<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration No. 333-84673
(Pursuant to Rule 429, also
Registration No. 333-66865)
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 23, 1999)
EMERSON ELECTRIC CO. LOGO
$2,000,000,000
Emerson Electric Co.
MEDIUM - TERM NOTES
------------------------
Emerson Electric Co. may offer from time to time its Medium-Term Notes. We will
include the specific terms of any Notes that we may offer in a Pricing
Supplement to this Prospectus Supplement. Unless the Pricing Supplement provides
otherwise, the Notes that we offer will have the following general terms:
<TABLE>
<S> <C>
- - The Notes will mature in nine months or more from the - We will pay interest on amortizing fixed rate Notes
date of issue. quarterly on February 15, May 15, August 15 and
- - The Notes will bear interest at either a fixed, November 15 or semiannually on May 15 and November
amortizing fixed or floating rate. Floating rate 15.
interest will be based on: - We will pay interest on floating rate Notes on the
- CD Rate dates specified herein or in the applicable Pricing
- Commercial Paper Rate Supplement.
- EURIBOR - The Notes will be held in global form by The
- Federal Funds Rate Depository Trust Company, unless specified otherwise
- LIBOR in the applicable Pricing Supplement.
- Prime Rate - The Notes will not be subject to redemption and
- Treasury Rate repurchase, unless specified otherwise in the
- CMT Rate applicable Pricing Supplement.
- Any other rate specified in the applicable Pricing - The Notes will be in minimum denominations of $1,000,
Supplement and integral multiples of $1,000.
- - We will pay interest on fixed rate (other than
amortizing fixed rate) Notes on May 15 and November
15.
</TABLE>
------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
--------- -------------- -------------
<S> <C> <C> <C>
Per Note............. 100% 0.125% - 0.750% 99.875% - 99.250%
Total................ $2,000,000,000 $2,500,000 - $15,000,000 $1,997,500,000 - $1,985,000,000
</TABLE>
(1) We will issue the Notes at 100% of their principal amount, unless we
specify otherwise in the applicable Pricing Supplement.
(2) See "Supplemental Plan of Distribution."
(3) Assuming we issue the Notes at 100% of their principal amount and before
deducting expenses.
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 accompanying Prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated and J.P. Morgan Securities Inc. have agreed to
solicit offers to purchase the Notes as Agents for Emerson. See "Supplemental
Plan of Distribution" for additional information.
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MORGAN STANLEY DEAN WITTER J.P. MORGAN & CO.
September 23, 1999
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You should rely only on the information contained or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. We have
not authorized anyone to provide you with information different from that
contained in this Prospectus Supplement and the accompanying Prospectus. We are
offering to sell the Notes, and seeking offers to buy the Notes, only in
jurisdictions where offers and sales are permitted. The information contained in
this Prospectus Supplement and the accompanying Prospectus is accurate only as
of the date of this Prospectus Supplement and the date of the accompanying
Prospectus, regardless of the time of delivery of this Prospectus Supplement or
any sales of the Notes.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Important Currency Exchange Information..................... S-3
Foreign Currency Risks...................................... S-3
Description of the Notes.................................... S-4
United States Federal Income Tax Consequences to Holders.... S-23
Supplemental Plan of Distribution........................... S-30
Validity of the Notes....................................... S-31
PROSPECTUS
PAGE
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Where You Can Find More Information......................... 2
Information About Emerson................................... 3
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of the Debt Securities.......................... 4
Book-Entry Debt Securities.................................. 8
Plan of Distribution........................................ 10
Experts..................................................... 10
</TABLE>
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IMPORTANT CURRENCY EXCHANGE INFORMATION
Unless the applicable Pricing Supplement provides otherwise, purchasers
must pay for the Notes in U.S. dollars, and we will make payments of principal
and interest on the Notes in U.S. dollars. The applicable Pricing Supplement may
provide that purchasers must pay for the Notes in a specified currency other
than U.S. dollars and/or that we will make payments of principal and interest on
such Notes in such a specified currency. Currently, a limited number of
facilities in the United States convert U.S. dollars into foreign currencies and
vice versa. In addition, most banks do not currently offer non-U.S. dollar
denominated checking or savings account facilities in the United States.
Accordingly, unless a Pricing Supplement specifies otherwise or unless we make
alternative arrangements, we will make payment of principal and interest on
Notes in a specified currency other than U.S. dollars to an account at a bank
outside the United States. See "Description of the Notes" and "Foreign Currency
Risks."
The Exchange Rate Agent will handle the conversion of a specified currency
into U.S. dollars or U.S. dollars into a specified currency, as the case may be,
if the applicable Pricing Supplement provides that
- we will make payments of principal of and interest on a non-U.S. dollar
denominated Note in U.S. dollars or
- we will make payments of principal of and interest on a U.S. dollar
denominated Note in a specified currency other than U.S. dollars.
Holders of the Notes will bear the costs of such conversion through
deductions from such payments. Any Agent may act, from time to time, as the
Exchange Rate Agent. Unless we indicate otherwise in the applicable Pricing
Supplement, the Exchange Rate Agent will be The Bank of New York.
When we refer to "U.S. dollars," "U.S. $" or "$" in this Prospectus
Supplement we mean the currency of the United States of America.
FOREIGN CURRENCY RISKS
This Prospectus Supplement, the accompanying Prospectus and any Pricing
Supplement do not describe all the risks of an investment in Notes denominated
in, or the payment of which is related to the value of, a foreign currency. We
disclaim any responsibility to advise prospective purchasers of those risks as
they exist at the date of this Prospectus Supplement or as those risks may
change in the future. Prospective investors should consult their own financial
and legal advisors as to such risks. Foreign Currency Notes are not an
appropriate investment for investors who are unsophisticated with respect to
foreign currency transactions and exchange rate fluctuations.
EXCHANGE RATES AND EXCHANGE CONTROLS
Any investment in Notes that are denominated in, or the payment of which is
related to the value of, a specified currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies and the possibility of the imposition
or modification of exchange controls by either the U.S. or a foreign government.
Such risks generally depend on economic and political events over which we and
you have no control. In recent years, rates of exchange between U.S. dollars and
certain foreign currencies have been highly volatile and such volatility may be
expected to continue or accelerate in the future. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations in such rate that may occur during the term of any
Note. Depreciation against the U.S. dollar of the currency in which a Note is
payable would result in a decrease in the effective yield of such Note below its
coupon rate and, in certain circumstances, could result in a negative yield or
loss to the investor on a U.S. dollar basis. In addition, depending on the
specific terms of a currency linked Note, changes in exchange rates relating to
any of the currencies involved may result in a decrease in its effective yield
and, in certain circumstances, could result in a loss of all or a substantial
portion of the principal of a Note to the investor.
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The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and we disclaim any
responsibility to advise prospective purchasers who are residents of countries
other than the United States with respect to any matters that may affect the
purchase, holding or receipt of payments of principal and interest on the Notes.
Such persons should consult their own counsel with regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal or interest
on a Note. Even if there are no actual exchange controls, it is possible that
the specified currency for any particular Note not denominated in U.S. dollars
would not be available when payments on such Note are due. In that event, we
would make required payments in U.S. dollars. See "Description of the
Notes--Unavailability of Foreign Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable currency exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein shall constitute a part of this
Prospectus Supplement and is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in fluctuations
in currency exchange rates that may occur in the future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. In the event an action based on Notes denominated in a
specified currency other than U.S. dollars were commenced in a court in the
United States, it is likely that such court would grant judgment relating to the
Notes only in U.S. dollars.
DESCRIPTION OF THE NOTES
This section is a summary of the material terms that are common to the Debt
Securities we are offering, which we refer to as the "Notes." This summary
supplements, and is qualified by reference to, the description of the general
terms and provisions of the Debt Securities in the Prospectus that is attached
to the back of this Prospectus Supplement. However, if any particular term of
the Notes described here is inconsistent with any general terms described in the
Prospectus, the particular term described here will control.
When we issue any particular Note or Notes, we will specify their
particular terms in a "Pricing Supplement" to this Prospectus Supplement. The
terms of any particular Notes may be different from or in addition to the terms
summarized here.
In this section, we use capitalized terms to signify defined terms that
have special meaning under the Indenture pursuant to which we will issue the
Notes, or under the terms of the Notes, or as explained in the accompanying
Prospectus. We describe meanings in this section for only the more important
terms.
In this entire Prospectus Supplement, the terms "Emerson," "we," "our" and
"us" refer to Emerson Electric Co. Also, in this section, "you", "your" and
"holders" mean those who own Notes registered in their own names and not those
who own beneficial interests in Notes registered in "street name" or in Notes
represented by a global Note or Notes issued in "book-entry" form through the
Depositary. Owners of beneficial interests in the Notes should read the
subsection below entitled "Book-Entry System."
GENERAL FEATURES OF THE NOTES
We will issue the Notes under the Indenture dated as of December 10, 1998,
between Emerson and The Bank of New York, as Trustee. An officer's certificate
will set forth the terms of the Notes that we may issue in accordance with the
Indenture. We may issue the Notes from time to time in an aggregate principal
amount of up to $2,000,000,000 or the equivalent thereof in one or more foreign
currencies, subject to
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reduction as a result of our sale of other Debt Securities. Information about
the Indenture and a description of the general terms and provisions of the Debt
Securities that we may issue under the Indenture are in the accompanying
Prospectus under "Description of the Debt Securities."
The Notes will rank equally with all our other unsecured and unsubordinated
debt. For the purpose of this Prospectus Supplement, (i) the principal amount of
any Discount Note (as defined below) means the Issue Price of such Note and (ii)
the principal amount of any Note issued in a foreign currency means the U.S.
dollar equivalent of the Issue Price of such Note on the date of issue.
The Notes will mature on any day nine months or more from the date of
issue, as set forth in the applicable Pricing Supplement. Except as the
applicable Pricing Supplement may provide, we will issue the Notes only in fully
registered form. Unless otherwise provided in the applicable Pricing Supplement,
the Notes will be denominated in Authorized Denominations.
We will offer the Notes on a continuing basis, as either book-entry, or
global securities or certificated Notes. Except as set forth in the Prospectus
under "Description of the Debt Securities--Book-Entry Debt Securities," such
Book-Entry Notes will not be issuable as certificated Notes. The laws of some
states may 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 own, transfer or pledge beneficial interests in global securities.
See "--Book-Entry System" below.
You may present the Notes for payment of principal and interest, register
the Notes for transfer and exchange the Notes at the agency in The City of New
York that we maintain for such purpose; provided that Book-Entry Notes will be
exchangeable only in the manner and to the extent set forth in the Prospectus
under "Description of the Debt Securities--Book-Entry Debt Securities." Unless
we indicate otherwise in the applicable Pricing Supplement, The Bank of New
York, acting through its principal corporate trust office in New York, New York,
will act as the Registrar and Transfer Agent, the Paying Agent and the
Authenticating Agent for the Notes.
The applicable Pricing Supplement will specify the Issue Price of each Note
that we sell (unless we sell such Note at 100% of its principal amount), the
interest rate or interest rate formula, interest payment date(s), maturity,
currency and principal amount and any other terms on which we will issue each
Note.
CERTAIN DEFINITIONS
The following terms in this Prospectus Supplement have the following
meanings:
"Authorized Denominations" means, unless otherwise provided in the
applicable Pricing Supplement, (i) with respect to Notes denominated in U.S.
dollars, $1,000 or any amount in excess thereof which is an integral multiple of
$1,000 and (ii) with respect to Notes denominated in a specified currency other
than U.S. dollars, the equivalent of U.S. $1,000 (rounded to an integral
multiple of 1,000 units of such specified currency), or any amount in excess
thereof which is an integral multiple of 1,000 units of such specified currency,
as determined by reference to the Market Exchange Rate on the Business Day
immediately preceding the date of issuance.
"Business Day" means any day, other than a Saturday or Sunday that is not a
day on which banking institutions are authorized or required by law or
regulation to be closed in The City of New York, New York, or St. Louis,
Missouri, and, with respect to Notes denominated in a specified currency other
than U.S. dollars, is (a) not a day on which banking institutions are authorized
or required by law or regulation to close in the financial center of the country
issuing the specified currency (which in the case of the lawful currency of the
member states of the European Union that adopt the single currency in accordance
with the Treaty establishing the European Community, as amended by the Treaty on
European Union (the "euro"), shall be London and Luxembourg) and (b) a day on
which banking institutions in such financial center are carrying out
transactions in such specified currency, and (c) with respect to LIBOR Notes, a
London Banking Day. Unless otherwise specified in the applicable Pricing
Supplement, "London Banking Day" means any day (i) if the Index Currency is
other than the euro, on which dealings in deposits in such Index Currency are
transacted in the London interbank market or (ii) if the Index Currency is the
euro, any day on which the
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Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET)
System is open ("TARGET Settlement Day").
"Discount Note" means any Note that provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof pursuant to the Indenture.
"Euro LIBOR Notes" means LIBOR notes for which the index currency is the
euro.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of the Notes, regularly scheduled interest shall be
payable. Such Interest Payment Date shall be specified in the applicable Pricing
Supplement.
The "Market Exchange Rate" means the noon dollar buying rate in New York
City for cable transfers of such specified currency as published by the Federal
Reserve Bank of New York.
The "Record Date" with respect to any Interest Payment Date shall be the
date 15 calendar days prior to such Interest Payment Date, whether or not such
date shall be a Business Day.
INTEREST AND PRINCIPAL PAYMENTS
RECIPIENTS OF PAYMENTS
The Paying Agent will pay interest to the person in whose name the Note is
registered at the close of business on the applicable Record Date; provided that
the interest payable upon maturity, redemption or repayment (whether or not the
date of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. In general, the Paying Agent
will make the initial interest payment on a Note on the first Interest Payment
Date falling after the date the Note is issued. However, unless we specify
otherwise in the applicable Pricing Supplement, the Paying Agent will make
payments of interest (or, in the case of an Amortizing Note, principal and
interest) on a Note issued less than 15 calendar days before an Interest Payment
Date on the next succeeding Interest Payment Date to the holder of record on the
Record Date with respect to such next succeeding Interest Payment Date.
BOOK-ENTRY NOTES
The Paying Agent will make payments of principal, premium, if any, and
interest to the account of the Depositary, as holder of Book-Entry Notes, by
wire transfer of immediately available funds. We expect that the Depositary,
upon receipt of any payment, will immediately credit its participants' accounts
in amounts proportionate to their respective beneficial interests in the
Book-Entry Notes as shown on the records of the Depositary. We also expect that
payments by the Depositary's participants to owners of beneficial interests in
the Book-Entry Notes will be governed by standing customer instructions and
customary practices and will be the responsibility of those participants.
CERTIFICATED NOTES
Except as indicated below for payments of interest at maturity, or upon
redemption or repayment, the Paying Agent will make U.S. dollar payments of
interest either:
- by check mailed to the address of the person entitled to payment as
shown on the Note register; or
- for a holder of at least $10,000,000 in aggregate principal amount of
certificated Notes having the same Interest Payment Date, by wire
transfer of immediately available funds, if the holder has given written
notice to the Paying Agent not later than 15 calendar days prior to the
applicable Interest Payment Date.
U.S. dollar payments of principal, premium, if any, and interest, at
maturity, redemption or upon repayment on a Note will be made in immediately
available funds against presentation and surrender of the Note.
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PAYMENT PROCEDURES FOR BOOK-ENTRY NOTES DENOMINATED IN A FOREIGN CURRENCY
Book-Entry Notes payable in a specified currency other than U.S. dollars
may provide that a beneficial owner of interests in those Notes may elect to
receive all or a portion of the payments of principal, premium, if any, or
interest in U.S. dollars. In those cases, the Depositary, as the holder, will
elect to receive all payments with respect to the beneficial owner's interest in
the Notes in U.S. dollars, unless the beneficial owner takes the following
steps:
- The beneficial owner must give complete instructions to the direct or
indirect participant through which it holds the Book-Entry Notes of its
election to receive those payments in the specified currency other than
U.S. dollars by wire transfer to an account specified by the beneficial
owner with a bank located outside the United States. In the case of a
Note payable in euros, the account must be a euro account in a country
for which the euro is the lawful currency.
- The participant must notify the Depositary of the beneficial owner's
election on or prior to the third business day after the applicable
Record Date, for payments of interest, and on or prior to the twelfth
business day prior to the maturity date or any redemption or repayment
date, for payment of principal or premium.
- The Depositary will notify the Paying Agent of the beneficial owner's
election on or prior to the fifth business day after the applicable
record date, for payments of interest, and on or prior to the tenth
business day prior to the maturity date or any redemption or repayment
date, for payment of principal or premium.
Beneficial owners should consult their participants in order to ascertain
the deadline for giving instructions to participants in order to ensure that
timely notice will be delivered to the Depositary.
PAYMENT PROCEDURES FOR CERTIFICATED NOTES DENOMINATED IN A FOREIGN CURRENCY
For certificated Notes payable in a specified currency other than U.S.
dollars, the Notes may provide that the holder may elect to receive all or a
portion of the payments on those Notes in U.S. dollars. To do so, the holder
must send a written request to the Paying Agent:
- for payments of interest, on or prior to the fifth Business Day after
the applicable Record Date; or
- for payments of principal, at least ten business days prior to the
maturity date or any redemption or repayment date.
To revoke this election for all or a portion of the payments on the
certificated Notes, the holder must send written notice to the Paying Agent:
- at least five Business Days prior to the applicable Record Date, for
payment of interest; or
- at least ten calendar days prior to the maturity date or any redemption
or repayment date, for payments of principal.
If the holder does not elect to be paid in U.S. dollars, the Paying Agent
will pay the principal, premium, if any, or interest on the certificated Notes:
- for a holder of at least $10,000,000 in aggregate principal amount (or
the equivalent in a specified currency) of certificated Notes having the
same Interest Payment Date by wire transfer of immediately available
funds in the specified currency to the holder's account at a bank
located outside the United States, and in the case of a Note payable in
euros, in a country for which the euro is the lawful currency, if the
Paying Agent has received the holder's written wire transfer
instructions not less than 15 calendar days prior to the applicable
payment date; or
- by check payable in the specified currency mailed to the address of the
person entitled to payment that is specified in the Note register, if
the holder is not eligible for payment by wire transfer or has not
provided wire instructions.
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However, the Paying Agent will only pay the principal of the certificated
Notes, any premium and interest due at maturity, or on any redemption or
repayment date, upon surrender of the certificated Notes at the office or agency
of the Paying Agent.
DETERMINATION OF EXCHANGE RATE FOR PAYMENTS IN U.S. DOLLARS FOR NOTES
DENOMINATED IN A FOREIGN CURRENCY
The Exchange Rate Agent will convert the specified currency into U.S.
dollars for holders who elect to receive payments in U.S. dollars and for
beneficial owners of Book-Entry Notes that do not follow the procedures we have
described immediately above. The conversion will be based on the highest bid
quotation in The City of New York received by the Exchange Rate Agent at
approximately 11:00 a.m., New York City time, on the second Business Day
preceding the applicable payment date from three recognized foreign exchange
dealers for the purchase by the quoting dealer:
- of the specified currency for U.S. dollars for settlement on the payment
date;
- in the aggregate amount of the specified currency payable to those
holders or beneficial owners of Notes; and
- at which the applicable dealer commits to execute a contract.
One of the dealers providing quotations may be the Exchange Rate Agent
unless the Exchange Rate Agent is our affiliate. If those bid quotations are not
available, payments will be made in the specified currency. The holders or
beneficial owners of Notes will pay all currency exchange costs by deductions
from the amounts payable on the Notes.
UNAVAILABILITY OF FOREIGN CURRENCY
The relevant specified currency may not be available to us for making
payments of principal of, premium, if any, or interest on any Note. This could
occur due to the imposition of exchange controls or other circumstances beyond
our control or if the specified currency is no longer used by the government of
the country issuing that currency or by public institutions within the
international banking community for the settlement of transactions. If the
specified currency is unavailable, we may satisfy our obligations to holders of
the Notes by making those payments on the date of payment in U.S. dollars on the
basis of the Market Exchange Rate on the second Business Day immediately
preceding the payment date. If that rate of exchange is not then available or is
not published for a particular payment currency, the Market Exchange Rate will
be based on the highest bid quotation in The City of New York received by the
Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the
second Business Day preceding the applicable payment date from three recognized
foreign exchange dealers for the purchase by the quoting dealer:
- of the specified currency for U.S. dollars for settlement on the payment
date;
- in the aggregate amount of the specified currency payable to those
holders or beneficial owners of Notes; and
- at which the applicable dealer commits to execute a contract.
One of the dealers providing quotations may be the Exchange Rate Agent
unless the Exchange Rate Agent is our affiliate. If those bid quotations are not
available, the Exchange Rate Agent will determine the Market Exchange Rate at
its sole discretion.
These provisions do not apply if a specified currency is unavailable
because it has been replaced by the euro. If the euro has been substituted for a
specified currency, Emerson may at its option, or will, if required by
applicable law, without the consent of the holders of the affected Notes, pay
the principal of, premium, if any, or interest on any Note denominated in the
specified currency in euros instead of the specified currency, in conformity
with legally applicable measures taken pursuant to, or by virtue of, the treaty
establishing the European Community, as amended by the treaty on European Union.
Any payment made in U.S. dollars or in
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euros as described above where the required payment is in an unavailable
specified currency will not constitute an event of default.
DISCOUNT NOTES
Certain Notes, including Discount Notes, may be considered to be issued
with original issue discount, which must be included in income for United States
federal income tax purposes at a constant rate. See "United States Income Tax
Consequences to Holders--Original Issue Discount" below. Unless we otherwise
specify in the applicable Pricing Supplement, if the principal of any Discount
Note is declared to be due and payable immediately as described under
"Description of the Debt Securities--Events of Default, Notice and Waiver" in
the Prospectus, the amount of principal due and payable with respect to such
Note will be limited to the sum of (a) the aggregate principal amount of such
Note multiplied by its Issue Price (expressed as a percentage of the aggregate
principal amount) plus (b) the original issue discount amortized from the date
of issue to the date of declaration, which amortization will be calculated using
the "interest method" (computed in accordance with generally accepted accounting
principles in effect on the date of declaration). Special considerations
applicable to any such Notes will be set forth in the applicable Pricing
Supplement.
FIXED RATE NOTES
Each Note bearing interest at a fixed rate (a "Fixed Rate Note,") will bear
interest from the date of issuance at the annual rate stated on the face
thereof, except as described below under "--Extension of Maturity," until the
principal thereof is paid or made available for payment. Unless we specify
otherwise in the applicable Pricing Supplement, such interest will be computed
on the basis of a 360-day year of twelve 30-day months.
INTEREST PAYMENT DATES; AMORTIZING NOTES
Unless we specify otherwise in the applicable Pricing Supplement, we will
make payments of interest on Fixed Rate Notes, other than Amortizing Notes,
semiannually on each May 15 and November 15 and at maturity or upon any earlier
redemption or repayment. Amortizing Notes are securities on which payments of
principal and interest are made in installments over the life of the security.
Unless we otherwise specify in the applicable Pricing Supplement, we will make
payments of principal and interest on Amortizing Notes either quarterly on each
February 15, May 15, August 15 and November 15 or semiannually on each May 15
and November 15, as set forth in the applicable Pricing Supplement, and at
maturity or upon any earlier redemption or repayment. We will apply payments
with respect to Amortizing Notes first to interest due and payable thereon and
then to the reduction of the unpaid principal amount thereof. We will provide a
table setting forth repayment information in respect of each Amortizing Note to
the original purchaser and, upon request, to subsequent holders.
If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, we will make the interest payment on the next day that is a
Business Day, and no interest on such payment will accrue for the period from
and after the Interest Payment Date. If the maturity (or date of redemption or
repayment) of any Fixed Rate Note falls on a day that is not a Business Day, we
will make the payment of interest and principal on the next succeeding Business
Day, and no interest on such payment will accrue for the period from and after
the maturity date (or date of redemption or repayment).
AMOUNT OF INTEREST PAYABLE
Interest payments for Fixed Rate Notes will include accrued interest from
and including the date of issue or from and including the last date in respect
of which we have paid interest, as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be.
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FLOATING RATE NOTES
Each Note bearing interest at a floating rate (a "Floating Rate Note") will
bear interest from the date of issuance until we pay or make available for
payment the principal at a rate determined by reference to an interest rate
basis or formula (the "Base Rate"), which may be adjusted by a Spread and/or
Spread Multiplier (each as defined below). The applicable Pricing Supplement
will designate one or more of the following Base Rates as applicable to each
Floating Rate Note:
- the CD Rate
- the Commercial Paper Rate
- EURIBOR
- the Federal Funds Rate
- LIBOR
- the Prime Rate
- the Treasury Rate
- the CMT Rate or
- such other Base Rate or interest rate formula as is set forth in such
Pricing Supplement and in such Floating Rate Note.
The "Index Maturity" for any Floating Rate Note is the period of maturity
of the instrument or obligation from which the Base Rate is calculated and will
be specified in the applicable Pricing Supplement.
FORMULA FOR INTEREST RATES
Unless we otherwise specify in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate for such Floating
Rate Note. The "Spread Multiplier" is the percentage specified in the applicable
Pricing Supplement to be applied to the Base Rate for such Floating Rate Note.
LIMITATIONS ON INTEREST RATES
If we specify in the applicable Pricing Supplement, a Floating Rate Note
may also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any interest period
("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the rate
of interest which may accrue during any interest period ("Minimum Interest
Rate"). In addition to any Maximum Interest Rate that may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on a
Floating Rate Note will in no event be higher than the maximum rate permitted by
New York law or other applicable state law, as the same may be modified by
United States law of general application.
HOW FLOATING INTEREST RATES ARE RESET
The interest rate in effect from the date of issue to the first Interest
Reset Date (defined below) with respect to a Floating Rate Note will be the
initial interest rate set forth in the applicable Pricing Supplement (the
"Initial Interest Rate"). The interest rate in effect on any Interest Reset Date
will be the applicable rate as reset on such date. The interest rate applicable
to any other day is the interest rate from the last Interest Reset Date (or, if
none, the Initial Interest Rate). However, the interest rate in effect for the
ten calendar days immediately prior to maturity, redemption, or repayment will
be that in effect on the tenth calendar day preceding such maturity, redemption,
or repayment date.
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Unless we otherwise specify in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless we otherwise specify in the Pricing Supplement, the Interest Reset Date
will be:
- in the case of Floating Rate Notes that reset daily, each Business Day;
- in the case of Floating Rate Notes (other than Treasury Rate Notes) that
reset weekly, the Wednesday of each week;
- in the case of Treasury Rate Notes that reset weekly, the Tuesday of
each week, except as provided below;
- in the case of Floating Rate Notes that reset monthly, the 15th day of
each month;
- in the case of Floating Rate Notes that reset quarterly, the 15th day of
February, May, August and November;
- in the case of Floating Rate Notes that reset semiannually, the 15th day
of two months of each year, as specified in the applicable Pricing
Supplement; and
- in the case of Floating Rate Notes that reset annually, the 15th day of
one month of each year, as specified in the applicable Pricing
Supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a
day that is not a Business Day, such Interest Reset Date shall be postponed to
the next succeeding Business Day, except that in the case of a EURIBOR Note or a
LIBOR Note, if such next Business Day is in the next succeeding calendar month,
such Interest Reset Date shall be the immediately preceding Business Day.
WHEN INTEREST IS PAID
Except as provided below, unless we otherwise specify in the applicable
Pricing Supplement, we will pay interest on Floating Rate Notes as follows:
- in the case of Floating Rate Notes with a daily, weekly or monthly
Interest Reset Date, on the 15th day of each month or on the 15th day of
February, May, August and November, as specified in the applicable
Pricing Supplement;
- in the case of Floating Rate Notes with a quarterly Interest Reset Date,
on the 15th day of February, May, August and November;
- in the case of Floating Rate Notes with a semiannual Interest Reset
Date, on the 15th day of the two months specified in the applicable
Pricing Supplement; and
- in the case of Floating Rate Notes with an annual Interest Reset Date,
on the 15th day of the month specified in the applicable Pricing
Supplement.
However, if the first Interest Payment Date is less than 15 days after the
date of issuance, interest will not be paid on the first Interest Payment Date,
but will be paid on the second Interest Payment Date.
If any Interest Payment Date for any Floating Rate Note would fall on a day
that is not a Business Day with respect to such Floating Rate Note, we will make
the interest payment on the next day that is a Business Day (and no interest on
such payment will accrue for the period from and after the Interest Payment
Date). However, in the case of a EURIBOR Note or a LIBOR Note, if such next
Business Day is in the next succeeding calendar month, we will make the interest
payment on the Business Day immediately preceding the Interest Payment Date. If
the maturity date or any earlier redemption or repayment date of a Floating Rate
Note would fall on a day that is not a Business Day, the payment of principal
and interest will be made on the next succeeding Business Day, and no interest
on such payment shall accrue for the period from and after such maturity,
redemption or repayment date, as the case may be.
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HOW INTEREST IS CALCULATED
Unless we otherwise specify in the applicable Pricing Supplement, interest
payments for Floating Rate Notes will be the amount of interest accrued from and
including the date of issue or from and including the last date in respect of
which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or maturity date or date of earlier redemption or
repayment, as the case may be.
With respect to a Floating Rate Note, accrued interest will be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless we otherwise specify in the applicable Pricing Supplement,
the interest factor for each such day is computed by dividing the interest rate
applicable to such day:
- by 360, in the case of CD Rate Notes, Commercial Paper Rate Notes,
EURIBOR Notes, Federal Funds Rate Notes, LIBOR Notes (except for LIBOR
Notes denominated in pounds sterling) and Prime Rate Notes; or
- by the actual number of days in the year, in the case of Treasury Rate
Notes and CMT Rate Notes; or
- by 365 in the case of LIBOR Notes denominated in pounds sterling.
All percentages used in or resulting from any calculation of the rate of
interest on a Floating Rate Note will be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward. All currency amounts used in or resulting from
such calculation on Floating Rate Notes will be rounded to the nearest minimum
unit of such currency (e.g., nearest cent), with one-half of such unit (e.g.,
one-half cent) rounded upward.
CALCULATION AGENT
Unless otherwise stated in the applicable Pricing Supplement, the
Calculation Agent with respect to any issue of Floating Rate Notes will be The
Bank of New York. Upon the request of the holder of any Floating Rate Note, the
Calculation Agent will provide the interest rate then in effect and, if
determined, the interest rate that will become effective on the next Interest
Reset Date with respect to such Floating Rate Note.
INTEREST DETERMINATION DATE
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes and Prime Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for LIBOR Notes (other than Euro LIBOR Notes) will be the second
London Banking Day preceding such Interest Reset Date, except that the Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note for
which the Index Currency is pounds sterling will be the Interest Reset Date. For
EURIBOR Notes or Euro LIBOR Notes, the Interest Determination Date will be the
second TARGET Settlement Day preceding such Interest Reset Date.
The Interest Determination Date pertaining to an Interest Reset Date for
Treasury Rate Notes will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the next day, but such
auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be the
Interest Determination Date pertaining to the Interest Reset Date occurring in
the next succeeding week. If an auction falls on a day that is an Interest Reset
Date, such Interest Reset Date will be the next following Business Day.
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CALCULATION DATE
Unless we otherwise specify in the applicable Pricing Supplement, the
"Calculation Date," where applicable below, pertaining to an Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date or, if such day is not a Business Day, the next
succeeding Business Day, or (ii) the Business Day preceding the applicable
Interest Payment Date or maturity date, as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD RATE NOTES
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless we otherwise specify in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note, the rate on such date for negotiable certificates of deposit having the
Index Maturity designated in the applicable Pricing Supplement as published by
the Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication of the Board
of Governors of the Federal Reserve System ("H.15(519)"), under the heading "CDs
(Secondary Market)."
The following procedures will be followed if the CD Rate cannot be
determined as described above:
- If the above rate is not published in H.15(519) by 9:00 a.m., New York
City time, on the Calculation Date, the CD Rate will be the rate on such
Interest Determination Date set forth in the daily update of H.15(519),
available through the world wide website of the Board of Governors of
the Federal Reserve System at
http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication ("H.15 Daily Update"), for the day in respect of
certificates of deposit having the Index Maturity specified in the
applicable Pricing Supplement under the caption "CDs (Secondary
Market)."
- If such rate is not yet published in either H.15(519) or the H.15 Daily
Update by 3:00 p.m., New York City time, on the Calculation Date, then
the Calculation Agent will determine the CD Rate to be the arithmetic
mean of the secondary market offered rates as of 10:00 a.m., New York
City time, on such Interest Determination Date, of three leading nonbank
dealers in negotiable U.S. dollar certificates of deposit in New York
City selected by the Calculation Agent (after consultation with the
Company) for negotiable certificates of deposit of major United States
money center banks of the highest credit standing in the market for
negotiable certificates of deposit with a remaining maturity closest to
the Index Maturity specified in the applicable Pricing Supplement in an
amount that is representative for a single transaction in that market at
that time.
- If the dealers selected by the Calculation Agent are not quoting as set
forth above, the CD Rate will remain the CD Rate then in effect on such
Interest Determination Date.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Notes and in
the applicable Pricing Supplement.
Unless we otherwise specify in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note, the Money Market Yield (as defined
below) of the rate on such date for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement, as such rate shall be published
in H.15(519), under the heading "Commercial Paper--Nonfinancial."
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The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
- In the event that such rate is not published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination
Date, then the Commercial Paper Rate shall be the Money Market Yield of
the rate on such Interest Determination Date for commercial paper of the
specified Index Maturity specified in the applicable Pricing Supplement
as published in H.15 Daily Update under the heading "Commercial
Paper -- Nonfinancial."
- If by 3:00 P.M., New York City time, on such Calculation Date such rate
is not yet available in either H.15(519) or H.15 Daily Update, then the
Commercial Paper Rate shall be the Money Market Yield of the arithmetic
mean of the offered rates as of 11:00 A.M., New York City time, on such
Interest Determination Date of three leading dealers of commercial paper
in The City of New York selected by the Calculation Agent (after
consultation with the Company) for commercial paper of the Index
Maturity specified in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized statistical rating agency.
- If the dealers selected by the Calculation Agent are not quoting offered
rates as mentioned above, the Commercial Paper Rate with respect to such
Interest Determination Date will remain the Commercial Paper Rate then
in effect on such Interest Determination Date.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360
------------------ X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the period for which interest is being calculated.
EURIBOR NOTES
EURIBOR Notes will bear interest at the interest rate (calculated with
reference to EURIBOR and the Spread and/or Spread Multiplier, if any) specified
in the EURIBOR Notes and the applicable Pricing Supplement.
Unless we otherwise specify in the applicable Pricing Supplement,
"EURIBOR," for each Interest Determination Date relating to a EURIBOR Note,
means the rate for deposits in euros as sponsored, calculated and published
jointly by the European Banking Federation and ACI--The Financial Market
Association, or any company established by the joint sponsors for purposes of
compiling and publishing those rates, for the Index Maturity specified in the
applicable Pricing Supplement as that rate appears on the display on Bridge
Telerate, Inc., or any successor service, on page 248 or any other page as may
replace page 248 on that service, which is commonly referred to as "Telerate
Page 248," as of 11:00 a.m. (Brussels time).
The following procedures will be followed if the rate cannot be determined
as described above:
- If the above rate does not appear, the Calculation Agent will request
the principal Euro-zone office of each of four major banks in the
Euro-zone interbank market, as selected by the Calculation Agent, after
consultation with us, to provide the Calculation Agent with its offered
rate for deposits in euros, at approximately 11:00 a.m. (Brussels time)
on the Interest Determination Date, to prime banks in the Euro-zone
interbank market for the Index Maturity specified in the applicable
Pricing Supplement commencing on the applicable Interest Reset Date, and
in a principal amount not less than the equivalent of U.S. $1 million in
euros that is representative of a single transaction in euros, in that
market at that time. If at least two quotations are provided, EURIBOR
will be the arithmetic mean of those quotations.
- If fewer than two quotations are provided, EURIBOR will be the
arithmetic mean of the rates quoted by four major banks in the
Euro-zone, as selected by the Calculation Agent, after consultation with
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us, at approximately 11:00 a.m. (Brussels time), on the applicable
Interest Reset Date for loans in euros to leading European banks for a
period of time equivalent to the Index Maturity specified in the
applicable Pricing Supplement commencing on that Interest Reset Date in a
principal amount not less than the equivalent of U.S. $1 million in
euros.
- If the banks so selected by the Calculation Agent are not quoting as
mentioned in the previous bullet point, the EURIBOR rate in effect for
the applicable period will be the same as the EURIBOR rate then in
effect on the Interest Determination Date.
"Euro-zone" means the region comprised of member states of the European
Union that adopt the single currency in accordance with the treaty establishing
the European Community, as amended by the treaty on European Union.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless we otherwise specify in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date
relating to a Federal Funds Rate Note, the rate on such date for Federal Funds
as published in H.15(519) under the heading "Federal Funds (Effective)", as
displayed on Bridge Telerate, Inc., or any successor service, on page 120 or any
other page as may replace the applicable page on that service, which is commonly
referred to as "Telerate Page 120."
The following procedures will be followed if the Federal Funds Rate cannot
be determined as described above:
- If the above rate is not published by 9:00 A.M., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the
Federal Funds Rate will be the rate on such Interest Determination Date
as published in H.15 Daily Update under the heading "Federal Funds
(Effective)."
- If such rate is not yet published in either H.15(519) or H.15 Daily
Update by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Federal Funds Rate
will be calculated by the Calculation Agent and will be the arithmetic
mean of the rates for the last transaction in overnight Federal Funds
arranged by three leading brokers of Federal funds transactions in The
City of New York selected by the Calculation Agent (after consultation
with Emerson) prior to 9:00 A.M., New York City time, on such Interest
Determination Date.
- If the brokers selected as aforesaid by the Calculation Agent are not
quoting as set forth above, the Federal Funds Rate with respect to such
Interest Determination Date will remain the Federal Funds Rate then in
effect on such Interest Determination Date.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread multiplier, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless we otherwise specify in the applicable Pricing Supplement, "LIBOR"
for each Interest Determination Date relating to a LIBOR Note will be determined
by the Calculation Agent as follows:
- As of the Interest Determination Date, LIBOR will be either: (a) if
"LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified Designated
LIBOR Page (as defined below) by its terms provides only for a single
rate, in which case such single rate shall be used) for deposits in the
Index Currency having the Index Maturity designed in the applicable
Pricing Supplement, commencing on the second London Banking Day
immediately following such Interest Determination Date, that appear on
the Designated LIBOR Page
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(as defined below) as of 11:00 A.M., London time, on that Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement, the rate for deposits in the Index Currency (as defined)
having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date or, if pounds sterling is the
Index Currency, commencing on that Interest Determination Date, that
appears on the Designated LIBOR Page as of 11:00 A.M., London time, on
that Interest Determination Date. If fewer than two offered rates appear
(if "LIBOR Reuters" is specified in the applicable Pricing Supplement),
or no rate appears (if "LIBOR Telerate" is specified in the applicable
Pricing Supplement, or if "LIBOR Reuters" is specified and the Designated
LIBOR page by its terms provides only for a single rate), LIBOR in
respect of the related Interest Determination Date will be determined as
if the parties had specified the rate described below.
- With respect to an Interest Determination Date on which fewer than two
offered rates appear (if "LIBOR Reuters" is specified in the applicable
Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified
in the applicable Pricing Supplement, or if "LIBOR Reuters" is specified
and the Designated LIBOR page by its terms provides only for a single
rate), the Calculation Agent will request the principal London offices
of each of four major reference banks in the London interbank market, as
selected by the Calculation Agent (after consultation with Emerson), to
provide the Calculation Agent with its offered quotation for deposits in
the Index Currency for the period of the Index Maturity designated in
the applicable Pricing Supplement, commencing on the second London
Banking Day immediately following such Interest Determination Date or,
if pounds sterling is the Index Currency, commencing on that Interest
Determination Date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such Interest Determination
Date and in a principal amount that is representative of a single
transaction in that Index Currency in that market at that time. If at
least two such quotations are provided, LIBOR determined on such
Interest Determination Date will be the arithmetic mean of such
quotations.
- If fewer than two quotations are provided, LIBOR will be determined for
the Interest Determination Date as the arithmetic mean of the rates
quoted at approximately 11:00 A.M. (or such other time specified in the
applicable Pricing Supplement), in the applicable principal financial
center for the country of the Index Currency on such Interest
Determination Date, by three major banks in such principal financial
center selected by the Calculation Agent (after consultation with
Emerson) for loans in the Index Currency to leading European banks,
having the Index Maturity designated in the applicable Pricing
Supplement and in a principal amount that is representative for a single
transaction in such Index Currency in such market at such time;
provided, however, that if the banks so selected by the Calculation
Agent are not quoting as mentioned in this sentence, LIBOR in effect for
the applicable period will be the same as the LIBOR rate then in effect
on that Interest Determination Date.
"Index Currency" means the currency specified in the applicable Pricing
Supplement as the currency for which LIBOR shall be calculated or, if the euro
is substituted for that currency, the Index Currency will be the euro. If no
such currency is specified in the applicable Pricing Supplement, the Index
Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency (or its designated successor), or (b) if
"LIBOR Telerate" is designated in the applicable Pricing Supplement, the display
on Bridge Telerate, Inc., or any successor service, on the page specified in the
applicable Pricing Supplement, or any other page as may replace that page or
that service, for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency. If neither LIBOR Reuters nor LIBOR
Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate had been
specified, and, if the U.S. dollar is the index currency, as if Page 3750, had
been specified.
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PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless we otherwise specify in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note, the rate set forth in H.15(519) for such date opposite the caption
"Bank Prime Loan."
The following procedures will be followed if the Prime Rate cannot be
determined as described above:
- If the rate is not published prior to 9:00 a.m., New York City time, on
the Calculation Date, then the Prime Rate will be the rate on such
Interest Determination Date as published in H.15 Daily Update opposite
the caption "Bank Prime Loan."
- If the rate is not published prior to 3:00 p.m., New York City time, on
the Calculation Date, in either H.15(519) or H.15 Daily Update then the
Calculation Agent will determine the Prime Rate to be the arithmetic
mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen US Prime 1 Page (as defined below) as such
bank's prime rate or base lending rate as in effect for that Interest
Determination Date.
- If fewer than four such rates but more than one such rate appear on the
Reuters Screen US Prime 1 Page for the Interest Determination Date, the
Calculation Agent will determine the Prime Rate to be the arithmetic
mean of the prime rates quoted on the basis of the actual number of days
in the year divided by 360 as of the close of business on such Interest
Determination Date by at least two major money center banks in New York
City selected by the Calculation Agent (after consulting with Emerson).
- If fewer than two such rates appear on the Reuters Screen US Prime 1
Page, the Calculation Agent will determine the Prime Rate on the basis
of the rates furnished in New York City by three substitute banks or
trust companies organized and doing business under the laws of the
United States, or any State thereof, in each case having total equity
capital of at least $500,000,000 and being subject to supervision or
examination by Federal or State authority, selected by the Calculation
Agent (after consulting with Emerson) to provide such rate or rates.
- If the banks selected are not quoting as mentioned above, the Prime Rate
will remain the Prime Rate in effect on such Interest Determination
Date.
"Reuters Screen US Prime 1 Page" means the display designated as page "US
Prime 1" on the Reuters Monitor Money Rates Service (or such other page as may
replace the US Prime 1 Page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless we otherwise specify in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date relating
to a Treasury Rate Note, the rate for the auction held on such date of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
designated in the applicable Pricing Supplement as that rate appears under the
caption "INVESTMENT RATE" on the display on Bridge Telerate, Inc., or any
successor service, on page 56 or any other page as may replace page 56 on that
service, which we refer to as "Telerate Page 56," or page 57 or any other page
as may replace page 57 on that service, which we refer to as "Telerate Page 57,"
or:
- if the rate described above is not published by 3:00 p.m., New York City
time, on the Calculation Date, the Bond Equivalent Yield of the rate for
the applicable Treasury Bills as published in the H.15
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Daily Update, or other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High," or
- if the rate described in the first bullet point is not published by 3:00
p.m., New York City time, on the related Calculation Date, the Bond
Equivalent Yield of the auction rate of the applicable Treasury Bills,
announced by the United States Department of the Treasury, or
- in the event that the rate referred to in the second bullet point is not
announced by the United States Department of the Treasury, or if the
auction is not held, the Bond Equivalent Yield of the rate on the
applicable Interest Determination Date of Treasury Bills having the
Index Maturity specified in the applicable Pricing Supplement published
in H.15(519) under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market," or
- if the rate referred to in the third bullet point is not so published by
3:00 p.m., New York City time, on the related calculation date, the rate
on the applicable Interest Determination Date of the applicable Treasury
Bills as published in H.15 Daily Update, or other recognized electronic
source used for the purpose of displaying the applicable rate, under the
caption "U.S. Government Securities/Treasury Bills/Secondary Market," or
- if the rate referred to in the fourth bullet point is not so published
by 3:00 p.m., New York City time, on the related Calculation Date, the
rate on the applicable Interest Determination Date calculated by the
Calculation Agent as the Bond Equivalent Yield of the arithmetic mean of
the secondary market bid rates, as of approximately 3:30 p.m., New York
City time, on the applicable Interest Determination Date, of three
primary United States government securities dealers, which may include
the agent or its affiliates, selected by the Calculation Agent, for the
issue of Treasury Bills with a remaining maturity closest to the Index
Maturity specified in the applicable Pricing Supplement, or
- if the dealers selected by the Calculation Agent are not quoting as
mentioned in the fifth bullet point, the Treasury rate will remain the
Treasury Rate then in effect on that Interest Determination Date.
The "Bond Equivalent Yield" means a yield calculated in accordance with the
following formula:
Bond Equivalent Yield = D X N
------------------ X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note, the rate displayed on the Designated CMT Telerate Page (as defined below)
under the caption "...Treasury Constant Maturities...Federal Reserve Board
Release H.15...Mondays Approximately 3:45 p.m.," under the column for the
Designated CMT Maturity Index (as defined below) for:
(i) if the Designated CMT Telerate Page is 7051, the rate on such
Interest Determination Date; and
(ii) if the Designated CMT Telerate Page is 7052, the week or the month,
as applicable, ended immediately preceding the week in which the
related Interest Determination Date occurs.
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The following procedures will be used if the CMT Rate cannot be determined
as described above:
- If such rate is no longer displayed on the relevant page, or if not
displayed by 3:00 p.m., New York City time, on the related Calculation
Date, then the CMT Rate will be such Treasury Constant Maturity rate for
the Designated CMT Maturity Index as published in the relevant H.15
(519).
- If such rate is no longer published, or, if not published by 3:00 p.m.,
New York City time, on the related Calculation Date, then the CMT Rate
will be such Treasury Constant Maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the Designated
CMT Maturity Index) for the Interest Determination Date as may then be
published by either the Board of Governors of the Federal Reserve System
or the United States Department of the Treasury that the Calculation
Agent determines to be comparable to the rate formerly displayed on the
Designated CMT Telerate Page and published in the relevant H.15 (519).
- If such information is not provided by 3:00 p.m., New York City time, on
the related Calculation Date, then the CMT Rate will be calculated by
the Calculation Agent and will be a yield to maturity, based on the
arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 p.m., New York City time on the Interest
Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each,
a "Reference Dealer") in The City of New York (which may include the
Agents or their affiliates) selected by the Calculation Agent (from five
such Reference Dealers selected by the Calculation Agent, after
consultation with the Company, and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the
United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and remaining term to
maturity of not less than such Designated CMT Maturity Index minus one
year. If two Treasury Notes with an original maturity as described above
have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the quotes for the Treasury Note with the shorter
remaining term to maturity will be used.
- If the Calculation Agent cannot obtain three such Treasury Notes
quotations, the CMT Rate will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the
secondary market offer side prices as of approximately 3:30 p.m., New
York City time, on the Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity equal to the number of years
closest to but not less than the Designated CMT Maturity Index and a
remaining term to maturity closest to the Designated CMT Maturity Index
and in an amount of at least $100,000,000.
- If three or four (but not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean
of the offer prices obtained and neither the highest nor the lowest of
such quotes will be eliminated.
- If fewer than three Reference Dealers selected by the Calculation Agent
are quoting as described herein, the CMT Rate will be the CMT Rate in
effect on such Interest Determination Date.
"Designated CMT Telerate Page" means the display on Bridge Telerate, Inc.
(or any successor service) on the page designated in an applicable Pricing
Supplement (or any other page as may replace such page on that service for the
purpose of displaying Treasury Constant Maturities as reported in H.15 (519)),
for the purpose of displaying Treasury Constant Maturities as reported in H.15
(519). If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in an applicable Pricing Supplement with respect to which the CMT Rate
will be calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be two years.
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RENEWABLE NOTES
We may also issue from time to time variable rate Notes that we will
automatically renew, subject to certain limitations, by extending the maturity
date of the Notes. These "Renewable Notes" will bear interest at the interest
rate specified in the Renewable Notes and in the applicable Pricing Supplement.
The Renewable Notes will mature on the "Initial Maturity Date" that we specify
in the applicable Pricing Supplement, which will also be an Interest Payment
Date, unless we extend the maturity of all or any portion of the principal
amount in accordance with the procedures described below, which will apply
unless we specify otherwise in the Pricing Supplement.
On specified "Election Dates," which will be the May 15 and November 15
Interest Payment Dates in each year unless we specify different Interest Payment
Dates in the applicable Pricing Supplement, we will extend the maturity of the
Renewable Notes to the Interest Payment Date occurring twelve months after such
Election Date. However, we will not so extend the maturity date if the holder
thereof elects to terminate the automatic extension of the maturity of the
Renewable Notes or of any portion of the Notes having a principal amount in an
Authorized Denomination. To terminate the automatic extension, a holder must
deliver a notice to such effect to the Paying Agent not less than nor more than
a number of days prior to such Election Date, as specified in the applicable
Pricing Supplement. A holder may exercise this option with respect to less than
the entire principal amount of the Renewable Notes; provided that the remaining
principal amount must be an Authorized Denomination.
Notwithstanding the foregoing, we may not extend the maturity of the
Renewable Notes beyond the "Final Maturity Date," as specified in the applicable
Pricing Supplement. If the holder elects to terminate the automatic extension of
the maturity of any portion of the principal amount of the Renewable Notes and
does not revoke this election, such portion will become due and payable on the
Interest Payment Date falling six months (unless another period is specified in
the applicable Pricing Supplement) after the Election Date prior to which the
holder made such election. To revoke an election to terminate the automatic
extension of maturity as to any portion of the Renewable Notes having a
principal amount of in an Authorized Denomination, a holder must deliver a
notice to such effect to the Paying Agent on any day following the effective
date of the election to terminate the automatic extension of maturity and prior
to the date 15 days before the date on which such portion would otherwise
mature. A holder may make such a revocation for less than the entire principal
amount of the Renewable Notes for which the automatic extension of maturity has
been terminated; provided that the principal amount of the Renewable Notes for
which the automatic extension of maturity has been terminated and for which such
a revocation has not been made is at least in the amount of an Authorized
Denomination. Notwithstanding the foregoing, a holder may not make a revocation
during the period from and including a Record Date to but excluding the
immediately succeeding Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent holder.
We may redeem the Renewable Notes in whole or in part at our option on the
Interest Payment Dates in each year specified in the applicable Pricing
Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement, at a redemption price as stated in the applicable
Pricing Supplement, together with accrued and unpaid interest to the date of
redemption. Notwithstanding anything to the contrary in this Prospectus
Supplement, notice of redemption will be provided by mailing a notice of such
redemption to each holder by first class mail, postage prepaid, at least 180
days prior to the date fixed for redemption.
EXTENDIBLE NOTES
The Pricing Supplement relating to each Note (other than an Amortizing
Note) will indicate whether we have the option to extend the maturity of such
Note for one or more "Extension Periods," which may be one or more whole years,
up to but not beyond the Final Maturity Date set forth in the Pricing
Supplement. If we
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have such option with respect to any such "Extendible Note," the following
procedures will apply, unless modified as set forth in the applicable Pricing
Supplement.
We may exercise such option with respect to an Extendible Note by notifying
the Paying Agent of such exercise at least 45 but not more than 60 days prior to
the maturity date originally in effect with respect to such Note (the "Original
Maturity Date") or, if the maturity date of such Note has already been extended,
prior to the maturity date then in effect (an "Extended Maturity Date"). No
later than 38 days prior to the Original Maturity Date or an Extended Maturity
Date, as the case may be (each, a "Maturity Date"), the Paying Agent will mail
to the holder of such Note a notice (the "Extension Notice") relating to such
Extension Period, by first class mail, postage prepaid, setting forth (a) our
election to extend the maturity of such Note; (b) the new Extended Maturity
Date; (c) the interest rate applicable to the Extension Period (which, in the
case of a Floating Rate Note, will be calculated with reference to a Base Rate
and the Spread and/or Spread Multiplier, if any); and (d) the provisions, if
any, for redemption during the Extension Period, including the date or dates on
which, the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing by the Paying
Agent of an Extension Notice to the holder of an Extendible Note, the maturity
of such Note shall be extended automatically, and, except as modified by the
Extension Notice and as described in the next paragraph, such Note will have the
same terms it had prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 A.M., New York City
time, on the twentieth calendar day prior to the Maturity Date then in effect
for an Extendible Note (or, if such day is not a Business Day, not later than
10:00 A.M., New York City time, on the immediately succeeding Business Day), we
may, at our option, revoke the interest rate provided for in the Extension
Notice and establish a higher interest rate (or, in the case of a Floating Rate
Note, a higher Spread and/or Spread Multiplier, if any) for the Extension Period
by causing the Paying Agent to send notice of such higher interest rate (or, in
the case of a Floating Rate Note, a higher Spread and/or Spread Multiplier, if
any) to the holder of such Note by first class mail, postage prepaid, or by such
other means as shall be agreed between us and the Paying Agent. Such notice
shall be irrevocable. All Extendible Notes with respect to which the Maturity
Date is extended in accordance with an Extension Notice will bear such higher
interest rate (or, in the case of a Floating Rate Note, a higher Spread and/or
Spread Multiplier, if any) for the Extension Period, whether or not tendered for
repayment.
If we elect to extend the maturity of an Extendible Note, the holder of
such Note will have the option to require us to repay such Note on the Maturity
Date then in effect at a price equal to the principal amount thereof plus any
accrued and unpaid interest to such date. In order for an Extendible Note to be
repaid on such Maturity Date, the holder thereof must follow the procedures set
forth below under "--Repayment at the Noteholders' Option; Repurchase" for
optional repayment, except that the period for delivery of such Note or
notification to the Paying Agent shall be at least 25 but not more than 35 days
prior to the Maturity Date then in effect and except that a holder who has
tendered an Extendible Note for repayment pursuant to an Extension Notice may,
by written notice to the Paying Agent, revoke any such tender for repayment
until 3:00 P.M., New York City time, on the twentieth calendar day prior to the
Maturity Date then in effect (or, if such day is not a Business Day, until 3:00
P.M., New York City time, on the immediately succeeding Business Day).
INDEXED NOTES
We may issue the Notes, from time to time, with the principal amount
payable on a date more than nine months from the date of original issue and/or
on which the amount of interest payable on an Interest Payment Date will be
determined by reference to commodity prices, financial or non-financial indices
or other factors, as indicated in the applicable Pricing Supplement. Holders of
these "Indexed Notes" may receive a principal amount at maturity that is greater
than or less than the face amount of such Notes depending upon the fluctuation
of the relative value, rate or price of the specified index. We will describe
specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value, rate
or price of the specified index and the face amount of the Indexed Note and
certain additional United States federal tax considerations in the applicable
Pricing Supplement.
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CURRENCY-LINKED NOTES
We may issue Notes with the principal amount payable on any principal
payment date and/or the amount of interest payable on any Interest Payment date
to be determined by reference to the value of one or more currencies as compared
to the value of one or more other currencies, which we refer to as
"Currency-Linked Notes." The Pricing Supplement will specify the following:
- information as to the one or more currencies to which the principal
amount payable on any principal payment date or the amount of interest
payable on any Interest Payment Date is linked or indexed;
- the currency in which the face amount of the Currency-Linked Note is
denominated, which we refer to as the "Denominated Currency;"
- the currency in which principal on the Currency-Linked Note will be
paid, which we refer to as the "Payment Currency;"
- the interest rate per annum and the dates on which Emerson will make
interest payments;
- specific historic exchange rate information and any currency risks
relating to the specific currencies selected; and
- additional tax considerations, if any.
The Denominated Currency and the Payment Currency may be the same currency
or different currencies. Interest on Currency-Linked Notes will be paid in the
Denominated Currency.
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Book-Entry Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, maturity date and other
terms, if any, will be represented by one or more global securities. All
Floating Rate Book-Entry Notes having the same Issue Date, Initial Interest
Rate, Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity,
Spread and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, maturity date and other terms, if any, also will be
represented by one or more global securities. Each global security representing
Book-Entry Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York, which we refer to as the Depositary, and registered
in the name of a nominee of the Depositary. Book-Entry Notes will not be
exchangeable for Certificated Notes, except under the circumstances described in
the Prospectus under "Book-Entry Debt Securities." Certificated Notes will not
be exchangeable for Book-Entry Notes and will not otherwise be issuable as
Book-Entry Notes.
A further description of the Depositary's procedures with respect to global
securities representing Book-Entry Notes is set forth in the Prospectus under
"Book-Entry Debt Securities." The Depositary has confirmed to us, each Agent and
the Trustee that it intends to follow such procedures.
PAYMENTS ON AMORTIZING NOTES
Amortizing Notes are securities for which payments of principal as well as
interest are made in installments over the life of the security. Interest on
each Amortizing Note will be computed on the basis of a 360-day year of twelve
30 day months. Payments with respect to Amortizing Notes will be applied first
to interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in respect
of each Amortizing Note will be provided to the original purchaser and will be
available, upon request, to subsequent holders.
OPTIONAL REDEMPTIONS BY US; SINKING FUND
The Pricing Supplement either will indicate that we may not redeem the
Notes prior to maturity or will describe the terms on which the Notes will be
redeemable at our option. If the Notes are redeemable, we will mail a notice of
such redemption to each holder by first class mail, postage prepaid, at least 30
days and not more than 60 days prior to the date fixed for redemption to the
respective address of each holder as that
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address appears upon the books maintained by the Paying Agent. Unless otherwise
provided in the applicable Pricing Supplement, the Notes, except for Amortizing
Notes, will not be subject to any sinking fund.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless we otherwise specify in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment, unless such Note was
issued with original issue discount, in which case the Pricing Supplement will
specify the amount payable upon such repayment.
In order for such a Note to be repaid, the Paying Agent must receive at
least 30 days but not more than 60 days prior to the repayment date (i) the Note
with the form entitled "Option to Elect Repayment" on the reverse of the Note
duly completed or (ii) a telegram, telex, facsimile transmission or a letter
from a member of a national securities exchange, or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States setting forth the name of the holder of the Note, the principal amount of
the Note, the principal amount of the Note to be repaid, the certificate number
or a description of the tenor and terms of the Note, a statement that the option
to elect repayment is being exercised thereby and a guarantee that the Note to
be repaid, together with the duly completed form entitled "Option to Elect
Repayment" on the reverse of the Note, will be received by the Paying Agent not
later than the third Business Day after the date of such telegram, telex,
facsimile transmission or letter, provided, however, that such telegram, telex,
facsimile transmission or letter shall only be effective if such Note and such
form duly completed are received by the Paying Agent by such third Business Day.
Except in the case of Renewable Notes or Extendible Notes, and unless we
otherwise specify in the applicable Pricing Supplement, exercise of the
repayment option by the holder of a Note will be irrevocable. The repayment
option may be exercised by the holder of a Note for less than the entire
principal amount of the Note but, in that event, the principal amount of the
Note remaining outstanding after repayment must be an Authorized Denomination.
If a Note is represented by a global security, the Depositary's nominee
will be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different deadlines for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other direct or
indirect participant through which it holds an interest in a Note in order to
ascertain the deadline by which such an instruction must be given in order for
timely notice to be delivered to the Depositary.
PURCHASE OF THE NOTES BY EMERSON IN THE OPEN MARKET OR OTHERWISE
We may purchase Notes at any price in the open market or otherwise. We may
hold, resell or surrender to the relevant Trustee for cancellation any Notes
that we purchase.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS
Bryan Cave LLP, our counsel, has advised us that the following discussion
as to legal matters is its opinion as to the principal United States federal
income tax consequences of ownership and disposition of the Notes to initial
holders purchasing Notes at the "issue price" (as defined below). This
discussion is based on the Internal Revenue Code of 1986, as amended to the date
hereof (the "Code"), administrative pronouncements, judicial decisions and
existing and proposed Treasury Regulations, including regulations concerning the
treatment of debt instruments issued with original issue discount ("OID" and the
"OID Regulations"), changes to any of which subsequent to the date of this
Prospectus Supplement may affect the tax consequences described herein. We
undertake no obligation to update this tax discussion in the future. This
discussion applies only to Notes held as capital assets, within the meaning of
Section 1221 of the Code. It does not discuss all of the tax consequences that
may be relevant to a holder in light of his particular
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circumstances or to holders subject to special rules, such as certain financial
institutions, insurance companies, dealers in securities or foreign currencies,
persons holding Notes as a hedge against, or which are hedged against, currency
risks, holders who are not U.S. persons, or holders whose functional currency
(as defined in Code Section 985) is not the United States dollar. Finally, this
summary does not discuss Discount Notes (as defined below) that qualify as
"applicable high yield discount obligations" under Section 163(i) of the Code.
Holders of Discount Notes that are "applicable high yield discount obligations"
may be subject to special rules. Persons considering the purchase of Notes
should consult their tax advisors with regard to the application of the United
States federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term "Holder" means an owner of a Note that is for
United States federal income tax purposes (i) a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons has the
authority to control all substantial decisions of the trust.
PAYMENTS OF INTEREST
Qualified stated interest (defined below) paid on a Note generally will be
taxable to a Holder as ordinary interest income at the time it accrues or is
received in accordance with the Holder's method of accounting for federal income
tax purposes. Under the OID Regulations, for accrual basis and other electing
taxpayers, all payments of interest on a Note that matures one year or less from
its date of issuance will be included in the stated redemption price at maturity
of the Notes and will be taxed in the manner described below under "Original
Issue Discount." Special rules governing the treatment of interest paid with
respect to Discount Notes, including certain Floating Rate Notes, Foreign
Currency Notes, and Notes providing for payments of principal or interest linked
to commodity prices, equity indices or other factors, are discussed below.
ORIGINAL ISSUE DISCOUNT
In General. A Note that is issued for an amount less than its stated
redemption price at maturity generally will be considered to have been issued at
an original issue discount for federal income tax purposes (a "Discount Note").
The "issue price" of a Note will equal the first price to the public (not
including bond houses, brokers or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers) at which a
substantial amount of the Notes is sold. The "adjusted issue price" of a Note at
the beginning of any accrual period is the issue price of the Note increased by
the amount of accrued OID for each prior accrual period and decreased by the
amount of any payments previously made on the Note that were not qualified
stated interest payments, as defined below. The "stated redemption price at
maturity" of a Note will equal the sum of all payments required under the Note
other than payments of "qualified stated interest." The "qualified stated
interest" is stated interest unconditionally payable as a series of payments in
cash or property (other than debt instruments of the issuer) at least annually
during the entire term of the Note and is equal to the outstanding principal
balance of the Note multiplied by a single fixed rate or certain variable rates
of interest, or certain combinations thereof. If the difference between a Note's
stated redemption price at maturity and its issue price is less than a de
minimis amount, i.e., 1/4 of 1 percent of the stated redemption price at
maturity multiplied by the number of complete years to maturity, then the Note
will not be considered to have OID. Holders of Notes with a de minimis amount of
OID generally will include such OID in income as capital gain on a pro rata
basis as principal payments are made on the Notes. If a Note has certain
interest payment characteristics (e.g., interest holidays, interest payable in
additional Notes or stepped interest rates), then the Note also may be treated
as having OID for federal income tax purposes, even if such Note was issued at
an issue price that does not otherwise result in OID.
A Holder of Notes issued with OID will be required to include any qualified
stated interest payments in income in accordance with the Holder's method of
accounting for federal income tax purposes. Holders of Notes that mature more
than one year from their date of issuance will be required to include OID in
income
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for federal income tax purposes as it accrues, regardless of such Holder's
method of accounting. The amount of OID included in the income of the Holder is
determined using a constant yield method based on a compounding of interest,
which may precede the receipt of cash payments attributable to such income. The
amount of OID that accrues in an accrual period is an amount equal to the
excess, if any, of (a) the product of the Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the end of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period), over
(b) the sum of the qualified stated interest payments, if any, allocable to the
accrual period. Under this method, Holders of Discount Notes generally will be
required to include in income increasingly greater amounts of OID in successive
accrual periods.
Under the OID Regulations, a Note that matures one year or less from its
date of issuance will be treated as a "short-term" Discount Note. Generally, a
cash method Holder of a short-term Discount Note is not required to accrue OID
for United States federal income tax purposes unless the Holder elects to do so.
Holders who make such an election, Holders who report income for federal income
tax purposes on the accrual method, and certain other Holders, including banks
and dealers in securities, are required to include OID in income on such
short-term Discount Notes as it accrues on a straight-line basis, unless an
election is made to accrue OID according to a constant yield method based on
daily compounding. In the case of a Holder who is not required and who does not
elect to include OID in income currently, any gain realized on the sale,
exchange or retirement of the short-term Discount Notes will be ordinary income
to the extent of OID accrued on a straight-line basis (or, if elected, according
to a constant yield method based on daily compounding) through the date of sale,
exchange or retirement. In addition, such Holders will be required to defer
deductions for any interest paid on indebtedness incurred to purchase or carry
short-term Discount Notes in an amount not exceeding the deferred interest
income, until such deferred interest income is recognized.
Notes issued with OID permitting redemption prior to maturity in certain
circumstances may be subject to rules that differ from the general rules
discussed above. Purchasers of such Discount Notes should examine carefully the
applicable Pricing Supplement and should consult their tax advisors with respect
to such a feature since the tax consequences with respect to OID will depend, in
part, on the particular terms and the particular features of the purchased Note.
The OID Regulations contain aggregation rules stating that in certain
circumstances if more than one type of Note is issued as part of the same
issuance of securities to a single Holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price, maturity
date, yield to maturity and stated redemption price at maturity for purposes of
calculating and accruing any OID. Unless otherwise provided in the related
Pricing Supplement, the Company does not expect to treat any of the Notes as
being subject to the aggregation rules for purposes of computing OID.
Floating Rate Notes. Under the OID Regulations, Floating Rate Notes are
subject to special rules whereby a Floating Rate Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Floating Rate Note by more than a
specified de minimis amount; (b) it provides for stated interest, paid or
compounded at least annually, of (i) one or more qualified floating rates, (ii)
a single fixed rate and one or more qualified floating rates, (iii) a single
objective rate, or (iv) a single fixed rate and a single objective rate that is
a qualified inverse floating rate; (c) it provides that a qualified floating
rate or objective rate in effect at any time is set at the current value of that
rate; and (d) except as provided under (a) above, it does not provide for any
contingent principal payments.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Note is denominated. Although a multiple of a qualified floating
rate generally will not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple that
is greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to
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have approximately the same values throughout the term of the Floating Rate Note
(e.g., two or more qualified floating rates with values within 25 basis points
of each other as determined on the Floating Rate Note's issue date) will be
treated as a single qualified floating rate. A rate is not a "qualified floating
rate," however, if the rate is subject to certain restrictions (including caps,
floors, governors, or other similar restrictions on interest) unless such
restrictions are fixed throughout the term of the Floating Rate Note or are not
reasonably expected to significantly affect the yield on the Floating Rate Note.
An "objective rate" is a rate that is not itself a qualified floating rate
but that is determined using a single fixed formula and that is based upon
objective financial or economic information. For example, an objective rate
generally includes a rate that is based on one or more qualified floating rates
or on the yield of actively traded personal property (within the meaning of
Section 1092(d)(1)). An objective rate, however, does not include a rate based
on information that is within the control of the issuer or a related party, or
that is unique to the circumstances of the issuer or a related party. The OID
Regulations also provide that other variable interest rates may be treated as
objective rates if so designated by the Internal Revenue Service ("IRS") in the
future. Despite the foregoing, a variable rate of interest on a Floating Rate
Note will not constitute an objective rate if it is reasonably expected that the
average value of such rate during the first half of the Floating Rate Note's
term will be either significantly less than or significantly greater than the
average value of the rate during the final half of the Floating Rate Note's
term. A "qualified inverse floating rate" is any objective rate where such rate
is equal to a fixed rate minus a qualified floating rate as long as variations
in the rate can reasonably be expected to inversely reflect contemporaneous
variations in the cost of newly borrowed funds.
The OID Regulations also provide that if a Floating Rate Note provides for
stated interest at a fixed rate for an initial period of less than one year
followed by a variable rate that is either a qualified floating rate or an
objective rate and if the variable rate on the Floating Rate Note's issue date
is intended to approximate the fixed rate (e.g., the value of the variable rate
on the issue date does not differ from the value of the fixed rate by more than
25 basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as the
case may be.
If a Floating Rate Note that provides for stated interest as either a
single qualified floating rate or a single objective rate throughout its term
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Floating Rate Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout its term and that
qualifies as a "variable rate debt instrument" under the OID Regulations
generally will not be treated as having been issued with OID, unless the
Floating Rate Note is issued at a "true" discount (i.e., at a price below the
Note's stated principal amount) in excess of a specified de minimis amount. OID
on such a Floating Rate Note arising from a "true" discount is allocated to an
accrual period using the constant yield method described above by assuming that
the variable rate is a fixed rate equal to (i) in the case of a qualified
floating rate or qualified inverse floating rate, the value, as of the issue
date, of the qualified floating rate or qualified inverse floating rate, or (ii)
in the case of an objective rate (other than a qualified inverse floating rate),
a fixed rate that reflects the yield that is reasonably expected for the
Floating Rate Note. Moreover, the amount of qualified stated interest allocable
to an accrual period will be increased (or decreased) if the interest actually
paid during an accrual period exceeds (or is less than) the interest assumed to
be paid during the accrual period as determined under the rules described under
this paragraph.
In general, any other Floating Rate Note that qualifies as a "variable rate
debt instrument" (i.e., one that provides for interest other than qualified
stated interest) will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of OID and
qualified stated interest on the Floating Rate Note. The OID Regulations
generally require that such a Floating Rate Note be converted into an
"equivalent" fixed rate debt instrument by substituting any qualified floating
rate or qualified inverse floating rate provided for under the terms of the
Floating Rate Note with a fixed rate equal to the value of the qualified
floating rate or qualified inverse floating rate, as the case may be, as of the
Floating Rate Note's issue date. Any objective rate (other than a qualified
inverse floating rate) provided for under the terms of the
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<PAGE> 27
Floating Rate Note is converted into a fixed rate that reflects the yield that
is reasonably expected for the Floating Rate Note. In the case of a Floating
Rate Note that qualifies as a "variable rate debt instrument" and provides for
stated interest at a fixed rate in addition to either one or more qualified
floating rates or a qualified inverse floating rate, the fixed rate initially is
converted into a qualified floating rate (or a qualified inverse floating rate,
if the Floating Rate Note provides for a qualified inverse floating rate). Under
such circumstances, the qualified floating rate or qualified inverse floating
rate that replaces the fixed rate must be such that the fair market value of the
Floating Rate Note as of its issue date is approximately the same as the fair
market value of an otherwise identical debt instrument that provides for either
the qualified floating rate or qualified inverse floating rate rather than the
fixed rate. Subsequent to converting the fixed rate into either a qualified
floating rate or a qualified inverse floating rate, the Floating Rate Note then
is converted into an "equivalent" fixed rate debt instrument in the manner
described above.
Once the Floating Rate Note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of OID and qualified
stated interest, if any, are determined for the "equivalent" fixed rate debt
instrument by applying the general OID rules to the "equivalent" fixed rate debt
instrument, and a Holder of the Floating Rate Note will account for such OID and
qualified stated interest as if the Holder held the "equivalent" fixed rate debt
instrument. For each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or OID assumed to have been accrued or paid
with respect to the "equivalent" fixed rate debt instrument in the event that
such amounts differ from the actual amount of interest accrued or paid on the
Floating Rate Note during the accrual period.
If a Floating Rate Note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Floating Rate Note will be
treated as a contingent payment debt instrument. Generally, if a Floating Rate
Note is treated as a contingent payment debt instrument, interest payments
thereon will be treated as "contingent interest" payments. Under the OID
Regulations, any contingent interest on a Floating Rate Note is includible in
income in a taxable year whether or not the amount of any payment is fixed or
determinable in that year. The amount of interest included in income in any
particular accrual period is determined by estimating a projected payment
schedule for the Floating Rate Note and applying daily accrual rules similar to
those for accruing OID on Notes issued with OID (as discussed above). If the
actual amount of contingent interest payments is not equal to the projected
amount, an adjustment to income at the time of the payment must be made to
reflect the difference. We will provide notice in the applicable Pricing
Supplement that a particular Note will be treated as a contingent payment debt
instrument and will describe its proper federal income tax treatment.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement and such Holder's adjusted tax basis in the Note.
For these purposes, the amount realized does not include any amount attributable
to accrued interest on the Note. Amounts attributable to accrued interest are
treated as interest as described under "--Payments of Interest" above, in
accordance with the Holder's method of accounting for federal income tax
purposes as described therein. A Holder's adjusted tax basis in a Note will
equal the cost of the Note to such Holder, increased by the amount of any OID
(including any de minimis OID) previously included in income by the Holder with
respect to such Note and reduced by any amortized premium and any principal
payments received by the Holder and, in the case of a Discount Note, by the
amounts of any other payments that do not constitute qualified stated interest
(as defined above).
Subject to the discussion under "--Foreign Currency Notes" below, gain or
loss realized on the sale, exchange or retirement of a Note generally will be
capital gain or loss except to the extent that gain represents accrued market or
acquisition discount not previously included in the Holder's taxable income (see
"--Original Issue Discount" above) and will be long-term capital gain or loss if
the Note has been held for more than one year at the time of such sale, exchange
or retirement. Prospective purchasers of Notes should consult their tax advisors
regarding the treatment of capital gains (which may be taxed at lower rates than
ordinary income for certain taxpayers who are individuals, trusts or estates)
and capital losses (the deductibility of which is subject to limitations).
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<PAGE> 28
AMORTIZABLE BOND PREMIUM
If a Holder purchases a Note for an amount that is greater than the amount
payable at maturity, such Holder will be considered to have purchased such Note
with "amortizable bond premium" equal in amount to such excess and may elect (in
accordance with applicable Code provisions) to amortize such premium, using a
constant yield method, over the term of the Note (where such Note is not
optionally redeemable prior to its maturity date). If such Note may be
optionally redeemed prior to maturity, the amount of amortizable bond premium is
determined with reference to the amount payable on maturity or, if it results in
a smaller premium attributable to the period of earlier redemption date, with
reference to the amount payable on the earlier redemption date. A Holder who
elects to amortize bond premium must reduce his tax basis in the Note by the
amount of the premium amortized in any year. An election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the taxpayer and may be revoked only with the consent of the IRS.
FOREIGN CURRENCY NOTES
The following discussion relates to Notes that are denominated in a
currency or currency unit other than the U.S. dollar ("Foreign Currency Notes").
A Holder who uses the cash method of accounting for tax purposes and who
receives a payment of qualified stated interest (including any portion of sales
proceeds received with respect to accrued interest) in a foreign currency with
respect to a Foreign Currency Note will be required to include in income the
U.S. dollar value of the foreign currency payment (determined on the date such
payment is received) regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the Holder's tax
basis in the foreign currency. For IRS reporting purposes, the Company generally
will determine such U.S. dollar value as of the date such payment is made. A
cash method Holder who receives such a payment in U.S. dollars pursuant to an
option available under such Note will be required to include the amount of such
payment in income upon receipt.
In the case of accrual method Holders and Holders of Discount Notes, such
Holders will be required to include in income the U.S. dollar value of the
amount of interest income (including OID) that has accrued and otherwise is
required to be taken into account with respect to a Foreign Currency Note during
an accrual period. The U.S. dollar value of such accrued income will be
determined by translating such income at the average rate of exchange for the
accrual period or, with respect to an accrual period that spans two taxable
years, at the average rate for the partial period within the taxable year. Such
Holder will realize ordinary income or loss, if any, with respect to the foreign
currency payment of such accrued interest (including any portion of sales
proceeds received with respect to accrued interest) on the date such income
actually is received. The amount of ordinary income or loss realized will equal
the difference between the U.S. dollar value of the foreign currency payment
when received (or, where a Holder receives U.S. dollars, the amount of such
payment received) and the U.S. dollar value of interest income that has accrued
during the accrual period for which the payment is received (as determined
above). A Holder may elect, regardless of its general accounting method, to
translate interest income (including OID) into U.S. dollars at the spot rate on
the last day of the interest accrual period (or, in the case of an accrual
period spanning two taxable years, the spot rate on the last date of the taxable
year) or, if the date of receipt is within five business days of the last day of
the interest accrual period, the spot rate on the date of receipt. A Holder that
makes such an election must apply it consistently to all debt instruments from
year to year and cannot change the election without the consent of the IRS.
OID and amortizable bond premium on a Foreign Currency Note are to be
determined in the relevant foreign currency.
If a Note was issued with amortizable bond premium and a Holder has made an
election to amortize such premium under Section 171 of the Code, amortizable
bond premium taken into account on a current basis shall reduce interest income
in units of the relevant foreign currency. Exchange gain or loss is realized on
such amortized bond premium with respect to any period by treating the bond
premium amortized in such period as a return of principal. Any amount not taken
into account upon a redemption prior to maturity may
S-28
<PAGE> 29
be deducted as a market loss. Any loss realized on the sale, redemption,
exchange, retirement or other taxable disposition of a Foreign Currency Note
with amortizable bond premium by a Holder who has not elected to amortize such
premium under Section 171 of the Code will be a capital loss to the extent of
such bond premium.
A Holder's tax basis in a Foreign Currency Note will be the U.S. dollar
value of the foreign currency amount paid for such Foreign Currency Note
determined on the date of purchase. In the event of any subsequent adjustment to
such Holder's basis, the amount of the adjustment will be the U.S. dollar value
of the foreign currency amount of the adjustment determined on the date of the
adjustment. A Holder who purchases a Foreign Currency Note with previously owned
foreign currency will recognize ordinary income or loss in an amount equal to
the difference, if any, between such Holder's tax basis in the foreign currency
and the U.S. dollar fair market value of the Foreign Currency Note on date of
purchase.
Gain or loss realized upon the sale, redemption, exchange, retirement or
other taxable disposition of a Foreign Currency Note that is attributable to
fluctuations in currency exchange rates will be ordinary income or loss which
will not be treated as interest income or expense, except to the extent provided
in IRS administrative pronouncements. Gain or loss attributable to fluctuations
in exchange rates will equal the difference between (i) the U.S. dollar value of
the foreign currency principal amount of such Note, and any payment with respect
to accrued interest, determined on the date such payment is received or such
Note is disposed of, and (ii) the U.S. dollar value of the foreign currency
principal amount of such Note, determined on the date such Holder acquired such
Note, and the U.S. dollar value of the accrued interest, determined by
translating such interest at the average exchange rate for the accrual period.
Such foreign currency gain or loss will be realized only to the extent of the
total gain or loss realized by a Holder on the sale, exchange or retirement of
the Foreign Currency Note. The source of such foreign currency gain or loss will
be determined by reference to the residence of the Holder or the "qualified
business unit" of the Holder on whose books the Note is properly reflected. Any
gain or loss realized by such a Holder in excess of such foreign currency gain
or loss generally will be capital gain or loss except, in the case of gain on a
short-term Discount Note, to the extent of any OID not previously included in
the Holder's income, which will be ordinary income.
A Holder will have a tax basis in any foreign currency received on the
sale, redemption, exchange, retirement or other taxable disposition of a Foreign
Currency Note equal to the U.S. dollar value of such foreign currency,
determined at the time of such sale, redemption, exchange, retirement or other
taxable disposition. Any gain or loss realized by a Holder on a sale or other
disposition of foreign currency (including its exchange for U.S. dollars or its
use to purchase Foreign Currency Notes) will be ordinary income or loss.
EXTENSION OF MATURITY
The extension of the maturity of a Note pursuant to its original terms may
be viewed as a taxable exchange if the extension of the final maturity date is
considered a significant modification as defined under Section 1.1001-3 of the
Treasury Regulations. Holders intending to purchase Notes that have such terms
for extension should refer to the discussion relating to taxation in the
applicable Pricing Supplement.
NOTES LINKED TO COMMODITY PRICES, EQUITY INDICES OR OTHER FACTORS
The United States federal income tax consequences to a Holder of the
ownership and disposition of Indexed Notes and Notes that are exchangeable into
the stock or a debt instrument of another issuer may vary depending on the exact
terms of the Notes. Such Notes generally will be treated as contingent payment
debt instruments. See the discussion of contingent payment debt instruments in
"--Floating Rate Notes," above. Holders intending to purchase such Notes should
refer to the discussion relating to taxation in the applicable Pricing
Supplement.
BACKUP WITHHOLDING
Certain noncorporate Holders may be subject to backup withholding at a rate
of 31% on payments of principal, premium and interest (including the accrual of
OID, if any) on, and the proceeds of disposition of,
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<PAGE> 30
a Note. Backup withholding will apply only if (i) the Holder fails to furnish
its Taxpayer Identification Number ("TIN"), which, for an individual, would be
his Social Security number, (ii) the Company is notified by the IRS that the
Holder furnished an incorrect TIN, (iii) the Company is notified by IRS that the
Holder has failed to report properly payments of interest and dividends or (iv)
the Holder fails to certify, under penalty of perjury, that he has furnished a
correct TIN and has not been notified by the IRS that it is subject to backup
withholding for failure to report interest and dividend payments. Holders should
consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption, if
applicable.
The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's United States federal income tax
liability and may entitle such Holder to a refund, provided that the required
information is timely furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution Agreement
between us and the Agents, the Notes may be offered from time to time by us
through Morgan Stanley & Co. Incorporated and/or J.P. Morgan Securities Inc.
(individually, an "Agent" and collectively, the "Agents"), who have agreed to
use their best efforts to solicit offers to purchase Notes. We will have the
sole right to accept offers to purchase Notes and may reject any offer to
purchase Notes in whole or in part. An Agent will have the right to reject any
offer to purchase Notes solicited by it in whole or in part. Payment of the
purchase price of the Notes will be required to be made in immediately available
funds. Unless otherwise provided in the Pricing Supplement, we will pay an
Agent, in connection with sales of Notes resulting from a solicitation made or
an order to purchase received by such Agent, a commission ranging from .125% to
.750% of the principal amount of Notes to be sold; provided, however, that
commissions with respect to Notes maturing more than thirty years from the date
of issue will be negotiated. However, other commission rates may apply if we
otherwise agree with one or more agents.
We may sell, or solicit, or accept offers to purchase Notes directly from,
and sell Notes directly to, investors. In this case, no underwriters or agents
would be involved. No commission will be payable on Notes we sell directly to
investors.
We may accept offers to purchase Notes through other agents and may appoint
additional agents for the purpose of soliciting offers to purchase Notes, in
either case on terms substantially identical to the terms contained in the
Distribution Agreement with the Agents. Any other additional agents will be
named in the applicable Pricing Supplement.
If we sell Notes to an Agent as principal, the Agent will purchase the
Notes for its own account at a discount to be agreed upon by us and the Agent at
the time of sale. Unless otherwise stated in the applicable Pricing Supplement,
the discount will be within the range of .125% to .750% of the principal amount
per Note. The Agents may resell the Notes in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. In addition, the Agents may offer Notes they
have acquired as principal to other dealers. The Agents may sell Notes to any
dealer at a discount and that discount will not be in excess of the discount
received by the Agent from us, unless specified in the applicable Pricing
Supplement. The obligations of the Agents to purchase the Notes as principal
will be subject to certain conditions. After the initial public offering of
Notes to be resold to investors and other purchasers, the public offering price
and any discounts or concessions allowed or re-allowed or paid to dealers may be
changed from time to time.
Agents may engage in transactions that stabilize, maintain or otherwise
affect the price of the Notes. Specifically, the Agents may overallot in
connection with the offering, creating a short position in the Notes for their
own account. In addition, to cover overallotments or to stabilize the price of
the Notes, the Agents may bid for, and purchase, the Notes, in the open market.
Finally, the Agents may reclaim selling concessions allowed to any agent or a
dealer for distributing the Notes in the offering, if the Agents repurchase
previously distributed Notes in transactions to cover syndicate short positions,
in stabilization. Any
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<PAGE> 31
of these activities may stabilize or maintain the market prices of the Notes
above independent market levels. The Agents are not required to engage in any of
these activities and may end any of these activities at any time.
Underwriters, dealers, and agents that participate in the distribution of
the Notes may be underwriters as defined in the Securities Act of 1933, as
amended. Any discounts or commissions that they receive from us and any profit
on their resale of the Notes may be treated as underwriting discounts and
commissions under the Securities Act. We have agreements with the Agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments which the Agents
may be required to make. Agents or their affiliates may engage in other
transactions with, or perform other services for, us or our subsidiaries in the
ordinary course of their businesses.
We do not intend to apply for listing of the Notes on a national securities
exchange. The Agents have advised us that they intend to make a market in the
Notes, as permitted by applicable laws and regulations. However, the Agents are
not obligated to do so and may discontinue making a market at any time. We
cannot assure you as to the liquidity of the trading market for the Notes.
VALIDITY OF THE NOTES
H.M. Smith, Esq., Emerson's Assistant General Counsel, will pass upon the
legality of the Notes for Emerson. Mr. Smith beneficially owns 13,088 shares of
Common Stock of Emerson and has options to purchase 3,500 shares.
S-31
<PAGE> 32
LOGO
EMERSON ELECTRIC CO.
DEBT SECURITIES
------------------------------
This Prospectus describes Debt Securities which we may issue and sell at
various times:
- The Debt Securities may be debentures, notes (including notes commonly
known as medium-term notes) or other unsecured evidences of indebtedness
of Emerson.
- We may issue the Debt Securities in one or several series.
- The total principal amount of the Debt Securities to be issued under
this Prospectus will be not more than $2,000,000,000 (or the equivalent
amount in other currencies).
- The terms of each series of Debt Securities (interest rates, maturity,
redemption provisions and other terms) will be determined at the time of
sale, and will be specified in a Prospectus Supplement which will be
delivered together with this Prospectus at the time of sale.
We may sell Debt Securities to or through underwriters, dealers or agents.
We may also sell Debt Securities directly to investors. More information about
the way we will distribute the Debt Securities is under the heading "Plan of
Distribution." Information about the underwriters or agents who will participate
in any particular sale of Debt Securities will be in the Prospectus Supplement
relating to that series of Debt Securities.
Unless we state otherwise in a Prospectus Supplement, we will not list any
of the Debt Securities on any securities exchange.
------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 23, 1999.
<PAGE> 33
We have not authorized anyone to give any information or to make any
representations concerning the offering of the Debt Securities except that which
is in this Prospectus or in the Prospectus Supplement which is delivered with
this Prospectus, or which is referred to under "Where You Can Find More
Information." If anyone gives or makes any other information or representations,
you should not rely on it. This Prospectus is not an offer to sell or a
solicitation of an offer to buy any securities other than the Debt Securities
which are referred to in the Prospectus Supplement. This Prospectus is not an
offer to sell or a solicitation of an offer to buy such Debt Securities in any
circumstances in which such offer or solicitation is unlawful. You should not
interpret the delivery of this Prospectus, or any sale of Debt Securities, as an
indication that there has been no change in our affairs since the date of this
Prospectus. You should also be aware that information in this Prospectus may
change after this date.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Where You Can Find More Information......................... 2
Information About Emerson................................... 3
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of the Debt Securities.......................... 4
Book-Entry Debt Securities.................................. 8
Plan of Distribution........................................ 10
Experts..................................................... 10
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any of these documents at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
at the SEC's web site at http://www.sec.gov. The SEC allows us to incorporate by
reference the information we file with them, which means that we can disclose
important information to you by referring you to those documents.
The information incorporated by reference is considered to be part of this
Prospectus, and later information that we file with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we sell all of
the Debt Securities. This Prospectus is part of a registration statement we
filed with the SEC.
- Our Annual Report on Form 10-K for the year ended September 30, 1998.
- Our Quarterly Reports on Form 10-Q for the quarters ended December 31,
1998, March 31, 1999 and June 30, 1999.
- Our Current Report on Form 8-K dated October 6, 1998.
You may receive a copy of any of these filings, at no cost, by writing or
telephoning H. M. Smith, our Assistant Secretary and Assistant General Counsel,
at Emerson Electric Co., Station 2431, 8000 West Florissant Avenue, P.O. Box
4100, St. Louis, Missouri 63136, telephone 314-553-2431.
We have filed with the SEC a Registration Statement to register the Debt
Securities under the Securities Act of 1933. This Prospectus omits certain
information contained in the Registration Statement, as permitted by SEC rules.
You may obtain copies of the Registration Statement, including exhibits, as
noted in the first paragraph above.
2
<PAGE> 34
INFORMATION ABOUT EMERSON
Emerson Electric Co. was incorporated in Missouri in 1890. We were
originally engaged in the manufacture and sale of electric motors and fans. We
subsequently expanded our product lines through internal growth and
acquisitions. We are now engaged principally in the design, manufacture and sale
of a broad range of electrical, electromechanical and electronic products and
systems throughout the world. Our principal executive offices are at 8000 West
Florissant Avenue, P. O. Box 4100, St. Louis, Missouri 63136. Our telephone
number is (314) 553-2000.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, we intend to add the net proceeds from the sale of the Debt
Securities to our general funds. We expect to use the proceeds for general
corporate purposes, which may include working capital, capital expenditures, and
the repayment of short-term borrowings. Before we use the proceeds for these
purposes, we may invest them in short-term investments.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of
the Company for the periods indicated. For purposes of computation of the ratio
of earnings to fixed charges, earnings consist of income before income taxes and
cumulative effects of changes in accounting principles plus the amount of fixed
charges. Fixed charges consist of interest expense and that portion of rental
expense deemed to represent interest.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
-------------------------------- ----------------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges............. 11.0x 9.7x 9.8x 11.3x 10.2x 9.2x
==== === === ==== ==== ===
</TABLE>
3
<PAGE> 35
DESCRIPTION OF THE DEBT SECURITIES
This section describes some of the general terms of the Debt Securities.
The Prospectus Supplement describes the particular terms of the Debt Securities
we are offering. The Prospectus Supplement also indicates the extent, if any, to
which such general provisions may not apply to the Debt Securities we are
offering. When we refer to the Prospectus Supplement we are also referring to
any applicable Pricing Supplement.
We will issue the Debt Securities under an Indenture between us and The
Bank of New York, which is serving as Trustee. We are summarizing certain
important provisions of the Indenture and the Debt Securities. We do not restate
the Indenture or the Debt Securities in their entirety. We urge you to read the
Indenture and the Debt Securities because they, and not this description, define
your rights as holders of the Debt Securities. We filed the Indenture as an
exhibit to the Registration Statement that includes this Prospectus. When we use
capitalized terms that we don't define here, those terms have the meanings given
in the Indenture. When we use references to Sections, we mean Sections in the
Indenture.
GENERAL
The Debt Securities will be unsecured obligations of Emerson.
The Indenture does not limit the amount of Debt Securities that we may
issue under the Indenture, nor does it limit other debt that we may issue. We
may issue the Debt Securities at various times in different series, each of
which may have different terms.
The Prospectus Supplement relating to the particular series of Debt
Securities we are offering includes the following information concerning those
Debt Securities:
- The title of the Debt Securities.
- Any limit on the amount of the Debt Securities that we may offer.
- The price at which Emerson is offering the Debt Securities. We will
usually express the price as a percentage of the principal amount.
- The maturity date of the Debt Securities.
- The interest rate per annum on the Debt Securities. We may specify a
fixed rate or a variable rate, or we may offer Debt Securities that do
not bear interest but are sold at a substantial discount from the amount
payable at maturity.
- The date from which interest on the Debt Securities will accrue.
- The dates on which we will pay interest and the regular record dates for
determining who is entitled to receive the interest.
- If applicable, the dates on which or after which, and the prices at
which, we are required to redeem the Debt Securities or have the option
to redeem the Debt Securities.
- If applicable, any limitations on our right to defease our obligations
under the Debt Securities by depositing cash or securities.
- The amount that we would be required to pay if the maturity of the Debt
Securities is accelerated, if that amount is other than the principal
amount.
- Any additional restrictive covenants or other material terms relating to
the Debt Securities.
- Any additional Events of Default that will apply to the Debt Securities.
- If we will make payments on the Debt Securities in any currency other
than United States dollars, the currency or composite currency in which
we will make those payments. If the currency will be determined under an
index, the details concerning such index.
- Any other material terms of the Debt Securities.
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PAYMENTS ON DEBT SECURITIES
We will make payments on the Debt Securities at the office or agency we
will maintain for that purpose (which will be the Corporate Trust Office of the
Trustee in New York, New York unless we indicate otherwise in the Prospectus
Supplement) or at such other places and at the respective times and in the
manner as we designate in the Prospectus Supplement. (Sections 3.1 and 3.2) As
explained under "Book-Entry Debt Securities" below, The Depository Trust Company
or its nominee will be the initial registered Holder unless the Prospectus
Supplement provides otherwise.
FORM, DENOMINATIONS AND TRANSFERS
Unless otherwise indicated in the Prospectus Supplement:
- The Debt Securities will be in fully registered form, without coupons, in
denominations of $1,000 or any multiple thereof.
- We will not charge any fee to register any transfer or exchange of the
Debt Securities, except for taxes or other governmental charges (if any).
(Section 2.8)
ORIGINAL ISSUE DISCOUNT SECURITIES
If Debt Securities are Original Issue Discount Securities, we will offer
and sell them at a substantial discount below their stated principal amount. We
will describe Federal income tax consequences and other special considerations
applicable to any such Original Issue Discount Securities in the Prospectus
Supplement. "Original Issue Discount Security" means any security which provides
that less than the full principal amount will be due if the maturity is
accelerated or if the security is redeemed before its maturity. (Section 5.1)
INDEXED DEBT SECURITIES
We may issue Debt Securities under which the principal amount payable at
maturity or the amount of interest payable will be determined by reference to
currency exchange rates, commodity prices, equity indices or other factors. In
that case, the amount we will pay to the Holders will depend on the value of the
applicable currency, commodity, equity index or other factor at the time our
payment obligation is calculated. We will include information in the Prospectus
Supplement for those Debt Securities about how we will calculate the principal
or interest payable, and will specify the currencies, commodities, equity
indices or other factors to which the principal amount payable at maturity or
interest is linked. We will also provide information about certain additional
tax considerations which would apply to the Holders of those Debt Securities.
CERTAIN RESTRICTIONS
Unless we otherwise specify in the Prospectus Supplement, there will not be
any covenants in the Indenture or the Debt Securities that would protect you
against a highly leveraged or other transaction involving Emerson that may
adversely affect you as a holder of Debt Securities. If there are provisions
that offer such protection, they will be described in the Prospectus Supplement.
Limitations on Liens. Under the Indenture, we and our Restricted
Subsidiaries (defined below) may not issue any debt for money borrowed, or
assume or guarantee any such debt, which is secured by a mortgage on a Principal
Property (defined below) or shares of stock or indebtedness of any Restricted
Subsidiary, unless such mortgage similarly secures your Debt Securities. A
Principal Property is any manufacturing plant or manufacturing facility that we
or any Restricted Subsidiary owns, is located within the continental United
States and, in the opinion of our Board of Directors, is of material importance
to
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our total business that we and our Restricted Subsidiaries conduct, taken as a
whole. The above restriction will not apply to debt that is secured by:
- mortgages on property, shares of stock or indebtedness of any corporation
that exists when it becomes a Restricted Subsidiary;
- mortgages on property that exist when we acquire the property and
mortgages that secure payment of the purchase price of the mortgaged
property;
- mortgages that secure debt which a Restricted Subsidiary owes to us or to
another Restricted Subsidiary;
- mortgages that existed at the date of the Indenture;
- mortgages on property of a company that exist when we acquire the
company;
- mortgages in favor of a government to secure debt that we incur to
finance the purchase price of the property that we mortgage; or
- extensions, renewals or replacement of any of the mortgages described
above.
A Restricted Subsidiary is a direct or indirect subsidiary of Emerson if
substantially all of its property is located in the continental United States
and if it owns any Principal Property (except a subsidiary principally engaged
in leasing or in financing installment receivables or overseas operations).
The Indenture also excepts from this limitation on liens secured debt of up
to 10% of our consolidated net tangible assets. (Section 3.6)
Limitation on Sale and Leaseback Transactions. We may not enter into sale
and leaseback transactions involving any Principal Property, except for leases
of up to three years, unless
- we could issue debt secured by the property involved (under the
limitations on liens described above) in an amount equal to the
Attributable Debt which would be calculated under the Indenture based on
the rental payments to be received, or
- we pay other debt within 90 days in an amount not less than such
Attributable Debt amount. (Section 3.7)
Restrictions on Consolidation, Merger or Sale. We may not consolidate or
merge or sell or convey all or substantially all of our assets unless (a) the
surviving corporation (if it is not Emerson) is a domestic corporation and
assumes our obligations on your Debt Securities and under the Indenture and (b)
immediately after such transactions, there is no default. (Section 9.1)
DEFEASANCE
The Indenture includes provisions allowing defeasance that we may choose to
apply to Debt Securities of any series. If we do so, we would deposit with the
Trustee or another trustee money or U. S. Government Obligations sufficient to
make all payments on those Debt Securities. If we make such a deposit with
respect to your Debt Securities, we may elect either:
- to be discharged from all our obligations on your Debt Securities, except
for our obligations to register transfers and exchanges, to replace
temporary or mutilated, destroyed, lost or stolen Debt Securities, to
maintain an office or agency in respect of the Debt Securities and to
hold moneys for payment in trust; or
- to be released from our restrictions described above relating to liens
and sale/leaseback transactions.
To establish such a trust, we must deliver to the Trustee an opinion of our
counsel that the Holders of the Debt Securities 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
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and at the same times as would have been the case if such defeasance had not
occurred. There may be additional provisions relating to defeasance which we
will describe in the Prospectus Supplement. (Sections 13.1, 13.2, 13.3 and 13.4)
EVENTS OF DEFAULT, NOTICE AND WAIVER
If certain Events of Default by us specified in the Indenture happen and
are continuing, either the Trustee or the Holders of 25% in principal amount of
the outstanding Debt Securities of a series may declare the principal, and
accrued interest, if any, of all securities of such series to be due and
payable. If other specified Events of Default happen and are continuing, either
the Trustee or the Holders of 25% in principal amount of the outstanding Debt
Securities of all series may declare the principal, and accrued interest, if
any, of all the outstanding Debt Securities to be due and payable. (Section 5.1)
An Event of Default in respect of any series of Debt Securities means:
- default for 30 days in payment of any interest installment;
- default in payment of principal, premium, sinking fund installment or
analogous obligation when due;
- unless stayed by litigation, default, for 90 days after notice to us by
the Trustee or by the Holders of 25% in principal amount of the
outstanding Debt Securities of such series, in performance of any other
covenant in the Indenture governing such series; and
- certain events of our bankruptcy, insolvency and reorganization.
(Section 5.1)
Within 90 days after a default in respect of any series of Debt Securities,
the Trustee must give to the Holders of such series notice of all uncured and
unwaived defaults by us known to it. However, except in the case of default in
payment, the Trustee may withhold such notice if it in good faith determines
that such withholding is in the interest of such Holders. The term "default"
means, for this purpose, the happening of any Event of Default, disregarding any
grace period or notice requirement. (Section 5.11)
Before the Trustee is required to exercise rights under the Indenture at
the request of Holders, it is entitled to be indemnified by such Holders,
subject to its duty, during an Event of Default, to act with the required
standard of care. (Sections 6.1 through 6.13)
If any Event of Default has occurred, the Holders of a majority in
principal amount of the outstanding Debt Securities of any series may direct the
time, method and place of conducting proceedings for remedies available to the
Trustee, or exercising any trust or power conferred on the Trustee, in respect
of such series. (Section 5.9)
We must file an annual certificate with the Trustee that it is in
compliance with conditions and covenants under the Indenture. (Section 3.5)
In certain cases, the Holders of a majority in principal amount of the
outstanding Debt Securities of a series, on behalf of the Holders of all Debt
Securities of such series, or the Holders of a majority of all outstanding Debt
Securities voting as a single class, on behalf of the Holders of all outstanding
Debt Securities, may waive any past default or Event of Default, or compliance
with certain provisions of the Indenture, but may not waive among other things
an uncured default in payment. (Sections 5.1 and 5.10)
MODIFICATION OR AMENDMENT OF THE INDENTURE
If we receive the consent of the holders of a majority in principal amount
of the outstanding Debt Securities affected, we may enter into supplemental
indentures with the Trustee that would
- add, change or eliminate provisions in the Indenture; or
- change the rights of the Holders of Debt Securities.
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However, unless we receive the consent of all of the affected Holders, we
may not enter into supplemental indentures that would with respect to the Debt
Securities of such Holders:
- change the maturity;
- reduce the principal amount or any premium;
- reduce the interest rate or extend the time of payment of interest;
- reduce any amount payable on redemption or reduce the amount of the
principal of an Original Issue Discount Security that would be payable on
acceleration;
- impair or affect the right of any Holder to institute suit for payment;
- change any right of the Holder to require repayment; or
- reduce the requirement for two-thirds approval of supplemental
indentures. (Section 8.2)
REGARDING THE TRUSTEE
The Trustee is The Bank of New York. The Trustee is a lender to us under
our revolving credit agreement. From time to time, we may enter into other
banking relationships with the Trustee.
BOOK-ENTRY DEBT SECURITIES
The Prospectus Supplement will indicate whether we are issuing the related
Debt Securities as book-entry securities. Book-entry securities of a series will
be issued in the form of one or more global notes that will be deposited with
The Depository Trust Company, New York, New York, and will evidence all of the
Debt Securities of that series. This means that we will not issue certificates
to each Holder. We will issue one or more global securities to DTC, which will
keep a computerized record of its participants (for example, your broker) whose
clients have purchased the Debt Securities. The participant will then keep a
record of its clients who own the Debt Securities. Unless it is exchanged in
whole or in part for a security evidenced by individual certificates, a global
security may not be transferred, except that DTC, its nominees and their
successors may transfer a global security as a whole to one another. Beneficial
interests in global securities will be shown on, and transfers of beneficial
interests in global notes will be made only through, records maintained by DTC
and its participants. Each person owning a beneficial interest in a global
security must rely on the procedures of DTC and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest to exercise any rights of a Holder of Debt Securities under the
Indenture.
The laws of some jurisdictions require that certain purchasers of
securities such as Debt Securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair your ability to acquire or
transfer beneficial interests in the global security.
We will make payments on each series of book-entry Debt Securities to DTC
or its nominee, as the sole registered owner and holder of the global security.
Neither Emerson, the Trustee nor any of their agents will be responsible or
liable for any aspect of DTC's records relating to or payments made on account
of beneficial ownership interests in a global security or for maintaining,
supervising or reviewing any of DTC's records relating to such beneficial
ownership interests.
DTC has advised us that, when it receives any payment on a global security,
it will immediately, on its book-entry registration and transfer system, credit
the accounts of participants with payments in amounts proportionate to their
beneficial interests in the global security as shown on DTC's records. Payments
by participants to you, as an owner of a beneficial interest in the global
security, will be governed by standing instructions and customary practices (as
is now the case with securities held for customer accounts registered in "street
name") and will be the sole responsibility of such participants.
A global security representing a series will be exchanged for certificated
Debt Securities of that series only if (x) DTC notifies us that it is unwilling
or unable to continue as Depositary or if DTC ceases to be
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a clearing agency registered under the 1934 Act and we don't appoint a successor
within 90 days, (y) we decide that the global security shall be exchangeable or
(z) there is an Event of Default under the Indenture or an event which with the
giving of notice or lapse of time or both would become an Event of Default with
respect to the Debt Securities represented by such global security. If that
occurs, we will issue Debt Securities of that series in certificated form in
exchange for such global security. An owner of a beneficial interest in the
global security then will be entitled to physical delivery of a certificate for
Debt Securities of such series equal in principal amount to such beneficial
interest and to have such Debt Securities registered in its name. We would issue
the certificates for such Debt Securities in denominations of $1,000 or any
larger amount that is an integral multiple thereof, and we would issue them in
registered form only, without coupons.
DTC has advised us that it is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under the 1934 Act. DTC was created to hold the
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants through electronic book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. DTC's participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations, some of whom (and/or their representatives) own
DTC. Access to DTC's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. The
rules applicable to DTC and its participants are on file with the SEC. No fees
or costs of DTC will be charged to you.
Management of DTC is aware that some computer applications, systems and the
like for processing data (Systems) that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed Direct Participants and Indirect Participants and
other members of the financial community (the Industry) that it has developed
and is implementing a program so that its Systems, as the same relate to the
timely payment of distributions (including principal and interest payments) to
security holders, book-entry deliveries, and settlement of trades within DTC
(Depositary Services), continue to function appropriately. This program includes
a technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including, but not limited to, issuers and their agents, as
well as DTC's Direct participants and Indirect Participants, third party vendors
from whom DTC licenses software and hardware, and third party vendors on whom
DTC relies for information or the provision of services, including
telecommunication and electrical utility service providers, among others. DTC
has informed the Industry that it is contacting (and will continue to contact)
third party vendors from whom DTC acquires services to: (i) impress upon them
the importance of these services being Year 2000 compliant; and (ii) determine
the extent of their efforts for Year 2000 remediation (and, as appropriate,
testing) of their services. In addition, DTC is in the process of developing
contingency plans as it deems appropriate.
According to DTC, the information in the preceding two paragraphs with
respect to DTC has been provided to the Industry for informational purposes only
and is not intended to serve as a representation, warranty, or contract
modification of any kind.
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PLAN OF DISTRIBUTION
We may sell Debt Securities to or through one or more underwriters or
dealers, and also may sell Debt Securities directly to other purchasers or
through agents. Such firms may also act as our agents in the sale of Debt
Securities. Only underwriters named in the Prospectus Supplement will be
considered as underwriters of the Debt Securities offered by such Supplement.
We may distribute Debt Securities at different times in one or more
transactions. We may sell Debt Securities at fixed prices, which may change, 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 us or from purchasers of Debt Securities in the form of
discounts, concessions or commissions. Underwriters, dealers and agents that
participate in the distribution of Debt Securities may be deemed to be
underwriters. Discounts or commissions they receive and any profit on their
resale of Debt Securities may be considered underwriting discounts and
commissions under the Securities Act of 1933. We will identify any such
underwriter, dealer or agent, and we will describe any such compensation, in the
Prospectus Supplement.
We may agree to indemnify underwriters, dealers and agents who participate
in the distribution of Debt Securities against certain liabilities, including
liabilities under the 1933 Act. We may also agree to contribute to payments
which the underwriters, dealers or agents may be required to make in respect of
such liabilities.
We may authorize dealers or other persons who act as our agents to solicit
offers by certain institutions to purchase Debt Securities from us under
contracts which provide for payment and delivery on a future date. We may enter
into such contracts with commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others. If we enter into such agreements concerning any series of Debt
Securities, we will indicate that in the Prospectus Supplement.
In connection with an offering of Debt Securities, underwriters may engage
in transactions that stabilize, maintain or otherwise affect the price of the
Debt Securities. Specifically, underwriters may over-allot in connection with
the offering, creating a syndicate short position in the Debt Securities for
their own account. In addition, underwriters may bid for, and purchase, Debt
Securities in the open market to cover short positions or to stabilize the price
of the Debt Securities. Finally, underwriters may reclaim selling concessions
allowed for distributing the Debt Securities in the offering if the underwriters
repurchase previously distributed Debt Securities in transactions to cover short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Debt Securities above
independent market levels. Underwriters are not required to engage in any of
these activities and may end any of these activities at any time.
EXPERTS
The consolidated financial statements of Emerson Electric Co. and
subsidiaries as of September 30, 1998 and 1997, and for each of the years in the
three-year period ended September 30, 1998 incorporated by reference herein,
have been incorporated herein in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein and
upon the authority of said firm as experts in accounting and auditing.
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