<PAGE> 1
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 5, 1995)
$150,000,000
(LOGO)
EATON CORPORATION
6 1/2% DEBENTURES DUE JUNE 1, 2025
---------------------------
Interest Payable June 1 and December 1
---------------------------
The 6 1/2% Debentures due June 1, 2025 (the "Debentures") may not be
redeemed prior to maturity by the Company and do not provide for any sinking
fund. The holder of each Debenture may elect to have such Debenture, or any
portion thereof which is a multiple of $1,000, repaid on June 1, 2005 at 100% of
its principal amount, together with accrued interest to June 1, 2005. Settlement
for the Debentures will be made in immediately available funds. All payments of
principal and interest will be made by the Company in immediately available
funds. See "Description of Debentures."
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================
Price to Underwriting Proceeds to
Public(1) Discount(2) Company(1)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Debenture .................. 99.716% .650% 99.066%
- -------------------------------------------------------------------------------
Total .......................... $149,574,000 $975,000 $148,599,000
===============================================================================
<FN>
(1) Plus accrued interest, if any, from June 9, 1995.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting expenses payable by the Company estimated at $100,000.
</TABLE>
---------------------------
The Debentures offered by this Prospectus Supplement are offered by the
Underwriter subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriter and
to certain further conditions. It is expected that delivery of the Debentures
will be made at the offices of Lehman Brothers Inc., New York, New York, on or
about June 9, 1995 against payment in immediately available funds.
---------------------------
LEHMAN BROTHERS
June 5, 1995.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
THE COMPANY
Eaton Corporation ("Eaton" or the "Company") is a leading global
manufacturer of vehicle powertrain components and a broad variety of controls
serving the vehicle, industrial, construction, commercial, aerospace and marine
markets. The Company offers high-quality products worldwide and derives a
significant majority of its net sales from products that are number one or
number two in the markets that they serve. Principal products include truck
transmissions and axles, engine components, hydraulic products, electrical power
distribution and control equipment, ion implanters and a wide variety of
controls. Eaton's products are often essential components of a variety of final
products ranging from heavy duty trucks and home appliances to the Space
Shuttle. The Company currently has approximately 150 manufacturing facilities in
22 countries.
On January 31, 1994, the Company acquired the Distribution and Control
Business Unit ("DCBU") of Westinghouse Electric Corporation for an adjusted
purchase price of $1.05 billion. DCBU, a leading North American manufacturer of
electrical distribution equipment and industrial controls with 1993 net sales of
$1.10 billion, was combined with Eaton's Industrial Control and Power
Distribution Operations to form the new Cutler-Hammer business unit. The
acquisition has been accounted for as a purchase and, accordingly, the
statements of consolidated income include the results of DCBU beginning February
1, 1994.
The Company's principal executive office is located at Eaton Center, 1111
Superior Avenue, Cleveland, Ohio 44114-2584; telephone (216) 523-5000.
DESCRIPTION OF DEBENTURES
The following description of the particular terms of the Debentures offered
hereby (referred to in the accompanying Prospectus as the "Offered Debt
Securities") supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
in the accompanying Prospectus, to which description reference is hereby made.
GENERAL
The Debentures are Senior Securities, as that term is defined in the
Prospectus. The Debentures will be limited to $150 million aggregate principal
amount and will mature on June 1, 2025, and will constitute a separate series
for the purposes of the Senior Indenture dated as of April 1, 1994 between
Chemical Bank, trustee, and the Company. The Debentures are not redeemable prior
to maturity by the Company, and are not subject to any sinking fund or similar
provision. Each Debenture will bear interest at the rate per annum set forth on
the cover page hereof from June 9, 1995, payable semi-annually on June 1 and
December 1 of each year, commencing December 1, 1995, to the person, with
certain exceptions, in whose name the Debenture is registered at the close of
business on the May 15 or November 15, as the case may be, next preceding such
Interest Payment Date. Settlement for the Debentures will be made by the
Underwriter in immediately available funds. All payments of principal and
interest will be made by the Company in immediately available funds. The
Debentures are issued in fully registered form without coupons in denominations
of $1,000 or any integral multiple thereof.
REPAYMENT AT OPTION OF HOLDER
The Debentures will be repayable on June 1, 2005, at the option of the
holders thereof, at 100% of their principal amount, together with accrued
interest to June 1, 2005. In order for a Debenture to be repaid, the Company
must receive at the corporate trust office of Chemical Bank, the Trustee, in the
Borough of Manhattan, New York, presently located at 55 Water Street, New York,
New York 10041, during the period from and including April 1, 2005 to and
including the close of business on May 1, 2005 (or if May 1, 2005 is not a
business day, the next succeeding business day): (i) a Debenture with the form
entitled "Option to Elect Repayment" on the reverse of the Debenture duly
completed, or (ii) a telegram, telex, facsimile transmission or letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or a trust company in the United
States of America dated no later than May 1, 2005 (or, if May 1, 2005 is not a
business day, the next succeeding business day) and setting forth the name of
the holder of the Debenture, the principal amount of the Debenture, the amount
of the Debenture to be repaid, a statement that the option to elect repayment is
being exercised thereby and a guarantee that the Debenture to be repaid (with
the form entitled "Option to Elect Repayment" on the reverse of the Debenture
S-3
<PAGE> 4
duly completed) will be received at the Trustee's office in the Borough of
Manhattan, New York, not later than five business days after the date of such
telegram, telex, facsimile transmission or letter and such Debenture and form
duly completed are received at the Trustee's office in the Borough of Manhattan,
New York, by such fifth business day. Effective exercise of the repayment option
by the holder of any Debenture shall be irrevocable. No transfer or exchange of
any Debenture (or, in the event that any Debenture is to be repaid in part, such
portion of the Debenture to be repaid) will be permitted after exercise of the
repayment option. The repayment option may be exercised by the holder of a
Debenture for less than the entire principal amount of the Debenture, provided
the principal amount which is to be repaid is equal to $1,000 or any integral
multiple thereof. All questions as to the validity, eligibility (including time
of receipt) and acceptance of any Debenture for repayment will be determined by
the Company, whose determination will be final, binding and non-appealable. For
purposes of this provision, "business day" means any day other than Saturday and
Sunday or any day on which banking institutions in The City of New York, New
York are authorized or obligated by law or executive order to close.
USE OF PROCEEDS
The net proceeds from the sale of the Debentures of approximately $148.5
million, will be used by the Company to repay a portion of the commercial paper
debt issued to finance the DCBU acquisition and other smaller acquisitions
completed during 1995 and for working capital. On June 2, 1995, the Company had
$450 million of such debt outstanding. This debt is backed by the Company's
revolving credit facilities and bears interest on the date hereof at an average
rate of 6.12% per annum with an average maturity of 39 days.
S-4
<PAGE> 5
<TABLE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table presents historical financial information concerning
Eaton and its consolidated subsidiaries. The historical financial information in
the table and the related notes should be read in conjunction with the financial
statements and related notes contained in Eaton's Annual Report on Form 10-K for
the year ended December 31, 1994 and the Quarterly Report on Form 10-Q for the
three-month period ended March 31, 1995.
<CAPTION>
THREE MONTHS
ENDED MARCH 31 YEAR ENDED DECEMBER 31
------------------ ----------------------------------------------------
1995(A) 1994(A) 1994(A) 1993 1992 1991 1990
------- ------- ------- ------- ------- ------- -------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
- ---------------------
Net sales........................... $1,731 $1,371 $6,052 $4,401 $4,101 $3,659 $4,083
Net sales by business segment
Vehicle Components................ 831 678 2,828 2,357 2,093 1,806 2,015
Electrical and Electronic
Controls........................ 872 665 3,088 1,852 1,776 1,575 1,624
Defense Systems................... 28 28 136 192 232 278 444
Operating profit.................... 192 131 594 332 264 174 325
Operating profit (loss) by business
segment
Vehicle Components.............. 123 89 354 247 170 63 178
Electrical and Electronic
Controls...................... 70 42 239 83 85 88 122
Defense Systems................. (1) 1 2 9 23 25
Income before extraordinary item and
cumulative effect of accounting
changes........................... 108 74 333 180 (b) 140 74 (d) 179
Extraordinary item.................. (7)(c)
Cumulative effect of accounting
changes
Postretirement benefits other than
pensions........................ (274)
Income taxes...................... 6
Net income (loss)................... 108 74 333 173 (128) 74 179
INCOME PER COMMON SHARE
- -----------------------
Income before extraordinary item
and cumulative effect of
accounting changes................ $ 1.39 $ 1.01 $ 4.40 $ 2.57 (b) $ 2.03 $ 1.09 (d) $ 2.53
Extraordinary item.................. (.10)(c)
Cumulative effect of accounting
changes
Postretirement benefits other than
pensions........................ (3.97)
Income taxes...................... 0.09
Net income (loss)................... 1.39 1.01 4.40 2.47 (1.85) 1.09 2.53
BALANCE SHEET DATA
- ------------------
Working capital..................... $ 891 $ 728 $ 744 $ 679 $ 751 $ 666 $ 669
Total assets........................ 4,926 4,588 4,682 3,268 3,220 3,184 3,140
Short-term debt and current portion
of long-term debt................. 53 159 36 124 (c) 49 132 60
Long-term debt...................... 1,102 1,199 1,053 649 833 795 755
Shareholders' equity................ 1,766 1,440 1,680 1,105 948 1,153 1,140
OTHER DATA
- ----------
Depreciation and amortization....... $ 66 $ 62 $ 251 $ 196 $ 200 $ 185 $ 181
Capital expenditures................ 57 39 267 227 186 194 192
Cash dividends...................... 23 22 91 83 76 75 75
Ratio of earnings to fixed
charges(e)........................ 6.66 4.72 5.20 3.80 2.72 2.05 3.57
<FN>
- ---------------
(a) Results for 1994 and 1995 reflect the acquisition of DCBU on January 31,
1994.
</TABLE>
S-5
<PAGE> 6
<TABLE>
<S> <C>
(b) Income in 1993 was reduced by a $55 million acquisition integration charge
related to the purchase of DCBU ($34 million after income tax credits, or
$.49 per Common Share).
(c) In March 1993, the Company called for redemption, in April 1993, the $74
million outstanding balance of its 9% debentures, and in December 1993, the
Company called for redemption, in January 1994, the $89 million outstanding
balance of its 8.5% debentures. The extraordinary loss on these redemptions,
including the write-off of debt issue costs, was $11 million ($7 million
after income tax credits, or $.10 per Common Share).
(d) Income in 1991 was reduced by a restructuring charge of $39 million ($25
million after income tax credits, or $.38 per Common Share).
(e) For the purpose of computing the ratios described above, "earnings" consist
of consolidated income before income taxes and minority interest in the
income (losses) of consolidated subsidiaries, less undistributed income
(losses) of 20% to less than 50% owned associate companies, plus 1) interest
expense capitalized in prior periods and amortized in the current period, 2)
the Company's proportionate share of income before income taxes of 50% owned
associate companies, and 3) fixed charges described below, excluding
capitalized interest. "Fixed charges" consist of 1) interest expensed and
capitalized on borrowed funds, 2) amortization of debt issue costs, 3) that
portion of rent expense representing interest, and 4) the Company's
proportionate share of the fixed charges of 50% owned associate companies.
In the second quarter of 1995, interest charges for employee deferred
compensation plans were reclassified from interest expense to administrative
expense. The consolidated statements of income for prior periods have been
reclassified to conform to the current presentation. This reclassification
had no effect on income for any period.
</TABLE>
S-6
<PAGE> 7
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to Lehman Brothers Inc. (the
"Underwriter"), and the Underwriter has agreed to purchase, the entire principal
amount of the Debentures.
Under the terms and conditions of the Underwriting Agreement, the
Underwriter is committed to take and pay for all of the Debentures, if any are
taken.
The Underwriter proposes to offer the Debentures directly to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement and to certain securities dealers at such price less a
concession of .400% of the principal amount of the Debentures. The Underwriter
may allow, and such dealers may reallow, a concession not to exceed .200% of the
principal amount of the Debentures to certain brokers and dealers. After the
Debentures are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Underwriter.
The Debentures are a new issue of securities with no established
trading market. The Company has been advised by the Underwriter that it intends
to make a market in the Debentures but is not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Debentures.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Underwriter and its affiliates have engaged from time to time in
investment banking business with the Company for which customary compensation
has been received.
S-7
<PAGE> 8
PROSPECTUS
(LOGO)
EATON CORPORATION
DEBT SECURITIES, DEBT WARRANTS, COMMON SHARES
AND PREFERRED SHARES
------------------
Eaton Corporation (the "Company") may offer from time to time its unsecured
debt securities, which may be either senior (the "Senior Securities") or
subordinated (the "Subordinated Securities") and, if subordinated, may be
convertible into common shares (the "Common Shares") of the Company (the
"Convertible Subordinated Securities", and together with the Senior Securities
and any other Subordinated Securities, the "Debt Securities"), warrants to
purchase the Senior Securities (the "Debt Warrants"), Common Shares or preferred
shares (the "Preferred Shares"), on terms to be determined at the time of
offering, in an aggregate amount of up to $600,000,000 (or the equivalent
thereof if any of the Securities are denominated in a currency other than the
U.S. Dollar), such amount being the aggregate issue price of all Debt Warrants
and Common Shares issued, the stated value of all Preferred Shares issued, the
principal face amount of all Debt Securities issued at their principal face
amount and the issue price rather than the principal amount of any Debt
Securities issued at original issue discount and the exercise price of any Debt
Securities issuable upon the exercise of a Debt Warrant. The Debt Securities may
be issued under this Prospectus in one or more series with the same or varying
maturities. The Debt Securities, Debt Warrants, Common Shares and Preferred
Shares (collectively, the "Securities") may be offered either together or
separately and (except with respect to the Common Shares) in one or more series,
in amounts, at prices and on terms to be set forth at the time of the offering
in one or more supplements to this Prospectus (each a "Prospectus Supplement").
The Debt Securities of any series may be in registered or bearer form and may be
represented by a single global security registered in the name of a securities
depository. The specific terms of the Securities in respect of which this
Prospectus is being delivered, including, where applicable, the designation,
aggregate amount, form, authorized denominations, initial public offering price,
purchase price, currency or currencies, currency unit or units or composite
currency or currencies ("Currency" or "Currencies") of denomination and payment
maturity, rate (or manner of calculation thereof) and time of payment of any
interest, any index, formula or other method pursuant to which principal (and
premium, if any) or interest may be determined, any sinking fund, any terms of
redemption at the option of the Company or the holder, any conversion terms of
Convertible Subordinated Securities or Preferred Shares which are convertible
into Common Shares and other terms with respect to Debt Securities, the
duration, offering price, exercise price, detachability and other terms with
respect to Debt Warrants, and the specific title and stated value, any dividend,
liquidation, redemption, conversion and other voting rights, the initial public
offering price and other terms with respect to Preferred Shares are set forth in
the accompanying Prospectus Supplement, together with a description of the terms
of offering of the Securities and the use of the net proceeds from such
offering.
The Senior Securities will rank equally with all other unsubordinated and
unsecured indebtedness of the Company. The Subordinated Securities will be
subordinated to all existing and future Senior Indebtedness of the Company, as
defined. See "Description of Debt Securities."
------------------
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 sold directly to purchasers, or through agents
designated from time to time, or through underwriters or dealers. If any agents
of the Company or any underwriters or dealers are involved in the sale of the
Securities, their names and any applicable fee, commission or discount
arrangements with them are set forth in the accompanying Prospectus Supplement.
See "Plan of Distribution." No Securities may be sold without delivery of a
Prospectus Supplement describing such series or issue of securities and the
method and the terms thereof.
------------------
The date of this Prospectus is June 5, 1995.
<PAGE> 9
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT, IN CONNECTION WITH THE
OFFERING CONTEMPLATED HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING PROSPECTUS SUPPLEMENT
CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
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 OR
THE ACCOMPANYING PROSPECTUS SUPPLEMENT, NOR ANY SALE MADE HEREUNDER OR
THEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy material and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
material or other information concerning the Company and the Registration
Statement can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, Room 1024, and at the following Regional Offices of the
Commission: 7 World Trade Center, New York, New York 10048, 13th Floor and
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661, 14th
Floor. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such reports, proxy material and other information concerning
the Company and the Registration Statement can also be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005,
the Chicago Stock Exchange, Incorporated, 120 South LaSalle Street, Chicago,
Illinois 60603 and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104.
The Company has filed with the Commission a registration statement on Form
S-3 (which together with the exhibits thereto is herein referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-1396) are hereby incorporated by reference in this Prospectus:
1. Annual Report on Form 10-K for the year ended December 31, 1994.
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be incorporated
by reference in this Prospectus and to be a part of this Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified and superseded, to constitute a part of
this Prospectus.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference
(not including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Eaton Corporation, Shareholder Relations, Eaton
Center, 1111 Superior Avenue, Cleveland, Ohio 44114-2584 (telephone (216)
523-4350).
2
<PAGE> 10
THE COMPANY
The Company, an Ohio corporation established in 1916, is a leading
manufacturer of vehicle powertrain components and a broad variety of controls
serving transportation, industrial, commercial, aerospace and military markets.
Principal products include truck transmissions and axles, engine components,
electrical equipment and controls.
The Company's principal executive office is located at Eaton Center, 1111
Superior Avenue, Cleveland, Ohio 44114-2584 and its telephone number is (216)
523-5000. As used in this Prospectus, the term "Company" means Eaton Corporation
and its consolidated subsidiaries, unless the context otherwise requires.
RISK FACTORS RELATING TO CURRENCIES
Debt Securities denominated or payable in foreign Currencies may entail
significant risks. These risks include, without limitation, the possibility of
significant fluctuations in the foreign currency markets, the imposition or
modification of foreign exchange controls and potential illiquidity in the
secondary market. These risks will vary depending upon the Currency or
Currencies involved. These risks will be more fully described in the applicable
Prospectus Supplement. See "Description of Debt Securities."
USE OF PROCEEDS
Unless otherwise provided in a Prospectus Supplement, the net proceeds from
the sale of the Securities will be added to the general funds of the Company and
will be used for working capital and general corporate purposes. Such net
proceeds also may be used to repay a portion of the debt issued in connection
with the acquisition of the Distribution and Control Business Unit of
Westinghouse Electric Corporation, or in connection with possible future
acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
The following table sets forth the ratio of earnings to fixed charges for
each of the five years in the period ended December 31, 1994 and for the
three-month periods ended March 31, 1995 and 1994(1):
<CAPTION>
THREE MONTHS
ENDED MARCH
31 YEAR ENDED DECEMBER 31
------------- ----------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges..... 6.66 4.72 5.20 3.80 2.72 2.05 3.57
<FN>
- ---------------
(1) For the purpose of computing the ratios described above, "earnings" consist
of consolidated income before income taxes and minority interest in the
income (losses) of consolidated subsidiaries, less undistributed income
(losses) of 20% to less than 50% owned associate companies, plus 1) interest
expense capitalized in prior periods and amortized in the current period, 2)
the Company's proportionate share of income before income taxes of 50% owned
associate companies, and 3) fixed charges described below, excluding
capitalized interest. "Fixed charges" consist of 1) interest expensed and
capitalized on borrowed funds, 2) amortization of debt issue costs, 3) that
portion of rent expense representing interest, and 4) the Company's
proportionate share of the fixed charges of 50% owned associate companies.
In the second quarter of 1995, interest charges for employee deferred
compensation plans were reclassified from interest expense to administrative
expense. The consolidated statements of income for prior periods have been
reclassified to conform to the current presentation. This reclassification
had no effect on income for any period.
</TABLE>
3
<PAGE> 11
DESCRIPTION OF DEBT SECURITIES
The Senior Securities may be issued in one or more series under an
indenture (the "Senior Indenture"), between the Company and Chemical Bank,
trustee (the "Senior Trustee"). The Subordinated Securities may be issued in one
or more series under an indenture (the "Subordinated Indenture"), between the
Company and Chemical Bank, trustee (the "Subordinated Trustee"). The Senior
Indenture and Subordinated Indenture (collectively, the "Indentures") are
exhibits to the Registration Statement.
The statements under this caption relating to the Indentures and the Debt
Securities are summaries and do not purport to be complete. Such summaries are
qualified in their entirety by express reference to the Indentures, including
the definitions of certain terms. Whenever any particular provision of, or term
defined in, the Indentures is referred to, such provision or defined term is
incorporated herein by reference.
The Indentures are subject to and governed by the Trust Indenture Act of
1939, as amended (the "TIA"). Parenthetical references below are to the
Indentures or to the TIA, as applicable. Capitalized terms used under this
caption without definition have the meanings ascribed thereto in the Indentures.
The description below sets forth certain general terms and provisions of
the Debt Securities. The specific terms of the Debt Securities offered by any
Prospectus Supplement (the "Offered Debt Securities"), as well as any
modifications of or additions to the general terms of the Debt Securities set
forth below that may be applicable in the case of the Offered Debt Securities,
are described in the Prospectus Supplement relating to such Offered Debt
Securities. Accordingly, for a description of the terms of the Offered Debt
Securities, reference must be made to both the Prospectus Supplement relating
thereto and the description of Debt Securities set forth in this Prospectus.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt Securities and
whether such Debt Securities are Senior Securities or Subordinated Securities,
including whether Subordinated Securities are Convertible Subordinated
Securities; (2) the aggregate principal amount of the Offered Debt Securities
and any limit on the aggregate principal amount of Debt Securities of such
series and any limit on the aggregate principal amount of Debt Securities of
such series; (3) the date or dates, or the method by which such date or dates
shall be determined or extended, on which the principal (and premium, if any) of
the Offered Debt Securities is payable; (4) the rate or rates (which may be
fixed or variable), or the method of determination thereof, at which the Offered
Debt Securities shall bear interest, if any, the date or dates from which such
interest shall accrue or the method by which such date or dates shall be
determined, the date or dates on which such interest shall be payable and for
any Registered Securities the Regular Record Dates for such interest payment
dates, and the basis on which any interest shall be calculated if other than on
the basis of a 360-day year of twelve 30-day months; (5) whether the amount of
payments of principal of (and premium, if any) or interest, if any, on the Debt
Securities may be determined with reference to an index, formula or other method
(which index, formula or method may be based on one or more Currencies,
commodities, equity indices or other indices) and the manner in which such
amounts shall be determined; (6) the period or periods within which, the price
or prices at which, the Currency or Currencies in which and the other terms and
conditions upon which Offered Debt Securities may be redeemed, in whole or in
part, at the option of the Company, if the Company is to have that option; (7)
the obligation, if any, of the Company to redeem, repay or purchase the Offered
Debt Securities pursuant to any sinking fund or analogous provisions or at the
option of a holder thereof and the period or periods within which or the date or
dates on which, the price or prices at which, the Currency or Currencies in
which, and the other terms and conditions upon which Offered Debt Securities
shall be redeemed, repaid or purchased in whole or in part pursuant to such
obligation; (8) the Currency or Currencies in which the Offered Debt Securities
are to be issuable and in which payment of the principal of, premium, if any, or
Additional Amounts, if any, and interest, if any, on, the Offered Debt
Securities will be payable, if other than the coin or currency of the United
States; (9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which the Offered Debt Securities shall be
issuable and, if other than the denomination of $5,000, the denomination or
denominations in which any Bearer Securities shall be issuable; (10) the
percentage of the principal amount at which the Offered Debt Securities will be
issued and, if other than the principal amount thereof, the portion of the
principal amount of Offered Debt Securities which shall
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<PAGE> 12
be payable upon declaration of acceleration of maturity or the method by which
such portion shall be determined; (11) whether the Offered Debt Securities are
to be issuable as Registered Securities or Bearer Securities or both, any
restrictions applicable to the offer, sale or delivery of Bearer Securities and
the terms upon which Bearer Securities of the series may be exchanged for
Registered Securities of the series and vice versa (if permitted by applicable
laws and regulations) and whether the Offered Debt Securities are to be issued
in the form of one or more temporary or permanent global securities (each, a
"Global Security") registered in the name of a depository ("the Depository")
identified in the Prospectus Supplement related to such Offered Debt Securities
with or without coupons and, if so, whether beneficial owners of interests in
any such permanent global security may exchange such interests for Debt
Securities of such series and of like tenor of any authorized form and
denomination and the circumstances under which any such exchanges may occur, if
other than in the manner provided in the applicable Indenture; (12) any
additional means of satisfaction and discharge of the applicable Indenture with
respect to Offered Debt Securities, any additional conditions to defeasance or
covenant defeasance and the application, if any, of defeasance or covenant
defeasance; (13) any deletions or modifications of or additions to the Events of
Default or covenants of the Company pertaining to the Offered Debt Securities,
whether or not such Events of Default or covenants are consistent with the
Events of Default or covenants set forth in the applicable Indenture as
originally executed; (14) the place or places, if any, other than or in addition
to New York, New York, where the principal of (and premium, if any) and any
interest or any Additional Amounts on such Debt Securities shall be payable;
(15) the place or places, if any, other than or in addition to New York, New
York, where any Registered Security may be surrendered for registration of
transfer, such Debt Securities may be surrendered for exchange, and notices or
demands to or upon the Company in respect of such Debt Securities may be served;
(16) whether the amount of payments of principal of (and premium, if any) or
interest on such Debt Securities may be determined with reference to an index,
formula or other method (which index, formula or method may, without limitation,
be based on one or more Currencies, commodities, equity indices or other
indices) and the manner in which such amounts shall be determined; (17) whether
the Company or a holder may elect payment of the principal of (and premium, if
any) or interest, if any, on such Debt Securities in one or more Currencies
other than that in which such Debt Securities are stated to be payable, and the
period or periods within which, and the terms and conditions upon which, such
election may be made, and the time and manner of determining the exchange rate
between the Currency or Currencies in which such Debt Securities are stated to
be payable and the Currency or Currencies in which such Debt Securities are to
be so payable; (18) if other than the applicable Trustee, the identity of each
Security Registrar and/or Paying Agent; (19) the designation of the Exchange
Rate Agent, if applicable; (20) the Person to whom any interest on any
Registered Security of the series shall be payable, if other than the Person in
whose name such Registered Security (or one or more Predecessor 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
Security of the series shall be payable, if otherwise than upon presentation and
surrender of the coupons appertaining thereto as they severally mature, and the
extent to which, or the manner in which, any interest payable on a temporary
Global Security on an Interest Payment Date will be paid if other than in the
manner provided in the applicable Indenture; (21) whether and under what
circumstances the Company will pay Additional Amounts as contemplated by Section
1005 of the applicable Indenture on the Offered Debt Securities to any holder
who is not a United States Person (including any modification to the definition
of such term as contained in the applicable Indenture as originally executed) in
respect of any tax, assessment or governmental charge and, if so, whether the
Company will have the option to redeem the Offered Debt Securities rather than
pay such Additional Amounts (and the terms of any such option); (22) the
provisions, if any, granting special rights to the holders of the Offered Debt
Securities upon the occurrence of such events as may be specified; (23) in the
case of Subordinated Securities, any terms modifying the subordination
provisions affecting such securities; (24) in the case of Convertible
Subordinated Securities, any terms by which such securities may be convertible
into Common Shares of the Company; (25) if the Debt Securities are to be
issuable in definitive form (whether upon original issue or upon exchange of a
temporary Debt Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions, the form
and/or terms of such certificates, documents and conditions; (26) if the Debt
Securities are to be issued upon the exercise of Debt Warrants, the time, manner
and place for such Debt Securities to be authenticated and delivered; (27) any
other terms, conditions, rights and preferences (or limitations on such rights
and preferences) of such Debt Securities not inconsistent with the provisions of
the applicable Indenture. In addition, principal,
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<PAGE> 13
premium, if any, and interest, if any, will be payable, and such Debt Securities
will be transferable, in the manner described in the accompanying Prospectus
Supplement.
If any series of Debt Securities are sold for, are payable in or are
denominated in one or more foreign Currencies, applicable restrictions,
elections, tax consequences, specific terms and other information with respect
to such series of Debt Securities and such Currency or Currencies, shall be set
forth in the Prospectus Supplement relating thereto.
There is no requirement that future issues of Debt Securities of the
Company be issued under the Indentures, and the Company will be free to employ
other indentures or documentation, containing provisions different from those
included in the Indentures or applicable to one or more issues of Debt
Securities, in connection with future issues of such other debt securities.
The general provisions of the Indentures do not contain any provisions that
would limit the ability of the Company to incur indebtedness or that would
afford holders of Debt Securities protection in the event of a highly leveraged
or similar transaction involving the Company. However, the general provisions of
the Senior Indenture do provide that neither the Company nor any Restricted
Subsidiary (as defined) will subject certain of its property or assets to any
mortgage or other encumbrance unless the Senior Securities issued under the
Senior Indenture are secured equally and ratably with or prior to such other
indebtedness thereby secured. See "Limitation on Sale and Leaseback
Transactions" and "Limitation on Liens." Reference is made to each Prospectus
Supplement related to Offered Debt Securities for information with respect to
any deletions from, modifications or additions to the Events of Default or
covenants of the Company that are described below, including any addition of a
covenant or other provision providing event risk or similar protection.
GENERAL
Each Indenture provides that the Debt Securities referred to on the cover
page of this Prospectus and additional unsecured debt securities of the Company
unlimited as to aggregate principal amount may be issued in one or more series
thereunder, in each case in the aggregate principal amount established in,
pursuant to or in the manner provided in a resolution of the Board of Directors
of the Company, or established by supplemental indenture. The Debt Securities
referred to on the cover page of this Prospectus and any such additional debt
securities so issued under the applicable Indenture are herein collectively
referred to, when a single Trustee is acting for all debt securities issued
under such Indenture, as the "Indenture Securities". Under the Indentures, the
Company will have the ability, in addition to the ability to issue Debt
Securities with terms different from those of Debt Securities previously issued,
without the consent of the holders, to reopen a previous issue of a series of
Debt Securities and issue additional Debt Securities of such series (unless such
reopening was restricted when such series was created), in an aggregate
principal amount determined by the Company. (Section 301 of the Indentures) Each
Indenture also provides that there may be more than one trustee under such
Indenture, each with respect to one or more different series of Indenture
Securities as described below under "-- Concerning the Trustees." At a time when
two or more trustees are acting under either Indenture, each with respect to
only certain series, the term "Indenture Securities" as used herein shall mean
the one or more series with respect to which each trustee is acting. In the
event there shall be more than one trustee under an Indenture, the powers and
trust obligations of each trustee as described below shall extend only to the
one or more series of Indenture Securities for which it is trustee. The effect
of the provisions contemplating that at a particular time there might be more
than one trustee acting is that, in such event, those Indenture Securities
(whether or not more than one series) for which each trustee is acting would be
treated as if issued under a separate indenture.
Each series of Debt Securities will be unsecured obligations of the
Company. The Senior Securities will rank pari passu with other unsecured and
unsubordinated indebtedness of the Company (as defined below). The Subordinated
Securities will be subordinated and junior in right of payment to the prior
payment in full of the Senior Indebtedness of the Company as described below
under "-- Subordination Provisions."
The Debt Securities may be issued as "Original Issue Discount Securities",
which is defined as Debt Securities, including any zero-coupon Debt Securities,
that are issued and sold at a discount from the stated principal amount thereof
and provide that upon acceleration of the maturity thereof an amount less than
the principal amount thereof shall become due and payable. United States federal
income tax consequences and
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<PAGE> 14
other considerations applicable to such Original Issue Discount Securities will
be described in the Prospectus Supplement relating thereto.
DENOMINATIONS, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable solely as Registered
Securities, solely as Bearer Securities or as both Registered Securities and
Bearer Securities. Registered Securities will be issuable in denominations of
$1,000 and integral multiples of $1,000 and Bearer Securities will be issuable
in the denomination of $5,000 or, in each case, in such other denominations as
may be in the terms of the Debt Securities of any particular series. The
Indentures also provide that Debt Securities of a series may be issuable in
global form. See "-- Global Securities." Unless otherwise indicated in the
related Prospectus Supplement, Bearer Securities will have interest coupons
attached. (Section 201 of the Indentures)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series and of a like aggregate principal
amount, tenor and rank, and of different authorized denominations. If (but only
if) provided in the related Prospectus Supplement, Bearer Securities (with all
unmatured coupons, except as provided below, and all matured coupons in default)
of any series may be exchanged for Registered Securities of the same series of
any authorized denominations and of a like aggregate principal amount and tenor.
In such event, Bearer Securities surrendered in a permitted exchange for
Registered 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 on such date for payment of interest in respect of the Registered
Security issued in exchange for such Bearer Security, but will be payable only
to the holder of such coupon when due in accordance with the terms of the
applicable Indenture. Unless otherwise specified in the related Prospectus
Supplement, Bearer Securities will not be issued in exchange for Registered
Securities. (Section 305 of the Indentures)
The Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented for registration of transfer (duly
endorsed or accompanied by a written instrument of transfer), initially at the
corporate trust office of the applicable Trustee 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 the related Prospectus Supplement.
No service charge will be made for any transfer or exchange of Debt Securities,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. (Section 305 of the
Indentures) If a Prospectus Supplement refers to any transfer agent (in addition
to the applicable Trustee) 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 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 may be issuable both as Registered
Securities and as Bearer Securities, the Company will be required to maintain
(in addition to the applicable Trustee) a transfer agent in a Place of Payment
for such series located outside the United States. The Company may at any time
designate additional transfer agents with respect to any series of Debt
Securities. (Section 1002 of the Indentures)
In the event of any redemption, the Company shall not be required to (i)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business on (A) if Debt Securities of the series are issuable only as Registered
Securities, the day of mailing of the relevant notice of redemption and (B) if
Debt Securities of the series are issuable as Bearer Securities, the day of the
first publication of the relevant notice of redemption, or, if Debt Securities
of the series are also issuable as Registered Securities and there is no
publication, the mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Registered Security, or portion thereof, called for
redemption, except the unredeemed portion of any Registered Security being
redeemed in part; or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 305 of
the Indentures)
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PAYMENT AND PAYING AGENTS
Unless otherwise provided in the related Prospectus Supplement, principal,
premium, if any, and interest, if any, and Additional Amounts, if any, on Bearer
Securities will be payable, subject to any applicable laws and regulations, at
the offices of such Paying Agents outside the United States as the Company may
designate from time to time. (Section 1002 of the Indentures) Unless otherwise
provided in the Prospectus Supplement, payment of interest and certain
Additional Amounts on Bearer Securities on any Interest Payment Date will be
made only against surrender of the coupon relating to such Interest Payment
Date. (Section 1001 of the Indentures) Unless otherwise provided in the
Prospectus Supplement, no payment with respect to any Bearer Security will be
made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. (Section 1002 of the
Indentures) Notwithstanding the foregoing, payments of principal, premium, if
any, interest, if any, and Additional Amounts, if any, in respect of Bearer
Securities payable in U.S. dollars will be made at the office of the Company's
Paying Agent in New York, 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 is
illegal or effectively precluded by exchange controls or other similar
restrictions. (Section 1002 of the Indentures)
Unless otherwise provided in the related Prospectus Supplement, principal,
premium, if any, and interest, if any, and Additional Amounts, if any, on
Registered Securities will be payable at any office or agency to be maintained
by the Company in New York, New York, except that at the option of the Company
interest (including Additional Amounts, if any) may be paid (i) by check mailed
to the address of the Person entitled thereto as such address shall appear in
the Security Register or (ii) by wire transfer to an account maintained by the
Person entitled thereto as specified in the Security Register. (Sections 301,
1001 and 1002 of the Indentures) Unless otherwise provided in the Prospectus
Supplement, payment of any installment of interest on Registered Securities will
be made to the Person in whose name such Registered Security is registered at
the close of business on the Regular Record Date for such interest. (Section 307
of the Indentures)
Any Paying Agents outside the United States and any other Paying Agents in
the United States initially designated by the Company for the Offered Debt
Securities will be named in the applicable Prospectus Supplement. 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 only as
Registered 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
also issuable as Bearer Securities, the Company will be required to maintain (i)
a Paying Agent in New York, New York for payments with respect to any Registered
Securities of the series (and for payments with respect to Bearer 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 where Debt
Securities of such series and any coupons appertaining thereto may be presented
and surrendered for payment; provided that, if the Debt Securities of such
series are listed on any stock exchange located outside the United States and
such stock exchange shall so require, the Company will maintain a Paying Agent
in any required city located outside the United States for the Debt Securities
of such series. (Section 1002 of the Indentures)
GLOBAL 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 Depository identified in the Prospectus Supplement relating to such
series.
The Company anticipates that the following provisions will apply to all
depository arrangements. Additional or differing terms of the depository
arrangement with respect to a series of Offered Debt Securities and whether all
or any part of Offered Debt Securities will be issued in one or more Global
Securities will be described in the Prospectus Supplement relating to such
series.
Global Securities will be deposited with, or on behalf of, the Depository
and registered in the name of the Depository's nominee. Except as set forth
below, a Global Security may not be transferred except as a whole among the
Depository and its nominees or by the Depository or any nominee to a successor
of the Depository or a nominee of such successor.
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<PAGE> 16
The Depository holds securities of its participants to facilitate the
clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. Upon the issuance of a Global Security, the Depository for such
Global Security will credit, on its book-entry registration and transfer system,
the respective principal amounts of the Debt Securities represented by such
Global Security. Such accounts shall be designated by the underwriters or agents
with respect to such Debt Securities or by the Company if such Debt Securities
are offered and sold directly by the Company. Ownership of beneficial interests
in a Global Security will be limited to persons that have accounts with the
Depository for such Global Security ("participants") or persons that may hold
interests through participants. Ownership of beneficial interests in such Global
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the Depository (with respect to interests of
participants) for such Global Security and on the records of participants (with
respect to interests of persons other than participants). The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Security.
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture governing such Debt Securities. Except as provided below,
owners of beneficial interests in a Global Security will not be entitled to have
Debt Securities of the series represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
Debt Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture governing such Debt Securities.
Accordingly, each person owning a beneficial interest in a Global Security must
rely on the procedures of the Depository and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interests, to exercise any rights of a holder under the applicable Indenture
or such Global Security. The Company understands that, under existing industry
practice, in the event that the Company requests any action of holders
represented by a Global Security or an owner of a beneficial interest in a
Global Security desires to take any action that the holder of such Global
Security is entitled to take, the Depository would authorize the participants to
take such action and that the participants would authorize beneficial owners
owning through such participants to take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Principal of, premium, if any, and interest payments on Debt Securities
represented by a Global Security registered in the name of a Depository or its
nominee will be made to the Depository or its nominee, as the case may be, as
the registered owner of the Global Security representing such Debt Securities.
Neither the Company, the Trustee for such Debt Securities, any Paying Agent nor
the Security Registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Global Security for such Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the Depository for a series of Debt Securities
represented by a Global Security or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of a Global Security, will
credit immediately participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of the Global
Security for such Debt Securities as shown on the records of such Depository or
its nominee. The Company also expects that payments by participants to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of such participants.
If the Depository for a series of Debt Securities is at any time unwilling
or unable to continue as depository and a successor depository is not appointed
by the Company within 90 days, the Company will issue Debt Securities of such
series in definitive form in exchange for each Global Security representing such
series of Debt Securities. In addition, the Company may at any time determine
not to have Debt Securities represented by a Global Security, and, in such
event, will issue Debt Securities in certificated form in
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<PAGE> 17
exchange for the Global Security representing such Debt Securities. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name.
Debt Securities of such series so issued in definitive form will be issued in
denominations, unless otherwise specified by the Company, of U.S. $1,000 and
integral multiples thereof.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Under the terms of the Senior Indenture, the Company will not, and will not
permit any Restricted Subsidiary (as defined), to sell or transfer any
manufacturing plant owned by the Company or any Restricted Subsidiary with the
intention of taking back a lease on such property unless: (i) the sale or
transfer of property is made within 120 days after the later of the date of (a)
the acquisition of such property, (b) the completion of construction of such
property or (c) the commencement of full operation thereof; (ii) such lease has
a term, including permitted extensions and renewals, of not more than three
years, and it is intended that the use by the Company or the Restricted
Subsidiary of the manufacturing plant covered by such lease will be discontinued
on or before the expiration of such term; (iii) the amount realized from such
sale or transfer, together with the value (as defined) of then outstanding sale
and leaseback transactions not otherwise permitted by the Senior Indenture and
the outstanding aggregate principal amount of mortgage, pledge or lien
indebtedness not otherwise permitted by the Senior Indenture shall not exceed
10% of Consolidated Net Tangible Assets (as defined); or (iv) the Company shall
cause an amount equal to the value (as defined) of the manufacturing plant to be
sold or transferred and leased to be applied to the retirement (other than any
mandatory retirement) within 120 days of the effective date of such sale and
leaseback transaction of either the Indenture Securities or other funded
indebtedness of the Company which is equal in rank to the Indenture Securities,
or both. (Section 1010 of the Senior Indenture)
LIMITATION ON LIENS
Under the terms of the Senior Indenture, with certain exceptions, the
Company will not, directly or indirectly, and the Company will not permit any
Restricted Subsidiary to, create or assume any mortgage, pledge or other lien of
or upon any of its or their assets unless all of the outstanding Indenture
Securities of each series are secured by such mortgage, pledge or lien equally
and ratably with any and all other obligations and indebtedness thereby secured
for so long as any such other obligations and indebtedness shall be so secured.
Among the exceptions is (i) the creation of any mortgage or other lien on any
property of the Company or any Restricted Subsidiary to secure indebtedness
incurred prior to, at the time of, or within 120 days after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property and (ii) mortgages or liens on any property acquired
by the Company or any Restricted Subsidiary after the date of the Senior
Indenture existing at the time of such acquisition; provided that such
indebtedness so secured shall have been incurred for the purpose of financing
all or any part of the acquisition or construction of any such property. In
addition, the Company or any Restricted Subsidiary may create or assume any
mortgage, pledge or other lien not otherwise permitted by the Senior Indenture
for the purpose of securing indebtedness or other obligations so long as the
aggregate of all such indebtedness and other obligations then outstanding,
together with the value of all outstanding sale and leaseback transactions not
otherwise permitted, shall not exceed 10% of Consolidated Net Tangible Assets.
(Section 1009 of the Senior Indenture)
DEFINITIONS
The term "Consolidated Net Tangible Assets" is defined in the Senior
Indenture as total assets of the Company and its consolidated subsidiaries,
including the investment in (at equity) and the net amount of advances to and
accounts receivable from corporations which are not consolidated subsidiaries
less the following: (i) current liabilities of the Company and its consolidated
subsidiaries, including an amount equal to indebtedness required to be redeemed
by reason of any sinking fund payment due in 12 months or less from the date as
of which current liabilities are to be determined; (ii) all other liabilities of
the Company and its consolidated subsidiaries other than Funded Debt (as
defined), deferred income taxes and liabilities for
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employee post-retirement health plans recognized in accordance with Statement of
Financial Accounting Standards No. 106; (iii) all depreciation and valuation
reserves and all other reserves (except for reserves for contingencies which
have not been allocated to any particular purpose) of the Company and its
consolidated subsidiaries; (iv) the book amount of all segregated intangible
assets of the Company and its consolidated subsidiaries, including, but without
limitation, such items as goodwill, trademarks, trade names, patents and
unamortized debt discount and expense less unamortized debt premium; and (v)
appropriate adjustments on account of minority interests of other persons
holding stock in subsidiaries. Consolidated Net Tangible Assets is to be
determined on a consolidated basis in accordance with generally accepted
accounting principles and as provided in the Senior Indenture. (Section 101 of
the Senior Indenture)
The term "Restricted Subsidiary" is defined in the Senior Indenture as any
subsidiary of the Company except (i) any subsidiary substantially all the assets
of which are located, or substantially all of the business of which is carried
on, outside of the United States and Canada, or any subsidiary substantially all
the assets of which consist of stock or other securities of such a subsidiary,
(ii) any subsidiary principally engaged in the business of financing notes and
accounts receivable and any subsidiary substantially all the assets of which
consist of the stock or other securities of such subsidiary or (iii) any
subsidiary acquired or organized after the date of the Indenture, unless the
Board of Directors of the Company has designated it as a Restricted Subsidiary
and such designation will not result in the breach of any covenant or agreement
in the Senior Indenture. (Section 101 of the Senior Indenture)
The term "Funded Debt" is defined in the Senior Indenture as indebtedness
for borrowed money owed or guaranteed by the Company or any consolidated
subsidiary, and any other indebtedness which under generally accepted accounting
principles would appear as debt on the balance sheet of such corporation, which
matures by its terms more than twelve months from the date as of which Funded
Debt is to be determined or is extendible or renewable at the option of the
obligor to a date more than twelve months from the date as of which Funded Debt
is to be determined. (Section 101 of the Senior Indenture)
For purposes of the Limitation on Liens and Limitation on Sale and
Leaseback Transactions, the term "value" with respect to a manufacturing plant
is defined in the Senior Indenture as the amount equal to the greater of (i) the
net proceeds of the sale or transfer of such manufacturing plant or (ii) the
fair value of such manufacturing plant at the time of entering into such Sale
and Leaseback Transaction, as determined by the Board of Directors of the
Company, in either case divided first by the number of full years of the term of
the lease and then multiplied by the number of full years of such term remaining
at the time of determination, without regard to renewal or extension options
contained in such lease. (Section 1010 of the Senior Indenture)
CONSOLIDATION, MERGER OR SALE OF ASSETS
Subject to the limitation set forth in the following paragraph, under each
Indenture, the Company may consolidate or merge with or into any other
corporation or sell or convey the property of the Company as an entirety, or
substantially as an entirety, to any other Person; provided that any such
consolidation, merger, sale or conveyance shall be upon the condition that (i)
immediately after such consolidation, merger, sale or conveyance the corporation
(whether the Company or such other corporation) formed by or surviving any such
consolidation or merger, or the Person to which such sale or conveyance shall
have been made, shall not be in default in the performance or observance of any
of the terms, covenants and conditions of the applicable Indenture to be kept or
performed by the Company; (ii) the corporation (if other than the Company)
formed by or surviving any such consolidation or merger, or the Person to which
such sale or conveyance shall have been made (if such Person is a Corporation),
shall be a corporation organized under the laws of the United States or any
State thereof; and (iii) the due and punctual payment of the principal of (and
premium, if any) and interest on all of the Indenture Securities of each series,
according to their tenor, and the due and punctual performance and observance of
all the covenants and conditions of the applicable Indenture to be performed or
observed by the Company, shall be expressly assumed, by supplemental indenture
complying with the requirements of such Indenture, satisfactory in form to the
Senior Trustee or Subordinated Trustee, as the case may be, executed and
delivered to such Trustee by the corporation formed by such consolidation, or
into which the Company shall have been merged, or by the Person which shall have
acquired such property. (Section 801 of the Indentures)
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If, upon any consolidation or merger of the Company with or into any other
corporation, or upon any consolidation or merger of any other corporation with
or into the Company or upon any sale or conveyance of the properties and assets
of the Company as an entirety or substantially as an entirety to any other
Person, any of the properties or assets owned by the Company or any Restricted
Subsidiary immediately prior thereto would thereupon become subject to any
mortgage, pledge, encumbrance or lien not permitted by the provisions described
under "Limitation on Liens" above, the Company, prior to such consolidation,
merger, sale or conveyance, will secure, or cause to be secured, all of the
outstanding Indenture Securities of each series (equally and ratably with any
other indebtedness of the Company then entitled thereto) by a direct lien on all
such properties and assets of the Company prior to all liens other than any
theretofore existing thereon. (Section 803 of the Senior Indenture)
In the event a successor corporation assumes the obligations of the
Company, such successor corporation shall succeed to and be substituted for the
Company under the Indentures and under the Indenture Securities. (Section 802 of
the Indentures)
DEFEASANCE AND COVENANT DEFEASANCE
Each Indenture provides that, if the provisions of Article Fourteen
relating to defeasance or covenant defeasance as described below are made
applicable to the Debt Securities of any series pursuant to Section 301 of the
Indentures, the Company may elect either (i) to defease and be discharged from
any and all obligations with respect to such Debt Securities (except for the
obligations to register the transfer or exchange of such Debt Securities, to
replace mutilated, destroyed, lost or stolen Debt Securities, to maintain an
office or agency in respect of the Debt Securities and to hold moneys for
payment in trust) ("defeasance") or (ii) in the case of the Senior Indenture, to
be released from its obligations with respect to such Debt Securities under
Sections 1009 and 1010 of the Senior Indenture (being the restrictions described
under "--Limitation on Liens" and "--Limitation on Sale and Leaseback
Transactions", respectively) and, in the case of each Indenture, if provided
pursuant to Section 301 of such Indenture, its obligations with respect to any
other covenant, and any omission to comply with such obligations thereafter
shall not constitute an Event of Default with respect to Debt Securities of such
series ("covenant defeasance"), in either case upon the irrevocable deposit with
the Senior Trustee or the Subordinated Trustee, as the case may be (or other
qualifying trustee), in trust, of money and/or U.S. Government Obligations (as
defined) which through the payment of principal and interest in accordance with
their terms will provide money in an amount sufficient to pay the principal of
(and premium, if any) and interest on such Debt Securities, and any mandatory
sinking fund or analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company has
delivered to the Senior Trustee or the Subordinated Trustee, as the case may be,
an Opinion of Counsel (as specified in the Indenture) 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 time as would have been the
case if such defeasance or covenant defeasance had not occurred. Such opinion,
in the case of defeasance, 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 Indentures. (Article Fourteen of the
Indentures)
In the event the Company effects covenant defeasance with respect to Debt
Securities of any series and the Debt Securities of such series are declared due
and payable because of the occurrence of any Event of Default other than the
Event of Default described in clause (iv) under "Events of Default" with respect
to Sections 1009 and 1010 of the Senior Indenture (which Sections would no
longer be applicable to Debt Securities of that series), the amount of money and
U.S. Government Obligations on deposit with the Senior Trustee or the
Subordinated Trustee, as the case may be, will be sufficient to pay amounts due
on the Debt Securities of such series at the time of their Maturity but may not
be sufficient to pay amounts due on the Debt Securities of such series at the
time of the 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 Prospectus Supplement may further describe the provisions, if any,
permitting such defeasance or covenant defeasance with respect to the Debt
Securities of a particular series.
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MODIFICATION OF THE INDENTURES
The Company and the Senior Trustee or the Subordinated Trustee, as the case
may be, with the consent of the holders of not less than a majority in aggregate
principal amount of the outstanding Debt Securities of each series to be
affected, may enter into supplemental indentures which modify the indenture
under which such Debt Securities were issued or any supplemental indenture or
the rights of the holders of the Debt Securities of such series; provided that
no such modification shall, without the consent of the holder of each Debt
Security so affected, (i) extend the fixed maturity of any Debt Securities, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof or change the currency of payment of principal or interest (or premium,
if any) or impair the right to institute suit for the enforcement of any such
payment, (ii) reduce the aforesaid percentage of the Debt Securities of any
series, the holders of which are required to consent to any such modification or
(iii) in the case of Convertible Subordinated Securities, impair any right to
convert such Debt Securities into Common Shares of the Company. (Section 902 of
the Indentures)
The holders of a majority in aggregate principal amount of Outstanding Debt
Securities of a series issued under either Indenture have the right to waive
compliance by the Company with certain covenants contained in such Indenture
applicable to such series. (Section 1011 of the Senior Indenture and Section
1008 of the Subordinated Indenture)
Modification and amendment of either Indenture may be made by the Company
and the applicable Trustee thereunder, without the consent of any holder, for
any of the following purposes: (i) to evidence the succession of another Person
to the Company as obligor under such Indenture; (ii) to add to the covenants of
the Company for the benefit of the holders of all or any series of Indenture
Securities issued under such Indenture; (iii) to add Events of Default for the
benefit of the holders of all or any series of such Indenture Securities; (iv)
to add to or change any of the provisions of the applicable Indenture to
facilitate the issuance of Bearer Securities; (v) to change or eliminate any
provisions of the applicable Indenture, provided that any such change or
elimination shall become effective only when there are no such Indenture
Securities Outstanding of any series created prior thereto which are entitled to
the benefit of such provision; (vi) to secure Senior Securities pursuant to the
requirements of Section 803 or Section 1009 of the Senior Indenture, or
otherwise; (vii) to establish the form or terms of such Indenture Securities of
any series and any related coupons; (viii) to provide for the acceptance of
appointment by a successor trustee or facilitate the administration of the
trusts under the applicable Indenture by more than one trustee; (ix) to close
the applicable Indenture with respect to the authentication and delivery of
additional series of Indenture Securities; (x) to cure any ambiguity, defect or
inconsistency in the applicable Indenture, provided such action does not
adversely affect the interests of holders of such Indenture Securities of any
series in any material respect; or (xi) to supplement any of the provisions of
the applicable Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Indenture Securities, provided
that such action shall not adversely affect the interests of the holders of any
such Indenture Securities in any material respect. (Section 901 of the
Indentures)
Each Indenture provides that in determining whether the holders of the
requisite principal amount of Indenture Securities of a series then Outstanding
have given any request, demand, authorization, direction, notice, consent or
waiver thereunder or whether a quorum is present at a meeting of holders of
Indenture Securities, (i) the principal amount of an Original Issue Discount
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 an Indenture Security denominated in one or more foreign Currencies
shall be deemed to be the U.S. dollar equivalent, determined on the date of
original issuance of such Indenture Security, of the principal amount (or, in
the case of an Original Issue Discount Security, the U.S. dollar equivalent on
the date of original issuance of such Original Issue Discount Security of the
amount determined as provided in (i) above) of such Indenture Security, and
(iii) the principal amount that shall be deemed outstanding of an Indenture
Security the terms of which provide that the principal amount thereof payable at
Stated Maturity may be more or less than the principal face amount thereof at
original issuance (an "Indexed Security") shall be deemed to be the principal
face amount of such Indenture Security at original issuance. (Section 101 of the
Indentures)
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The Indentures contain provisions for convening meetings of the holders of
Indenture Securities of a series if Indenture Securities of that series are
issuable as Bearer Securities. (Section 1501 of the Senior Indenture and Section
1701 of the Subordinated Indenture) A meeting may be called at any time by the
applicable Trustee, and also, upon request, by the Company or the holders of at
least 10% in principal amount of the Indenture Securities of such series
Outstanding, in any such case upon notice given as provided in the applicable
Indenture. (Section 1502 of the Senior Indenture and Section 1702 of the
Subordinated Indenture) Except for any consent that must be given by the holder
of each Indenture Security affected thereby, as described above, any resolution
presented at a meeting or adjourned meeting at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority in principal amount
of the Indenture Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of Indenture Securities of a series may be adopted at a meeting or
adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the Indenture Securities of that series. Any resolution passed or decision
taken at any meeting of holders of Indenture Securities of any series duly held
in accordance with the applicable Indenture will be binding on all holders of
Indenture Securities of that series and the related coupons. The quorum at 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 Indenture
Securities of a series; provided, however, that if any action is to be taken at
such meeting with respect to a consent or waiver which may be given by the
holders of not less than a specified percentage in principal amount of the
Indenture Securities of a series, the persons holding or representing such
specified percentage in principal amount of the Indenture Securities of such
series will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of holders of Indenture Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the applicable Indenture expressly provides may be made, given or
taken by the holders of a specified percentage in principal amount of all
Outstanding Indenture Securities affected thereby, or of the holders of such
series and one or more additional series: (i) there shall be no minimum quorum
requirement for such meeting and (ii) the principal amount of the Outstanding
Indenture Securities of such series that vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall be taken
into account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given or taken
under such Indenture. (Section 1504 of the Senior Indenture and Section 1704 of
the Subordinated Indenture)
EVENTS OF DEFAULT
The Indentures define an Event of Default with respect to any series of
Debt Securities as being any one of the following unless it is inapplicable or
is specifically deleted or modified in the supplemental indenture under which
such series is issued or in the form of Debt Securities of such series: (i)
failure to pay interest when due, continued for 30 days; (ii) failure to pay
principal when due and payable either at maturity, upon redemption, by
declaration or otherwise; (iii) failure to make or satisfy any sinking fund
payment or analogous obligation when due continued for 30 days; (iv) failure to
perform in any material respect any other covenant or agreement contained in
such Indenture for 60 days after written notice by the Trustee or the holders of
at least 25% in aggregate principal amount of the outstanding Debt Securities of
such series; (v) certain events of bankruptcy, insolvency or reorganization of
the Company; and (vi) any other Event of Default provided in the supplemental
indenture under which such series of Debt Securities is issued or in the form of
Debt Security for such series. No Event of Default with respect to a particular
series of Debt Securities necessarily constitutes an Event of Default with
respect to any other series of Debt Securities. (Section 501 of the Indentures)
Within 90 days after the occurrence of any default with respect to any
series of Debt Securities, the applicable Trustee must give the holders of such
series notice of all such defaults known to such Trustee, unless cured or waived
before the giving of such notice; provided that, except in the case of default
in the payment of principal of or interest on any of the Debt Securities of such
series, the applicable Trustee may withhold such notice. (TIA Section 315)
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In case an Event of Default shall occur (which shall not have been cured or
waived), the applicable Trustee will be required to exercise such of its rights
and powers under the applicable Indenture and to use the degree of care and
skill in its exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs. (TIA Section 315)
Subject to the foregoing, the Trustees are under no obligation to exercise
any of their rights or powers under the Indentures at the request of holders of
the Debt Securities, unless the holders shall have offered to the applicable
Trustee reasonable security or indemnity. (Section 602 of the Indentures)
RIGHTS UPON DEFAULT
No holder of Debt Securities of any series will have any right under either
Indenture to institute any suit, action or proceeding with respect to such
Indenture or for any remedy thereunder, unless such holder previously shall have
given to the applicable Trustee written notice of default and of the continuance
thereof and the holders of not less than 25% in aggregate principal amount of
the then outstanding Debt Securities of such series (or, in the case of an Event
of Default specified in clause (v) or (vi) under "Events of Default", the
holders of at least 25% in aggregate principal amount of the then Outstanding
Indenture Securities) shall have made written request upon such Trustee to
institute such action, suit or proceeding in its own name as Trustee thereunder
and shall have offered to such Trustee reasonable indemnity and the Trustee for
60 days after receipt of such notice shall have neglected or refused to
institute any such suit, action or proceeding. (Section 507 of the Indentures)
In case any Event of Default shall have occurred and shall be continuing
with respect to a particular series of the Debt Securities, the applicable
Trustee or the holders of at least 25% in aggregate principal amount of the then
outstanding Debt Securities of such series (or, in the case of an Event of
Default specified in clause (v) or (vi) under "Events of Default", the holders
of at least 25% in aggregate principal amount of the then Outstanding Indenture
Securities) may declare the principal of such series (or, in the case of
Original Issue Discount Securities, a portion of the principal) to be
immediately due and payable. Under certain circumstances, the holders of a
majority in aggregate principal amount of the Debt Securities of such series may
waive all defaults with respect to such series and may rescind and annul such
declaration and its consequences. (Section 502 of the Indentures)
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 applicable
Trustee, or exercising any trust or power conferred on such Trustee. (Section
512 of the Indentures) Prior to the declaration of the acceleration of the
maturity, the holders of a majority in aggregate principal amount of the
outstanding Debt Securities of any series may on behalf of all holders of the
Debt Securities of such series waive any past default and its consequences with
respect to such series, except a default in the payment of principal, premium or
interest. (Section 513 of the Indentures)
EVIDENCE AS TO COMPLIANCE
Each Indenture requires that the Company deliver to the applicable Trustee,
upon becoming aware of any default with respect to any covenant, agreement or
condition contained in such Indenture, a statement specifying such default and
that the Company deliver to the applicable Trustee each year a statement as to
whether or not, to the knowledge of the officers signing such statement, the
Company is in default with respect to any such covenant, agreement or condition.
(Section 1004 of the Indentures)
CONCERNING THE TRUSTEES
The Senior Trustee and the Subordinated Trustee may each resign or be
removed with respect to one or more series of Debt Securities and a successor
trustee may be appointed to act with respect to such series. (Section 608 of the
Indentures) In the event that two or more persons are acting as trustee with
respect to different series of Debt Securities under either one of the
Indentures, each such trustee shall be a trustee of a trust under such Indenture
separate and apart from the trust administered by any other such trustee.
(Section 609 of the Indentures) Any action described herein to be taken by the
"Trustee" may then be taken
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by each such trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is trustee.
Chemical Bank ("Chemical") has agreed to serve as the Trustee under both
Indentures. Chemical is among the banks with which the Company and certain of
its subsidiaries maintain banking relationships in the ordinary course of
business, both in the United States and abroad. Chemical is trustee under the
indentures under which the 8% Debentures due 2006 ("8% Debentures") and the 9%
Debentures of Eaton ETN Offshore Ltd. due 2001 ("9% Debentures") are
outstanding.
In the event that a default occurs under either Indenture or under the
indentures which govern the 8% Debentures (the "8% Debentures Indenture") or the
9% Debentures (the "9% Debentures Indenture") at a time when Indenture
Securities are outstanding under the Subordinated Indenture, unless the default
is cured or waived within 90 days, the provisions of the TIA require that
Chemical resign as Trustee under either the Subordinated Indenture or each of
the Senior Indenture, the 8% Debentures Indenture and the 9% Debentures
Indenture. In such circumstance, the Company expects that Chemical would resign
as Trustee under the Subordinated Indenture.
CONVERSION PROVISIONS OF CONVERTIBLE SUBORDINATED SECURITIES
The holder of Convertible Subordinated Securities of a specified series
will have the right, exercisable at any time up to and including the date
specified in the applicable Prospectus Supplement (except that, in the event
that such Securities or portion thereof shall be called for redemption, such
right shall terminate at the close of business on the day prior to the specified
redemption date) at such holder's option to convert such Securities at the
principal amount thereof (or any portion thereof that is an integral multiple of
$1,000) into Common Shares, at the conversion price and in the manner set forth
in the applicable Prospectus Supplement. Conversions of the Convertible
Subordinated Securities may be effected by delivering them to the office or
agency of the Company maintained for such purpose. Except as described in the
applicable Prospectus Supplement, on conversion no adjustment for interest or
dividends is to be made, but if any holder surrenders a Convertible Subordinated
Security for conversion between the record date for the payment of an
installment of interest and the next interest payment date (unless called for
redemption in whole or in part during such period) such a Convertible
Subordinated Security, when surrendered for conversion, must be accompanied by
payment of an amount equal to the interest thereon which the registered holder
on such record date is to receive on such interest payment date. No fractional
Common Shares will be issued upon conversion, but an appropriate amount in cash
will be paid in lieu of such fractional shares. The Subordinated Indenture
contains provisions requiring adjustment of the conversion price in the event of
(i) the subdivision, combination or reclassification of the outstanding Common
Shares, (ii) the declaration of any dividend on the Common Shares in shares of
the Company's capital stock, (iii) the issuance of certain rights or warrants to
all holders of Common Shares entitling them to acquire Common Shares within 45
days after the record date for determining holders entitled to receive such
rights or warrants at less than the current market price (as defined in the
Subordinated Indenture) of the Common Shares and (iv) the distribution to
holders of Common Shares of evidence of indebtedness or assets (excluding cash
dividends or other distributions made out of earned surplus) or rights or
warrants to subscribe for or purchase Common Shares (other than those referred
to in clause (iii) above). No adjustment in the conversion price will be made
for regular quarterly or other periodic or recurring cash dividends or
distributions or for cash dividends or distributions to the extent paid from
retained earnings. The Company is not required to make adjustments in the
conversion price of less than 1% of such price, but any adjustment that would
otherwise be required to be made will be taken into account in the computation
of any subsequent adjustment. (Article 15 of the Subordinated Indenture)
If at any time the Company makes a distribution of property to its
shareholders that would be taxable to such shareholders as a dividend for United
States federal income tax purposes (including, for example, a distribution of
evidences of indebtedness or assets of the Company, but generally not including
a stock dividend or a distribution of rights to subscribe for Common Shares)
and, pursuant to the anti-dilution provisions of the Subordinated Indenture, the
Conversion Rate is increased (or the Holders of the Convertible Subordinated
Securities otherwise participate in such distribution), such increase (or
participation) may be treated as a taxable dividend to holders of the
Convertible Subordinated Securities. In addition, if the
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Conversion Rate is increased at the discretion of the Company, such increase may
result in taxable income for the holders of the Convertible Subordinated
Securities.
SUBORDINATION PROVISIONS
Payment of the principal of (including any sinking fund payments), premium,
if any, and interest, if any, on the Convertible Subordinated Securities will be
subordinated in right of payment, as set forth in the Subordinated Indenture, to
the prior payment in full of Senior Indebtedness of the Company, and no payment
with respect to the Convertible Subordinated Securities can be made by the
Company while a default exists with respect to Senior Indebtedness of the
Company. "Senior Indebtedness" is defined in the Subordinated Indenture as (i)
indebtedness of the Company theretofore or thereafter created, incurred, assumed
or guaranteed for money borrowed from banks or other lending institutions and
any other indebtedness or obligation of the Company evidenced by a bond,
debenture, note or other similar instrument, including without limitation
over-drafts, letters of credit issued for the account of the Company and
commercial paper, (ii) any other indebtedness constituting purchase money
indebtedness for the payment of which the Company is directly or contingently
liable (excluding trade accounts payable), (iii) any direct or contingent
indebtedness or obligation represented by guarantees or instruments having a
similar effect entered into by the Company (whether prior to the date of the
Subordinated Indenture or thereafter) with reference to lease or purchase money
obligations of any Subsidiary or any affiliate of the Company or any other
corporation as to which the Company holds or has an option to purchase 50% or
more of the outstanding capital stock, and (iv) renewals, extensions and
refundings of any such indebtedness, unless in any such case it is provided by
the terms of the instrument creating or evidencing such indebtedness that such
indebtedness is made on a parity with or is junior in right of payment to the
Subordinated Securities. With respect to the Company, any indebtedness which
becomes indebtedness of the Company by operation of merger, consolidation or
other acquisition, shall constitute Senior Indebtedness if such indebtedness
would have been Senior Indebtedness had it been issued by the Company. By reason
of such subordination, in the event of insolvency, holders of Senior
Indebtedness of the Company may receive more, ratably, and holders of the
Subordinated Securities may receive less, ratably, than the other creditors of
the Company. At April 30, 1995, the outstanding amount of Senior Indebtedness of
the Company was approximately $1,321,810,000. There is no limitation on the
issuance of Senior Indebtedness in the Subordinated Indenture. (Article 16 of
the Subordinated Indenture)
DESCRIPTION OF COMMON SHARES
The following is a summary of certain of the provisions concerning the
Common Shares contained in the Company's Amended Articles of Incorporation
("Articles") and its Amended Regulations ("Regulations"), as affected by debt
agreements with certain lenders. Reference is made to such Articles and
Regulations, which are exhibits to the Registration Statement, for a full and
complete statement of such provisions and rights, and the following statements
are qualified in their entirety by such reference.
AUTHORIZED NUMBER
The Articles authorize the issuance of up to 300,000,000 Common Shares. At
the close of business on April 30, 1995, there were 77,867,984 Common Shares
issued and outstanding. The outstanding Common Shares are fully paid and
non-assessable, and shareholders are not subject to any liability for calls and
assessments. The Company does not have any current plans to issue any such
additional shares. The Articles also authorize the issuance of up to 14,106,394
shares of preferred stock ("Preferred Shares"). Currently, there are no
Preferred Shares issued and outstanding.
DIVIDEND RIGHTS
Holders of Common Shares are entitled to receive such dividends as may be
declared by the Company's Board of Directors subject to provisions of law.
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VOTING RIGHTS
Each Common Share entitles the holder to one vote, with the right of
cumulative voting in the election of directors.
Notwithstanding any provision of law requiring the vote of a designated
proportion of the voting power of the Company for any action, the Articles
provide that such action may be taken by the vote of the holders of shares
entitling them to exercise a majority of the voting power of the Company, except
in each case as is otherwise provided in the Articles or Regulations. The
Articles and Regulations provide for a voting proportion which is different from
that provided by statutory law in order for shareholders to take action in
certain circumstances, including the following:
(1) Two-thirds vote required to fix or change the number of directors.
(2) Two-thirds vote required for removal of directors.
(3) Fifty percent of the outstanding shares required to call a special
meeting of shareholders.
(4) Two-thirds vote required to amend the Regulations without a
meeting.
(5) Two-thirds vote required to amend the provisions described in
items (1) through (4) above and this provision, unless such action is
recommended by two-thirds of the members of the Board of Directors.
(6) Two-thirds vote required to approve certain transactions, such as
the sale, exchange, lease, transfer or other disposition by the Company of
all, or substantially all, of its assets or business, or the consolidation
of the Company or its merger into another corporation, or certain other
mergers and majority share acquisitions.
(7) Two-thirds vote required to amend the provisions described in item
6, or this provision.
The requirement of a two-thirds vote in certain circumstances may have the
effect of delaying, deferring or preventing a change in control of the Company.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, after the payment or provision for payment of the
debts and other liabilities of the Company and the preferential amounts to which
holders of the Company's Preferred Shares are entitled (if any such Preferred
Shares are then outstanding), the holders of the Common Shares are entitled to
share pro rata in the assets of the Company remaining for distribution to
shareholders.
MISCELLANEOUS RIGHTS, LISTING AND TRANSFER AGENTS
The Common Shares have no pre-emptive or conversion rights and there are no
redemption or sinking fund provisions applicable thereto.
The outstanding Common Shares are listed on the New York, Chicago, Pacific
and London Stock Exchanges.
KeyCorp Shareholder Services, Inc., headquartered in Cleveland, Ohio, is
the transfer agent and registrar for the Common Shares.
CLASSIFICATION OF BOARD OF DIRECTORS
The Board of Directors of the Company is divided into three approximately
equal classes, having staggered terms of office of three years each. The effect
of a classified Board of Directors, where cumulative voting is in effect, is to
require the votes of more shares to elect one or more members of the Board of
Directors than would be required if the Board of Directors were not classified.
Additionally, the effect of a classified Board of Directors may be to make it
more difficult to acquire control of the Company.
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CERTAIN OHIO STATUTES
Various laws may affect the legal or practical ability of shareholders to
dispose of shares of the Company. Such laws include the Ohio statutory
provisions described below.
Chapter 1704 of the Ohio Revised Code prohibits an interested shareholder
(defined as a beneficial owner, directly or indirectly, of ten percent (10%) or
more of the voting power of any issuing public Ohio corporation) or any
affiliate or associate of an interested shareholder (as defined in Section
1704.01 of the Ohio Revised Code) from engaging in certain transactions with the
corporation during the three-year period after the interested shareholder's
share acquisition date. The prohibited transactions include mergers,
consolidations, majority share acquisitions, certain asset sales, loans, certain
sales of shares, dissolution, and certain reclassifications, recapitalizations,
or other transactions that would increase the proportion of shares held by the
interested shareholder. After expiration of the three-year period, the
corporation may participate in such a transaction with an interested shareholder
only if, among other things, (i) the transaction receives the approval of the
holders of two-thirds of all the voting shares and the approval of the holders
of a majority of the disinterested voting shares (shares not held by the
interested shareholder) or (ii) the transaction meets certain criteria designed
to ensure that the remaining shareholders receive fair consideration for their
shares. The prohibitions do not apply if, before the interested shareholder
becomes an interested shareholder, the board of directors of the corporation
approves either the interested shareholder's acquisition of shares or the
otherwise prohibited transaction. The restrictions also do not apply if a person
inadvertently becomes an interested shareholder or was an interested shareholder
prior to the adoption of the statute on April 11, 1990, unless, subject to
certain exceptions, the interested shareholder increases his, her or its
proportionate share interest on or after April 11, 1990.
Pursuant to Ohio Revised Code Section 1707.043, a public corporation formed
in Ohio may recover profits that a shareholder makes from the sale of the
corporation's securities within eighteen (18) months after making a proposal to
acquire control or publicly disclosing the possibility of a proposal to acquire
control. The corporation may not, however, recover from a person who proves in a
court of competent jurisdiction either (i) that his, her or its sole purpose in
making the proposal was to succeed in acquiring control of the corporation and
there were reasonable grounds to believe that such person would acquire control
of the corporation or (ii) such person's purpose was not to increase any profit
or decrease any loss in the stock and the proposal did not have a material
effect on the market price or trading volume of the stock. Also, before the
corporation may obtain any recovery, the aggregate amount of the profit realized
by such person must exceed $250,000. Any shareholder may bring an action on
behalf of the corporation if a corporation fails or refuses to bring an action
to recover these profits within sixty (60) days of a written request. The party
bringing such an action may recover his, her or its attorneys fees if the court
having jurisdiction over such action orders recovery of any profits.
The Company is also subject to Ohio's Control Share Acquisition Act (Ohio
Revised Code 1701.831). The Control Share Acquisition Act provides that, with
certain exceptions, a person may acquire beneficial ownership of shares in
certain ranges (one-fifth or more but less than one-third, one-third or more but
less than a majority, or a majority or more) of the voting power of the
outstanding shares of an Ohio corporation meeting certain criteria, which the
Company meets, only if such person has submitted an "acquiring person statement"
and the proposed acquisition has been approved by the vote of a majority of the
shares of the corporation represented at a special meeting called for such
purpose and by a majority of such shares of the corporation excluding
"interested shares," as defined in Section 1701.01 of the Ohio Revised Code.
DESCRIPTION OF DEBT WARRANTS
The Company may issue Debt Warrants in registered or bearer certificated
form for the purchase of Senior Securities. Debt Warrants may be issued together
with or separately from any Debt Securities or Preferred Shares offered by any
Prospectus Supplement and, if issued together with any Debt Securities or
Preferred Shares, may be attached to or separate from such Debt Securities. Debt
Warrants are to be issued under warrant agreements (each, a "Debt Warrant
Agreement") to be entered into between the Company and one or more banks or
trust companies, as debt warrant agent (each, a "Debt Warrant Agent"), all as
set forth in the Prospectus Supplement relating to the particular issue of Debt
Warrants. A copy of the form of
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Debt Warrant Agreement, including a form of debt warrant certificate
representing the Debt Warrants (a "Debt Warrant Certificate") are filed as
exhibits to the Registration Statement. The following summaries of certain
provisions of the Debt Warrant Agreement and Debt Warrant Certificates do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Debt Warrant Agreement and the Debt
Warrant Certificate. Capitalized terms used in this description of Debt Warrants
but not defined herein have the meanings ascribed to such terms in the Debt
Warrant Agreement.
The particular terms of and other information with respect to each issue of
Debt Warrants, as well as any modifications or additions to the general terms of
the Debt Warrant Agreement or Debt Warrant Certificate which may be applicable
in the case of such Debt Warrants, will be described in the Prospectus
Supplement relating to such Debt Warrants. Accordingly, for a description of the
terms of a particular issue of Debt Warrants, reference must be made both to the
Prospectus Supplement relating thereto and to the following description.
GENERAL
The Prospectus Supplement will describe the terms of the Debt Warrants
offered thereby, the Debt Warrant Agreement relating to such Debt Warrants and
the Debt Warrant Certificate representing such Debt Warrants, including the
following: (1) the initial offering price; (2) the title and aggregate number of
such Debt Warrants; (3) the designation, aggregate principal amount and other
terms of the Senior Securities purchasable upon exercise of the Debt Warrants;
(4) if applicable, the designation and terms of the Debt Securities or Preferred
Shares with which the Debt Warrants are issued and the number of Debt Warrants
issued with each such Debt Security or Preferred Share; (5) if applicable, the
date on and after which the Debt Warrants and the related Debt Securities or
Preferred Shares will be separately transferable; (6) the principal amount of
Senior Securities purchasable upon exercise of one Debt Warrant and the price at
which such principal amount of Senior Securities may be purchased upon such
exercise; (7) the date on which the right to exercise the Debt Warrants shall
commence and the date (the "Debt Warrant Expiration Date") on which such right
shall expire; (8) if applicable, a discussion of United States federal income
tax consequences applicable to the exercise of the Debt Warrants and to the
Senior Securities purchasable upon the exercise of the Debt Warrants; (9) the
identity of the Debt Warrant Agent; (10) whether the Debt Warrants represented
by the Debt Warrant Certificates will be issued in registered or bearer form,
and if registered, where they may be transferred or registered; and (11) any
other terms of the Debt Warrants.
Debt Warrant Certificates may be exchanged for new Debt Warrant
Certificates of different denominations and, if in registered form, may be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Debt Warrant Agent or any other office indicated in the
Prospectus Supplement relating thereto. (Section 3.01 of the Debt Warrant
Agreement) Prior to exercise of Debt Warrants, holders of Debt Warrants will not
be entitled to payments of principal of (or premium, if any) or interest, if
any, on the Senior Securities purchasable upon such exercise or to enforce any
of the covenants in the Senior Indenture. (Section 4.01 of the Debt Warrant
Agreement)
EXERCISE OF DEBT WARRANTS
Unless otherwise provided in the Prospectus Supplement, each Debt Warrant
will entitle its holder to purchase such principal amount of Senior Securities
at such exercise price and in the manner as shall in each case be set forth in,
or calculated from, the Prospectus Supplement relating to the Debt Warrants
offered thereby. (Sections 1.01 and 2.01 of the Debt Warrant Agreement.) Debt
Warrants may be exercised at any time up to the close of business on the Debt
Warrant Expiration Date set forth in the Prospectus Supplement relating to such
Debt Warrants offered thereby. After the close of business on the Debt Warrant
Expiration Date (or such later date to which such Debt Warrant Expiration Date
may be extended by the Company), unexercised Debt Warrants will be void.
(Section 2.02 of the Debt Warrant Agreement)
Debt Warrants may be exercised by delivery to the Debt Warrant Agent of
payment as provided in the Prospectus Supplement of the amount required to
purchase the Senior Securities purchasable upon such exercise together with the
purchase form in the Debt Warrant Certificate duly executed. Debt Warrants will
be deemed to have been exercised upon receipt of the exercise price and the duly
executed and completed
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Debt Warrant Certificate evidencing such Debt Warrants. Upon receipt of such
payment and the Debt Warrant Certificate duly executed and completed at the
corporate trust office of the Debt Warrant Agent or any other office indicated
in the Prospectus Supplement, the Company will, as soon as practicable, issue
and deliver the Debt Securities purchasable upon such exercise. If fewer than
all of the Debt Warrants represented by such Debt Warrant Certificate are
exercised, a new Debt Warrant Certificate will be issued for the remaining
amount of Debt Warrants. (Section 2.03 of the Debt Warrant Agreement)
MODIFICATIONS
The Debt Warrant Agreement and the terms of the Debt Warrants may be
amended by the Company and the Debt Warrant Agent, without the consent of the
holders of any Debt Warrant Certificate, for the purpose of curing any
ambiguity, or curing, correcting or supplementing any defective provision
contained therein, or in any other manner which the Company and the Debt Warrant
Agent may deem necessary or desirable and which will not adversely affect the
interests of the holders of Debt Warrant Certificates. The Company and the Debt
Warrant Agent also may modify or amend the Debt Warrant Agreement and the terms
of the Debt Warrants, with the consent of the beneficial owners of not less than
a majority in number of the then outstanding unexercised Debt Warrants affected,
provided that no such modification or amendment that increases the exercise
price, shortens the period of time during which the Debt Warrants may be
exercised or otherwise materially and adversely affects the exercise rights of
the owners of the Debt Warrants or reduces the number of Debt Warrants, the
consent of whose owners is required for modification or amendment of the Debt
Warrant Agreement or the terms of the Debt Warrants, may be made without the
consent of the owners affected thereby. (Section 6.03 of the Debt Warrant
Agreement)
MERGER, CONSOLIDATION, SALE OR OTHER DISPOSITIONS
Under the Debt Warrant Agreement, the Company may, to the extent permitted
in the Senior Indenture, consolidate with, or sell or convey all or
substantially all of its assets to, or merge with or into, any other Person. If
at any time there shall be a merger, consolidation, sale, transfer, conveyance
or other disposition of substantially all of the assets of the Company, the
successor or assuming Person shall succeed to and be substituted for the
Company, with the same effect as if it had been named in the Debt Warrant
Agreement and in the Debt Warrants as the Company. The Company shall thereupon
be relieved of any further obligation under the Debt Warrant Agreement or under
the Debt Warrants. (Sections 6.01 and 6.02 of the Debt Warrant Agreement)
ENFORCEABILITY OF RIGHTS BY HOLDERS; GOVERNING LAW
The Debt Warrant Agent will act solely as an agent of the Company in
connection with the Debt Warrant Certificates and will not assume any obligation
or relationship of agency or trust for or with any holders of Debt Warrant
Certificates. (Section 5.02 of the Debt Warrant Agreement) Holders, without the
consent of the Debt Warrant Agent, the Senior Trustee, the holder of any Senior
Securities issued upon exercise of Debt Warrants or the holder of any other Debt
Warrant Certificates, may enforce by appropriate legal action, on their own
behalf, their right to exercise their Debt Warrants in the manner provided in
their Debt Warrant Certificates and the Debt Warrant Agreement. (Section 4.02 of
the Debt Warrant Agreement) Prior to the exercise of their Debt Warrants,
holders of Debt Warrants will not have any of the rights of holders of the
Senior Securities purchasable upon such exercise, including the right to receive
payments of principal of (and premium, if any) or interest, if any, on the
Senior Securities purchasable upon such exercise or to enforce covenants in the
Senior Indenture. (Section 4.01 of the Debt Warrant Agreement) Except as may
otherwise be provided in the Prospectus Supplement relating thereto, each issue
of Debt Warrants and the applicable Debt Warrant Agreement will be governed by
and construed in accordance with the laws of the State of New York. (Section
6.07 of the Debt Warrant Agreement)
DESCRIPTION OF PREFERRED SHARES
The description below sets forth certain general terms and provisions of
the Preferred Shares. The specific terms of and other information with respect
to the Preferred Shares offered by any Prospectus Supplement
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(the "Offered Preferred Shares") including, but not limited to, tax consequences
relating to the purchase, ownership, disposition and conversion of Offered
Preferred Shares will be described in the Prospectus Supplement relating to such
Offered Preferred Shares. The following summaries of certain provisions of the
Preferred Shares do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the Certificate of Designations
relating to the particular series of Preferred Shares, which will be filed with
the Commission at or prior to the time of the sale of such Preferred Shares.
If so indicated in the Prospectus Supplement, the terms of the Offered
Preferred Shares may differ from the terms set forth below, except those terms
required by the Articles.
GENERAL
Under the Articles, the Board of Directors of the Company is authorized at
any time and from time to time and without further shareholder action to adopt
resolutions providing for the issuance, in one or more series, of up to
14,106,394 Preferred Shares, without par value and of equal rank with such
designations, number of shares, dividend rates, dividend payment dates, and
dates from which dividends shall be cumulative, redemption rights or prices,
sinking fund provisions, liquidation prices, conversion rights and restrictions
on the issuance of shares of the same series or any other class or series, as
may be determined by the Board of Directors. As of the date of this Prospectus,
the Company has no Preferred Shares outstanding.
The Preferred Shares shall have the dividend, liquidation, redemption,
voting rights and conversion rights set forth below unless otherwise provided in
the Prospectus Supplement relating to a particular series of Offered Preferred
Shares. The Prospectus Supplement will set forth the following terms of the
Offered Preferred Shares: (1) the title and stated value of the Offered
Preferred Shares, the liquidation preference per share and the number of shares
offered; (2) the price at which the Offered Preferred Shares will be issued; (3)
the dividend rates and dates on which dividends shall be payable, as well as the
dates from which dividends shall commence to cumulate or the method(s) of
calculation thereof; (4) the period or periods within which, the price or prices
at which and the terms and conditions upon which the Offered Preferred Shares
may be redeemed, in whole or in part, at the option of the Company, if the
Company is to have that option; (5) the obligation, if any, of the Company to
redeem or purchase the Offered Preferred Shares pursuant to any sinking fund or
analogous provisions or at the option of a holder thereof and the period or
periods within which, the price or prices at which and the terms and conditions
upon which the Offered Preferred Shares shall be redeemed or purchased in whole
or in part pursuant to such obligation; (6) any rights on the part of the holder
to convert the Offered Preferred Shares into Common Shares of the Company; (7)
any additional dividend, liquidation, redemption, sinking fund, voting and other
rights, preferences, privileges, limitations and restrictions; (8) the terms of
any Debt Warrants being offered together with or separately from the Offered
Preferred Shares; (9) the national securities exchange, if any, upon which the
Offered Preferred Shares will be listed; (10) the procedures for any auction or
remarketing, if any, of the Offered Preferred Shares; and (11) any other terms
of the Offered Preferred Shares.
The Preferred Shares will be fully paid and nonassessable, and for each
share issued, a sum equal to the stated value will be credited to the Company's
preferred stock account.
DIVIDENDS
Holders of the Offered Preferred Shares will be entitled to receive cash
dividends, when and as declared by the Board of Directors of the Company out of
assets of the Company legally available for payment, at such rate and on such
quarterly dates as will be set forth in the applicable Prospectus Supplement.
Each dividend will be payable to holders of record as they appear on the stock
books of the Company on the record dates fixed by the Board of Directors of the
Company. Dividends will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If, for any dividend period or periods, full
cumulative dividends on any Preferred Shares have not been paid or declared and
set apart for payment or the Company is in default with respect to the
redemption of Preferred Shares or any sinking fund for any Preferred Shares, the
Company may not declare any dividends (except a dividend payable in Common
Shares or in any other shares of the Company ranking junior to the Preferred
Shares) on, or make any distribution (except as aforesaid) on the Common Shares
or any other shares of the Company, or make any payment on account of the
purchase,
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redemption or other retirement of, its Common Shares or any other shares of the
Company (except out of the proceeds of the sale of Common Shares or any other
shares ranking junior to the Preferred Shares). If dividends on Preferred Shares
are in arrears, and there shall be outstanding shares of any other series of
Preferred Shares ranking on a parity as to dividends with the Preferred Shares,
the Company, in making any dividend payment on account of such arrears, is
required to make payments ratably upon all outstanding Preferred Shares and such
other series of Preferred Shares in proportion to the respective amounts of
dividends in arrears on such Preferred Shares and shares of such other series.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Offered Preferred Shares will be
entitled to receive out of assets of the Company available for distribution to
shareholders, before any distribution of assets is made to holders of Common
Shares, liquidating distributions in the amount set forth in the applicable
Prospectus Supplement plus all accrued and unpaid dividends. If, upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the amounts payable with respect to the Preferred Shares and any other shares of
the Company ranking as to any such distribution on a parity with the Preferred
Shares are not paid in full, the holders of the Preferred Shares and of such
other shares will share ratably in any such distribution of assets of the
Company in proportion to the full respective preferential amounts to which they
are entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the holders of Preferred Shares will not be entitled
to any further participation in any distribution of assets by the Company. A
consolidation or merger of the Company with or into any other corporation or
corporations or a sale of all or substantially all of the assets of the Company
shall not be deemed to be a liquidation, dissolution or winding up of the
Company.
REDEMPTION
The Offered Preferred Shares will be redeemable in whole or in part at the
option of the Company, at the times and at the redemption prices set forth in
the applicable Prospectus Supplement.
The Company may not redeem less than all the outstanding shares of any
series of Preferred Shares unless full cumulative dividends have been paid or
declared and set apart for payment upon all outstanding shares of such series of
Preferred Shares for all past dividend periods, and unless all matured
obligations of the Company with respect to all sinking funds, retirement funds
or purchase funds for all series of Preferred Shares then outstanding have been
met.
VOTING RIGHTS
The holders of the Offered Preferred Shares are entitled to one vote per
share on all matters presented to shareholders of the Company.
If the equivalent of six quarterly dividends payable on any series of
Preferred Shares are in default (whether or not declared or consecutive), the
holders of all outstanding series of Preferred Shares, voting as a single class
without regard to series, will be entitled to elect two directors until all
dividends in default have been paid or declared and set apart for payment. The
holders of Preferred Shares shall not have or exercise such special class voting
rights except at meetings of the shareholders for the election of directors at
which the holders of not less than a majority of the outstanding Preferred
Shares of all series are present in person or by proxy.
The affirmative vote of the holders of at least two-thirds of the
outstanding Preferred Shares voting as a single class without regard to series,
will be required (i) for any amendment of the Articles or Regulations that will
adversely affect the preferences, rights or voting powers of the Preferred
Shares, but, in any case in which one or more, but not all, series of Preferred
Shares would be so affected as to their preferences, rights or voting powers,
only the consent of holders of at least two-thirds of the shares of each series
that would be so affected, voting separately as a class, shall be required or
(ii) to issue any class of stock that shall have preference as to dividends or
distribution of assets over any outstanding series of Preferred Shares.
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The affirmative vote of the holders of a majority of the outstanding
Preferred Shares shall be necessary to increase the authorized number of
Preferred Shares or to authorize any shares ranking on a parity with the
Preferred Shares. The Regulations may be amended to increase the number of
directors, without the vote of the holders of outstanding Preferred Shares.
CONVERSION RIGHTS
The Prospectus Supplement for any series of Offered Preferred Shares will
state whether shares in that series are convertible into Common Shares. Unless
otherwise provided in the applicable Prospectus Supplement, if a series of
Preferred Shares is convertible into Common Shares ("Convertible Preferred
Shares"), holders of such Convertible Preferred Shares will have the right, at
their option and at any time, to convert any of such Convertible Preferred
Shares, at the conversion rate set forth in the Prospectus Supplement relating
to such Convertible Preferred Shares, subject to adjustment as specified below,
provided that if such series of Convertible Preferred Shares is called for
redemption, the conversion rights pertaining thereto will terminate at the close
of business on the date before the redemption date.
Unless otherwise indicated in the applicable Prospectus Supplement, the
conversion rate is subject to adjustment in certain events, including the
following: (1) the issuance of Common Shares or capital shares of any other
class as a dividend or distribution on the Common Shares; (2) subdivisions and
combinations of the Common Shares; (3) the issuance to all holders of Common
Shares of certain rights or warrants entitling them to subscribe for or purchase
Common Shares (or securities convertible into Common Shares) within the period
specified in the Prospectus Supplement after the date fixed for the
determination of the shareholders entitled to receive such rights or warrants,
at less than the current market price (as defined in the Certificate of
Designations for such series of Convertible Preferred Shares); and (4) the
distribution to all holders of Common Shares of evidences of indebtedness or
assets of the Company (excluding certain cash dividends and distributions
described above) or rights or warrants (excluding those referred to above).
No adjustments in the conversion rate will be made as a result of regular
quarterly or other periodic or recurring cash dividends or distributions or for
cash dividends or distributions to the extent paid from retained earnings. No
adjustment in the conversion price will be required unless such adjustment would
require a change of at least 1% in the conversion price then in effect or a
period of three years shall have elapsed from the date of occurrence of any
event requiring any such adjustment; provided that any adjustment that would
otherwise be required to be made shall be carried forward and taken into account
in any subsequent adjustment. The Company reserves the right to make such
increases in the conversion rate in addition to those required in the foregoing
provisions as the Company in its discretion shall determine to be advisable in
order that certain stock-related distributions or subdivisions of the Common
Shares hereafter made by the Company to its shareholders shall not be taxable.
Except as stated above, the conversion rate will not be adjusted for the
issuance of Common Shares or any securities convertible into or exchangeable for
Common Shares, or securities carrying the right to purchase any of the
foregoing.
In the case of (i) any reclassification or change of the Common Shares,
(ii) a consolidation or merger involving the Company or (iii) a sale or
conveyance to another corporation of the property and assets of the Company as
an entirety or substantially as an entirety, in each case as a result of which
holders of Common Shares shall be entitled to receive stock, securities, other
property or assets (including cash) with respect to or in exchange for such
Common Shares, the holders of the Convertible Preferred Shares then outstanding
will be entitled thereafter to convert such Convertible Preferred Shares into
the kind and amount of shares and other securities or property which they would
have received upon such reclassification, change, consolidation, merger,
combination, sale or conveyance had such Convertible Preferred Shares been
converted into Common Shares immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance.
In the event of a taxable distribution to holders of Common Shares (or
other transaction) which results in any adjustment of the conversion rate, the
holders of Convertible Preferred Shares may, in certain circumstances, be deemed
to have received a distribution subject to United States federal income tax as a
dividend; in certain other circumstances, the absence of such an adjustment may
result in a taxable dividend to the holders of Common Shares or the Convertible
Preferred Shares.
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PLAN OF DISTRIBUTION
The Company may sell Securities in any of three ways: (i) directly to a
limited number of institutional purchasers or to a single purchaser; (ii) to or
through underwriters or dealers; or (iii) through agents. Any such underwriter
or underwriters, dealer or dealers or agent or agents involved in the offer and
sale of Securities in respect of which this Prospectus is delivered (the
"Offered Securities") will be named in the Prospectus Supplement. The Prospectus
Supplement relating to the Offered Securities will also set forth the terms of
the offering of the Offered Securities, including the purchase price of the
Offered Securities and the proceeds to the Company from such sale, any
underwriting discounts and other items constituting underwriters' compensation,
any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers and any securities exchanges on which the Offered
Securities may be listed.
If underwriters are used in an offering of Offered Securities, the name of
each managing underwriter and any other underwriters and the terms of the
transaction, including any underwriting discounts and other items constituting
compensation of the underwriters and dealers, if any, will be set forth in the
Prospectus Supplement relating to such offering, and the Offered Securities will
be acquired by the underwriters for their own accounts and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. Any initial public offering price and any discounts or concessions allowed
or reallowed or paid to dealers may be changed from time to time. It is
anticipated that any underwriting agreement pertaining to any Offered Securities
will (1) entitle the underwriters to indemnification by the Company against
certain civil liabilities under the Securities Act, or to contribution with
respect to payments which the underwriters may be required to make in respect
thereof, (2) provide that the obligations of the underwriters will be subject to
certain conditions precedent and (3) provide that the underwriters will be
obligated to purchase all Offered Securities if any are purchased.
If a dealer is used in an offering of Offered Securities, the Company will
sell such Offered Securities to the dealer, as principal. The dealer may then
resell such Offered Securities to the public at varying prices to be determined
by such dealer at the time of resale. The name of the dealer and the terms of
the transaction will be set forth in the Prospectus Supplement relating thereto.
If an agent is used in an offering of Offered Securities, the agent will be
named, and the terms of the agency will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in such Prospectus
Supplement, an agent will act on a best efforts basis for the period of its
appointment.
Dealers and agents named in a Prospectus Supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the Offered
Securities described therein and, under agreements which may be entered into
with the Company, may be entitled to indemnification by the Company against
certain civil liabilities under the Securities Act. Underwriters, dealers and
agents may be customers of, engage in transactions with or perform services for
the Company in the ordinary course of business.
Offers to purchase Offered Securities may be solicited, and sales thereof
may be made, by the Company directly to institutional investors or others, who
may be deemed to be underwriters within the meaning of the Securities Act with
respect to any resales thereof. The terms of any such offer will be set forth in
the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other agents of the Company to solicit offers by certain
institutional investors to purchase Offered Securities from the Company pursuant
to contracts providing for payment and delivery at a future date. Institutional
investors 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 purchasers must be
approved by the Company. The obligations of any purchaser under any such
contract will not be subject to any conditions except that (1) the purchase of
the Offered Securities shall not at the time of delivery be prohibited under the
laws of any jurisdiction to which such purchaser is subject and which govern
such investment and (2) if the Offered Securities are also being sold to
underwriters, the Company shall have sold to such underwriters the Offered
Securities not subject to delayed delivery. Underwriters and other agents will
not have any responsibility in respect of the validity or performance of such
contracts.
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The anticipated date of delivery of Offered Securities will be set forth in
the Prospectus Supplement relating to each offering.
LEGAL OPINIONS
The validity of the Securities will be passed upon for the Company by G. L.
Gherlein, Executive Vice President and General Counsel of the Company, and for
the underwriters, if any, by Shearman & Sterling, 599 Lexington Avenue, New
York, New York 10022. Mr. Gherlein is paid a salary by the Company and
participates in various employee benefit plans offered to officers of the
Company generally.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 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 herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
26
<PAGE> 34
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THAT DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company............................. S-3
Description of Debentures............... S-3
Use of Proceeds......................... S-4
Selected Historical Financial
Information........................... S-5
Underwriting............................ S-7
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Available Information................... 2
Incorporation of Certain Documents by
Reference............................. 2
The Company............................. 3
Risk Factors Relating to Currencies..... 3
Use of Proceeds......................... 3
Ratio of Earnings to Fixed Charges...... 3
Description of Debt Securities.......... 4
Description of Common Shares............ 17
Description of Debt Warrants............ 19
Description of Preferred Shares......... 21
Plan of Distribution.................... 25
Legal Opinions.......................... 26
Experts................................. 26
</TABLE>
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$150,000,000
(LOGO)
EATON CORPORATION
6 1/2% DEBENTURES DUE
JUNE 1, 2025
---------------------------
PROSPECTUS SUPPLEMENT
June 5, 1995
---------------------------
LEHMAN BROTHERS
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