<PAGE>
This preliminary prospectus supplement relates to an effective registration
statement under the Securities Act of 1933, but is not complete and may be
changed. This preliminary prospectus supplement 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.
<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-14771
SUBJECT TO COMPLETION, DATED JANUARY 16, 2001
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 18, 1996
$150,000,000
[LOGO]
ECOLAB INC.
% Notes due , 2011
-----------
We will pay interest on the notes each and . The first
interest payment will be made on , 2001. We may redeem the notes at
any time prior to maturity. There is no sinking fund for the notes.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS ECOLAB INC.(1)
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Note................................. % % %
Total.................................... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 2001.
Delivery of the notes in book-entry form only will be made on or about
, 2001.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
CREDIT SUISSE FIRST BOSTON
JP MORGAN
BANC OF AMERICA SECURITIES LLC
SALOMON SMITH BARNEY
The date of this prospectus supplement is , 2001.
<PAGE>
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
FORWARD-LOOKING STATEMENTS............. S-3
AVAILABLE INFORMATION.................. S-3
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE............................ S-3
THE COMPANY............................ S-4
RECENT DEVELOPMENTS.................... S-6
USE OF PROCEEDS........................ S-6
CAPITALIZATION......................... S-7
SELECTED CONSOLIDATED FINANCIAL DATA... S-8
RATIO OF EARNINGS TO FIXED CHARGES..... S-8
DESCRIPTION OF THE NOTES............... S-9
UNDERWRITING........................... S-13
NOTICE TO CANADIAN RESIDENTS........... S-14
LEGAL OPINIONS......................... S-15
EXPERTS................................ S-15
PROSPECTUS
AVAILABLE INFORMATION.................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE............................ 3
THE COMPANY............................ 4
USE OF PROCEEDS........................ 4
RATIOS OF EARNINGS TO FIXED CHARGES.... 4
DESCRIPTION OF DEBT SECURITIES......... 5
PLAN OF DISTRIBUTION................... 16
VALIDITY OF DEBT SECURITIES............ 18
EXPERTS................................ 18
</TABLE>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
S-2
<PAGE>
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements. This prospectus supplement and the accompanying
prospectus include and incorporate by reference forward-looking statements
regarding our future performance which may include anticipated financial
performance, business prospects, prospects for international growth, investments
in the sales and service force, the impact of legislation and environmental
compliance, the effect of litigation, production capability, share repurchases,
the effect of new accounting pronouncements and similar matters. Without
limiting the foregoing, words or phrases such as "will likely result," "are
expected to," "will continue," "is anticipated," "we believe," "estimate,"
"project" (including the negative or variations thereof) or similar terminology,
generally identify forward-looking statements.
Forward-looking statements are based on assumptions and estimates and are
subject to risks and uncertainties. You should not place undue reliance on
forward-looking statements, which speak only as of the date made. The reports we
file with the Securities and Exchange Commission (the "SEC"), including our
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q that are
incorporated herein by reference, discuss important factors which could affect
our financial performance and could cause our actual results for future periods
to differ materially from the anticipated results or other expectations
expressed in the forward-looking statements. These factors should be considered,
together with any similar risk factors or other cautionary language accompanying
the forward-looking statements.
AVAILABLE INFORMATION
The following paragraph supersedes the first paragraph under the heading
"Available Information" in the accompanying prospectus:
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. Our SEC filings are also available to the public
at the SEC's web site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following information supersedes the last sentence under the heading
"Incorporation of Certain Documents by Reference" in the accompanying
prospectus:
We will provide, free of charge, a copy of any or all of the information
that has been incorporated herein by reference upon written or oral request to:
Kenneth A. Iverson
Vice President and Secretary
Ecolab Inc.
Ecolab Center
370 North Wabasha Street
Saint Paul, Minnesota 55102
(651) 293-2125
S-3
<PAGE>
THE COMPANY
As used in this prospectus supplement and the accompanying prospectus,
except as otherwise stated or as the context otherwise requires, references to
"us," "we," "our" and "Ecolab" mean Ecolab Inc., together with its consolidated
subsidiaries.
Our principal executive offices are located at 370 Wabasha Street North, St.
Paul, Minnesota 55102-1390; our telephone number is (651) 293-2233; and our
Internet address is www.ecolab.com. Information contained on our Internet world
wide web site or any other Internet world wide web site is not part of this
prospectus supplement or the accompanying prospectus.
Incorporated in Delaware on February 18, 1924, Ecolab is a leading global
developer and marketer of premium cleaning, sanitizing, pest elimination,
maintenance and repair products and services for hospitality, institutional and
industrial markets. Customers include hotels and restaurants; foodservice,
healthcare and educational facilities; quickservice (fast-food) units;
commercial laundries; light industry; dairy plants and farms; and food and
beverage processors. Ecolab provides customized products, equipment and programs
backed by one of the industry's largest and best-trained sales-and-service
force.
In Europe, Ecolab reaches customers through a 50-50 joint venture with
Henkel KGaA. Founded in 1991, the Henkel-Ecolab joint venture meets the cleaning
and sanitizing needs of the European institutional and food and beverage
markets. The joint venture is headquartered in Dusseldorf, Germany. On
December 7, 2000, Ecolab announced that it has agreed to combine into its
operations the remaining 50% of the Henkel-Ecolab joint venture now owned by
Henkel. See "Recent Developments."
Our "Circle the Customer--Circle the Globe" strategy, is focused on meeting
our customers' cleaning and sanitizing needs around the world. We accomplish
this through our ten operating divisions:
- Institutional
- Food and Beverage
- Kay
- Pest Elimination
- Professional Products
- GCS Services
- Textile Care
- Vehicle Care
- Water Care Services
- International
INSTITUTIONAL
The Institutional division provides detergents and sanitizers for
warewashing and on-premise laundry for the foodservice, institutional and
hospitality industries. Institutional is always in search of ways to provide
better results and cost savings to our customers through innovative solutions
and services. The division's customers cover the spectrum from large public
chains to small private businesses.
Institutional provides warewashing systems supported by unique products and
services that clean and sanitize dishware, glasses and utensils. Warewashing
products include detergents, rinse additives and presoaks. These products
provide optimal cleaning and sanitizing results while promoting employee and
environmental safety. Institutional is also a supplier of on-premise laundry
products and dispensing equipment, typically to large restaurants, hotels,
nursing homes and hospitals that launder their own uniforms and table linen. The
division also offers specialty products to meet our customer's kitchen and
housekeeping cleaning needs, leases warewashing equipment under the Ecotemp line
and sells kitchen equipment and accessories, such as dish racks, through its
Raburn line.
S-4
<PAGE>
FOOD AND BEVERAGE
The Food and Beverage division provides Ecolab's cleaning and sanitizing
expertise to the food and beverage industry, serving the dairy, agribusiness,
beverage and brewery and food processing markets. Food and Beverage provides its
customers with premium detergents, cleaners, sanitizers and conveyor lubricants
to ensure the safe preparation of food. It also designs, manufactures, and
supplies controlled dispensing equipment that enhance cleaning and sanitizing
results.
KAY
Kay is a leading supplier of cleaning and sanitizing products and services
to quick-service restaurant chains and food retail operators, such as
supermarkets and convenience stores. As with other divisions of Ecolab, Kay not
only provides cleaning and sanitizing products for its customers, but also
provides unique customized cleaning and sanitizing solutions. The Kay division
provides customers with education and training on sanitizing standards and
practices, which is vital to an industry with a work force with high levels of
turnover.
PEST ELIMINATION
Ecolab formed the Pest Elimination division in 1984 to capitalize on the
strength of the Institutional division. This marked the commencement of our
strategy of "circling the customer" with complementary offerings that meet all
of a customer's cleaning and sanitizing needs. The approximately 1,400 sales and
service associates in the Pest Elimination Division make more than one million
service calls per year.
PROFESSIONAL PRODUCTS
The Professional Products division provides products for cleaning and
infection prevention, such as hand soaps and lotions, surface cleaners,
disinfectants, floor care and odor control products. Ecolab has focused on
developing and marketing janitorial and infection prevention products to the
health care, education, building service, contractor, retail and industrial
markets.
GCS SERVICES
GCS Services is an independent nationwide provider of commercial kitchen
equipment repair services and maintenance contracts serving the hospitality and
institutional markets. GCS emphasizes preventative maintenance contracts with
its customers, thereby enhancing and prolonging the useful life of the
customer's kitchen equipment.
TEXTILE CARE
The Textile Care division provides customized laundry wash programs that
include products, dispenser systems, customer services and technical support for
larger capacity operations. Markets served include hotels, shirt laundries,
hospitals and commercial laundries.
VEHICLE CARE
The Vehicle Care division provides cleaning products and equipment solutions
to the car, fleet and truck-washing markets--markets that are complementary to
Ecolab's Institutional and Food and Beverage divisions. With the acquisition of
Grace-Lee Products in 1997 and Blue Coral Systems in 1999, Ecolab became a
market leader in the car wash market.
S-5
<PAGE>
WATER CARE SERVICES
The Water Care Services division provides products and water treatment
programs that are designed to prevent corrosion and scale from forming in water
systems. Ecolab started providing water care services to its customers in 1993.
The market for the Water Care Services division services consists primarily of
facilities such as food plants, hotels, cruise ships, hospitals and office
buildings that use boilers, chillers and cooling towers in the regulation of a
building's environment or to provide potable water systems.
INTERNATIONAL
Ecolab directly operates and sells its products in the Asia-Pacific region,
Central America, South America, Africa and Canada. Our International division
offers products that are similar to those offered in the United States, but also
customizes products and services to meet the unique needs of our international
customers. Serving our customers around the world is a cornerstone of our
"Circle the Customer--Circle the Globe" strategy.
RECENT DEVELOPMENTS
On December 7, 2000, Ecolab announced that it has agreed to combine into its
operations the remaining 50% of the Henkel-Ecolab joint venture now owned by its
partner, Henkel KGaA of Dusseldorf, Germany. The transaction is scheduled to
close January 2, 2002, subject to regulatory approvals in various jurisdictions
and customary closing conditions.
Under the agreement, Ecolab will pay Henkel approximately 11 times Henkel's
50% share of the joint venture's average operating income before interest, taxes
and certain other expenses for the years 2000 and 2001. The transaction will be
effected in either cash or Ecolab stock, at Henkel's option. Based on current
estimates, the consideration would range from approximately 520 million euros to
approximately 560 million euros, equal to $487 million to $525 million at
current exchange rates. If Henkel chooses to receive Ecolab stock, the shares
will be valued at $41.06 per share, but the actual number of shares Henkel
receives will not exceed approximately 13.2 million shares or be less than
approximately 9.3 million shares. Henkel owned 32.2 million, or approximately
25%, of Ecolab's outstanding shares on November 30, 2000.
As part of the transaction, the stockholder agreement between Ecolab and
Henkel will be amended and extended. The amended stockholder agreement will
provide, among other things, that Henkel is permitted to increase its ownership
in Ecolab to 35%. Henkel will remain entitled to proportionate representation on
Ecolab's Board of Directors.
USE OF PROCEEDS
The net proceeds from the sale of the notes, after deducting underwriting
discounts and commissions and estimated fees and expenses, are expected to be
approximately $ million and will be used to reduce our outstanding commercial
paper and for general corporate purposes. Pending the use of proceeds, we may
invest the net proceeds temporarily in marketable securities. As of
September 30, 2000, our commercial paper outstanding had a weighted average
effective cost of approximately 6.7% per year. We issued the commercial paper to
finance acquisitions and share repurchases and for general corporate purposes.
S-6
<PAGE>
CAPITALIZATION
The following table shows our consolidated capitalization as of
September 30, 2000 (i) on an actual basis and (ii) as adjusted to give effect to
the sale of the notes and the application of the net proceeds therefrom as
described under "Use of Proceeds." The table should be read together with the
consolidated financial statements, notes and other financial information we are
incorporating by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
------------------------
ACTUAL AS ADJUSTED
---------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Short-term debt
Notes payable............................................. $ 219,223 $ 70,526
Long-term debt, current maturities........................ 15,087 15,087
---------- ----------
Total short-term debt..................................... 234,310 85,613
---------- ----------
Long-term debt
7.19% notes, due 2006..................................... 75,000 75,000
9.68% notes, due 1995-2001................................ 14,286 14,286
6.00% medium term notes, due 2001......................... 57,600 57,600
% notes, due , 2011, offered hereby................ -- 150,000
Other..................................................... 14,831 14,831
---------- ----------
Total long-term debt...................................... 161,717 311,717
---------- ----------
Total debt.................................................. $ 396,027 $ 397,330
========== ==========
Shareholders' equity
Common stock (par value of $1.00 per share; shares
outstanding 127,079).................................... $ 147,043 $ 147,043
Additional paid-in capital................................ 258,974 258,974
Retained earnings......................................... 861,696 861,696
Deferred compensation..................................... (9,265) (9,265)
Accumulated other comprehensive income:
translation............................................. (78,771) (78,771)
Treasury stock............................................ (434,465) (434,465)
---------- ----------
Total shareholders' equity................................ $ 745,212 $ 745,212
========== ==========
Total capitalization........................................ $1,141,239 $1,142,542
========== ==========
</TABLE>
S-7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1999 1998 1997 1996 1995 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales.................. $2,080,012 $1,888,226 $1,640,352 $1,490,009 $1,340,881 $1,697,637 $1,564,231
Operating income........... 289,951 261,980 218,504 185,317 162,686 249,049 221,860
Income from continuing
operations............... 175,786 154,506 133,955 113,185 99,189 151,359 133,443
Net income................. 175,786 192,506 133,955 113,185 99,189 151,359 133,443
Diluted Income Per Common
Share:
Income from continuing
operations............... $ 1.31 $ 1.15 $ 1.00 $ 0.85 $ 0.73 $ 1.14 $ 0.99
Net income................. 1.31 1.44 1.00 0.85 0.73 1.14 0.99
Diluted weighted-average
common shares
outstanding................ 134,419 134,047 133,822 132,817 134,956 132,534 134,569
Balance Sheet Data:
Current assets............. $ 577,321 $ 503,514 $ 509,501 $ 435,507 $ 358,072 $ 644,608 $ 577,321
Total assets............... 1,585,946 1,470,995 1,416,299 1,208,409 1,060,880 1,724,379 1,585,946
Current liabilities........ 470,674 399,791 404,464 327,771 310,538 634,737 470,674
Total debt................. 281,074 295,032 308,268 176,292 161,049 396,027 281,074
Long-term debt............. 169,014 227,041 259,384 148,683 89,402 161,717 169,014
Shareholders' equity....... 762,016 690,541 551,701 519,963 456,658 745,212 762,016
Cash Flow Data:
Cash provided by operating
activities............... $ 293,494 $ 235,642 $ 235,098 $ 254,269 $ 166,463 $ 236,043 $ 198,961
Cash dividends declared per
common share............. 0.435 0.39 0.335 0.29 0.2575 0.36 0.315
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
7.98 7.42 8.52 7.07 6.89
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2000 1999
-------- --------
<S> <C> <C> <C>
8.68 8.38
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
before fixed charges by fixed charges. Earnings consist of income from
continuing operations before income taxes and equity in earnings of
Henkel-Ecolab, plus cash royalties and dividends received from Henkel-Ecolab and
fixed charges. Fixed charges consist of interest expense plus the estimated
interest portion of rent expense.
S-8
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The following description of the terms of the % Notes due , 2011
(the "Notes") offered hereby supplements and modifies the description of the
general terms and provisions of the debt securities set forth in the
accompanying prospectus, to which reference is hereby made. As used in this
description of the notes, "us," "we," "our" and "Ecolab" refer to Ecolab Inc.
only.
The Notes will be issued under the Amended and Restated Indenture dated as
of January 9, 2001 (the "Indenture") between us and Bank One, National
Association (f/k/a The First National Bank of Chicago), as Trustee (the
"Trustee"), which indenture amends and restates the Indenture dated November 1,
1996 between us and the Trustee.
The Notes are initially being offered in the aggregate principal amount of
$150 million. We may, without the consent of the holders of the Notes, issue
additional notes in the future, on the same terms and conditions and with the
same CUSIP number as the Notes being offered hereby. The Notes will bear
interest at the rate of % per year from , 2001, payable semiannually on
each and to the holders of record on and
immediately before the interest payment date. The first interest
payment will be made on , 2001. Interest on the Notes will be paid on the
basis of a 360-day year comprised of twelve 30-day months. The Notes will mature
on . The Notes are subject to redemption prior to maturity as
described below, but are not entitled to the benefit of any sinking fund.
The indebtedness evidenced by the Notes will be unsecured senior
indebtedness and will rank PARI PASSU in right of payment with all of our
existing and future senior indebtedness.
For additional important information on the Notes, see "Description of Debt
Securities" in the accompanying prospectus. That information includes:
- additional information on the terms of the Notes;
- general information on the Indenture and the Trustee, except as modified
herein; and
- additional information with respect to the delivery of the Notes in
book-entry form.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at our option at any
time, at a redemption price equal to the greater of:
- 100% of the principal amount of the Notes to be redeemed or
- the sum of the present values of the Remaining Scheduled Payments (as
defined below) on such Notes, discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate (as defined below) plus basis points;
plus, in either case, accrued and unpaid interest on the principal amount being
redeemed to the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker (as defined below) as having a
maturity comparable to the remaining term of the Notes to be redeemed that would
be used, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Notes.
S-9
<PAGE>
"Comparable Treasury Price" means, with respect to any redemption date,
(1) the arithmetic average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
on the third business day before such redemption date, as published in the daily
statistical release (or any successor release) by the Federal Reserve Bank of
New York and designated "Composite 3:30 p.m. Quotations for U.S. Government
Securities" or (2) if such release (or any successor release) is not available
or does not contain such prices on such business day, the arithmetic average of
the Reference Treasury Dealer Quotations (as defined below) for such redemption
date.
"Independent Investment Banker" means one of the Reference Treasury Dealers
(as defined below) appointed by us.
"Reference Treasury Dealer" means Credit Suisse First Boston Corporation,
Banc of America Securities LLC and their successors; provided, however, that, if
Credit Suisse First Boston Corporation or Banc of America Securities LLC ceases
to be a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), we will substitute another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the arithmetic average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer by 5:00 p.m. on the
third business day before such redemption date.
"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of the principal and interest on such
Note that would be due after the related redemption date but for such
redemption; provided, however, that if such redemption date is not an interest
payment date, the amount of the next succeeding scheduled interest payment on
such Note will be reduced by the amount of interest accrued on such Note to such
redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
Unless we default in payment of the redemption price, on and after the
redemption date interest will cease to accrue on the Notes or portions thereof
called for redemption.
CERTAIN COVENANTS OF ECOLAB
The following description supersedes "Certain Covenants of the Company" in
the accompanying prospectus.
LIMITATION ON LIENS ON STOCK OR INDEBTEDNESS OF SIGNIFICANT
SUBSIDIARIES. We will not, nor will we permit any Significant Subsidiary (as
defined below) to, create, assume, incur or suffer to exist any mortgage,
pledge, lien, encumbrance, charge or security interest of any kind (referred to
in this prospectus supplement and accompanying prospectus as a "lien") on any
stock or indebtedness, whether owned on the date of the Indenture or thereafter
acquired, of any Significant Subsidiary to secure any Obligation (as defined
below) of ours (other than the Notes), any subsidiary of ours or any other
person without in any such case effectively providing that all the Notes will be
directly secured equally and ratably with such Obligation. These restrictions do
not apply to:
- any lien upon stock or indebtedness of a Significant Subsidiary existing
at the date of the Indenture;
- any lien upon stock or indebtedness of any corporation existing at the
time it becomes a Significant Subsidiary;
S-10
<PAGE>
- any lien existing or created upon stock or indebtedness of a Significant
Subsidiary at the time of the acquisition of such stock or indebtedness;
and
- any extensions, renewals or replacements, in whole or in part, of any lien
referred to above; provided that the principal amount of the Obligation
secured thereby shall not exceed the principal amount of the Obligation so
secured at the time of such extension, renewal or replacement; and
provided, further, that such lien be limited to all or such part of the
stock or indebtedness which secured the lien so extended, renewed or
replaced.
"Obligation" means every obligation for money borrowed and every obligation
evidenced by a bond, note, debenture or other similar instrument.
"Significant Subsidiary" means (1) any subsidiary of Ecolab which had total
assets that constituted at least 10% of our total assets on a consolidated basis
determined as of the date of our most recent quarterly consolidated balance
sheet or (2) any subsidiary of Ecolab which had net sales for the three-month
period ending on the date of the most recent quarterly consolidated statement of
income that constituted at least 10% of our net sales on a consolidated basis
for such period.
EVENTS OF DEFAULT
The following description supersedes "Events of Default" in the accompanying
prospectus.
You will have special rights if an Event of Default occurs in respect of the
Notes and is not cured, as described below.
WHAT IS AN EVENT OF DEFAULT? The term "Event of Default" in respect of the
Notes means any of the following:
- we do not pay the principal of or any premium on a Note on its due date;
- we do not pay interest on a Note within 30 days of its due date;
- we do not deposit any sinking fund payment in respect of a Note on its due
date;
- we remain in breach of a covenant in respect of the Notes 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 the holders of 25% of the
principal amount of the Notes; or
- we file for bankruptcy or certain other events in bankruptcy, insolvency
or reorganization occur.
The Trustee may withhold notice to the holders of the Notes of any default,
except in the payment of principal, interest or any sinking fund installment, if
it considers such withholding of notice to be in the best interests of the
holders of the Notes.
REMEDIES IF AN EVENT OF DEFAULT OCCURS. If an Event of Default has occurred
and has not been cured, the Trustee or the holders of 25% in principal amount of
the Notes may, upon notice to us and, if applicable, the Trustee, declare the
entire principal amount of all the Notes to be due and immediately payable. 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 Notes.
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. If reasonable indemnity is provided, the holders of a
majority in principal amount of the outstanding Notes 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. No delay or
S-11
<PAGE>
omission in exercising any right or remedy will be treated as a waiver of such
right, remedy or Event of Default.
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 interests relating to the Notes, the following must occur:
- you must give the Trustee written notice that an Event of Default has
occurred and remains uncured;
- the holders of 25% in principal amount of all outstanding Notes must make
a written request that the Trustee take action because of the default and
must offer the Trustee indemnity satisfactory to the Trustee against the
cost and other liabilities of taking that action;
- the Trustee must not have taken action for 60 days after receipt of the
above notice and offer of indemnity; and
- the holders of a majority in principal amount of the Notes must not have
given the Trustee a direction inconsistent with the above notice.
However, you are entitled at any time to bring a lawsuit for the payment of
money due on your Notes on or after the due date.
Holders of a majority in principal amount of the Notes may waive any past
defaults other than (1) the payment of principal, any premium, interest or any
related additional amounts or (2) in respect of a covenant that cannot be
modified or amended without the consent of each holder.
IF YOUR NOTES ARE HELD FOR YOU BY A BANK OR BROKERAGE FIRM, YOU SHOULD
CONSULT SUCH BANK OR BROKERAGE FIRM FOR INFORMATION ON HOW TO GIVE NOTICE OR
DIRECTION TO OR MAKE A REQUEST OF THE TRUSTEE AND 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 Notes, or else specifying any default.
DEFEASANCE
The defeasance and covenant defeasance provisions of the Indenture described
under the caption "Description of Debt Securities--Defeasance of Debt Securities
or Certain Covenants in Certain Circumstances" in the accompanying prospectus
will apply.
FORM OF NOTES
The Notes will be represented by a global note in registered form, without
coupons, issued to The Depository Trust Company, New York, New York ("DTC"), and
registered in the name of Cede & Co. (DTC's nominee) or such other name as may
be requested by an authorized representative of DTC. See "Description of Debt
Securities--Global Securities" in the accompanying prospectus. DTC will act as
securities depositary for the Notes.
Because DTC can only act on behalf of its direct participants, which in turn
act on behalf of indirect participants, the ability of an owner of a beneficial
interest in the Notes to pledge such interest to persons or entities that do not
participate in the DTC system or otherwise take actions in respect of such
interest may be limited by the lack of a definitive certificate for that
interest. The laws of some states require that certain persons take physical
delivery of securities in definitive form. Consequently, the ability to transfer
beneficial interests to such persons may be limited.
S-12
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2001, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation is acting as
representative, the following principal amounts of the Notes:
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
----------- ----------------
<S> <C>
Credit Suisse First Boston Corporation...................... $
Chase Securities Inc........................................
Banc of America Securities LLC..............................
Salomon Smith Barney Inc....................................
------
Total................................................. $
======
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all of the Notes if any are purchased. The underwriting agreement
provides that if an underwriter defaults, the purchase commitments of
non-defaulting underwriters may be increased or the offering of the Notes may be
terminated.
The underwriters propose to offer the Notes initially at the public offering
price on the cover page of this prospectus supplement and to selling group
members at that price less a concession of % of the principal amount per
Note. The underwriters and selling group members may allow a discount of %
of such principal amount per Note on sales to other broker/dealers. After the
initial public offering, the public offering price and concession and discount
to broker/dealers may be changed by the representative.
We estimate that our out-of-pocket expenses for this offering will be
approximately $329,000.
The Notes are a new issue of securities with no established trading market.
One or more of the underwriters intends to make a secondary market for the
Notes. However, they are not obligated to do so and may discontinue making a
secondary market for the Notes at any time without notice. No assurance can be
given as to how liquid the trading market for the Notes will be.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933 (the "Securities Act"), or contribute to payments which
the underwriters may be required to make in respect thereof.
The representative, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the Notes in the open
market after the distribution has been completed in order to cover
syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the Notes originally sold by such syndicate
member are purchased in a stabilizing transaction or a syndicate covering
transaction to cover syndicate short positions.
Such stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the Notes to be higher than it would otherwise be in
the absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
S-13
<PAGE>
The underwriters and/or their affiliates have in the past and may in the
future provide investment and commercial banking and other related services to
us in the ordinary course of business for which the underwriters and/or their
affiliates have received or may receive customary fees and reimbursement of
their out-of-pocket expenses. Affiliates of Credit Suisse First Boston
Corporation, Banc of America Securities LLC and Salomon Smith Barney Inc. are
among the lenders under our $275 million Multicurrency Credit Agreement (the
"Multicurrency Credit Agreement") dated as of September 29, 1993, as amended and
restated as of December 13, 2000. We are in compliance in all material respects
with the terms of the Multicurrency Credit Agreement. The decision of the
underwriters to distribute the Notes was made independent of their respective
affiliates that are lenders under the Multicurrency Credit Agreement, which
lenders had no involvement in determining whether or when to distribute the
Notes under this offering or the terms of this offering. The underwriters will
not receive any benefit from us in connection with this offering other than
their respective portion of the underwriting discounts and commissions as paid
by us.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of the Notes are made. Any resale of the Notes in Canada must be made
under applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made under available statutory
exemptions or under a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the Notes.
REPRESENTATIONS OF PURCHASERS
By purchasing the Notes in Canada and accepting a purchase confirmation a
purchaser is representing to us and the dealer from whom the purchase
confirmation is received that
- the purchaser is entitled under applicable provincial securities laws to
purchase the Notes without the benefit of a prospectus qualified under
those securities laws,
- where required by law, that the purchaser is purchasing as principal and
not as agent, and
- the purchaser has reviewed the text above under "--Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
S-14
<PAGE>
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of the Notes to whom the SECURITIES ACT (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any Notes
acquired by the purchaser in this offering. The report must be in the form
attached to British Columbia Securities Commission Blanket Order BOR #95/17, a
copy of which may be obtained from us. Only one report must be filed for the
Notes acquired on the same date and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of the Notes should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Notes in
their particular circumstances and about the eligibility of the Notes for
investment by the purchaser under relevant Canadian legislation.
LEGAL OPINIONS
The legality of the Notes offered hereby will be passed on for Ecolab Inc.
by Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago, Illinois. The
legality of the Notes will be passed on for the underwriters by Shearman &
Sterling, New York, New York.
EXPERTS
Our consolidated financial statements and related financial statement
schedule, which are included or incorporated by reference in our Annual Report
on Form 10-K for the year ended December 31, 1999, and incorporated by reference
in this prospectus supplement, the accompanying prospectus and the related
Registration Statement on Form S-3, have been audited by PricewaterhouseCoopers
LLP, independent accountants, for the periods indicated in such firm's reports
thereon. The consolidated financial statements and financial statement schedule
audited by PricewaterhouseCoopers LLP have been incorporated herein by reference
in reliance on such firm's reports given upon their authority as experts in
accounting and auditing. To the extent that PricewaterhouseCoopers LLP examines
and reports on financial statements and financial statement schedules that we
issue at future dates, and consents to the use of their reports thereon, such
financial statements and financial statement schedules will also be incorporated
by reference in this prospectus supplement, the accompanying prospectus and the
related Registration Statement on Form S-3 in reliance upon their reports and
said authority.
With respect to unaudited interim financial information incorporated by
reference in this prospectus supplement, the accompanying prospectus and the
related Registration Statement on Form S-3, PricewaterhouseCoopers LLP has
reported that they have applied limited procedures in accordance with
professional standards for reviews of such information. However, their separate
reports, incorporated by reference in this prospectus supplement, the
accompanying prospectus and the related Registration Statement on Form S-3,
state that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. The independent accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because each such report is not a
"report" or a "part" of the Registration Statement prepared or certified by the
independent accountants within the meaning of Sections 7 and 11 of the
Securities Act.
The combined financial statements and related financial statement schedule
of Henkel-Ecolab as of and for the years ended November 30, 1999 and 1998, which
are included in Ecolab's Annual Report on Form 10-K for the year ended
December 31, 1999, and incorporated by reference in this prospectus supplement,
the accompanying prospectus and the related Registration Statement on Form S-3,
have been audited by PricewaterhouseCoopers Gesellschaft mit beschrankter
Haftung
S-15
<PAGE>
Wirtschaftsprufungsgesellschaft, independent accountants. The combined financial
statements and related financial statement schedule audited by
PricewaterhouseCoopers Gesellschaft mit beschrankter Haftung
Wirtschaftsprufungsgesellschaft have been incorporated herein by reference in
reliance on such firm's report given upon their authority as experts in
accounting and auditing. To the extent that PricewaterhouseCoopers Gesellschaft
mit beschrankter Haftung Wirtschaftsprufungsgesellschaft examines and reports on
the financial statements and financial statement schedules of Henkel-Ecolab
issued at future dates, and consents to the use of their reports thereon, such
financial statements and financial statement schedules will also be incorporated
by reference in this prospectus supplement, the accompanying prospectus and the
related Registration Statement on Form S-3 in reliance upon their reports and
said authority.
The combined financial statements and related financial statement schedule
of Henkel-Ecolab as of and for the year ended November 30, 1997, which are
included in Ecolab's Annual Report on Form 10-K for the year ended December 31,
1999, and incorporated by reference in this prospectus supplement, the
accompanying prospectus and the related Registration Statement on Form S-3, have
been audited by KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprufungsgesellschaft, independent accountants. The combined financial
statements and related financial statement schedule audited by KPMG Deutsche
Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft have
been incorporated herein by reference in reliance on such firm's reports given
upon their authority as experts in accounting and auditing.
S-16
<PAGE>
PROSPECTUS
$200,000,000
[LOGO]
ECOLAB INC.
DEBT SECURITIES
------------------
Ecolab Inc. (the "Company") may offer from time to time its debt securities
consisting of debentures, notes and/or other unsecured evidences of indebtedness
("Debt Securities") at an aggregate initial offering price of not more than
$200,000,000 (or the equivalent in foreign currency or composite currencies).
The Debt Securities may be offered as separate series in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in supplements
to this Prospectus (each a "Prospectus Supplement"). The Company may sell Debt
Securities to or through underwriters to be designated from time to time and may
also sell Debt Securities directly to other purchasers or through agents or
broker dealers. See "Plan of Distribution."
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, currency or currencies, denomination,
maturity, rate or rates of interest (or the method of calculating the interest
rate), dates for payment of interest, if any, terms for redemption at the option
of the Company or the Holder (as defined under "Certain Definitions" below),
terms for sinking fund payments, if any, the initial public offering price, the
names of any underwriters or agents, the principal amounts, if any, to be
purchased by underwriters, the compensation, if any, of such underwriters or
agents and any other terms in connection with the offering and sale of the Debt
Securities with respect to which this Prospectus is being delivered, are set
forth in the accompanying Prospectus Supplement. The Prospectus Supplement will
also contain information, where applicable, about material United States federal
income tax considerations relating to, and any listing on a securities exchange
of, the Offered Debt Securities (as defined below) covered by such Prospectus
Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
------------------------
The date of this Prospectus is November 18, 1996.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR THE PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR
THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THEREOF. THIS PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the
Commission's regional offices located at 1400 Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60601, and Seven World Trade Center, Suite 1300, New
York, New York 10048. The Commission maintains a web site that contains reports,
proxy and information statements and other information. The web site address is
http://www.sec.gov. Copies of such material can be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports,
proxy statements and other information concerning the Company may be inspected
at the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement, which may be
inspected without charge at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of which may be obtained from the Commission, at prescribed rates.
Any statements contained herein concerning the provisions of any document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and, in each instance, reference is made to the copy of such document so filed
for a more nearly complete description of the matter involved. Each such
statement is qualified in its entirety by such reference.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Commission under the
Exchange Act, are incorporated in this Prospectus by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
(2) The Company's Current Report on Form 8-K dated February 24, 1996.
(3) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Debt Securities shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents incorporated herein by reference (other than certain
exhibits to such documents). Requests for such documents should be directed to
Ecolab Inc., Ecolab Center, 370 N. Wabasha Street, St. Paul, Minnesota
55102-1390, Attention: Corporate Secretary (telephone (612) 293-2233).
3
<PAGE>
THE COMPANY
Ecolab Inc., incorporated in Delaware, is engaged in the development and
marketing of premium products and services for institutional and industrial
markets. The Company provides cleaning, sanitizing, pest elimination, water
treatment and maintenance products, systems and services to a variety of
industries including hotels and restaurants, food service, health care and
educational facilities, commercial and institutional laundries, light industry,
dairy plants and farms, and food and beverage processors. In addition, the
Company and Henkel KGaA of Dusseldorf, Germany, each have a 50% economic
interest in a joint venture (the Henkel-Ecolab Joint Venture) which operates
institutional and industrial cleaning and sanitizing businesses in Europe.
The Company's principal executive offices are located at Ecolab Center, 370
N. Wabasha Street, St. Paul, Minnesota 55102-1390, and its telephone number is
(612) 293-2233.
USE OF PROCEEDS
Except as otherwise set forth in the Prospectus Supplement, the net proceeds
to the Company from the sale of the Debt Securities offered hereby will be added
to the working capital of the Company and will be available for general
corporate purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED DECEMBER 31,
---------------------------------- ----------------------------------------------------------------
JUNE 30, 1996 JUNE 30, 1995 1995 1994 1993 1992 1991
-------------- -------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
5.50 6.13 6.68 5.79 4.02 2.79 2.90
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
before fixed charges by the fixed charges. Earnings consist of income before
income taxes and before equity in earnings of the Henkel-Ecolab Joint Venture,
plus fixed charges. Fixed charges consist of interest expense, plus the
estimated interest portion of rent expense.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate. The specific terms of the Debt Securities offered by any Prospectus
Supplement (the "Offered Debt Securities") and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered, will be
described in the Prospectus Supplement relating to such Offered Debt Securities.
The Offered Debt Securities are to be issued in one or more series under an
Indenture dated as of November 1, 1996, as amended and supplemented (the
"Indenture"), between the Company and The First National Bank of Chicago, as
trustee (the "Trustee"). A copy of the Indenture is an exhibit to the
Registration Statement. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all provisions of the Indenture, including
definitions of certain terms contained in the Indenture. Particular sections or
defined terms of the Indenture referred to herein are incorporated herein by
reference. Capitalized terms not otherwise defined herein shall have the
meanings given to them in the Indenture. Section numbers set forth below refer
to provisions of the Indenture.
GENERAL
The Debt Securities (and, in the case of Bearer Securities, any Coupons
appertaining thereto) will be unsecured obligations of the Company and will rank
equally and PARI PASSU with all other unsecured and unsubordinated indebtedness
of the Company, PROVIDED that such other unsecured and unsubordinated
indebtedness may contain covenants, events of default or other provisions which
are different from or which are not contained in the Debt Securities.
The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that Debt Securities may
be issued thereunder from time to time in one or more series. (Section 2.3)
Reference is made to the Prospectus Supplement relating to the Offered Debt
Securities for the following terms thereof: (1) the title of the Offered Debt
Securities; (2) any limit on the aggregate principal amount of the Offered Debt
Securities; (3) the date or dates on which the Offered Debt Securities will be
payable, which date or dates may be fixed or extendible; (4) the rate or rates
per annum, which may be fixed or variable (or the method of calculating such
rate), at which the Offered Debt Securities will bear interest, if any, and the
date from which such interest, if any, will accrue; (5) the times at which any
such interest will be payable; (6) the date, if any, after which and the price
or prices at which such Securities may, pursuant to any optional or mandatory
redemption provisions, be redeemed at the option of the Company or the Holder
and any other terms and provisions of such optional or mandatory redemptions;
(7) the obligation, if any, of the Company to redeem, repay or purchase such
Securities pursuant to any sinking fund (or analogous provision) or at the
option of a Holder thereof and the period or periods within which or the date or
dates on which, the price or prices at which, the currency in which, and the
other terms and conditions upon which, such Securities shall be redeemed, repaid
or purchased, in whole or in part, pursuant to such obligation; (8) if the
Offered Debt Securities are Original Issue Discount Securities, the amount (or
the method of calculating such amount) of principal payable upon acceleration of
such Offered Debt Securities following an Event of Default; (9) whether the
Offered Debt Securities are to be issued as Registered Securities or Bearer
Securities or both and, if Bearer Securities are to be issued, whether Coupons
will be attached thereto, whether Bearer Securities of the series may be
exchanged for Registered Securities having the same terms and the circumstances
under which and the place or places at which any such exchanges, if permitted,
may be made; (10) the coin or currency, which may be a composite currency such
as the ECU, in which payment of the principal of and interest on the Offered
Debt Securities will be made if other than the coin or currency of the United
States; (11) any provisions enabling the Company or Holders of Offered Debt
Securities to elect to make or receive payments of the principal
5
<PAGE>
of or interest on the Offered Debt Securities in a coin or currency other than
that in which the Offered Debt Securities are stated to be payable; (12) the
manner in which the amount of payments of principal of or interest on the
Offered Debt Securities is to be determined if such determination is to be made
with reference to an index; (13) the right of the Company to defease the Offered
Debt Securities or certain covenants under the Indenture; (14) whether the
Offered Debt Securities will be issued in whole or in part in temporary or
permanent global form and, if so, the initial Depositary with respect to such
Global Security; (15) if a temporary Global Security is to be issued with
respect to the Offered Debt Securities, the terms upon which beneficial
interests in such temporary Global Security may be exchanged in whole or in part
for beneficial interests in a definitive Global Security or for individual
Offered Debt Securities of the series and the terms upon which beneficial
interests in a definitive Global Security, if any, may be exchanged for
individual Offered Debt Securities having the same terms; (16) any addition to,
or modification or deletion of, any Event of Default or any covenant specified
in the Indenture with respect to the Offered Debt Securities; (17) the Person to
whom any interest on the Offered Debt Securities is payable, if other than the
registered Holder thereof, or the manner in which any interest is payable on a
Bearer Security if other than upon presentation of the Coupons; (18) whether and
under what circumstances the Company will pay additional interest on the Offered
Debt Securities held by a Non-U.S. Person in respect of any tax assessment or
governmental charge withheld or deducted and, if so, whether the Company will
have the option to redeem the Offered Debt Securities rather than pay such
additional interest; and (19) any other terms of the Offered Debt Securities.
(Section 2.3)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of and interest on the Registered Securities will be payable, and the
Registered Securities will be exchangeable and transfers thereof will be
registrable, at the Corporate Trust Office of the Trustee in the City and State
of New York or, in the case of Bearer Securities, at the principal London office
of the applicable Trustee; PROVIDED that, at the option of the Company, payment
of any interest may be made by check mailed to the address of the Person
entitled thereto as it appears in the Security Register. (Sections 2.3, 2.8 and
3.2)
If Bearer Securities are issued, the special restrictions and
considerations, including special offering restrictions and special federal
income tax considerations, applicable to any such Offered Debt Securities and to
payment on and transfer and exchange of such Offered Debt Securities will be
described in the applicable Prospectus Supplement. No service charge will be
made for any transfer or exchange of the Offered Debt Securities, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Section 2.8)
Debt Securities may be sold at a substantial discount below their principal
amount, bearing no interest or interest at a rate which at the time of issuance
is below market rates. Special United States federal income tax considerations
applicable to any such Debt Securities, or to Debt Securities which are
denominated in a currency or currency unit other than United States dollars,
will be set forth in the applicable Prospectus Supplement.
FORM, EXCHANGE AND TRANSFER
Debt Securities of a series may be issuable as individual securities in
registered form without Coupons ("Registered Securities") or in bearer form with
or without Coupons attached ("Bearer Securities") or as one or more global
securities in registered form (each a "Global Security"). Unless otherwise
specified in the applicable Prospectus Supplement, Debt Securities will be
issued only (i) as Registered Securities in denominations of $1,000 and integral
multiples thereof or (ii) as Bearer Securities in denominations of $1,000 or
$5,000 and integral multiples thereof. (Sections 2.3 and 2.7)
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Registered Securities of each
series will be exchangeable for other Registered Securities of the same series
of any authorized denomination and of a like tenor and aggregate principal
amount. (Section 2.8) In addition, if Debt Securities of any series are issuable
as both Registered Securities and as
6
<PAGE>
Bearer Securities, at the option of the Holder, subject to the terms of the
Indenture, Bearer Securities (accompanied by all unmatured Coupons, except as
provided below, and all matured Coupons in default) of such series will be
exchangeable for Registered Securities of the same series of any authorized
denominations and of a like tenor and aggregate principal amount. Unless
otherwise indicated in the applicable Prospectus Supplement, any Bearer Security
surrendered in exchange for a Registered Security between a record date or a
special record date for defaulted interest and the relevant date for payment of
interest will be surrendered without the Coupon relating to such date for
payment of interest, 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 Indenture. Bearer Securities will not be issued in exchange for
Registered Securities. (Section 2.8)
Subject to the terms of the Indenture and the limitations applicable to
Global Securities, Debt Securities may be presented for exchange as provided
above, and Registered Securities may be presented for registration of transfer
(duly endorsed or with the form of transfer endorsed thereon duly executed), at
the office of the Security Registrar or at the office of any transfer agent
designated by the Company for such purpose. No service charge will be made for
any registration of transfer or exchange of Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Such transfer or exchange will be
effected upon the Security Registrar or such transfer agent, as the case may be,
being satisfied with the documents of title and identity of the person making
the request. Bearer Securities will be transferable by delivery. Provisions with
respect to the exchange of Bearer Securities will be described in the applicable
Prospectus Supplement. Any transfer agent (in addition to the Security
Registrar) initially designated by the Company for any Debt Securities will be
named in the applicable Prospectus Supplement. The Company may at any time
designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent acts,
except that the Company will be required to maintain a transfer agent in each
Place of Payment for the Debt Securities of each series. (Sections 2.8 and 3.2)
If the Company redeems, in whole or in part, the Debt Securities of any
series (or of any series and specified tenor), the Company will not be required
to (i) issue, register the transfer of or exchange any Debt Security of that
series (or of that series and specified tenor, as the case may be) during a
period beginning at the opening of business 15 Business Days before the first
publication of the relevant notice of redemption or, if Registered Securities
are Outstanding and there is no publication, the day of mailing of a notice of
redemption or exchange of any such Debt Security selected for redemption and
ending at the close of business on the day of such mailing or (ii) register the
transfer of or exchange any Registered Security so selected for redemption, in
whole or in part, except the unredeemed portion of any such Registered Security
being redeemed in part or (iii) exchange any Bearer Security called for
redemption, except to exchange any Bearer Security for a Registered Security of
that series and of like tenor and principal amount that is immediately
surrendered for redemption. (Section 2.8)
GLOBAL SECURITIES
The Offered Debt Securities of a series may be issued in whole or in part in
the form of one or more Global Securities that will be issued to and registered
in the name of the depositary (the "Depositary") identified in the Prospectus
Supplement, or its nominee, relating to such Series. Global Securities may be
issued only in fully registered form and in either temporary or permanent form.
Unless and until a Global Security is exchanged in whole or in part for the
individual Debt Securities represented thereby, such Global Security may not be
transferred except as a whole by the Depositary to its nominee or by a nominee
of such Depositary to such Depositary or another nominee of such Depositary or
by such Depositary or any such nominee to a successor Depositary or nominee of
such successor Depositary. (Section 2.8)
The specific terms of the depositary arrangement with respect to a series of
Offered Debt Securities will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
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Upon the issuance of a Global Security, the Depositary or its nominee will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the individual Debt Securities represented by such Global
Security to the accounts of persons that have accounts with the Depositary. Such
accounts shall be designated by the dealers, underwriters or agents with respect
to such Debt Securities or by the Company if such Debt Securities are offered
and sold directly by the Company. Ownership of beneficial interests in a Global
Security will be limited to persons that have accounts with the Depositary
("Participants") or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depositary or its nominee (with respect to interests of Participants) and
the records of Participants (with respect to interests of persons other than
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
So long as the Depositary or its nominee is the registered owner of a Global
Security, such registered owner will be considered the sole owner or Holder of
the Debt Securities represented by such Global Security for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in a
Global Security will not be entitled to have any of the individual Debt
Securities represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of any such Debt
Securities in definitive form and will not be considered the owners or Holders
thereof under the Indenture.
Payments of principal of and interest, if any, on Debt Securities
represented by a Global Security registered in the name of the Depositary or its
nominee will be made to the Depositary or its nominee, as the case may be, as
the registered owner of the Global Security representing such Debt Securities.
None of the Company, the Trustee, any Paying Agent or the Security Registrar for
such Debt Securities will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects the Depositary or its nominee, immediately upon receipt
of any payment of principal or interest in respect of a Global Security, will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of the Depositary or its nominee. The Company also
expects that payments by Participants to owners of beneficial interests in such
Global Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the sole responsibility of such Participants. The Company
has no control over the practices of the Depositary or the Participants, and
there can be no assurance that these practices will not be changed.
If the Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as Depositary and a successor Depositary is not
appointed by the Company within 90 days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security representing such
series of Debt Securities. In addition, the Company may at any time and in its
sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Debt Securities, determine not to have any Debt
Securities of a series represented by one or more Global Securities and, in such
event, will issue individual Debt Securities of such series in exchange for the
Global Security representing such series of Debt Securities. Further, if there
shall have occurred and be continuing an Event of Default, or an event which,
with the giving of notice or lapse of time, or both, would constitute an Event
of Default with respect to any series of Debt Securities represented by a Global
Security, such Global Security shall be exchangeable for individual Debt
Securities of such series. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to a physical delivery of
individual Debt
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Securities of the series represented by such Global Security equal in principal
amount to such beneficial interest and to have such Debt Securities registered
in its name.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities may not be offered, sold, resold or delivered in connection with
their original issuance in the United States or to U.S. Persons (each as defined
below) other than to a Qualifying Branch of a United States Financial
Institution (as defined below) or a U.S. Person acquiring Bearer Securities
through a Qualifying Branch of a United States Financial Institution, and any
underwriters, agents and dealers participating in the offering of Debt
Securities must agree that they will not offer any Bearer Securities for sale or
resale in the United States or to U.S. Persons (other than a Qualifying Branch
of a United States Financial Institution or a U.S. Person acquiring Bearer
Securities through a Qualifying Branch of a United States Financial Institution)
nor deliver Bearer Securities within the United States. In addition, any such
underwriters, agents and dealers must agree to send confirmations to each
purchaser of a Bearer Security confirming that such purchaser represents that it
is a Non-U.S. Person or is a Qualifying Branch of a United States Financial
Institution and, if such person is a dealer, that it will send similar
confirmations to purchasers from it. The term "Qualifying Branch of a United
States Financial Institution" means a branch located outside the United States
of a United States securities clearing organization, bank or other financial
institution listed under Treasury Regulation Section 1.165-12(c)(1)(v) that
agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder.
Bearer Securities and any Coupons appertaining thereto will bear a legend
substantially to the following effect: "Any U.S. Person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Sections 165(j) and 1287(a) of the
Internal Revenue Code." (Section 2.1) Under Sections 165(j) and 1287(a) of the
Code, Holders that are U.S. Persons, with certain exceptions, will not be
entitled to deduct any loss on Bearer Securities and must treat as ordinary
income any gain realized on the sale or other disposition (including the receipt
of principal) of Bearer Securities.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Registered Security on any Interest Payment Date will be made
to 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. (Section 2.15)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and interest on the Registered Securities of a particular series
will be payable at the office of such Paying Agent or Paying Agents as the
Company may designate for such purpose from time to time, except that, at the
option of the Company, payment of any interest may be made by check mailed to
the address of the Person entitled thereto as such address appears in the
Security Register or may be made by wire transfer of immediately available funds
to an account designated by the Holder. Unless otherwise provided in the
applicable Prospectus Supplement, no payment on a Bearer Security will be made
by mail to an address in the United States or by wire transfer to an account
maintained by the Holder thereof in the United States. Unless otherwise
indicated in the applicable Prospectus Supplement, a Paying Agent designated by
the Company and located in the Borough of Manhattan, the City of New York, will
act as Paying Agent for payments with respect to Debt Securities of each series.
All Paying Agents initially designated by the Company for the Debt Securities of
a particular series will be named in the applicable Prospectus Supplement. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent or approve a change in the office through which
any Paying Agent acts, except that, if the Debt Securities of a series are
issuable only as Registered Securities, the Company will be required to maintain
a
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Paying Agent in each Place of Payment for the Debt Securities of a particular
series and, if Debt Securities of a series include Bearer Securities, the
Company will be required to maintain (i) a Paying Agent in New York, New York,
for payments with respect to any Registered Securities of the series and (ii) a
Paying Agent in a city located outside the United States where Bearer Securities
of such series and any related Coupons may be presented and surrendered for
payment (including any city in which such agency is required to be maintained
under the rules of any stock exchange on which the Debt Securities of such
series are listed). (Section 3.2)
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of and interest, if any, on Bearer Securities will be payable,
subject to any applicable laws and regulations, at the offices of such Paying
Agents outside the United States as the Company may designate from time to time,
or by check or by transfer to an account maintained by the payee outside the
United States. Unless otherwise indicated in the applicable Prospectus
Supplement, any payment of interest on any Bearer Securities will be made only
against surrender of the Coupon relating to such interest installment.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on any Debt Security which remain unclaimed at the end
of one year after such principal or interest has become due and payable will be
repaid to the Company upon request, and the Holder of such Debt Security or any
Coupon thereafter may look only to the Company for payment thereof. (Section
10.4)
RESTRICTED AND UNRESTRICTED SUBSIDIARIES
Certain of the restrictive provisions of the Indenture are applicable to the
Company and its Restricted Subsidiaries and do not apply to Unrestricted
Subsidiaries. The assets and liabilities of Unrestricted Subsidiaries are not
consolidated with those of the Company and its Restricted Subsidiaries in
calculating Consolidated Net Tangible Assets under the Indenture.
"Unrestricted Subsidiaries" are defined as (1) any Subsidiary substantially
all of whose physical properties are located, or substantially all of whose
business is carried on, outside the United States and Canada, (2) any finance
Subsidiary and (3) any Subsidiary of an Unrestricted Subsidiary. In addition,
the Board of Directors may designate any other Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any capital stock of, or owns or holds
any mortgage on any Operating Property (as defined under "Certain Definitions"
below) of, the Company or any Restricted Subsidiary of the Company; PROVIDED
that the Subsidiary to be so designated has total assets at the time of such
designation of $5 million or less. "Restricted Subsidiaries" are all
Subsidiaries other than Unrestricted Subsidiaries. The term "Subsidiary" means
any corporation of which the Company directly or indirectly owns or controls
stock which under ordinary circumstances (not dependent upon the happening of a
contingency) has the voting power to elect a majority of the Board of Directors
of such corporation. (Section 1.1)
Neither the Company nor any Restricted Subsidiary may transfer an Operating
Property or shares of stock or Debt (as defined below) of a Restricted
Subsidiary to an Unrestricted Subsidiary. (Section 3.9)
An Unrestricted Subsidiary may not be designated a Restricted Subsidiary
unless, after giving effect thereto, the aggregate amount of all Debt of the
Company and its Restricted Subsidiaries secured by mortgages (as defined below)
which would otherwise be subject to the restrictions described under "Certain
Covenants of the Company--Restrictions on Liens" and the Attributable Debt (as
defined under "Certain Definitions" below) in respect of all Sale and Leaseback
Transactions pursuant to clause (2) under "Certain Covenants of the
Company--Restrictions on Sale and Leaseback Transactions") in existence at such
time does not at the time exceed 15% of Consolidated Net Tangible Assets (as
defined under "Certain Definitions" below). (Section 3.10)
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CERTAIN COVENANTS OF THE COMPANY
RESTRICTIONS ON LIENS. Unless otherwise provided in the Prospectus
Supplement with respect to any series of Debt Securities, the Indenture provides
that the Company will not, and will not permit any Restricted Subsidiary to,
issue, assume or guarantee any indebtedness for money borrowed (herein referred
to as "Debt") if such Debt is secured by any mortgage, security interest,
pledge, lien or other encumbrance (herein referred to as a "mortgage") upon any
Operating Property of the Company or any Restricted Subsidiary or any shares of
stock or Debt of any Restricted Subsidiary, whether owned at the date of the
Indenture or thereafter acquired, without effectively securing the Debt
Securities equally and ratably with such Debt for at least the period such other
Debt is so secured unless, after giving effect thereto, the aggregate amount of
all Debt so secured (not including Debt permitted in clauses (1) through (7) in
the following sentence), together with all Attributable Debt in respect of Sale
and Leaseback Transactions involving Operating Properties pursuant to clause (2)
under "Certain Covenants of the Company--Restrictions on Sale and Leaseback
Transactions" in existence at such time would not exceed 15% of the Consolidated
Net Tangible Assets of the Company. The foregoing restriction does not apply to,
and therefore shall be excluded in computing secured Debt for the purpose of
such restriction, Debt secured by (1) mortgages on Operating Property, shares of
stock or Debt of any entity existing at the time such entity becomes a
Restricted Subsidiary, PROVIDED that such mortgages are not incurred in
anticipation of such entity's becoming a Restricted Subsidiary; (2) mortgages on
Operating Property, shares of stock or Debt existing at the time of acquisition
thereof by the Company or a Restricted Subsidiary or mortgages thereon to secure
the payment of all or any part of the purchase price thereof, or mortgages on
Operating Property, shares of stock or Debt to secure any Debt incurred prior
to, at the time of, or within 180 days after, the latest of the acquisition
thereof or, in the case of Operating Property, the completion of construction,
the completion of improvements or the commencement of substantial commercial
operation of such Operating Property for the purpose of financing all or any
part of the purchase price thereof, such construction or the making of such
improvements; (3) mortgages to secure Debt owing to the Company or to a
Restricted Subsidiary; (4) mortgages on Operating Property, shares of stock or
Debt existing at the date of the initial issuance of Debt Securities of such
series then outstanding; (5) mortgages on Operating Property, shares of stock or
Debt of a Person existing at the time such Person is merged into or consolidated
with the Company or a Restricted Subsidiary or at the time of a sale, lease or
other disposition of the properties of a Person as an entirety or substantially
as an entirety to the Company or a Restricted Subsidiary, PROVIDED that such
mortgage was not incurred in anticipation of such merger or consolidation or
sale, lease or other disposition; (6) mortgages on Operating Property, shares of
stock or Debt in favor of the United States or any state, territory or
possession thereof (or the District of Columbia), or any department, agency,
instrumentality or political subdivision of the United States or any state,
territory or possession thereof (or the District of Columbia), to secure
partial, progress, advance or other payments pursuant to any contract or statute
or to secure any Debt incurred for the purpose of financing all or any part of
the purchase price or the cost of constructing or improving the Operating
Property subject to such mortgages; or (7) extensions, renewals or replacements
of any mortgage referred to in the foregoing clauses (1) through (6), PROVIDED,
HOWEVER, that the principal amount of Debt secured thereby shall not exceed the
principal amount of Debt so secured at the time of such extension, renewal or
replacement. (Section 3.7)
RESTRICTIONS ON SALE AND LEASEBACK TRANSACTIONS. Unless otherwise provided
in the Prospectus Supplement with respect to any series of Debt Securities, Sale
and Leaseback Transactions by the Company or any Restricted Subsidiary with a
third party of any Operating Property are prohibited (except for temporary
leases for a term, including renewals, of not more than 60 months and except for
leases between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries) unless the net proceeds of such Sale and Leaseback Transactions
are at least equal to the fair market value (as determined in good faith by the
Board of Directors of the Company) of the Operating Property to be leased and
either (1) the Company or such Restricted Subsidiary would (at the time of
entering into such arrangement) be entitled, as described in clauses (1) through
(7) of the paragraph under the caption "--Restrictions on Liens"
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herein, without equally and ratably securing the Debt Securities, to issue,
assume or guarantee Debt secured by a mortgage on such Operating Property, (2)
the Attributable Debt of the Company and its Restricted Subsidiaries in respect
of such Sale and Leaseback Transactions (other than such Sale and Leaseback
Transactions as are referred to in clause (1) or (3) of this paragraph), plus
the aggregate principal amount of Debt secured by mortgages on Operating
Properties then outstanding (excluding any such Debt secured by mortgages
described in clauses (1) through (7) of the paragraph under the caption
"--Restrictions on Liens" herein) which do not equally and ratably secure the
Debt Securities, would not exceed 15% of Consolidated Net Tangible Assets of the
Company or (3) the Company, within 180 days after the sale or transfer, applies
or causes a Restricted Subsidiary to apply an amount equal to the greater of the
net proceeds of such sale or transfer or fair market value of the Operating
Property (as determined in good faith by the Board of Directors of the Company)
so sold and leased back at the time of entering into such Sale and Leaseback
Transaction to (a) retire (other than any mandatory retirement, mandatory
repayment or sinking fund payment or by payment at maturity) Debt Securities or
other Debt of the Company or a Restricted Subsidiary (other than Debt
subordinated to the Debt Securities) having a Stated Maturity more than 12
months from the date of such application or which is extendible at the option of
the obligor thereon to a date more than 12 months from the date of such
application or (b) purchase, construct or develop one or more Operating
Properties (other than that involved in such Sale and Leaseback Transaction);
PROVIDED that the amount to be so applied pursuant to clause (3) will be reduced
by the principal amount of Debt Securities delivered within 180 days after such
sale or transfer to the Trustee for retirement and cancellation. (Section 3.8)
CERTAIN DEFINITIONS
"Attributable Debt" in respect of a Sale and Leaseback Transaction means, as
of any particular time, the present value (discounted at the rate of interest
implicit in the terms of the lease involved in the Sale and Leaseback
Transaction, as determined in good faith by the Company) of the obligation of
the lessee thereunder for net rental payments (excluding, however, any amounts
required to be paid by such lessee, whether or not designated as rent or
additional rent, on account of maintenance and repairs, services, insurance,
taxes, assessments, water rates and similar charges or any amounts required to
be paid by such lessee thereunder contingent upon monetary inflation or the
amount of sales, maintenance and repairs, insurance, taxes, assessments, water
rates or similar charges) during the remaining term of such lease (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended). (Section 1.1)
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) of the Company
and its Restricted Subsidiaries after deducting therefrom (a) all goodwill,
tradenames, trademarks, patents, unamortized debt discount and expense and other
like intangibles and (b) all current liabilities (excluding any current
liabilities for money borrowed having a maturity of less than 12 months but by
its terms being renewable or extendible beyond 12 months from such date at the
option of the borrower), all as reflected in the Company's latest audited
consolidated balance sheet contained in the Company's most recent annual report
to its stockholders prior to the time as of which "Consolidated Net Tangible
Assets" shall be determined. For purposes of this definition, the Company's
investment (excluding the goodwill portion thereof) in the Henkel-Ecolab Joint
Venture, which is not a Subsidiary of the Company, shall be deemed to be an
asset of the Company. (Section 1.1)
"Holder" means (a) a Person in whose name a Debt Security is registered in
the Security Register and (b) in the case of any Bearer Security, the bearer of
such Debt Security and, when used with any Coupon, means the bearer thereof.
(Section 1.1)
"Operating Property" means any manufacturing or processing plant, warehouse
or distribution center, together with the land upon which it is situated,
located within the United States or in Canada and owned and operated now or
hereafter by the Company or any Restricted Subsidiary and having a net book
value on the date as of which the determination is being made of more than 1.0%
of Consolidated Net Tangible
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Assets other than property which, in the opinion of the Board of Directors of
the Company, is not of material importance to the total business conducted by
the Company and its Restricted Subsidiaries taken as a whole. (Section 1.1)
"principal" of a Security means principal amount of, and, unless the context
indicates otherwise, includes any premium payable on the Security. (Section 1.1)
"United States" means the United States of America (any state thereof and
the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (including the Commonwealth of Puerto Rico).
(Section 1.1)
"U.S. Person" means a citizen or resident of the United States, a
corporation, partnership, joint venture, limited liability company, association,
joint-stock company, unincorporated organization or other entity or government
or any agency or political subdivision thereof created or organized in or under
the United States, or an estate or trust, the income of which is subject to
United States federal income taxation regardless of its source. (Section 1.1)
Reference is made to the Prospectus Supplement relating to each series of
Offered Debt Securities for any particular provisions relating to such Offered
Debt Securities, including any additional restrictive covenants that may be
included in the terms thereof.
Unless otherwise indicated in a Prospectus Supplement, the covenants
described above and in the Offered Debt Securities would not necessarily afford
Holders of the Offered Debt Securities protection in the event of a highly
leveraged transaction involving the Company, such as a leveraged buyout.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may, without the consent of the
Holders of the Debt Securities, consolidate with or merge into any other
corporation, or sell or convey all or substantially all its properties and
assets as an entirety to any Person, PROVIDED that in any such case (1) the
successor corporation, if other than the Company, shall be a domestic
corporation and such corporation shall assume by supplemental indenture the
Company's obligations under the Indenture and the Debt Securities and any
Coupons issued thereunder and (2) immediately after such transaction, no Event
of Default and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing. Upon
compliance with these provisions by a successor corporation in connection with a
consolidation with or merger of the Company into, or conveyance, transfer or
lease to, such successor corporation, the Company (except in the case of a
lease) would be relieved of its obligations under the Indenture and the Debt
Securities. Notwithstanding the foregoing clause (2), the Company may merge or
consolidate any Restricted Subsidiary into or with the Company or any other
direct or indirect wholly-owned Restricted Subsidiary of the Company. (Sections
9.1 and 9.2)
EVENTS OF DEFAULT
The Indenture defines an Event of Default with respect to any series of Debt
Securities as being any one of the following events: (1) default for 30 days in
any payment of interest on such series or of any related Coupon when due; (2)
default in any payment of principal of such series when due either at maturity,
upon redemption, by declaration or otherwise (except a failure to make payment
resulting from mistake, oversight or transfer difficulties not continuing for
more than three (3) Business Days beyond the date on which such payment is due);
(3) default in the payment of any sinking fund installment with respect to such
series when due either at maturity, upon redemption, by declaration or otherwise
(except a failure to make payment resulting from mistake, oversight or transfer
difficulties not continuing for more than three (3) Business Days beyond the
date on which such payment is due); (4) default for 90 days after appropriate
notice in performance of any other covenant or warranty in the Indenture (other
than a covenant or warranty included in the Indenture solely for the benefit of
any series of Debt Securities other
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than that series); (5) certain events in bankruptcy, insolvency or
reorganization; or (6) any other Event of Default provided with respect to Debt
Securities of that series. In case an Event of Default shall occur and be
continuing with respect to any series of Debt Securities, the Trustee or the
Holders of not less than 25% in aggregate principal amount of the Outstanding
Debt Securities of that series may declare the principal of and interest on such
series (or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal as may be specified in the terms of
that series) to be immediately due and payable PROVIDED, HOWEVER, that with
respect to Events of Default with respect to clauses (4) and (6) involving all
series of Outstanding Debt Securities, only the Trustee or the Holders of not
less than 25% of all such series voting as a single class may declare the
principal of and interest on such Debt Securities immediately due and payable.
Any Event of Default with respect to a particular series of Debt Securities may
be waived by the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of such series, except in each case a failure to pay
principal of or interest or any sinking fund installment on such Debt Security
or in respect of a provision which under the Indenture cannot be modified
without the consent of the Holder of each Outstanding Debt Security of the
series affected. (Sections 5.1 and 5.2)
Reference is made to the Prospectus Supplement relating to each series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of the maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
The Indenture requires the Company to file annually with the Trustee an
Officers' Certificate as to the absence of certain defaults under the terms of
the Indenture. (Section 3.5) The Indenture provides that the Trustee will,
within 90 days after the occurrence of a default in respect of the Debt
Securities of any series, transmit by mail (or give by publication for Bearer
Securities) to all Holders of Debt Securities and Coupons of such series notice
of any default known to the Trustee, unless such default shall have been cured
or waived; PROVIDED that the Trustee may withhold notice to the Holders of Debt
Securities and Coupons of such series of any default (except in payment of
principal or interest or any sinking fund installment) if it considers it in the
interest of the Holders of Debt Securities and Coupons of such series to do so.
(Section 5.14)
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the
Indenture provides that the Trustee shall be, under no obligation to exercise
any of its rights or powers under the Indenture at the request or direction of
the Holders of the Debt Securities and Coupons of such series unless such
Holders shall have offered to the Trustee reasonable indemnity. (Sections 6.1
and 6.2) Subject to such provisions for indemnification and certain other rights
of the Trustee, the Indenture provides that the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of any series
affected shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to the Debt Securities of such
series. However, the Indenture provides that the Trustee need not take any
action which would be unduly prejudicial to the Holders not joining such
direction. (Sections 5.12)
No Holder of any Debt Security or any Coupon of any series thereunder will
have any right to institute any proceeding with respect to the Indenture or for
any remedy thereunder, unless (1) such Holder shall have previously given to the
Trustee written notice of a continuing Event of Default with respect to Debt
Securities of that series, (2) the Holders of at least 25% in aggregate
principal amount of the Outstanding Debt Securities of that series shall have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee, (3) the Trustee shall not have received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of that series a direction inconsistent with such request within
60 days of such notice, request and offer of indemnity and (4) the Trustee shall
have failed to institute such proceeding within that 60-day period. (Section
5.8) However, the Holder of any Debt Security will have an absolute right to
receive payment of the principal of and interest
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on such Debt Security on or after the due dates expressed in such Debt Security
and to institute suit for the enforcement of any such payment. (Section 5.9)
MODIFICATION AND WAIVER
Modification and amendments of the Indenture or any supplemental indenture
or the rights of the Holders of such Debt Securities may be made by the Company
and the Trustee with the consent of the Holders of at least a majority of the
principal amount of the Outstanding Debt Securities of each series affected by
such modifications or amendments; PROVIDED, HOWEVER, that no such modification
or amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (1) change the Stated Maturity of the principal of,
or any installment of interest payable on, any Debt Security; (2) reduce the
principal amount of, the rate of interest on, or any premium payable on
redemption of any Debt Security, or reduce the amount of principal of an
Original Issue Discount Security that would be due and payable upon
acceleration; (3) change the place or currency of payment of principal of or
interest on any Debt Security; (4) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security after the
Stated Maturity thereof; (5) limit the Company's obligation to maintain a Paying
Agent outside the United States for Bearer Securities; (6) limit the obligation
of the Company to redeem certain Bearer Securities if certain events occur
involving United States information reporting requirements; or (7) reduce the
percentage in principal amount of Outstanding Debt Securities of any series, the
consent of whose Holders is required for modification or amendment of the
Indenture, for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults. (Section 8.2)
Unless otherwise provided in the Prospectus Supplement, the Holders of at
least a majority of the principal amount of the Outstanding Debt Securities of
any series may on behalf of the Holders of all Debt Securities of that series
waive, insofar as that series is concerned, compliance by the Company with
certain restrictive provisions of the Indenture. (Section 3.12)
The Indenture also permits the Company and the Trustee to amend the
Indenture in certain circumstances without the consent of the Holders of Debt
Securities to evidence the merger of the Company or the replacement of the
Trustee and for certain other purposes.
DEFEASANCE OF DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
The Indenture provides that the Company may defease and be discharged from
any and all obligations (except as otherwise described in (a) below) with
respect to the Debt Securities of any series which have not already been
delivered to the Trustee for cancellation and which have either become due and
payable or are by their terms due and payable within one year (or scheduled for
redemption within one year) by irrevocably depositing with the Trustee, as trust
funds, money or, in the case of Debt Securities payable only in U.S. dollars,
U.S. Government Obligations (as defined) which through the payment of principal
and interest in accordance with their terms will provide money, in an amount
certified to be sufficient to pay at maturity (or upon redemption) the principal
of and interest on such Debt Securities.
In addition, the Indenture provides that with respect to each series of Debt
Securities, the Company may elect either (a) to defease and be discharged from
any and all obligations with respect to the Debt Securities of such series
(except for the obligations to register the transfer or exchange of the Debt
Securities of such series and of Coupons appertaining thereto, to replace
temporary or mutilated, destroyed, lost or stolen Debt Securities of such series
and of Coupons appertaining thereto, to maintain an office or agency in respect
of the Debt Securities of such series and to hold moneys for payment in trust)
or (b) to be released from the restrictions described under "Certain Covenants
of the Company" and "Merger and Consolidation" and to the extent specified in
connection with the issuance of such series of Debt Securities, other covenants
applicable to such series of Debt Securities ("covenant defeasance"), upon the
deposit with the Trustee (or other qualifying trustee), in trust for such
purpose, of money or, in
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the case of Debt Securities payable only in U.S. dollars, U.S. Government
Obligations which through the payment of principal and interest in accordance
with their terms will provide money, in an amount certified to be sufficient to
pay at maturity (or upon redemption) the principal of and interest on the Debt
Securities of such series. Such a trust may only be established if, among other
things, the Company has delivered to the Trustee an opinion of counsel (as
specified in the Indenture) to the effect that the Holders of the Debt
Securities of such series will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance had not occurred. Such opinion,
in the case of a defeasance under clause (a) above, must refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable federal
income tax law occurring after the date of such Indenture. (Sections 10.1
and 10.2)
The foregoing provisions relating to defeasance may be modified in
connection with the issuance of any series of Debt Securities, and any such
modification will be described in the applicable Prospectus Supplement.
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, any
notice required to be given to a Holder of a Debt Security of any series that is
a Registered Security will be mailed to the last address of such Holder set
forth in the applicable Security Register. Any notice required to be given to a
Holder of a Debt Security that is a Bearer Security will be published in a daily
morning newspaper of general circulation in the city or cities specified in the
Prospects Supplement relating to such Bearer Security. (Section 11.4)
GOVERNING LAW
The Indenture, the Debt Securities and any related Coupons will be governed
by, and construed in accordance with, the laws of the State of New York.
(Section 11.8)
CONCERNING THE TRUSTEE
The First National Bank of Chicago is the Trustee under the Indenture. In
the ordinary course of its business, affiliates of the Trustee have engaged and
may in the future engage in commercial banking transactions with the Company and
its affiliates.
PLAN OF DISTRIBUTION
The Company may sell Securities (i) to or through underwriters or dealers;
(ii) directly to one or more other purchasers; (iii) through agents; or
(iv) through a combination of any such methods of sale.
Offers to purchase Debt Securities may be solicited by agents designated by
the Company from time to time. Any such agent, who may be deemed to be an
underwriter as that term is defined in the Securities Act, involved in the offer
or sale of any Debt Securities will be named, and any commissions payable by the
Company to such agent will be set forth, in the Prospectus Supplement relating
to such Debt Securities. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment. Agents may be entitled under agreements which may be entered
into with the Company to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for the Company in
the ordinary course of business.
If any underwriters are utilized in the sale of any Debt Securities, the
Company will enter into an underwriting agreement with such underwriters at the
time of sale to them and the names of the underwriters and the terms of the
transaction will be set forth in the Prospectus Supplement relating to
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such Debt Securities, which will be used by the underwriters to make resales of
such Debt Securities. Any underwriters will acquire Debt Securities for their
own account and may resell such Debt Securities from time to time in one or more
transactions, including negotiated transactions, at fixed public offering prices
or at varying prices determined at the time of sale. Debt Securities may be
offered to the public either through underwriting syndicates represented by
managing underwriters, or directly by the managing underwriters. Only
underwriters named in the Prospectus Supplement are deemed to be underwriters in
connection with the Debt Securities offered thereby. If any underwriters are
utilized in the sale of the Debt Securities, the underwriting agreement will
provide that the obligations of the underwriters are subject to certain
conditions precedent and that the underwriters with respect to a sale of Debt
Securities will be obligated to purchase all such Debt Securities, if any are
purchased. The underwriters may be entitled, under the relevant underwriting
agreement, to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, and may be customers of, engage
in transactions with or perform services for the Company in the ordinary course
of business.
If a dealer is utilized in the sale of any Debt Securities, the Company will
sell such Debt Securities to the dealer, as principal. The dealer may then
resell such Debt Securities to the public at varying prices to be determined by
such dealer at the time of resale. Dealers may be entitled under agreements
which may be entered into with the Company to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act, and
may be customers of, engage in transactions with or perform services for the
Company in the ordinary course of business.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents, in the form of discounts, concessions or commissions.
Underwriters and agents that participate in the distribution of Debt Securities
may be deemed to be underwriters, and any discounts or commissions received by
them from the Company and any profit on the resale of Debt Securities by them
may be deemed to be underwriting discounts and commissions, under the Securities
Act. Any such compensation received by such underwriters or agents from the
Company will be described in the Prospectus Supplement. Underwriters may sell
Debt Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent. The
Company may also offer and sell Debt Securities in exchange for other
outstanding Debt.
If so indicated in the Prospectus Supplement, the Company will authorize
dealers or other persons acting as agents of the Company to solicit offers by
certain institutions to purchase Debt Securities from the Company pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Institutions with which
such Contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. The obligations of any purchaser under any such Contract will not
be subject to any conditions except that (i) the purchase of the Offered Debt
Securities shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject and (ii) the Company shall have
sold, and delivery shall have taken place, to the underwriters named in the
Prospectus Supplement, such part of the Debt Securities as is to be sold to
them. The dealers and such other persons will not have any responsibility in
respect of the validity or performance of such Contracts.
The Debt Securities will be a new issue of securities with no established
trading market. Any underwriters or agents to or through whom Debt Securities
are sold by the Company for public offering and sale may make a market in such
Debt Securities, but such underwriters and agents will not be
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obligated to do so and may discontinue any market-making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
any Debt Securities.
Debt Securities denominated or payable in foreign currencies may entail
significant risks. These risks include, without limitation, the possibility of
significant fluctuations in foreign currency exchange rates. These risks may
vary depending upon the currency or currencies involved. These risks will be
more fully described in the Prospectus Supplement relating thereto.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities offered hereby is being passed upon for
the Company by Skadden, Arps, Slate, Meagher & Flom (Illinois).
EXPERTS
The consolidated financial statements and related supplemental financial
statement schedule of the Company, which are included or incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein and in the Registration Statement by
reference, have been audited by Coopers & Lybrand L.L.P., independent
accountants. Such financial statements and financial statement schedule are
incorporated herein and in the Registration Statement by reference in reliance
upon the reports of Coopers & Lybrand L.L.P. given upon the authority of that
firm as experts in accounting and auditing. To the extent that Coopers & Lybrand
L.L.P. audits and reports on the financial statements and related supplemental
financial statement schedule of the Company issued at future dates, and consents
to the use of their reports thereon, such financial statements also will be
incorporated by reference in this Prospectus in reliance upon their reports and
said authority.
With respect to unaudited interim financial information incorporated herein
and in the Registration Statement by reference, the independent accountants have
reported that they have applied limited procedures in accordance with
professional standards for review of such information. However, their separate
reports, incorporated herein and in the Registration Statement by reference,
state that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. The accountants are not subject to the liability
provisions of Section 11 of the Securities Act for their reports on the
unaudited interim financial information because such reports are not a "report"
or a "part" of the Registration Statement prepared or certified by the
accountants within the meanings of Sections 7 and 11 of the Securities Act.
In addition, the combined financial statements and financial statement
schedule of the Henkel-Ecolab Joint Venture, which are included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and
incorporated herein and in the Registration Statement by reference, have been
audited by KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft, independent
accountants. Such combined financial statements and financial statement schedule
are incorporated herein and in the Registration Statement by reference in
reliance upon the reports of KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft given upon the authority of that firm as experts in
accounting and auditing. To the extent that KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft audits and reports on the financial statements of the
Henkel-Ecolab Joint Venture issued at future dates, and consents to the use of
their reports thereon, such financial statements also will be incorporated by
reference in this Prospectus in reliance upon their reports and said authority.
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