
reference to all of the provisions of the Company's articles of incorporation,
as amended and restated (the "Amended and Restated Articles of
Incorporation"), and the Company's By-laws, which have been filed or
incorporated by reference as exhibits to the Registration Statement, and the
form of articles of amendment relating to such series of Preferred Stock which
will be filed as an exhibit to or incorporated by reference in the
Registration Statement, all of which are incorporated herein by reference.
The following description of Preferred Stock sets forth certain general
terms and provisions of any series of Preferred Stock to which any Prospectus
Supplement may relate. Certain other terms of any particular series of
Preferred Stock, including Preferred Stock to be represented by Depositary
Shares, will be described in the applicable Prospectus Supplement. If so
indicated in the applicable Prospectus Supplement, the terms of the Preferred
Stock offered thereby may differ from the terms set forth below.
GENERAL
Under the Amended and Restated Articles of Incorporation, the Company is
authorized to issue up to 25,000,000 shares of Preferred Stock, without par
value, which may be issued from time to time in one or more series. Subject to
limitations prescribed by Virginia law and the Amended and Restated Articles
of Incorporation, the Board of Directors of the Company, without further
action by the shareholders, is authorized to designate and issue in series
Preferred Stock and to fix as to any series: (i) the number of shares
constituting such series; (ii) the rate of dividend, the time of payment and,
if cumulative, the dates from which dividends shall be cumulative, and the
extent of participation rights, if any; (iii) any right to vote with holders
of shares of any other series or class and any right to vote as a class,
either generally or as a condition to specified corporate action; (iv) the
price at and the terms and conditions on which shares may be redeemed,
including any sinking fund provisions for the redemption or purchase of
shares; (v) the amount payable in the event of a liquidation; and (vi) whether
shares will have the privilege of conversion, and if so, the terms and
conditions on which shares may be converted.
The Company has reserved for issuance 250,000 shares of Series A $7.00
Cumulative Convertible Preferred Stock, $100 stated value per share ("Series A
Preferred Stock"). In addition, in connection with the Shareholder Rights Plan
(as defined below), the Company has reserved for issuance 3,000,000 shares of
Series B Junior Participating Preferred Stock, without par value (the "Series
B Preferred Stock"), which are issuable only in connection with the exercise
of Rights (as defined below). As of the date of this Prospectus, no shares of
Series A Preferred Stock or Series B Preferred Stock were outstanding. See
"Description of Capital Stock."
Reference is made to the applicable Prospectus Supplement relating to the
series of Preferred Stock offered thereby (the "Offered Preferred Stock") for
specific terms of such Offered Preferred Stock, including (where applicable):
(1) the title of the series; (2) the number of shares offered, (3) the initial
public offering price; (4) the dividend rate or method of calculation thereof
and the dividend payment dates or periods; (5) the date from which dividends
shall accrue and whether dividends will be cumulative; (6) any right to vote
with holders of shares of any other series or class and any right to vote as a
class; (7) the provisions for redemption or repurchase, if applicable,
including any sinking fund provisions for the redemption or repurchase of
shares; (8) the amount payable with respect to both the payment of dividends
and the distribution of assets upon liquidation, dissolution or winding up of
the Company; (9) any listing on any securities exchange; (10) the procedures
for any auction or remarketing, if any; (11) the terms and conditions, if any,
upon which such Offered Preferred Stock will be convertible into or
exchangeable for other Securities; (12) whether interests will be represented
by Depositary Shares; and (13) any other specific terms of such Offered
Preferred Stock.
21
<PAGE>
RANKING
Unless otherwise specified in the applicable Prospectus Supplement, any
series of Offered Preferred Stock offered thereby will rank, with respect to
both the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up of the Company, (i) junior to Series A Preferred
Stock (if issued), (ii) senior to Series B Preferred Stock (if issued) and
Common Stock (as defined below), and (iii) on a parity with shares of any
other outstanding series of Offered Preferred Stock.
DIVIDEND, REPURCHASE AND REDEMPTION RESTRICTIONS
Unless otherwise described in the applicable Prospectus Supplement, the
Company will be limited in its ability to pay dividends on, and redeem or
otherwise purchase, any shares of Offered Preferred Stock if the Company has
not paid full cumulative dividends on Series A Preferred Stock.
DIVIDENDS
Subject to the preferential rights of holders of Series A Preferred Stock
and any other capital stock of the Company ranking prior to any series of the
Offered Preferred Stock as to dividends, holders of shares of such Offered
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors of the Company, out of assets of the Company legally
available therefor, dividends at such rates and on such dates as will be set
forth in, or as are determined by the method described in, the applicable
Prospectus Supplement. Such rates may be fixed or variable or both. If
variable, the formula used for determining the dividend rate for each dividend
period will be specified in the applicable Prospectus Supplement. Each such
dividend shall be payable to holders of record as they appear on the stock
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company. Dividends may be paid in the form of cash,
Preferred Stock (of the same or a different series), or other securities or
property, in each case as specified in the applicable Prospectus Supplement.
Dividends on any series of the Offered Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable Prospectus Supplement. If the Board of Directors of the
Company fails to declare a dividend payable on a dividend payment date on any
series of the Offered Preferred Stock for which dividends are non-cumulative,
then the holders of such series of the Offered Preferred Stock will have no
right to receive a dividend in respect of the dividend period ending on such
dividend payment date, and the Company will have no obligation to pay the
dividend accrued for such period, whether or not dividends on such series are
declared payable on any future dividend payment date.
No full dividends will be declared or paid or set aside for payment on any
Preferred Stock of the Company ranking, as to dividends, on a parity with or
junior to any outstanding series of Offered Preferred Stock for any period
unless full dividends on such series of Offered Preferred Stock (including
accumulated dividends on any such series of Offered Preferred Stock on which
dividends are cumulative) have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set aside for
payment. When dividends are not paid in full on any series of Offered
Preferred Stock and any other Preferred Stock ranking on a parity as to
dividends with such series of Offered Preferred Stock, all dividends declared
or paid upon shares of Offered Preferred Stock of such series and any other
Preferred Stock ranking on a parity as to dividends with the Offered Preferred
Stock of such series shall be declared and paid pro rata so that the amount of
dividends declared and paid per share on the Offered Preferred Stock of such
series and such other Preferred Stock shall in all cases bear to each other
the same ratio that accrued dividends per share (which in the case of non-
cumulative Preferred Stock shall not include any accumulation in respect of
unpaid dividends for prior dividend periods) on shares of such series of
Offered Preferred Stock and such other Preferred Stock bear to each other.
Except as provided in the preceding sentence, unless full dividends on all
outstanding shares of any series of Offered Preferred Stock (including
accumulated dividends on any such series on which dividends are cumulative)
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set aside for payment, no dividends (other
than dividends or distributions paid in shares of, or options, warrants or
rights to
22
<PAGE>
subscribe for or purchase shares of, Common Stock or any other stock of the
Company ranking junior to the Offered Preferred Stock of such series as to
dividends and as to distribution of assets upon liquidation, dissolution or
winding up of the Company) shall be declared or paid or set aside for payment
or any other distribution declared or made upon Common Stock or any other
stock of the Company ranking junior to or on a parity with the Offered
Preferred Stock of such series as to dividends or distribution of assets upon
liquidation, dissolution or winding up of the Company, nor may any Common
Stock or any other stock of the Company ranking junior to or on a parity with
the Offered Preferred Stock of such series as to dividends or distribution of
assets upon liquidation, dissolution or winding up of the Company be redeemed,
purchased or otherwise acquired for any consideration (and no moneys shall be
paid to or made available for a sinking fund for the redemption of any shares
of any such junior or parity stock) by the Company (except by conversion into
or exchange for stock of the Company ranking junior to the Offered Preferred
Stock of such series as to dividends and as to distribution of assets upon
liquidation, dissolution or winding up of the Company).
Holders of shares of any series of Offered Preferred Stock shall not be
entitled to any dividends, whether payable in cash, securities or other
property, in excess of full cumulative (if applicable) dividends on such
series. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend or payments which may be in arrears.
The Company will be prohibited from paying dividends on Offered Preferred
Stock of any series in the event of a dividend arrearage on Series A Preferred
Stock and may be prohibited from paying dividends on Offered Preferred Stock
of any series as a result of certain other dividend restrictions. See "--
Dividend, Repurchase and Redemption Restrictions" above and "Description of
Capital Stock --Preferred Stock Reserved for Issuance--Series A Preferred
Stock" below.
REDEMPTION AND REPURCHASE
The shares of Offered Preferred Stock of any series may be redeemable at the
option of the Company, may be subject to mandatory redemption pursuant to a
sinking fund or otherwise, or may be subject to repurchase by the Company at
the option of the holders, in each case upon the terms, at the times and at
the prices set forth in the applicable Prospectus Supplement. Offered
Preferred Stock redeemed by the Company will be restored to the status of
authorized but unissued shares of Preferred Stock.
The Prospectus Supplement relating to a series of Offered Preferred Stock
which is subject to mandatory redemption will specify the number of shares of
such series which shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(including accumulated dividends on any such series on which dividends are
cumulative) to the date fixed for redemption. The redemption price may be
payable in cash, securities or other property, as specified in the Prospectus
Supplement relating to such series of Offered Preferred Stock.
If fewer than all of the outstanding shares of any series of Offered
Preferred Stock are to be redeemed, the shares to be redeemed will be
determined pro rata, by lot or by any other method deemed equitable by the
Company.
If full cumulative dividends on any series of Offered Preferred Stock
(including accumulated dividends on any such series on which dividends are
cumulative) have not been declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment, the Company shall not redeem,
repurchase or otherwise acquire any shares of such series of Offered Preferred
Stock except by conversion into or exchange for capital stock of the Company
ranking junior to the Offered Preferred Stock of such series as to dividends
and as to distributions upon liquidation, dissolution or winding up of the
Company, or except pursuant to a purchase or exchange offer made on the same
terms to all holders of such series of Offered Preferred Stock.
Notice of redemption shall be given by mailing the same to each record
holder of the shares to be redeemed, not less than 30 nor more than 60 days
prior to the date fixed for redemption thereof, to the respective addresses
23
<PAGE>
of such holders as the same shall appear in the stock registry of the Company.
Each such notice shall state: (i) the redemption date; (ii) the number of
shares and series of Offered Preferred Stock to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such Offered
Preferred Stock are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights
as to such shares, if any, shall terminate. If fewer than all shares of any
series of the Preferred Stock held by any holder are to be redeemed, the
notice mailed to such holder shall also specify the number of shares to be
redeemed from such holder.
If a notice of redemption has been given, from and after the redemption date
for the shares of Offered Preferred Stock called for redemption (unless the
Company shall default in providing money for the payment of the redemption
price of the shares so called for redemption plus, if applicable, accrued and
unpaid dividends), dividends on the shares of Offered Preferred Stock so
called for redemption shall cease to accrue and such shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as
shareholders of the Company shall cease, except the right to receive the
redemption price plus, if applicable, accrued and unpaid dividends upon
surrender of the certificates representing the shares to be so redeemed
(properly endorsed or assigned for transfer, if the Company shall so require)
in accordance with such notice. If fewer than all of the shares represented by
any such certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares.
The Company will be prohibited from redeeming or repurchasing Offered
Preferred Stock of any series in the event of a dividend arrearage on Series A
Preferred Stock and may be prohibited from redeeming or repurchasing Offered
Preferred Stock of any series as the result of certain other dividend
restrictions. See "--Dividend, Repurchase and Redemption Restrictions" above
and "Description of Capital Stock" below.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, and after payment of all amounts due upon liquidation,
dissolution or winding up to holders of Series A Preferred Stock and any other
capital stock of the Company ranking prior to the Offered Preferred Stock of
any series as to the distribution of assets upon liquidation, dissolution or
winding up, and subject to the rights of holders of any capital stock of the
Company ranking on a parity with the shares of Offered Preferred Stock of such
series as to distribution of assets upon liquidation, dissolution or winding
up of the Company, the holders of shares of Offered Preferred Stock of such
series shall be entitled to receive, out of assets of the Company legally
available therefor and before any distribution or payment shall be made to the
holders of any Common Stock or any other class or series of capital stock of
the Company ranking junior to the Offered Preferred Stock of such series as to
distribution of assets upon liquidation, dissolution or winding up of the
Company, liquidating distributions in the amount of the liquidation preference
per share set forth in the applicable Prospectus Supplement, plus accrued and
unpaid dividends (including accumulated dividends if dividends on such series
of Offered Preferred Stock are cumulative). After payment of the full amount
of the liquidating distributions to which they are entitled, the holders of
Offered Preferred Stock of such series will have no right or claim to any of
the remaining assets of the Company. In the event that, upon any such
voluntary or involuntary liquidation, dissolution or winding up, the legally
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Offered Preferred Stock
of any series and the corresponding amounts payable on all shares of other
capital stock of the Company ranking on a parity with the Offered Preferred
Stock of such series in the distribution of assets upon liquidation,
dissolution or winding up, the holders of the Offered Preferred Stock of such
series and of such other capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
For such purposes, the consolidation or merger of the Company with or into
any other person, or the sale, lease, transfer or conveyance of all or
substantially all or any portion of the property or business of the Company,
shall not be deemed to constitute a liquidation, dissolution or winding up of
the Company.
24
<PAGE>
VOTING RIGHTS
Holders of Offered Preferred Stock will not have voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement. In the event that the
Company issues a series of Offered Preferred Stock with voting rights or the
Offered Preferred Stock of any series is entitled pursuant to applicable law
to vote on any matter, then, unless otherwise specified in the Prospectus
Supplement relating to such series, each share of such series will be entitled
to one vote on matters on which holders of such shares are entitled to vote.
However, as more fully described under "Description of Depositary Shares," if
the Company elects to provide for the issuance of Depositary Shares
representing fractional interests in shares of any such series of Offered
Preferred Stock, the holder of any such Depositary Share will, in effect and
subject to certain limitations and conditions, be entitled to such fraction of
a vote, rather than a full vote. In the case of any series of Offered
Preferred Stock having one vote per share on matters on which holders of such
series are entitled to vote, the voting power of such series on matters on
which holders of such series and holders of any other series of Preferred
Stock or other capital stock of the Company are entitled to vote as a single
class will depend on the number of shares in such series, not the aggregate
stated value, liquidation preference or initial offering price of the shares
of such series.
So long as any shares of Offered Preferred Stock remain outstanding, and
except as otherwise set forth in the applicable Prospectus Supplement or
except as otherwise required by applicable law, the Company will not, without
the affirmative vote or consent of the holders of at least a majority of the
shares of any affected series of Offered Preferred Stock outstanding at the
time (voting separately as a single class with all other affected series of
Preferred Stock ranking on a parity with the Offered Preferred Stock of such
series either as to dividends or as to distribution of assets upon
liquidation, dissolution or winding up of the Company and upon which like
voting rights have been conferred and are then exercisable), given in person
or by proxy, either in writing or at a meeting, (i) authorize, create or
issue, or increase the authorized or issued amount of, any class or series of
capital stock ranking prior to such affected series of Offered Preferred Stock
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
stock of the Company into any such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase
any such shares; or (ii) amend, alter or repeal the provisions of the Amended
and Restated Articles of Incorporation (including the articles of amendment
for such affected series of Offered Preferred Stock), whether by merger,
consolidation or otherwise, so as to materially and adversely affect any
right, preference or privilege of such affected series of Offered Preferred
Stock; provided, however, that any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other class or series of
capital stock or any other series of Preferred Stock, or any increase in the
number of authorized shares of any series of Preferred Stock, in each case,
ranking on a parity with or junior to the Preferred Stock of such affected
series with respect to payment of dividends and the distribution of assets
upon liquidation, dissolution or winding up, shall not be deemed to materially
and adversely affect such rights, preferences or privileges.
None of the foregoing voting provisions will apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected or occur, all outstanding shares of the relevant series of
Offered Preferred Stock shall have been redeemed or called for redemption upon
proper notice and sufficient funds shall have been deposited in trust to
effect such redemption.
Under Virginia law, notwithstanding anything to the contrary set forth
above, holders of shares of a series of Preferred Stock generally will be
entitled to vote as a class upon a proposed amendment to the Amended and
Restated Articles of Incorporation if the amendment would increase or decrease
the aggregate number of authorized shares of such class; effect an exchange or
reclassification of all or part of the shares of the class into shares of
another class; effect an exchange or reclassification, or create the right of
exchange, of all or part of the shares of another class into shares of the
class; change the designation, rights preferences, or limitations of all or
part of the shares of the class; change the shares of all or part of the class
into a different number of shares of the same class; create a new class of
shares, or change a class with subordinate and inferior rights into a class of
shares, having rights or preferences with respect to distributions or to
dissolution that are prior, superior, or substantially equal to the shares of
the class, or increase the rights, preferences, or number of authorized shares
25
<PAGE>
of any class having rights or preferences with respect to distributions or to
dissolution that are prior, superior, or substantially equal to the shares of
the class; or cancel or otherwise affect rights to distributions or dividends
that have accumulated but not yet been declared. Any such amendment requires
the vote of a majority of the shares entitled to vote thereon, voting as a
class. If a proposed amendment that entitles two or more series of shares to
vote as separate voting groups would affect those two or more series in the
same or substantially similar way, the shares of all the series so affected
shall vote together as a single voting group on the proposed amendment.
CONVERSION AND EXCHANGE RIGHTS
The terms, if any, upon which shares of any series of Preferred Stock are
convertible into or exchangeable for another series of Preferred Stock or
other Securities will be set forth in the applicable Prospectus Supplement
relating thereto. Such terms may include provisions for conversion or
exchange, either mandatory, at the option of the holders or at the option of
the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the shares of Preferred Stock will be
named in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
The Company may offer Depositary Shares (either separately or together with
other Securities) representing fractional interests in shares of Preferred
Stock of any series. In connection with the issuance of any Depositary Shares,
the Company will enter into a deposit agreement (a "Deposit Agreement") with a
bank or trust company, as depositary (the "Preferred Stock Depositary"), which
will be named in the applicable Prospectus Supplement. Depositary Shares will
be evidenced by depositary receipts (the "Depositary Receipts") issued
pursuant to the related Deposit Agreement. The summary of certain provisions
of the Depositary Shares and the Deposit Agreement set forth below and the
summary of certain terms of a particular issue of Depositary Shares and the
related Deposit Agreement set forth in the applicable Prospectus Supplement do
not purport to be complete and are subject to and qualified in their entirety
by reference to all the provisions of the form of Deposit Agreement, together
with the form of related Depositary Receipt which will be filed as an exhibit
to or incorporated by reference in the Registration Statement, all of which
are incorporated herein by reference.
The following description of Depositary Shares sets forth certain general
terms and provisions of the Depositary Shares and the related Deposit
Agreement to which any Prospectus Supplement may relate. Certain other terms
of any such Depositary Shares and the related Deposit Agreement will be
described in the applicable Prospectus Supplement. If so indicated in the
accompanying Prospectus Supplement, the terms of the Depositary Shares offered
thereby and of the related Deposit Agreement may differ from the terms set
forth below.
GENERAL
The Company may provide for the issuance by the Preferred Stock Depositary
of Depositary Receipts evidencing the related Depositary Shares, each of which
Depositary Shares in turn will represent a fractional interest (which will be
specified in the applicable Prospectus Supplement) in one share of a series of
Preferred Stock. Shares of Preferred Stock of any series represented by
Depositary Shares will be deposited under a separate Deposit Agreement.
Subject to the terms of the Deposit Agreement, each owner of a Depositary
Receipt will be entitled, in proportion to the fraction of a share of
Preferred Stock represented by the related Depositary Share, to all the
rights, preferences and privileges of, and will be subject to all of the
limitations and restrictions on, the Preferred Stock represented thereby
(including, if applicable and subject to certain matters discussed below,
dividend, voting, conversion, exchange, redemption and liquidation rights).
Depositary Shares may be issued in respect of shares of the Preferred Stock
of any series. Immediately following the issuance of any such shares of
Preferred Stock by the Company, the Company will deposit such
26
<PAGE>
shares of Preferred Stock with the relevant Preferred Stock Depositary and
will cause the Preferred Stock Depositary to issue, on behalf of the Company,
the related Depositary Receipts.
Reference is made to the applicable Prospectus Supplement relating to the
Depositary Shares offered thereby for specific terms, including (where
applicable): (1) the terms of the series of Preferred Stock deposited by the
Company under the related Deposit Agreement; (2) the number of such Depositary
Shares and the fraction of one share of such Preferred Stock represented by
one such Depositary Share; (3) whether such Depositary Shares will be listed
on any securities exchange; (4) whether such Depositary Shares will be sold
with any other Securities and, if so, the amount and terms thereof; and (5)
any other specific terms of such Depositary Shares and the related Deposit
Agreement.
Depositary Receipts may be surrendered for transfer or exchange for new
Depositary Receipts of different authorized denominations at any office or
agency of the relevant Preferred Stock Depositary maintained for such purpose,
subject to the terms of the related Deposit Agreement. Unless otherwise
specified in the applicable Prospectus Supplement, Depositary Receipts will be
issued in denominations evidencing any whole number of Depositary Shares. No
service charge will be made for any permitted transfer or exchange of
Depositary Receipts, but the Company or the Preferred Stock Depositary may
require payment of any tax or other governmental charge payable in connection
therewith.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the related Preferred Stock to the
record holders of Depositary Receipts in proportion, insofar as possible, to
the number of Depositary Receipts owned by such holders on the relevant record
date. The Preferred Stock Depositary will distribute only such amount,
however, as can be distributed without attributing to any holder of Depositary
Receipts a fraction of one cent, and any balance not so distributed will be
added to and treated as part of the next sum, if any, received by the
Preferred Stock Depositary for distribution to the record holders of
Depositary Receipts.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto in proportion, insofar as possible, to
the number of Depositary Receipts owned by such holders on the relevant record
date, unless the Preferred Stock Depositary determines that it is not feasible
to make such distribution, in which case the Preferred Stock Depositary may,
with the approval of the Company, adopt such method as it deems equitable and
practicable for the purpose of effecting such distribution, including sale
(public or private) of such property and distribution of the net proceeds from
such sale to such holders.
The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
the related series of Preferred Stock will be made available to holders of
Depositary Receipts.
The amount distributed in any of the foregoing cases will be reduced by any
amount required to be withheld by the Company or the Preferred Stock
Depositary on account of taxes.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of the Depositary Receipts at an office or agency of the
Preferred Stock Depositary maintained for such purpose (unless the related
shares of Preferred Stock have previously been called for redemption), the
holder thereof will be entitled to delivery, at such office or agency, to or
upon such holder's order, of the number of whole shares of the related series
of Preferred Stock and any money or other property represented by such
Depositary Receipts. Shares of Preferred Stock so withdrawn, however, may not
be redeposited. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of whole shares of
Preferred Stock to be withdrawn, the Preferred Stock Depositary will deliver
to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares.
27
<PAGE>
REDEMPTION AND REPURCHASE OF PREFERRED STOCK
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption at the option of the Company, then, whenever the Company redeems
shares of Preferred Stock of such series held by the Preferred Stock
Depositary, the Preferred Stock Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the shares of the
Preferred Stock so redeemed, provided the Company shall have paid in full to
the Preferred Stock Depositary the redemption price of the Preferred Stock to
be redeemed plus any other amounts or property payable with respect to the
Preferred Stock to be redeemed. The redemption price per Depositary Share will
be equal to the redemption price and any other amounts or property per share
payable with respect to the Preferred Stock multiplied by the fraction of a
share of Preferred Stock represented by one such Depositary Share. If less
than all of the Depositary Shares are to be redeemed, the Depositary Shares to
be redeemed will be selected by the Preferred Stock Depositary by lot or pro
rata or other equitable method, in each case as may be determined by the
Company. If the Depositary Shares evidenced by a Depositary Receipt are to be
redeemed in part only, one or more new Depositary Receipts will be issued for
any Depositary Shares not so redeemed.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Receipts evidencing the Depositary Shares so called
for redemption will cease, except the right to receive any monies payable upon
such redemption and any money or other property to which the holders of such
Depositary Receipts were entitled upon such redemption upon surrender of such
Depositary Receipts to the Preferred Stock Depositary.
Depositary Shares, as such, are not subject to repurchase by the Company at
the option of the holders. Nevertheless, if the Preferred Stock represented by
Depositary Shares is subject to repurchase of the option of the holders, the
related Depositary Receipts may be surrendered by the holders thereof to the
Preferred Stock Depositary with written instructions to the Preferred Stock
Depositary to instruct the Company to repurchase the Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipts at
the applicable repurchase price specified in the related Prospectus
Supplement. The Company, upon receipt of such instructions and subject to the
Company having funds legally available therefor, will repurchase the requisite
whole number of shares of such Preferred Stock from the Preferred Stock
Depositary, who in turn will repurchase such Depositary Receipts.
Notwithstanding the foregoing, holders shall only be entitled to request the
repurchase of Depositary Shares representing one or more whole shares of the
related Preferred Stock. The repurchase price per Depositary Share will be
equal to the repurchase price and any other amounts per share payable with
respect to the Preferred Stock multiplied by the fraction of a share of
Preferred Stock represented by one Depositary Share. If the Depositary Shares
evidenced by a Depositary Receipt are to be repurchased in part only, one or
more new Depositary Receipts will be issued for any Depositary Shares not to
be repurchased.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock of any series represented by Depositary Shares are entitled to vote, the
relevant Preferred Stock Depositary will mail the information contained in
such notice of meeting to the record holders of the related Depositary
Receipts. Each record holder of Depositary Receipts evidencing Depositary
Shares on the record date (which will be the same date as the record date for
the Preferred Stock) will be entitled to instruct the Preferred Stock
Depositary as to the exercise of the voting rights pertaining to the amount of
Preferred Stock represented by such holder's Depositary Shares. The Preferred
Stock Depositary will endeavor, insofar as practicable, to vote the number of
shares of Preferred Stock represented by such Depositary Shares in accordance
with such instructions, and the Company will agree to take all reasonable
action which may be deemed necessary by the Preferred Stock Depositary in
order to enable the Preferred Stock Depositary to do so. The Preferred Stock
Depositary will abstain from voting shares of Preferred Stock to the extent it
does not receive specific instructions from the holders of Depositary Receipts
evidencing the Depositary Shares representing such Preferred Stock.
28
<PAGE>
CONVERSION AND EXCHANGE OF PREFERRED STOCK
If the Preferred Stock represented by Depositary Shares is exchangeable at
the option of the Company for other Securities, then, whenever the Company
exercises its option to exchange all or a portion of such shares of Preferred
Stock held by the Preferred Stock Depositary, the Preferred Stock Depositary
will exchange as of the same exchange date a number of such Depositary Shares
representing the shares of the Preferred Stock so exchanged, provided the
Company shall have issued and deposited with the Preferred Stock Depositary
the Securities for which such shares of Preferred Stock are to be exchanged.
The exchange rate per Depositary Share shall be equal to the exchange rate per
share of Preferred Stock multiplied by the fraction of a share of Preferred
Stock represented by one Depositary Share. If less than all of the Depositary
Shares are to be exchanged, the Depositary Shares to be exchanged will be
selected by the Preferred Stock Depositary by lot or pro rata or other
equitable method, in each case as may be determined by the Company. If the
Depositary Shares evidenced by a Depositary Receipt are to be exchanged in
part only, a new Depositary Receipt or Receipts will be issued for any
Depositary Shares not to be exchanged.
Depositary Shares, as such, are not convertible or exchangeable at the
option of the holders into other Securities or property. Nevertheless, if the
Preferred Stock represented by Depositary Shares is convertible into or
exchangeable for other Securities at the option of the holders, the related
Depositary Receipts may be surrendered by holders thereof to the Preferred
Stock Depositary with written instructions to the Preferred Stock Depositary
to instruct the Company to cause conversion or exchange, as the case may be,
of the Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into a whole number of shares of Preferred Stock, or Debt
Securities in authorized denominations, as specified in the related Prospectus
Supplement. The Company, upon receipt of such instructions and any amounts
payable in respect thereof, will cause the conversion or exchange, as the case
may be, and will deliver to the holders such number of whole shares of
Preferred Stock, or a principal amount of Debt Securities in authorized
denominations (and cash in lieu of any fractional Security). The exchange or
conversion rate per Depositary Share shall be equal to the exchange or
conversion rate per share of Preferred Stock multiplied by the fraction of a
share of Preferred Stock represented by one Depositary Share. If the
Depositary Shares evidenced by a Depositary Receipt are to be converted or
exchanged in part only, a new Depositary Receipt or Receipts will be issued
for any Depositary Shares not to be converted or exchanged.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The Depositary Receipts evidencing Depositary Shares and any provision of
the related Deposit Agreement may at any time be amended by agreement between
the Company and the Preferred Stock Depositary. However, any amendment that
materially and adversely alters the rights of the holders of Depositary
Receipts issued under any Deposit Agreement will not be effective unless such
amendment has been approved by the holders of at least a majority of such
Depositary Receipts then outstanding (or such greater proportion as may be
required by the rules of any securities exchange on which the related
Depositary Shares may be listed). In no event may any such amendment impair
the right of any holder of Depositary Receipts, subject to the conditions
specified in the Deposit Agreement, to receive the related Preferred Stock
upon surrender of such Depositary Receipts as described above under "--
Withdrawal of Preferred Stock."
The Deposit Agreement may be terminated by the Company upon not less than 60
days' notice to the Preferred Stock Depositary. In any such case, the
Preferred Stock Depositary shall deliver or make available to each holder of
the related Depositary Receipts, upon surrender of such Depositary Receipts,
such number of whole shares of the related series of Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipts,
together with cash in lieu of any fractional shares (to the extent the Company
has deposited such cash with the Preferred Stock Depositary). The Deposit
Agreement will automatically terminate if all of the shares of Preferred Stock
deposited thereunder shall have been withdrawn, redeemed, converted or
exchanged or if there shall have been a final distribution in respect of such
Preferred Stock in connection with any liquidation, dissolution or winding up
of the Company.
29
<PAGE>
CHARGES OF PREFERRED STOCK DEPOSITARY
The Company will pay the fees and expenses of the Preferred Stock Depositary
in connection with the performance of its duties under the Deposit Agreement,
and will pay all transfer and other taxes and governmental charges arising
solely from the existence of the Deposit Agreement. Holders of Depositary
Receipts will be required to pay all other transfer and other taxes and
governmental charges (including taxes and other governmental charges in
connection with the transfer, exchange, surrender or conversion of Depositary
Receipts) and such other charges as are expressly provided in the Deposit
Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time
remove the Preferred Stock Depositary, any such resignation or removal to take
effect upon the appointment of a successor Preferred Stock Depositary.
MISCELLANEOUS
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if
either is prevented or delayed by law or any circumstances beyond its control
in performing its obligations under the Deposit Agreement. The obligations of
the Company and the Preferred Stock Depositary under the Deposit Agreement
will be limited to performing their duties thereunder without gross negligence
or willful misconduct, and the Company and the Preferred Stock Depositary will
not be obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or any related shares of Preferred Stock or Depositary
Receipts unless satisfactory indemnity is furnished. The Company and the
Preferred Stock Depositary may rely on advice of counsel, accountants or other
advisors, and information provided by persons presenting shares of Preferred
Stock for deposit, holders of Depositary Receipts or other persons believed to
be authorized or competent and on documents believed to be genuine.
If the Preferred Stock Depositary shall receive conflicting claims, requests
or instructions from any holders of Depositary Receipts, on the one hand, and
the Company, on the other hand, the Preferred Stock Depositary shall be
entitled to act on such claims, requests or instructions received from the
Company.
DESCRIPTION OF SECURITIES WARRANTS
The Company may issue (either separately or together with other Securities)
warrants for the purchase of Debt Securities (the "Debt Warrants"), warrants
for the purchase of Preferred Stock (the "Preferred Stock Warrants"). The Debt
Warrants and the Preferred Stock Warrants are collectively referred to herein
as the "Securities Warrants." The Securities Warrants are to be issued under
warrant agreements (each a "Securities Warrant Agreement") to be entered into
between the Company and a bank or trust company, as warrant agent ("Securities
Warrant Agent"), all as set forth in the Prospectus Supplement relating to the
particular issue of Securities Warrants. The form of Securities Warrant
Agreement, including the form of certificates representing the Securities
Warrants ("Securities Warrant Certificates"), that will be entered into with
respect to a particular offering of Securities Warrants will be filed as an
exhibit to or incorporated by reference in the Registration Statement. The
following summary of certain provisions of the Securities Warrant Agreement
and the Securities Warrants and the summary of certain terms of the particular
Securities Warrant Agreement and Securities Warrants set forth in the
applicable Prospectus Supplement do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all the provisions of
the particular Securities Warrant Agreement and the related Securities Warrant
Certificates, all of which are incorporated herein by reference.
30
<PAGE>
The following description of the Securities Warrants sets forth certain
general terms and provisions of the Securities Warrants and the related
Securities Warrant Agreement to which any Prospectus Supplement may relate.
Certain other terms of any Securities Warrants and the related Securities
Warrant Agreement will be described in the applicable Prospectus Supplement.
If so indicated in the accompanying Prospectus Supplement, the terms of the
Securities Warrants offered thereby and the related Securities Warrant
Agreement may differ from the terms set forth below.
GENERAL
Reference is made to the applicable Prospectus Supplement for the terms of
the Securities Warrants offered thereby, including (where applicable): (1) the
title and aggregate number of such Securities Warrants; (2) the designation,
aggregate principal amount, currency, currencies or currency units and terms
of the Debt Securities purchasable upon exercise of the Securities Warrants;
the price, or the manner of determining the price, at which such Debt
Securities may be purchased upon such exercise; (3) the designation, number of
shares and terms of the series of Preferred Stock purchasable upon exercise of
the Securities Warrants; the price, or the manner of determining the price, at
which such Preferred Stock may be purchased upon such exercise; (4) if other
than cash, the property and manner in which the exercise price of such
Securities Warrants may be paid; and any minimum number of such Securities
Warrants that are exercisable at any one time; (5) the time or times at which,
or period or periods during which, such Securities Warrants may be exercised
and the expiration date of such Securities Warrants; (6) the terms of any
right of the Company to redeem such Securities Warrants; (7) the terms of any
right of the Company to accelerate the exercise of such Securities Warrants
upon the occurrence of certain events; (8) whether such Securities Warrants
will be sold with any other Securities, and the date, if any, on and after
which such Securities Warrants and any such other Securities will be
separately transferable; (9) whether Securities Warrants will be issued in
registered or bearer form; (10) a discussion of certain Federal income tax,
accounting and other special considerations, procedures and limitations
relating to the Securities Warrants; and (11) any other terms of such
Securities Warrants.
Securities Warrant Certificates may be surrendered for transfer or exchange
for new Securities Warrant Certificates of authorized denominations at any
office or agency of the relevant Securities Warrant Agent maintained for such
purpose, subject to the terms of the related Securities Warrant Agreement.
Unless otherwise specified in the applicable Prospectus Supplement, Securities
Warrant Certificates will be issued in denominations evidencing any whole
number of Warrants. No service charge will be made for any permitted transfer
or exchange of Securities Warrant Certificates, but the Company or the
Securities Warrant Agent may require payment of any tax or other governmental
charge payable in connection therewith.
EXERCISE OF WARRANTS
Each Securities Warrant will entitle the holder to purchase such principal
amount of Debt Securities or such number of shares of Preferred Stock, as the
case may be, at such exercise price as shall in each case be set forth in, or
be determinable from, the Prospectus Supplement relating to such Securities
Warrants, by payment of such exercise price in the Currency and in the manner
specified in the Prospectus Supplement. Securities Warrants may be exercised
at any time up to the date and time specified in the applicable Prospectus
Supplement for the expiration thereof. After the specified expiration time on
the specified date of expiration, unexercised Securities Warrants will become
void.
Upon receipt at an office or agency indicated in the applicable Prospectus
Supplement of (i) payment of the exercise price and (ii) the Securities
Warrant Certificate properly completed and duly executed, the Company will, as
soon as practicable, issue and deliver the Debt Securities or shares of
Preferred Stock purchasable upon such exercise. Unless otherwise indicated in
the applicable Prospectus Supplement, fractional shares of Preferred Stock
will not be issued upon the exercise of Warrants and, in lieu thereof, the
Company will make a cash payment in an amount determined as provided in the
applicable Prospectus Supplement. If less than all of the Securities Warrants
represented by such Securities Warrant Certificate are exercised, a new
Securities Warrant Certificate will be issued for the remaining number of
Securities Warrants. The holder of a Securities Warrant
31
<PAGE>
will be required to pay any tax or other governmental charge that may be
imposed in connection with any transfer involved in the issuance of Securities
purchased upon such exercise.
MODIFICATIONS
Any Securities Warrant Agreement and the terms of the related Securities
Warrants may be modified or amended by the Company and the applicable
Securities Warrant Agent, without the consent of any holder of the related
Securities Warrants, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective or inconsistent provision contained
therein, or in any other manner that the Company deems necessary or desirable
and that will not materially and adversely affect the interests of the holders
of the related Securities Warrants.
The Company and the applicable Securities Warrant Agent may also modify or
amend the applicable Securities Warrant Agreement and the terms of the related
Securities Warrants with the consent of the holders of not less than a
majority in number of the then outstanding unexercised Securities Warrants
affected thereby; provided that no such modification or amendment that
accelerates the expiration date, increases the exercise price, or reduces the
number of outstanding Securities Warrants the consent of whose holders is
required for any such amendment or modification, may be made without the
consent of each holder affected thereby.
NO RIGHTS AS HOLDERS
Holders of Securities Warrants for the purchase of Debt Securities are not
entitled, by virtue of being such holders, to exercise any rights as holders
of Debt Securities, or to receive any principal, interest or other amounts in
respect of Debt Securities. Holders of Securities Warrants for the purchase of
shares of Preferred Stock are not entitled, by virtue of being such holders,
to vote, consent or receive notice as stockholders of the Company in respect
of any meeting of stockholders for the election of directors of the Company or
any other matter, or to exercise any other rights whatsoever as stockholders
of the Company, or to receive any dividends or distributions, if any, on the
Preferred Stock.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 300,000,000
shares of Common Stock, par value $1.00 per share ("Common Stock"), and (ii)
25,000,000 shares of Preferred Stock, without par value, issuable in series,
of which 250,000 shares of Series A Preferred Stock have been reserved for
issuance and 3,000,000 shares of Series B Preferred Stock have been reserved
for issuance under the Shareholders Rights Plan. As of June 26, 1998,
218,640,983 shares of Common Stock were issued and outstanding, and no shares
of Preferred Stock were outstanding.
The following summary of certain provisions of Common Stock, Preferred
Stock, Series A Preferred Stock, Series B Preferred Stock, the Amended and
Restated Articles of Incorporation and the By-laws do not purport to be
complete and are qualified in their entirety by reference to the Amended and
Restated Articles of Incorporation, the By-laws and the articles of amendment
establishing the terms of Series A Preferred Stock and Series B Preferred
Stock, copies of which have been incorporated by reference or filed as
exhibits to the Registration Statement.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters voted on by shareholders, including elections of directors, and,
except as otherwise required by law or provided by the express provisions of
any series of Preferred Stock of the Company, the holders of such shares
exclusively possess all voting power of the Company. If and when issued and
except as otherwise provided by law, the holders of Series A Preferred Stock
will be entitled to one vote per share, and the holders of such Series A
Preferred Stock, and the holders of
32
<PAGE>
Common Stock and any other class of stock of the Company then having general
voting rights shall vote together as one class. If and when issued and except
as otherwise provided by law, the holders of Series B Preferred Stock will be
entitled to 100 votes per share (subject to adjustment in accordance with the
Amended and Restated Articles of Incorporation) on all matters submitted to a
vote of the shareholders of the Company, and the holders of such Series B
Preferred Stock and the holders of Common Stock shall vote together as one
class. See "--Preferred Stock" and "--Preferred Stock Reserved for Issuance"
below. There is no cumulative voting in the election of directors, and no
holder of Common Stock is entitled as such, as a matter of right, to subscribe
for or purchase any shares of Common Stock or Preferred Stock. Subject to the
preferential rights of any outstanding series of Preferred Stock, the holders
of Common Stock are entitled to receive ratably such dividends as may be
declared from time to time by the Board of Directors of the Company from funds
legally available therefor. In the event of a liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share
ratably in all assets remaining after payment or provision for liabilities and
amounts owing in respect of any outstanding Preferred Stock.
The transfer agent for the Common Stock is Harris Trust Company located in
Chicago, Illinois.
PREFERRED STOCK
Preferred Stock may be issued from time to time in one or more series.
Subject to limitations prescribed by Virginia law and the Amended and Restated
Articles of Incorporation, the Board of Directors of the Company, without
further action by the shareholders, is authorized to designate and issue in
series Preferred Stock and to fix as to any series: (1) the number of shares
constituting such series, (2) the rate of dividend, the time of payment and,
if cumulative, the dates from which dividends shall be cumulative, and the
extent of participation rights, if any, (3) any right to vote with holders of
shares of any other series or class and any right to vote as a class, either
generally or as a condition to specified corporate action, (4) the price at
and the terms and conditions on which shares may be redeemed, including any
sinking fund provisions for the redemption or purchase of shares, (5) the
amount payable in the event of a liquidation, and (6) whether shares will have
the privilege of conversion, and if so, the terms and conditions on which
shares may be converted.
The issuance of Preferred Stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could, among other
things, adversely affect the voting power of the holders of Common Stock and,
under certain circumstances, make it more difficult for a third party to gain
control of the Company and could have the effect of delaying or preventing a
merger, tender offer or other attempted takeover of the Company. No holder of
Preferred Stock shall be entitled, as a matter of right, to subscribe for or
purchase any shares of Preferred Stock or Common Stock.
PREFERRED STOCK RESERVED FOR ISSUANCE
Series A Preferred Stock. Pursuant to a resolution adopted on April 20,
1982, the Board of Directors of the Company designated 250,000 shares of
Preferred Stock as Series A Preferred Stock. No shares of Series A Preferred
Stock are outstanding as of the date of this Prospectus.
Each share of Series A Preferred Stock is entitled to receive, when, as and
if declared by the Board of Directors of the Company out of funds legally
available therefor, cash dividends in the amount of $7.00 per annum, payable
quarterly. Dividends on shares of Series A Preferred Stock are cumulative
commencing with the first day of the first dividend period, whether or not
there are net profits or net assets of the Company legally available for the
payment of such dividends. However, no dividend is payable as to any payment
date occurring in the same calendar month in which the initial issuance of
Series A Preferred Stock occurs. Series A Preferred Stock ranks senior as to
dividends to both Series B Preferred Stock and Common Stock.
Except as otherwise provided by law, holders of shares of Series A Preferred
Stock are entitled to one vote for each share held, and the shares of Series A
Preferred Stock, the shares of Common Stock and any other class of stock of
the Company having general voting rights, vote together as one class. In the
event that at any time or from time to time, while any shares of Series A
Preferred Stock are outstanding, six or more quarterly dividends,
33
<PAGE>
whether consecutive or not, on any shares of Series A Preferred Stock are in
arrears and unpaid, whether or not earned or declared, then the holders of all
of the outstanding shares of Series A Preferred Stock together with the
holders of any other series of Preferred Stock then entitled to such a vote,
voting as a single class, will be entitled to elect two members of the Board
of Directors of the Company. The number of members of the Board of Directors
of the Company will be increased accordingly. Generally, so long as such a
dividend arrearage exists, holders of shares of Series A Preferred Stock and
such other Preferred Stock entitled to such a vote will be entitled to elect
two additional directors at each subsequent regular annual meeting of
shareholders.
Upon any involuntary or voluntary liquidation, dissolution or winding up of
the Company, the holders of Series A Preferred Stock are entitled to be paid
out of the assets of the Company legally available for distribution to its
shareholders an amount equal to $100 per share, plus an amount equal to
accumulated and unpaid dividends to and including the date on which payment is
made, before any amount shall be paid or distributed to the holders of shares
of capital stock ranking junior to the Series A Preferred Stock with respect
to distributions upon liquidation, dissolution or winding up, including the
Series B Preferred Stock and the Common Stock. If, upon any such liquidation,
dissolution or winding up, amounts payable in respect of the Series A
Preferred Stock and any other capital stock ranking as to such distribution on
a parity with the Series A Preferred Stock are not paid in full, the holders
of Series A Preferred Stock and such parity stock shall share ratably in any
distribution of assets in proportion to the full respective preferential
amounts to which they are entitled. Neither the merger or consolidation of the
Company with or into any other corporation, nor the sale, transfer, exchange
or lease of all or any portion of the assets of the Company, shall be deemed
to be a dissolution, liquidation or winding up for the foregoing purposes.
Shares of Series A Preferred Stock are, at the option of the holder,
convertible at any time into shares of Common Stock at the conversion rate in
effect at that time as determined in accordance with the Amended and Restated
Articles of Incorporation. The initial conversion rate is two shares of Common
Stock for each share of Series A Preferred Stock. The Amended and Restated
Articles of Incorporation call for adjustments from time to time to the
conversion rate upon the occurrence of various events including, but not
limited to, changes in the number of outstanding shares of Common Stock due to
stock dividends and stock splits, the issuance of rights or warrants for
Common Stock below "average market price," and the distribution of
indebtedness or assets (excluding cash dividends) to holders of Common Stock.
Should any reorganization, recapitalization, consolidation, merger, or sale,
transfer, exchange or conveyance of all or substantially all of the property
or assets of the Company occur, as a result of which the holders of Common
Stock shall be entitled to receive stock, other securities, cash or other
assets in exchange for Common Stock, holders of Series A Preferred Stock shall
have the right to convert each share of Series A Preferred Stock into the
amount of such consideration at the Common Stock conversion rate applicable
just prior to such an event.
Shares of Series A Preferred Stock are subject to a mandatory redemption
provision that will require the Company to redeem, at a redemption price of
$100 per share (i) 50,000 shares of Series A Preferred Stock on the last day
of the dividend period for Series A Preferred Stock which includes the sixth
anniversary of the initial issuance of such Series A Preferred Stock and (ii)
an additional 50,000 shares of Series A Preferred Stock on the last day of
each corresponding dividend period in the four successive twelve month
periods. The shares to be redeemed will be selected by lot by the transfer
agent as provided in the Amended and Restated Articles of Incorporation.
At any time after the fifth anniversary of the initial issuance date of the
Series A Preferred Stock, the Company will have the option to redeem all of
the shares of Series A Preferred Stock at a price of $110 per share within 60
days of a "class vote" as described in the Amended and Restated Articles of
Incorporation. A "class vote," as so described, shall be deemed to have
occurred if (i) the shares of Series A Preferred Stock shall have voted as a
class, either separately or together with shares of any other series of
Preferred Stock, as a condition to the taking of any corporate action other
than action which would change the Series A Preferred Stock dividend rights,
liquidation preference, mandatory redemption rights, redemption premium,
voting rights, or conversion rights, (ii) the vote necessary to constitute
approval of that action by such class shall not have been obtained, and (iii)
the vote necessary to constitute approval of that action by the holders of the
Common Stock shall have been obtained.
34
<PAGE>
All accumulated dividends owed to holders of Series A Preferred Stock must
be paid prior to the redemption of any shares of Series A Preferred Stock.
Shares of Series A Preferred Stock which have been acquired by the Company
will not be reissued as Series A Preferred Stock, but will be retired and
cancelled in the manner provided by Virginia law and shall constitute
authorized but unissued Preferred Stock undesignated as to series.
Series B Preferred Stock. In connection with the issuance of the Rights
(described under "--Shareholder Rights Plan" below), the Board of Directors of
the Company designated 3,000,000 shares of Preferred Stock as Series B
Preferred Stock. No shares of Series B Preferred Stock are outstanding as of
the date of this Prospectus, and such shares will be issued only in connection
with the exercise of Rights. The Series B Preferred Stock ranks junior to
Series A Preferred Stock as to the payment of dividends and the distribution
of assets.
Subject to the rights of the holders of shares of any other series of
Preferred Stock ranking prior and superior to Series B Preferred Stock with
respect to dividends, and in preference to Common Stock or any other junior
series of Preferred Stock or other stock, each share of Series B Preferred is
generally entitled to receive, when, as and if declared by the Board of
Directors of the Company out of funds legally available therefor, cumulative
quarterly cash dividends equal to the greater of $1.00 per share or, subject
to certain adjustments, 100 times the aggregate per share amount of all cash
dividends and non-cash dividends paid on each share of the Company's Common
Stock in the preceding quarter. Whenever quarterly dividends or other
distributions payable to the holders of Series B Preferred Stock are in
arrears, whether or not such dividends or other distributions have been
declared the Company shall not (i) declare or pay dividends or distributions
to holders of Common Stock or any shares of stock junior to Series B Preferred
Stock or (ii) purchase or otherwise acquire shares of Series B Preferred Stock
or any shares of stock junior to or in parity with Series B Preferred Stock.
Except as otherwise provided by law, holders of shares of Series B Preferred
Stock are entitled to 100 votes for each share held, and the shares of Series
B Preferred Stock and the shares of Common Stock of the Company will vote
together as one class. In the event the Company declares or pays any dividend
to holders of Common Stock payable in Common Stock, or affects the number of
outstanding shares of Common Stock by reclassification or otherwise, the
number of votes per share of Series B Preferred Stock will be adjusted to
equalize the relative voting strength of the Series B Preferred Stock vis-a-
vis the Common Stock to the relative voting strength immediately prior to such
an event.
Upon any involuntary or voluntary liquidation, dissolution or winding up of
the Company, subject to the rights of Series A Preferred Stock and the rights
of any other capital stock prior in rank with respect to liquidation,
dissolution or winding up, the holders of Series B Preferred Stock will be
entitled to be paid out of the assets of the Company legally available
therefor the greater of $100 per share, plus accumulated and unpaid dividends,
or an amount per share equal to 100 times the aggregate amount to be
distributed per share to the holders of Common Stock (subject to certain
adjustments). In such a liquidation, dissolution or winding up, Series B
Preferred Stock will be paid prior to any distributions to the holders of
Common Stock or any other stock ranking junior to Series B Preferred Stock.
Holders of stock ranking on a parity (either as to dividends or liquidation,
dissolution or winding up) with Series B Preferred Stock, will share ratably
in any distribution with holders of Series B Preferred Stock in proportion to
the total amounts to which the holders of all such shares are entitled upon
liquidation, dissolution or winding up of the Company.
In the event that the Company shall enter into any consolidation, merger,
combination or other transaction in which Common Stock is exchanged for or
changed into other securities, cash or property, the holders of Series B
Preferred Stock will be entitled to receive 100 times the per share
consideration received in connection with such transaction by holders of
Common Stock (subject to certain adjustments).
Shares of Series B Preferred Stock which have been acquired by the Company
in any manner whatsoever will not be reissued as Series B Preferred Stock, but
will be retired and cancelled in the manner provided by Virginia law and shall
constitute authorized but unissued Preferred Stock undesignated as to series.
Shares of Series B Preferred Stock are not redeemable.
35
<PAGE>
SHAREHOLDER RIGHTS PLAN
The following summary of certain provisions of the Company's Shareholder
Rights Plan and the Rights Agreement, dated as of May 29, 1998 (the "Rights
Agreement"), between the Company and Harris Trust Company of New York does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, including the form of Rights Certificate attached thereto,
and the articles of amendment for Series B Preferred Stock, both of which are
incorporated by reference as exhibits to the Registration Statement.
The Rights Agreement contains provisions that could make it more difficult
for a third party to gain control of the Company and that could have the
effect of delaying or preventing a merger, tender offer or other takeover
attempt of the Company. In May 1998, the Board of Directors of the Company
declared a dividend of one preferred share purchase right (each, a "Right")
for each share of the Company's Common Stock outstanding as of June 8, 1998.
Each Right entitles its holder to purchase from the Company, until the earlier
of June 8, 1998, or the redemption of the Rights, one one-hundredth (1/100th)
of a share of Series B Preferred Stock at an exercise price of $180 per Right,
subject to certain adjustments or, under certain circumstances, to obtain
additional shares of Common Stock of the Company in exchange for each Right.
The Rights will not be exercisable or transferable apart from Common Stock of
the Company until the earlier of 10 days following the public announcement
that a person or affiliated group has acquired or obtained the right to
acquire 20% or more of the outstanding Common Stock of the Company; or 10 days
following the commencement or announcement of an intention to make a tender
offer or exchange offer, the consummation of which would result in the
ownership by a person or group of 20% or more of the outstanding Common Stock
of the Company. The Board of Directors of the Company may redeem the Rights at
a price of one cent per Right at any time prior to the acquisition by a person
of 20% or more of the outstanding Common Stock of the Company.
VIRGINIA STOCK CORPORATION ACT; ANTI-TAKEOVER EFFECTS
The Virginia Stock Corporation Act contains provisions governing "Affiliated
Transactions." These provisions, with several exceptions discussed below,
generally require approval of certain material transactions between a Virginia
corporation and any beneficial holder of more than 10% of any class of its
outstanding voting shares (an "Interested Shareholder") by a majority of
disinterested directors and by the holders of at least two-thirds of the
remaining voting shares. Affiliated Transactions subject to this approval
requirement include mergers, share exchanges, material dispositions of
corporate assets not in the ordinary course of business, any dissolution of
the corporation proposed by or on behalf of an Interested Shareholder, or any
reclassification, including reverse stock splits, recapitalization or merger
of the corporation with its subsidiaries, which increases the percentage of
voting shares owned beneficially by an Interested Shareholder by more than 5%.
For three years following the time that an Interested Shareholder becomes an
owner of 10% of the outstanding voting shares, a Virginia corporation cannot
engage in an Affiliated Transaction with such Interested Shareholder without
the approval of two-thirds of the voting shares other than those shares
beneficially owned by the Interested Shareholder, and the approval of a
majority of the Disinterested Directors. "Disinterested Director" means, with
respect to a particular Interested Shareholder, a member of the Company's
Board of Directors who was (1) a member on the date on which an Interested
Shareholder became an Interested Shareholder or (2) recommended for election
by, or was elected to fill a vacancy and received the affirmative vote of, a
majority of the Disinterested Directors then on the Board. After the
expiration of the three-year period, the statute requires approval of
Affiliated Transactions by two-thirds of the voting shares other than those
beneficially owned by the Interested Shareholder.
The principal exceptions to the special voting requirements apply to
transactions proposed after the three-year period has expired and require
either that the transaction be approved by a majority of the Company's
Disinterested Directors or that the transaction satisfy the fair-price
requirements of the statute. In general, the fair-price requirement provides
that in a two-step acquisition transaction, the Interested Shareholder must
pay the shareholders in the second step either the same amount of cash or the
same amount and type of consideration paid to acquire the Company's shares in
the first step.
36
<PAGE>
None of the foregoing limitations and special voting requirements applies to
an Interested Shareholder whose acquisition of shares making such person an
Interested Shareholder was approved by a majority of the Company's
Disinterested Directors.
These provisions are designed to deter certain types of takeovers of
Virginia corporations. The statute provides that, by affirmative vote of a
majority of the voting shares other than shares owned by any Interested
Shareholder, a corporation can adopt an amendment to its articles of
incorporation or by-laws providing that the Affiliated Transactions provisions
shall not apply to the corporation. The Company has not "opted out" of the
Affiliated Transactions provisions.
Virginia law also generally provides that shares of a Virginia corporation
acquired in a transaction that would cause the acquiring person's voting
strength to meet or exceed any of three thresholds (20%, 33 1/3% or 50%) have
no voting rights with respect to such shares unless granted by a majority vote
of shares not owned by the acquiring person or any officer or employee-
director of the corporation. This provision empowers an acquiring person to
require the Virginia corporation to hold a special meeting of shareholders to
consider the matter within 50 days of its request. The Board of Directors of a
Virginia corporation can opt out of this provision at any time before four
days after receipt of a control share acquisition notice.
37
<PAGE>
UNITED STATES TAXATION
The following summary of the principal United States federal income tax
consequences of the ownership and disposition of Debt Securities is based upon
the opinion of McGuire, Woods, Battle & Boothe LLP, special tax counsel for
the Company. It deals only with Debt Securities held as capital assets and
does not deal with special classes of Holders, such as dealers in securities
or currencies, banks, life insurance companies, tax-exempt organizations,
persons holding Debt Securities as a hedge against currency risks, certain
United States expatriates or United States Holders (as defined below) whose
functional currency is not the U.S. dollar. It also does not deal with Holders
other than original purchasers and thus does not deal with the "market
discount rules." The discussion of original issue discount is based on the
Internal Revenue Code of 1986, as amended (the "Code"), regulations
promulgated thereunder, judicial decisions and administrative rulings in
effect on the date hereof, all of which are subject to change, possibly with
retroactive effect. PERSONS CONSIDERING THE PURCHASE OF DEBT SECURITIES SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF THE UNITED STATES
FEDERAL TAX LAWS TO THEIR PARTICULAR SITUATIONS, AS WELL AS THE APPLICATION OF
STATE, LOCAL, OR FOREIGN LAWS.
The federal income tax consequences of ownership of other Securities
including Preferred Stock, Debt Warrants, Preferred Stock Warrants and
Depositary Shares will be discussed in an applicable Prospectus Supplement.
UNITED STATES HOLDERS
The following discussion pertains to a Holder of a Debt Security who or
which is a United States person as defined above under "Limitations on
Issuance of Euro-Debt Securities" (a "United States Holder").
Payments of Interest.
Except as provided below under "Original Issue Discount", Interest on a Debt
Security (including payments received on the sale, exchange or retirement of a
Debt Security that are attributable to accrued but unpaid interest) will be
taxable to a United States Holder as ordinary interest income at the time it
is accrued or is received (or made available for payment, if earlier),
depending on the United States Holder's method of accounting for tax purposes.
If interest is payable in a currency or currency unit other than the U.S.
dollar (a "Specified Currency"), the amount of income will be the U.S. dollar
value of the Specified Currency, which (i) will be determined, in the case of
a cash basis United States Holder, at the time such payment is received or is
made available for payment, if earlier, and (ii) in the case of an accrual
basis United States Holder, or a cash basis United States Holder accruing
original issue discount, will be translated at the average exchange rate for
the interest accrual period or, with respect to an interest accrual period
that spans two taxable years, at the average rate for the partial period
within the taxable year, or, if so elected, at the spot rate on the applicable
date, as provided in Section 1.988-2(b)(iii)(B) of the Treasury Regulations.
The rules described in the preceding sentence will apply regardless of whether
the payment is in fact converted to U.S. dollars. In general, upon the receipt
of an interest payment (including a payment attributable to accrued but unpaid
interest upon the sale or retirement of a Debt Security) in the Specified
Currency, an accrual basis United States Holder will recognize foreign
currency gain or loss to the extent of the difference, if any, between the
U.S. dollar value of the accrued interest with respect to which payment is
being made (determined as described in the preceding sentence), and the U.S.
dollar value of the interest payments received (determined as of the time of
receipt). Such foreign currency gain or loss generally will be treated as
ordinary income or loss.
Original Issue Discount.
General. A Debt Security will be treated as having been issued at an
original issue discount (a "Discount Security") if the excess of its "stated
redemption price at maturity" over its issue price (defined as the initial
offering price to the public at which a substantial amount of the Discount
Debt Securities have been sold) equals or exceeds 1/4 of 1 percent of such
Debt Security's "stated redemption price at maturity" multiplied by the
38
<PAGE>
number of complete years to its maturity. The stated redemption price at
maturity of a Debt Security is the total of all payments provided by the Debt
Security that are not "qualified stated interest payments." Stated generally,
a qualified stated interest payment is stated interest that is unconditionally
payable in cash or in property (other than in debt instruments of the issuer)
at least annually over the term of the Debt Security at (i) a single fixed
rate of interest, (ii) one or more qualified floating rates, (iii) a single
fixed rate and one or more qualified floating rates, (iv) a single fixed rate
and a single objective rate that is a qualified inverse floating rate, or (v)
a single objective rate.
A United States Holder (including a cash basis Holder) of a Discount
Security will be required to include original issue discount ("Discount") in
income as it accrues, generally before the receipt of cash attributable to
such income. The amount of Discount includable in income is the sum of the
daily portions of Discount with respect to the Discount Security determined
for each day during the taxable year or portion of the taxable year in which a
United States Holder holds such Discount Security. The daily portion is
determined by allocating to each day in any "accrual period" a pro rata
portion of the Discount allocable to such accrual period. The amount of
Discount allocable to any accrual period is an amount equal to the excess of
(a) the product of the Discount Security's adjusted issue price at the
beginning of such accrual period and the yield to maturity of the Discount
Security (determined by compounding at the close of each accrual period and
adjusted for the length of such period) over (b) the qualified stated interest
payments, if any, allocable to the accrual period. In general, unless
otherwise specified, the accrual period is each period between Interest
Payment Dates (including (i) the period from the issue date to the first
Interest Payment Date and (ii) the period from the final Interest Payment Date
to Stated Maturity). The accrual period may be of any length and may vary in
length over the term of the Debt Security, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs either on the final day or on the first day of an accrual period. The
adjusted issue price of the Discount Security at the start of any accrual
period is the sum of the issue price of such Discount Security, increased by
the amount of Discount previously includable by the Holder for each prior
accrual period, and decreased by any prior payments made during each prior
accrual period on the Discount Security that were not qualified stated
interest payments.
Under existing Treasury Regulations, it is possible that Debt Securities
that (i) do not provide for payments of stated interest at least annually,
(ii) bear interest pursuant to an interest rate formula that is subject to a
restriction or restrictions on the maximum stated interest rate, on the
minimum stated interest rate, on the amount of increase or decrease in the
stated interest rate, or other similar restrictions, or (iii) bear interest at
a base rate that is not based on either changes in the price of actively
traded personal property or on one or more floating market interest rates,
that are issued at par may be subject to the original issue discount rules of
the Code as Discount Securities even though such Debt Securities may not be
Original Issue Discount Securities (as defined above in "Description of Debt
Securities--General"). Accordingly, United States Holders (including cash
basis Holders) may be required to report income in respect of such Debt
Securities before the receipt of cash attributable thereto.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase
price of a Debt Security is attributable to pre-issuance accrued interest,
(ii) the first stated interest payment on the Debt Security is to be made
within one year of the Debt Security's issue date and (iii) the payment will
equal or exceed the amount of pre-issuance accrued interest, then the United
States Holder may elect to decrease the issue price of the Debt Security 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 Debt Security.
Acquisition Premium. A United States Holder that purchases a Debt Security
for an amount less than or equal to the sum of all amounts payable on the Debt
Security after the purchase date (other than payments of qualified stated
interest) but in excess of its adjusted issue price (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 Debt Security
immediately after its purchase over the adjusted
39
<PAGE>
issue price of the Debt Security, and the denominator of which is the excess
of the sum of all amounts payable on the Debt Security after the purchase
date, other than payments of qualified stated interest, over the Debt
Security's adjusted issue price.
Debt Securities Subject to Contingencies Including Optional Redemption. In
general, if a Debt Security 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, special rules apply for purposes of determining
the yield and maturity of the Debt Security.
If the Debt Security is not subject to any contingencies other than
contingencies that are, in the aggregate, remote and incidental contingencies,
then any such contingencies will be disregarded in computing the yield and
maturity of the Debt Security. For purposes of this rule, a contingency is
remote if, as of the date of issuance, the likelihood that it will occur is
remote, and a contingency is incidental if, as of the date of issuance, the
amount of payments subject to the contingency and the impact of the
contingency on the timing of payments is insignificant.
If the Debt Security is subject to one or more contingencies (other than
remote and incidental contingencies), then, in general, the amount of interest
taken into account for each accrual period will be determined by constructing
a projected payment schedule for the Debt Security and applying rules similar
to those for accruing OID on a noncontingent debt instrument. This method is
applied by first determining the yield at which the Company would have issued
a fixed rate debt instrument with terms and conditions similar to the
contingent payment Debt Security (the comparable yield) and then determining a
payment schedule as of the issue date that would produce the comparable yield.
Notwithstanding the general rules for determining yield and maturity in the
case of Debt Securities subject to contingencies, if the Company or the Holder
has an unconditional option or options that, if exercised, would require
payments to be made on the Debt Security under an alternative payment schedule
or schedules, 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 Debt Security 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 Debt Security. For purposes of those
calculations, the yield on the Debt Security is determined by using any date
on which the Debt Security may be redeemed or repurchased as the maturity date
and the amount payable on such date in accordance with the terms of the Debt
Security as the principal amount payable at maturity.
If a contingency (including the exercise of an option) fails to occur, or
actually occurs but in a manner inconsistent with the assumption made
according to the above rules (a "change in circumstances") then, except to the
extent that a portion of the Debt Security is repaid as a result of the change
in circumstances and solely for purposes of the accrual of OID, the yield and
maturity of the Debt Security are redetermined by treating the Debt Security
as having been retired and reissued on the date of the change in circumstances
for an amount equal to the Debt Security's adjusted issue price on that date.
The federal income tax treatment of Debt Securities providing for
alternative payment schedules applicable upon the occurrence of one or more
contingencies will be described in greater detail in the applicable Prospectus
Supplement.
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
Debt Security 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 "Debt Securities Purchased at a Premium") or
acquisition premium.
40
<PAGE>
In applying the constant-yield method to a Debt Security with respect to
which this election has been made, the issue price of the Debt Security will
equal the electing United States Holder's adjusted basis in the Debt Security
immediately after its acquisition, the issue date of the Debt Security will be
the date of its acquisition by the electing United States Holder, and no
payments on the Debt Security will be treated as payments of qualified stated
interest. This election will generally apply only to the Debt Security 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 Debt Security 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 Debt Security 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.
Variable Rate Debt Securities. A "Variable Rate Debt Security" is a Debt
Security that: (i) has an issue price that does not exceed the total
noncontingent principal payments by more than the lesser of (1) .015
multiplied by the product of (x) the total noncontingent principal payments
and (y) the number of complete years to maturity from the issue date, or (2)
15 percent of the total noncontingent principal payments; (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"; (iii)
provides that 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 (i.e., the value of the rate on any day that is no earlier than
three months prior to the first day on which that value is in effect and no
later than one year following that first day); and (iv) does not provide for
any contingent principal payments other than as provided in clause (i) of this
sentence.
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
Debt Security is denominated or (ii) it is equal to the product of a rate
described in clause (i) and either (a) a fixed multiple that is greater than
zero but not more than 1.35, or (b) a fixed multiple greater than zero but not
more than 1.35, increased or decreased by a fixed 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 Debt Security or
are not reasonably expected to significantly affect the yield on the Debt
Security.
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 objective
financial or economic information, including one or more qualified floating
rates, or 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. A variable rate is not an objective rate, however, if it is based on
information within the control of the issuer or a related party or if it is
reasonably expected that the average value of the rate during the first half
of the Debt Security's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Debt Security'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.
In general, if a Variable Rate Debt Security provides for stated interest at
a single qualified floating rate or objective rate, all stated interest on the
Debt Security 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, a fixed rate equal to 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 Debt Security.
If a Variable Rate Debt Security does not provide for stated interest at a
single qualified floating rate or objective rate and does not provide for
interest payable at a fixed rate (other than at a single fixed rate for an
41
<PAGE>
initial period), the amount of interest and OID accruals on the Debt Security
are generally determined by (i) determining a fixed rate substitute for each
variable rate provided under the Variable Rate Debt Security (which generally
will be 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 reasonably reflects the expected yield on the note), (ii) constructing
the equivalent fixed rate debt instrument (using the fixed rate substitute
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 Debt Security 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
a single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Debt Security 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 Debt Security 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.
United States federal income tax rules applicable to Debt Securities that
provide for payments of stated interest at a variable rate, but do not meet
the foregoing requirements of a Variable Rate Debt Security, will be described
in the applicable Prospectus Supplement.
Short-Term Debt Securities. In general, an individual or other cash basis
United States Holder of a Debt Security with a term of one year or less (a
"short-term Debt Security") is not required to accrue OID (as specially
defined below for the purposes of this paragraph) for United States federal
income tax purposes unless such person 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 companies, dealers in securities, common trust
funds, United States Holders who hold Debt Securities 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
Debt Securities 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 Debt Security 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 Debt Securities will be required to defer deductions for interest
on borrowings allocable to short-term Debt Securities 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 Debt Security, including stated interest,
are included in the short-term Debt Security's stated redemption price at
maturity.
Foreign Currency Discount Debt Securities. OID for any accrual period on a
Discount Debt Security that is denominated in, or determined by reference to,
a Specified Currency will be determined in the Specified 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 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 Debt
Security), a United States Holder may recognize ordinary income or loss.
42
<PAGE>
Other Considerations. The preceding discussion sets forth the general
structure of the federal income tax rules applicable to Discount Securities
that have a maturity date in excess of one year from the date of issue. The
precise application of these rules will be affected by the terms of the
particular Discount Security, including the existence of any optional
redemption rights exercisable by the Company, the denomination of the Debt
Security in a Specified Currency, and the term of the Debt Security. The
impact of such terms, if any, on the application of these rules will be
discussed in the applicable Prospectus Supplement.
Reporting. The Company is required to report to the Internal Revenue Service
the amount of Discount accrued on Discount Securities held of record by United
States persons other than corporations and other exempt Holders. The amount
required to be reported by the Company may not be equal to the amount of
original issue discount required to be reported as taxable income by a Holder
of such Debt Security.
DEBT SECURITIES PURCHASED AT A PREMIUM
A United States Holder that purchases a Debt Security 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 Debt Security
will be reduced by the amount of amortizable bond premium allocable (based on
the Debt Security's yield to maturity) to such year. In the case of a Debt
Security that is denominated in, or determined by reference to, a foreign
currency, 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 Debt Securities. 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 DEBT SECURITIES
A United States Holder's tax basis in a Debt Security generally will be its
U.S. dollar cost (as defined below), increased by the amount of any OID or
market discount included in the United States Holder's income with respect to
the Debt Security 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 Debt Security, 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 Debt Security. The U.S. dollar cost of a Debt Security 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 Debt Securities 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 for
the purchase.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Debt Security equal to the difference between the amount
realized on the sale or retirement and its tax basis in the Debt Security. 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 (i) the date payment is received in
the case of a cash basis United States Holder, (ii) the date of disposition in
the case of an accrual basis United States Holder or (iii) in the case of Debt
Securities traded on an established securities market, as defined in the
applicable Treasury Regulations, sold by a cash basis United States Holder (or
an accrual basis United States Holder that so elects), on the settlement date
for the sale. Except to the extent described above under "Original Issue
Discount--Short-Term Debt Securities" 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 Debt Security will be capital gain
or loss and will be long-term capital gain or loss if the Debt Security was
held for more than one year.
43
<PAGE>
Gain or loss recognized by a United States Holder on the sale or retirement
of a Debt Security that is attributable to changes in exchange rates will be
treated as ordinary income or loss. However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
Exchange of Specified Currency.
A United States Holder's tax basis in Specified Currency purchased by such
Holder generally will be the U.S. dollar value thereof at the spot rate on the
date such Specified Currency is purchased. A United States Holder's tax basis
in Specified Currency received as interest on, or on the sale, exchange or
retirement of, a Debt Security will be the U.S. dollar value thereof at the
spot rate at the time such Specified Currency is received. The amount of gain
or loss recognized by a United States Holder on a sale, exchange or other
disposition of Specified Currency will be equal to the difference between (i)
the amount of U.S. dollars, the U.S. dollar value at the spot rate of
Specified Currency, or the fair market value in U.S. dollars of any other
property received by the Holder in the sale, exchange or other disposition,
and (ii) the Holder's tax basis in the Specified Currency.
Accordingly, a United States Holder that purchases a Debt Security with
Specified Currency will recognize gain or loss in an amount equal to the
difference, if any, between such Holder's tax basis in the Specified Currency
and the U.S. dollar value at the spot rate of the Specified Currency on the
date of purchase. Generally, any such gain or loss will be ordinary income or
loss and will not be treated as interest income or expense, except to the
extent provided by administrative pronouncements of the IRS.
Bearer Debt Securities.
Under Sections 165(j) and 1287(a) of the Code, a United States Holder
generally will not be entitled to deduct any loss on Bearer Debt Securities
(including for purposes of this paragraph Debt Securities in global form
exchangeable for Bearer Debt Securities) or coupons (other than Bearer Debt
Securities having a maturity of one year or less from their date of issuance)
and must treat as ordinary income any gain realized on the sale, exchange or
other disposition (including the receipt of principal) of Bearer Debt
Securities or coupons (other than Bearer Debt Securities having a maturity of
one year or less from their date of issue).
Indexed Debt Securities.
The applicable Prospectus Supplement will contain a discussion of any
special United States federal income tax rules with respect to Indexed
Securities.
Convertible Debt Securities.
The applicable Prospectus Supplement will contain a discussion of any
special United States federal income tax rules with respect to Debt Securities
that are convertible into or exchangeable for Preferred Stock, Depository
Shares, or other Securities.
Debt Warrants.
The applicable Prospectus Supplement will contain a discussion of any
special United States federal income tax rules with respect to an issuance of
Debt Warrants.
UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law and subject to
the discussion of backup withholding below:
(1) payments of principal and any premium and interest (including any
Discount) on a Debt Security by the Company or any of its Paying Agents to
any Holder that is a United States Alien Holder (as defined below) will not
be subject to United States federal withholding tax, provided that in the
case of such Debt Security, (i) the Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company, (ii) the Holder is not a controlled
foreign corporation that is related to the Company through stock ownership;
(iii) the Holder is not a bank that acquired the Notes
44
<PAGE>
pursuant to a loan agreement made in the ordinary course or its trade or
business; (iv) if the Debt Security is a Bearer Debt Security, the Company
and any underwriters, agents, and dealers participating in the offering of
such Debt Security have complied with certain requirements described in
"Limitations on Issuance of Euro-Debt Securities," and (v) if the Debt
Security is a Registered Debt Security (including such Debt Securities
which were received in exchange for Bearer Debt Securities), either (x) the
beneficial owner of the Debt Securities certifies to the Company or its
agent, under penalties of perjury, that such Owner is not a United States
Holder and provides such Owner's name and address, or (y) 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 Debt Securities on behalf of a
beneficial owner certifies to the Company or its Paying 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;
(2) a United States Alien Holder generally will not be subject to United
States federal income tax or withholding tax on gain realized on the sale,
exchange or redemption of a Debt Security, unless (i) in the case of an
individual Holder, such Holder is present in the United States for a period
of 183 days or more during the taxable year in which gain is realized and
certain other conditions are met or (ii) if the Company is a "United States
real property holding corporation," as defined in Section 897 of the Code,
such Holder actually or constructively owns any other interests in the
Company (excluding an interest solely as a creditor, but including
convertible debt instruments) that are not regularly traded with an
aggregate fair market value exceeding the fair market value of 5% of the
"regularly traded class," as defined in the United States Treasury
Regulations, of the Company's stock with the lowest fair market value
(currently, the Company's Common Stock); and
(3) a Debt Security or coupon held by an individual who at the time of
death is not a citizen or resident (as defined for federal estate tax
purposes) of the United States (as defined under "Limitations on Issuance
of Euro-Debt Securities") will not be subject to United States federal
estate tax as a result of such individual's death if (i) the individual
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote (ii)
the Debt Security does not provide for any payment of contingent interest,
and (iii) the income on the Debt Securities would not have been effectively
connected with the conduct of a trade or business by the individual in the
United States.
A United States Alien Holder will be subject to United States federal income
tax on any interest income (including Discount) and on any gain realized on
the sale, exchange or other disposition of a Debt Security in the same manner
as a United States Holder, if interest (including Discount) or gain on such
Debt Security is effectively connected with the conduct by the United States
Alien Holder of a trade or business within the United States. See "United
States Holders" above. Such a Holder generally will be exempt from withholding
tax with respect to such income, provided that it provides the Company with a
properly executed Internal Revenue Service Form 4224.
In the case of a Non-U.S. Holder that is a corporation, such U.S. trade or
business income may also be subject to the branch profits tax, which is
generally imposed on a foreign corporation on the actual or deemed
repatriation from the United States of earnings and profits attributable to
U.S. trade or business income, at a 30% rate. The branch profits tax may not
apply, or may apply at a reduced rate, in the case of Non-U.S. Holders that
are qualified residents of certain countries with which the United States has
an income tax treaty.
As used herein, a "United States Alien Holder" is a beneficial owner of a
Debt Security that is not a United States Holder.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of principal and any premium and interest (including
Discount, if any) made within the United States by the Company or any of its
Paying Agents are subject to information reporting and, in certain
45
<PAGE>
cases, to "backup withholding" at a rate of 31%. Similarly, payment of the
proceeds from the sale of a Debt Security to or through the United States
office of a broker will be subject to information reporting and backup
withholding unless the Holder or beneficial owner provides a certification
that it is not a United States person or otherwise establishes its entitlement
to an exemption from the information reporting and backup withholding rules.
Information reporting and backup withholding ordinarily do not apply to
payments made outside the United States by the Company or a Paying Agent on a
Bearer Debt Security described in clause (1)(iii) under "United States Alien
Holders" or on a Registered Debt Security described in clause (1)(iv) under
"United States Alien Holders," provided that the payor does not have actual
knowledge that the Holder is a United States person. Payments made outside the
United States will be subject to information reporting, however, if collected
by a custodian, nominee, or other agent that is either a United States person,
a controlled foreign corporation for United States tax purposes, or a foreign
person 50% or more of whose gross income over a specified three-year period is
effectively connected with the conduct of a trade or business within the
United States, unless such custodian, nominee, or other agent has documentary
evidence of the beneficial owner's foreign status and has no actual knowledge
to the contrary, or unless the owner otherwise establishes entitlement to an
exemption.
In general, payment of the proceeds from the sale of a Debt Security to or
through the foreign office of a broker will not be subject to information
reporting or backup reporting; however, 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 over a specified three-year
period is effectively connected with the conduct of a trade or business within
the United States, such payments will be subject to information reporting
unless such broker has documentary evidence in its files of the owner's
foreign status and has no actual knowledge to the contrary, or unless the
owner otherwise establishes entitlement to an exemption.
With respect to United States Holders, backup withholding ordinarily applies
only to certain noncorporate Holders who fail to supply accurate taxpayer
identification numbers or who fail to report all interest and dividend income
required to be shown on their federal income tax returns.
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make modifications to the withholding, backup withholding
and information reporting rules described above. The New Regulations will
generally be effective for payments made after December 31, 1999, subject to
certain transition rules. Prospective investors are urged to consult their own
tax advisors regarding the New Regulations.
PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to institutional investors
directly or through agents which solicit or receive offers on behalf of the
Company or through dealers or through a combination of any such methods of
sale. The Prospectus Supplement or Prospectus Supplements with respect to
particular Securities will set forth the terms of the offering of such
Securities, including the name or names of any underwriters or agents, the
public offering or purchase price and the proceeds to the Company from such
sale, any discounts and commissions to be allowed or paid to the underwriters
or agents, all other items constituting underwriting compensation, the
discounts and commissions to be allowed or paid to dealers, if any, and the
securities exchanges, if any, on which the Securities will be listed.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may offer and sell Securities in exchange
for one or more of its outstanding issues of debt. The Company may, from time
to time, authorize agents acting on a best or reasonable efforts basis as
agents of the Company to solicit or receive offers to purchase the Securities
upon the terms and conditions as are set forth in the applicable Prospectus
Supplement. In connection with the sale of Securities,
46
<PAGE>
underwriters or agents may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Securities for whom they may act as
agent. Underwriters may sell 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 agent.
Underwriters, dealers and agents who participate in the distribution of
Securities may be entitled, under agreements which may be entered into with
the Company, to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution with
respect to payments which the underwriters, dealers or agents may be required
to make in respect thereof.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase 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
institutional purchaser under any such contract will not be subject to any
conditions except (i) the purchase by such institution of the Securities
covered by such contract shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such institution is subject, and (ii) if
such Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of such Securities less the
principal amount thereof covered by delayed delivery contracts.
Certain of the underwriters, dealers or agents and their affiliates may
engage in transactions with and perform services for the Company in the
ordinary course of business.
VALIDITY OF THE SECURITIES
The validity of the Securities offered hereby will be passed upon for the
Company by McGuire, Woods, Battle & Boothe LLP, Richmond, Virginia. Robert L.
Burrus, Jr., a partner of McGuire, Woods, Battle & Boothe LLP, is a director
of the Company and owns 7,680 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company, included in the
Company's Annual Report on Form 10-K, incorporated by reference in this
Prospectus and in the Registration Statement, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated by reference in this Prospectus and in the
Registration Statement in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
47
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT,
THE PROSPECTUS OR THE APPLICABLE PRICING SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY CSX CORPORATION OR ANY UNDERWRITER OR AGENT. THIS PROSPECTUS SUPPLEMENT, THE
PROSPECTUS AND THE APPLICABLE PRICING SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
AND THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR THE APPLICABLE PRICING SUPPLEMENT NOR
ANY SALE MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CSX CORPORATION SINCE THE DATE
OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR THE APPLICABLE PRICING SUPPLE-
MENT, OR THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUB-
SEQUENT TO THEIR RESPECTIVE DATES.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
CSX Corporation............................................................ S-3
Use of Proceeds ........................................................... S-3
Description of Notes....................................................... S-3
Special Provisions Relating to Foreign Currency Notes...................... S-17
Supplemental Plan of Distribution.......................................... S-20
Validity of the Notes...................................................... S-21
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
CSX Corporation............................................................ 3
Recent Developments........................................................ 4
Forward-Looking Statements................................................. 5
Ratio of Earnings to Fixed Charges......................................... 6
Use of Proceeds............................................................ 6
Description of Debt Securities............................................. 7
Limitations on Issuance of Euro-Debt Securities............................ 20
Description of Preferred Stock............................................. 21
Description of Depositary Shares........................................... 26
Description of Securities Warrants ........................................ 30
Description of Capital Stock............................................... 32
United States Taxation..................................................... 38
Plan of Distribution....................................................... 46
Validity of Securities..................................................... 47
Experts.................................................................... 47
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$750,000,000
[LOGO OF CSX CORPORATION]
MEDIUM-TERM NOTES,
SERIES C
---------------
PROSPECTUS SUPPLEMENT
---------------
CHASE SECURITIES INC.
BANCAMERICA SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY
September 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
