<PAGE> 1
Information contained in this preliminary prospectus supplement is subject
to completion or amendment. A registration statement relating to these
securities has been declared effective by the Securities and Exchange
Commission pursuant to Rule 415 under the Securities Act of 1933. A final
prospectus supplement and accompanying prospectus will be delivered to
purchasers of these securities. This preliminary prospectus supplement and
the accompanying prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
Filed Pursuant to Rule 424(b)(5)
Registration No. 33-51265
SUBJECT TO COMPLETION, DATED JANUARY 19, 1994
- --------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
(To Prospectus dated January 10, 1994)
- --------------------------------------------------------------------------------
4,000,000 Shares
LOGO
Common Stock
(without par value)
------------------
Of the 4,000,000 shares of Common Stock, without par value (the "Common Stock"),
of Federal-Mogul Corporation ("Federal-Mogul" or the "Company") being offered
hereby, 3,400,000 shares are being offered in the United States and
Canada by the U.S. Underwriters (the "U.S. Offering") and 600,000
shares are being concurrently offered outside the United States and
Canada by the Managers (the "International Offering" and,
together with the U.S. Offering, the "Offerings"). The price
to the public and the underwriting discount per share are
identical for the Offerings. See "Underwriting."
The Common Stock of Federal-Mogul is listed on the New York Stock Exchange under
the symbol "FMO." On January 18, 1994, the reported last sale price of
the Common Stock on the New York Stock Exchange Composite
Transactions Tape was $33 3/4 per share.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Price to Underwriting Proceeds to
Public Discount Company(1)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Per Share
- -------------------------------------------------------------------------------------------------------------------
Total(2)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deduction of expenses payable by the Company estimated at $500,000.
(2) The Company has granted the U.S. Underwriters and the Managers an option,
exercisable by the representatives of the U.S. Underwriters for 30 days
from the date of the public offering of the shares of Common Stock offered
hereby, to purchase a maximum of 600,000 additional shares of Common Stock,
in the aggregate, solely to cover overallotments, if any. If the option is
exercised in full, the total Price to Public will be $ ,
Underwriting Discount will be $ and Proceeds to Company will be
$ . See "Underwriting."
------------------
The shares of Common Stock are offered by the several U.S. Underwriters
when, as and if issued by the Company, delivered to and accepted by the U.S.
Underwriters and subject to their right to reject orders in whole or in part. It
is expected that the shares of Common Stock will be ready for delivery on or
about February , 1994.
CS First Boston Donaldson, Lufkin & Jenrette
Securities Corporation
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is February , 1994.
<PAGE> 2
IN CONNECTION WITH THE OFFERINGS, CS FIRST BOSTON CORPORATION ON BEHALF OF
THE U.S. UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
This summary is qualified in its entirety by the more detailed information
included elsewhere in this Prospectus Supplement and the accompanying
Prospectus. Unless otherwise indicated, the information contained in this
Prospectus Supplement assumes that the U.S. Underwriters' and Managers'
overallotment option is not exercised.
THE COMPANY
Federal-Mogul Corporation (which together with its consolidated
subsidiaries is referred to herein as "Federal-Mogul" or the "Company") is a
global distributor and manufacturer of a broad range of precision parts,
primarily vehicular components for automobiles, light trucks, heavy duty trucks
and farm and construction vehicles, and industrial products. Through the
Company's worldwide distribution network, Federal-Mogul sells replacement parts
in the vehicular aftermarket ("Aftermarket" products) through independent
warehouse distributors, local parts suppliers and retail parts stores. The
Company also sells parts to original equipment manufacturers ("OE" products),
principally the major automotive manufacturers in the United States and Europe.
Federal-Mogul intends to continue to emphasize Aftermarket product sales,
as the Company believes that Aftermarket sales are less cyclical and offer
greater potential for long-term growth and higher gross margins than OE sales.
In line with this strategy, the Company has recently acquired two distributors
of automotive Aftermarket products. The Company acquired the automotive
aftermarket business ("AAB") of TRW Inc. in October 1992 for approximately $220
million (the "AAB Acquisition"), and Sealed Power Replacement ("SPR"), the
automotive aftermarket business of SPX Corporation, in October 1993 for
approximately $140 million (the "SPR Acquisition," and together with the AAB
Acquisition, the "Acquisitions"). The Acquisitions have enabled the Company to
increase its presence as a distributor of Aftermarket products in North America
and Europe, broaden its customer base, increase its product offerings and
realize substantial cost savings. Primarily as a result of the Acquisitions,
Federal-Mogul has increased its Aftermarket net sales as a percentage of net
sales from 53% in 1991 to 66% for the first nine months of 1993 on a pro forma
basis as if SPR had been acquired on January 1, 1993.
In connection with the Acquisitions, the Company has sought to realize
significant cost savings through the consolidation of the acquired businesses
and Federal-Mogul's existing Aftermarket operations. During 1993, Federal-Mogul
completed the consolidation of AAB. The Company believes that it will meet or
exceed its projected total annual savings in connection with the AAB Acquisition
of approximately $21 million during and after 1995, with approximately $15
million of these savings having been realized during 1993 and approximately $20
million to be realized during 1994. The Company expects to achieve significant
cost savings through a similar consolidation of SPR. Although there can be no
assurance that the Company will be able to realize the projected savings, the
Company believes that total annual savings in connection with the SPR
Acquisition of approximately $22 million could be realized during and after
1995, with approximately $12.5 million of the savings to be realized during
1994. See "The Company -- Recent Acquisitions."
THE OFFERINGS
<TABLE>
<S> <C>
Securities Offered............................. Common Stock, without par value (the
"Common Stock").
Common Stock Outstanding as of January 17,
1994......................................... 29,581,694 shares
Common Stock Offered by the Company:
U.S. Offering................................ 3,400,000 shares
International Offering....................... 600,000 shares
Total..................................... 4,000,000 shares
Common Stock to be Outstanding after the
Offerings.................................... 33,581,694 shares
New York Stock Exchange Symbol................. FMO
Use of Proceeds from the Offerings............. Repayment of bank indebtedness, including
bank indebtedness incurred in connection
with the SPR Acquisition. See "Use of
Proceeds."
</TABLE>
S-3
<PAGE> 4
THE COMPANY
OVERVIEW
The Company is a global distributor and manufacturer of a broad range of
precision parts, primarily vehicular components for automobiles, light trucks,
heavy duty trucks and farm and construction vehicles, and industrial products.
Through the Company's worldwide distribution network, Federal-Mogul sells
Aftermarket products through independent warehouse distributors, local parts
suppliers and retail parts stores. The Company also sells OE products to
original equipment manufacturers, principally the major automotive manufacturers
in the United States and Europe.
For the nine months ended September 30, 1993, net sales of Aftermarket and
OE products represented 63% and 37%, respectively, of net sales. Net sales of
Aftermarket and OE products represented 66% and 34%, respectively, of combined
net sales for this period on a pro forma basis as if the SPR Acquisition had
occurred on January 1, 1993. Of the Company's combined net sales of Aftermarket
products for the nine months ended September 30, 1993, on a pro forma basis as
if the SPR Acquisition had occurred on January 1, 1993, 37% represented products
manufactured by the Company, with the balance being purchased from third party
producers. All of the Company's OE sales consist of products manufactured by the
Company.
Vehicular components sold by Federal-Mogul include ball and roller
bearings, engine and transmission products, sealing devices, fuel pumps and
related systems, suspension and steering parts, and lighting and electrical
components. Industrial products sold by the Company include ball and roller
bearings and specialized heavy duty fluid-film bearings.
Federal-Mogul also sells heavy wall bearings and precision forged powdered
metal parts, which account for the balance of the Company's sales.
The following table sets forth the Company's net sales by market segment
and geographic region as a percentage of total net sales.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1993 YEAR ENDED DECEMBER 31,
---------------------- ------------------------------------------------------
1992 1992 1991 1990
------------ ----------- ----------- -----------
Pro Forma(1) Actual Pro Forma(2)
<S> <C> <C> <C> <C> <C> <C>
Aftermarket
United States and Canada..... 48% 43% 44% 36% 34% 40%
International................ 18 20 19 19 19 16
Original Equipment
United States and Canada..... 20 23 20 24 23 28
International................ 8 8 10 13 13 7
Other(3)
United States and Canada..... 3 3 4 4 6 7
International................ 3 3 3 4 5 2
--- ------ --- --- --- ---
Total........................ 100% 100% 100% 100% 100% 100%
--- ------ --- --- --- ---
--- ------ --- --- --- ---
</TABLE>
- -------------------------
(1) Pro forma for the SPR Acquisition in October 1993 as if such acquisition
had occurred on January 1, 1993.
(2) Pro forma for the AAB Acquisition in October 1992 as if such acquisition
had occurred on January 1, 1992.
(3) Sales of these products -- air bearing spindles, heavy wall bearings, and
precision forged powdered metal parts -- are accounted for by the Company
primarily as OE sales for financial reporting purposes. The Company's air
bearing spindles operation was sold in May 1993.
S-4
<PAGE> 5
STRATEGY
Federal-Mogul intends to continue emphasizing Aftermarket product sales, as
it believes that Aftermarket sales are less cyclical and offer greater potential
for long-term growth and higher gross margins than OE sales. The Company plans
to continue to strengthen its Aftermarket sales by providing to customers
value-added services such as the Company's Reduced Inventory Management System,
an automatic inventory replenishment system that links customers and
Federal-Mogul's Aftermarket operations electronically.
In its Aftermarket operations, Federal-Mogul intends to continue to
capitalize on its expertise in logistics and distribution through its worldwide
network of distribution facilities. The Company also intends to continue to
specialize in product lines that are broad, nonstandard and
application-specific, particularly parts that are nondiscretionary in that, when
they fail, they must be replaced in order to operate the vehicle in a safe and
efficient manner.
The Company believes that its position as a supplier to original equipment
manufacturers strengthens its Aftermarket operations. As an OE supplier, the
Company maintains a strong technological base and superior quality and has
opportunities to innovate and maintain state of the art products.
The Company plans to continue to implement process changes in its
manufacturing operations and to work with its outside suppliers to support its
global, market-driven strategy of just-in-time delivery of its products to
Aftermarket and OE customers. This enables the Company to reduce inventory and
manufacturing lead time, improve company-wide productivity and quality and
achieve scrap and rework reductions. To increase productivity, the Company has
implemented an inventory management system that allows the Company's
manufacturing plants to replenish products in inventory as they are sold rather
than producing to volume forecasts.
Federal-Mogul intends to continue to strengthen its presence in
international markets in both Aftermarket products and OE sales. Outside the
United States and Canada, the Company has 16 manufacturing operations in 8
countries, 33 distribution facilities in 21 countries and 20 retail stores in 3
countries. The Company believes that the addition of retail stores offering
Aftermarket products in various international markets represents a significant
opportunity for future growth and provides it with the opportunity to realize
higher operating margins by selling products directly to end users.
Federal-Mogul's 20 retail store locations have been added since 1990 through new
store openings and acquisitions in Australia, Chile and Venezuela. The Company
intends to continue to add new stores in these and other international markets
through both new store openings and acquisitions.
Federal-Mogul is implementing revised purchasing practices in its
Aftermarket distribution operations in order to reduce the cost of products
purchased from third party suppliers. As a result of the Acquisitions, the
Company expects annual Aftermarket purchases from third party suppliers to more
than triple from approximately $150 million prior to the Acquisitions. These
increased levels of purchasing have provided the Company with opportunities to
renegotiate supply agreements with its outside suppliers. The Company expects to
achieve substantial cost savings in 1994 and beyond as a result of these revised
purchasing practices and its increased levels of purchasing.
RECENT ACQUISITIONS
In line with the Company's Aftermarket products strategy, the Company has
recently acquired two distributors of automotive Aftermarket products. The
Company acquired AAB in October 1992 for approximately $220 million, and SPR in
October 1993 for approximately $140 million. Primarily as a result of the
Acquisitions, Federal-Mogul has increased its Aftermarket combined net sales as
a percentage of net sales from 53% in 1991 to 66% for the first nine months of
1993 on a pro forma basis as if SPR had been acquired on January 1, 1993. The
Acquisitions have enabled the Company to increase its presence as a distributor
of Aftermarket products in North America and Europe, broaden its customer base,
increase its product offerings and realize substantial cost savings.
S-5
<PAGE> 6
SPR Acquisition. SPR, which had 1992 net sales of $163 million, is a
distributor of engine and chassis components to the North American aftermarket.
The Company believes that the primary strategic benefits of the SPR Acquisition
include:
- Increased Customer Base -- The addition of SPR's customers has
increased the Company's customer base. For example, SPR is a major
distributor of components to machine shops, a distribution channel in which
Federal-Mogul previously did not have a significant presence.
- Expanded Parts Coverage -- SPR is a major distributor of replacement
parts for heavy truck, agricultural and construction equipment vehicles.
Prior to the SPR Acquisition, Federal-Mogul had not been a major
distributor of parts for these vehicles, the market for which currently
represents a significant portion of worldwide replacement parts sales. As a
result of the SPR Acquisition, the Company is able to offer, for the first
time, a complete set of agricultural and heavy truck engine parts in the
form of an engine kit.
- Consolidation of Distribution Systems -- The Company expects to
achieve significant cost savings through the consolidation of the
distribution systems of the two companies. Federal-Mogul and SPR have
duplicate warehouse locations in 34 of the 36 cities served by the two
companies in the United States and Canada. The Company intends to combine
all of the overlapping facilities in these cities by early 1995.
The Company believes that a key aspect of the SPR Acquisition is the
opportunity to realize significant cost savings. Although there can be no
assurance that Federal-Mogul will realize the projected savings, the Company
believes that total annual savings of approximately $22 million could be
realized during and after 1995, with approximately $12.5 million of these
savings being realized during 1994. Estimated savings include consolidating the
marketing and administrative facilities in North America and obtaining certain
sourcing savings ($8.6 million per year); closing overlapping warehouses and
consolidating personnel and freight ($8.6 million per year); and eliminating
redundancies in the sales staff and consolidating the management information
systems of the two companies ($4.8 million per year).
In connection with realizing these cost savings, the Company anticipates
incurring substantial expenses to address personnel terminations, relocations,
lease buyouts and asset disposals. The Company estimates that these one-time
costs will total approximately $26 million, approximately $25 million of which
were capitalized at the time of the SPR Acquisition.
AAB Acquisition. In October 1992, the Company acquired from TRW Inc. the
assets of AAB for approximately $220 million. AAB distributed a full line of
suspension and steering parts and engine components to the vehicular Aftermarket
in North, Central and South America as well as in Europe, Africa and the Middle
East. Since the date of the AAB Acquisition, Federal-Mogul has completed the
consolidation of the operations of the businesses. The Company believes that it
will meet or exceed its projected total annual savings of approximately $21
million during and after 1995, with approximately $15 million of these savings
having been realized during 1993 and approximately $20 million to be realized
during 1994.
AFTERMARKET
The Company supplies a wide variety of Aftermarket products, including
engine and transmission products (engine bearings, pistons, piston rings,
valves, camshafts, valve lifters, valvetrain parts, timing components and engine
kits, bushings and washers), ball and roller bearings, sealing devices (gaskets
and oil seals and other high performance specialty seals), lighting and
electrical components, and automotive fuel pumps, water pumps, oil pumps and
related systems. The Company also sells additional steering and suspension parts
which include such items as tie rod ends, ball joints, idler and pitman arms,
center links, constant velocity parts, rack and pinion assemblies, coil springs,
U-joints, engine mounts and alignment products.
Federal-Mogul sells Aftermarket products under its own brand names and
under brand names for which it has long term licenses such as TRW and Sealed
Power and also packages its products under third-party private brand labels such
as NAPA and CARQUEST.
S-6
<PAGE> 7
The Company's Aftermarket business supplies approximately 75,000 part
numbers to almost 10,000 customers, including more than 2,000 customers in North
America and Europe added as a result of the Acquisitions. Federal-Mogul's
customers are located in more than 90 countries around the world. For the nine
months ended September 30, 1993, domestic Aftermarket net sales represented 68%
of total Aftermarket net sales, with net sales outside of the United States and
Canada representing 32% of such sales. On a pro forma basis as if the SPR
Acquisition had occurred on January 1, 1993, Aftermarket combined net sales in
the United States and Canada represented 73% of total Aftermarket combined net
sales for the nine months ended September 30, 1993.
Domestic customers include industrial bearing distributors, distributors of
heavy duty vehicular parts, machine shops, retail parts stores and independent
warehouse distributors who redistribute products to local parts suppliers called
jobbers. Internationally, the Company sells Aftermarket products to jobbers,
local retail parts stores and independent warehouse distributors. Aftermarket
sales to jobbers and local retail parts stores comprise a larger proportion of
total international Aftermarket sales than they do of total domestic Aftermarket
sales. The Company believes that customer demand for Aftermarket products is
relatively stable and noncyclical.
Federal-Mogul's distribution centers in Jacksonville, Alabama; LaGrange,
Indiana; Olive Branch, Tennessee; and Maysville, Kentucky (the "Distribution
Centers") serve as the hub of the Company's domestic Aftermarket distribution
network. Products are shipped from the Distribution Centers to North American
service centers. For international sales, products are shipped through a
facility in Port Everglades, Florida to seven international regional
distribution centers and six Latin American branches.
The Distribution Centers apply sophisticated computer technology which
allows the Company to better manage its inventory and respond to customer needs.
Techniques such as the Company's Reduced Inventory Management System, which was
implemented in the fall of 1990, allow customers to reduce their inventories by
providing them with the ability to order smaller quantities of products more
frequently. This allows customers to increase their return on inventory
investment.
ORIGINAL EQUIPMENT
Federal-Mogul supplies to OE customers a wide variety of parts under a
number of well-established brand names, including Federal-Mogul(R) and Glyco(R)
engine bearings, National(R) and Mather(R) oil seals, BCA(R) ball bearings,
Carter(R) fuel systems and Signal-Stat(R) lighting and Switches(R) electrical
components. The Company manufactures all of the OE products it sells.
Customers consist primarily of automotive, heavy duty vehicle and farm and
industrial equipment manufacturers. For the nine months ended September 30,
1993, approximately 16% of the Company's net sales were to the three major
automobile manufacturers in the United States, with GM, Ford and Chrysler
accounting for approximately 9%, 5% and 2% of the Company's net sales,
respectively. The Company sells OE products to most of the major automotive
manufacturers headquartered outside the United States. The Glyco facility in
Wiesbaden, Germany sells OE products to Volkswagen, Daimler-Benz and BMW. The
Company also sells Federal-Mogul engine bearings to Renault and Peugeot in
France and to Fiat in Italy. In addition, the Company sells a small amount of OE
products to certain Japanese manufacturers, including Nissan-Mexico and certain
Toyota operations in the United States. Recently, the Company began exporting
oil seals to Komatsu in Japan for heavy duty diesel engines.
The Company works closely with its customers, including the three major
U.S. automobile manufacturers, to tailor its products to developing market
needs. For example, the Company has served as the primary design source for
engine bearings for Ford since 1982. As part of this relationship, engineers
from the Company work closely with engineers at Ford to produce engine bearings
specifically designed to meet the needs of new Ford products.
The Company believes that its position as a supplier to original equipment
manufacturers strengthens its Aftermarket operations. As an OE supplier, the
Company continues to have opportunities to innovate and maintain state of the
art products.
S-7
<PAGE> 8
MANUFACTURED PRODUCTS
The Company manufactures the following vehicular and industrial components:
Engine and Transmission Products -- The Company is the world's largest
manufacturer of engine bearings. Other engine and transmission products
include pistons, bushings and washers. Bimetallic engine bearings, bushings
and washers are used in automotive, truck, industrial, construction and
farm equipment applications. These products are marketed under the brand
names Federal-Mogul(R), Glyco(R), TRW(R), Speed Pro(R) and Sterling(R).
Ball Bearings -- The Company manufactures ball bearings for use
chiefly in farm and construction equipment, trucks, automobiles and some
industrial machinery under the brand name BCA(R). The Company also produces
clutch and other specialty type precision ball bearings.
Sealing Devices -- The Company produces a line of sealing products
consisting of oil seals and other specialty seals, including oil bath seals
and high performance sealing products. Sealing products are used in the
automotive, truck, farm and off-highway construction equipment markets.
Sealing devices are also supplied for aircraft, marine, stationary
machinery and fuel power equipment. These products are marketed under the
brand names Bruss, Mather(R) and National(R).
Lighting and Electrical Products -- The Company manufactures lighting
and safety components for heavy duty truck applications, and electrical
switches, controls and assemblies for vehicular applications. These
products are marketed under the brand names Switches(R) and Signal Stat(R).
The Company focuses on the heavy duty truck market segment where strict
government regulations require that all lighting and electrical systems be
operational at all times.
Fuel Systems -- The Company manufactures full lines of automotive fuel
pumps and related systems under the Carter(R) brand name.
OTHER BUSINESSES
The Company also manufactures:
Heavy Wall Bearings -- Braunschweiger Huttenwerk GmbH ("BHW"), an
indirect, wholly-owned, German subsidiary of the Company, manufactures
heavy wall bearings used primarily for large diesel engines in ships and
stationary power plants. The Company also manufactures heavy wall bearings
at facilities in Indiana and Brazil.
Precision Forged Powdered Metal Parts -- The Company manufactures
intricate component parts from compressed metal powders. These parts are
best suited for applications requiring high fatigue strength, such as
clutch races for automatic transmissions, engine connecting rods, and
engine camshaft lobes.
S-8
<PAGE> 9
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are estimated to be
approximately $129 million. The Company will use the net proceeds to repay bank
indebtedness, including a portion of the bank indebtedness incurred in
connection with the SPR Acquisition. All such bank indebtedness was incurred
under the Company's Second Amended and Restated Revolving Credit Agreement,
dated October 19, 1993 (the "Revolving Credit Agreement"). On January 19, 1994,
the Company had $245 million outstanding under the Revolving Credit Agreement,
including $145 million which was incurred in connection with the SPR
Acquisition. Of the amount outstanding under the Revolving Credit Agreement, $90
million matures on February 22, 1994 and currently bears interest at a rate of
LIBOR plus 1.0%. Such rate was 4.13% at January 19, 1994. The remaining $155
million outstanding matures on April 26, 1994 and currently bears interest at a
rate of LIBOR plus 1.0%. Such rate was 4.375% at January 19, 1994.
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
September 30, 1993, (ii) on a pro forma basis to reflect the SPR Acquisition as
if it had occurred on September 30, 1993, and (iii) as further adjusted to give
effect to the Offerings and the application of the net proceeds to repay a
portion of the indebtedness incurred under the Revolving Credit Agreement.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Short-term debt(1)............................................. $ 28.9 $ 28.9 $ 28.9
------ ------- -------
------ ------- -------
Long-term debt:
Bank debt.................................................... $ 92.2 $ 237.2 $ 108.2
Notes payable due 2000....................................... 75.0 75.0 75.0
ESOP Obligation.............................................. 39.5 39.5 39.5
Other........................................................ 24.2 24.2 24.2
------ ------- -------
Total long-term debt.................................... 230.9 375.9 246.9
Minority interests in international subsidiaries............... 5.0 5.0 5.0
Shareholders' equity:
Series D convertible exchangeable preferred stock............ 76.6 76.6 76.6
Series C ESOP convertible preferred stock.................... 60.9 60.9 60.9
Unearned ESOP compensation and other......................... (49.3) (49.3) (49.3)
Common stock................................................. 147.0 147.0 167.0
Additional paid-in capital................................... 114.7 114.7 223.8
Retained earnings............................................ 41.7 41.7 41.7
Currency translation......................................... (18.9) (18.9) (18.9)
------ ------- -------
Total shareholders' equity.............................. 372.7 372.7 501.8
------ ------- -------
Total capitalization.................................... $608.6 $ 753.6 $ 753.7
------ ------- -------
------ ------- -------
</TABLE>
- -------------------------
(1) Short-term debt includes current maturities of long-term debt.
S-9
<PAGE> 10
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed on the New York and Pacific Stock Exchanges
under the symbol "FMO."
The following table sets forth the reported high and low last sale prices
per share for the Common Stock reported on the New York Stock Exchange Composite
Transactions Tape and the cash dividends declared on the Common Stock for such
periods.
<TABLE>
<CAPTION>
PRICE RANGE DIVIDENDS
------------ PER
HIGH LOW COMMON SHARE
---- ---- ------------
<S> <C> <C> <C>
1992
First Quarter.................................................. $18 1/8 $14 7/8 $ 0.12
Second Quarter................................................. 20 15 5/8 0.12
Third Quarter.................................................. 18 14 1/2 0.12
Fourth Quarter................................................. 18 15 1/4 0.12
1993
First Quarter.................................................. $20 1/2 $16 1/4 $ 0.12
Second Quarter................................................. 22 17 5/8 0.12
Third Quarter.................................................. 26 1/4 19 7/8 0.12
Fourth Quarter................................................. 29 7/8 23 1/4 0.12
1994
First Quarter (through January 18, 1994)....................... $33 3/4 $28 3/8 N/A
------- -------
</TABLE>
On January 18, 1994, the reported last sale price of the Common Stock on
the New York Stock Exchange Composite Transactions Tape was $33 3/4 per share.
Dividends on the Common Stock and the preferred stock of the Company are
payable at the discretion of the Company's Board of Directors out of funds
legally available therefor. Future payments of dividends (and the amounts
thereof) will depend on the Company's financial condition, results of operations
and capital factors as the Board of Directors of the Company deems relevant.
The Company's guaranty of the Senior ESOP Note due December 31, 2000 (the
guaranty is referred to herein as the "ESOP Note" or the "ESOP Obligation")
restricts the ability of the Company to pay dividends. Pursuant to the terms of
the ESOP Note, the Company may not pay dividends on the Common Stock or
preferred stock other than the Series C ESOP Convertible Preferred Stock unless
the aggregate amount of Distributions (dividends with respect to the Company's
capital stock as defined in the ESOP Note) and Restricted Investments (as
defined in the ESOP Note) would not exceed the sum of $120 million plus 100% of
Consolidated Net Income (as defined in the ESOP Note) determined on a cumulative
basis commencing on January 1, 1989. As of September 30, 1993, the Company has
made Restricted Investments and otherwise made Distributions in excess of
Consolidated Net Income in an aggregate amount of approximately $56 million. In
addition, the Company is restricted from paying dividends if the Company cannot
meet certain debt incurrence tests as set forth in the ESOP Note.
Currently, the Company's Revolving Credit Agreement restricts the payment
of dividends on the Common Stock to the greater of $0.135 per share per fiscal
quarter or 80% of the Company's average net earnings available for shares of
Common Stock, as defined in the Revolving Credit Agreement, for its four most
recent fiscal quarters.
S-10
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following selected historical financial information for the Company and
its consolidated subsidiaries should be read in conjunction with financial
information in the Consolidated Financial Statements of Federal-Mogul
Corporation incorporated by reference herein. This data does not include data
for SPR or combined pro forma data for the Company and SPR, which are shown on
the following pages.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1993(1) 1992(2) 1992(2,3) 1991(4,5) 1990(5) 1989(5) 1988
--------- ------- --------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales................... $ 1,182.3 $905.8 $ 1,264.0 $ 1,098.7 $ 964.8 $ 944.9 $ 1,056.5
Earnings (loss) from
continuing operations
before taxes............. 47.8 14.8 9.0 (18.7) 7.0 58.2 85.6
Earnings (loss) from
continuing operations.... 32.8 8.0 4.4 (19.8) 0.3 34.7 49.5
Net earnings (loss)......... 32.8 (80.1) (83.7) (3.7) 6.8 34.9 41.7
Net earnings (loss)
available for common
shares................... 25.9 (82.4) (88.3) (6.8) 3.1 32.1 41.7
Primary earnings (loss) per
common share:
Continuing operations.... $ 0.97 $ 0.25 $ (0.01) $ (1.03) $ (0.15) $ 1.38 $ 1.91
Cumulative effect of
accounting change...... -- (3.93) (3.93) -- -- 0.12 --
Discontinued
operations............. -- -- -- 0.72 0.29 (0.12) (0.24)
--------- ------ --------- --------- ------- ------- ---------
Total earnings (loss) per
common share........... $ 0.97 $(3.68) $ (3.94) $ (0.31) $ 0.14 $ 1.38 $ 1.67
Dividends paid per common
share.................... $ 0.36 $ 0.36 $ 0.48 $ 0.92 $ 0.92 $ 0.905 $ 0.86
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1993 1992
------------- ------------
<S> <C> <C>
BALANCE SHEET DATA
Inventories.................................................... $ 268.7 $ 267.4
Working capital................................................ 227.1 222.2
Total assets................................................... 1,097.3 1,099.5
Short-term debt(6)............................................. 28.9 69.4
Long-term debt................................................. 230.9 350.6
Shareholders' equity........................................... 372.7 230.9
</TABLE>
- -------------------------
(1) Includes a pretax gain on the sale of Federal-Mogul Westwind Air Bearings
Ltd. ("Westwind") of $4.9 million, or $0.17 per share, and a favorable tax
adjustment of $0.8 million, or $0.03 per share, reflecting the impact of
the new United States corporate tax rate on the Company's deferred tax
benefits.
(2) In 1992, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions" ("SFAS 106") effective as of January 1, 1992. The Company
recorded a charge of $88.1 million, or $3.93 per common share, net of
applicable tax benefits of $47.6 million, to reflect the cumulative effect
for years prior to 1992 of the change in accounting method. For 1992, the
Company's pretax postretirement costs included in the results of operations
increased $7.6 million, or $0.22 per share, as a result of the adoption of
SFAS 106.
(3) Includes a fourth quarter pretax special charge of $14 million, or $0.40
per share, in connection with the integration of AAB, which was acquired on
October 20, 1992.
(4) Includes a pretax restructuring charge of $25 million, or $0.98 per share,
in connection with certain process changes to the manufacturing and
distribution operations of the Company.
(5) Restated to reflect the retroactive to 1989 adoption of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
(6) Includes current maturities of long-term debt.
S-11
<PAGE> 12
SELECTED FINANCIAL DATA FOR SPR
(IN MILLIONS)
The following selected historical financial data for SPR should be read in
conjunction with the financial information in the Combined Condensed Statements
of Assets and Liabilities and the related Combined Condensed Statements of
Revenues and Expenses and Combined Condensed Statement of Cash Flows of Sealed
Power Corporation and Sealed Power Corporation of Canada, Ltd. included in the
Form 8-K/A dated December 3, 1993 to the Current Report dated November 10, 1993,
and incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------- ------------------
1993 1992 1992 1991
------ ------ ------ ------
<S> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA
Net sales................................ $129.6 $127.6 $163.2 $155.3
Earnings before income tax............... 8.2 7.4 9.5 9.1
Earnings from continuing operations...... 5.0 4.7 6.0 5.8
Cumulative effect of accounting change... -- (3.2)(1) (3.2)(1) --
Net earnings............................. 5.0 1.5 2.7 5.8
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1993 1992
------------- ------------
<S> <C> <C>
BALANCE SHEET DATA
Inventories(2).................................................... $41.6 $ 51.3
Working capital................................................... 22.9 30.0
Total assets...................................................... 66.5 76.3
Long-term debt.................................................... 3.6 3.7
Net investment(3)................................................. 35.7 43.5
</TABLE>
- -------------------------
(1) Effective January 1, 1992, SPX Corporation implemented SFAS No. 106 using
the immediate recognition transition option. The cumulative effect
allocated to SPR of $3.2 million was based on estimated percentages of
relative active and retired employees covered under the benefit plans of
SPX Corporation.
(2) The cost of certain SPR inventories has been determined by the last-in,
first-out (LIFO) method. If these inventories had been valued at current
cost, amounts reported at September 30, 1993 and December 31, 1992 would
have been increased by $22.8 million.
(3) Net investment represents total assets less total liabilities of SPR as of
the dates indicated.
S-12
<PAGE> 13
SELECTED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following selected pro forma combined condensed statement of earnings
data for the nine months ended September 30, 1993 give effect to the SPR
Acquisition as if it had occurred at the beginning of the period. The pro forma
combined condensed statement of earnings data for the year ended December 31,
1992 reflect both the SPR Acquisition and the AAB Acquisition as if such
acquisitions had occurred at the beginning of the period. The following selected
pro forma combined balance sheet data reflect the SPR Acquisition as if it had
occurred on September 30, 1993. This information should be read in conjunction
with the Pro Forma Combined Condensed Financial Statements included in the Form
8-K/A dated December 3, 1993 to the Current Report dated November 10, 1993, and
incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1993 DECEMBER 31, 1992
------------------ -----------------
<S> <C> <C>
PRO FORMA COMBINED STATEMENT OF EARNINGS DATA
Net sales................................................. $1,304 $ 1,672
Earnings from continuing operations before taxes.......... 66(1) 42(2)
Earnings from continuing operations....................... 44(1) 26(2)
Earnings from continuing operations per common share:
Primary................................................ $ 1.39(1) $ 0.76(2)
Fully-diluted.......................................... 1.27(1) 0.76(2)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
------------------
<S> <C>
PRO FORMA COMBINED BALANCE SHEET DATA
Inventories............................................................... $ 332
Working capital........................................................... 282
Total assets.............................................................. 1,275
Short-term debt(3)........................................................ 29
Long-term debt............................................................ 378
Shareholders' equity...................................................... 372
</TABLE>
- -------------------------
(1) Includes a pretax gain on the sale of Westwind of $4.9 million, or
$0.17 per share, and a favorable tax adjustment of $0.8 million, or $0.03
per share, reflecting the impact of the new United States corporate tax
rate on the Company's deferred tax benefits.
(2) Includes a fourth quarter pretax special charge of $14 million, or
$0.40 per share, in connection with the integration of AAB which was
acquired on October 20, 1992.
(3) Includes current maturities of long-term debt.
S-13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE MONTHS ENDED SEPTEMBER 30, 1993 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1992
Net sales for the three months ended September 30, 1993 were $370.0 million
compared to $297.8 million in the corresponding period of 1992. The 24.2%
increase was largely attributed to increased domestic and international
Aftermarket sales of steering and suspension products ($40.8 million increase)
and engine parts and kits ($18.3 million increase) due to the AAB Acquisition in
October 1992. Overall Aftermarket net sales totalled $236.8 million for the
quarter, or 64% of Company net sales.
Third quarter OE net sales in the United States and Canada improved 6.4%
from the comparable 1992 quarter, benefitted by an increase in North American
vehicle production. Product lines significantly contributing to the net sales
increase included oil seals (18.3% increase), lighting, electrical and fuel
systems (9.1% increase) and engine bearings (6.3% increase). Internationally,
the Company's OE business continued to be substantially impacted by the severe
recession taking hold throughout the European continent, particularly in
Germany. OE net sales of Glyco, the Company's German engine bearings
manufacturer, declined 32.2% from the previous year's third quarter. In addition
to the European decline, OE net sales in Mexico were off over 23% from 1992. The
Company believes the decline in Mexico is temporary and largely due to economic
uncertainties related to the North American Free Trade Agreement. Overall, the
international downturn more than offset domestic sales improvements, as total
1993 third quarter OE net sales decreased $7.0 million from the same 1992
quarter.
Gross margin for the quarter increased $27.4 million over the same 1992
quarter to $74.8 million, or 20.2% of net sales. This 4.3% point improvement
resulted from the changing mix of sales (i.e., increased emphasis on Aftermarket
sales) which provided a higher gross margin on the overall net sales increase.
Specifically, the Company has realized higher than previously experienced
margins on product lines gained as part of the AAB Acquisition. Operating margin
(net sales less cost of products sold and selling, distribution and
administrative expenses) for the 1993 third quarter improved to $19.3 million or
5.2% of net sales from $8.6 million or 2.9% of net sales in the year ago period.
This change resulted from increased Aftermarket volume, reductions in
administrative expenses as a percent of sales and the benefits of distribution
and marketing rationalization savings realized since the AAB Acquisition.
The 1993 third quarter was also impacted by the sale of the Company's
equity interest in the Japanese engine bearing manufacturer, Taiho Kogyo Co.,
Ltd. ("Taiho") for $9.3 million in cash, and the announced consolidation of the
Company's lighting and electrical and fuel systems operating units. The net
effect of the gain on the sale of Taiho and charges taken to provide for the
business unit consolidation was insignificant to the results of operations for
the quarter.
Pretax earnings of $12.9 million for the 1993 third quarter improved from
the $4.7 million level achieved in the same 1992 period. A favorable tax
adjustment of $0.8 million, or $0.03 per share, was recorded in 1993, reflecting
the impact of the new United States corporate tax rate on the Company's deferred
tax benefits. Net earnings amounted to $10.0 million or $0.26 per common share
for 1993 as compared to $3.0 million or $0.10 per common share for the third
quarter of 1992.
NINE MONTHS ENDED SEPTEMBER 30, 1993 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1992
Net sales for the nine months ended September 30, 1993 were $1,182.3
million compared to $905.8 million for the first nine months of 1992. Nearly all
product lines contributed to the 30.5% improvement, with the largest increases
the result of the AAB Acquisition. Aftermarket net sales in the first nine
months of 1993 totalled $742.3 million and exceeded comparable 1992 sales by
$260.1 million, a 53.9% increase. Net sales to the OE sector increased 3.9% from
the prior year.
Net earnings were $32.8 million, or $0.97 per common share for the first
nine months of 1993, including a $0.17 gain on the sale of the Company's former
subsidiary, Westwind. Net earnings for the comparable 1992 period were $8.0
million (excluding the effects of adoption of SFAS No. 106 in the first quarter
of 1992), or $0.25 per common share.
S-14
<PAGE> 15
LIQUIDITY AND SOURCES OF CAPITAL
Cash flows from operations were $26.9 million for the nine months ended
September 30, 1993 as compared to $30.3 million in the comparable 1992 period.
Comparative year-to-year changes included the nine month net earnings increase
offset by an increase in accounts receivable as a result of the higher sales
volume attained in 1993. At September 30, 1993, the Company's ratio of current
assets to current liabilities was 1.9, compared to 1.8 at December 31, 1992.
On October 26, 1993, the Company completed the SPR Acquisition. SPR
distributed engine and chassis components to the North American automotive
Aftermarket. Federal-Mogul and SPX Corporation also completed a long-term
trademark agreement making Federal-Mogul the distributor of engine and chassis
parts sold under the Sealed Power and Speed-Pro brand names in North America.
Federal-Mogul also acquired the right to use these trademarks throughout the
rest of the world. The Company initially financed the SPR Acquisition, with
borrowings under its Revolving Credit Agreement.
Net cash used by investing activities in 1993 also included significant
property, plant and equipment expenditures incurred to facilitate the change
process in manufacturing and new product introduction in OE markets.
Proceeds from the sale of 6,250,000 shares of the Company's Common Stock,
the disposition of business investments and the first quarter $40.0 million sale
and securitization of certain trade receivables enabled the Company to reduce
its outstanding borrowings by $153.2 million between December 31, 1992 and
September 30, 1993.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations relevant to purchasers of the Common Stock, but does
not purport to be a complete analysis of all the potential tax considerations
relating thereto. This discussion is based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service
("IRS") rulings and judicial decisions now in effect, all of which are subject
to change (possibly with retroactive effect) or different interpretations. This
discussion does not purport to deal with all aspects of federal income taxation
that may be relevant to a particular investor's decision to purchase the Common
Stock, and it is not intended to be wholly applicable to all categories of
investors, some of which, such as dealers in securities, banks, insurance
companies, tax-exempt organizations and non-United States persons, may be
subject to special rules. For a discussion of certain special federal tax
considerations for non-United States persons, see "Certain Special Federal Tax
Considerations For Non-United States Holders." In addition, this discussion is
limited to persons that will hold Common Stock as a "capital asset" (within the
meaning of section 1221 of the Code).
ALL PROSPECTIVE PURCHASERS OF THE COMMON STOCK ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE COMMON STOCK.
DIVIDENDS ON COMMON STOCK
Dividend distributions paid on the Common Stock will be taxable to a holder
as ordinary income to the extent of the holder's allocable share of earnings and
profits (if any) for federal income tax purposes. To the extent that the amount
of such a distribution exceeds the holder's allocable share of the Company's
earnings and profits, the distribution to the holder will be treated first as a
tax-free return of capital to the extent of the holder's basis in the Common
Stock and thereafter as capital gain from the sale or exchange of the Common
Stock. Such gain will be long-term or short-term depending on the holder's
holding period for the Common Stock.
S-15
<PAGE> 16
Dividends paid out of the Company's earnings and profits to corporate
holders may be eligible for the 70% dividends-received deduction, subject to the
minimum holding period requirement under section 246(c) of the Code (generally
at least 46 days) and other applicable requirements. Under section 246A of the
Code, the dividends-received deduction may be reduced or eliminated if the
holder's shares of Common Stock are debt-financed. Under certain circumstances,
a corporate holder may be subject to the alternative minimum tax with respect to
a portion of its dividends-received deduction.
Under certain circumstances, a corporation that receives an "extraordinary
dividend," as defined in section 1059(c) of the Code, will be required to reduce
its basis in the Common Stock by the portion of such dividend that is not taxed
pursuant to the dividends-received deduction if the holder does not meet minimum
holding period requirements (generally two years).
BACKUP WITHHOLDING
Certain noncorporate holders of the Common Stock may be subject to backup
withholding at the rate of 31% with respect to dividends on the Common Stock.
Generally, backup withholding applies only when the taxpayer (i) fails to
furnish or certify his correct taxpayer identification number to the payor in
the manner required, (ii) is notified by the IRS that he has failed to report
payments of interest and dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that he
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 any applicable exemption.
CERTAIN SPECIAL FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain special United States
federal income and estate tax considerations relevant to non-United States
holders of the Common Stock, but does not purport to be a complete analysis of
all the potential tax considerations relating thereto.
As used herein, "non-United States holder" means a corporation, individual
or partnership that is, as to the United States, a foreign corporation, a
nonresident alien individual or a foreign partnership, and any estate or trust
if such estate or trust is not subject to United States taxation on income from
sources without the United States that is not effectively connected with the
conduct of a trade or business within the United States.
This discussion is based upon the Code, Treasury Regulations, IRS rulings
and judicial decisions now in effect, all of which are subject to change
(possibly with retroactive effect) or different interpretations. This discussion
does not purport to deal with all aspects of federal income and estate taxation
that may be relevant to a particular non-United States holder's decision to
purchase the Common Stock.
ALL PROSPECTIVE NON-UNITED STATES HOLDERS OF THE COMMON STOCK ARE ADVISED
TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, AND DISPOSITION
OF THE COMMON STOCK.
DIVIDENDS
Dividends paid to a non-United States holder of the Common Stock will be
subject to withholding of United States federal income tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. Currently,
dividends paid to an address in a foreign country are presumed to be paid to a
resident of such country in determining the applicability of a treaty for such
purposes. However, proposed Treasury Regulations which have not been finally
adopted would require non-United States holders to satisfy certain certification
and other requirements to obtain the benefit of any applicable income tax treaty
providing for a lower rate of withholding tax on dividends.
S-16
<PAGE> 17
Except as may be otherwise provided in an applicable income tax treaty, a
non-United States holder will be taxed at ordinary federal income tax rates (on
a net income basis) on dividends that are effectively connected with the conduct
of a trade or business of such non-United States holder within the United States
and will not be subject to the withholding tax described above. If such
non-United States holder is a foreign corporation, it may also be subject to a
United States branch profits tax at a 30% rate or such lower rate as may be
specified by any applicable income tax treaty. Non-United States holders must
comply with certain certification and disclosure requirements to claim treaty
benefits or an exemption from withholding tax under the foregoing rules.
DISPOSITION OF COMMON STOCK
Non-United States holders generally will not be subject to United States
federal income tax in respect of gain recognized on a disposition of the Common
Stock unless (i) the gain is effectively connected with a trade or business
conducted by the non-United States holder within the United States (in which
case the branch profits tax described under "Dividends" above may also apply if
the holder is a foreign corporation), (ii) in the case of a non-United States
holder who is a nonresident alien individual and holds the Common Stock as a
capital asset, such holder is present in the United States for 183 or more days
in the taxable year of the disposition and either the income from the
disposition is attributable to an office or other fixed place of business
maintained by the holder in the United States or the holder has a "tax home" in
the United States (within the meaning of the Code), or (iii) the Company is or
has been a "United States real property holding corporation" and certain other
requirements are met. The Company does not believe it has been or is currently,
and does not anticipate becoming, a United States real property holdings
corporation.
FEDERAL ESTATE TAXES
Common Stock that is owned or treated as being owned by a non-United States
holder (as determined for United States federal estate tax purposes) at the time
of death will be included in such holder's gross estate for United States
federal estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
United States information reporting requirements and 31% backup withholding
tax generally will not apply to dividends paid on the Common Stock if the
dividends are subject to either the 30% withholding tax or such lower rate as
may be specified by an applicable income tax treaty, or are exempt from such
withholding tax under the rules discussed above relating to dividends that are
effectively connected with the conduct of a trade or business of such holder
within the United States, or are paid to a non-United States holder at an
address outside the United States provided that the holder certifies to its
non-United States status on the appropriate form and the payer has no actual
knowledge that the holder is a United States person. As a general matter,
information reporting and backup withholding will also not apply to a payment of
the proceeds of a sale effected outside the United States of Common Stock by a
foreign office of a foreign broker. However, information reporting requirements
(but under current proposed Treasury regulations not backup withholding) will
apply to a payment of the proceeds of a sale effected outside the United States
of Common Stock by a foreign office of a broker that (i) is a United States
person, (ii) is a foreign person that derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in the United
States, or (iii) is a "controlled foreign corporation" (generally, a foreign
corporation controlled by United States shareholders) with respect to the United
States, unless the broker has documentary evidence in its records that the
holder is a non-United States holder and certain conditions are met, or the
holder otherwise establishes an exemption. Payment by a United States office of
a broker of the proceeds of a sale of Common Stock is subject to both backup
withholding and information reporting unless the holder certifies to the payor
in the manner required as to its non-United States status under penalties of
perjury or otherwise establishes an exemption.
A non-United States holder may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing an appropriate claim for
refund with the IRS.
S-17
<PAGE> 18
UNDERWRITING
The Underwriters named below (the "U.S. Underwriters"), for whom CS First
Boston Corporation and Donaldson, Lufkin & Jenrette Securities Corporation are
acting as representatives (the "U.S. Representatives"), have severally agreed to
purchase from the Company, pursuant to a terms agreement dated ,
1994 and related underwriting agreement (collectively, the "Underwriting
Agreement") the following respective numbers of shares of Common Stock (the
"U.S. Shares") set forth opposite their names:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS U.S. SHARES
------------------------------------------------------------------- -----------
<S> <C>
CS First Boston Corporation........................................
Donaldson, Lufkin & Jenrette Securities Corporation................
-----------
Total.................................................... 3,400,000
</TABLE>
The Underwriting Agreement between the Company and the several U.S.
Underwriters provides that the obligations of the U.S. Underwriters are subject
to certain conditions precedent, and that the U.S. Underwriters will be
obligated to purchase all of the U.S. Shares being offered hereby if any are
purchased.
The Company has granted to the U.S. Underwriters and the Managers of the
International Offering (the "Managers") an option, exercisable by the U.S.
Representatives, expiring at the close of business on the 30th day after the
date of the initial public offering of the U.S. Shares, to purchase up to
600,000 additional shares of Common Stock (the "Option Shares"), at the initial
public offering price less the underwriting discount, all as set forth on the
cover page of this Prospectus Supplement. The U.S. Representatives may exercise
such option only to cover overallotments in the sale of the shares of Common
Stock. To the extent that this option to purchase is exercised, each U.S.
Underwriter and each Manager will become obligated, subject to certain
conditions, to purchase approximately the same percentage of Option Shares being
sold to the U.S. Underwriters and the Managers as the number set forth next to
such U.S. Underwriter's name in the preceding table bears to the total number of
shares in such table and as the number set forth next to such Manager's name in
the corresponding table in the prospectus supplement relating to the
International Offering bears to the total number of shares in such table (the
"International Shares").
The Company has been advised by the U.S. Representatives that the U.S.
Underwriters propose to offer the U.S. Shares to the public in the United States
and Canada initially at the offering price set forth on the cover page of this
Prospectus Supplement and through the U.S. Representatives to certain dealers at
such price less a concession of $ per share of Common Stock; that the U.S.
Underwriters and such dealers may allow a discount of $ per share of Common
Stock on sales to other dealers; and that, after the initial public offering,
the public offering price and concession and discount to dealers may be changed
upon the mutual agreement of the U.S. Representatives and CS First Boston
Limited on behalf of the Managers.
The Company has entered into a Subscription Agreement (the "Subscription
Agreement") with the Managers providing for the concurrent offer and sale of the
International Shares outside the United States and Canada. The offering price,
the aggregate underwriting discount per share and the per share discount to
dealers for the U.S. Offering and the concurrent International Offering are
identical. The closing of the U.S. Offering is a condition to the closing of the
International Offering, and vice versa.
S-18
<PAGE> 19
Pursuant to an Agreement Between U.S. Underwriters and Managers (the
"Agreement Between") relating to the Offerings, each of the U.S. Underwriters
has agreed or will agree that, as part of the distribution of the U.S. Shares
and subject to certain exceptions, (a) it is not purchasing any shares of Common
Stock for the account of anyone other than a U.S. or Canadian Person and (b) it
has not offered or sold, and will not offer to sell, directly or indirectly, any
shares of Common Stock or distribute any prospectus relating to the Common Stock
to any person outside the United States or Canada or to anyone other than a U.S.
or a Canadian Person nor to any dealer who does not so agree. Each of the
Managers has agreed or will agree that, as part of the distribution of the
International Shares and subject to certain exceptions, (i) it is not purchasing
any shares of Common Stock for the account of any U.S. or Canadian Person and
(ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares of Common Stock, or distribute any prospectus relating to
the Common Stock, in the United States or Canada or to any U.S. or Canadian
Person nor to any dealer who does not so agree. The foregoing limitations do not
apply to stabilization transactions or to transactions between the U.S.
Underwriters and the Managers pursuant to the Agreement Between. As used herein,
"United States" means the United States of America (including the States and the
District of Columbia), its territories and possessions and other areas subject
to its jurisdiction, "Canada" means Canada, its provinces, territories and
possessions and other areas subject to its jurisdiction, and "U.S. or Canadian
Person" means a citizen or resident of the United States or Canada, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or Canada (other than a foreign branch of such an
entity) and includes any United States or Canadian branch of a non-U.S. or
non-Canadian Person.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Common Stock as may be
mutually agreed upon. The price of any shares so sold will be the public
offering price, less such amount as may be mutually agreed upon by the U.S.
Representatives and CS First Boston Limited, on behalf of the Managers, but such
amount will not exceed the selling concession applicable to such shares. To the
extent there are sales between the U.S. Underwriters and the Managers pursuant
to the Agreement Between, the number of shares of Common Stock initially
available for sale by the U.S. Underwriters or by the Managers may be more or
less than the amount appearing on the cover page of this Prospectus Supplement.
Neither the U.S. Underwriters nor the Managers are obligated to purchase from
the other any unsold shares of Common Stock.
The Company has agreed that, for a period of 120 days after the date of
this Prospectus Supplement, it will not, without the prior written consent of CS
First Boston Corporation, on behalf of the U.S. Representatives and the
Managers, directly or indirectly, offer, sell, contract to sell or otherwise
dispose of any Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock other than to the U.S. Underwriters or the
Managers pursuant to the Underwriting and Subscription Agreements and other than
(a) issuances and sales of Common Stock in accordance with the terms of the
Company's Preferred Share Purchase Rights or pursuant to any employee or
director stock option plan, stock ownership plan, stock bonus plan, stock
compensation plan or dividend reinvestment plan of the Company as in effect on
the date of this Prospectus Supplement and (b) issuances of Common Stock
issuable upon the conversion of securities or the exercise of warrants
outstanding at the date of this Prospectus Supplement.
The Company has agreed to indemnify the U.S. Underwriters and the Managers
against certain liabilities, including civil liabilities under the Securities
Act of 1933, as amended, or to contribute to payments that the U.S. Underwriters
and the Managers may be required to make in respect thereof.
Certain of the U.S. Underwriters and Managers and their affiliates have
from time to time performed, and continue to perform, various investment banking
and commercial banking services for the Company, for which customary
compensation has been received.
S-19
<PAGE> 20
PROSPECTUS
FEDERAL-MOGUL CORPORATION
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK AND WARRANTS
-------------------------
Federal-Mogul Corporation ("Federal-Mogul" or the "Company") may from time
to time offer, together or separately, its (i) debt securities ("Debt
Securities"), which may be either senior debt securities ("Senior Debt
Securities") or subordinated debt securities ("Subordinated Debt Securities"),
consisting of debentures, notes and/or other unsecured evidences of indebtedness
in one or more series; (ii) shares of its Preferred Stock ("Preferred Stock"),
which may be issued in the form of depositary shares evidenced by Depositary
Receipts ("Depositary Shares"); (iii) shares of its Common Stock, without par
value (the "Common Stock"); and (iv) warrants to purchase securities of the
Company as shall be designated by the Company at the time of the offering (the
"Warrants") in amounts, at prices and on terms to be determined at the time of
the offering. The Debt Securities, Preferred Stock, Depositary Shares, Common
Stock and Warrants are collectively called the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances at an aggregate initial offering price not to exceed
$300,000,000 or its equivalent (based on the applicable exchange rate at the
time of sale) in one or more foreign currencies, currency units, composite
currencies or in amounts determined by reference to an index as shall be
designated by the Company.
The Senior Debt Securities when issued will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Company, and the Subordinated
Debt Securities when issued will be subordinated as described in the
accompanying Prospectus Supplement (the "Prospectus Supplement"). Certain
specific terms of the particular Securities in respect of which this Prospectus
is being delivered are set forth in the Prospectus Supplement, including, where
applicable, (i) in the case of Debt Securities, the title, aggregate principal
amount, denominations, maturity, any interest rate (which may be fixed or
variable) and time of payment of any interest, any terms for redemption at the
option of the Company or the holder, any terms for sinking fund payments, any
terms for conversion into other securities, currency or currencies of
denomination and payment, if other than U.S. dollars, any listing on a
securities exchange and any other terms in connection with the offering and sale
of the Debt Securities in respect of which this Prospectus is delivered, as well
as the initial public offering price; (ii) in the case of Preferred Stock, the
specific title, the aggregate amount, any dividend (including the method of
calculating payment of dividends), liquidation, redemption, voting and other
rights, any terms for any conversion or exchange into other Securities, any
listing on a securities exchange, the initial public offering price and any
other terms; (iii) in the case of Common Stock, the number of shares of Common
Stock and the terms of offering thereof; and (iv) in the case of Warrants, the
designation and number, the exercise price, any listing of the Warrants or the
underlying Securities on a securities exchange and any other terms in connection
with the offering, sale and exercise of the Warrants.
The Prospectus Supplement will also contain information, where applicable,
about certain United States federal income tax considerations relating to the
Securities covered by the Prospectus Supplement.
The Company's Common Stock is listed on the New York Stock Exchange under
the trading symbol "FMO." Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on such exchange, subject to official notice of
issuance.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Securities will be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. If agents of the Company or any dealers or underwriters are involved in
the sale of the Securities in respect of which this Prospectus is being
delivered, the names of such agents, dealers or underwriters and any applicable
commissions or discounts are set forth in or may be calculated from the
Prospectus Supplement with respect to such Securities.
The date of this Prospectus is January 10, 1994.
<PAGE> 21
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, THE ACCOMPANYING PROSPECTUS
SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY REFERENCE
HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN OR THEREIN
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS OR PROSPECTUS SUPPLEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company has filed with the Securities and Exchange Commission (the
"Commission"), pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"):
(i) an Annual Report on Form 10-K for the year ended December 31,
1992, as amended by a Form 8 dated April 19, 1993;
(ii) Quarterly Reports on Form 10-Q for the quarterly periods ended
September 30, 1993 dated November 15, 1993, June 30, 1993 dated August 13,
1993 and March 31, 1993 dated May 14, 1993, amended by a Form 10-QA dated
June 25, 1993;
(iii) a Form 8-K/A dated December 3, 1993 to a Current Report on Form
8-K dated November 10, 1993;
(iv) a Form 8 dated January 4, 1993 to a Current Report on Form 8-K
dated October 20, 1992; and
(v) a Form 8 dated April 5, 1993 to a Current Report on Form 8-K dated
December 31, 1992;
which are hereby incorporated by reference in and made a part of this
Prospectus.
All documents hereafter filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the filing of
a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold shall
be deemed to be incorporated by reference in and to be a part of this Prospectus
from the date of filing of such documents. Any statement contained in a document
incorporated by reference or deemed to be incorporated herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE INCORPORATED BY REFERENCE IN SUCH DOCUMENTS)
ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST DIRECTED TO: GEORGE N.
BASHARA, JR., SECRETARY, FEDERAL-MOGUL CORPORATION, 26555 NORTHWESTERN HIGHWAY,
SOUTHFIELD, MICHIGAN 48034 (TELEPHONE: (313) 354-7700).
2
<PAGE> 22
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copies may be obtained at the principal office
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such materials can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and
other information concerning the Company can also be inspected at the offices of
the New York Stock Exchange, Inc. ("NYSE"), 20 Broad Street, New York, New York
10005; and the Pacific Stock Exchange, Inc., 618 South Spring Street, Los
Angeles, California 90014, and 301 Pine Street, San Francisco, California 94104.
Federal-Mogul has filed with the Commission a Registration Statement
(herein, together with all amendments thereto, called the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities offered hereby. This Prospectus does not contain
all of the information included in the Registration Statement and the exhibits
and schedules thereto. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein and filed as an
exhibit to the Registration Statement are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. For further information with respect to
Federal-Mogul and the securities, reference is hereby made to the Registration
Statement and the exhibits and schedules thereto.
THE COMPANY
Federal-Mogul is a global distributor and manufacturer of a broad range of
precision parts, primarily vehicular components for automobiles, light trucks,
heavy duty trucks and farm and construction vehicles and industrial products.
Through the Company's worldwide distribution network, Federal-Mogul sells
replacement parts in the vehicular aftermarket (the "Aftermarket") to
independent warehouse distributors, local parts suppliers and retail parts
stores. The Company also sells parts to original equipment ("OE") manufacturers,
principally the major automotive manufacturers in the United States and Europe.
In 1992, the Company's net sales were $1,264 million. For the nine month
periods ended September 30, 1993 and 1992, the Company's net sales were $1,182.3
million and $905.8 million, respectively. Of net sales for the nine month period
ended September 30, 1993, Aftermarket and OE products represented 63% and 37%,
respectively.
The Company was incorporated in 1924 under Michigan law to carry on a
business begun in 1900. The Company's executive offices are located at 26555
Northwestern Highway, Southfield, Michigan 48034, telephone number (313)
354-7700.
USE OF PROCEEDS
Except as otherwise described in the accompanying Prospectus Supplement or
any Pricing Supplement, the net proceeds from the sale of Securities will be
used for general corporate purposes, which may include refinancings of
indebtedness, including amounts outstanding under the Company's Second Amended
and Restated Revolving Credit Agreement, dated October 19, 1993, working
capital, capital expenditures and acquisitions.
3
<PAGE> 23
RECENT DEVELOPMENTS
In October 1993, the Company acquired from SPX Corporation ("SPX") its
Sealed Power Replacement division ("SPR"), SPX's U.S. and Canadian automotive
aftermarket operations (the "Acquisition"), for approximately $143 million. See
"Selected Financial Data for SPR" and "Selected Pro Forma Combined Condensed
Financial Data." These operations distribute engine and chassis components to
the North American aftermarket. The Company also completed a long-term trademark
agreement under which the Company has become the exclusive distributor of engine
and chassis parts sold under the Sealed Power(R) and Speed-Pro(R) brand names in
the United States and Canada. The Company acquired the non-exclusive right to
use these trademarks throughout the rest of the world. The Company also entered
into a non-competition agreement for a period of seven years. The Acquisition
furthered the Company's strategy of emphasizing Aftermarket product sales and
the development of this aspect of the business.
SPR distributes a full line of chassis parts (15% of 1992 sales) and engine
parts (83% of 1992 sales) to the automotive Aftermarket to over 2,500 wholesale
and retail distribution outlets. Net sales in 1992 were $163.2 million.
The Company believes that the Acquisition will (i) allow the Company to
broaden its customer base, (ii) increase the Company's product offerings in the
Aftermarket business, particularly in the case of heavy truck, agricultural and
construction parts, and (iii) allow the Company to realize substantial cost
savings through the consolidation of the distribution system of the two
companies.
4
<PAGE> 24
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
RATIO OF EARNINGS TO FIXED CHARGES:(A)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA YEARS ENDED DECEMBER 31,
NINE MONTHS ENDED NINE MONTHS ENDED YEAR ENDED ----------------------------------------
SEPTEMBER 30, 1993(B) SEPTEMBER 30, 1993 DECEMBER 31, 1992(B,C) 1992 1991 1990 1989 1988
- --------------------- ------------------ --------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
2.87 2.76 1.43 1.13 (D) 1.03 2.84 3.31
</TABLE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS(A):
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA YEARS ENDED DECEMBER 31,
NINE MONTHS ENDED NINE MONTHS ENDED YEAR ENDED ----------------------------------------
SEPTEMBER 30,1993(B) SEPTEMBER 30, 1993 DECEMBER 31, 1992(B,C) 1992 1991 1990 1989 1988
- ------------------- ------------------ --------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
2.43 2.27 1.32 1.10 (D) 1.02 2.51 3.31
</TABLE>
- -------------------------
The ratio of earnings to fixed charges has been computed by dividing
earnings by fixed charges. The ratio of earnings to fixed charges and preferred
stock dividends has been computed by dividing earnings by the sum of fixed
charges and preferred stock dividend requirements. Earnings consist of income
before income taxes plus fixed charges excluding capitalized interest. Fixed
charges consist of interest on all indebtedness, amortization of debt issuance
costs and the portion of rental expense representative of interest.
(A) The Company guarantees the debt of the Federal-Mogul Employee Stock
Ownership Plan ("ESOP"); the fixed charges of the ESOP are not included in
the above calculations.
(B) Gives effect to the Acquisition as if it occurred at the beginning of the
period presented.
(C) Gives effect to the acquisition of the automotive aftermarket business of
TRW on October 20, 1992 as if it occurred at the beginning of the period
presented.
(D) As a result of a special charge of $25.0 million, earnings in 1991 were
$14.1 million, which were less than 1991 fixed charges of $33.8 million.
5
<PAGE> 25
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions may not apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
The Senior Debt Securities are to be issued under an Indenture (the "Senior
Indenture"), to be entered into between the Company and Continental Bank,
National Association, as trustee. The Subordinated Debt Securities are to be
issued under a separate Indenture (the "Subordinated Indenture"), to be entered
into between the Company and Continental Bank, National Association, as trustee.
The Senior Indenture and the Subordinated Indenture are sometimes referred to
collectively as the "Indentures." Copies of the Senior Indenture and the
Subordinated Indenture have been filed as exhibits to the Registration
Statement. Continental Bank, National Association, as trustee under the Senior
Indenture or the Subordinated Indenture, as applicable, is referred to herein as
the "Applicable Trustee."
The following summaries of certain provisions of the Senior Debt
Securities, the Subordinated Debt Securities and the Indentures do not purport
to be complete and are subject, and are qualified in their entirety by
reference, to all the provisions of the Indenture applicable to a particular
series of Debt Securities (the "Applicable Indenture"), including the
definitions therein of certain terms. Wherever particular Sections, Articles or
defined terms of the Indentures are referred to, it is intended that such
Sections, Articles or defined terms shall be incorporated by reference herein.
Section and Article references used herein are references to the Applicable
Indenture. Capitalized terms not otherwise defined herein shall have the
meanings given to them in the Applicable Indenture.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt
Securities that may be issued thereunder, and each Indenture provides that Debt
Securities may be issued thereunder from time to time in one or more series.
Unless otherwise specified in the Prospectus Supplement, the Senior Debt
Securities when issued will be unsecured and unsubordinated obligations of the
Company and will rank equally and ratably with all other unsecured and
unsubordinated indebtedness of the Company. The Subordinated Debt Securities
when issued will be subordinated in right of payment to the prior payment in
full of all Senior Indebtedness (as defined in the Subordinated Indenture) of
the Company as described in the Prospectus Supplement applicable to the offering
of Subordinated Debt Securities.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for a description of the following
terms or additional provisions of the Debt Securities:
(1) the title of the Debt Securities;
(2) whether the Debt Securities are Senior Debt Securities or
Subordinated Debt Securities;
(3) any limit on the aggregate principal amount of the Debt
Securities;
(4) the Person to whom any interest on a Debt Security of such series
will be payable, if other than the Person in whose name that Debt Security
is registered at the close of business on the Regular Record Date for such
interest;
(5) the date or dates on which the principal of the Debt Securities
will be payable;
(6) the rate or rates at which the Debt Securities will bear
interest, if any;
(7) the date or dates from which any such interest will accrue and
the dates on which any such interest will be payable and the record dates
for such interest payments;
(8) the place or places where the principal of and any premium and
interest on the Debt Securities will be payable;
6
<PAGE> 26
(9) the period or periods within which, the price or prices at which,
and the terms and conditions on which the Debt Securities may be redeemed,
in whole or in part, at the option of the Company;
(10) the obligation, if any, of the Company to redeem or purchase the
Debt Securities pursuant to any sinking fund or analogous provision or at
the option of the Holder thereof, and the period or periods within which,
the price or prices at which, and the terms and conditions on which the
Debt Securities will be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(11) the terms and conditions, if any, pursuant to which such Debt
Securities are convertible or exchangeable into a security or securities of
the Company;
(12) the denominations in which the Debt Securities will be issuable,
if other than denominations of $1,000 and any integral multiple thereof;
(13) if the amount of principal of or any premium or interest on any
Debt Securities may be determined with reference to an index or pursuant to
a formula, the manner in which such amounts will be determined;
(14) if other than the currency of the United States of America, the
currency, currencies or currency units in which the principal of or any
premium or interest on any of the Debt Securities will be payable (and the
manner in which the equivalent thereof in the currency of the United States
of America is to be determined for any purpose, including for the purpose
of determining the principal amount deemed to be Outstanding at any time);
(15) if the principal of or any premium or interest on the Debt
Securities is to be payable, at the election of the Company or the Holder
thereof, in one or more currencies or currency units other than those in
which the Debt Securities are stated to be payable, the currency,
currencies or currency units in which payment of any such amount as to
which such election is made will be payable, the periods within which and
the terms and conditions upon which such election is to be made and the
amount so payable (or the manner in which such amount is to be determined);
(16) if other than the entire principal amount thereof, the portion of
the principal amount of any of the Debt Securities which will be payable
upon declaration of acceleration of the maturity thereof;
(17) if the principal amount payable at the Stated Maturity of any of
the Debt Securities will not be determinable as of any one or more dates
prior to the Stated Maturity, the amount which will be deemed to be such
principal amount as of any such date for any purpose, including the
principal amount thereof which will be due and payable upon any maturity
other than the Stated Maturity or which will be deemed to be Outstanding as
of any such date (or, in any such case, the manner in which such deemed
principal amount is to be determined);
(18) if applicable, that the Debt Securities, in whole or any
specified part, are defeasible pursuant to the provisions of the Applicable
Indenture described under "Defeasance and Covenant Defeasance";
(19) whether any of the Securities will be issuable in whole or in
part in the form of one or more Global Securities;
(20) any addition to or change in the Events of Default applicable to
any of the Debt Securities and any change in the right of the Applicable
Trustee or the Holders to declare the principal amount of any of the Debt
Securities due and payable;
(21) any addition to or change in the covenants in the Applicable
Indenture;
(22) if the Debt Securities are Subordinated Debt Securities, the
subordination provisions and the definition of Senior Indebtedness which
will be applicable to such Subordinated Debt Securities; and
(23) any other terms of the Debt Securities not inconsistent with the
provisions of the Applicable Indenture. (Sections 301 and 901)
7
<PAGE> 27
Debt Securities may be issued as Original Issue Discount Securities to be
sold at a substantial discount below their principal amount. Certain special
United States federal income tax considerations applicable to Debt Securities
sold at an original issue discount will be described in the Prospectus
Supplement relating thereto. In addition, certain special United States federal
income tax or other considerations applicable to any Debt Securities which are
denominated in a currency or currency unit other than United States dollars may
be described in the applicable Prospectus Supplement relating thereto.
Unless otherwise provided in the Prospectus Supplement relating thereto,
principal of and any premium and interest on the Debt Securities will be
payable, and the Debt Securities will be exchangeable and transfers thereof will
be registrable, at the office or agency of the Trustee in the Borough of
Manhattan, The City of New York, except that, at the option of the Company,
interest may be paid by mailing a check to the address of the Person entitled
thereto as it appears in the Security Register. (Sections 202, 305 and 1002)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Debt Securities will be issued only in fully registered form, without
coupons, and in denominations of $1,000 and integral multiples thereof. (Section
302) No service charge will be made for any registration of transfer or exchange
of Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
(Section 305) The Indentures also provide that the Debt Securities of any
series, if so specified with respect to a particular series, may be issued in
permanent global form. See "Global Debt Securities."
Unless otherwise set forth in the applicable Prospectus Supplement, neither
the Indentures nor the Debt Securities will contain provisions that would afford
the Debt Securities protection in the event of a takeover, recapitalization or
similar restructuring involving the Company which could adversely affect the
Debt Securities.
SUBORDINATION
The Subordinated Debt Securities will be subordinated and junior in right
of payment, to the extent set forth in the applicable Prospectus Supplement, to
all "Senior Indebtedness" of the Company as defined in the applicable Prospectus
Supplement.
EVENTS OF DEFAULT
Unless otherwise specified in the Prospectus Supplement relating to a
particular series of Debt Securities, the following events will constitute an
Event of Default under the Indentures with respect to Debt Securities of any
series: (a) failure to pay principal of or any premium on any Debt Security of
that series when due (in the case of the Subordinated Indenture, whether or not
such payment is prohibited by the subordination provisions); (b) failure to pay
any interest on any Debt Security of that series when due, and such failure
continues for 30 days (in the case of the Subordinated Indenture, whether or not
such payment is prohibited by the subordination provisions); (c) failure to
deposit any sinking fund payment, when due, in respect of any Debt Security of
that series (in the case of the Subordinated Indenture, whether or not such
deposit is prohibited by the subordination provisions); (d) failure to perform
any other covenant of the Company in the Applicable Indenture or such Debt
Security (other than a covenant included in the Applicable Indenture solely for
the benefit of a series other than that series), continued for 60 days after
written notice has been given by the Applicable Trustee, or the Holders of at
least 10% in principal amount of the Outstanding Debt Securities of that series,
as provided in the Applicable Indenture; and (e) certain events in bankruptcy,
insolvency or reorganization. (Section 501)
If an Event of Default (other than an Event of Default described in clause
(e) above) with respect to the Debt Securities of any series at the time
Outstanding shall occur and be continuing, either the Applicable Trustee or the
Holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of that series by notice as provided in the Applicable Indenture may
declare the principal amount of the Debt Securities of that series (or, in the
case of any Debt Security that is an Original Issue Discount Security or the
principal amount of which is not then determinable, such portion of the
principal amount of such Debt Security, or such other amount in lieu of such
principal amount, as may be specified in the terms of such Debt
8
<PAGE> 28
Security) to be due and payable immediately. If an Event of Default described in
clause (e) above with respect to the Debt Securities of any series at the time
Outstanding shall occur, the principal amount of all the Debt Securities of that
series (or, in the case of any such Original Issue Discount Security or other
Debt Security, such specified amount) will automatically, and without any action
by the Applicable Trustee or any Holder, become immediately due and payable.
After any such acceleration, but before a judgment or decree based on
acceleration, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
non-payment of accelerated principal (or other specified amount), have been
cured or waived as provided in the Applicable Indenture. (Section 502) For
information as to waiver of defaults, see "Modification and Waiver."
Subject to the provisions of the Applicable Indenture relating to the
duties of the Applicable Trustee in case an Event of Default shall occur and be
continuing, the Applicable Trustee will be under no obligation to exercise any
of its rights or powers under the Applicable Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Applicable Trustee reasonable indemnity. (Section 603) Subject to such
provisions for the indemnification of the Applicable Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Applicable Trustee or exercising
any trust or power conferred on the Applicable Trustee with respect to the Debt
Securities of that series. (Section 512)
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Applicable Indenture, or for the appointment
of a receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Applicable Trustee written notice of a
continuing Event of Default with respect to the Debt Securities of that series,
(ii) the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of that series have made written request, and such
Holder or Holders have offered reasonable indemnity, to the Applicable Trustee
to institute such proceeding as trustee, and (iii) the Applicable Trustee has
failed to institute such proceeding, and has not received from the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of
that series a direction inconsistent with such request, within 60 days after
such notice, request and offer. (Section 507) However, such limitations do not
apply to a suit instituted by a Holder of a Debt Security for the enforcement of
payment of the principal of or any premium or interest on such Debt Security on
or after the applicable due date specified in such Debt Security. (Section 508)
The Company will be required to furnish to the Applicable Trustee annually
a statement by certain of its officers as to whether or not the Company, to
their knowledge, is in default in the performance or observance of any of the
terms, provisions and conditions of the Applicable Indenture and, if so,
specifying all such known defaults. (Section 1004)
CONVERSION RIGHTS
The terms on which Debt Securities of any series are convertible into
Common Stock or other securities of the Company will be set forth in the
Prospectus Supplement relating thereto. Such terms will include provisions as to
whether conversion is mandatory or at the option of the Holder thereof and may
include provisions pursuant to which the number of shares of Common Stock or
other securities of the Company to be received by the Holders of Debt Securities
would be subject to adjustment.
GLOBAL DEBT SECURITIES
If any Debt Securities of a series are to be issued in global form, the
Prospectus Supplement relating thereto will describe the circumstances, if any,
under which beneficial owners of interests in any such global Debt Security
("Global Security") may exchange such interests for Debt Securities of such
series and of like tenor and principal amount in any authorized form and
denomination. Principal of and any premium and interest on a Global Security
will be payable in the manner described in the Prospectus Supplement relating
thereto. (Sections 204 and 305)
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<PAGE> 29
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Debt
Securities under the Indentures, may consolidate with or merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to, any
Person, and may permit any Person to merge into, or convey, transfer or lease
its properties and assets substantially as an entirety to, the Company, provided
(i) that any successor Person must be a corporation, partnership, trust or other
entity organized and validly existing under the laws of any domestic
jurisdiction and must assume the Company's obligations on the Debt Securities
and under the Indentures, (ii) that after giving effect to the transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing and
(iii) that certain other conditions are met. Upon any consolidation or merger
into any other Person or any conveyance, transfer or lease of the Company's
assets substantially as an entirety to any Person, the successor Person will
succeed to, and be substituted for, the Company under the Indentures, and the
Company, except in the case of a lease, will be relieved of all obligations and
covenants under the Indentures and the Debt Securities to the extent it was the
predecessor Person. (Article Eight)
MODIFICATION AND WAIVER
Modifications and amendments of the Senior Indenture and the Subordinated
Indenture may be made by the Company and the Trustee under the Applicable
Indenture, only with the consent of the Holders of a majority in aggregate
principal amount of each series of the outstanding Debt Securities issued under
the Applicable Indenture and affected by such modification or amendment unless a
greater percentage of such aggregate principal amount is specified in the
applicable Prospectus Supplement; provided, however, that no such modification
or amendment may, without the consent of each Holder of such Debt Security
affected thereby, (a) change the Stated Maturity of the principal of, or any
instalment of principal of or interest on, any such Debt Security, (b) reduce
the principal amount of, or any premium or interest on, any such Debt Security,
(c) reduce the amount of principal of an Original Issue Discount Security or any
other Debt Security payable upon acceleration of the maturity thereof, (d)
change the place or currency of payment of principal of, or any premium or
interest on, any such Debt Security, (e) impair the right to institute suit for
the enforcement of any payment on or with respect to any such Debt Security, (f)
in the case of the Subordinated Indenture, modify the subordination provisions
in a manner adverse to the Holders of the Subordinated Debt Securities, (g)
reduce the percentage in principal amount of Outstanding Debt Securities of any
series, the consent of whose Holders is required for modification or amendment
of the Applicable Indenture, (h) reduce the percentage in principal amount of
outstanding Debt Securities of any series necessary for waiver of compliance
with certain provisions of the Applicable Indenture or for waiver of certain
defaults or (i) modify such provisions with respect to modification and waiver.
(Section 902 of the Indentures and Section 907 of the Subordinated Indenture)
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may waive compliance by the Company with certain
restrictive provisions of the Applicable Indenture and, if applicable, such Debt
Securities, unless a greater percentage of such aggregate principal amount is
specified in the applicable Prospectus Supplement. (Section 1008) The Holders of
a majority in principal amount of the Outstanding Debt Securities of any series
may waive any past default under the Applicable Indenture, except a default in
the payment of principal, premium or interest and certain covenants and
provisions of the Applicable Indenture and, if applicable, such Debt Securities
which may not be amended without the consent of the Holder of each Outstanding
Debt Security of such series affected. (Section 513)
OUTSTANDING DEBT SECURITIES
The Indentures provide that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given or
taken any direction, notice, consent, waiver or other action under the
Applicable Indenture as of any date, (i) the portion of the principal amount of
an Original Issue Discount Security that will be deemed to be Outstanding for
such purpose will be the amount of the principal thereof that would be due and
payable as of such date upon acceleration of the maturity thereof to such date,
(ii) if, as of such date, the principal amount payable at the Stated Maturity of
a Debt Security is not determinable (for
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<PAGE> 30
example, because it is based on an index), the principal amount of such Debt
Security deemed to be Outstanding as of such date will be an amount determined
in the manner prescribed for such Debt Security and (iii) the portion of the
principal amount of a Debt Security denominated in one or more foreign
currencies or currency units that will be deemed to be Outstanding will be the
U.S. dollar equivalent, determined as of such date in the manner prescribed for
such Debt Security, of the principal amount of such Debt Security (or, in the
case of a Debt Security described in clause (i) or (ii) above, of the amount
described in such clause). Certain Debt Securities, including those for whose
payment or redemption money has been deposited or set aside in trust for the
Holders and those that have been fully defeased, will not be deemed to be
Outstanding. In addition, Debt Securities owned by the Company or any of its
Affiliates will not be deemed to be Outstanding. (Section 101)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide, if such provision is made applicable to the Debt
Securities of any series pursuant to Section 301 of the Applicable Indenture
(which will be indicated in the Prospectus Supplement relating thereto), that
the Company may elect either (A) to defease and be discharged from any and all
its obligations with respect to such Debt Securities (including, in the case of
Subordinated Debt Securities, the subordination provisions which will be
described in the applicable Prospectus Supplement and except for the obligations
to exchange or register the transfer of such Debt Securities, to replace
temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain
an office or agency with respect to the Debt Securities and to hold moneys for
payment in trust) ("defeasance") or (B) to be released from its obligations with
respect to such Debt Securities concerning certain restrictive covenants
(including, in the case of Subordinated Debt Securities, the subordination
provisions which will be described in the applicable Prospectus Supplement)
which are subject to covenant defeasance ("covenant defeasance"), and the
occurrence of certain Events of Default, which are described above in clause (d)
(with respect to such restrictive covenants) and clause (e) under "Events of
Default" and any that may be described in the applicable Prospectus Supplement,
shall no longer be an Event of Default, in each case, upon deposit with the
Applicable Trustee (or other qualifying trustee), in trust for such purpose,
money or U.S. Government Obligations, or both (or Foreign Government Obligations
(as defined) in the case of Debt Securities denominated in foreign currencies),
which, through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of and any premium and interest on such Debt Securities.
As a condition to defeasance or covenant defeasance, the Company must
deliver to the Applicable Trustee an Opinion of Counsel (as specified in the
Applicable Indenture) to the effect that Holders of such Debt Securities will
not recognize gain or loss for federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred. The Company
may exercise its defeasance option with respect to such Debt Securities
notwithstanding its prior exercise of its covenant defeasance option. If the
Company exercises its defeasance option, payment of such Debt Securities may not
be accelerated because of an Event of Default. If the Company exercises its
covenant defeasance option, payment of such Debt Securities may not be
accelerated by reference to the covenants noted under clause (B) above. In the
event the Company omits to comply with its remaining obligations with respect to
such Debt Securities under the Indentures after exercising its covenant
defeasance option and such Debt Securities are declared due and payable because
of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations (or Foreign Government Obligations in the case of Debt
Securities denominated in foreign currencies) on deposit in the defeasance trust
may be insufficient to pay amounts due on the Debt Securities of such series at
the time of the acceleration resulting from such Event of Default. However, the
Company will remain liable in respect of such payments. (Article Thirteen)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed
in accordance with, the law of the State of New York, without regard to
principles of conflicts of laws. (Section 112)
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<PAGE> 31
REGARDING THE TRUSTEE
Continental Bank, National Association, is the Trustee under the Senior
Indenture and the Subordinated Indenture. The Trustee may be deemed to have a
conflicting interest and may be required to resign as Trustee if at the time of
a default under one of the Indentures it is a creditor of the Company. In
addition, the Trustee will be required to resign as Trustee under one of the
Indentures if at the time of default under one Indenture Debt Securities have
been issued under the other Indenture. The Trustee or its affiliates perform
certain commercial banking services for the Company in the ordinary course of
business.
Notices should be directed to 231 South LaSalle Street, Chicago Illinois,
60697, Attn: Corporate Trust Division.
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of certain general terms of
the Company's Preferred Stock to which any Prospectus Supplement may relate.
Certain terms of any series of Preferred Stock offered by any Prospectus
Supplement will be described in the Prospectus Supplement relating thereto. If
so indicated in the Prospectus Supplement, the terms of any series may differ
from the terms set forth below. The description of certain provisions of the
Company's Preferred Stock does not purport to be complete and is subject to and
qualified in its entirety by reference to the provisions of the Company's Second
Restated Articles of Incorporation, as amended (the "Articles"), and the
Certificate of Designation (the "Certificate of Designation") relating to each
particular series of Preferred Stock which will be filed or incorporated by
reference, as the case may be, as an exhibit to the Registration Statement of
which this Prospectus is a part at or prior to the time of the issuance of such
Preferred Stock.
GENERAL
Under the Company's Articles, the Board of Directors of the Company is
authorized, without further stockholder action, to provide for the issuance of
up to 5,000,000 shares of preferred stock (the "Preferred Stock"). The Preferred
Stock may be issued in one or more series, with such designations of titles;
dividend rates; any redemption provisions; special or relative rights in the
event of liquidation, dissolution, distribution or winding up of the Company;
any sinking fund provisions; any conversion provisions; any voting rights
thereof; and any other preferences, privileges, powers, rights, qualifications,
limitations and restrictions, as shall be set forth as and when established by
the Board of Directors of the Company. The shares of any series of Preferred
Stock will be, when issued, fully paid and non-assessable and holders thereof
will have no preemptive rights in connection therewith.
The liquidation preference of any series of Preferred Stock is not
necessarily indicative of the price at which shares of such series of Preferred
Stock will actually trade at or after the time of their issuance. The market
price of any series of Preferred Stock can be expected to fluctuate with changes
in market and economic conditions, the financial condition and prospects of the
Company and other factors that generally influence the market price of
securities.
RANK
Any series of Preferred Stock will, with respect to rights on liquidation,
winding up and dissolution, rank (i) senior to all classes of Common Stock and
to all equity securities issued by the Company, the terms of which specifically
provide that such equity securities will rank junior to such series of Preferred
Stock (the "Junior Liquidation Securities"); (ii) on a parity with all equity
securities issued by the Company, the terms of which specifically provide that
such equity securities will rank on a parity with such series of Preferred Stock
("Parity Liquidation Securities"); and (iii) junior to all equity securities
issued by the Company, the terms of which specifically provide that such equity
securities will rank senior to such series of Preferred Stock (the "Senior
Liquidation Securities"). In addition, any series of Preferred Stock will, with
respect to dividend rights, rank (i) senior to all equity securities issued by
the Company, the terms of which specifically provide that such equity securities
will rank junior to such series of Preferred Stock and, to the extent provided
in the
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<PAGE> 32
applicable Certificate of Designation, to Common Stock, (ii) on a parity with
all equity securities issued by the Company, the terms of which specifically
provide that such equity securities will rank on a parity with such series of
Preferred Stock and, to the extent provided in the applicable Certificate of
Designation, to Common Stock ("Parity Dividend Securities") and (iii) junior to
all equity securities issued by the Company, the terms of which specifically
provide that such equity securities will rank senior to such series of Preferred
Stock. As used in any Certificate of Designation for these purposes, the term
"equity securities" will not include debt securities convertible into or
exchangeable for equity securities.
DIVIDENDS
Holders of each series of Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of the Company out of funds
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the Prospectus Supplement relating to such series of Preferred
Stock. Dividends will be payable to holders of record of Preferred Stock as they
appear on the books of the Company (or, if applicable, the records of the
Depositary referred to below under "Description of Depositary Shares") on such
record dates as shall be fixed by the Board of Directors. Dividends on any
series of Preferred Stock may be cumulative or non-cumulative.
No full dividends may be declared or paid on funds set apart for the
payment of dividends on any series of Preferred Stock unless dividends shall
have been paid or set apart for such payment on the Parity Dividend Securities.
If full dividends are not so paid, such series of Preferred Stock shall share
dividends pro rata with the Parity Dividend Securities.
CONVERSION AND EXCHANGE
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
another series of Preferred Stock or Common Stock or exchangeable for another
series of Preferred Stock, Common Stock or Debt Securities of the Company. The
Common Stock of the Company is described below under "Description of Common
Stock."
REDEMPTION
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Company or the holder thereof and may be subject to
mandatory redemption pursuant to a sinking fund or otherwise upon terms and at
the redemption prices set forth in the Prospectus Supplement relating to such
series.
In the event of partial redemptions of Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be determined
by lot or pro rata, as may be determined by the Board of Directors of the
Company, or by any other method determined to be equitable by the Board of
Directors.
On and after a redemption date, unless the Company defaults in the payment
of the redemption price, dividends will cease to accrue on shares of Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, holders of each series of Preferred Stock that ranks senior to the
Junior Liquidation Securities will be entitled to receive out of assets of the
Company available for distribution to shareholders, before any distribution is
made on any Junior Liquidation Securities, including Common Stock, distributions
upon liquidation in the amount set forth in the Prospectus Supplement relating
to such series of Preferred Stock, plus an amount equal to any accrued and
unpaid dividends. If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the amounts payable with respect to the Preferred
Stock of any series and any other Parity Liquidation Securities are not paid in
full, the holders of the Preferred Stock of such series and the Parity
Liquidation Securities will share ratably in any such distribution of assets of
the Company in proportion to the full
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<PAGE> 33
liquidation preferences to which each is entitled. After payment of the full
amount of the liquidation preference to which they are entitled, the holders of
such series of Preferred Stock will not be entitled to any further participation
in any distribution of assets of the Company.
VOTING RIGHTS
Except as indicated below or in the Prospectus Supplement relating to a
particular series of Preferred Stock or except as expressly required by
applicable law, the holders of shares of Preferred Stock will have no voting
rights.
PREFERRED STOCK OUTSTANDING
As of the date hereof, the Company has issued and outstanding 1,600,000
shares of Series D Convertible Exchangeable Preferred Stock and as of October
15, 1993, 944,668 shares of Series C ESOP Convertible Preferred Stock. The
shares of each issued and outstanding series are fully paid and nonassessable.
The Company has also authorized the Series B Junior Participating Cumulative
Preferred Stock in connection with its preferred stock purchase rights plan. See
"Description of Preferred Share Purchase Rights."
Series D Convertible Exchangeable Preferred Stock. The Series D Convertible
Exchangeable Preferred Stock bears a dividend of $3.875 per share per annum. It
is senior to the Common Stock, the Series C ESOP Convertible Preferred Stock
and, when and if issued, the Series B Junior Participating Cumulative Preferred
Stock, as to the payment of dividends and distributions of assets on
liquidation, dissolution and winding up of the Company.
Such shares provide for a liquidation preference of $50.00 per share, plus
accrued and unpaid dividends.
Holders of Series D Convertible Exchangeable Preferred Stock have no
general voting rights but have the right to vote in certain events.
Whenever dividends have not been paid on such shares or any other class or
series of stock ranking pari passu as to dividends in an aggregate amount equal
to six quarterly dividends (whether or not consecutive), the number of members
of the Company's Board of Directors will be increased by two, and the holders of
such shares, voting separately as a class with the holders of such pari passu
stock with like voting rights, will be entitled to elect such two additional
directors at any meeting of shareholders at which directors are to be elected
held during the period such dividends remain in arrears. Such voting rights will
continue until there are not such dividends in arrears.
The Series D Convertible Exchangeable Preferred Stock may not be redeemed
prior to September 20, 1996 and thereafter may be redeemed by the Company, at
its option, in whole or in part at any time at a redemption price of $52.33 per
share, plus accrued and unpaid dividends, if redeemed prior to September 10,
1997, and at the following redemption prices per share, if redeemed during the
12-month period ending September 9:
<TABLE>
<CAPTION>
PRICE
YEAR PER SHARE
- ---- ---------
<S> <C>
1998........................................................ $ 51.94
1999........................................................ 51.55
2000........................................................ 51.16
2001........................................................ 50.78
2002........................................................ 50.39
</TABLE>
and thereafter at $50 per share plus, in each case, accrued and unpaid
dividends. There is no mandatory redemption or sinking fund obligation with
respect to the Series D Convertible Exchangeable Preferred Stock.
Each holder of Series D Convertible Exchangeable Preferred Stock has the
right, at the holder's option, to convert any or all such shares into Common
Stock at any time at a ratio (subject to adjustment) of 2.778 shares of Common
Stock for each share of Series D Convertible Exchangeable Preferred Stock. The
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<PAGE> 34
conversion rate is further adjusted in the event of certain transactions
involving the Company that would result in a "Fundamental Change" as defined in
the Series D Convertible Exchangeable Preferred Stock.
The Series D Convertible Exchangeable Preferred Stock is exchangeable in
whole but not in part, at the option of the Company on a dividend payment date
for the Series D Convertible Exchangeable Preferred Stock, for Convertible
Subordinated Debentures (the "Debentures"). In such event, the holders of
outstanding Series D Convertible Exchangeable Preferred Stock will receive $50
principal amount of the Debentures for each share of such stock so exchanged.
Such Debentures will be unsecured, subordinated obligations of the Company,
will mature on September 10, 2012, and will pay interest at a rate of 7 3/4% per
annum. Each holder of Debentures will have the right, at the holder's option, to
convert any or all such Debentures into Common Stock at any time at a ratio
(subject to adjustment) of 2.778 shares of Common Stock for each $50 principal
amount of Debentures.
The Debentures will not be redeemable prior to September 20, 1996, and
thereafter may be redeemed by the Company, at its option, in whole or in part,
at any time at a redemption price of 104.65% of the principal amount, plus
accrued and unpaid interest, if redeemed prior to September 10, 1997, and at the
following redemption prices, if redeemed during the 12-month period ending
September 9:
<TABLE>
<CAPTION>
YEAR PRICE
- ---- -------
<S> <C>
1998....................................................... 103.88%
1999....................................................... 103.10%
2000....................................................... 102.33%
2001....................................................... 101.55%
2002....................................................... 100.78%
</TABLE>
and thereafter at 100% of the principal amount plus, in each case, accrued and
unpaid interest. There is no mandatory redemption or sinking fund obligation
with respect to the Debentures.
Series C ESOP Convertible Preferred Stock. The Series C ESOP Convertible
Preferred Stock bears a dividend of $4.78125 per share per annum, subject to
certain adjustments. The shares of Series C ESOP Convertible Preferred Stock are
convertible into shares of Common Stock at a rate of two shares of Common Stock
per share, subject to certain adjustments. The shares may only be issued to a
trustee acting on behalf of any employee stock ownership plan or other employee
benefit plan of the Company and will be automatically converted into Common
Stock in the event of any transfer to a person other than a plan trustee. Such
shares have a liquidation preference of $63.75 per share plus accrued and unpaid
dividends. The Series C ESOP Convertible Preferred Stock is redeemable, in whole
or in part, at the option of the Company at a redemption price per share
currently equal to 104.5% of the liquidation preference, declining by 75 basis
points each January 1, to the liquidation preference of $63.75 per share on and
after January 1, 1999, plus, in each case, accrued and unpaid dividends. Holders
of Series C ESOP Convertible Preferred Stock have full voting rights and vote
together with the Common Stock as one class, each share of the Series C ESOP
Convertible Preferred Stock having such number of votes as equals the number of
shares of Common Stock into which such share could be converted on the record
date for determining the stockholders entitled to vote. The shares of the Series
C ESOP Convertible Preferred Stock are not subject to any sinking fund
provisions and have no preemptive rights. The shares rank junior to the Series D
Convertible Exchangeable Preferred Stock and rank senior to the Series B Junior
Participating Cumulative Preferred Stock and the Common Stock as to the payment
of dividends and distribution of assets on liquidation, dissolution and winding
up of the Company.
In the event the Company is unable to pay dividends on the Series C ESOP
Preferred Stock, the Company is required pursuant to the terms of the ESOP to
make a contribution to the ESOP to satisfy the then current debt service
requirements of the Senior ESOP Note due December 31, 2000 (which obligation is
fully reflected in long-term debt on the Company's balance sheet).
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<PAGE> 35
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below of certain provisions of the Deposit
Agreement (as defined below) and of the Depositary Shares and Depositary
Receipts (as defined below) does not purport to be complete and is subject to
and qualified in its entirety by reference to the forms of Deposit Agreement and
Deposit Receipt relating to the Preferred Stock, included as exhibits to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Company may, at its option, elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In the event such
option is exercised, the Company will issue receipts for Depositary Shares, each
of which will represent a fraction (to be set forth in the Prospectus Supplement
relating to a particular series of Preferred Stock) of a share of a particular
series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). Subject to the terms of the
Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption, conversion
and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary
Receipts will be distributed to those persons purchasing the fractional shares
of Preferred Stock in accordance with the terms of the offering.
Pending the preparation of definitive Depositary Receipts, the Depositary
may, upon the written order of the Company or any holder of deposited Preferred
Stock, execute and deliver temporary Depositary Receipts which are substantially
identical to, and entitle the holders thereof to all the rights pertaining to,
the definitive Depositary Receipts. Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the deposited Preferred Stock to the record
holders of Depositary Shares relating to such Preferred Stock in proportion to
the numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto. If the Depositary determines that it is not feasible to make
such distribution, it may, with the approval of the Company, sell such property
and distribute the net proceeds from such sale to such holders.
REDEMPTION OF STOCK
If a series of Preferred Stock represented by Depositary Shares is to be
redeemed, the Depositary Shares will be redeemed from the proceeds received by
the Depositary resulting from the redemption, in whole or in part, of such
series of Preferred Stock held by the Depositary. The Depositary Shares will be
redeemed by the Depositary at a price per Depositary Share equal to the
applicable fraction of the redemption price per share payable in respect of the
shares of Preferred Stock so redeemed. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same date the number of Depositary Shares representing shares of Preferred Stock
so redeemed. If fewer than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by the Depositary by lot or
pro rata or by any other equitable method as may be determined by the
Depositary.
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<PAGE> 36
WITHDRAWAL OF STOCK
Any holder of Depositary Shares may, upon surrender of the Depositary
Receipts at the corporate trust office of the Depositary (unless the related
Depositary Shares have previously been called for redemption), receive the
number of whole shares of the related series of Preferred Stock and any money or
other property represented by such Depositary Receipts. Holders of Depositary
Shares making such withdrawals will be entitled to receive whole shares of
Preferred Stock on the basis set forth in the related Prospectus Supplement for
such series of Preferred Stock, but holders of such whole shares of Preferred
Stock will not thereafter be entitled to deposit such Preferred Stock under the
Deposit Agreement or to receive Depositary Receipts therefor. If the Depositary
Shares surrendered by the holder in connection with such withdrawal exceed the
number of Depositary Shares that represent the number of whole shares of
Preferred Stock to be withdrawn, the Depositary will deliver to such holder at
the same time a new Depositary Receipt evidencing such excess number of
Depositary Shares.
VOTING DEPOSITED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of any series of
deposited Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such series of Preferred Stock. Each record holder
of such Depositary Shares on the record date (which will be the same date as the
record date for the relevant series of Preferred Stock) will be entitled to
instruct the Depositary as to the exercise of the voting rights pertaining to
the amount of the Preferred Stock represented by such holder's Depositary
Shares. The Depositary will endeavor, insofar as practicable, to vote the amount
of such series of Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable actions that may be deemed necessary by the Depositary in order to
enable the Depositary to do so. The Depositary will abstain from voting shares
of the Preferred Stock to the extent it does not receive specific instructions
from the holder of Depositary Shares representing such Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which materially
and adversely alters the rights of the holders of the Depositary Shares
representing Preferred Stock of any series will not be effective unless such
amendment has been approved by the holders of at least the amount of the
Depositary Shares then outstanding representing the minimum amount of Preferred
Stock of such series necessary to approve any amendment that would materially
and adversely affect the rights of the holders of the Preferred Stock of such
series. Every holder of an outstanding Depositary Receipt at the time any such
amendment becomes effective, or any transferee of such holder, shall be deemed,
by continuing to hold such Depositary Receipt, or by reason of the acquisition
thereof, to consent and agree to such amendment and to be bound by the Deposit
Agreement as amended thereby. The Deposit Agreement automatically terminates if
(i) all outstanding Depositary Shares have been redeemed; or (ii) each share of
Preferred Stock has been converted into other preferred stock or common stock or
has been exchanged for debt securities; or (iii) there has been a final
distribution in respect of the Preferred Stock in connection with any
liquidation, dissolution or winding up of the Company and such distribution has
been distributed to the holders of Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay all charges of the Depositary in connection with the initial deposit of
the relevant series of Preferred Stock and any redemption of such Preferred
Stock. Holders of Depositary Receipts will pay other transfer and other taxes
and governmental charges and such other charges or expenses as are expressly
provided in the Deposit Agreement to be for their accounts.
17
<PAGE> 37
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice
of its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
MISCELLANEOUS
The Depositary will forward all reports and communications from the Company
which are delivered to the Depositary and which the Company is required to
furnish to the holders of the deposited Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstances beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares, Depositary
Receipts or shares of Preferred Stock unless satisfactory indemnity is
furnished. They may rely upon written advice of counsel or accountants, or upon
information provided by holders of Depositary Receipts or other persons believed
to be competent and on documents believed to be genuine.
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 60,000,000 shares of Common Stock. As of
November 30, 1993, 29,452,444 shares of Common Stock were issued and
outstanding, and an aggregate of 1,282,010 shares of Common Stock were reserved
for issuance under the Company's incentive stock plans. The Common Stock is
listed on the New York Stock Exchange and the Pacific Stock Exchange.
The holders of Common Stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. The holders of Common Stock are entitled to one vote per
share on all matters submitted to a vote of shareholders and do not have
cumulative voting rights. Holders of Common Stock are entitled to receive, upon
any liquidation of the Company, all remaining assets available for distribution
to shareholders after satisfaction of the Company's liabilities and the
preferential rights of any preferred stock that may then be issued and
outstanding. The outstanding shares of Common Stock are, and the shares offered
hereby will be, fully paid and nonassessable. The holders of Common Stock have
no preemptive, conversion or redemption rights. The registrar and transfer agent
for the Common Stock is The Bank of New York.
DESCRIPTION OF PREFERRED SHARE PURCHASE RIGHTS
In 1988, the Company's Board of Directors authorized the distribution of
one Preferred Share Purchase Right (a "Right") for each outstanding share of
Common Stock. Each Right entitles the holder thereof to buy one-half of one
one-hundredth of a share of Series B Junior Participating Cumulative Preferred
Stock at a price of $70.
As distributed, the Rights trade together with the Common Stock. They may
be exercised or traded separately only after the earlier to occur of: (i) 10
days following a public announcement that a person or group of persons has
obtained the right to acquire 10% or more of the outstanding Common Stock (20%
in the case of certain institutional investors), or (ii) 10 business days (or
such later date as may be determined by action of the Board of Directors)
following the commencement or announcement of an intent to make a tender offer
or exchange offer which would result in beneficial ownership by a person or
group of persons of 10% or more of the Company's outstanding Common Stock. If
the acquiring person or group of persons acquires 10% or more of the Common
Stock, each Right (other than those held by the acquiror) will entitle
18
<PAGE> 38
its holder to purchase, at the Right's exercise price, shares of Common Stock
having a market value of twice the Right's exercise price. Additionally, if the
Company is acquired in a merger or other business combination, each Right (other
than those held by the surviving or acquiring company) will entitle its holder
to purchase, at the Right's exercise price, shares of the acquiring company's
common stock (or Common Stock of the Company if it is the surviving corporation)
having a market value of twice the Right's exercise price.
Rights may be redeemed at the option of the Board of Directors for $0.005
per Right at any time before a person or group of persons acquires 10% or more
of the Company's Common Stock. The Board may amend the Rights at any time
without shareholder approval. The Rights will expire by their terms on November
14, 1998.
DESCRIPTION OF WARRANTS
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), as well as other types of Warrants to purchase
Securities. Warrants may be issued independently or together with any Securities
and may be attached to or separate from such securities. The Warrants are to be
issued under warrant agreements (each a "Warrant Agreement") to be entered into
between the Company and a bank or trust company, as warrant agent (the "Warrant
Agent"), all as shall be set forth in the Prospectus Supplement relating to
Warrants being offered pursuant thereto.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the debt warrant certificates representing such Debt Warrants, including the
following: (1) the title of such Debt Warrants; (2) the aggregate number of such
Debt Warrants; (3) the price or prices at which such Debt Warrants will be
issued; (4) the currency or currencies, including composite currencies or
currency units, in which the price of such Debt Warrants may be payable; (5) the
designation, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of such Debt Warrants, and the procedures and
conditions relating to the exercise of such Debt Warrants; (6) the designation
and terms of any related Debt Securities with which such Debt Warrants are
issued, and the number of such Debt Warrants issued with each such Debt
Security; (7) the currency or currencies, including composite currencies or
currency units, in which the principal of or any premium or interest on the Debt
Securities purchasable upon exercise of such Debt Warrants will be payable; (8)
the date, if any, on and after which such Debt Warrants and the related Debt
Securities will be separately transferable; (9) the principal amount of Debt
Securities purchasable upon exercise of each Debt Warrant, and the price at
which and the currency or currencies, including composite currencies or currency
units, in which such principal amount of Debt Securities may be purchased upon
such exercise; (10) the date on which the right to exercise such Debt Warrants
will commence, and the date on which such right will expire; (11) the maximum or
minimum number of such Debt Warrants which may be exercised at any time; (12) a
discussion of any material federal income tax considerations; and (13) any other
terms of such Debt Warrants and terms, procedures and limitations relating to
the exercise of such Debt Warrants.
Debt warrant certificates will be exchangeable for new debt warrant
certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the Prospectus Supplement. Prior to the exercise of their Debt Warrants, holders
of Debt Warrants will not have any of the rights of holders of the Debt
Securities purchasable upon such exercise and will not be entitled to payment of
principal of or any premium or interest on the Debt Securities purchasable upon
such exercise.
OTHER WARRANTS
The Company may issue other Warrants. The applicable Prospectus Supplement
will describe the following terms of any such other Warrants in respect of which
this Prospectus is being delivered: (1) the title of such Warrants; (2) the
Securities (which may include Preferred Stock or Common Stock) for which such
Warrants are exercisable; (3) the price or prices at which such Warrants will be
issued; (4) the currency or
19
<PAGE> 39
currencies, including composite currencies or currency units, in which the price
of such Warrants may be payable; (5) if applicable, the designation and terms of
the Preferred Stock or Common Stock with which such Warrants are issued, and the
number of such Warrants issued with each such share of Preferred Stock or Common
Stock; (6) if applicable, the date on and after which such Warrants and the
related Preferred Stock or Common Stock will be separately transferable; (7) if
applicable, a discussion of any material federal income tax considerations; and
(8) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase for cash such principal
amount of Debt Securities or number of shares of Preferred Stock or Common Stock
at such exercise price as shall in each case be set forth in, or be determinable
as set forth in, the Prospectus Supplement relating to the Warrants offered
thereby. Warrants may be exercised at any time up to the close of business on
the expiration date set forth in the Prospectus Supplement relating to the
Warrants offered thereby. After the close of business on the expiration date,
unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Warrants offered thereby. Upon receipt of payment and the
warrant certificate properly completed and duly executed at the corporate trust
office of the Warrant Agent or any other office indicated in the Prospectus
Supplement, the Company will, as soon as practicable, forward the Securities
purchasable upon such exercise. If less than all of the Warrants represented by
such warrants certificate are exercised, a new warrant certificate will be
issued for the remaining Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities being offered hereby in four ways: (i)
directly to purchasers, (ii) through agents, (iii) through underwriters, and
(iv) through dealers.
If one or more underwriters are used in the sale of Securities, the Company
will execute an underwriting agreement with such underwriters setting forth,
among other things, certain terms of the sale and offering.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Prospectus Supplement will describe
the method of distribution of the Securities.
In connection with the sale of Securities, underwriters and agents may
receive compensation both from the Company, in the form of discounts,
concessions or commissions, and from purchasers of Securities for whom they may
act as agents. The underwriters, agents and dealers that participate in the
distribution of Securities may be deemed to be "underwriters" within the meaning
of, and any discounts or commissions received by them and any profit on the
resale of Securities by them may be deemed to be underwriting discounts and
commissions under, the Securities Act. Any such underwriters or agents will be
identified and any such compensation will be described in the Prospectus
Supplement.
Under agreements which may be entered into by the Company, underwriters,
agents and dealers who participate in the distribution of Securities may be
entitled to indemnification by the Company against or in respect of certain
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments required to be made in respect thereof.
Certain of the underwriters, dealers and agents and their associates may
engage in transactions with, and perform services for, the Company in the
ordinary course of business.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as agents to solicit offers by
certain institutions to purchase Debt Securities or Preferred Stock from the
Company at the public offering price set forth in such Prospectus Supplement
pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and
delivery on the date or dates stated in the
20
<PAGE> 40
applicable Prospectus Supplement. Each Contract will be for an amount stated in
the applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
that (i) the purchase by an institution of the Securities covered by its
Contracts will not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject and (ii)
if the Securities are being sold to underwriters, the Company will have sold to
such underwriters such amount specified in the applicable Prospectus Supplement.
Agents and underwriters will have no responsibility in respect of the delivery
or performance of Contracts. A commission indicated in the applicable Prospectus
Supplement will be paid to underwriters and agents soliciting purchases of
Securities pursuant to Contracts accepted by the Company.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, George
N. Bashara, Jr., General Counsel of the Company, is passing upon the validity of
the Securities. On behalf of any underwriters, agents or dealers, Sullivan &
Cromwell, New York, New York, is passing upon certain legal matters in
connection with the Securities. In rendering its opinion, Sullivan & Cromwell
will rely as to matters of Michigan law on the opinion of George N. Bashara, Jr.
INDEPENDENT AUDITORS
The consolidated financial statements and schedules of Federal-Mogul
Corporation and subsidiaries at December 31, 1992 and 1991, and for each of the
three years in the period ended December 31, 1992, appearing in Federal-Mogul
Corporation's Annual Report (Form 10-K) as amended by its Form 8 dated April 19,
1993, and the combined financial statements of TRW Automotive Aftermarket Group
at December 31, 1991 and 1990, and for each of the years then ended, appearing
in Federal-Mogul Corporation's Form 8 dated January 4, 1993 to its Form 8-K
dated October 20, 1992, have been audited by Ernst & Young, independent
auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such consolidated and combined financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
The combined statements of assets and liabilities of Sealed Power
Corporation and Sealed Power Corporation of Canada, Ltd. at December 31, 1992
and 1991 and the related combined statements of revenues and expenses and
changes in equity and cash flows for each of the years then ended, appearing in
Federal-Mogul Corporation's Form 8-K dated November 10, 1993, as amended on Form
8-K/A, dated December 3, 1993 and incorporated herein by reference, have been
audited by Arthur Andersen & Co., independent public accountants, as indicated
in their report with respect thereto, and is included herein in reliance upon
the authority of said firm as experts in giving said reports.
21
<PAGE> 41
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......... S-3
The Company........................... S-4
Use of Proceeds....................... S-9
Capitalization........................ S-9
Price Range of Common Stock and
Dividends........................... S-10
Selected Consolidated Financial
Data................................ S-11
Management's Discussion and
Analysis............................ S-14
Certain Federal Income Tax
Considerations...................... S-15
Certain Special Federal Tax
Considerations for Non-United States
Holders............................. S-16
Underwriting.......................... S-18
PROSPECTUS
Incorporation of Certain Documents by
Reference........................... 2
Available Information................. 3
The Company........................... 3
Use of Proceeds....................... 3
Recent Developments................... 4
Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges
and Preferred Stock Dividends....... 5
Description of Debt Securities........ 6
Description of Preferred Stock........ 12
Description of Depositary Shares...... 16
Description of Common Stock........... 18
Description of Preferred Share
Purchase Rights..................... 18
Description of Warrants............... 19
Plan of Distribution.................. 20
Legal Opinions........................ 21
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[LOGO]
4,000,000 Shares
Common Stock
(without par value)
-------------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------------
CS First Boston
Donaldson, Lufkin & Jenrette
Securities Corporation
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 42
Information contained in this preliminary prospectus supplement is subject
to completion or amendment. This preliminary prospectus supplement and
accompanying prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
[ALTERNATE COVER PAGE]
SUBJECT TO COMPLETION, DATED JANUARY 19, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JANUARY 10, 1994
4,000,000 SHARES
LOGO
COMMON STOCK
(WITHOUT PAR VALUE)
Of the 4,000,000 shares of Common Stock, without par value (the "Common Stock"),
of Federal-Mogul Corporation ("Federal-Mogul" or the "Company") being offered
hereby, 3,400,000 shares are being offered in the United States and Canada by
the U.S. Underwriters (the "U.S. Offering") and 600,000 shares are being
concurrently offered outside the United States and Canada by the Managers (the
"International Offering" and, together with the U.S. Offering, the "Offerings").
The price to the public and underwriting discount and commissions per share are
identical for the Offerings. See "Subscription and Sale."
The Common Stock of Federal-Mogul is listed on the New York Stock Exchange under
the symbol "FMO." On January 18, 1994, the reported last sale price of the
Common Stock on the New York Stock Exchange Composite Transactions Tape was
$33 3/4 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNT PROCEEDS TO
PUBLIC AND COMMISSIONS COMPANY(1)
--------------- --------------- ---------------
<S> <C> <C> <C>
Per Share......................... $ $ $
Total(2).......................... $ $ $
</TABLE>
- ---------------
(1) Before deduction of expenses payable by the Company estimated at $500,000.
(2) The Company has granted the U.S. Underwriters and the Managers an option,
exercisable by the representatives of the U.S. Underwriters for 30 days
from the date of the public offering of the shares of Common Stock offered
hereby, to purchase a maximum of 600,000 additional shares of Common Stock,
in the aggregate, solely to cover overallotments, if any. If the option is
exercised in full, the total Price to Public will be $ ,
Underwriting Discount and Commissions will be $ and Proceeds to
Company will be $ . See "Subscription and Sale."
The shares of Common Stock are offered by the several Managers when, as and if
issued by the Company, delivered to and accepted by the Managers and subject to
their right to reject orders in whole or in part. It is expected that the shares
of Common Stock will be ready for delivery on or about February , 1994.
CS FIRST BOSTON BHF-BANK
DONALDSON, LUFKIN & JENRETTE S.G. WARBURG SECURITIES
SECURITIES CORPORATION
The date of this Prospectus Supplement is February , 1994.
<PAGE> 43
[ALTERNATE PAGE]
THE SHARES OF COMMON STOCK OFFERED HEREBY (THE "INTERNATIONAL SHARES") MAY
NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR CANADA
OR TO ANY U.S. OR CANADIAN PERSON AS PART OF THE DISTRIBUTION OF THE
INTERNATIONAL SHARES. THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT AND
ACCOMPANYING PROSPECTUS AND THE OFFERING OF THE SHARES OF COMMON STOCK IN
CERTAIN JURISDICTIONS MAY BE RESTRICTED BY LAW. PERSONS INTO WHOSE POSSESSION
THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS COME ARE REQUIRED BY
FEDERAL-MOGUL AND THE MANAGERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY
SUCH RESTRICTIONS INCLUDING, WITHOUT LIMITATION, COMPLIANCE WITH THE
RESTRICTIONS ON DISTRIBUTION OF THIS DOCUMENT UNDER THE FINANCIAL SERVICES ACT
OF 1986 OF THE UNITED KINGDOM. SEE "SUBSCRIPTION AND SALE."
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY MANAGER. THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN ANY JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......... S-3
The Company........................... S-4
Use of Proceeds....................... S-9
Capitalization........................ S-9
Price Range of Common Stock and
Dividends........................... S-10
Selected Consolidated Financial
Data................................ S-11
Management's Discussion and
Analysis............................ S-14
Certain Federal Income Tax
Considerations...................... S-15
Certain Special Federal Tax
Considerations for Non-United States
Holders............................. S-16
Subscription and Sale................. S-18
PAGE
----
PROSPECTUS
Incorporation of Certain Documents by
Reference........................... 2
Available Information................. 3
The Company........................... 3
Use of Proceeds....................... 3
Recent Developments................... 4
Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges
and Preferred Stock Dividends....... 5
Description of Debt Securities........ 6
Description of Preferred Stock........ 12
Description of Depositary Shares...... 16
Description of Common Stock........... 18
Description of Preferred Share
Purchase Rights..................... 18
Description of Warrants............... 19
Plan of Distribution.................. 20
Legal Opinions........................ 21
IN CONNECTION WITH THE OFFERINGS, CS FIRST BOSTON CORPORATION ON BEHALF OF
THE U.S. UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 44
[ALTERNATE PAGE]
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , 1994 (the "Subscription Agreement"),
severally and not jointly, agreed with the Company to subscribe and pay for the
following respective numbers of shares of Common Stock (the "International
Shares") as set forth opposite their names:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL
NAME SHARES
---- -------------
<S> <C>
CS First Boston Limited.........................................
Berliner Handels-und Frankfurter Bank...........................
Donaldson, Lufkin & Jenrette Securities Corporation.............
S.G. Warburg Securities Ltd. ...................................
-------
Total......................................................... 600,000
-------
-------
</TABLE>
The Subscription Agreement provides that the obligations of the Managers
are such that, subject to certain conditions precedent, the Managers are
severally committed to take and pay for all of the International Shares if any
are taken. The Managers are entitled to terminate the Subscription Agreement in
certain circumstances prior to the purchase of the International Shares.
The Company has granted to the U.S. Underwriters (as defined below) and the
Managers an option, exercisable by CS First Boston Corporation and Donaldson,
Lufkin & Jenrette Securities Corporation, as representatives (the "U.S.
Representatives") of the U.S. Underwriters, for 30 days after the date of the
initial public offering of the shares of Common Stock pursuant to the U.S.
Offer, to purchase up to 600,000 additional shares of Common Stock (the "Option
Shares") at the initial public offering price less the underwriting discount and
commissions, all as set forth on the cover page of this Prospectus Supplement.
The U.S. Representatives may exercise such option only to cover over-allotments
in the sale of the shares of Common Stock. To the extent that this option to
purchase is exercised, each Manager and U.S. Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
Option Shares being sold to the Managers and the U.S. Underwriters as the number
set forth next to such Manager's name in the preceding table bears to the total
number of shares in such table and as the number set forth next to such U.S.
Underwriter's name in the corresponding table in the prospectus supplement
relating to the U.S. Offering bears to the total number of shares in such table.
The Company has been advised by CS First Boston Limited, on behalf of the
Managers, (i) that the Managers propose to offer the International Shares
outside the United States and Canada initially at the offering price set forth
on the cover page of this Prospectus Supplement and through the Managers to
certain dealers at such price less a concession of $ per share of Common Stock
and (ii) that the Managers and such dealers may reallow a concession of $ per
share on sales to certain other dealers.
The Company has entered into a terms agreement dated , 1994 and
related underwriting agreement (collectively, the "Underwriting Agreement") with
the U.S. Underwriters for the concurrent offer and sale of the U.S. Shares in
the United States and Canada. The closing of the U.S. Offering is a condition to
the closing of the International Offering, and vice versa.
The public offering price and the aggregate underwriting discount and
commissions per share for the International Offering and the concurrent U.S.
Offering are identical. Pursuant to an Agreement Between the U.S. Underwriters
and Managers (the "Agreement Between") relating to the Offerings, changes in the
public offering price, the aggregate underwriting discount and commissions per
share and reallowance per share will be made only upon the mutual agreement of
the U.S. Representatives, on behalf of the U.S. Underwriters, and CS First
Boston Limited, on behalf of the Managers.
S-18
<PAGE> 45
[ALTERNATE PAGE]
Pursuant to the Agreement Between, each of the Managers has agreed or will
agree that, as part of the distribution of the International Shares and subject
to certain exceptions, (a) it is not purchasing any shares of Common Stock for
the account of any U.S. or Canadian Person (as defined below) and (b) it has not
offered or sold, and will not offer or sell, directly or indirectly, any shares
of Common Stock or distribute any prospectus relating to the Common Stock, in
the United States or Canada or to any U.S. or Canadian Person nor to any dealer
who does not so agree. Each of the U.S. Underwriters has agreed or will agree
that, as part of the distribution of the U.S. Shares and subject to certain
exceptions, (i) it is not purchasing any shares of Common Stock for the account
of anyone other than a U.S. or Canadian Person and (ii) it has not offered or
sold, and will not offer or sell, directly or indirectly, any shares of Common
Stock, or distribute any prospectus relating to the Common Stock, to any Person
outside the United States or Canada or to anyone other than a U.S. or Canadian
Person nor to any dealer who does not so agree. The foregoing limitations do not
apply to stabilization transactions or to transactions between the U.S.
Underwriters and the Managers pursuant to the Agreement Between. As used herein,
"United States" means the United States of America (including the States and the
District of Columbia), its territories and possessions and other areas subject
to its jurisdiction, "Canada" means Canada, its provinces, territories and
possessions and other areas subject to its jurisdiction, and "U.S. or Canadian
Person" means a citizen or resident of the United States or Canada, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or Canada (other than a foreign branch of such an
entity), and includes any United States or Canadian branch of a non-Canadian
Person.
Pursuant to the Agreement Between, sales may be made between the Managers
and the U.S. Underwriters of such number of shares of Common Stock as may be
mutually agreed upon. The price of any shares so sold shall be the public
offering price, less any such amount as may be mutually agreed upon by the U.S.
Representatives and CS First Boston Limited, on behalf of the Managers, but such
amount will not exceed the selling concession applicable to such shares. To the
extent there are sales between the Managers and the U.S. Underwriters pursuant
to the Agreement Between, the number of shares of Common Stock initially
available for sale by the U.S. Underwriters or by the Managers may be more or
less than the amount appearing on the cover page of this Prospectus Supplement.
Neither the U.S. Underwriters nor the Managers are obligated to purchase from
the other any unsold shares of Common Stock.
Each Manager has represented and agreed or will represent and agree that
(i) it has not offered or sold and will not offer or sell in the United Kingdom,
by means of any document, any International Shares other than to person whose
ordinary business is to buy or sell shares or debentures (whether as principal
or agent) or in circumstances which do not constitute an offer to the public
within the meaning of the Companies Act 1985; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act of 1986 with
respect to anything done by it in relation to the International Shares in, from
or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the International Shares
if that person is of a kind described in Article 9(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1988 (as amended by
Article 6(c) of the Financial Services Act of 1986 (Investment Advertisements)
Order 1992) or is a person to whom the document may otherwise lawfully be issued
or passed on.
The Company has agreed that, for a period of 120 days after the date of
this Prospectus Supplement, it will not, without the prior written consent of CS
First Boston Corporation, on behalf of the U.S. Representatives and the
Managers, directly or indirectly, offer, sell, contract or sell or otherwise
dispose of any Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock other than to the U.S. Underwriters or the
Managers pursuant to the Underwriting and Subscription Agreements and other than
(a) issuances and sales of Common Stock in accordance with the terms of the
Company's Preferred Stock Purchase Rights or pursuant to any employee or
director stock option plan, stock ownership plan, stock bonus plan, stock
compensation plan, dividend reinvestment plan of the Company as in effect on the
date of this Prospectus Supplement and (b) issuances of Common Stock issuable
upon the conversion of securities or the exercise of warrants outstanding at the
date of this Prospectus Supplement.
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The Company has agreed to indemnify the U.S. Underwriters and the Managers
against certain liabilities, including civil liabilities under the Securities
Act of 1933, as amended, or to contribute to payments that the U.S. Underwriters
and the Managers may be required to make in respect thereof.
Certain of the U.S. Underwriters and Managers and their affiliates have
from time to time performed, and continue to perform, various investment banking
and commercial banking services for the Company, for which customary
compensation has been received.
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