<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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EATON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
34-0196300
(IRS EMPLOYER IDENTIFICATION NO.)
Eaton Center, 1111 Superior Avenue, Cleveland, Ohio 44114-2584, (216) 523-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
E. R. FRANKLIN, Secretary
Eaton Corporation, Eaton Center, 1111 Superior Avenue, Cleveland, Ohio
44114-2584, (216) 523-4103
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
Copies to:
JONATHAN JEWETT
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
From time to time after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1)(2) PRICE PER UNIT(2) OFFERING PRICE(2) FEE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Debt Securities........................ | 100% |
- --------------------------------------- | -------------------- |
Debt Warrants(3)....................... | -- |
- --------------------------------------- -->$1,400,000,000 -------------------- -->$1,400,000,000 $389,200
Preferred Shares(4).................... | -- |
- --------------------------------------- | -------------------- |
Common Shares, par value 50c per | |
share(5)............................. | -- |
===========================================================================================================================
</TABLE>
================================================================================
(1) In U.S. dollars or the equivalent thereof in any other currency or
currencies, currency unit or units or composite currency or currencies.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) Debt Warrants entitling the holder to purchase Debt Securities may be sold
separately or with Debt Securities as units. It is not practicable to
determine the number of Debt Warrants and proposed maximum offering price
per Debt Warrant at this time as they will depend, among other things, on
the denominations or stated values of the Debt Securities covered by the
Debt Warrants, the duration of the Debt Warrants and prevailing interest
rates at the time of the offering.
(4) Such indeterminate number of Preferred Shares as may, from time to time, be
issued at indeterminate prices.
(5) Such indeterminate number of Common Shares as may, from time to time, be
issued at indeterminate prices, including Common Shares issuable upon
conversion of any Subordinated Debt Securities and Preferred Shares that are
convertible into Common Shares. Such number of Common Shares also includes
shares initially offered or sold outside the United States that are sold or
resold in the United States. Offers and sales of such shares outside the
United States are not registered under this Registration Statement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 12, 1999
[LOGO]
EATON CORPORATION
---------------------------------------------------
By this prospectus, we offer
up to $1,400,000,000 of the following:
<TABLE>
<S> <C>
DEBT SECURITIES PREFERRED SHARES
DEBT WARRANTS COMMON SHARES
</TABLE>
We will provide the specific terms and the initial public offering prices
of these securities in supplements to this prospectus. This prospectus may not
be used to sell securities unless accompanied by a prospectus supplement. You
should read this prospectus and the prospectus supplements carefully before you
invest.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 1999.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information......................... 2
The Company................................................. 3
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Prospectus.................................................. 3
Prospectus Supplement....................................... 4
Description of Debt Securities.............................. 4
Description of Debt Warrants................................ 20
Description of Preferred Shares............................. 22
Description of Common Shares................................ 25
Plan of Distribution........................................ 28
Legal Opinions.............................................. 28
Experts..................................................... 29
</TABLE>
<PAGE> 4
WHERE YOU CAN FIND MORE
INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's public reference rooms at 450 Fifth Street,
N.W., Washington D.C. 20549, and in New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
web site at http://www.sec.gov. Our common shares are listed on the New York
Stock Exchange, the Chicago Stock Exchange, the Pacific Exchange and the London
Stock Exchange, and information about us also is available there.
This prospectus is part of a registration statement that we have filed with
the SEC. The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to other documents that we identify as part of this prospectus.
Our subsequent filings of similar documents with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (1) after the date of
the filing of this registration statement and before its effectiveness and (2)
until our offering of securities has been completed.
- Annual Report on Form 10-K for the year ended December 31, 1997.
- Definitive proxy statement dated March 13, 1998 concerning our Annual
Meeting of Shareholders on April 22, 1998.
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June
30, 1998 and September 30, 1998.
- Current Reports on Form 8-K dated February 3, 1998, April 2, 1998 and
October 8, 1998.
You may obtain a copy of these filings at no cost, by writing to or
telephoning us at the following address:
Eaton Corporation
Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2584
Attn: Shareholder Relations
(216) 523-5000
You should rely only on the information incorporated by reference or provided
in this prospectus or any supplement. We have not authorized anyone else to
provide you with different information. This prospectus is an offer to sell or
buy only the securities described in this document, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of the date of this prospectus.
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THE COMPANY
We are a global manufacturer of highly-engineered products which serve the
industrial, vehicle, construction, commercial and semiconductor markets, with
operations in 25 countries.
Our operations are categorized into these five business segments:
- Automotive Components
- Hydraulics and Other Components
- Industrial and Commercial Controls
- Semiconductor Equipment
- Truck Components
Our principal executive office is located at Eaton Center, 1111 Superior
Avenue, Cleveland, Ohio 44114-2584 and our telephone number is (216) 523-5000.
USE OF PROCEEDS
Except as may be described otherwise in a prospectus supplement, the net
proceeds from the sale of the securities under this prospectus will be added to
our general funds and will be available for general corporate purposes,
including investments and acquisitions and refinancing of indebtedness.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our ratio of earnings to fixed charges for the
nine months ended September 30, 1998 and for each of the five years in the
period ended December 31, 1997.
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------------------
SEPTEMBER 30, 1998 1997 1996 1995 1994 1993
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges..... 4.78 6.30 5.04 5.96 5.19 3.76
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consist of consolidated pretax income before adjustment for minority
interests in consolidated subsidiaries or income (loss) of equity investees,
plus (1) amortization of capitalized interest, (2) distributed income of equity
investees and (3) fixed charges described below, excluding capitalized interest.
"Fixed charges" consist of (1) interest expensed, (2) interest capitalized, (3)
amortization of debt issue costs and (4) that portion of rent expense estimated
to represent interest. Because we have not had any Preferred Shares outstanding
during the last five years and have, therefore, not paid any dividends on
Preferred Shares, our ratio of earnings to combined fixed charges and Preferred
Share dividends has been the same as the ratio of earnings to fixed charges for
each of the above periods.
PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may
sell any combination of the following securities in one or more offerings up to
a total dollar amount of $1,400,000,000 (or the equivalent thereof if any of the
securities are denominated in a currency, currency unit or composite currency
("Currency") other than the U.S. dollar):
- Unsecured debt securities which may be either senior (the "Senior
Securities") or subordinated (the "Subordinated Securities").
Subordinated Securities may be convertible into our common shares
("Convertible Subordinated Securities"). In this prospectus, we will
refer to Senior
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Securities, Subordinated Securities and Convertible Subordinated
Securities together as the "Debt Securities."
- Warrants to purchase Debt Securities ("Debt Warrants").
- Preferred shares ("Preferred Shares").
- Common shares with a par value of $0.50 per share ("Common Shares").
We will refer to the above securities that we may offer or sell under this
prospectus as the "Offered Securities." The Offered Securities, together with
any Debt Securities issuable upon exercise of Debt Warrants, or other securities
issuable upon conversion or exchange of other Offered Securities, will be
referred to as the "Securities."
PROSPECTUS SUPPLEMENT
This prospectus provides you with a general description of the Debt
Securities, Debt Warrants, Preferred Shares and Common Shares we may offer. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add to, update or change information contained in this
prospectus and, accordingly, to the extent inconsistent, such information will
be superseded by the information in the prospectus supplement. You should read
both this prospectus and any prospectus supplement together with additional
information described under the heading "Where You Can Find More Information."
The prospectus supplement to be attached to the front of this prospectus
will describe:
- the terms of any Debt Securities that we offer, including their
title, ranking, aggregate principal amount, maturity, rate of any
interest (or manner of calculation) and time of payment of principal
and/or interest, any redemption or repayment terms, the Currency or
Currencies in which such Debt Securities will be denominated or
payable, any index, formula, or other method pursuant to which
principal, premium, or interest may be determined, any terms for
conversion or exchange and the form of such Debt Securities
(registered, bearer, global and/or certificate);
- the terms of any Debt Warrants that we offer, including the exercise
price, detachability, expiration date and other terms;
- the terms of any Preferred Shares that we offer, including the
specific designations and dividend, redemption, liquidation, voting
and other rights not described in this prospectus and any terms for
conversion or exchange;
- the terms of any Common Shares that we offer; and
- any initial public offering price, the purchase price and net
proceeds to our company and the other specific terms related to our
offering of such Securities.
For more details on the terms of the Securities, you should read the
exhibits filed with our registration statements.
DESCRIPTION OF DEBT SECURITIES
We may issue Debt Securities from time to time in one or more distinct
series. This section summarizes terms of the Debt Securities that are common to
all series. Most of the financial and other terms of any series of Debt
Securities that we offer will be described in a prospectus supplement to be
attached to the front of this prospectus. Since the terms of specific Debt
Securities may differ from the general information we have provided below, you
should rely on information in the prospectus supplement that is inconsistent
with the information below. As used in this section, "we", "us", "our" and "our
company" refer to Eaton Corporation and not to its subsidiaries, unless the
context otherwise requires.
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The Debt Securities are governed by a document called an "Indenture." An
Indenture is a contract between us and a financial institution acting as Trustee
on your behalf. The Trustee has two main roles. First, the Trustee can enforce
your rights against us if we default. There are some limitations on the extent
to which the Trustee acts on your behalf, described later on page 10 of this
prospectus. Second, the Trustee performs certain administrative duties for us.
Senior Securities will be issued under an Indenture dated as of April 1,
1994, as supplemented from time to time (the "Senior Indenture"), which we
entered into with Chemical Bank, as trustee (the "Senior Trustee"), and
Subordinated Securities will be issued under a separate indenture (the
"Subordinated Indenture"), which we will enter into with a trustee (the
"Subordinated Trustee") if we decide to issue any Subordinated Securities. The
Chase Manhattan Bank, as successor by merger to Chemical Bank, is acting as
Senior Trustee. The term "Trustee" refers to either the Senior Trustee or the
Subordinated Trustee, as appropriate. We will refer to the Senior Indenture and
the Subordinated Indenture, as executed, together as the "Indentures" and each
as an "Indenture." The Indentures are subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA").
The Indentures and associated documents contain the full legal text of the
matters described in this section. We have filed the form of each Indenture as
an exhibit to a registration statement that we have filed with the SEC. See
"Where You Can Find More Information" on page 2 of this prospectus for
information on how to obtain copies of the Indentures.
Because this section is a summary, it does not describe every aspect of the
Debt Securities. This summary is subject to and qualified in its entirety by
reference to all the provisions of the Indentures, including definitions of
certain terms used in the Indentures. For example, in this section, we use
capitalized words to signify terms that are specifically defined in the
Indentures. Some of the definitions are repeated in this prospectus, but for the
rest you will need to read the Indentures. We also include references in
parentheses to certain sections of the Indentures or the TIA. Whenever we refer
to particular sections or defined terms of the Indentures in this prospectus or
in the prospectus supplement, such sections or defined terms are incorporated by
reference in this prospectus or in the prospectus supplement. Unless otherwise
noted, the section numbers refer to the applicable section for both Indentures.
PROVISIONS APPLICABLE TO BOTH THE SENIOR AND SUBORDINATED INDENTURES
GENERAL
The Debt Securities will be our unsecured obligations. The Senior
Securities will rank equally with all of our other unsecured and unsubordinated
indebtedness. The Subordinated Securities will be subordinated in right of
payment to the prior payment in full of our Senior Indebtedness as described
below under "--Subordinated Indenture Provisions--Subordination."
Under the Indentures, we may issue any Debt Securities offered under this
prospectus and the attached prospectus supplement ("Offered Debt Securities")
and any Debt Securities issuable upon the exercise of Debt Warrants or upon
conversion or exchange of other Offered Securities ("Underlying Debt
Securities"), as well as other of our unsecured debt securities, in one or more
series.
With respect to the Offered Debt Securities and any Underlying Debt
Securities, you should read the prospectus supplement for the following and
other terms, which will be established pursuant to authority granted by one or
more resolutions of our Board of Directors before the issuance of the Debt
Securities:
(1) The title of the Debt Securities and whether they will be Senior
Securities or Subordinated Securities, including whether Subordinated
Securities are Convertible Subordinated Securities;
(2) The total principal amount of the Debt Securities and any limit on
the total principal amount of Debt Securities of each series;
(3) The date or dates, or how the date or dates will be determined or
extended, when the principal of the Debt Securities will be payable;
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(4) The interest rate or rates which the Debt Securities will bear, if
any, or how such rate or rates will be determined, the date or dates from
which interest will accrue, if any, or how such date or dates will be
determined, the interest payment dates, the record dates for such payments,
if any, or how such date or dates will be determined and the basis upon
which interest will be calculated, if other than that of a 360-day year of
twelve 30-day months;
(5) Whether the amount of payments of principal of (or premium, if
any) or interest on the Debt Securities will be determined with reference
to an index, formula or other method (which could be based on one or more
Currencies, commodities, equity indices or other indices) and how such
amounts will be determined;
(6) Any optional redemption provisions;
(7) Any sinking fund or other provisions that would obligate us to
repurchase or redeem the Debt Securities;
(8) If other than U.S. dollars, the Currency or Currencies of the Debt
Securities;
(9) If other than denominations of $1,000 in the case of Registered
Securities and $5,000 in the case of Bearer Securities, the denominations
in which the offered Debt Securities will be issued;
(10) If not the principal amount of the Debt Securities, the portion
of the principal amount at which the Debt Securities will be issued and, if
not the principal amount of the Debt Securities, the portion of the
principal amount payable upon acceleration of the maturity of the Debt
Securities or how that portion will be determined;
(11) The form of the Debt Securities, including whether the Debt
Securities are to be issuable in permanent or temporary global form, as
Registered Securities, Bearer Securities or both, any restrictions on the
offer, sale or delivery of Bearer Securities, and the terms, if any, upon
which you may exchange Bearer Securities of the series for Registered
Securities of the series and vice versa (if permitted by applicable laws
and regulations);
(12) Any modifications or additions to the provisions of Article
Fourteen of the applicable Indenture described under "Defeasance and
Covenant Defeasance" if that Article is applicable to the Debt Securities;
(13) Any changes or additions to the Events of Default or our
covenants with respect to the Debt Securities;
(14) The place or places, if any, other than or in addition to The
City of New York, of payment, transfer, conversion and/or exchange of the
Debt Securities, and where notices or demands to or upon us in respect of
the Debt Securities may be served;
(15) Whether we or a holder may elect payment of the principal of or
interest, if any, on the 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,
that election may be made, and the time and manner of determining the
exchange rate between the Currency or Currencies in which they are stated
to be payable and the Currency or Currencies in which they are to be so
payable;
(16) If other than the Trustee, the identity of each Security
Registrar and/or Paying Agent;
(17) The designation of the Exchange Rate Agent, if applicable;
(18) The Person to whom any interest on any Registered Security of the
series will 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 will be payable, if not upon presentation and surrender of
the coupons relating to the Bearer Security as they mature, and the extent
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to which, or the manner in which, any interest payable on a temporary
Global Security on an Interest Payment Date will be paid if not in the
manner provided in the applicable Indenture;
(19) Whether and under what circumstances we will pay additional
amounts as contemplated by Section 1005 of the applicable Indenture
("Additional Amounts") in respect of any tax, assessment or governmental
charge and, if so, whether we will have the option to redeem the Debt
Securities rather than pay the Additional Amounts (and the terms of any
such option);
(20) Any provisions granting special rights to the holders of the Debt
Securities upon the occurrence of specified events;
(21) In the case of Subordinated Securities, any terms modifying the
subordination provisions affecting such securities;
(22) In the case of Convertible Subordinated Securities, any terms by
which they may be convertible into Common Shares;
(23) If we issue the Debt Securities in definitive form (whether upon
original issue or upon exchange of temporary Debt Securities of such
series), the terms and conditions under which definitive securities will be
issued;
(24) If we issue the Debt Securities upon the exercise of Debt
Warrants, the time, manner and place for them to be authenticated and
delivered;
(25) The manner for paying principal and interest and the manner for
transferring the Debt Securities; and
(26) Any other terms of the Debt Securities that are consistent with
the requirements of the TIA.
For purposes of this prospectus, any reference to the payment of principal
of (or premium, if any) or interest on Debt Securities will include Additional
Amounts if required by the terms of the Debt Securities.
The Indentures do not limit the amount of Debt Securities that we are
authorized to issue from time to time. (Section 301) When a single Trustee is
acting for all debt securities issued under an Indenture, those Securities are
called the "Indenture Securities." Each Indenture also provides that there may
be more than one Trustee thereunder, each for a series of Indenture Securities.
See "Resignation of Trustee" on page 16 of this prospectus. At a time when two
or more Trustees are acting under either Indenture, each with respect to only
certain series, the term "Indenture Securities" means the series of Debt
Securities for which each respective Trustee is acting. If there is more than
one Trustee under either Indenture, the powers and trust obligations of each
Trustee will apply only to the Indenture Securities for which it is Trustee. If
two or more Trustees are acting under either Indenture, then the Indenture
Securities for which each Trustee is acting would be treated as if issued under
separate indentures.
Please refer to the prospectus supplement for information about any changes
to the Events of Default or our covenants that are described below, including
any addition of a covenant or other provision providing event risk or similar
protection.
We may issue Indenture Securities with terms different from those of
Indenture Securities already issued and, without the consent of the holders
thereof, we may reopen a previous issue of a series of Indenture Securities and
issue additional Indenture Securities of that series (unless the reopening was
restricted when that series was created).
If any series of Debt Securities are sold for, are payable in or are
denominated in one or more foreign Currencies, we will specify applicable
restrictions, elections, tax consequences, specific terms and other information
with respect to that series of Debt Securities and such Currency or Currencies
in the applicable prospectus supplement.
There is no requirement that we issue Debt Securities in the future under
the Indentures, and we may use other indentures or documentation, containing
provisions different from those included in the Indentures or
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applicable to one or more issues of Debt Securities, in connection with future
issues of such other Debt Securities.
We may issue the Debt Securities as "Original Issue Discount Securities,"
which are Debt Securities, including any zero-coupon Debt Securities, that are
issued and sold at a discount from their stated principal amount and provide
that upon acceleration of their maturity an amount less than their principal
amount will become due and payable. We will describe United States federal
income tax consequences and other considerations applicable to Original Issue
Discount Securities in any prospectus supplement relating to Original Issue
Discount Securities.
ADDITIONAL MECHANICS
Form, Exchange and Transfer
We may issue Debt Securities as follows:
- As Registered Securities.
- As Bearer Securities (unless otherwise stated in the prospectus
supplement with interest coupons attached). (Section 201)
- As both Registered Securities and Bearer Securities.
- In denominations that are even multiples of $1,000 for Registered
Securities and even multiples of $5,000 for Bearer Securities.
(Section 302)
- In global form. See "-- Book-Entry Debt Securities."
You may have your Registered Securities separated into smaller
denominations or combined into larger denominations, as long as the total
principal amount is not changed. (Section 305) This is called an "exchange." If
provided in the prospectus supplement, you may exchange your Bearer Securities
(with all unmatured coupons, except as provided below, and all matured coupons
which are in default) for Registered Securities of the same series as long as
the total principal amount is not changed. Bearer Securities surrendered in
exchange for Registered Securities between a Regular Record Date or a Special
Record Date and the relevant interest payment dates will be surrendered without
the coupon relating to such interest payment dates, and interest will not be
payable 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 we specify
otherwise in the prospectus supplement, we will not issue Bearer Securities in
exchange for Registered Securities. (Section 305)
You may transfer Registered Securities of a series and you may exchange
Debt Securities of a series at the office of the Trustee. The Trustee will act
as our agent for registering Registered Securities in the names of holders and
transferring Debt Securities. We may designate someone else to perform this
function. Whoever maintains the list of registered holders is called the
"Security Registrar." The Security Registrar also will perform transfers.
(Section 305)
You will not be required to pay a service charge to transfer or exchange
Debt Securities, but you may be required to pay for any tax or other
governmental charge associated with the exchange or transfer. The transfer or
exchange will be made only if the Security Registrar is satisfied with your
proof of ownership. (Section 305)
If we designate additional transfer agents, we will name them in the
accompanying prospectus supplement. We may cancel the designation of any
particular transfer agent. We may also approve a change in the office through
which any transfer agent acts.
If the Securities are redeemable and we redeem less than all of the
Securities of a particular series, we may block the transfer or exchange of
Securities during the period beginning 15 days before the day we mail the notice
of redemption or publish the notice (in the case of Bearer Securities) and
ending on the day of that mailing or publication, as the case may be, in order
to freeze the list of holders to prepare the mailing. We may also decline to
register transfers or exchanges of Debt Securities selected for redemption,
except that we will
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continue to permit transfers and exchanges of the unredeemed portion of any Debt
Security being partially redeemed. (Section 305)
If the Offered Debt Securities are redeemable, we will describe the
procedures for redemption in the accompanying prospectus supplement.
IN THIS "ADDITIONAL MECHANICS" SECTION OF THIS PROSPECTUS, "YOU" MEANS
DIRECT HOLDERS AND NOT INDIRECT HOLDERS OF DEBT SECURITIES.
PAYMENT AND PAYING AGENTS
We will pay interest to you, if you are listed in the Trustee's records as
the owner of your Debt Security at the close of business on a particular day in
advance of each due date for interest on your Debt Security, even if you no
longer own the Debt Security, on the interest due date. That particular day,
usually about two weeks in advance of the interest due date, is called the
"Regular Record Date" and is defined in the prospectus supplement. Persons who
are listed in the Trustee's records as the owners of Debt Securities at the
close of business on a particular day are referred to as "holders." (Section
307) Holders buying and selling Debt Securities must work out between them the
appropriate purchase price since we will pay all the interest for an interest
period to the holders on the Regular Record Date. The most common manner is to
adjust the sales price of the Debt Securities to prorate interest fairly between
buyer and seller based on their respective ownership periods within the
particular interest period.
We will deposit interest, principal and any other money due on the Debt
Securities with the Paying Agent that we name in the prospectus supplement.
IF YOU PLAN TO HAVE A BANK OR BROKERAGE FIRM HOLD YOUR SECURITIES, YOU
SHOULD ASK THEM FOR INFORMATION ON HOW YOU WILL RECEIVE PAYMENTS. (Section 305)
If we issue Bearer Securities, unless we provide otherwise in the
prospectus supplement, we will maintain an office or agency outside the United
States for the payment of all amounts due on the Bearer Securities. If we list
the Debt Securities on any stock exchange located outside the United States, we
will maintain an office or agency for those Debt Securities in any city located
outside the United States required by that stock exchange. (Section 1002) We
will specify the initial locations of such offices and agencies in the
prospectus supplement. Unless otherwise provided in the prospectus supplement,
we will make payment of interest on any Bearer Securities on or before Maturity
only against surrender of coupons for such interest installments as they mature.
(Section 1001) Unless otherwise provided in the prospectus supplement, we will
not make payment with respect to any Bearer Security at any of our offices or
agencies 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. Notwithstanding the foregoing, we will make payments of principal of
(and premium, if any) and interest on Bearer Securities payable in U.S. dollars
at the office of our Paying Agent in The City of New York if (but only if)
payment of the full amount 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)
We may from time to time designate additional offices or agencies, approve
a change in the location of any office or agency and, except as provided above,
rescind the designation of any office or agency. (Section 1002)
EVENTS OF DEFAULT
You will have special rights if an Event of Default occurs as to the Debt
Securities of your series which is not cured, as described later in this
subsection. (Section 501)
What is an Event of Default? The term "Event of Default" as to the Debt
Securities of your series means any of the following:
- We do not pay the principal of (or premium, if any) on a Debt
Security of such series on its due date.
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- We do not pay interest on a Debt Security of such series within 30
days of its due date.
- We do not make or satisfy any sinking fund payment in respect of
Debt Securities of such series within 30 days of its due date.
- We remain in breach of a covenant in respect of Debt Securities of
such series for 60 days after we receive a written notice of default
stating we are in breach. The notice must be sent by either the
Trustee or holders of 25% of the principal amount of Debt Securities
of such series.
- We file for bankruptcy or certain other events in bankruptcy,
insolvency or reorganization occur.
- There occurs any other Event of Default as to Debt Securities of the
series described in the prospectus supplement. (Section 501)
An Event of Default for a particular series of Debt Securities does not
necessarily constitute an Event of Default for any other series of Debt
Securities issued under an Indenture.
The Trustee may withhold notice to the holders of Debt Securities of a
particular series of any default (except in the payment of principal of (or
premium, if any) or interest on the Debt Securities) if it considers its
withholding of notice to be in the interest of the holders of that series.
(Section 601)
Remedies if an Event of Default Occurs. If an Event of Default has occurred
and we have not cured it, the Trustee or the holders of 25% in principal amount
of the Debt Securities of the affected series may declare the entire principal
amount of all the Debt Securities of that series to be due and immediately
payable by notifying us (or the Trustee, if the holders give notice) in writing.
This is called a declaration of acceleration of maturity. A declaration of
acceleration of maturity may be canceled by the holders of at least a majority
in principal amount of the Debt Securities of the affected series by notifying
us (or the Trustee, if the holders give notice) in writing. (Section 502)
Except in cases of default, where the Trustee has some special duties, the
Trustee is not required to take any action under the Indenture at the request of
any holders unless the holders offer the Trustee reasonable protection from
expenses and liability (called an "indemnity"). (Section 602 and TIA Section
315) If reasonable indemnity is provided, the holders of a majority in principal
amount of the Outstanding Debt Securities of the relevant series may direct the
time, method and place of conducting any lawsuit or other formal legal action
seeking any remedy available to the Trustee. The Trustee may refuse to follow
those directions in certain circumstances. (Section 512) No delay or omission in
exercising any right or remedy will be treated as a waiver of that right, remedy
or Event of Default. (Section 511)
Before you are allowed to bypass the Trustee and bring your own lawsuit or
other formal legal action or take other steps to enforce your rights or protect
your interest relating to the Debt Securities, the following must occur:
- You must give the Trustee written notice that an Event of Default
has occurred and remains uncured. (Section 507)
- The holders of 25% in principal amount of all outstanding Debt
Securities of the relevant series must make a written request that
the Trustee take action because of the default (Section 507) and
must offer reasonable indemnity to the Trustee against the cost and
other liabilities of taking that action. (Section 602)
- The Trustee must not have instituted a proceeding for 60 days after
receipt of the above notice and offer of indemnity. (Section 507)
- The holders of a majority in principal amount of the Debt Securities
must not have given the Trustee a direction inconsistent with the
above notice during such 60-day period. (Section 507)
However, you are entitled at any time to bring a lawsuit for the payment of
money due on your Debt Securities on or after the due date. (Section 508)
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Holders of a majority in principal amount of the Debt Securities of the
affected series may waive any past defaults other than (1) the payment of
principal, any premium, interest or Additional Amounts on any Debt Security or
related coupon or (2) in respect of a covenant that under Article Ten of the
applicable Indenture cannot be modified or amended without the consent of each
holder. (Section 513)
IF YOUR SECURITIES ARE HELD FOR YOU BY A BANK OR BROKERAGE FIRM, YOU SHOULD
CONSULT THEM FOR INFORMATION ON HOW TO GIVE NOTICE OR DIRECTION TO THE TRUSTEE
OR MAKE A REQUEST OF THE TRUSTEE AND HOW TO MAKE OR CANCEL A DECLARATION OF
ACCELERATION.
Each year, we will furnish to the Trustee a written statement of certain of
our officers certifying that to their knowledge we are in compliance with the
Indenture and the Debt Securities, or else specifying any default. (Section
1004)
MERGER, CONSOLIDATION OR SALE OF ASSETS
Under the terms of the Indentures, we are generally permitted to
consolidate or merge with another firm. We are also permitted to sell or
transfer our assets substantially as an entirety to another firm (Section 801).
However, we may not take any of these actions unless all of the following
conditions are met:
- Where we merge or consolidate out of existence or sell or transfer
our assets substantially as an entirety, the resulting firm must
agree to be legally responsible for all obligations under the Debt
Securities and the applicable Indenture. (Section 801)
- The merger, consolidation or sale or transfer of assets
substantially as an entirety must not cause a default on the Debt
Securities. For purposes of this no-default test, a default would
include an Event of Default that has occurred and not been cured, as
described on page 10 of this prospectus under "-- What is an Event
of Default?" (Section 801)
- Where we merge or consolidate out of existence or sell or transfer
our assets substantially as an entirety, the resulting firm (if a
corporation) must be a corporation organized under the laws of the
United States or any state thereof or the District of Colombia.
(Section 801)
- Under the Senior Indenture, we may not merge, consolidate or sell or
transfer our assets substantially as an entirety if, as a result,
any of our property or assets or any property or assets of a
Restricted Subsidiary (as defined) would become subject to any
mortgage, lien or other encumbrance unless either (1) the mortgage,
lien or other encumbrance could be created pursuant to Section 1009
of such Indenture (see "-- Senior Indenture Provisions -- Limitation
on Liens" below) without equally and ratably securing the Indenture
Securities or (2) the Indenture Securities are secured equally and
ratably with or prior to the debt secured by the mortgage, lien or
other encumbrance. (Section 803)
- We must deliver certain certificates and documents to the Trustee.
(Section 801)
- We must satisfy any other requirements specified in the prospectus
supplement.
MODIFICATION OR WAIVER
There are three types of changes we can make to the Indenture and the Debt
Securities.
Changes Requiring Your Approval. First, there are changes that cannot be
made to your Debt Securities without your specific approval. (Section 902)
Following is a list of those types of changes:
- Change the Stated Maturity of the principal of or interest on a Debt
Security.
- Reduce any amounts due on a Debt Security.
- Reduce the amount of principal payable upon acceleration of the
Maturity of a Security following a default.
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- Adversely affect any right of repayment at your option.
- Change the place (except as otherwise described in this prospectus)
or Currency of payment on a Debt Security.
- Impair your right to sue for payment.
- With respect to Debt Securities issued under the Subordinated
Indenture, adversely affect the right to convert any Debt Securities
as provided in Article 15 of the Subordinated Indenture.
- Modify the subordination provisions in the Subordinated Indenture in
a manner that is adverse to you as a holder of the Subordinated
Securities.
- Reduce the percentage of holders of Debt Securities whose consent is
needed to modify or amend the Indenture.
- Reduce the percentage of holders of Debt Securities whose consent is
needed to waive compliance with certain provisions of the Indenture
or to waive certain defaults.
- Modify any other aspect of the provisions of the Indenture dealing
with modification and waiver of past defaults (Section 513), the
quorum or voting requirements of the Debt Securities (Section 1504
of the Senior Indenture and Section 1704 of the Subordinated
Indenture) or provisions relating to the waiver of certain covenants
(Section 1011 of the Senior Indenture and Section 1008 of the
Subordinated Indenture), except to increase any percentage of
consents required to amend an Indenture or for any waiver or to add
certain provisions that cannot be modified without the approval of
each holder under Section 902.
- Change any of our obligations to pay Additional Amounts.
Changes Requiring a Majority Vote. The second type of change to the
Indenture and the Outstanding Debt Securities is the kind that requires a vote
in favor by holders of Outstanding Debt Securities owning a majority of the
principal amount of the particular series affected. Most changes fall into this
category, except for clarifying changes and certain other changes that would not
adversely affect holders of the Outstanding Debt Securities in any material
respect. The same vote would be required for us to obtain a waiver of all or
part of certain covenants in the applicable Indenture (Section 1011 of the
Senior Indenture; Section 1008 of the Subordinated Indenture), or a waiver of a
past default. However, we cannot obtain a waiver of a payment default or any
other aspect of the Indentures or the Outstanding Debt Securities listed in the
first category described previously under "-- Changes Requiring Your Approval"
unless we obtain your individual consent to the waiver. (Section 902)
Changes Not Requiring Approval. The third type of change does not require
any vote by you as holders of Outstanding Debt Securities. This type is limited
to clarifications and certain other changes that would not adversely affect
holders of the Outstanding Debt Securities in any material respect. (Section
901)
Further Details Concerning Voting. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a Debt
Security:
- For Original Issue Discount Securities, we will use the principal
amount that would be due and payable on the voting date if the
Maturity of the Debt Securities were accelerated to that date
because of a default.
- For Debt Securities whose principal amount is not known (for
example, because it is based on an index), we will use a special
rule for that Debt Security described in the prospectus supplement.
- For Debt Securities denominated in one or more foreign Currencies or
Currency units, we will use the U.S. dollar equivalent.
Debt Securities will not be considered Outstanding, and therefore not
eligible to vote, if we have deposited or set aside in trust for you money for
their payment or redemption. Debt Securities will also not be
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eligible to vote if they have been fully defeased as described later under
"Defeasance -- Full Defeasance." (Section 101)
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of Debt Securities that are entitled to vote
or take other action under the Indentures. If we set a record date for a vote or
other action to be taken by holders of a particular series, that vote or action
may be taken only by persons who are holders of Debt Securities of that series
on the record date. (Section 104)
IF YOUR SECURITIES ARE HELD BY A BANK OR BROKERAGE FIRM, YOU SHOULD CONSULT
THEM FOR INFORMATION ON HOW APPROVAL MAY BE GRANTED OR DENIED IF WE SEEK TO
CHANGE THE INDENTURE OR THE DEBT SECURITIES OR REQUEST A WAIVER.
Each Indenture contains provisions for convening meetings of the holders of
Debt Securities issued 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 us or
by the holders of at least 10% in principal amount of the Outstanding Debt
Securities of that series, 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 Debt
Security affected thereby, as described above, the holders of a majority in
principal amount of the Outstanding Debt Securities of a series may adopt any
resolution presented at a meeting (or adjourned meeting duly reconvened) at
which a quorum is present, except that any resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action which the Indenture expressly provides may be made, given or taken by a
specified percentage less than a majority in principal amount of the Outstanding
Debt Securities of a series may be adopted at a meeting (or an adjourned meeting
duly reconvened) at which a quorum is present by vote of the specified
percentage of holders of the Outstanding Debt Securities of that series. Any
resolution passed or decision taken at any meeting of holders of Debt Securities
of a series in accordance with the applicable Indenture will be binding on all
holders of Debt Securities of that series and any related coupons. The quorum at
any meeting called to adopt a resolution will be persons holding or representing
a majority in principal amount of the Outstanding Debt Securities of a series,
except that if any action is to be taken at such meeting which may be given by
the holders of not less than a specified percentage in principal amount of the
Outstanding Debt Securities of a series, the persons holding or representing
such specified percentage in principal amount of the Outstanding Debt Securities
of that series will constitute a quorum. (Section 1504 of the Senior Indenture
and Section 1704 of the Subordinated Indenture)
Notwithstanding the above, if any action is to be taken at a meeting of
holders of Debt Securities of a series that the applicable Indenture expressly
provides may be taken by the holders of a specified percentage in principal
amount of all Outstanding Debt Securities affected thereby or of the holders of
such series and one or more additional series:
- there will be no minimum quorum requirement for that meeting, and
- the principal amount of the Outstanding Debt Securities of that
series that vote in favor of such action will be taken into account
in determining whether that action has been made, given or taken
under such Indenture. (Section 1504 of the Senior Indenture and
Section 1704 of the Subordinated Indenture).
DEFEASANCE AND COVENANT DEFEASANCE
The following discussion of defeasance and covenant defeasance will be
applicable to your series of Debt Securities only if we choose to have them
apply to that series. If we do so choose, we will specify the choice in the
prospectus supplement. (Section 1401)
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Defeasance. If there is a change in U.S. federal tax law, as described
below, we can legally release ourselves from all payment and other obligations
on the Debt Securities (called "defeasance") if we put in place the following
other arrangements for you to be repaid:
- We must deposit in trust for your benefit and the benefit of all
other direct holders of the Debt Securities a combination of money
and U.S. government or U.S. government agency obligations that will
generate enough cash to make interest, principal and any other
payments on the Debt Securities on their various due dates.
- We must deliver to the Trustee a legal opinion confirming that there
has been a change in current federal tax law or an IRS ruling that
lets us make the above deposit without causing you to be taxed on
the Debt Securities any differently than if we did not make the
deposit at Maturity. (Sections 1402 and 1404) (under current federal
tax law, the deposit and our legal release from the Debt Securities
would be treated as though we paid you your share of the cash and
notes or bonds at the time the cash and notes or bonds are deposited
in trust in exchange for your Debt Securities and you would
recognize gain or loss on the Debt Securities at the time of the
deposit.)
If we ever did accomplish defeasance, as described above, you would have to
rely solely on the trust deposit for repayment of the Debt Securities. You could
not look to us for repayment in the event of any shortfall. Conversely, the
trust deposit would most likely be protected from claims of our lenders and
other creditors if we ever become bankrupt or insolvent. You would also be
released from the subordination provisions on the Subordinated Debt Securities
described later under "Subordination" on page 18 of this prospectus. If we
accomplish a defeasance, we would retain only the obligations to register the
transfer or exchange of the Debt Securities, to maintain an office or agency in
respect of the Debt Securities and hold moneys for payment in trust.
Covenant Defeasance. Under current federal tax law, we can make the same
type of deposit described above and be released from some of the restrictive
covenants in the Indentures. These covenants relate to "Limitation on Liens" and
"Limitation on Sale and Leaseback Transactions" described in Sections 1009 and
1010 respectively of the Senior Indenture and are summarized beginning on page
17 of this prospectus. We can also be released from any other covenant in the
Indentures which may be specified in the prospectus supplement if we make the
same type of deposit described above. This is called "covenant defeasance." In
that event, you would lose the protection of those covenants but would gain the
protection of having money and debt securities set aside in trust to repay the
Debt Securities. You also would be released from the subordination provisions on
the Subordinated Securities described under "Subordination" on page 18 of this
prospectus. In order to achieve covenant defeasance, we must do the following:
- We must deposit in trust for your benefit and the benefit of all
other direct holders of the Debt Securities a combination of money
and U.S. government or U.S. government agency obligations that will
generate enough cash to make interest, principal and any other
payments on the Debt Securities on their various due dates.
- We must deliver to the Trustee a legal opinion of our counsel
confirming that under current federal income tax law we may make the
above deposit without causing you to be taxed on the Debt Securities
any differently than if we did not make the deposit and just repaid
the Debt Securities ourselves.
If we accomplish covenant defeasance, you can still look to us for
repayment of the Debt Securities if there were a shortfall in the trust deposit
or the trustee is prevented from making payment. In fact, if one of the
remaining Events of Default occurred (such as our bankruptcy) and the Debt
Securities become immediately due and payable, there may be such a shortfall.
Depending on the event causing the default, you may not be able to obtain
payment of the shortfall.
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BOOK-ENTRY DEBT SECURITIES
We may issue Debt Securities of a series in whole or in part in global form
that we will deposit with, or on behalf of, a depositary that we identify in a
prospectus supplement. Global securities may be issued in either registered or
bearer form and in either temporary or permanent form (each, a "Global
Security"). Global Securities will be registered in the name of a financial
institution we select, and the Debt Securities included in the Global Securities
may not be transferred to the name of any other direct holder unless the special
circumstances described below occur. The financial institution that acts as the
sole direct holder of the Global Security is called the "Depositary." Any person
wishing to own a Debt Security must do so indirectly by virtue of an account
with a broker, bank or other financial institution that, in turn, has an account
with the Depositary.
Special Investor Considerations for Global Securities. Our obligations, as
well as the obligations of the Trustee and those of any third parties employed
by us or the Trustee, run only to Persons who are registered as holders of Debt
Securities. For example, once we make payment to the registered holder, we have
no further responsibility for the payment even if that holder is legally
required to pass the payment along to you but does not do so. As an indirect
holder, an investor's rights relating to a Global Security will be governed by
the account rules of the investor's financial institution and of the Depositary,
as well as general laws relating to debt securities transfers.
You should be aware that when we issue Debt Securities in the form of
Global Securities:
- You cannot get Debt Securities registered in your own name.
- You cannot receive physical certificates for your interest in the
Debt Securities.
- You must look to your own bank or brokerage firm for payments on the
Debt Securities and protection of your legal rights relating to the
Debt Securities.
- You may not be able to sell interests in the Debt Securities to some
insurance companies and other institutions that are required by law
to hold the physical certificates of Debt Securities that they own.
- The Depositary's policies will govern payments, transfers, exchange
and other matters relating to your interest in the Global Security.
We and the Trustee have no responsibility for any aspect of the
Depositary's actions or for its records of ownership interests in
the Global Security. We and the Trustee also do not supervise the
Depositary in any way.
- The Depositary will usually require that interests in a Global
Security be purchased or sold within its system using same-day
funds.
Management of the Depository Trust Company ("DTC") is aware that some
computer applications, systems, and the like for processing data that are
dependent upon calendar dates, including dates before, on, and after January 1,
2000, may encounter "Year 2000 problems." DTC has informed its participants and
other members of the financial community that it has developed and is
implementing a program so that its applications and systems, as the same relate
to the timely payment of distributions (including principal and income payments)
to securityholders, book-entry deliveries, and settlement of trades within DTC,
continue to function appropriately. This program includes a technical assessment
and a remediation plan, each of which DTC has indicated is complete.
Additionally, DTC's plan includes a testing phase, which DTC expects to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as DTC's direct and indirect participants and third party vendors to whom
DTC licenses software and hardware, and third party vendors upon whom DTC relies
for information or the provision of services, including telecommunication and
electrical utility service providers,
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among others. DTC has informed its participants and other members of the
financial community that it is contacting (and will continue to contact) third
party vendors from whom DTC acquires services to:
(1) impress upon them the importance of such services being Year 2000
compliant; and
(2) determine the extent of their efforts for Year 2000 remediation
(and, as appropriate, testing) of their services. In addition, DTC is in
the process of developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
Special Situations when Global Security Will be Terminated. In a few
special situations described later, a Global Security will terminate and
interests in it will be exchanged for physical certificates representing Debt
Securities. After that exchange, the choice of whether to hold Debt Securities
directly or indirectly through an account at your bank or brokerage firm will be
up to you. You must consult your own bank or broker to find out how to have
interests in Debt Securities transferred to your own name, so that they will be
direct holders.
The special situations for termination of a Global Security are:
- When the Depositary notifies us that it is unwilling, unable or no
longer qualified to continue as Depositary (unless a replacement
Depositary is named).
- When an Event of Default on the Debt Securities has occurred and has
not been cured.
- When and if we decide to terminate a Global Security.
The prospectus supplement may list situations for terminating a Global
Security that would apply only to the particular series of Debt Securities
covered by the prospectus supplement. When a Global Security terminates, the
Depositary (and neither we nor the Trustee) is responsible for deciding the
names of the institutions that will be the initial direct holders. (Section 302)
Unless otherwise provided in the prospectus supplement, Debt Securities that are
represented by a Global Security will be issued in denominations of $1,000 and
any integral multiple thereof, and will be issued in registered form only,
without coupons.
RESIGNATION OF TRUSTEE
Each Trustee may resign or be removed with respect to one or more series of
Indenture Securities, and a successor Trustee may be appointed to act with
respect to such series. (Section 608) In the event that two or more persons are
acting as Trustee with respect to different series of Indenture Securities under
one of the Indentures, each such Trustee will be a Trustee of a trust separate
and apart from the trust administered by any other such Trustee (Section 609),
and any action described herein to be taken by the "Trustee" may then be taken
by each such Trustee with respect to, and only with respect to, the one or more
series of Indenture Securities for which it is Trustee.
SENIOR INDENTURE PROVISIONS
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Under the terms of the Senior Indenture, we will not, and will not permit
any Restricted Subsidiary (as defined) to, sell or transfer any manufacturing
plant owned by us or any Restricted Subsidiary with the intention of taking back
a lease on such property unless:
(1) 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;
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(2) such lease has a term, including permitted extensions and
renewals, of not more than three years, and it is intended that the use by
us or the Restricted Subsidiary of the manufacturing plant covered by such
lease will be discontinued on or before the expiration of such term;
(3) the amount that we realize 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 will not
exceed 10% of our Consolidated Net Tangible Assets (as defined); or
(4) we will 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 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, we will
not, directly or indirectly, and we will not permit any Restricted Subsidiary
to, create or assume any mortgage, pledge or other lien of or upon any of our 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 will be so secured. Among the exceptions are:
(1) the creation of any mortgage or other lien on any of our property
or property of 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
(2) mortgages or liens on any property that we or any Restricted
Subsidiary acquire after the date of the Senior Indenture existing at the
time of such acquisition; provided that we incur the secured indebtedness
for the purpose of financing all or any part of the acquisition or
construction of any such property.
In addition, we 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, will not exceed 10% of Consolidated Net Tangible Assets.
(Section 1009 of the Senior Indenture)
DEFINITIONS
The Senior Indenture defines the term "Consolidated Net Tangible Assets" as
our total assets and those of our 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:
(1) our current liabilities and those of our 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;
(2) all of our other liabilities and those of our consolidated
subsidiaries other than Funded Debt (as defined), deferred income taxes and
liabilities for employee post-retirement health plans recognized in
accordance with Statement of Financial Accounting Standards No. 106;
(3) all of our and our consolidated subsidiaries' depreciation and
valuation reserves and all other reserves (except for reserves for
contingencies which have not been allocated to any particular purpose);
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(4) the book amount of all our and our consolidated subsidiaries'
segregated intangible assets, including, but without limitation, such items
as goodwill, trademarks, trade names, patents and unamortized debt discount
and expense, less unamortized debt premium; and
(5) 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 Senior Indenture defines the term "Restricted Subsidiary" as any of our
subsidiaries except:
(1) 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;
(2) 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
(3) any subsidiary acquired or organized after the date of the
Indenture, unless our Board of Directors 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 Senior Indenture defines the term "Funded Debt" as indebtedness for
borrowed money owed or guaranteed by us or any of our consolidated subsidiaries,
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 Senior Indenture defines the term "value" with
respect to a manufacturing plant as the amount equal to the greater of (1) the
net proceeds of the sale or transfer of such manufacturing plant or (2) the fair
value of such manufacturing plant at the time of entering into such Sale and
Leaseback Transaction, as determined by our Board of Directors, 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)
SUBORDINATED INDENTURE PROVISIONS
SUBORDINATION
Article 16 of the Subordinated Indenture provides that the payment of
principal of (premium, if any) and interest on Subordinated Securities will be
subordinated in right of payment to the prior payment in full of Senior
Indebtedness. We may make no payment with respect to Subordinated Securities
while a default exists with respect to our Senior Indebtedness.
The Subordinated Indenture defines "Senior Indebtedness" as:
(1) indebtedness of our company, whether outstanding on the date of
the Subordinated Indenture or thereafter created, incurred, assumed or
guaranteed for money borrowed from banks or other lending institutions and
any other indebtedness or obligations of our company evidenced by a bond,
debenture, note or other similar instrument, including without limitation,
overdrafts, letters of credit issued for our account and commercial paper;
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(2) any other indebtedness that constitutes purchase money
indebtedness for payment of which we are directly or contingently liable
(excluding trade accounts payable);
(3) any direct or contingent indebtedness or obligation represented by
guarantees or instruments having a similar effect that we enter into
(whether prior to the date of the Subordinated Indenture or thereafter)
with reference to lease or purchase money obligations of a subsidiary or
affiliate of our company or any other corporation in which we hold or have
an option to purchase 50% or more of the outstanding capital stock; and
(4) renewals, extensions and refundings of any indebtedness described
in clauses (1), (2) and (3) above, unless in any case the terms of the
instrument creating or evidencing such indebtedness provide that the
indebtedness is on a parity with or is junior to the Subordinated
Indebtedness.
Any indebtedness that becomes indebtedness of our company by operation of
merger, consolidation or other acquisition will constitute Senior Indebtedness
if that indebtedness would have been Senior Indebtedness had it been issued by
us. By reason of this subordination, in the event that we become insolvent,
holders of our Senior Indebtedness may receive more, ratably, and holders of
Subordinated Indebtedness may receive less, ratably, than our other creditors.
The Subordinated Indenture does not limit our ability to issue Senior
Indebtedness.
If this prospectus is being delivered in connection with a series of
Subordinated Debt, the accompanying prospectus supplement or the information
incorporated by reference will set forth the approximate amount of Senior
Indebtedness outstanding as of a recent date.
CONVERSION AND EXCHANGE
If you may convert or exchange Debt Securities for other Securities, the
prospectus supplement will explain terms and conditions of such conversion or
exchange, including the conversion price or exchange ratio (or the calculation
method), the conversion or exchange period (or how such period will be
determined), if conversion or exchange will be mandatory, at your option or at
our option, provisions for adjustment of the conversion price or the exchange
ratio and provisions affecting conversion or exchange in the event of the
redemption of the Debt Securities. The terms may also include provisions under
which the number or amount of other Securities to be received by the holders of
such Debt Securities upon conversion or exchange would be calculated according
to the market price of such other Securities as of a time stated in the
prospectus supplement.
THE TRUSTEES UNDER THE INDENTURE
The Chase Manhattan Bank, as successor by merger to Chemical Bank, is the
Trustee under the Senior Indenture. We may appoint The Chase Manhattan Bank as
trustee under the Subordinated Indenture. The Chase Manhattan Bank is among the
banks with which we maintain ordinary banking relationships. The Chase Manhattan
Bank, as successor by merger to Chemical Bank, also serves as trustee under
other indentures under which the 6 1/2% Debentures due 2025 ("6 1/2%
Debentures"), 7 5/8% Debentures due 2024 ("7 5/8% Debentures"), 8% Debentures
due 2006 ("8% Debentures") and the 9% Notes of Eaton ETN Offshore Ltd. due 2001
("9% Notes") are outstanding.
In the event that a default occurs under either Indenture or under the
indentures which govern the 6 1/2% Debentures, the 7 5/8% Debentures, the 8%
Debentures or the 9% Notes 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, if The Chase Manhattan Bank is
Subordinated Trustee, it must resign as Trustee under either the Subordinated
Indenture or each of the Senior Indenture, the 6 1/2% Debentures Indenture, the
7 5/8% Debentures Indenture, the 8% Debentures Indenture and the 9% Notes
Indenture. In such circumstance, we expect that The Chase Manhattan Bank would
resign as Trustee under the Subordinated Indenture.
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CERTAIN CONSIDERATIONS RELATING TO FOREIGN 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 and will be more fully described in the applicable
prospectus supplement.
DESCRIPTION OF DEBT WARRANTS
We may issue (either together with other Debt Securities or Preferred
Shares or separately) Debt Warrants to purchase Underlying Debt Securities
("Offered Debt Warrants"). We will issue Debt Warrants, if any, under warrant
agreements (each a "Debt Warrant Agreement") that would be between us and a bank
or trust company, as warrant agent (the "Debt Warrant Agent"), that we will
describe in a prospectus supplement. The form of the Debt Warrant Agreement is
contained in a registration statement that we have filed with the SEC. See
"Where You Can Obtain More Information" on page 2 of this prospectus for
information on how to obtain a copy of the Debt Warrant Agreement. The following
summary of the Debt Warrant Agreement is not complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Debt
Warrant Agreement and the accompanying Debt Warrant certificates, including the
definitions therein of certain terms.
GENERAL
You should read the prospectus supplement for the terms of the Offered 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 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 will
commence and the date (the "Debt Warrant Expiration Date") on which such
right will 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
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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)
EXERCISE OF DEBT WARRANTS
Each Offered Debt Warrant will entitle the holder thereof to purchase such
amount of Underlying Debt Securities at the exercise price set forth in, or
calculable from, the prospectus supplement relating to such Offered Debt
Warrants. After the close of business on the expiration date, unexercised Debt
Warrants will become void.
You may exercise Debt Warrants by payment to the Debt Warrant Agent of the
applicable exercise price and by delivery to the Debt Warrant Agent of the
related Debt Warrant Certificate, properly completed. Debt Warrants will be
deemed to have been exercised upon receipt of the exercise price, subject to the
receipt by the Debt Warrant Agent, within five business days thereafter, of the
Debt Warrant Certificate or Certificates evidencing such Debt Warrants. Upon
receipt of such payment and the properly completed Debt Warrant Certificates at
the corporate trust office of the Debt Warrant Agent or any other office
indicated in the prospectus supplement, we will, as soon as practicable, deliver
the amount of the Underlying Debt Securities purchased upon such exercise. If
fewer than all of the Debt Warrants represented by any Debt Warrant Certificate
are exercised, a new Debt Warrant Certificate will be issued for the unexercised
Debt Warrants. If you hold a Debt Warrant, you must pay any tax or other
governmental charge that may be imposed in connection with any transfer involved
in the issuance of Underlying Debt Securities purchased upon such exercise.
MODIFICATIONS
There are three types of changes we can make to the Debt Warrant Agreement
and the Offered Debt Warrants.
Changes Requiring Your Approval. First, there are changes that cannot be
made to your Debt Warrants without your specific approval. Those types of
changes include modifications and amendments that:
- Accelerate the expiration date.
- Increase the exercise price.
- Reduce the number of outstanding Debt Warrants, the consent of the
holders of which is required for any such modification or amendment.
- Otherwise materially and adversely affect the rights of the holders
of the Debt Warrants.
Changes Requiring a Majority Vote. The second type of change to the Debt
Warrant Agreement and the Offered Debt Warrants is the kind that requires a vote
in favor by holders of Debt Warrants owning a majority of the principal amount
of the particular series affected. Most changes fall into this category.
Changes Not Requiring Approval. The third type of change does not require
any vote by holders of Debt Warrants. This type of change is limited to
clarifications and other changes that would not adversely affect holders of the
Debt Warrants.
NO RIGHTS AS HOLDERS OF UNDERLYING DEBT SECURITIES
Before you exercise the warrants, you are not entitled to payments of
principal of (or premium, if any) or interest on the related Underlying Debt
Securities or to exercise any other rights whatsoever as a holder of the
Underlying Debt Securities.
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DESCRIPTION OF PREFERRED SHARES
The following description sets forth the general terms and provisions of
the Preferred Shares. If we offer Preferred Shares, we will describe the
specific designation and rights in a prospectus supplement and we will file a
description with the SEC.
GENERAL
Our Board of Directors is authorized without further shareholder action to
issue one or more series of up to 14,106,394 Preferred Shares. The Board of
Directors can also determine the number of shares, dividend rates, dividend
payment dates, and dates from which dividends will 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 of the date of this prospectus, no Preferred Shares are issued or
outstanding.
The Preferred Shares will 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.
We will set forth the following terms of the Offered Preferred Shares in
the prospectus supplement:
(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 we will issue the Offered Preferred Shares;
(3) the dividend rates and dates on which dividends will be payable,
as well as the dates from which dividends will 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 our option, if we are to have that
option;
(5) our obligation, if any, 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 will 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 our Common Shares;
(7) any additional dividend, liquidation, redemption, sinking fund,
voting and other rights, preferences, privileges, limitations and
restrictions;
(8) the terms of any Debt Warrants that we will offer together with or
separately from the Offered Preferred Shares;
(9) the national securities exchanges, 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 our preferred
stock account.
We have adopted a rights plan and are subject to certain provisions of Ohio
law, each of which may have the effect of delaying, deferring or preventing a
change in control of our company. See "Description of Common Shares -- Rights
Plan" and "-- Certain Ohio Statutes."
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DIVIDENDS
As a holder of Offered Preferred Shares, you will be entitled to receive
cash dividends, when and as declared by the Board of Directors out of our assets
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 our stock books on the record
dates fixed by the Board of Directors. Dividends will be cumulative from and
after the date set forth in the applicable prospectus supplement.
If, for any dividend period or periods, we have not paid or declared and
set apart for payment full cumulative dividends on any Preferred Shares or we
are in default with respect to the redemption of Preferred Shares or any sinking
fund for any Preferred Shares, we may not declare any dividends (except a
dividend payable in Common Shares or in any of our other shares ranking junior
to the Preferred Shares) on, or make any distribution (except as aforesaid) on
the Common Shares or any of our other shares, or make any payment on account of
the purchase, redemption or other retirement of, our Common Shares or any of our
other shares (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 will be outstanding shares of any other series
of Preferred Shares ranking on a parity as to dividends with the Preferred
Shares, we, in making any dividend payment on account of such arrears, are
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 our company, the holders of the Offered Preferred Shares will be
entitled to receive out of our assets 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 our company,
the amounts payable with respect to the Preferred Shares and any of our other
shares 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 our assets 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 our assets. A consolidation or merger of
our company with or into any other corporation or corporations or a sale of all
or substantially all of our assets will not be deemed to be a liquidation,
dissolution or winding up of our company.
REDEMPTION
The Offered Preferred Shares will be redeemable in whole or in part at our
option, at the times and at the redemption prices that we set forth in the
applicable prospectus supplement.
We 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 of our matured obligations
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 our shareholders.
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
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been paid or declared and set apart for payment. The holders of Preferred Shares
will 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 (1) for any amendment of the Articles of 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, will be required or (2)
to issue any class of stock that will have preference as to dividends or
distribution of assets over any outstanding series of Preferred Shares.
The affirmative vote of the holders of a majority of the outstanding
Preferred Shares will 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
We will state in the prospectus supplement for any series of Offered
Preferred Shares 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 we specify otherwise 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 (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 recurrent 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 will 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 will be carried forward and taken into account in any
subsequent adjustment. We reserve the right to make such increases in the
conversion rate in addition to those required in the foregoing provisions as we,
in our discretion, determine to be advisable in order that certain stock-related
distributions or subdivisions of the Common Shares hereafter made by us to our
shareholders will not be taxable. Except as stated above, the conversion rate
will not be adjusted for the issuance of Common Shares or
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any securities convertible into or exchangeable for Common Shares, or securities
carrying the right to purchase any of the foregoing.
In the case of:
(1) any reclassification or change of the Common Shares,
(2) a consolidation or merger involving our company, or
(3) a sale or conveyance to another corporation of the property and
assets of our company as an entirety or substantially as an entirety,
in each case as a result of which holders of Common Shares will be entitled to
receive stock, securities, or 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.
DESCRIPTION OF COMMON SHARES
The following is a summary of the provisions concerning the Common Shares
contained in our Amended Articles of Incorporation ("Articles") and our Amended
Regulations ("Regulations"), as affected by debt agreements. Reference is made
to such Articles and Regulations, which we have filed with the SEC. See "Where
You Can Obtain More Information" on page 2 of this prospectus for information on
how to obtain a copy of the Articles and Regulations.
AUTHORIZED NUMBER
The Articles authorize the issuance of up to 300,000,000 Common Shares. On
March 1, 1999, there were 71,756,637 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 Articles also
authorize the issuance of up to 14,106,394 Preferred Shares. Currently, there
are no Preferred Shares issued and outstanding.
DIVIDENDS
Holders of Common Shares may receive dividends that our Board of Directors
declares.
VOTING RIGHTS
Each Common Share entitles the holder to one vote. Directors are elected by
cumulative voting, which means that each Common Share entitles the holder to the
number of votes equal to the number of directors to be elected. All votes in
respect of such share may be cast for one or more of the directors to be
elected. Cumulative voting may have the effect of increasing minority
shareholders' representation on the Board of Directors.
The Articles provide that 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
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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) and (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; and
(7) Two-thirds vote required to amend the provisions described in item
(6) above, 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 our company.
RIGHTS PLAN
We have adopted a rights plan which may have the effect of delaying,
deferring or preventing a change in control of our company. This plan attached
to each Common Share one right (a "Right") that, when exercisable, entitles the
holder of the Right to purchase one one-hundredth of a share of Series A
Participating Preferred Stock, without par value, at a purchase price (the
"Purchase Price") of $250, subject to adjustment. In certain events (such as a
person or group becoming the owner of 20% or more of the Common Shares or the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of the outstanding Common Shares),
exercise of the Rights would entitle the holders thereof (other than the
acquiring person or group) to receive Common Shares or common stock of a
surviving corporation, or cash, property or other securities, with a market
value equal to twice the Purchase Price. Accordingly, exercise of the Rights may
cause substantial dilution to a person who attempts to acquire our company. The
Rights automatically attach to each outstanding Common Share, including any
shares offered pursuant to the applicable prospectus supplement. There is no
monetary value presently assigned to the Rights, and they will not trade
separately from the Common Shares unless and until they become exercisable. The
Rights, which expire on July 12, 2005, may be redeemed, at the option of our
Board of Directors, at a price of $.01 per Right at any time prior to a group or
person acquiring ownership of 20% or more of the outstanding Common Shares. The
Rights Agreement may have certain antitakeover effects, although it is not
intended to preclude any acquisition or business combination that is at a fair
price and otherwise in the best interests of our company and our shareholders as
determined by our Board of Directors. However, a shareholder could potentially
disagree with the Board's determination of what constitutes a fair price or the
best interests of our company and our shareholders.
The description and terms of the Rights are set forth in a Rights Agreement
(the "Rights Agreement") between us and First Chicago Trust Company of New York,
as Rights Agent (the "Rights Agent"). We have filed a copy of the Rights
Agreement as an exhibit to the registration statement of which this prospectus
forms a part. See "Where You Can Find More Information" on page 2 of this
prospectus for information on how to obtain a copy of the Rights Agreement. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is hereby
incorporated herein by reference.
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LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of our company, after the payment or provision for payment of our
debts and other liabilities and the preferential amounts to which holders of our
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
our assets remaining for distribution to shareholders.
MISCELLANEOUS RIGHTS, LISTING AND TRANSFER AGENTS
Our Common Shares have no pre-emptive or conversion rights and there are no
redemption or sinking fund provisions applicable thereto.
Our outstanding Common Shares are listed on the New York, Chicago, Pacific
and London Stock Exchanges. The First Chicago Trust Company of New York is the
transfer agent and registrar for our Common Shares.
CLASSIFICATION OF BOARD OF DIRECTORS
Our Board of Directors 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 our company.
CERTAIN OHIO STATUTES
Various laws may affect the legal or practical ability of shareholders to
dispose of shares of our 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
(1) 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
(2) 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 (1) 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
27
<PAGE> 30
corporation or (2) 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.
CONTROL SHARE ACQUISITION ACT
We are 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 our 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.
PLAN OF DISTRIBUTION
We may sell the Offered Securities (a) through agents; (b) to or through
underwriters; or (c) directly to other purchasers. We will identify any
underwriters or agents and describe their compensation in a prospectus
supplement.
We (directly or through agents) may sell, and the underwriters may resell,
the Offered Securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or prices, which may be changed,
or at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Offered Securities, the underwriters or
agents may receive compensation from us or from purchasers of the Offered
Securities for whom they may act as agents. The underwriters may sell Offered
Securities to or through dealers, who may also receive compensation from
purchasers of the Offered Securities for whom they may act as agents.
Compensation may be in the form of discounts, concessions or commissions.
Underwriters, dealers and agents that participate in the distribution of the
Offered Securities may be underwriters as defined in the Securities Act of 1933
(the "Act"), and any discounts or commissions received by them from us and any
profit on the resale of the Offered Securities by them may be treated as
underwriting discounts and commissions under the Act.
We will indemnify the underwriters and agents against certain civil
liabilities, including liabilities under the Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our affiliates in the ordinary course of their
business.
If we indicate in the prospectus supplement relating to a particular series
or issue of Offered Securities, we will authorize underwriters, dealers or
agents to solicit offers by certain institutions to purchase such Offered
Securities from us pursuant to delayed delivery contracts providing for payment
and delivery at a future date. Such contracts will be subject only to those
conditions that we specify in the prospectus supplement, and we will specify in
the prospectus supplement the commission payable for solicitation of such
contracts.
LEGAL OPINIONS
The validity of the Offered Securities will be passed upon for us by G. L.
Gherlein, Executive Vice President and General Counsel, and for any
underwriters, dealers or agents by Shearman & Sterling, 599
28
<PAGE> 31
Lexington Avenue, New York, New York 10022. Mr. Gherlein is paid a salary by our
company and participates in various employee benefit plans offered to officers
of our company generally.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1997, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
29
<PAGE> 32
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Filing Fee for Registration Statement....................... $ 389,200
Legal Fees and Expenses..................................... 200,000
Rating Agency Fees.......................................... 650,000
Blue Sky Fees and Expenses.................................. 5,000
Printing and Engraving Fees................................. 100,000
Accounting Fees and Expenses................................ 120,000
Trustee's and Depositary's Fees and Expenses................ 30,000
Miscellaneous Expenses...................................... 50,800
----------
TOTAL.................................................. $1,545,000
==========
</TABLE>
The foregoing expenses, except for the filing fee for the Registration
Statement, are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Paragraph (E) of Section 1701.13 of the Ohio Revised Code grants each
corporation organized under the laws of the State of Ohio, such as Eaton
Corporation, power to indemnify its directors, officers and other specified
persons. Provisions relating to indemnification of directors and officers of
Eaton Corporation and other specified persons have been adopted pursuant to the
Ohio law and are contained in Article IV, Section 2 of Eaton Corporation's
Amended Regulations. Under the Amended Regulations, Eaton Corporation shall
indemnify any director, officer or other specified person against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him by reason of the fact that he is or was
such director, officer or other specified person, to the full extent permitted
by applicable law. The foregoing statement is subject to, and only part of, the
detailed provisions of the Ohio Revised Code and Eaton Corporation's Amended
Regulations referred to herein.
Eaton Corporation has entered into Indemnification Agreements with all of
its officers and directors. The Agreements provide that Eaton Corporation shall
indemnify such directors or officers to the full extent permitted by law against
expenses actually and reasonably incurred by them in connection with any claim
filed against them by reason of anything done or not done by them in such
capacity. The Agreements also require Eaton Corporation to maintain director and
officer insurance which is no less favorable to the director and officer than
the insurance in effect on the date of the Agreements, and to establish and
maintain an escrow account of up to $10 million to fund Eaton Corporation's
obligations under the Agreements, except that Eaton Corporation is required to
fund the escrow only upon the occurrence of a change of control of Eaton
Corporation, as defined under the Agreements.
Eaton Corporation also maintains insurance coverage for the benefit of
directors and officers with respect to many types of claims that may be made
against them, some of which claims may be in addition to those described in
Section 2 of Article IV of the Amended Regulations.
Eaton Corporation and its officers, directors and controlling persons may
receive indemnification against certain liabilities pursuant to the terms of any
underwriting agreement or similar agreement entered into with respect to the
Securities registered hereunder.
ITEM 16. EXHIBITS
This Registration Statement includes the following exhibits:
<TABLE>
<C> <S>
*1(a) -- Form of Underwriting Agreement (or similar agreement) and
Underwriting Agreement Basic Provisions.
4(a) -- Form of Senior Indenture between the Company and Chemical
Bank filed as Exhibit 4(a) to Registration Statement No.
33-52333 and incorporated herein by reference.
</TABLE>
II-1
<PAGE> 33
4(b) -- Form of Fixed Rate Senior Note filed as Exhibit 4(b) to
Registration Statement No. 33-52333 and incorporated herein
by reference.
4(c) -- Form of Subordinated Indenture between the Company and
Chemical Bank filed as Exhibit 4(c) to Registration
Statement No. 33-52333 and incorporated herein by
reference.
4(d) -- Form of Fixed Rate Subordinated Note filed as Exhibit
4(d) to Registration Statement No. 33-52333 and incorporated
herein by reference.
4(e) -- Form of Debt Warrant Agreement between the Company and
the Debt Warrant Agent, including a form of Debt Warrant
Certificate, filed as Exhibit 4(c) to Registration
Statement No. 33-48851 and incorporated herein by
reference.
4(f) -- Amended Articles of Incorporation, adopted on April 27,
1994 and filed as Exhibit 3(i) to the Registrant's Current
Report on Form 8-K dated May 19, 1994, File No. 1-1396,
and incorporated herein by reference.
4(g) -- Amended Regulations, adopted on April 27, 1988 and filed
as Exhibit 3 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994, File No. 1-1396,
and incorporated herein by reference.
4(h) -- Rights Agreement dated as of June 1, 1997.
5 -- Opinion of G. L. Gherlein, Executive Vice President and
General Counsel, as to validity of the Securities.
12 -- Computation of Ratio of Earnings to Fixed Charges.
23(a) -- Consent of Ernst & Young LLP.
23(b) -- Consent of G. L. Gherlein, Executive Vice President and
General Counsel, contained in his opinion filed as Exhibit 5
to this Registration Statement.
24 -- Power of Attorney.
25 -- Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank (as
successor by merger to Chemical Bank) with respect to the
Senior Indenture and Subordinated Indenture.
- ---------------
* To be filed as an exhibit to a Current Report on Form 8-K.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
II-2
<PAGE> 34
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
* * *
II-3
<PAGE> 35
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CLEVELAND, STATE OF OHIO, ON THE 12TH DAY OF MARCH,
1999.
EATON CORPORATION
By /s/ G. L. GHERLEIN
G. L. Gherlein
Executive Vice President and
General Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
* Chairman and Chief Executive Officer;
--------------------------------------- Principal Executive Officer; Director
Stephen R. Hardis
* President and Chief Operating Officer;
--------------------------------------- Director
Alexander M. Cutler
* Executive Vice President -- Chief
--------------------------------------- Financial and Planning Officer;
Adrian T. Dillon Principal Financial Officer
* Vice President and Controller;
--------------------------------------- Principal Accounting Officer
Billie K. Rawot
* Director
---------------------------------------
Neil A. Armstrong
* Director
---------------------------------------
Michael J. Critelli
Director
---------------------------------------
Phyllis B. Davis
* Director
---------------------------------------
Ernie Green
* Director
---------------------------------------
Ned C. Lautenbach
* Director
---------------------------------------
John R. Miller
* Director
---------------------------------------
Furman C. Moseley
* Director
---------------------------------------
Victor A. Pelson
* Director
---------------------------------------
A. William Reynolds
* Director
---------------------------------------
Gary L. Tooker
</TABLE>
March 12, 1999
*By /s/ JANE W. GRISWOLD
-------------------------------
Jane W. Griswold,
Attorney-in-Fact
for the officers and directors
signing in the capacities
indicated
<PAGE> 36
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
*1(a) -- Form of Underwriting Agreement (or similar agreement) and Underwriting Agreement Basic
Provisions.
4(a) -- Form of Senior Indenture between the Company and Chemical Bank filed as Exhibit 4(a) to
Registration Statement No. 33-52333 and incorporated herein by reference.
4(b) -- Form of Fixed Rate Senior Note filed as Exhibit 4(b) to Registration Statement No.
33-52333 and incorporated herein by reference.
4(c) -- Form of Subordinated Indenture between the Company and Chemical Bank filed as Exhibit
4(c) to Registration Statement No. 33-52333 and incorporated herein by reference.
4(d) -- Form of Fixed Rate Subordinated Note filed as Exhibit 4(d) to Registration Statement
No. 33-52333 and incorporated herein by reference.
4(e) -- Form of Debt Warrant Agreement between the Company and the Debt Warrant Agent,
including a form of Debt Warrant Certificate, filed as Exhibit 4(c) to Registration
Statement No. 33-48851 and incorporated herein by reference.
4(f) -- Amended Articles of Incorporation, adopted on April 27, 1994 and filed as Exhibit 3(i)
to the Registrant's Current Report on Form 8-K dated May 19, 1994, File No. 1-1396, and
incorporated herein by reference.
4(g) -- Amended Regulations, adopted on April 27, 1988 and filed as Exhibit 3 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, File No.
1-1396, and incorporated herein by reference.
4(h) -- Rights Agreement dated as of June 1, 1997.
5 -- Opinion of G. L. Gherlein, Executive Vice President and General Counsel, as to validity
of the Securities.
12 -- Computation of Ratio of Earnings to Fixed Charges.
23(a) -- Consent of Ernst & Young LLP.
23(b) -- Consent of G. L. Gherlein, Executive Vice President and General Counsel, contained in
his opinion filed as Exhibit 5 to this Registration Statement.
24 -- Power of Attorney.
25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Chase
Manhattan Bank with respect to the Senior Indenture and Subordinated Indenture.
</TABLE>
- ---------------
* To be filed as an exhibit to a Current Report on Form 8-K.
<PAGE> 1
Exhibit 4(h)
REFERENCE
DOCUMENT NO. 3225
- --------------------------------------------------------------------------------
EATON CORPORATION
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK
Amended and Restated Rights Agreement
Dated as of June 1, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions...................... 1
Section 2. Appointment of Rights Agent ............. 7
Section 3. Issue of Right Certificates ............. 7
Section 4. Form of Right Certificates .............. 11
Section 5. Countersignature and Registration ....... 12
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or
Stolen Right Certificates ........ 13
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights .............. 14
Section 8. Cancellation and Destruction of
Right Certificates ..................... 17
Section 9. Availability of Preferred Shares ........ 17
Section 10. Preferred Shares Record Date ............ 19
Section 11. Adjustment of Purchase Price, Number of
Shares or Number of Rights ............. 20
Section 12. Certificate of Adjusted Purchase Price
or Number of Shares 34
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power ............. 35
Section 14. Fractional Rights and Fractional Shares.. 37
Section 15. Rights of Action ........................ 40
Section 16. Agreement of Right Holders .............. 40
Section 17. Right Certificate Holder Not Deemed a
Stockholder ............................ 41
-i-
<PAGE> 3
Section 18. Concerning the Rights Agent ........... 42
Section 19. Merger or Consolidation or Change of
Name of Rights Agent ................. 43
Section 20. Rights and Duties of Rights Agent ..... 45
Section 21. Change of Rights Agent ................ 48
Section 22. Issuance of New Right Certificates .... 50
Section 23. Redemption ............................ 51
Section 24. Exchange .............................. 52
Section 25. Notice of Certain Events .............. 55
Section 26. Notices ............................... 57
Section 27. Supplements and Amendments ............ 58
Section 28. Successors ............................ 59
Section 29. Benefits of this Agreement ............ 59
Section 30. Severability .......................... 59
Section 31. Governing Law ......................... 60
Section 32. Counterparts .......................... 60
Section 33. Descriptive Headings .................. 60
Signatures ................................................ 61
Exhibit A - Form of Certificate of Amendment
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred
Shares
-ii
<PAGE> 4
Agreement, dated as of June 1, 1997, between Eaton Corporation, an
Ohio corporation (the "Company"), and First Chicago Trust Company of New
York, a national banking association (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding on July 12, 1995 (the
"Record Date"), each Right representing the right to purchase one one-hundredth
of a Preferred Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
<PAGE> 5
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 20% or more of the Common Shares
of the Company then outstanding, but shall not include the Company, any
Subsidiary (as such term is hereinafter defined) of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of an acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 20% or more of the Common Shares of the
Company then outstanding; PROVIDED, HOWEVER, that if a Person shall become the
Beneficial Owner of 20% or more of the Common Shares of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
Common Shares of the Company, then such Person shall be deemed to be an
"Acquiring Person". Notwithstanding the foregoing, if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be an
"Acquiring Person", as defined pursuant to the foregoing provisions of this
paragraph (a),
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<PAGE> 6
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph (a), then such Person shall not be deemed to be or have ever
been an "Acquiring Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling
-3-
<PAGE> 7
group members with respect to a bona fide public offering of securities), or
upon the exercise of conversion rights, exchange rights, rights (other than
these Rights), warrants or options, or otherwise; PROVIDED, HOWEVER, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; or (B) the right to
vote pursuant to any agreement, arrangement or understanding; PROVIDED, HOWEVER,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations promulgated under
the Exchange Act and (2) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other Person
with which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than
-4-
<PAGE> 8
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent contemplated by
the proviso to Section 1(c)(ii)(B)) or disposing of any securities of
the Company.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday,
or a day on which banking institutions in [Ohio] are authorized or obligated by
law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00 P.M.,
Cleveland, Ohio time, on such date; PROVIDED, HOWEVER, that if such date is not
a Business Day it shall mean 5:00 P.M., Cleveland, Ohio time, on the next
succeeding Business Day.
-5-
<PAGE> 9
(f) "Common Shares" when used with reference to the Company shall mean
the shares of common stock, par value $.50 per share, of the Company. "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock (or equity interest) with the greatest voting power of such
other Person or, if such other Person is a Subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(h) "Final Expiration Date" shall have the meaning set forth in Section
7 hereof.
(i) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(j) "Preferred Shares" shall mean shares of Series A
Participating Preferred Stock, without par value, of the Company having the
rights and preferences set forth in the Form of Certificate of Amendment
attached to this Agreement as Exhibit A.
(k) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
-6-
<PAGE> 10
(1) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(m) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
Section 3. ISSUE OF RIGHT CERTIFICATES. (a) Until the earlier of (i)
the tenth day after the Shares Acquisition Date or (ii) the tenth business day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares for or pursuant to
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<PAGE> 11
the terms of any such plan) of, or of the first public announcement of the
intention of any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company or
any entity holding Common Shares for or pursuant to the terms of any such plan)
to commence, a tender or exchange offer the consummation of which would result
in any Person becoming the Beneficial Owner of Common Shares aggregating 20% or
more of the then outstanding Common Shares (including any such date which is
after the date of this Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates, and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date, at the address of
such
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holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
one Right for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
The Company shall notify the Rights Agent in writing immediately upon
the occurrence of the Distribution Date and, if such notification is given
orally, the Company shall confirm same in writing on or prior to the Business
Day next following. Until such notice is received by the Rights Agent, the
Rights Agent may presume conclusively for all purposes that the Distribution
Date has not occurred.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the close of business on the Record Date, at the address of such holder shown on
the records of the Company. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or
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the Final Expiration Date), the surrender for transfer of any certificate for
Common Shares outstanding on the Record Date, with or without a copy of the
Summary of Rights attached thereto, shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in an Amended and Restated Rights Agreement between
Eaton Corporation and First Chicago Trust Company of New York, dated as of
June 1, 1997 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of Eaton Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. Eaton Corporation will mail to the holder of this certificate
a copy of the Rights Agreement without charge after receipt of a written
request therefor. Under certain circumstances, as set forth in the Rights
Agreement, Rights issued to any Person who becomes an Acquiring Person (as
defined in the Rights Agreement) may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender
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<PAGE> 14
for transfer of any such certificate shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed cancelled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.
Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
forms of election to purchase preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-hundredths of a preferred
Share as shall be set forth therein at the price per one one-hundredth of a
preferred Share set forth therein (the "Purchase Price"), but the number of such
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<PAGE> 15
one one-hundredths of a Preferred Share and the Purchase Price shall be subject
to adjustment as provided herein.
Section 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents, or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
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<PAGE> 16
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject
to the provisions of Section 14 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall
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<PAGE> 17
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the principal office of the Rights Agent. Thereupon the
Rights Agent shall countersign and deliver to the person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS. (a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby
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<PAGE> 18
(except as otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the principal office of the Rights Agent, together with payment of the
Purchase Price for each one one-hundredth of a Preferred Share as to which the
Rights are exercised, at or prior to the earliest of (i) the close of business
on July 12, 2005 (.the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or
(iii) the time at which such Rights are exchanged as provided in Section 24
hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred Share
purchasable pursuant to the exercise of a Right shall initially be $250, and
shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to
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<PAGE> 19
the order of the Company, the Rights Agent shall thereupon promptly (i) (A)
requisition from any transfer agent of the Preferred Shares certificates for the
number of Preferred Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B)
requisition from the depositary agent depositary receipts representing such
number of one one-hundredths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs the depositary agent to comply with such request, (ii)
when appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the
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<PAGE> 20
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. AVAILABILITY OF PREFERRED SHARES. The Company covenants
and agrees that it will cause to be reserved and kept available out of its
authorized and unissued
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<PAGE> 21
Preferred Shares or any Preferred Shares held in its treasury, the number of
Preferred Shares that will be sufficient to permit the exercise in full of all
outstanding Rights in accordance with Section 7. The Company covenants and
agrees that it will take all such action as may be necessary to ensure that all
Preferred Shares delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such Preferred Shares (subject to payment of
the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to
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<PAGE> 22
the Company's reasonable satisfaction that no such tax is due.
Section 10. PREFERRED SHARES RECORD DATE. Each person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
PROVIDED, HOWEVER, that if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
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<PAGE> 23
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books
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<PAGE> 24
of the Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification; PROVIDED, HOWEVER, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event any Person
becomes an Acquiring Person, each holder of a Right shall thereafter have a
right to receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable, in accordance with the terms of
this Agreement and in lieu of Preferred Shares, such number of Common Shares of
the Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable and dividing that product by (y) 50%
of the then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any Person shall become an Acquiring Person and
the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights.
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<PAGE> 25
From and after the occurrence of such event, any Rights that are or
were acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of
this Agreement. No Right Certificate shall be issued pursuant to Section 3 that
represents Rights beneficially owned by an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii), the
Company shall take all such action as may be necessary to authorize additional
Common Shares for issuance upon exercise of the Rights. In the event the Company
shall, after good faith effort, be unable to take all such action as may be
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<PAGE> 26
necessary to authorize such additional Common Shares, the Company shall
substitute, for each Common Share that would otherwise be issuable upon exercise
of a Right, a number of Preferred Shares or fraction thereof such that the
current per share market price of one Preferred Share multiplied by such number
or fraction is equal to the current per share market price of one Common Share
as of the date of issuance of such Preferred Shares or fraction thereof.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
preferred Shares outstanding on such record date plus the number of
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<PAGE> 27
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or equivalent preferred
shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); PROVIDED, HOWEVER, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase
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<PAGE> 28
Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; PROVIDED, HOWEVER, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of
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<PAGE> 29
one Right. Such adjustments shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such date; PROVIDED,
HOWEVER, that in the event that the current per share market price of the
Security is determined during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on
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such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day.
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(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in accordance
with the method set forth in Section 11(d)(i). If the Preferred Shares are
not publicly traded, the "current per share market price" of the Preferred
Shares shall be conclusively deemed to be the current per share market price of
the Common Shares as determined pursuant to Section 11(d)(i) (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multiplied by one hundred. If neither the
Common Shares nor the Preferred Shares are publicly held or so listed or traded,
"current per share market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this
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Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction which
requires such adjustment or (ii) the date of the expiration of the right to
exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
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(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by
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dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
10 days later than the date of the public announcement. If Right Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
and shall be registered in the names of
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the holders of record of Right Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of
the Preferred Shares issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(1) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital
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stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the
Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
(n) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common
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Shares payable in Common Shares or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then in any such case (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-hundredths of a
Preferred Share so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (B) each Common Share outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for in this Section 11(n)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer
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agent for the Common Shares or the preferred Shares a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. In the event, directly or indirectly, at any time after a Person
has become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof at a price equal
to the then
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current Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable, in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of Common
Shares of such other Person (including the Company as successor thereto or as
the surviving corporation) as shall equal the result obtained by (A) multiplying
the then current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable and dividing that product
by (B) 50% of the then current per share market price of the Common Shares of
such other Person (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; (ii) the issuer of
such Common Shares shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such issuer; and (iv) such issuer shall take
such steps (including, but not limited to, the reservation of a sufficient
number of its Common Shares in accordance with Section 9 hereof) in connection
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
the Common Shares thereafter deliverable upon the exercise of the Rights. The
Company shall not consummate any such consolidation, merger, sale or
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transfer unless prior thereto the Company and such issuer shall have executed
and delivered to the Rights Agent a supplemental agreement so providing. The
Company shall not enter into any transaction of the kind referred to in this
Section 13 if at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or arrangements which,
as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights. The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place
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on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or, if
the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required to issue fractions of preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a preferred Share) upon exercise of the Rights or to distribute certificates
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which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; PROVIDED, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one one-hundredth of a Preferred Share, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For the purposes of
this Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
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Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against, actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees
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with the Company and the Rights Agent and with every other holder of a Right
that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER.
No holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or
any other
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securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense (including, without
limitation, the reasonable expenses of legal counsel), incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with
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the acceptance and administration of its duties under this Agreement .
The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement, in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
Any corporation into which the Rights Agent or any successor Rights Agent may
be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the stock
transfer business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
PROVIDED, that such corporation
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would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
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Section 20. RIGHTS AND DUTIES OF RIGHTS AGENT. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice president, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
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(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after actual
notice that such
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change or adjustment is required); nor shall it by any act hereunder be deemed
to make any representation or warranty as to the authorization or reservation of
any Preferred Shares to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the president,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or
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deal in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity
for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights
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Agent, as the case may be, and to each transfer agent of the Common Shares or
Preferred Shares by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be a corporation organized and doing business under the laws
of the United States or of the States of Ohio or New York (or of any other state
of the United States so long as such corporation is authorized to do business as
a banking institution in the States of Ohio or New York), in good standing,
having an office in the States of Ohio or New York, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of
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its appointment as Rights Agent a combined capital and surplus of at least $50
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
or Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or
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kind or class of shares or other securities or property purchasable under the
Right Certificates made in accordance with the provisions of this Agreement.
Section 23. REDEMPTION. (a) The Board of Directors of the Company may,
at its option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
The redemption of the Rights by the Board of Directors may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; PROVIDED, HOWEVER, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after
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such action of the Board of Directors ordering the redemption of the Rights,
the Company shall mail a notice of redemption to all the holders of the then
outstanding Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Shares. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Neither the Company nor
any of its Affiliates or Associates may redeem, acquire or purchase for value
any Rights at any time in any manner other than that specifically set forth in
this Section 23 or in Section 24 hereof, and other than in connection with the
purchase of Common Shares prior to the Distribution Date.
Section 24. EXCHANGE. (a) The Board of Directors of the Company
may, at its option, at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which
shall not include Rights that have become void pursuant to the provisions of
Section 11 (a) (ii) hereof) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
exchange ratio being hereinafter referred to as the "Exchange
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Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or any such Subsidiary, or any entity holding Common Shares for or pursuant to
the terms of any such plan), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; PROVIDED, HOWEVER, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which
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the exchange of the Common Shares for Rights will be effected and, in the event
of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to the provisions of Section 11(a)
(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exchange of the Rights. In the event the Company shall, after
good faith effort, be unable to take all such action as may be necessary to
authorize such additional Common Shares, the Company shall substitute, for each
Common Share that would otherwise be issuable upon exchange of a Right, a number
of Preferred Shares or fraction thereof such that the current per share market
price of one Preferred Share multiplied by such number or fraction is equal to
the current per share market price of one Common Share as of the date of
issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such
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<PAGE> 58
fractional Common Shares, the Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. For the purposes of this paragraph
(d), the current market value of a whole Common Share shall be the closing price
of a Common Share (as determined pursuant to the second sentence of Section
11(d) (i) hereof) for the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more
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<PAGE> 59
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least 10 days
prior to the record date for determining holders of the Preferred Shares for
purposes of such action, and in the case of any such other action, at least 10
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11 (a) (ii) hereof shall
occur, then the Company shall as soon
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<PAGE> 60
as practicable thereafter give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which notice shall describe such event and the consequences of such event to
holders of Rights under Section 11 (a) (ii) hereof.
Section 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Eaton Corporation
Eaton Center
Cleveland, Ohio 44114
Attention: Office of the Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
First Chicago Trust Company of New York
525 Washington Boulevard
Suite 4660
Jersey City, New Jersey 07310
Attention: Tenders and Exchanges
-57-
<PAGE> 61
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Right Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent; PROVIDED, HOWEVER, that from and after such time as any Person becomes an
Acquiring Person, this Agreement shall not be amended in any manner which would
adversely affect the interests of the holders of Rights. Without limiting the
foregoing, the Board of Directors of the Company may at any time prior to such
time as any Person becomes an Acquiring Person amend this Agreement to lower the
thresholds set forth in Sections 1(a) and 3(a) to not less than the greater of
(i) the sum of .001% and the largest percentage of the outstanding Common Shares
then known by the Company to be beneficially owned by any Person (other than
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<PAGE> 62
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan) and (ii) 10%.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the solec and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares)
.
Section 30. SEVERABILTY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
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<PAGE> 63
Section 31. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Ohio, except that Sections 18-21 hereof shall be deemed to be a
contract made in accordance with the laws of the State of New York. For all
purposes this Agreement and those sections hereof shall be governed by and
construed in accordance with the laws of such States applicable to contracts to
be made and performed entirely within such States.
Section 32. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
EATON CORPORATION
Attest:
By /s/ E.R. Franklin By /s/ R.E. Paimenter
--------------------------------- ---------------------------------
Title: Secretary Title: Vice President
& Treasurer
FIRST CHICAGO TRUST COMPANY
Attest: OF NEW YORK
as Rights Agent
By /s/ George Dalt By /s/ [ILLEGIBLE]
--------------------------------- ---------------------------------
Title:Assistant Vice President Title: Assistant Vice President
-61-
<PAGE> 65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
EATON CORPORATION
Attest:
By /s/ E.R. Franklin By /s/ J. M. Carmont
- ----------------------- --------------------
Title: Secretary Title: Vice President and
Treasurer
Attest: SOCIETY NATIONAL BANK,
as Rights Agent
By /s/ Laura Thoms By /s/ B. William Bedy
- ------------------------ ----------------------
Title: Assistant Vice
President Title: Vice President
-61-
<PAGE> 66
Exhibit A
---------
FORM
of
CERTIFICATE OF AMENDMENT
by
DIRECTORS
of
EATON CORPORATION
------------------------------------------------------
William E. Butler, Chairman of the Board and Chief Executive Officer,
and Earl R. Franklin, Secretary of Eaton Corporation, an Ohio corporation for
profit with its principal place of business at Cleveland, Ohio (hereinafter
called the "Corporation"), hereby certify that at a meeting of the Board of
Directors called and held on the 28th day of June, 1995 the following resolution
was adopted pursuant to Section 1701.70(B)(1) of the Ohio General Corporation
Law:
RESOLVED, that pursuant to the authority vested in the Board of
Directors (hereinafter called the "Board of Directors"or the "Board") in
accordance with the provisions of the Ohio General Corporation Law, as amended,
and by Article FOURTH of the Corporation's Amended Articles of Incorporation,
such Article FOURTH is amended to add a new paragraph 9 to Division A providing
for a series of Serial Preferred Shares, without par value, of the Corporation
and that the designation and the authorized number of shares of, and the
relative rights, preferences, and limitations of, such series are as follows:
Series A Participating Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Participating Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting the Series A preferred Stock shall
be 900,000.
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<PAGE> 67
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any class of
preferred stock ranking prior and superior to the Series A preferred Stock with
respect to dividends, the holders of shares of Series A Preferred Stock, in
preference to the holders of Common Stock, par value $.50 per share (the "Common
Stock"), of the Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series A preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the
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<PAGE> 68
next subsequent Quarterly Dividend Payment Date, a dividend of $1 per
share on the Series A Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares,
or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Preferred Stock shall entitle the
holder thereof to 1 vote on all matters submitted to a vote of the stockholders
of the Corporation. The holders of fractional Series A Preferred Stock shall not
be entitled to any vote on any matter submitted to a vote of the shareholders of
the Corporation.
(B) Subject to the provisions of Paragraph 6 of Division A of
this Article FOURTH, the holders of Serial Preferred Shares shall be entitled to
elect two directors of the Corporation whenever dividends payable on any series
of Serial Preferred Shares shall be in default as qualified therein. For
purposes of the holders of Serial Preferred Shares exercising such right, the
provisions of the Corporation's Code of Regulations and other provisions of law
shall apply, as if the Serial Preferred Shares were the only class of shares of
the Corporation outstanding.
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<PAGE> 69
(C) Except as otherwise provided herein, in the Amended Articles of
Incorporation of the Corporation, in any other Certificate of Amendment creating
a series of Serial Preferred Shares or any similar stock, or by law, the holders
of shares of Series A Preferred Stock and the holders of shares of Common Stock
and any other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(D) Except as set forth herein, in the Amended Articles of
Incorporation of the Corporation, or as otherwise provided by law, holders of
Series A Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable
or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series
A Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
A-4
<PAGE> 70
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any
shares of stock ranking on a parity with the Series A Preferred
Stock, except in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued Serial
Preferred Shares and may be reissued as part of a new series of Serial Preferred
Shares subject to the conditions and restrictions on issuance set forth herein,
in the Amended Articles of Incorporation, or in any other Certificate of
Amendment creating a series of Serial Preferred Shares or any similar stock or
as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION or WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or
A-5
<PAGE> 71
winding up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation. shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock
shall not be redeemable.
Section 9. RANK. The Series A preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, on a parity with any
other series of Serial Preferred Shares and shall rank junior to any series of
any other class of preferred stock of the Corporation which by its terms is
senior to the Serial Preferred Shares.
Section 10. AMENDMENT. Subject to the provisions of Article FOURTH
of the Corporation's Amended Articles of
A-6
<PAGE> 72
Incorporation, the Amended Articles of Incorporation and the Code of Regulations
of the Corporation shall not be amended, altered or repealed in any manner which
would affect adversely the voting powers, rights or preferences of the holders
of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Series A Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Amendment is executed on behalf
of the Corporation by its Chairman of the Board and Chief Executive Officer and
attested by its Secretary this _____ day of ___________, 1995.
---------------------------
Chairman of the Board and
Chief Executive Officer
Attest:
- ---------------------
Secretary
A-7
<PAGE> 73
Exhibit B
---------
Form of Right Certificate
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER JULY 12, 2005 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
EATON CORPORATION
This certifies that _____________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of June 28, 1995 (the "Rights Agreement"),
between Eaton Corporation, an Ohio corporation (the "Company"), and Society
National Bank (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M., Cleveland, Ohio time, on July 12, 2005 at the principal
office of the Rights Agent, or at the office of its successor as Rights Agent,
one one-hundredth of a fully paid non-assessable share of Series A Participating
Preferred Stock, without par value (the "Preferred Shares"), of the Company, at
a purchase price of $250 per one one-hundredth of a Preferred Share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-hundredths of a
Preferred Share which may be purchased upon exercise hereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
June 28, 1995, based on the Preferred Shares as constituted at such date. As
provided in the Rights Agreement, the Purchase Price and the number of one
one-hundredths of a Preferred Share which may be purchased upon the exercise of
the Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement,
B-1
<PAGE> 74
which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Rights Agent, the Company
and the holders of the Right Certificates. Copies of the Rights Agreement are on
file at the principal executive offices of the Company and the above-mentioned
offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for Preferred Shares
or shares of the Company's Common Stock, par value $.50 per share.
No fractional preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the
B-2
<PAGE> 75
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ____________, 199_.
ATTEST: EATON CORPORATION
_______________________ By _________________________
Countersigned:
Society National Bank
By________________________________
Authorized Signature
B-3
<PAGE> 76
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ______________________________
hereby sells, assigns and transfers unto ____________________
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: _______________________, 199
-----------------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in the Securities
Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the
New York Stock Exchange, Inc. Medallion Signature Program.
- -------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) .
-----------------------------------------------
Signature
- -------------------------------------------------------------------------------
B-4
<PAGE> 77
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: EATON CORPORATION
The undersigned hereby irrevocably elects to exercise
____________________________ Rights represented by this Right Certificate to
purchase the Preferred Shares issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: __________________, 199_
-----------------------------------------------
Signature
B-5
<PAGE> 78
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
B-6
<PAGE> 79
Form of Reverse Side of Right Certificate -- continued
- -------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
---------------------------------------
Signature
- -------------------------------------------------------------------------------
NOTICE
------
The signature in the Form of Assignment or Form of Election to
purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-7
<PAGE> 80
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
Introduction
- ------------
On June 28, 1995, the Board of Directors of Eaton Corporation (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding common share, par value $.50 per share (the "Common
Shares"), of the Company. The dividend is payable on July 12, 1995 (the "Record
Date") to the shareholders of record on that date. The description and terms of
the Rights are set forth in a Rights Agreement (the "Rights Agreement") between
the Company and Society National Bank, as Rights Agent (the "Rights Agent") .
The Rights contain important "flip-over" and "flip-in" features designed to
protect the Company from unfair takeovers.
Purchase Price
- --------------
Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Participating preferred Stock, without
par value (the "preferred Shares") , of the Company at a price of $250 per one
one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment.
Flip-Over
- ---------
If the Company is acquired in a merger or other business combination or
50% or more of its consolidated assets or earning power are sold after a person
or group has become an Acquiring Person (as defined below) , each holder of a
Right will thereafter have the right to receive, upon exercise, that number of
shares of common stock of the acquiring company which then will have a market
value of two times the exercise price of the Right.
Flip-In
- -------
If any person or group of affiliated or associated persons becomes an
Acquiring Person, each holder of a Right, other than Rights beneficially owned
by the Acquiring Person (which will thereafter be void), will thereafter have
<PAGE> 81
the right to receive upon exercise that number of Common Shares having a market
value of two times the exercise price of the Right .
Transfer and Detachment
- -----------------------
Until the Distribution Date, the Rights will be evidenced, with respect
to any of the Common Share certificates outstanding as of the Record Date, by
such Common Share certificate with a copy of this Summary of Rights attached
thereto. Until the Distribution Date (or earlier redemption or expiration of the
Rights) , the Rights will be transferred with and only with the Common Shares,
and transfer of those certificates will also constitute transfer of those
Rights.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will thereafter
evidence the Rights.
Distribution Date
- -----------------
The "Distribution Date" is the earlier of:
(i) 10 days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") have
acquired beneficial ownership of 20% or more of the outstanding Common
Shares; or
(ii) 10 business days (or such later date as may be determined
by action of the Board of Directors before any person or group becomes
an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation
of which would result in the beneficial ownership by a person or group
of 20% or more of the outstanding Common Shares.
Exercisability
- --------------
The Rights are not exercisable until the Distribution Date. The Rights
will expire on July 12, 2005 (the "Final Expiration Date") , unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, as described below.
C-2
<PAGE> 82
Adjustments
- -----------
The Purchase Price, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution, in the event of:
(i) a stock dividend on, or a subdivision, combi-
nation or reclassification of, the Preferred Shares,
(ii) the grant to holders of the Preferred Shares of certain
rights to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price,
less than the then-current market price of the Preferred Shares, or
(iii) the distribution to holders of the Preferred Shares of
evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable
in Preferred Shares) or of subscription rights or warrants (other than
those referred to above).
The number of outstanding Rights is also subject to adjustment upon
certain occurrences prior to the Distribution Date .
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
Preferred Shares
- ----------------
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each Preferred
Share will have 1 vote, voting together with the
C-3
<PAGE> 83
Common Shares. Finally, in the event of any merger, consolidation or other
transaction in which Common Shares are exchanged, each Preferred Share will be
entitled to receive 100 times the amount received per Common Share. The dividend
and liquidation rights and rights upon a merger, consolidation or other
transaction are protected by customary antidilution provisions.
The value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should, because of the nature of the
Preferred Shares' dividend and liquidation rights, approximate the value of one
Common Share.
Exchange
- --------
At any time after any person or group becomes an Acquiring Person, and
prior to the acquisition by that person or group of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by the Acquiring Person, which will have
become void), in whole or in part, at an exchange ratio of one Common Share, or
one one-hundredth of a Preferred Share (or of a share of a class or series of
the Company's preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
Redemption
- ----------
At any time prior to any person or group becoming an Acquiring Person,
the Board of Directors of the Company may redeem all the Rights at a price of
$.01 per Right (the "Redemption Price") . The redemption may be made effective
at such time, on such basis and with such conditions as the Board of Directors
in its sole discretion may establish. Immediately upon any redemption, the right
to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Amendments
- ----------
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower the 20% threshold described above to not less than the greater of (i)
the sum of .001% and the largest percentage of the outstanding Common Shares
then known to the Company to be beneficially owned by any person or group of
affiliated or associated persons and (ii) 10%, except that after any person or
C-4
<PAGE> 84
group becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.
Rights as Holders
- -----------------
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Further Information
- -------------------
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
_______, 1995. A copy of the Rights Agreement is available free of charge from
the Company's Shareholder Relations Department. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is hereby incorporated herein by
reference.
C-5
<PAGE> 1
Exhibit 5
[LETTERHEAD]
March 12, 1999
Board of Directors
Eaton Corporation
Ladies and Gentlemen:
I am furnishing this opinion for Eaton Corporation (the "Company") in
connection with the Registration Statement (the "Registration Statement") on
Form S-3 being filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, relating to the
offering from time to time, as set forth in the prospectus contained in the
Registration Statement (the "Prospectus") and as to be set forth in one or more
supplements to the Prospectus (each such supplement, a "Prospectus Supplement"),
of up to $1,400,000,000 aggregate amount of the Company's (i) debt securities
(the "Debt Securities"), (ii) warrants to purchase Debt Securities (the "Debt
Warrants"), (iii) preferred shares (the "Preferred Shares") and (iv) common
shares (the "Common Shares"). The Debt Warrants, the Debt Securities, the
Preferred Shares and the Common Shares are collectively referred to as the
"Securities". Any Debt Securities and Preferred Shares may be convertible into
or exchangeable for Common Shares or other Securities.
The Debt Securities will be issued in one or more series and may be
either senior debt securities (the "Senior Securities") issued pursuant to an
Indenture (the "Senior Indenture") dated as of April 1, 1994 between the Company
and The Chase Manhattan Bank (as successor to Chemical Bank), trustee (the
"Senior Trustee"), or subordinated debt securities (the "Subordinated
Securities") issued pursuant to an Indenture (the "Subordinated Indenture") to
be entered into between the Company and an institution identified therein as
trustee (the "Subordinated Trustee"). The Debt Warrants will be issued under one
or more debt warrant agreements (each, a "Debt Warrant Agreement") to be entered
into between the Company and a financial institution identified therein as
warrant agent (each, a "Warrant Agent").
I have examined the resolutions of the Board of Directors of the
Company (the "Resolutions") authorizing the Indentures and the issuance,
offering and sale of the Securities, and I have examined such corporate records
of the Company and such other documents and certificates as I have deemed
necessary as a basis for the opinions hereinafter expressed.
<PAGE> 2
2
Based on the foregoing, and having regard for such legal
considerations as I have deemed relevant, I am of the opinion that:
1. The Senior Indenture has been duly authorized, executed and
delivered by the Company and constitutes a legally binding instrument of the
Company enforceable against the Company in accordance with its terms.
2. The Senior Securities (including Senior Securities issuable upon
conversion of or exchange for any Security or upon exercise of any Debt Warrant)
have been duly authorized and, when the final terms thereof have been duly
established and approved and when duly executed by the Company, in each case
pursuant to the authority granted in the Resolutions, and authenticated by the
Senior Trustee in accordance with the Senior Indenture and delivered to and paid
for by the purchasers thereof, will constitute legally binding obligations of
the Company entitled to the benefits of the Senior Indenture.
3. The Subordinated Indenture has been duly authorized and, when
executed and delivered by the Company pursuant to the authority granted in the
Resolutions, and assuming due authorization, execution and delivery thereof by
the Subordinated Trustee, will constitute a legally binding instrument of the
Company enforceable against the Company in accordance with its terms.
4. The Subordinated Securities (including Subordinated Securities
issuable upon conversion of or exchange for any Security or upon exercise of any
Debt Warrant) have been duly authorized and, when the final terms thereof have
been duly established and approved and when duly executed by the Company, in
each case pursuant to the authority granted in the Resolutions, and
authenticated by the Subordinated Trustee in accordance with the Subordinated
Indenture and delivered to and paid for by the purchasers thereof, will
constitute legally binding obligations of the Company entitled to the benefits
of the Subordinated Indenture.
5. The Warrant Agreements have been duly authorized and, when executed
and delivered by the Company pursuant to the authority granted in the
Resolutions, and assuming due authorization, execution and delivery thereof by
the applicable Warrant Agent, will constitute legally binding instruments of the
Company enforceable against the Company in accordance with their respective
terms.
6. The Warrants have been duly authorized and, when the final terms
thereof have been duly established and approved and when certificates
representing such Warrants have been duly executed by the Company, in each case
pursuant to the authority granted in the Resolutions, and when such certificates
have been countersigned by the applicable Warrant Agent in accordance with the
applicable Warrant Agreement and delivered to and paid for by the purchasers
thereof, such Warrants will constitute legally binding obligations of the
Company entitled to the benefits of the applicable Warrant Agreement.
<PAGE> 3
3
7. The Preferred Shares (including Preferred Shares issuable upon
conversion of or exchange for any Security) have been duly authorized and, when
the final terms thereof have been duly established and approved and certificates
representing such Preferred Shares have been duly executed by the Company, in
each case pursuant to the authority granted in the Resolutions, and when such
certificates have been delivered to and paid for by the purchasers thereof, and
when all corporate action necessary for issuance of such Preferred Shares has
been taken, including the adoption of a Certificate of Designations relating
thereto, such shares will be validly issued, fully paid and non-assessable.
8. The Common Shares (including Common Shares issuable upon conversion
of or exchange for any Security) have been duly authorized and, when issued and
delivered pursuant to the authority granted in the Resolutions and against
payment therefor, will be validly issued, fully paid and non-assessable.
The opinions set forth above are subject, as to enforcement, to
(i) bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws relating
to or affecting the enforcement of creditors' rights generally, (ii) general
equitable principles (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (iii) provisions of law that require that a
judgment for money damages rendered by a court in the United States be expressed
only in United States dollars.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of my name under the heading "Legal
Opinions" in the Prospectus.
Very truly yours,
Gerald L. Gherlein
Executive Vice President and
General Counsel
<PAGE> 1
Exhibit 12
EATON CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine
months
ended Year ended December 31
Sept. 30, ----------------------------------------------------------
(Millions of dollars) 1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes & extraordinary item $395 $668 $485 $592 $488 $262
Adjustments
Minority interests in consolidated subsidiaries (1) 1 1 0 (2) (3)
Income of equity investees 3 (7) (14) (9) (3) (3)
Amortization of capitalized interest 5 8 8 7 6 5
Distributed income of equity investees 2 4 5 5 3 2
Interest expensed 70 86 85 86 83 65
Amortization of debt issue costs 0 1 1 0 0 0
Estimated portion of rent expense representing interest 23 26 24 22 22 14
-------------------------------------------------------------------
Adjusted income before income taxes $497 $787 $595 $703 $597 $342
===================================================================
Fixed charges
Interest expensed $70 $86 $85 $86 $83 $65
Interest capitalized 11 12 8 10 10 12
Amortization of debt issue costs 0 1 1 0 0 0
Estimated portion of rent expense representing interest 23 26 24 22 22 14
-------------------------------------------------------------------
Total fixed charges $104 $125 $118 $118 $115 $91
===================================================================
Ratio of earnings to fixed charges 4.78 6.30 5.04 5.96 5.19 3.76
</TABLE>
<PAGE> 1
Exhibit 23 (a)
CONSENT OF INDEPENDENT AUDITORS
- -------------------------------
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Eaton Corporation
for the registration of $1,400,000,000 of debt and equity securities, and to the
incorporation by reference therein of our report dated January 19, 1998, with
respect to the consolidated financial statements of Eaton Corporation included
in its Annual Report (Form 10-K) for the year ended December 31, 1997, filed
with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Cleveland, Ohio
March 10, 1999
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That each person whose name is signed
hereto has made, constituted and appointed, and does hereby make, constitute and
appoint, GERALD L. GHERLEIN, EARL R. FRANKLIN, MARK HENNESSEY, DAVID M.
O'LOUGHLIN OR JANE W. GRISWOLD his or her true and lawful attorney, for him or
her and in his or her name, place and stead to affix, as attorney-in-fact, his
or her signature as director or officer or both, as the case may be, of Eaton
Corporation, an Ohio corporation (the "Corporation"), to any and all
registration statements and amendments filed with the Securities and Exchange
Commission with respect to an aggregate amount of up to $1.5 billion of debt
securities, warrants to purchase debt securities, preferred shares, common
shares or any combination thereof, giving and granting unto each such
attorney-in-fact full power and authority to do and perform every act and thing
whatsoever necessary to be done in the premises, as fully as he or she might or
could do if personally present, hereby ratifying and confirming all that each
such attorney-in-fact shall lawfully do or cause to be done by virtue hereof.
This Power of Attorney shall not apply to any registration statement or
amendment filed after December 31, 1999.
IN WITNESS WHEREOF, this Power of Attorney has been signed at
Cleveland, Ohio, this 24th day of February, 1999.
/s/ Stephen R. Hardis /s/ Alexander M. Cutler
- --------------------------------- -----------------------------------
Stephen R. Hardis, Chairman Alexander M. Cutler, President and
and Chief Operating Officer; Chief Executive Officer;
Principal Executive Officer; Director
Director
/s/ Adrian T. Dillon /s/ Billie K. Rawot
- --------------------------------- -----------------------------------
Adrian T. Dillon, Billie K. Rawot,
Executive Vice President-- Vice President and Controller;
Chief Financial and Principal Accounting Officer
Planning Officer;
Principal Financial Officer
/s/ Neil A. Armstrong /s/ Michael J. Critelli
- --------------------------------- -----------------------------------
Neil A. Armstrong, Director Michael J. Critelli, Director
/s/ Ernie Green
- --------------------------------- -----------------------------------
Phyllis B. Davis, Director Ernie Green, Director
Page 1 of 2 Pages
<PAGE> 2
/s/ Ned C. Lautenbach /s/ John R. Miller
- --------------------------------- -----------------------------------
Ned C. Lautenbach, Director John R. Miller, Director
/s/ Furman C. Moseley /s/ Victor A. Pelson
- --------------------------------- -----------------------------------
Furman C. Moseley, Director Victor A. Pelson, Director
/s/ A. William Reynolds /s/ Gary L. Tooker
- --------------------------------- -----------------------------------
A. William Reynolds, Director Gary L. Tooker, Director
Page 2 of 2 Pages
<PAGE> 1
Exhibit 25
----------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
EATON CORPORATION
(Exact name of obligor as specified in its charter)
OHIO 34-0196300
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
EATON CENTER
1111 SUPERIOR AVENUE
CLEVELAND, OH 44114-2584
(Address of principal executive offices) (Zip Code)
--------------------------------------------------
DEBT SECURITIES
(Title of the indenture securities)
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New
York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 3rd day of March, 1999.
THE CHASE MANHATTAN BANK
By /s/ P. Kelly
-----------------
/s/ P. Kelly
Vice President
- 3 -
<PAGE> 4
<TABLE>
<CAPTION>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business September 30, 1998, in accordance
with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ..................................................... $ 11,951
Interest-bearing balances ............................................. 4,551
Securities: ...............................................................
Held to maturity securities................................................. 1,740
Available for sale securities............................................... 48,537
Federal funds sold and securities purchased under
agreements to resell .................................................. 29,730
Loans and lease financing receivables:
Loans and leases, net of unearned income ....... $127,379
Less: Allowance for loan and lease losses ...... 2,719
Less: Allocated transfer risk reserve .......... 0
Loans and leases, net of unearned income, --------
allowance, and reserve ................................................. 124,660
Trading Assets .............................................................. 51,549
Premises and fixed assets (including capitalized
leases)................................................................. 3,009
Other real estate owned ..................................................... 272
Investments in unconsolidated subsidiaries and
associated companies.................................................... 300
Customers' liability to this bank on acceptances
outstanding ............................................................ 1,329
Intangible assets ........................................................... 1,429
Other assets ................................................................ 13,563
TOTAL ASSETS ................................................................ $292,620
=========
</TABLE>
- 4 -
<PAGE> 5
<TABLE>
<CAPTION>
LIABILITIES
Deposits
<S> <C>
In domestic offices ..................................... $98,760
Noninterest-bearing ..................................... $39,071
Interest-bearing ........................................ 59,689
In foreign offices, Edge and Agreement, ------
subsidiaries and IBF's .................................. 75,403
Noninterest-bearing ..................................... $ 3,877
Interest-bearing ........................................ 71,526
Federal funds purchased and securities sold under agree-
ments to repurchase ........................................... 34,471
Demand notes issued to the U.S. Treasury ...................... 1,000
Trading liabilities ........................................... 41,589
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less ...... 3,781
With a remaining maturity of more than one year
through three years............................ 213
With a remaining maturity of more than three years.. 104
Bank's liability on acceptances executed and outstanding 1,329
Subordinated notes and debentures ............................ 5,408
Other liabilities ............................................ 12,041
TOTAL LIABILITIES ............................................ 274,099
-------
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock ................................................. 1,211
Surplus (exclude all surplus related to preferred stock)... 10,441
Undivided profits and capital reserves ....................... 6,287
Net unrealized holding gains (losses)
on available-for-sale securities ............................... 566
Cumulative foreign currency translation adjustments ......... 16
TOTAL EQUITY CAPITAL ......................................... 18,521
------
TOTAL LIABILITIES AND EQUITY CAPITAL ......................... $292,620
==========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
