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SUBJECT TO COMPLETION DATED AUGUST 5, 1994
PRELIMINARY PROSPECTUS SUPPLEMENT Filed Pursant to Rule 424(b)(5)
(To Prospectus dated August 5, 1994) Registration Statement 33-54717
$200,000,000
FEDERAL-MOGUL CORPORATION
MEDIUM-TERM NOTES, SERIES A
WITH MATURITIES OF NINE MONTHS OR MORE FROM DATE OF ISSUE
Federal-Mogul Corporation (the "Company") may offer from time to time
its Medium-Term Notes, Series A (the "Notes"), in an aggregate principal amount
not to exceed $200,000,000 (or, if any Notes are to be Original Issue Discount
Notes, or Indexed Notes (as each such term is defined under "Description of
Notes") or denominated or payable in one or more foreign currencies or currency
units), such principal amount as shall result in an initial aggregate offering
price equivalent to no more than $200,000,000), subject to reduction under
certain circumstances as a result of the sale of other Securities of the
Company under the Prospectus to which this Prospectus Supplement relates. The
Notes will be offered at varying maturities of nine months or more from their
dates of issue and may be subject to redemption at the option of the Company or
repayment at the option of the Holder, in each case, in whole or in part, prior
to the maturity date (as further defined below, "Stated Maturity") thereof as
set forth in a Pricing Supplement to this Prospectus Supplement (a "Pricing
Supplement"). Each Note will be denominated in United States dollars or in
other currencies or currency units (the "Specified Currency") as may be
designated by the Company and set forth in the applicable Pricing Supplement.
See "Important Currency Information" and "Currency Risks". The Notes may be
issued as "Amortizing Notes," "Original Issue Discount Notes," "Extendible
Notes," "Renewable Notes" or "Indexed Notes." See "Description of Notes."
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, THIS
PROSPECTUS SUPPLEMENT OR ANY SUPPLEMENT THERETO. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Agent's Commission or Proceeds to
Price to Public(1) Discount(2) Company(2)(3)
<S> <C> <C> <C>
Per Note . . . . . . . . 100% .125% - .750% 99.250% - 99.875%
Total . . . . . . . . . $200,000,000 $250,000 - $1,500,000 $198,500,000 - $199,750,000
</TABLE>
(1) Unless otherwise specified in the Pricing Supplement relating thereto,
each Note will be issued at 100% of the principal amount thereof.
(2) The Company will pay Lehman Brothers, Lehman Brothers Inc. (including
its affiliate, Lehman Government Securities Inc.), CS First Boston
Corporation, Salomon Brothers Inc and Chemical Securities Inc. (each an
"Agent," and collectively, the "Agents") a commission, in the form of a
discount ranging from .125% to .750%, of the principal amount of any
Note, depending on its Stated Maturity, sold through such Agent, except
that the commission payable by the Company to the Agents with respect to
Notes with maturities of greater than thirty years will be negotiated at
the time the Company issues such Notes. Any Agent, acting as principal,
may also purchase Notes at a discount for resale to one or more
investors or one or more broker-dealers (acting as principal for
purposes of resale) at varying prices related to prevailing market
prices at the time of resale, as determined by such Agent, or, if so
agreed, at a fixed public offering price. The Company has agreed to
reimburse the Agents for expenses, estimated at $100,000. The Company
has agreed to indemnify the Agents against certain liabilities,
including liabilities under the applicable Federal and state securities
laws.
(3) Before deducting offering expenses payable by the Company estimated at
$410,000.
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit offers
to purchase the Notes. The Company has reserved the right to sell Notes
directly to investors on its own behalf, and on such sales no commissions will
be paid. Unless otherwise indicated in the applicable Pricing Supplement, the
Notes will not be listed on any securities exchange, and there can be no
assurance that the Notes will be sold or that there will be a secondary market
for the Notes. The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company or the Agent that solicits any
offer to purchase Notes may reject any offer to purchase Notes in whole or in
part. See "Plan of Distribution."
LEHMAN BROTHERS
CS FIRST BOSTON
SALOMON BROTHERS INC
CHEMICAL SECURITIES INC.
The Date of this Prospectus Supplement is August __, 1994.
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Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in United States dollars will be issued only in denominations of
$1,000 or any amount in excess thereof which is an integral multiple of $1,000.
If the Notes are to be denominated in a foreign currency or units of a foreign
composite currency, the authorized denominations and currency exchange rate
information will be set forth in the applicable Pricing Supplement. Unless
otherwise specified in the applicable Pricing Supplement, each Note will be
registered and will be issued either in (i) book-entry form and represented by a
global certificate (a "Global Security") registered in the name of a nominee of
The Depository Trust Company, as Depositary (the "Depositary") (each such Note
represented by a Global Security being referred to herein as a "Book-Entry
Note"), or (ii) if specified in the applicable Pricing Supplement, in
certificated form and represented by certificates issued in definitive form
("Certificated Notes") and registered in the name of each Holder. Interests in
Book-Entry Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary (with respect to beneficial
interests of participants) and its participants. Owners of beneficial interests
in Book-Entry Notes will be entitled to physical delivery of Certificated Notes
only under the limited circumstances described herein and will not be considered
the Holders thereof. See "Description of Notes--Book-Entry System."
Except as otherwise set forth herein, the interest rate or interest rate
formula, if any, currency or currency unit, issue price, Stated Maturity,
redemption provisions, if any, and other terms for each Note will be established
by the Company at the date of issuance of such Note and will be set forth in the
applicable Pricing Supplement. Interest rates and interest rate formulas are
subject to change by the Company, but, except as otherwise set forth herein, no
such change will affect the interest rate on, or interest rate formula for, any
Note theretofore issued or which the Company has agreed to sell. Unless
otherwise located in the applicable Pricing Supplement, each Note will bear
interest at a fixed rate (a "Fixed Rate Note"), which may be zero in the case of
certain Notes issued at a price representing a discount from the principal
amount payable at Stated Maturity, or at rates determined by reference to the
Commercial Paper Rate, Federal Funds Rate, CD Rate, LIBOR, Prime Rate, Treasury
Rate, CMT Rate, 11th District Cost of Funds Rate, J.J. Kenny Rate (each as
defined below) or such other interest rate formula (a "Floating Rate") as may be
designated in an accompanying Pricing Supplement, as adjusted by the Spread
and/or Spread Multiplier, if any, applicable to such Notes. See "Description of
Notes."
Unless otherwise specified in the applicable Pricing Supplement,
interest on each Fixed Rate Note other than an Amortizing Note will accrue from
its Original Issue Date (as defined below), or the last date to which interest
has been paid or duly provided for, and will be payable semiannually on each
June 15 and December 15 and at Maturity.
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED HEREBY AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RECENT DEVELOPMENTS
On July 20, 1994, the Company announced its earnings for the six-month
period ended June 30, 1994. The following table sets forth actual results
for the six months ended June 30, 1994 and pro forma information for the six
months ended June 30, 1993. The selected pro forma combined condensed
statement of earnings data for the six months ended June 30, 1993 set forth
below give effect to the SPR Acquisition as if it had occurred at the beginning
of the period. This information should be read in conjunction with the Pro
Forma Combined Condensed Financial Statements included in the Form 8-K/A dated
February 11, 1994 to the Current Report dated November 10, 1993, and
incorporated by reference herein. See "Recent Developments" in the Prospectus.
SELECTED PRO FORMA AND ACTUAL COMBINED CONDENSED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1993 1994
---------- ----------
(PRO FORMA) (ACTUAL)
<S> <C> <C>
Combined Statement of Earnings Data
Net Sales ................................................. $897 $935
Earnings before taxes ..................................... 42(1) 57
Net earnings .............................................. 28(1) 35
Earnings per common share:
Primary ................................................. $ .93(1) $.89(2)
Fully diluted ........................................... .85(1) .84(2)
</TABLE>
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(1) Includes a pretax gain on the sale of Westwind of $4.7 million, or $0.17
per share on a primary basis and $0.15 per share on a fully diluted
basis.
(2) Reflects the issuance of 5,750,000 shares of common stock in February
1994.
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DESCRIPTION OF NOTES
The Notes will be issued under an Indenture, dated as of August __, 1994
(the "Indenture"), between the Company and Continental Bank, as trustee (the
"Trustee"). The following summaries of certain provisions of the Notes and the
Indenture hereby supplement the description of the general terms and conditions
of Debt Securities set forth under the heading "Description of Debt Securities"
in the Prospectus, to which description reference is hereby made. Such summaries
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Notes and the Indenture.
Capitalized terms set forth below that are not otherwise defined herein shall
have the meanings specified in the Indenture and/or the Notes. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will have the terms
described below. Notwithstanding the following description, any provisions with
respect to the determination of an interest rate basis, the specifications of
interest rate basis, calculation of the interest rate applicable to, or the
principal payable at Maturity on, any Note, its Interest Payment Dates or any
other matter relating thereto may be modified by the terms as specified under
"Other Provisions" on the face of such Note, or in an addendum relating thereto
if so specified on the face thereof, and in the applicable Pricing Supplement.
GENERAL
The Notes constitute a single series of debt securities for purposes of
the Indenture (the "Debt Securities") and are limited to $200,000,000 principal
amount (or, if any Notes are to be Original Issue Discount Notes, or are to be
denominated with amounts payable in respect of principal of or any premium or
interest on the Notes to be determined by reference to the value, rate or price
of one or more specified currencies ("Indexed Notes") or are to be denominated
or payable in one or more foreign currencies or currency units, such principal
amount as shall result in an aggregate initial offering price equivalent to no
more than $200,000,000), subject to reduction under certain circumstances as a
result of the sale of other Securities of the Company under the accompanying
Prospectus. In this Prospectus Supplement, the accompanying Prospectus and any
Pricing Supplement, reference to "U.S. dollars", "U.S. $", "$", "dollars" or
"cents" are to United States currency, unless otherwise indicated in the
applicable Pricing Supplement. The Company may from time to time sell additional
series of Debt Securities, including additional series of medium-term notes.
For a description of the rights attaching to different series of Securities
(including the Notes) under the Indenture, see "Description of Debt Securities"
in the Prospectus.
The Notes will be offered on a continuing basis and each Note will
mature nine months or more from its date of issue, as selected by the initial
purchaser and agreed to by the Company, and may be subject to redemption at the
option of the Company or repayment at the option of the Holder prior to Stated
Maturity as set forth below under "Optional Redemption" and "Repayment at the
Noteholders' Option." Each Note will be denominated in U.S. dollars or in such
other Specified Currency as is specified in the applicable Pricing Supplement.
Each Note will be either (i) a Fixed Rate Note, which may bear interest at a
rate of zero in the case of a Note issued at an Issue Price (as defined below)
representing a discount from the principal amount payable at Stated Maturity (a
"Zero Coupon Note"), or (ii) a Floating Rate Note which will bear interest at a
rate determined by reference to the interest rate basis or combination of
interest rate bases specified in the applicable Pricing Supplement, which may be
adjusted by a Spread and/or Spread Multiplier (each as defined below).
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note only in fully registered form without coupons. Except as set
forth below under "Book-Entry System," Book-Entry Notes will not be exchangeable
for Certificated Notes. Unless otherwise specified in the applicable Pricing
Supplement, Notes will be issuable in U.S. dollars in denominations of $1,000
and integral multiples of $1,000 in excess thereof. The
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authorized denominations of any Note denominated in other than U.S. dollars
will be the amount of the Specified Currency for such Note equivalent, at the
noon buying rate in The City of New York for cable transfers for such
Specified Currency as certified for customs purposes by the Federal Reserve
Bank of New York (the "Market Exchange Rate") on the first Business Day (as
defined below) in The City of New York and the country issuing such currency
(or, in the case of European Currency Units ("ECUs"), Brussels) next preceding
the date on which the Company accepts the offer to purchase such Note, to U.S.
$1,000, or such other minimum denomination as may be allowed or required from
time to time by any relevant central bank or equivalent governmental body,
however designated, or by any laws or regulations applicable to the Notes or
to such Specified Currency. The Notes will be issued in integral multiples of
1,000 units of any such Specified Currency in excess of their minimum
denominations. If any of the Notes are to be denominated in a Specified
Currency other than U.S. dollars, or if the principal of and premium, if any,
and any interest on any of the Notes not denominated in U.S. dollars is to be
payable at the option of the Holder or the Company in U.S. dollars, the
applicable Pricing Supplement will provide additional information, including
applicable exchange rate information, pertaining to the terms of such notes
and other matters of interest to the Holders thereof.
Interest rates offered by the Company with respect to the Notes may
differ depending upon the aggregate principal amount of Notes purchased in any
transaction, and the Company expects generally to distinguish, with respect to
such offered rates, between purchases which are for less than, and purchases
which are equal to or greater than, $200,000. Interest rates, interest rate
formulae and other variable terms of the Notes are subject to change by the
Company from time to time, but no such change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
As used herein, "Business Day" means, unless otherwise specified in the
applicable Pricing Supplement, any Monday, Tuesday, Wednesday, Thursday or
Friday that in the Place of Payment is not a day on which banking institutions
are authorized or required by law, regulation or executive order to close, and
"Market Day" means, with respect to Notes as to which LIBOR (as defined below)
is an applicable Base Rate (as defined below), a Business Day which is also a
London Business Day. As used herein, "London Business Day" means any day (a) on
which dealings in deposits in the Specified Currency are transacted in the
London interbank market, (b) if the Designated LIBOR Currency is other than the
ECU, on which dealings in deposits in such Designated LIBOR Currency are
transacted in the London interbank market or (c) if the Designated LIBOR
Currency is the ECU, that is not designated as an ECU Non-Settlement Day by the
ECU Banking Association in Paris or otherwise generally regarded in the ECU
interbank market as a day on which payments on ECUs shall not be made.
"Index Maturity" means, with respect to a Floating Rate Note, the period
to maturity of the instrument or obligation on which the interest rate formula
is based, as specified in the applicable Pricing Supplement.
The Pricing Supplement relating to each Note will describe the following
terms, as applicable: (i) the Specified Currency with respect to such Note (and,
if such Specified Currency is other than U.S. dollars, certain other terms
relating to such Note, including the authorized denomination); (ii) the price
(expressed as a percentage of the aggregate principal amount thereof) at which
such Note will be issued (the "Issue Price"); (iii) the date on which such Note
will be issued (the "Original Issue Date"); (iv) the Stated Maturity of such
Note and whether the Stated Maturity may be extended by the Company, and if so,
the Extension Periods and the Final Maturity Date (each as defined below); (v)
whether such Note is a Fixed Rate Note or a Floating Rate Note; (vi) whether
such Note is an Amortizing Note (as defined below), and if so, the basis or
formula for the amortization of principal and the payment dates for periodic
principal payments; (vii) if such Note is a Fixed Rate Note, the rate per annum
at which such Note will bear interest, if any, the Interest Payment Date or
Dates and, if so specified in the applicable Pricing Supplement, that such rate
may be changed by the Company prior to the Stated Maturity and, if so, the basis
or formula for such change, if any; (viii) if such Note is a Floating Rate Note,
the Base Rate, the Initial Interest Rate, if available, the Interest Reset Date
or Dates, the Calculation Date or Dates, the Maximum Interest Rate, if any, the
Minimum Interest Rate, if any, the Spread, if any, the Spread Multiplier, if any
(all as defined below), the Interest Payment Date or Dates, the Index Maturity,
and any other terms relating to the particular method of calculating the
interest rate for such Note and, if so specified in the applicable Pricing
Supplement, that any such Spread and/or Spread Multiplier may be changed by the
Company prior to the Stated Maturity and, if so, the basis
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or formula for such change, if any; (ix) whether such Note is an Original
Issue Discount Note (as defined below), and if so, the yield to maturity; (x)
the regular record date or dates (a "Regular Record Date") if other than as
set forth below with respect to Fixed Rate Notes and Floating Rate Notes; (xi)
whether such Note may be redeemed at the option of the Company, or repaid at
the option of the Holder, on or after a specified date prior to the Stated
Maturity at a specified price or prices (which may include a premium),
together with accrued interest to the date of redemption or repayment;
(xii) whether such Note is an Indexed Note, and if so, the specific terms
thereof; (xiii) certain specified United States Federal income tax
consequences of the purchase, ownership and disposition of such Note, if
applicable; and (xiv) any other term of such Note not inconsistent with the
provisions of the Indenture.
The Notes and the Indenture do not limit the aggregate principal amount
of other indebtedness or securities which may be issued by the Company. The
Notes will be unsecured and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Company, provided that such other unsecured
and unsubordinated indebtedness may contain covenants, events of default and
other provisions which are different from or which are not contained in the
Notes.
PAYMENT OF INTEREST AND PRINCIPAL
Payments of interest and principal (and premium, if any) to Beneficial
Owners (as defined below) of Book-Entry Notes are expected to be made in
accordance with the Depositary's and its participants' procedures in effect from
time to time as described below under "Book-Entry System."
Unless otherwise specified in the applicable Pricing Supplement,
payments of interest and, in the case of Amortizing Notes, principal with
respect to any Certificated Note (other than interest and, in the case of
Amortizing Notes, principal payable at Maturity) will be made by mailing a check
to the Holder at the address of such Holder appearing on the security register
for the Notes on the applicable Regular Record Date. Notwithstanding the
foregoing, at the option of the Company, all payments of interest and, in the
case of Amortizing Notes, principal on the Notes may be made by wire transfer of
immediately available funds to an account at a bank located within the United
States as designated by each Holder not less than 15 calendar days prior to the
applicable Interest Payment Date. Notwithstanding the foregoing, a Holder of
$10 million or more in aggregate principal amount of Notes of like tenor and
terms with the same Interest Payment Date may demand payment by wire transfer
but only if appropriate payment instructions have been received in writing by
the Paying Agent, not less than 15 calendar days prior to the applicable
Interest Payment Date. In the event that payment is so made in accordance with
instructions of the Holder, such wire transfer shall be deemed to constitute
full and complete payment of such interest and principal on the Notes. Payment
of the principal of (and premium, if any) and interest due with respect to any
Certificated Note at Maturity will be made in immediately available funds upon
surrender of such Note at the principal office of the Paying Agent in Chicago,
Illinois accompanied by wire transfer instructions, provided that the
Certificated Note is presented to the Paying Agent in time for the Paying Agent
to make such payments in such funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement,
payments of interest and principal (and premium, if any) with respect to any
Note to be made in a Specified Currency other than U.S. dollars will be made by
wire transfer to such account with a bank located in the country issuing the
Specified Currency (or, with respect to Notes denominated in ECUs, Brussels) or
other jurisdiction acceptable to the Company and the Trustee as shall have been
designated at least 15 days prior to the Interest Payment Date or Maturity, as
the case may be, by the Holder of such Note on the relevant Regular Record Date
or at Maturity, provided that, in the case of payment of principal (and premium,
if any) and any interest due at Maturity, the Note is presented to the Paying
Agent in time for the Paying Agent to make such payments in such funds in
accordance with its normal procedures. Such designation shall be made by filing
the appropriate information with the Trustee at its Corporate Trust Office, and,
unless revoked, any such designation made with respect to any Note by a Holder
will remain in effect with respect to any further payments with respect to such
Note payable to such Holder. If a payment with respect to any such Note cannot
be made by wire transfer because the required designation has not been received
by the Trustee on or
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before the requisite date or for any other reason, a notice will be mailed to
the Holder at its registered address requesting a designation pursuant to
which such wire transfer can be made and, upon the Trustee's receipt of such a
designation, such payment will be made within 15 days of such receipt. The
Company will pay any administrative costs imposed by banks in connection with
making payments by wire transfer, but any tax, assessment or governmental
charge imposed upon payments will be borne by the Holders of the Notes in
respect of which such payments are made.
If so specified in the applicable Pricing Supplement, except as provided
below, payments of interest and principal (and premium, if any) with respect to
any Note denominated in other than U.S. dollars will be made in U.S. dollars if
the Holder of such Note on the relevant Regular Record Date or at Maturity, as
the case may be, has transmitted a written request for such payment in U.S.
dollars to the Paying Agent at its principal office on or prior to such Regular
Record Date or the date 15 days prior to Maturity, as the case may be. Such
request may be delivered by mail, by hand or by cable, telex or any other form
of facsimile transmission. Any such request made with respect to any Note by a
Holder will remain in effect with respect to any further payments of interest
and principal (and premium, if any) with respect to such Note payable to such
Holder, unless such request is revoked by written notice received by the Paying
Agent on or prior to the relevant Regular Record Date or the date 15 days prior
to Maturity, as the case may be (but no such revocation may be made with respect
to payments made on any such Note if an Event of Default has occurred with
respect thereto or upon the giving of a notice of redemption). Holders of Notes
denominated in other than U.S. dollars whose Notes are registered in the name of
a broker or nominee should contact such broker or nominee to determine whether
and how an election to receive payments in U.S. dollars may be made.
The U.S. dollar amount to be received by a Holder of a Note denominated
in other than U.S. dollars who elects to receive payments in U.S. dollars will
be based on the highest indicated bid quotation for the purchase of U.S. dollars
in exchange for the Specified Currency obtained by the Currency Determination
Agent (as defined below) at approximately 11:00 A.M., New York City time, on the
second Market Day next preceding the applicable payment date (the "Conversion
Date") from the bank composite or multicontributor pages of the Quoting Source
for three (or two if three are not available) major banks in The City of New
York. The first three (or two) such banks selected by the Currency
Determination Agent which are offering quotes on the Quoting Source will be
used. If fewer than two such bid quotations are available at 11:00 A.M., New
York City time, on the second Market Day next preceding the applicable payment
date, such payment will be based on the Market Exchange Rate as of the second
Market Day next preceding the applicable payment date. If the Market Exchange
Rate for such date is not then available, such payment will be made in the
Specified Currency. As used herein, the "Quoting Source" means Reuters Monitor
Foreign Exchange Service, or if the Currency Determination Agent determines that
such service is not available, Telerate Monitor Foreign Exchange Service, or if
the Currency Determination Agent determines that neither service is available,
such comparable display or other comparable manner of obtaining quotations as
shall be agreed between the Company and the Currency Determination Agent. All
currency exchange costs associated with any payment in U.S. dollars on any such
Note will be borne by the Holder thereof by deductions from such payment. The
currency determination agent (the "Currency Determination Agent") with respect
to any Notes will be specified in the applicable Pricing Supplement for such
Notes.
If payment in respect of a Note is required to be made in any currency
unit (e.g. ECUs) and such currency unit is unavailable, in the good faith
judgment of the Company, due to the imposition of exchange controls or other
circumstances beyond the Company's control, then all payments in respect of such
Note shall be made in U.S. dollars until such currency unit is again available.
The amount of each payment of U.S. dollars shall be computed on the basis of the
equivalent of the currency unit in U.S. dollars, which shall be determined by
the Currency Determination Agent on the following basis. The component
currencies of the currency unit for this purpose (the "Component Currencies")
shall be the currency amounts that were components of the currency unit as of
the Conversion Date. The equivalent of the currency unit in U.S. dollars shall
be calculated by aggregating the U.S. dollar equivalents of the Component
Currencies. The U.S. dollar equivalent of each of the Component Currencies
shall be determined by the Currency Determination Agent on the basis of the
Market Exchange Rate for each such Component Currency as of the Conversion Date.
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If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above made by the Currency Determination
Agent shall be at its sole discretion and shall, in the absence of manifest
error, be conclusive for all purposes and binding on Holders of Notes.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described in this Prospectus Supplement under "Description of
Notes--Events of Default," the amount of principal due and payable with respect
to such Note shall be the Amortized Face Amount of such Note as of the date of
such declaration. The "Amortized Face Amount" of an Original Issue Discount
Note that does not bear stated interest shall be an amount equal to the sum of
(i) the principal amount of such Note multiplied by the Issue Price (expressed,
for this purpose, as a percentage of the principal amount of the Note) set forth
in the applicable Pricing Supplement plus (ii) the portion of the difference
between the dollar amount determined pursuant to the preceding clause (i) and
the principal amount of such Note that has accrued at the yield to maturity set
forth in the Pricing Supplement (computed in accordance with generally accepted
financial practices) to such date of declaration, but in no event shall the
Amortized Face Amount of an Original Issue Discount Note exceed its principal
amount.
INTEREST AND INTEREST RATES
Each Note other than certain Original Issue Discount Notes will bear
interest from its Original Issue Date or from the most recent Interest Payment
Date to which interest on such Note has been paid or duly provided for at a
fixed rate or rates per annum, or at a rate or rates per annum determined
pursuant to a Base Rate or Rates stated therein and in the applicable Pricing
Supplement that may be adjusted by a Spread and/or Spread Multiplier, until the
principal thereof is paid or made available for payment. Interest will be
payable on each Interest Payment Date and at Maturity. "Maturity" means the
date on which the principal of a Note becomes due and payable in full in
accordance with its terms and the terms of the Notes and the Indenture, whether
at Stated Maturity (as defined above) or earlier by declaration of acceleration,
call for redemption, repayment or otherwise. Interest (other than defaulted
interest which may be paid on a special record date, as described above) will be
payable to the Holder at the close of business on the Regular Record Date next
preceding such Interest Payment Date; provided, however, that interest payable
at Maturity will be payable to the person to whom principal shall be payable.
The first payment of interest on any Note originally issued between a Regular
Record Date for such Note and the succeeding Interest Payment Date will be made
on the Interest Payment Date following the next succeeding Regular Record Date
for such Note to the Holder on such next Regular Record Date.
Interest rates, Base Rates, Spreads and Spread Multipliers are subject
to change by the Company from time to time but no such change will affect any
Note theretofore issued or which the Company has agreed to sell. The Interest
Payment Dates and the Regular Record Dates for each Fixed Rate Note shall be as
described below under "Fixed Rate Notes." The Interest Payment Dates for each
Floating Rate Note shall be as described below under "Floating Rate Notes" and
in the applicable Pricing Supplement, and the Regular Record Dates for a
Floating Rate Note will be the fifteenth day (whether or not a Market Day) next
preceding each Interest Payment Date.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date at
the annual rate or rates stated thereon and in the applicable Pricing
Supplement. Payments of interest on any Fixed Rate Note with respect to any
Interest Payment Date will include interest accrued from and including the
Original Issue Date, or the next preceding
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Interest Payment Date, to but excluding the applicable Interest Payment Date
or the date of Maturity. Fixed Rate Notes may bear one or more annual rates
of interest during the periods or under the circumstances specified therein
and in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, interest on the Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
Unless otherwise specified in an applicable Pricing Supplement, the
Interest Payment Dates for the Fixed Rate Notes other than Amortizing Notes will
be June 15 and December 15 of each year, and the Regular Record Dates will be
May 31 and November 30 (whether or not a Business Day) of each year. Unless
otherwise specified in the applicable Pricing Supplement, the Regular Record
Dates with respect to Fixed Rate Amortizing Notes will be the 15th day (whether
or not a Business Day) next preceding each Interest Payment Date. Unless
otherwise specified in the applicable Pricing Supplement, payments of principal
and interest on Fixed Rate Amortizing Notes will be made either quarterly on
each March 15, June 15, September 15 and December 15 or semiannually on each
June 15 and December 15, as set forth in the applicable Pricing Supplement, and
at Maturity. If the Interest Payment Date or Maturity for any Fixed Rate Note
falls on a day that is not a Business Day, payment of principal, premium, if
any, and interest with respect to such Note will be made on the next succeeding
Business Day with the same force and effect as if made on the due date, and no
interest shall be payable on the date of payment for the period from and after
the due date.
Payments with respect to Fixed Rate Amortizing Notes will be applied
first to interest due and payable thereon and then to the reduction of the
unpaid principal amount thereof. A table setting forth repayment information in
respect of each Fixed Rate Amortizing Note will be set forth in such Notes,
included in the applicable Pricing Supplement and provided to the original
purchaser thereof and will be available, upon request, to subsequent Holders.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest at a rate determined by
reference to one or more interest rate bases (each a "Base Rate"), which may be
adjusted by adding to or subtracting from the Base Rate a fixed percentage per
annum (the "Spread") and/or by multiplying the Base Rate by a fixed interest
factor (the "Spread Multiplier"). The applicable Pricing Supplement will
designate one or more of the following Base Rates as applicable to each Floating
Rate Note: (a) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (b)
the Federal Funds Rate (a "Federal Funds Rate Note"), (c) the CD Rate (a "CD
Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the Prime Rate (a "Prime Rate
Note"), (f) the Treasury Rate (a "Treasury Rate Note"), (g) the CMT Rate (a "CMT
Rate Note"), (h) the 11th District Cost of Funds Rate (an "11th District Cost of
Funds Rate Note"), (i) the J.J. Kenny Rate (a "J.J. Kenny Rate Note"), or (j)
such other Base Rate or interest rate formula as is set forth in such Pricing
Supplement and in such Floating Rate Note.
Each Floating Rate Note will bear interest from its Original Issue Date
to the first Interest Reset Date (as defined below) for such Note at the Initial
Interest Rate (the "Initial Interest Rate") set forth on the face thereof and in
the applicable Pricing Supplement. Thereafter, the interest rate on each
Floating Rate Note for each Reset Period (as defined below) will be equal to the
interest rate calculated by reference to the Base Rate or Rates specified on the
face thereof and in the applicable Pricing Supplement plus or minus the Spread,
if any, and/or times the Spread Multiplier, if any. The Spread and/or Spread
Multiplier for a Floating Rate Note may be subject to adjustment during a Reset
Period under circumstances specified therein and in the applicable Pricing
Supplement.
The Company will appoint, and enter into an agreement with, an agent (a
"Calculation Agent") to calculate interest rates on Floating Rate Notes. Unless
otherwise specified in the applicable Pricing Supplement, the Calculation Agent
for each Floating Rate will be the Trustee. All determinations to be made by
the Calculation Agent shall be at its sole discretion and shall, in the absence
of manifest error, be conclusive for all purposes and binding on the Holders of
Notes.
The interest rate on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semiannually or annually (such type or period being
the "Reset Period" for such Note, and the first day of each Reset Period
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being an "Interest Reset Date"), as specified on the face thereof and in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, the Interest Reset Dates will be, in the case of Floating
Rate Notes that reset daily, each Market Day; in the case of Floating Rate
Notes (other than Treasury Rate Notes) that reset weekly, Wednesday of each
week; in the case of Treasury Rate Notes that reset weekly, Tuesday of each
week, except as provided below; in the case of Floating Rate Notes that reset
monthly, the third Wednesday of each month (with the exception of monthly
reset 11th District Cost of Funds Rate Notes, which will reset on the first
calendar day of the month); in the case of Floating Rate Notes that reset
quarterly, the third Wednesday of each March, June, September and December; in
the case of Floating Rate Notes that reset semiannually, the third Wednesday
of each of two months of each year specified on the face thereof and in the
applicable Pricing Supplement; and, in the case of Floating Rate Notes that
reset annually, the third Wednesday of the month of each year specified on the
face thereof and in the applicable Pricing Supplement; provided, however, that
the interest rate in effect from the date of issue to the first Interest Reset
Date will be the Initial Interest Rate specified on the face of the Floating
Rate Note. If an Interest Reset Date for a Floating Rate Note would otherwise
be a day that is not a Market Day, the Interest Reset Date for such Floating
Rate Note shall be postponed to the next day that is a Market Day, except
that, in the case of a LIBOR Note, if such Market Day is in the next
succeeding calendar month, such Interest Reset Date shall be the immediately
preceding Market Day.
The interest rate for each Reset Period will be the rate determined by
the Calculation Agent on the Calculation Date (as defined below) pertaining to
the Interest Determination Date pertaining to the Interest Reset Date for such
Reset Period. Unless otherwise specified in the applicable Pricing Supplement,
the "Interest Determination Date" pertaining to an Interest Reset Date for (a) a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
(b) a Federal Funds Rate Note (the "Federal Funds Interest Determination Date"),
(c) a CD Rate Note (the "CD Interest Determination Date"), (d) a Prime Rate Note
(the "Prime Interest Determination Date"), (e) a CMT Rate Note (the "CMT
Interest Determination Date"), or (f) a J.J. Kenny Rate Note (the "Kenny Rate
Interest Determination Date") will be the second Market Day prior to such
Interest Reset Date. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to an Interest Reset Date
for an 11th District Cost of Funds Rate Note (the "11th District Interest
Determination Date") will be the last business day of the month immediately
preceding such Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as defined below).
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note (the
"LIBOR Interest Determination Date") will be the second London Market Day
immediately preceding each Interest Reset Date. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Determination Date pertaining to
an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are usually sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as a result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Interest Determination Date pertaining to the Reset Period
commencing in the next succeeding week. If an auction date shall fall on any
Interest Reset Date for a Treasury Rate Note, then such Interest Reset Date
shall instead be the first Market Day immediately following such auction date.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date" pertaining to any Interest Determination Date shall be the
earlier of (i) the tenth calendar day after the Interest Determination Date or,
if such day is not a Market Day, the next succeeding Market Day, or (ii) the
Market Day preceding the applicable Interest Payment Date or Maturity, as the
case may be.
Except as provided below or in the applicable Pricing Supplement,
interest on Floating Rate Notes, including Floating Rate Amortizing Notes, will
be payable, (i) in the case of Floating Rate Notes that reset daily, weekly or
monthly, on the third Wednesday of each month or on the third Wednesday of
March, June, September and December of each year, as specified on the face
thereof and in the applicable Pricing Supplement; (ii) in the case of Floating
Rate Notes, including Floating Rate Amortizing Notes, that reset quarterly, on
the third Wednesday of March, June, September and December of each year; (iii)
in the case of Floating Rate Notes, including Floating Rate Amortizing Notes,
that reset semiannually, on the third Wednesday of each of two months of each
year specified on the face thereof and in the applicable Pricing Supplement; and
(iv) in the case of Floating Rate Notes,
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including Floating Rate Amortizing Notes, that reset annually, on the third
Wednesday of one month of each year specified on the face thereof and in the
applicable Pricing Supplement (each such day being an "Interest Payment Date")
and, in each case, at Maturity. If any Interest Payment Date, other than
Maturity, for any Floating Rate Note would otherwise be a day that is not a
Market Day (or, in the case of any Note denominated in other than U.S.
dollars, a Market Day in the country issuing the Specified Currency (or, in
the case of ECUs, Brussels)), such Interest Payment Date shall be postponed to
the next day that is a Market Day, except that in the case of a LIBOR Note, if
such Market Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding Market Day. If the Maturity
for any Floating Rate Note falls on a day that is not a Market Day, payment of
principal, premium, if any, and interest with respect to such Note will be
made on the next succeeding Market Day with the same force and effect as if
made on the due date, and no interest shall be payable on the date of payment
for the period from and after the due date.
Unless otherwise specified in the applicable Pricing Supplement,
payments with respect to Floating Rate Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in
respect of each Floating Rate Amortizing Note will be included in such Notes and
in the applicable Pricing Supplement and provided to the original purchaser
thereof and will be available, upon request, to subsequent Holders.
Each payment of interest on a Floating Rate Note will include interest
accrued from and including the Original Issue Date, or the next preceding
Interest Payment Date to which interest has been paid or duly provided for, to
but excluding the applicable Interest Payment Date or the date of Maturity.
Accrued interest from the Original Issue Date, or from the last date to which
interest has been paid or duly provided for, is calculated by multiplying the
face amount of a Note by an accrued interest factor computed by adding the
interest factor calculated for each day from the Original Issue Date, or from
the last date to which interest has been paid or duly provided for, to but
excluding the date for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for each such day is computed by dividing the interest rate applicable to such
date by 360, in the case of Commercial Paper Rate Notes, Federal Funds Rate
Notes, CD Rate Notes, Prime Rate Notes, 11th District Cost of Funds Rate Notes
and LIBOR Notes, or by the actual number of days in the year, in the case of
Treasury Rate Notes or CMT Rate Notes, or by 365 days in the case of a J.J.
Kenny Rate Note.
All percentages resulting from any calculation on Floating Rate Notes
will be rounded upward, if necessary, to the nearest one hundred-thousandth of a
percentage point with five one-millionths of one percentage point being rounded
upward (e.g., 9.876545% or .09876545, being rounded to 9.87655% or .0987655,
respectively), and all dollar amounts used in or resulting from such calculation
on Floating Rate Notes will be rounded to the nearest cent (with one-half cent
being rounded upward).
The Calculation Agent will, upon the request of the Holder of any
Floating Rate Note, provide the interest rate then in effect.
Any Floating Rate Note may also have either or both of the following:
(i) a maximum numerical interest rate limitation, or ceiling, on the rate of
interest that may accrue during any Reset Period (the "Maximum Interest Rate")
and (ii) a minimum numerical interest rate limitation, or floor, on the rate of
interest that may accrue during any Reset Period (the "Minimum Interest Rate").
The interest rate on any Note will in no event be higher than the maximum rate
permitted by New York law or other applicable law. Under present New York law,
the maximum rate of interest is 25% per annum on a simple interest basis. This
limit may not apply to Notes in which $2,500,000 or more has been invested,
including Notes purchased by an Agent or Agents in such aggregate principal
amount or more for resale to investors.
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Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at the rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in such Commercial Paper Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) of
the rate on such date for commercial paper having the Index Maturity designated
in the applicable Pricing Supplement as such rate is published by the Board of
Governors of the Federal Reserve System in "Statistical Release H. 15(519),
Selected Interest Rates," or any successor publication of the Board of Governors
("H. 15(519)") under the heading "Commercial Paper." In the event that such
rate is not published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Commercial Paper Interest Determination Date, then the
Commercial Paper Rate shall be the Money Market Yield of the rate on such
Commercial Paper Interest Determination Date for commercial paper having the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" ("Composite Quotations")
under the heading "Commercial Paper." If by 3:00 P.M., New York City time, on
such Calculation Date such rate is not yet published in Composite Quotations,
then the Commercial Paper Rate for such Commercial Paper Interest Determination
Date shall be calculated by the Calculation Agent and shall be the Money Market
Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York
City time, on such Commercial Paper Interest Determination Date of three leading
dealers of commercial paper in The City of New York selected by the Calculation
Agent for commercial paper having the Index Maturity designated in the
applicable Pricing Supplement placed for an industrial issuer whose bond rating
is "AA," or the equivalent, from a nationally recognized securities rating
agency; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate with respect to such Commercial Paper Interest Determination Date
will be the Commercial Paper Rate in effect on such Commercial Paper Interest
Determination Date.
"Money Market Yield" means a yield (expressed as a percentage rounded to
the nearest one hundred thousandth of a percentage point) calculated in
accordance with the following formula:
Money Market Yield = D x 360
------------ X 100
360 - (D x M)
where "D" refers to the per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal; and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate Note and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Federal Funds Rate" means, with respect to any Federal Funds Interest
Determination Date, the rate on such date for Federal Funds as published in H.
15(519) under the heading "Federal Funds (Effective)" or, if not so published by
9:00 A.M., New York City time, on the Calculation Date pertaining to such
Federal Funds Interest Determination Date, the Federal Funds Rate will be the
rate on such Federal Funds Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate." If such rate is
not published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Federal Funds Interest Determination Date, then the Federal
Funds Rate for such Federal Funds Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the rates as of 9:00
A.M., New York City time, on such Federal Funds Interest Determination Date for
the last transaction in overnight Federal Funds arranged by three leading
brokers of Federal Funds transactions in
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The City of New York selected by the Calculation Agent; provided, however,
that if the brokers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Federal Funds Rate with respect to
such Federal Funds Interest Determination Date will be the Federal Funds Rate
in effect on such Federal Funds Interest Determination Date.
CD Rate Notes
Each CD Rate Note will bear interest at the interest rate (calculated
with reference to the CD Rate and the Spread and/or Spread Multiplier, if any),
specified in such CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD
Rate" means, with respect to any CD Interest Determination Date, the rate on
such date for negotiable certificates of deposit having the Index Maturity
designated in the applicable Pricing Supplement as published in H.15(519) under
the heading "CDs (Secondary Market)" or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such CD Interest
Determination Date, the CD Rate will be the rate on such CD Interest
Determination Date for negotiable certificates of deposit having the Index
Maturity designated in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Certificates of Deposit." If such rate
is not published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such CD Interest Determination Date, then the CD Rate for such CD
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the secondary market offered rates as of 10:00 A.M.,
New York City time, on such CD Interest Determination Date of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in The City of
New York selected by the Calculation Agent for negotiable certificates of
deposit of major United States money center banks of the highest credit standing
(in the market for negotiable certificates of deposit) with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement in
a denomination of $5,000,000; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the CD Rate with respect to such CD Interest Determination Date will
be the CD Rate in effect on such CD Interest Determination Date.
11th District Cost of Funds Rate Notes
11th District Cost of Funds Rate Notes will bear interest at the rates
(calculated with reference to the 11th District Cost of Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in the applicable 11th
District Cost of Funds Rate Note and in the Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any 11th District Interest
Determination Date, the rate equal to the monthly weighted average cost of funds
for the calendar month preceding such 11th District Cost of Funds Rate Interest
Determination Date as set forth under the caption "11th District" on Telerate
Page 7058 as of 11:00 A.M., San Francisco time, on such 11th District Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related 11th District Interest Determination Date, the 11th District Cost of
Funds Rate for such 11th District Interest Determination Date shall be the
monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Index") by the FHLB of San Francisco as such cost of funds for the calendar
month preceding the date of such announcement. If the FHLB of San Francisco
fails to announce such rate for the calendar month next preceding such 11th
District Interest Determination Date, then the 11th District Cost of Funds Rate
for such 11th District Interest Determination Date will be the 11th District
Cost of Funds Rate then in effect on such 11th District Interest Determination
Date.
Kenny Rate Notes
Kenny Rate Notes will bear interest at the rates (calculated with
reference to the Kenny Rate and the Spread and/or Spread Multiplier, if any)
specified in the applicable Kenny Rate Note and in the Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Kenny
Rate" means, with respect to any Kenny Rate Interest Determination Date, the
high grade weekly index (the "Weekly Index") on such date made
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available by Kenny Information Systems ("Kenny") to the Calculation Agent.
The Weekly Index is, and shall be, based upon 30 day yield evaluations at par
of bonds, the interest on which is exempt from Federal income taxation under
the Internal Revenue Code of 1986, as amended, of not less than five high
grade component issuers selected by Kenny which shall include, without
limitation, issuers of general obligation bonds. The specific issuers
included among the component issuers may be changed from time to time by Kenny
in its discretion. The bonds on which the Weekly Index is based shall not
include any bonds on which the interest is subject to a minimum tax or similar
tax under the Internal Revenue Code of 1986, as amended, unless all tax-exempt
bonds are subject to such tax. In the event Kenny ceases to make available
such Weekly Index, a successor indexing agent will be selected by the
Calculation Agent, such index to reflect the prevailing rate for bonds rated
in the highest short-term rating category by Moody's Investors Service, Inc.
and Standard & Poor's Corporation in respect of issuers most closely
resembling the high grade component issuers selected by Kenny for its Weekly
Index, the interest on which is (A) variable on a weekly basis, (B) exempt
from Federal income taxation under the Internal Revenue Code of 1986, as
amended, and (C) not subject to a minimum tax or similar tax under the
Internal Revenue Code of 1986, as amended, unless all tax-exempt bonds are
subject to such tax. If such successor indexing agent is not available, the
rate for any J.J. Kenny Rate Interest Determination Date shall be 60.4% of the
rate determined if the Treasury Rate option had been originally selected.
LIBOR Notes
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in
such LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
means, with respect to any LIBOR Interest Determination Date, the rate
determined in accordance with the following provisions:
(i) With respect to any LIBOR Interest Determination Date, LIBOR
will be either: (a) if "LIBOR Reuters" is specified in the Note and
the applicable Pricing Supplement, the arithmetic mean of the offered
rates (unless the specified designated LIBOR Page (as defined below) by
its terms provides only for a single rate, in which case such single
rate shall be used) for deposits in the Designated LIBOR Currency (as
defined below) having the Index Maturity designated in the Note and the
applicable Pricing Supplement, commencing on the second London Market
Day immediately following the LIBOR Interest Determination Date, which
appear on the Designated LIBOR Page specified in the Note and the
applicable Pricing Supplement as of 11:00 A.M., London time, on that
LIBOR Interest Determination Date, if at least two such offered rates
appear (unless, as aforesaid, only a single rate is required) on such
Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in the
Note and the applicable Pricing Supplement, the rate for deposits in
the Designated LIBOR Currency (as defined below) having the Index
Maturity designated in the Note and the applicable Pricing Supplement,
commencing on the second London Market Day immediately following such
LIBOR Interest Determination Date, which appears on the Designated
LIBOR Page specified in the Note and the applicable Pricing Supplement
as of 11:00 A.M. London time on that LIBOR Interest Determination Date.
Notwithstanding the foregoing, if fewer than two offered rates appear on
the Designated LIBOR Page with respect to LIBOR Reuters (unless the
specified Designated LIBOR Page with respect to LIBOR Reuters by its
terms provides only for a single rate, in which case such single rate
shall be used), or if no rate appears on the Designated LIBOR Page with
respect to LIBOR Telerate, whichever may be applicable, LIBOR in respect
of the related LIBOR Interest Determination Date will be determined as
if the parties had specified the rate described in clause (ii) below.
(ii) With respect to any LIBOR Interest Determination Date on
which fewer than two offered rates appear on the Designated LIBOR Page
with respect to LIBOR Reuters (unless the Designated LIBOR Page by its
terms provides only for a single rate, in which case such single rate
shall be used), or if no rate appears on the Designated LIBOR Page with
respect to LIBOR Telerate, as the case may be, the Calculation Agent
will request the principal London office of each of four major banks in
the London interbank market selected by the Calculation Agent to provide
the Calculation Agent with its offered rate quotation for deposits in
the Designated LIBOR Currency (as defined below) for the period of the
Index
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Maturity designated in the Note and the applicable Pricing Supplement,
commencing on the second London Market Day immediately following such
LIBOR Interest Determination Date, to prime banks in the London
interbank market as of 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for
a single transaction in such Designated LIBOR Currency in such market at
such time. If at least two such quotations are provided, LIBOR
determined on such LIBOR Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such LIBOR Interest Determination Date
will be the arithmetic mean of the rates quoted as of 11:00 A.M. in the
applicable Principal Financial Center (as defined below), on such LIBOR
Interest Determination Date by three major banks in such Principal
Financial Center selected by the Calculation Agent for loans in the
Designated LIBOR Currency to leading banks, having the Index Maturity
designated in the Note and the applicable Pricing Supplement in a
principal amount that is representative for a single transaction in such
Designated LIBOR Currency in such market at such time; provided,
however, that if the banks so selected by the Calculation Agent are not
quoting as mentioned in this sentence, LIBOR determined on such LIBOR
Interest Determination Date will be LIBOR in effect on such LIBOR
Interest Determination Date.
"Designated LIBOR Currency" means, as with respect to any LIBOR Note,
the currency (including a composite currency), if any, designated in the Note
and the applicable Pricing Supplement as the Designated LIBOR Currency. If no
such currency is designated in the Note and the applicable Pricing Supplement,
the Designated LIBOR Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London interbank
rates of major banks for the applicable Designated LIBOR Currency (if "LIBOR
Reuters" is designated in the Note and the applicable Pricing Supplement), or
(b) the display on the Dow Jones Telerate Service for the purpose of displaying
the London interbank rates of major banks for the applicable designated LIBOR
Currency (if "LIBOR Telerate" is designated in the Note and the applicable
Pricing Supplement). If neither LIBOR Reuters nor LIBOR Telerate is specified
in the Note and applicable Pricing Supplement, LIBOR for the applicable
Designated LIBOR Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Designated LIBOR Currency, page 3750) had been chosen.
"Principal Financial Center" means, as with respect to any LIBOR Note,
unless otherwise specified in the Note and the applicable Pricing Supplement,
the capital city of the country that issues as its legal tender the Designated
LIBOR Currency of such Note, except that with respect to U.S. dollars and ECUs,
the Principal Financial Center shall be The City of New York and Brussels,
respectively.
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in such Prime Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Interest Determination Date, the rate
set forth in H.15(519) for such date opposite the caption "Bank Prime Loan," or,
if not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Prime Interest Determination Date, the Prime Rate will be
calculated by the Calculation Agent and will be the arithmetic mean of the rates
of interest publicly announced by each bank named on the Reuters Screen NYMF
Page as such bank's prime rate or base lending rate as in effect for such Prime
Interest Determination Date as quoted on the Reuters Screen NYMF Page on such
Prime Interest Determination Date, or, if fewer than four such rates appear on
the Reuters Screen Page for such Prime Interest Determination Date, the rate
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business on
such Prime Interest Determination Date by at least two of the three major money
center banks in The City of New York selected by the Calculation Agent from
which quotations are requested. If fewer than two quotations are quoted as
aforesaid, the Prime Rate for such Prime Interest Determination Date shall be
calculated
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by the Calculation Agent and shall be the arithmetic mean of the prime rates
quoted in The City of New York on such date by the appropriate number of
substitute banks or trust companies organized and doing business under the
laws of the United States, or any state thereof, having total equity capital
of at least U.S. $500 million and being subject to supervision or examination
by a Federal or state authority, selected by the Calculation Agent to quote
such rate or rates; provided, however, that if the Prime Rate is not published
in H.15(519) and the banks or trust companies selected as aforesaid are not
quoting as mentioned in this sentence, the Prime Rate with respect to such
Prime Interest Determination Date will be the interest rate otherwise in
effect on such Prime Interest Determination Date. "Reuters Screen NYMF Page"
means the display designated as page "NYMF" on the Reuters Monitor Money Rates
Service (or such other page as may replace page NYMF on that service for the
purpose of displaying prime rates or base lending rates of major United States
banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest at the interest rate
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Note and in the applicable
Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, the
"Treasury Rate" for each such Interest Reset Date will be determined as of the
Treasury Interest Determination Date and will be the rate applicable to the most
recent auction of direct obligations of the United States (herein called
"Treasury bills") having the Index Maturity specified on the Note and Pricing
Supplement set forth in H.15(519) under the heading "Treasury Bills--auction
average (Investment)" or, if not so made available by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such Treasury Interest Determination
Date, the auction average rate (expressed as a bond equivalent, on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury bills having the specified
Index Maturity are not published or reported as provided above by 3:00 P.M., New
York City time, on such Calculation Date or if no such auction is held in a
particular week, then the Treasury Rate shall be calculated by the Calculation
Agent and shall be a yield to maturity (expressed as a bond equivalent, on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Treasury Interest Determination Date, of
three leading primary United States government securities dealers selected by
the Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the applicable Index Maturity; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned
above, the Treasury Rate with respect to such Treasury Interest Determination
Date shall be the Treasury Rate in effect on such date.
CMT Rate Notes
Each CMT Rate Note will bear interest at the interest rate (calculated
with reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT
Rate" means, with respect to any CMT Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page (as defined below) under the
caption "...Treasury Constant Maturities ... Federal Reserve Board Release H. 15
... Mondays Approximately 3:45 P.M.," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page is
7055, the rate on such CMT Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the applicable CMT Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such CMT Interest Determination Date, then the CMT Rate for
such CMT Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index as published in the relevant H.
15(519). If such rate is no longer published, or if not published by 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such CMT Interest
Determination Date, then the CMT Rate for such CMT Interest Determination Date
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will be such treasury constant maturity rate for the Designated CMT Maturity
Index (or other United States Treasury rate for the Designated CMT Maturity
Index) for the CMT Interest Determination Date with respect to such Interest
Reset Date as may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury that
the Calculation Agent determines to be comparable to the rate formerly
displayed on the Designated CMT Telerate Page and published in the relevant
H.15(519). If such information is not provided by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such CMT Interest Determination
Date, then the CMT Rate for the CMT Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity, based on
the arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 P.M., New York City time, on the CMT Interest Determination
Date reported, according to their written records, by three leading primary
United States government securities dealers (each, a "Reference Dealer") in
The City of New York selected by the Calculation Agent (from five such
Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the United
States ("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not less
than such Designated CMT Maturity Index minus one year. If the Calculation
Agent cannot obtain three such Treasury Note quotations, the CMT Rate for such
CMT Interest Determination Date will be calculated by the Calculation Agent
and will be a yield to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 P.M., New York City time, on
the CMT Interest Determination Date of three Reference Dealers in The City of
New York (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one of
the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for Treasury Notes with an original maturity of the number of
years that is the next highest to the Designated CMT Maturity Index and a
remaining term to maturity closest to the Designated CMT Maturity Index and in
an amount of at least $100,000,000. If three or four (and not five) of such
Reference Dealers are quoting as described above, then the CMT Rate will be
based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided however,
that if fewer than three Reference Dealers selected by the Calculation Agent
are quoting as described herein, the CMT Rate will be the CMT Rate in effect
on such CMT Interest Determination Date. If two Treasury Notes with an
original maturity as described in the third preceding sentence, have remaining
terms to maturity equally close to the Designated CMT Maturity Index, the
quotes for the Treasury Note with the shorter remaining term to maturity will
be used.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service on the page specified in the applicable Pricing Supplement (or
any other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as published in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as published in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the Treasury Notes (either one, two, three, five, seven, ten, twenty or thirty
years) specified in the applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
INDEXED NOTES
General
The Company may from time to time offer Notes, the principal amount
payable at Maturity and/or the interest rate of which is determined by a formula
which makes reference to the rate of exchange between one currency ("Currency
I") and another currency ("Currency II"; together with Currency I, the "Selected
Currencies", both as specified in the applicable Pricing Supplement), neither of
which need be the Specified Currency of such Notes (the "Currency Indexed
Notes"). Unless otherwise specified in the applicable Pricing Supplement,
Holders of Currency Indexed Notes will be entitled to receive (i) an amount in
respect of principal equal to the principal amount of the Currency Indexed Notes
plus an adjustment, which may be negative or positive, based on the change
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in the relationship between Selected Currencies or (ii) an amount of interest
calculated at the stated rate of interest on their Currency Indexed Note plus
an adjustment, which may be negative or positive, based on the change in the
relationship between the Selected Currencies, in each case determined as
described below under "Payment of Principal and Interest." As specified in
the Pricing Supplement, the exchange rate designated as the base exchange rate
(the "Base Exchange Rate") will be the initial rate at which Currency I can be
exchanged for Currency II and from which the change in such exchange rate will
be measured.
Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, the
payment of principal at Maturity and interest on each Interest Payment Date
(until the payment thereof is paid or made available for payment) will be
payable in the Specified Currency in amounts calculated in the manner described
below.
Unless otherwise specified in the applicable Pricing Supplement,
principal at Maturity, if indexed, will be payable in an amount equal to the
principal amount of the Currency Indexed Note, plus or minus an amount
determined by reference to the difference between the Base Exchange Rate
specified in the applicable Pricing Supplement and the rate at which Currency I
can be exchanged for Currency II on the second Market Day prior to the Maturity
(the "Determination Date") of such Currency Indexed Note, as determined by the
determination agent specified in the applicable Pricing Supplement (the
"Determination Agent"). Unless otherwise specified in the applicable Pricing
Supplement, the interest payable on any Interest Payment Date, if indexed, will
be payable in an amount equal to the stated interest rate of the Currency
Indexed Note, plus or minus a rate adjustment determined by reference to the
difference between the Base Exchange Rate specified in the applicable Pricing
Supplement and the rate at which Currency I can be exchanged for Currency II on
the second Market Day prior to the Interest Payment Date (the "Indexed Interest
Determination Date") of such Currency Indexed Note, as determined by the
Determination Agent, applied to the average principal amount outstanding of
such Note for the period being measured. For the purpose of this section, such
rate of exchange on the Determination Date or the Indexed Interest
Determination Date, as the case may be, will be the average of quotations for
settlement on the Maturity Date or the relevant Interest Payment Date, as the
case may be, obtained by the Determination Agent from three Reference Dealers
in The City of New York at approximately 11:00 A.M., New York City time, on
either the Determination Date or the relevant Indexed Interest Determination
Date, as the case may be.
The formulas to be used by the Determination Agent to determine the
principal amount and/or the stated interest rate of a Currency Indexed Note
payable at Maturity or any Interest Payment Date will be specified in the
applicable Pricing Supplement by reference to the appropriate formula and will
be as follows:
Principal
A. If principal is to increase when the Spot Rate exceeds the Base
Exchange Rate, and if principal is to decrease when the Spot Rate is less than
the Base Exchange Rate, the formula to determine the principal amount of a
Currency Indexed Note payable at Maturity shall equal:
Principal Amount + (Principal Amount x F x [Spot Rate - Base Exchange Rate])
---------------------------------
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will sell
Currency I in exchange for a single unit of Currency II.
B. If principal is to increase when the Base Exchange Rate exceeds the
Spot Rate, and if principal is to decrease when the Base Exchange Rate is less
than the Spot Rate, the formula to determine the principal amount of a Currency
Indexed Note payable at Maturity shall equal:
Principal Amount + (Principal Amount x F x [Base Exchange Rate - Spot Rate])
---------------------------------
Spot Rate
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To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will purchase
Currency I in exchange for a single unit of Currency II.
Interest
A. If interest is to increase when the Spot Rate exceeds the Base
Exchange Rate, and if interest is to decrease when the Spot Rate is less than
the Base Exchange Rate, the formula to determine the interest rate payable on
any Interest Payment Date on a Currency Indexed Note shall equal:
Stated Interest Rate + F x (Spot Rate - Base Exchange Rate)
--------------------------------
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will sell
Currency I in exchange for a single unit of Currency II.
B. If interest is to increase when the Base Exchange Rate exceeds the
Spot Rate, and if interest is to decrease when the Base Exchange Rate is less
than the Spot Rate, the formula to determine the interest rate payable on any
Interest Payment Date on a Currency Indexed Note shall equal:
Stated Interest Rate + F x (Base Exchange Rate - Spot Rate)
--------------------------------
Spot Rate
To determine the "Spot Rate" for use in this formula, each Reference
Dealer's quotation will be the rate at which such Reference Dealer will purchase
Currency I in exchange for a single unit of Currency II.
In each of the above formulas "F" will be the leverage factor, if any,
used in such formula, which could be a constant expressed as a whole number or a
decimal. This leverage factor will depend on market conditions and other trade
specific variables at the time such Currency Indexed Note is issued.
The Notes may be issued as Indexed Notes, other than Currency Indexed
Notes, the principal amount payable at Maturity and/or the interest rate of
which may be determined by reference to the relationship between two or more
currencies, to the price of one or more specified securities or commodities, to
one or more securities or commodities exchange indices or other indices or by
other similar methods or formulas. The Pricing Supplement relating to such an
Indexed Note will describe, as applicable, the method by which the amount of
interest payable on any Interest Payment Date and the amount of principal
payable at Maturity in respect of such Indexed Note will be determined, certain
special tax consequences of the purchase, ownership or disposition of such
Indexed Notes, certain risks associated with an investment in such Indexed Notes
and other information relating to such Indexed Notes.
An investment in Notes indexed, as to principal or interest or both, to
one or more values of currencies (including exchange rates and swap indices
between currencies), commodities, interest rate or other indices entails
significant risks that are not associated with similar investments in a
conventional fixed-rate debt security. If the interest rate of such a Note is
so indexed, it may result in an interest rate that is less than that payable on
a conventional fixed-rate debt security issued at the same time, including the
possibility that no interest will be paid, and, if the principal amount of such
a Note is so indexed, the principal amount payable at Maturity may be less than
the original purchase price of such Note if allowed pursuant to the terms of
such Note, including the possibility that no principal will be paid. The
secondary market for such Notes will be affected by a number of factors
independent of the creditworthiness of the Company and the value of the
applicable currency, commodity or interest rate index, including the volatility
of the applicable currency, commodity or interest rate index, the time remaining
to the maturity of such Notes, the amount outstanding of such Notes and market
interest rates. The value of the applicable currency, commodity or interest rate
index depends on a number of interrelated factors, including economic, financial
and political events, over which the Company has no control. Additionally, if
the formula used to determine the principal amount or interest payable with
respect to such Notes contains a multiple or leverage factor,
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the effect of any change in the applicable currency, commodity or interest
rate index may be increased. The historical experience of the relevant
currencies, commodities or interest rate indices should not be taken as an
indication of future performance of such currencies, commodities or interest
rate indices during the term of any Note. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks entailed
by an investment in such Notes and the suitability of such Notes in light of
their particular circumstances.
FORM, REGISTRATION, TRANSFER AND EXCHANGE
Certificated Notes will be exchangeable for other Certificated Notes of
any authorized denominations and of a like aggregate principal amount and tenor.
Certificated Notes may be presented to the Trustee for registration of
transfer at Continental Bank, c/o Mellon Securities Transfer Services, 120
Broadway, 33rd Floor, New York, New York 10271, Attn: Corporate Trust
Administration (the "Corporate Trust Office"). Certificated Notes may be
presented for exchange and transfer in the manner, at the places and subject to
the restrictions set forth in the Indenture and the Notes. No service charge
will be made for any transfer or exchange of Certificated Notes, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Certificated Notes may be presented for exchange as provided above, and
may be presented for registration of transfer (duly endorsed or accompanied by a
duly executed written instrument of transfer), at the office of the Trustee or
of any transfer agent designated by the Company for such purpose with respect to
the Notes, without service charge and upon payment of any taxes and other
governmental charges as described in the Indenture. Such transfer or exchange
will be effected upon the Trustee or such transfer agent, as the case may be,
being satisfied with the documents of title and identity of the person making
the request. The Company may at any time rescind the designation of any
transfer agent except that the Company will be required to maintain a transfer
agent in The City of New York for the Notes. With respect to registration of
transfer and exchange of Book-Entry Notes, see "Description of Notes --
Book-Entry System" below and "Description of Debt Securities -- Global
Securities" in the accompanying Prospectus.
In the event of any redemption of Notes, the Company will not be
required to (i) register the transfer of or exchange the Notes during a period
of 15 days next preceding the mailing of the relevant notice of redemption; or
(ii) register the transfer of or exchange the Notes, or portion thereof, called
for redemption, except the unredeemed portion of any of the Notes being redeemed
in part.
The Trustee will initially act as paying agent pursuant to the Indenture
("Paying Agent"). The Company may at any time designate additional Paying Agents
or rescind the designation of any Paying Agent.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may from time to time offer Original Issue Discount Notes.
The applicable Pricing Supplement to certain Original Issue Discount Notes may
provide that the Holders of such Notes will not receive periodic payments of
interest. For the purpose of determining whether Holders of the requisite
principal amount of Notes outstanding under the Indenture have made a demand or
given a notice or waiver or taken any other action, the outstanding principal
amount of Original Issue Discount Notes shall be deemed to be the amount of the
principal that would be due and payable upon declaration of acceleration of the
Stated Maturity thereof as of the date of such determination.
Notwithstanding anything in this Prospectus to the contrary, unless
otherwise specified in the applicable Pricing Supplement, if a Note is an
Original Issue Discount Note, the amount payable on such Note in the event of
Maturity prior to the Stated Maturity shall be the Amortized Face Amount of such
Note as of such Maturity.
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"Original Issue Discount Note" means a Note, including a Zero Coupon
Note, which is issued at a price lower than the principal amount thereof and
which provides that upon redemption or acceleration of the Maturity thereof an
amount less than the principal thereof shall become due and payable. In the
event of redemption or acceleration of the Maturity of an Original Issue
Discount Note, the amount payable to the Holder of such Note upon such
redemption or acceleration will be determined in accordance with the terms of
the Note, but will be an amount less than the amount payable at the Stated
Maturity of such Note. In addition, a Note issued at a discount may, for United
States federal income tax purposes, be considered an original issue discount
note, regardless of the amount payable upon redemption or acceleration of
Maturity of such Note. See "United States Taxation -- Original Issue Discount".
INTEREST RATE RESET
If the Company has the option with respect to any Note to reset the
interest rate, in the case of a Fixed Rate Note, or to reset the Spread and/or
Spread Multiplier, in the case of a Floating Rate Note, the Pricing Supplement
relating to such Note will indicate such option, and, if so, (i) the date or
dates on which such interest rate or such Spread and/or Spread Multiplier, as
the case may be, may be reset (each an "Optional Reset Date") and (ii) the basis
or formula, if any, for such resetting.
The Company may exercise such option with respect to a Note by notifying
the Paying Agent of such exercise at least 45 but not more than 60 days prior to
an Optional Reset Date for such Date for such Note. Not later than 40 days
prior to such Optional Reset Date, the Paying Agent will mail to the Holder of
such Note a notice (the "Reset Notice"), first class, postage prepaid, setting
forth (i) the election of the Company to reset the interest rate, in the case of
a Fixed Rate Note, or the Spread and/or Spread Multiplier, in the case of a
Floating Rate Note, (ii) such new interest rate or such new Spread and/or Spread
Multiplier, as the case may be, and (iii) the provisions, if any, for redemption
during the period from such Optional Reset Date to the next Optional Reset Date
or, if there is no such next Optional Reset Date, to the Stated Maturity Date of
such Note (each period a "Subsequent Interest Period"), including the date or
dates on which or the period or periods during which and the price or prices at
which such redemption may occur during such Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 days prior to an
Optional Reset Date for a Note, the Company may, at its option, revoke the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, in either case provided for in
the Reset Notice and establish a higher interest rate, in the case of a Fixed
Rate Note, or a higher Spread and/or Spread Multiplier, in the case of a
Floating Rate Note, for the Subsequent Interest Period commencing on such
Optional Reset Date by mailing or causing the Paying Agent to mail notice of
such higher interest rate or higher Spread and/or Spread Multiplier, as the case
may be, first class, postage prepaid, to the Holder of such Note. Such notice
shall be irrevocable. All Notes with respect to which the interest rate or
Spread and/or Spread Multiplier is reset on an Optional Reset Date will bear
such higher interest rate, in the case of a Fixed Rate Note, or higher Spread
and/or Spread Multiplier, in the case of a Floating Rate Note.
If the Company elects to reset the interest rate or the Spread and/or
Spread Multiplier of a Note, the Holder of such Note will have the option to
elect repayment of such Note by the Company on any Optional Reset Date at a
price equal to the principal amount thereof plus any accrued interest to such
Optional Reset Date. In order for a Note to be so repaid on an Optional Reset
Date on which the interest rate is reset, the Holder thereof must follow the
procedures set forth below under "Repayment at the Noteholder's Option" for
optional repayment, except that the period for delivery of such Note or
notification to the Paying Agent shall be at least 25 but not more than 35 days
prior to such Optional Reset Date and except that a Holder who has tendered a
Note for repayment pursuant to a Reset Notice may, by written notice to the
Paying Agent, revoke any such tender for repayment until 5:00 p.m. New York City
time on the tenth day, whether or not a Market Day, prior to such Optional Reset
Date.
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EXTENDIBLE NOTES
The Company may from time to time offer Notes whose interest rate or
interest rate formula may be adjusted on specified dates and which may be
subject to repayment at certain times at the option of the holder or to
redemption at certain times at the option of the Company ("Extendible Notes").
The applicable Pricing Supplement will indicate whether the Company has the
option to extend the maturity of such Note for one or more periods up to but not
beyond a date set forth in such Pricing Supplement. If the Company has such
option with respect to any such Notes, the procedures relating thereto will be
as set forth in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
Extendible Notes will be repayable in whole or in part on the day immediately
following the end of the initial interest period, as specified in the applicable
Pricing Supplement, and on the day immediately following the end of each
Extension Period, at the option of the holder, at 100% of the principal amount
to be repaid, in each case plus accrued interest, if any, to the repayment
date. The applicable Pricing Supplement will specify the procedures that must be
followed in order to effect such a repayment. An "Extension Period" will be a
period of one or more whole calendar periods (e.g., weeks, months, or years)
commencing on the day following the last day of the initial interest period or
any subsequent Extension Period.
RENEWABLE NOTES
The applicable Pricing Supplement will indicate whether a Note (other
than an Amortizing Note) will mature unless the term of all or any portion of
any such Note is renewed in accordance with the procedures described in such
Supplement.
COMBINATION OF PROVISIONS
If so specified in the applicable Pricing Supplement, any Note may be
subject to all of the provisions, or any combination of the provisions,
described above under "Interest Rate Reset," "Extendible Notes" and "Renewable
Notes."
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be subject to any sinking fund. The Notes will be redeemable at
the option of the Company prior to the Stated Maturity only if an Initial
Redemption Date is specified in the applicable Pricing Supplement ("Initial
Redemption Date"). If so specified, the Notes will be subject to redemption at
the option of the Company on any date on and after the applicable Initial
Redemption Date in whole or from time to time in part in increments of $1,000 or
the minimum denomination specified in such Pricing Supplement (provided that any
remaining principal amount thereof shall be at least $1,000 or such minimum
denomination), at the applicable Redemption Price (as defined below) on notice
given not more than 60 nor less than 30 days prior to the date of redemption and
in accordance with the provisions of the Indenture. "Redemption Price", with
respect to a Note, means an amount equal to the sum of (i) the Initial
Redemption Percentage specified in such Pricing Supplement (as adjusted by the
Annual Redemption Percentage Reduction, if applicable (as specified in such
Pricing Supplement)) multiplied by the unpaid principal amount or the portion to
be redeemed plus (ii) accrued interest to the date of redemption [; provided,
however, that interest installments due prior to the date fixed for redemption
will be payable to the Holder of record at the close of business on the Regular
Record Date]. The Initial Redemption Percentage, if any, applicable to a Note
shall decline at each anniversary of the Initial Redemption Date by an amount
equal to the applicable Annual Redemption Percentage Reduction, if any, until
the Redemption Price is equal to 100% of the unpaid principal amount thereof or
the portion thereof to be redeemed.
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REPAYMENT AT THE OPTION OF THE HOLDER
If so specified in the applicable Pricing Supplement, the Notes will be
repayable by the Company in whole or in part at the option of the Holders
thereof on their respective optional repayment dates ("Optional Repayment
Dates") specified in such Pricing Supplement. If no Optional Repayment Date is
specified with respect to a Note, such Note will not be repayable at the option
of the Holder thereof prior to the Stated Maturity. Any repayment in part will
be in increments of $1,000 or the minimum denomination specified in the
applicable Pricing Supplement (provided that any remaining principal amount
thereof shall be at least $1,000 or such minimum denomination). Unless
otherwise specified in the applicable Pricing Supplement, the repayment price
for any Note to be repaid means an amount equal to the sum of (i) 100% of the
unpaid principal amount thereof or the portion thereof plus (ii) accrued
interest to the date of repayment [; provided, however, that interest
installments due prior to the date fixed for redemption will be payable to the
Holder of record at the close of business on the Regular Record Date]. For any
Note to be repaid, such Note must be received, together with the form thereon
entitled "Option to Elect Repayment" duly completed, by the Trustee at its
Corporate Trust Office (or such other address of which the Company shall from
time to time notify the Holders) not more than 60 nor less than 30 days prior to
the date of repayment. Exercise of such repayment option by the Holder will be
irrevocable.
In the case of Book-Entry Notes represented by a Global Security or
Securities held by or on behalf of the Depositary, and registered in the name of
the Depositary or the Depositary's nominee, the option for repayment may be
exercised by the applicable Participant (as defined herein) that has an account
with the Depositary, on behalf of the beneficial owners of the Global Security
or Securities representing such Book-Entry Notes, by delivering a written notice
substantially similar to the above mentioned form to the Trustee at its
Corporate Trust Office (or such other address of which the Company shall from
time to time notify the Holders), not more than 60 nor less than 30 days prior
to the date of repayment. Notices of elections from Participants on behalf of
beneficial owners of the Global Security or Securities representing such
Book-Entry Notes to exercise their option to have such Book-Entry Notes repaid
must be received by the Trustee by 5:00 P.M., New York City time, on the last
day for giving such notice. In order to ensure that a notice is received by the
Trustee on a particular day, the beneficial owner of the Global Security or
Securities representing such Book-Entry Notes must so direct the applicable
Participant before such participant's deadline for accepting instructions for
that day. Different firms may have different deadlines for accepting
instructions from their customers. Accordingly, beneficial owners of the Global
Security or Securities representing Book-Entry Notes should consult the
Participants through which they own their interest therein for the respective
deadlines for such Participants. All notices shall be executed by a duly
authorized officer of such Participant (with signatures guaranteed) and shall be
irrevocable. In addition, beneficial owners of the Global Security or
Securities representing Book-Entry Notes shall effect delivery at the time such
notices of election are given to the Depositary by causing the applicable
Participant to transfer such beneficial owner's interest in the Global Security
or Securities representing such Book-Entry Notes, on the Depositary's records,
to the Trustee. See "Book-Entry System".
If applicable, the Company will comply with the requirements of Rule
14e-1 under the Securities Exchange Act of 1934, as amended, and any other
securities laws or regulations in connection with any such repayment.
REPURCHASE
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation. If an issue of Notes and any applicable Pricing Supplement
provide for mandatory sinking fund payments with respect to such Notes, the
Indenture provides that in lieu of making all or any part of any mandatory
sinking fund payment in cash, the Company may deliver to the Trustee Notes
previously purchased or otherwise acquired by the Company (to the extent not
previously credited).
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AMORTIZING NOTES
The Company may from time to time offer Notes for which payments of
principal and interest are made in installments over the life of the Note
("Amortizing Notes"). Interest on each Amortizing Note will be computed as set
forth in a Pricing Supplement or in the Book-Entry Note representing such
Amortizing Note. Unless otherwise provided in such Pricing Supplement or in
such Book-Entry Note, payments with respect to Amortizing Notes will be applied
first to interest due and payable thereon and then to the reduction of the
unpaid principal amount thereof. A table setting forth repayment information
with respect to each Amortizing Note will be provided to the original purchaser
of such Note and will be available upon request to the subsequent holders
thereof.
BOOK-ENTRY SYSTEM
The Depositary will act as securities depositary for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully-registered securities
registered in the name of Cede & Co. (the Depositary's partnership nominee). One
fully-registered Global Security will be issued for each issue of the Notes,
each in the aggregate principal amount of such issue, and will be deposited with
the Depositary. If, however, the aggregate principal amount of any issue
exceeds $150 million, one Global Security will be issued with respect to each
$150 million of principal amount and an additional Global Security will be
issued with respect to any remaining principal amount of such issue. Unless
otherwise indicated in the applicable Pricing Supplement, Global Notes will only
be denominated in U.S. dollars.
The Company has been advised by the Depositary as follows:
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Depositary holds securities
that its participants ("Participants") deposit with the Depositary. The
Depositary also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants ("Direct Participants") include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations.
The Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to the Depositary and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for the
Book-Entry Notes on the Depositary's records. The ownership interest of each
actual purchaser of each Book-Entry Note ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Book-Entry
Notes are to be accomplished by entries made on the books of Participants acting
on behalf of the Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Book-Entry Notes, except
in the event that use of the book-entry system for one or more Book-Entry Notes
is discontinued.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with the Depositary are registered in the name of the Depositary's
partnership nominee, Cede & Co. The deposit of Global Securities with the
Depositary and their registration in the name of Cede & Co. effect no change in
beneficial ownership. The Depositary has no knowledge of the actual Beneficial
Owners of the Book-Entry Notes; the Depositary's records
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reflect only the identity of the Direct Participants to whose accounts such
Book-Entry Notes are credited, which may or may not be the Beneficial Owners.
The Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, the Depositary's current
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
The Depositary and Cede & Co. have agreed that neither of them will
consent or vote with respect to Book-Entry Notes. The Company understands that
under the Depositary's usual procedures, the Depositary will mail an "Omnibus
Proxy" to the Company as soon as possible after the record date. The Omnibus
Proxy will assign Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Book-Entry Notes are credited on the record
date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Book-Entry Notes will be made to
the Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the payable date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on the payable date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as in the case of securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of the Depositary, or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to the Depositary is the responsibility of the
Company, disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry
Notes purchased or tendered, through its Participant, to the Paying Agent, and
shall effect delivery of such Book-Entry Notes by causing the Direct Participant
to transfer the Participant's interest in the Book-Entry Notes, on the
Depositary's records, to the Paying Agent. The requirement for physical
delivery of Book-Entry Notes in connection with a demand for purchase or a
mandatory purchase will be deemed satisfied when the ownership rights in the
Book-Entry Notes are transferred by a Direct Participant on the Depositary's
records.
The Depositary may discontinue providing its services as securities
depositary with respect to the Book-Entry Notes at any time by giving reasonable
notice to the Company or the Agents. Under such circumstances, in the event
that a successor securities depository is not obtained, Certificated Notes will
be printed and delivered in exchange for the Book-Entry Notes represented by the
Global Securities held by the Depositary.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered in exchange for the
Book-Entry Notes represented by the Global Securities held by the Depositary.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Neither the Company, the Trustee, any Paying Agent nor the registrar for
the Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial
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ownership interests in a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Note in the Specified Currency
for such Note. Currently, there are limited facilities in the United States for
conversion of U.S. dollars into foreign currencies and vice versa, and banks
generally do not offer non-U.S. dollar checking or savings account facilities in
the United States. However, if requested by a prospective purchaser of Notes
denominated in a Specified Currency other than U.S. dollars, the Agent
soliciting the offer to purchase will arrange for the conversion of U.S. dollars
into such Specified Currency to enable the Purchaser to pay for such Notes. Such
requests must be made on or before the fifth Market Day preceding the date of
delivery of the Notes, or by such other date as determined by the Agent which
presents the offer to the Company. Each such conversion will be made by the
relevant Agent on such terms and subject to such conditions, limitations and
charges as such Agent may from time to time establish in accordance with its
regular foreign exchange practice. All costs of exchange will be borne by the
relevant purchaser of the Notes.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in, or the payment of which
is determined with reference to, a Specified Currency other than U.S. dollars
entails significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Similarly, an investment in an Indexed
Note entails significant risks that are not associated with an investment in
non-Indexed Notes. Such risks include, without limitation, the possibility of
significant changes in rates of exchange between U.S. dollars and the Specified
Currency (or, in the case of each Indexed Note, the rate of exchange between the
denominated currency and the indexed currency for such Indexed Note), including
changes resulting from official redenomination with respect to such Specified
Currency (or, in the case of each Indexed Note, with respect to the denominated
currency or the indexed currency therefor) and the possibility of the imposition
or modification of foreign exchange controls with respect to the Specified
Currency. Such risks generally depend on factors over which the Company has no
control, such as economic and political events and the supply of and demand for
the relevant currencies. In recent years, rates of exchange between Specified
Currencies have been highly volatile, and such volatility may be expected in the
future. Fluctuations in any particular exchange rate that have occurred in the
past are not necessarily indicative, however, of fluctuations in the rate that
may occur during the term of any Note. Depreciation of a foreign currency or
units of a foreign composite currency in which a Note is denominated against the
U.S. dollar would result in a decrease in the effective yield of such Note below
its coupon rate, and in certain circumstances could result in a loss to the
investor on a U.S. dollar basis. Similarly, depreciation of the denominated
currency with respect to an Indexed Note against the applicable indexed currency
would result in the principal amount payable with respect to such Indexed Note
at the Stated Maturity being less than the Face Amount of such Indexed Note
which, in turn, would decrease the effective yield of such Indexed Note below
its applicable interest rate and could also result in a loss to the investor.
The Notes will provide that, in the event of an official redenomination
of a foreign currency (including, without limitation, an official redenomination
of a foreign currency that is a composite currency) the obligations of the
Company with respect to payments on Notes denominated in such currency shall, in
all cases, be deemed immediately following such redenomination to provide for
the payment of that amount of redenomination currency representing the amount of
such obligations immediately before such redenomination. The Notes do not
provide for any adjustment to any amount payable under the Notes as a result of
(a) any change in the value of a foreign currency relative to any other currency
due solely to fluctuations in exchange rates or (b) any redenomination of any
component currency of any composite currency (unless such composite currency is
itself officially redenominated).
Governments have from time to time imposed, and may in the future
impose, exchange controls that could affect exchange rates as well as the
availability of a foreign currency for making payments with respect to a Note
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denominated in such currency. There can be no assurances that exchange
controls will not restrict or prohibit payments of principal or interest in
any currency or currency unit. Even if there are not actual exchange controls,
it is possible that, with respect to any particular Note, the foreign currency
for such Note will not be available to the Company to make payments of
interest and principal then due because of circumstances beyond the control of
the Company. In that event, the Company will make such payment in the manner
set forth below under "Payment Currency."
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT, AND
THE APPLICABLE PRICING SUPPLEMENT WILL NOT, DESCRIBE ALL THE RISKS OF AN
INVESTMENT IN NOTES DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE
VALUE OF, A CURRENCY (INCLUDING ANY COMPOSITE CURRENCY) OTHER THAN U.S. DOLLARS,
AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF
SUCH RISKS AS THEY EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE DATE
OF THE APPLICABLE PRICING SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO
TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED IN AN INVESTMENT IN SUCH NOTES. SUCH AN
INVESTMENT IS NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE UNSOPHISTICATED
WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The Pricing Supplement relating to Notes denominated in a Specified
Currency other than U.S. dollars or relating to Indexed Notes will contain
information concerning historical exchange rates for such Specified Currency or
denominated currency against the U.S. dollar or other relevant currency
(including, in the case of Indexed Notes, the applicable indexed currency), a
description of such currency or currencies and any exchange controls affecting
such currency or currencies. Information concerning exchange rates is furnished
as a matter of information only and should not be regarded as indicative of the
range of or trend in fluctuations in currency exchange rates that may occur in
the future.
PAYMENT CURRENCY
Except as set forth in the applicable Pricing Supplement, if payment on
a Note is required to be made in a Specified Currency other than U.S. dollars
and such currency is unavailable due to the imposition of exchange controls or
other circumstances beyond the Company's control or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions of or within the international banking
community, then any payment with respect to such Note shall be made in U.S.
dollars until such currency is again available or so used. The amount so
payable on any date in such Specified Currency will be converted into U.S.
dollars on the basis of the Market Exchange Rate on the last date such Specified
Currency was available. See "Description of Notes--Payment of Principal and
Interest."
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a component
shall be divided or multiplied in the same proportion. If two or more
component currencies are consolidated into a single currency, the amounts of
those currencies as components shall be replaced by an amount in such single
currency. If any component currency is divided into two or more currencies,
the amount of the original component currency as a component shall be replaced
by the amounts of such two or more currencies having an aggregate value on the
date of division equal to the amount of the former component currency
immediately before such division.
FOREIGN CURRENCY JUDGMENTS
The Notes will be governed by and construed in accordance with the laws
of the State of New York applicable to instruments made to be performed wholly
within such jurisdiction. Courts in the United States customarily have not
rendered judgments for money damages denominated in any currency other than U.S.
dollars. If a Note is denominated in a Specified Currency other than U.S.
dollars, any judgment under New York law will
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be rendered in the foreign currency of the underlying obligation and converted
into U.S. dollars at a rate of exchange prevailing on the date of entry of the
judgment or decree.
INFORMATION LIMITED TO UNITED STATES HOLDERS
The information set forth in this Prospectus Supplement (except for
certain tax information) is directed to prospective purchasers of Notes who are
United States Holders (as defined below), and the Company disclaims any
responsibility to advise prospective purchasers who are residents of countries
other than the United States with respect to any matters that may affect the
purchase or holding of, or receipt of payments of principal, premium or interest
in respect of, Notes. Such persons should consult their own counsel with regard
to such matters.
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income
tax consequences of ownership of Notes. It deals only with Notes held as
capital assets by initial purchasers, and not with special classes of holders,
such as dealers in securities or currencies, banks, tax-exempt organizations,
life insurance companies, persons that hold Notes that are a hedge or that are
hedged against currency risks or that are part of a straddle or conversion
transaction, persons that are not "United States Holders", as defined below,or
persons whose functional currency is not the U.S. dollar. Moreover, the summary
deals only with Notes that are due to mature 30 years or less from the date on
which they are issued. The United States federal income tax consequences of
ownership of Notes that are due to mature more than 30 years from their date of
issue will be discussed in an applicable Prospectus Supplement. The summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), its
legislative history, existing and proposed regulations thereunder, published
rulings and court decisions, all as currently in effect and all subject to
change at any time, perhaps with retroactive effect.
Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of ownership of Notes.
UNITED STATES HOLDERS
Payments of Interest
Interest on a Note, whether payable in U.S. dollars or a currency,
composite currency or basket of currencies other than U.S. dollars (a "foreign
currency"), other than interest on a "Discount Note" that is not "qualified
stated interest" (each as defined below under "Original Issue Discount --
General"), will be taxable to a United States Holder as ordinary income at the
time it is received or accrued, depending on the holder's method of accounting
for tax purposes. A United States Holder is a beneficial owner who or that is
(i) a citizen or resident of the United States, (ii) a domestic corporation or
(iii) otherwise subject to United States federal income taxation on a net
income basis in respect of the Note.
If an interest payment is denominated in, or determined by reference to,
a foreign currency, the amount of income recognized by a cash basis United
States Holder will be the U.S. dollar value of the interest payment, based on
the exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined by
reference to, a foreign currency in accordance with either of two methods. Under
the first method, the amount of income accrued will be based on the average
exchange rate in effect during the interest accrual period (or, with respect to
an accrual period that spans two taxable years, the part of the period within
the taxable year). Upon receipt of the interest payment (including a payment
attributable to accrued but unpaid interest upon the sale or retirement of a
Note) denominated in, or determined by reference
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to, a foreign currency, the United States Holder will recognize ordinary
income or loss measured by the difference between the average exchange rate
used to accrue interest income and the exchange rate in effect on the date of
receipt, regardless of whether the payment is in fact converted into U.S.
dollars.
Under the second method, the United States Holder may elect to determine
the amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year. Additionally, if a payment of interest is
actually received within five business days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such accrued interest into U.S. dollars at the exchange rate
in effect on the day of actual receipt. Any such election will apply to all
debt instruments held by the United States Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the United
States Holder, and will be irrevocable without the consent of the Internal
Revenue Service (the "Service").
ORIGINAL ISSUE DISCOUNT
General
A Note, other than a Note with a term of one year or less (a "short-term
Note"), will be treated as issued at an original issue discount (a "Discount
Note") if the excess of the Note's "stated redemption price at maturity" over
its issue price is more than a "de minimis amount" (as defined below).
Generally, the issue price of a Note will be the first price at which a
substantial amount of Notes included in the issue of which the Note is a part is
sold to other than bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers. The
stated redemption price at maturity of a Note is the total of all payments
provided by the Note that are not payments of "qualified stated interest". A
qualified stated interest payment is generally any one of a series of stated
interest payments on a Note that are unconditionally payable at least annually
at a single fixed rate (with certain exceptions for lower rates paid during some
periods) applied to the outstanding principal amount of the Note. Special rules
for "Variable Rate Notes" (as defined below under "Original Issue Discount --
Variable Rate Notes") are described below under "Original Issue Discount --
Variable Rate Notes".
In general, if the excess of a Note's stated redemption price at
maturity over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not a Discount Note. Unless
the election described below under "Election to Treat All Interest as Original
Issue Discount" is made, a United States Holder of a Note with de minimis
original issue discount must include such de minimis original issue discount in
income as stated principal payments on the Note are made. The includible amount
with respect to each such payment will equal the product of the total amount of
the Note's de minimis original issue discount and a fraction, the numerator of
which is the amount of the principal payment made and the denominator of which
is the stated principal amount of the Note.
United States Holders of Discount Notes having a maturity of more than
one year from their date of issue must include original issue discount ("OID")
in income calculated on a constant-yield method before the receipt of cash
attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Note. The amount of
OID includible in income by a United States Holder of a Discount Note is the sum
of the daily portions of OID with respect to the Discount Note for each day
during the taxable year or portion of the taxable year on which the United
States Holder holds such Discount Note ("accrued OID"). The daily portion is
determined by allocating to each day in any "accrual period" a pro rata portion
of the OID allocable to that accrual period. Accrual periods with respect to a
Note may be of any length selected by the United States Holder and may vary in
length over the term of the Note as long as (i) no accrual period is longer than
one year and (ii) each scheduled payment of interest or principal on the Note
occurs on either the final or first day of an accrual period. The amount of OID
allocable to an accrual period equals the excess of (a) the product of the
Discount Note's adjusted issue price at the beginning of the accrual period and
such Note's yield to maturity (determined on the basis of compounding at the
close of each accrual period and properly adjusted for the length
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of the accrual period) over (b) the sum of the payments of qualified stated
interest on the Note allocable to the accrual period. The "adjusted issue
price" of a Discount Note at the beginning of any accrual period is the issue
price of the Note increased by (x) the amount of accrued OID for each prior
accrual period and decreased by (y) the amount of any payments previously made
on the Note that were not qualified stated interest payments. For purposes of
determining the amount of OID allocable to an accrual period, if an interval
between payments of qualified stated interest on the Note contains more than
one accrual period, the amount of qualified stated interest payable at the end
of the interval (including any qualified stated interest that is payable on
the first day of the accrual period immediately following the interval) is
allocated pro rata on the basis of relative lengths to each accrual period in
the interval, and the adjusted issue price at the beginning of each accrual
period in the interval must be increased by the amount of any qualified stated
interest that has accrued prior to the first day of the accrual period but
that is not payable until the end of the interval. The amount of OID
allocable to an initial short accrual period may be computed using any
reasonable method if all other accrual periods other than a final short
accrual period are of equal length. The amount of OID allocable to the final
accrual period is the difference between (x) the amount payable at the
maturity of the Note (other than any payment of qualified stated interest) and
(y) the Note's adjusted issue price as of the beginning of the final accrual
period.
Acquisition Premium
A United States Holder that purchases a Note for an amount less than or
equal to the sum of all amounts payable on the Note after the purchase date
other than payments of qualified stated interest but in excess of its adjusted
issue price (any such excess being "acquisition premium") and that does not make
the election described below under "Election to Treat All Interest as Original
Issue Discount" is permitted to reduce the daily portions of OID by a fraction,
the numerator of which is the excess of the United States Holder's adjusted
basis in the Note immediately after its purchase over the adjusted issue price
of the Note, and the denominator of which is the excess of the sum of all
amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, over the Note's adjusted issue price.
Market Discount
A Note, other than a short-term Note, will be treated as purchased at a
market discount (a "Market Discount Note") if (i) the amount for which a United
States Holder purchased the Note is less than the Note's issue price (as
determined above under "Original Issue Discount -- General") and (ii) the Note's
stated redemption price at maturity or, in the case of a Discount Note, the
Note's "revised issue price", exceeds the amount for which the United States
Holder purchased the Note by at least 1/4 of 1 percent of such Note's stated
redemption price at maturity or revised issue price, respectively, multiplied by
the number of complete years to the Note's maturity. If such excess is not
sufficient to cause the Note to be a Market Discount Note, then such excess
constitutes "de minimis market discount". The Code provides that, for these
purposes, the "revised issue price" of a Note generally equals its issue price,
increased by the amount of any OID that has accrued on the Note.
Any gain recognized on the maturity or disposition of a Market Discount
Note will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively, a United States
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Note. Such an election shall apply to all debt
instruments with market discount acquired by the electing United States Holder
on or after the first day of the first taxable year to which the election
applies. This election may not be revoked without the consent of the Service.
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on a
constant-yield method. Such an election shall apply only to the Note with
respect to which it is made and may not be revoked without the consent of the
Service. A United States Holder of a Market Discount Note that does not elect
to include market discount in income currently generally will be required to
defer deductions for interest on borrowings allocable to such Note in an amount
not exceeding the accrued market discount on such Note until the maturity or
disposition of such Note.
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Pre-Issuance Accrued Interest
If (i) a portion of the initial purchase price of a Note is attributable
to pre-issuance accrued interest, (ii) the first stated interest payment on the
Note is to be made within one year of the Note's issue date and (iii) the
payment will equal or exceed the amount of pre-issuance accrued interest, then
the United States Holder may elect to decrease the issue price of the Note by
the amount of pre-issuance accrued interest. In that event, a portion of the
first stated interest payment will be treated as a return of the excluded pre-
issuance accrued interest and not as an amount payable on the Note.
Notes Subject to Contingencies Including Optional Redemption
In general, if a Note provides for an alternative payment schedule or
schedules applicable upon the occurrence of a contingency or contingencies and
the timing and amounts of the payments that comprise each payment schedule are
known as of the issue date, the yield and maturity of the Note are determined by
assuming that the payments will be made according to the Note's stated payment
schedule. If, however, based on all the facts and circumstances as of the issue
date, it is more likely than not that the Note's stated payment schedule will
not occur, then, in general, the yield and maturity of the Note are computed
based on the payment schedule most likely to occur.
Notwithstanding the general rules for determining yield and maturity in
the case of Notes subject to contingencies, if the Company has an unconditional
option or options to redeem a Note, or the Holder has an unconditional option or
options to cause a Note to be repurchased, prior to the Note's stated maturity,
then (i) in the case of an option or options of the Company, the Company will be
deemed to exercise or not exercise an option or combination of options in the
manner that minimizes the yield on the Note and (ii) in the case of an option or
options of the Holder, the Holder will be deemed to exercise or not exercise an
option or combination of options in the manner that maximizes the yield on the
Note. For purposes of those calculations, the yield on the Note is determined
by using any date on which the Note may be redeemed or repurchased as the
maturity date and the amount payable on such date in accordance with the terms
of the Note as the principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs
or does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the Note
is repaid as a result of a change in circumstances and solely for purposes of
the accrual of OID, the yield and maturity of the Note are redetermined by
treating the Note as reissued on the date of the change in circumstances for an
amount equal to the Note's adjusted issue price on that date.
Election to Treat All Interest as Original Issue Discount
A United States Holder may elect to include in gross income all interest
that accrues on a Note using the constant-yield method described above under the
heading "Original Issue Discount -- General", with the modifications described
below. For purposes of this election, interest includes stated interest, OID,
de minimis original issue discount, market discount, de minimis market discount
and unstated interest, as adjusted by any amortizable bond premium (described
below under "Notes Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Note with respect to which
this election has been made, the issue price of the Note will equal the electing
United States Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition by
the electing United States Holder, and no payments on the Note will be treated
as payments of qualified stated interest. This election will generally apply
only to the Note with respect to which it is made and may not be revoked without
the consent of the Service. If this election is made with respect to a Note
with amortizable bond premium, then the electing United States Holder will be
deemed to have elected to apply amortizable bond premium against interest with
respect to all debt instruments with amortizable bond premium (other than debt
instruments the interest on which is excludible from gross income) held by the
electing United States Holder as of the beginning of the taxable year in which
the Note with respect to which the election is made is acquired or thereafter
acquired. The deemed election with respect to amortizable bond premium may not
be revoked without the consent of the Service.
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If the election to apply the constant-yield method to all interest on a
Note is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
Variable Rate Notes
A "Variable Rate Note" is a Note that: (i) has an issue price that does
not exceed the total noncontingent principal payments by more than the lesser of
(1) the product of (x) the total noncontingent principal payments, (y) the
number of complete years to maturity from the issue date and (z) .015, or (2) 15
percent of the total noncontingent principal payments, and (ii) provides for
stated interest compounded or paid at least annually at (1) one or more
"qualified floating rates", (2) a single fixed rate and one or more qualified
floating rates, (3) a single "objective rate" or (4) a single fixed rate and a
single objective rate that is a "qualified inverse floating rate".
A qualified floating rate or objective rate in effect at any time during
the term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no earlier
than 3 months prior to the first day on which that value is in effect and no
later than 1 year following that first day.
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Note is denominated or (ii) it is equal to the product of such a rate and
either (a) a fixed multiple that is greater than zero but not more than 1.35,
or (b) a fixed multiple greater than zero but not more than 1.35, increased or
decreased by a fixed rate. A rate is not a qualified floating rate, however,
if the rate is subject to certain restrictions (including caps, floors,
governors, or other similar restrictions) unless such restrictions are fixed
throughout the term of the Note or are not reasonably expected to significantly
affect the yield on the Note.
An "objective rate" is a rate, other than a qualified floating rate,
that is determined using a single, fixed formula and that is based on (i) one or
more qualified floating rates, (ii) one or more rates each of which would be a
qualified floating rate for a debt instrument denominated in a currency other
than the currency in which the debt instrument is denominated, (iii) the yield
or changes in the price of one or more actively traded items of personal
property other than stock or debt of the issuer or a related party, or (iv) a
combination of objective rates. A variable rate is not an objective rate,
however, if it is reasonably expected that the average value of the rate during
the first half of the Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Note's term. An objective rate is a "qualified inverse floating rate" if
(i) the rate is equal to a fixed rate minus a qualified floating rate, and (ii)
the variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds. Under these
rules, Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, Treasury Rate
Notes, CD Rate Notes, Federal Funds Rate Notes, CMT Rate Notes, 11th District
Cost of Funds Rate Notes and J.J. Kenny Rate Notes will generally be treated as
Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a
single qualified floating rate or objective rate, all stated interest on the
Note is qualified stated interest and the amount of OID, if any, is determined
by using, in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date of the qualified floating rate or qualified
inverse floating rate, or, in the case of any other objective rate, a fixed rate
that reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or objective rate, or at a single fixed rate (other than
at a single fixed rate for an initial period), the amount of interest and OID
accruals on the Note are generally determined by (i) determining a fixed rate
substitute for each variable rate provided under the Variable Rate Note
(generally, the value of each variable rate as of the issue date or, in the case
of an objective rate that is not a qualified inverse floating rate, a rate that
reflects the reasonably expected yield on the Note), (ii) constructing the
equivalent fixed rate debt instrument (using the fixed rate substitute described
above), (iii) determining the amount of qualified stated interest and OID with
respect to the equivalent fixed rate debt
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instrument, and (iv) making the appropriate adjustments for actual variable
rates during the applicable accrual period.
If a Variable Rate Note provides for stated interest either at one or
more qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than the
fixed rate. The qualified floating rate (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the Variable
Rate Note as of the issue date would be approximately the same as the fair
market value of an otherwise identical debt instrument that provides for the
qualified floating rate (or qualified inverse floating rate) rather than the
fixed rate.
Short-Term Notes
In general, an individual or other cash basis United States Holder of a
short-term Note is not required to accrue OID (as specially defined below for
the purposes of this paragraph) for United States federal income tax purposes
unless it elects to do so (but may be required to include any stated interest
in income as the interest is received). Accrual basis United States Holders
and certain other United States Holders, including banks, regulated investment
companies, dealers in securities, common trust funds, United States Holders who
hold Notes as part of certain identified hedging transactions, certain
pass-thru entities and cash basis United States Holders who so elect, are
required to accrue OID on short-term Notes on either a straight-line basis or
under the constant-yield method (based on daily compounding), at the election
of the United States Holder. In the case of a United States Holder not
required and not electing to include OID in income currently, any gain realized
on the sale or retirement of the short-term Note will be ordinary income to the
extent of the OID accrued on a straight-line basis (unless an election is made
to accrue the OID under the constant-yield method) through the date of sale or
retirement. United States Holders who are not required and do not elect to
accrue OID on short-term Notes will be required to defer deductions for
interest on borrowings allocable to short-term Notes in an amount not exceeding
the deferred income until the deferred income is realized.
For purposes of determining the amount of OID subject to these rules,
all interest payments on a short-term Note, including stated interest, are
included in the short-term Note's stated redemption price at maturity.
Foreign Currency Discount Notes
OID for any accrual period on a Discount Note that is denominated in, or
determined by reference to, a foreign currency will be determined in the foreign
currency and then translated into U.S. dollars in the same manner as stated
interest accrued by an accrual basis United States Holder, as described under
"Payments of Interest". Upon receipt of an amount attributable to OID (whether
in connection with a payment of interest or the sale or retirement of a Note), a
United States Holder may recognize ordinary income or loss.
NOTES PURCHASED AT A PREMIUM
A United States Holder that purchases a Note for an amount in excess of
its principal amount may elect to treat such excess as "amortizable bond
premium", in which case the amount required to be included in the United States
Holder's income each year with respect to interest on the Note will be reduced
by the amount of amortizable bond premium allocable (based on the Note's yield
to maturity) to such year. In the case of a Note that is denominated in, or
determined by reference to a foreign currency, bond premium will be computed in
units of foreign currency, and amortizable bond premium will reduce interest
income in units of the foreign currency. At the time amortized bond premium
offsets interest income, exchange gain or loss (taxable as ordinary income or
loss) is realized measured by the difference between exchange rates at that time
and at the time of the acquisition of the Notes. Any election to amortize bond
premium shall apply to all bonds (other than bonds the interest on which is
excludible from gross income) held by the United States Holder at the beginning
of the first taxable year to which
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the election applies or thereafter acquired by the United States Holder, and
is irrevocable without the consent of the Service. See also "Original Issue
Discount -- Election to Treat All Interest as Original Issue Discount".
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost (as defined below), increased by the amount of any OID or market
discount included in the United States Holder's income with respect to the Note
and the amount, if any, of income attributable to de minimis original issue
discount and de minimis market discount included in the United States Holder's
income with respect to the Note, and reduced by (i) the amount of any payments
that are not qualified stated interest payments, and (ii) the amount of any
amortizable bond premium applied to reduce interest on the Note. The U.S.
dollar cost of a Note purchased with a foreign currency will generally be the
U.S. dollar value of the purchase price on the date of purchase or, in the case
of Notes traded on an established securities market, as defined in the
applicable Treasury Regulations, that are purchased by a cash basis United
States Holder (or an accrual basis United States Holder that so elects), on the
settlement date for the purchase.
A United States Holder will generally recognize gain or loss on the
sale or retirement of a Note equal to the difference between the amount
realized on the sale or retirement and the tax basis of the Note. The amount
realized on a sale or retirement for an amount in foreign currency will be the
U.S. dollar value of such amount on the date of sale or retirement or, in the
case of Notes traded on an established securities market, as defined in the
applicable Treasury Regulations, sold by a cash basis United States Holder (or
an accrual basis United States Holder that so elects), on the settlement date
for the sale. Except to the extent described above under "Original Issue
Discount -- Short-Term Notes" or "Original Issue Discount -- Market Discount"
or described in the next succeeding paragraph or attributable to accrued but
unpaid interest, gain or loss recognized on the sale or retirement of a Note
will be capital gain or loss and will be long-term capital gain or loss if the
Note was held for more than one year.
Gain or loss recognized by a United States Holder on the sale or
retirement of a Note that is attributable to changes in exchange rates will be
treated as ordinary income or loss. However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
Foreign currency received as interest on a Note or on the sale or
retirement of a Note will have a tax basis equal to its U.S. dollar value at the
time such interest is received or at the time of such sale or retirement.
Foreign currency that is purchased will generally have a tax basis equal to the
U.S. dollar value of the foreign currency on the date of purchase. Any gain or
loss recognized on a sale or other disposition of a foreign currency (including
its use to purchase Notes or upon exchange for U.S. dollars) will be ordinary
income or loss.
INDEXED NOTES, RENEWABLE NOTES AND EXTENDIBLE NOTES
The applicable Pricing Supplement will contain a discussion of any
special United States federal income tax rules with respect to Notes that are
not subject to the rules governing Variable Rate Notes payments on which are
determined by reference to any index and with respect to any Renewable or
Extendible Notes.
AMORTIZING NOTES
The applicable Pricing Supplement will contain a discussion of special
United States federal income tax rules applicable to Notes, such as Amortizing
Notes, that provide for partial principal payments prior to Stated Maturity.
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UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder who or that is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States Federal income tax on a net income basis in respect of a Note.
Under present United States federal income and estate tax law and
subject to the discussion of backup withholding below:
(i) payments of principal, premium (if any) and interest
(including OID) by the Company or any of its paying agents to any holder
of a Note who or which is a United States Alien Holder will not be
subject to United States federal withholding tax if, in the case of
interest or OID, (a) the beneficial owner of the Note does not actually
or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote, (b) the beneficial
owner of the Note is not a controlled foreign corporation that is
related to the Company through stock ownership, (c) the interest on the
Note is not contingent interest to which Section 871(h)(4)(A) of the
Code is applicable, and (d) either (A) the beneficial owner of the Note
certifies to the Company or its agent, under penalties of perjury, that
it is not a United States Holder and provides its name and address or
(B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") and holds the Note
certifies to the Company or its agent under penalties of perjury that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes
the payor with a copy thereof;
(ii) a United States Alien Holder of a Note will not be subject
to United States federal withholding tax on any gain realized on the
sale or exchange of a Note; and
(iii) a Note held by an individual who at death is not a citizen
or resident of the United States will not be includible in the
individual's gross estate for purposes of the United States federal
estate tax as a result of the individual's death if the individual did
not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote,
the income on the Note would not have been effectively connected with a
United States trade or business of the individual at the individual's
death and in the case of a Note on which all or a portion of the
interest payments are contingent interest to which Section 871(h)(4)(A)
is applicable, only to the extent that the value of such Note is not
allocable to such interest.
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Holders
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Note and the proceeds of the sale of a
Note before maturity within the United States to, and to the accrual of OID on a
Discount Note with respect to, non-corporate United States Holders, and "backup
withholding" at a rate of 31% will apply to such payments and to payments of OID
if the United States Holder fails to provide an accurate taxpayer identification
number or to report all interest and dividends required to be shown on its
federal income tax returns.
United States Alien Holders
Information reporting and backup withholding will not apply to payments
of principal, premium (if any) and interest (including OID) made by the Company
or a paying agent to a United States Alien Holder on a Note if the certification
described in clause (i)(c) under "United States Alien Holders" above is
received, provided that the payor does not have actual knowledge that the holder
is a United States person.
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Payments of the proceeds from the sale by a United States Alien Holder
of a Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Note to or through the United States office of a
broker is subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Under the terms of a Distribution Agreement, dated August __, 1994 among
the Company and Lehman Brothers, Lehman Brothers Inc. (including its affiliate
Lehman Government Securities Inc.), CS First Boston Corporation, Salomon
Brothers Inc and Chemical Securities Inc. (the "Distribution Agreement"), the
Notes are offered on a continuing basis by the Company through the Agents,
each of which has agreed to use its reasonable efforts to solicit purchases of
the Notes. The Company will pay each Agent a commission of from 0.125% to
0.750% of the principal amount of each Note, depending upon its Stated
Maturity, sold through such Agent, except that the commission payable by the
Company to the Agents with respect to Notes with maturities of greater than
thirty years will be negotiated at the time the Company issues such Notes. The
Company will have the sole right to accept offers to purchase Notes and may
reject any such offer in whole or in part. Each Agent will have the right, in
its discretion reasonably exercised, to reject in whole or in part any offer to
purchase Notes received by such Agent. The Company also may sell Notes to any
Agent, acting as principal, at a discount to be agreed upon at the time of
sale, for resale to one or more investors or to one or more broker-dealers
(acting as principal for purposes of resale) at varying prices related to
prevailing market prices at the time of resale, as determined by such Agent,
or, if so agreed, at a fixed public offering price. Unless otherwise indicated
in the applicable Pricing Supplement, if any Note is resold by an Agent to any
broker-dealer at a discount, such discount will not be in excess of 66 2/3% of
the discount or commission received by such Agent from the Company. In
addition, unless otherwise indicated in the applicable Pricing Supplement, any
Note purchased by an Agent as principal will be purchased at 100% of the
principal amount thereof less a percentage equal to the commission applicable
to an agency sale of a Note having an identical Stated Maturity. After the
initial public offering of the Notes, the public offering price (in the case of
Notes to be resold on a fixed public offering price basis), the concession and
the discount may be changed. The Company also reserves the right to sell the
Notes directly to investors on its own behalf in those jurisdictions where it
is authorized to do so or as otherwise provided in the applicable Pricing
Supplement. In such circumstances, the Company will have the sole right to
accept offers to purchase Notes and may reject any proposed purchase of Notes
in whole or in part. In the case of sales made directly by the Company, no
commission will be payable. In addition, the Company may accept (but not
solicit) offers from additional agents for the sale of particular Notes;
provided that any such solicitation and sale of the Notes shall be on
substantially the same terms and conditions as the Agents have agreed to. Such
additional agents will be named in the applicable Pricing Supplement.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Act, or to contribute to payments each Agent may be required to make in
respect thereof. The Company has agreed to reimburse the Agents for certain of
the Agents' expenses, including, but not limited to, the fees and expenses of
counsel to the Agents.
The Company has been advised by each Agent that it may from time to time
purchase and sell Notes in the secondary market, but that it is not obligated to
do so. There can be no assurance that there will be a secondary market for the
Notes or liquidity in the secondary market if one develops. From time to time,
each Agent may make a market in the Notes.
Chemical Securities Inc. is an affiliate of Chemical Bank, which is the
administrative agent for and a lender to the Company under the Company's
Revolving Credit and Competitive Advance Facility Agreement, dated June 30,
1994. As further described under "Use of Proceeds" in the accompanying
Prospectus, the Company may use
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the net proceeds of the offering of the Securities to, among other things,
repay certain outstanding borrowings under such credit facility. If as a
result of such debt repayment to Chemical Bank more than 10 percent of the net
offering proceeds would be paid to an affiliate of a member of the National
Association of Securities Dealers, Inc. ("NASD") which is participating in the
distribution of the Notes, the offering of the Notes would be made pursuant to
the provisions of Article III, Section 44(c)(8) of the NASD Rules of Fair
Practice. Chemical Bank also participates on a regular basis in various
general financing and banking transactions with the Company.
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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 Debt Securities, Preferred Stock or Common Stock 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 $202,343,750 (or the equivalent thereof in one or more foreign
currencies or currency units or, in the case of any Debt Securities (including
Debt Securities that are denominated or payable in one or more foreign
currencies or currency units or are denominated with amounts payable in respect
of principal of or any premium or interest on such Debt Securities to be
determined by reference to the value, rate or price or one or more specified
currencies or are issued at an original discount)), such principal amount
as shall result in an aggregate initial offering price equivalent to not more
than $202,343,750.
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
<PAGE> 38
terms for sinking fund payments, any terms for conversion into or exchange for
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 into or exchange for 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. This
Prospectus may not be used to consummate the sale of Securities unless
accompanied by a 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 August 5, 1994.
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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, 1993;
(ii) a Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1994 dated May 13, 1994;
(iii) a Current Report on Form 8-K dated February 8, 1994;
(iv) a Current Report on Form 8-K/A dated February 11, 1994
amending a Current Report on Form 8-K dated November 10, 1993; and
(v) a Current Report on Form 8-K dated July 25, 1994;
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
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<PAGE> 40
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).
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: Citicorp 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,
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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.
For the six months ended June 30, 1994, the Company's net sales were
$935.1 million.
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 Revolving
Credit and Competitive Advance Facility Agreement dated June 30, 1994, working
capital, capital expenditures and acquisitions.
RECENT DEVELOPMENTS
In October 1993, the Company acquired from SPX Corporation ("SPX") its
Sealed Power Replacement division ("SPR"),
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SPX's U.S. and Canadian automotive aftermarket operations (the
"Acquisition"), for approximately $137 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 and Speed-Pro 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.
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<PAGE> 43
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
Six Months Ended Year Ended Years Ended December 31,
June 30, 1994 December 31, 1993(B) 1993 1992 1991 1990 1989
------------------ -------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
5.12 2.79 2.64 1.26 (c) 1.34 4.08
</TABLE>
Ratio of Earnings to Combined Fixed Charges and Preferred Dividends(A):
<TABLE>
<CAPTION>
Pro Forma
Six Months Ended Year Ended Years Ended December 31,
June 30, 1994 December 31, 1993(B) 1993 1992 1991 1990 1989
------------------ -------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
3.70 2.35 2.18 1.21 (c) 1.28 3.52
</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) As a result of a special charge of $25.0 million, earnings in 1991
were $15.2 million, which were less than 1991 fixed charges of $33.8
million. Including preferred dividend requirements, earnings in 1991
were $20.0 million, which were less than 1991 fixed charges of $38.6
million.
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<PAGE> 44
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, 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, 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,
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
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<PAGE> 45
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
of the series of which they are a part;
(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;
(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
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<PAGE> 46
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 into or exchangeable for 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
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<PAGE> 47
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 and, if so, the
respective Depositaries for such Global Securities, the form of any legend
or legends to be borne by any such Global Security in addition to or in
lieu of the legend referred to under "Form, Exchange and Transfer --
Global Securities" and, if different from those described under such
caption, any circumstances under which any such Global Security may be
exchanged in whole or in part for Debt Securities registered, and any
transfer of such Global Security in whole or in part may be registered, in
the names of Persons other than the Depositary for such Global Security or
its nominee;
(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)
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
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<PAGE> 48
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 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 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.
FORM, EXCHANGE AND TRANSFER
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."
At the option of the Holder, subject to the terms of the Applicable
Indenture and the limitations applicable to Global Securities, Debt Securities
of each series will be exchangeable for other Debt Securities of the same
series of any authorized denomination and of a like tenor and aggregate
principal amount. (Section 305)
Subject to the terms of the Applicable Indenture and the limitations
applicable to Global Securities, Debt Securities may be presented for exchange
as provided above or for registration of transfer (duly endorsed or with the
form of transfer endorsed thereon duly executed) at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose. No service charge will be made for any registration of transfer
or exchange of Debt Securities, but the Company may require payment of a sum
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<PAGE> 49
sufficient to cover any tax or other governmental charge payable in
connection therewith. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request. The
Company has appointed the Trustee as Security Registrar. Any transfer agent
(in addition to the Security Registrar) initially designated by the Company for
any Debt Securities will be named in the applicable Prospectus Supplement.
(Section 305) The Company may at any time designate additional transfer agents
or rescind the designation of any transfer agent or approve a change in the
office through which any transfer agent acts, except that the Company will be
required to maintain a transfer agent in each Place of Payment for the Debt
Securities of each series. (Section 1002)
If the Debt Securities of any series (or of any series and specified
terms) are to be redeemed in part, the Company will not be required to (i)
issue, register the transfer of or exchange any Debt Security of that series
(or of that series and specified terms, as the case may be) during a period
beginning at the opening of business 15 days before the day of mailing of a
notice of redemption of any such Debt Security that may be selected for
redemption and ending at the close of business on the day of such mailing or
(ii) register the transfer of or exchange any Debt Security so selected for
redemption, in whole or in part, except the unredeemed portion of any such
Debt Security being redeemed in part. (Section 305)
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.
CERTAIN COVENANTS OF THE COMPANY
The following restrictions apply to each series of Debt Securities
unless the terms of such series of Debt Securities provide otherwise.
Limitation on Liens. The Indentures contain a covenant providing that
so long as Debt Securities of any series entitled by their terms to the
benefits of such covenant shall be Outstanding, the Company will not create or
assume, and will not permit any Restricted Subsidiary to create or assume, any
notes, bonds, debentures or other similar evidences of Indebtedness secured by
any mortgage, pledge, security interest or
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<PAGE> 50
lien (any such mortgage, pledge, security interest or lien being
hereinafter referred to as a "Mortgage" or "Mortgages") of or upon any
Principal Property owned by the Company or by any Restricted Subsidiary or on
shares of capital stock or evidence of Indebtedness of any Restricted
Subsidiary, whether owned at the date of the Applicable Indenture or thereafter
acquired, without making effective provision, and the Company in such case will
make or cause to be made effective provision, whereby all Debt Securities of
each series to which such covenant applies (together with, if the Company shall
so determine, any other Indebtedness of the Company or such Restricted
Subsidiary, whether then existing or thereafter created which is not
subordinated to such Debt Securities) shall be secured by such a Mortgage
equally and ratably with (or prior to) any and all other Indebtedness thereby
secured, provided, however, that the foregoing shall not apply to any of the
following:
(1) Mortgages on any Principal Property, shares of stock or
Indebtedness of any corporation existing at the time such corporation becomes a
Subsidiary;
(2) Mortgages on any Principal Property, shares of stock or
Indebtedness acquired, constructed or improved by the Company or any Restricted
Subsidiary after the date of the Applicable Indenture which are created or
assumed prior to, or contemporaneously with, such acquisition, construction or
improvement or within 365 days after the acquisition, completion of
construction or improvement or commencement of commercial operation of such
property, to secure or provide for the payment of all or any part of the
purchase price or the cost of such construction or improvement thereof, or, in
addition to Mortgages contemplated by clause (3) below, Mortgages on any
Principal Property, shares of stock or Indebtedness existing at the time of
acquisition thereof (including acquisition through merger or consolidation)
existing at the time of acquisition thereof;
(3) Mortgages on any Principal Property or shares of stock or
Indebtedness acquired from a corporation which is merged with or into the
Company or a Restricted Subsidiary;
(4) Mortgages on any Principal Property, shares of stock or
Indebtedness to secure Indebtedness to the Company or to a Restricted
Subsidiary;
(5) Mortgages on any Principal Property, shares of stock or
Indebtedness in favor of the United States of America or any State thereof or
The Commonwealth of Puerto Rico, or any department, agency or instrumentality
or political subdivision
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<PAGE> 51
of the United States of America or any State thereof or The Commonwealth of
Puerto Rico, to secure partial, progress, advance or other payments, or to
secure any Indebtedness incurred for the purpose of financing all or any part
of the cost of acquiring, constructing or improving the Principal Property,
shares of stock or Indebtedness subject to such Mortgages (including Mortgages
incurred in connection with pollution control, industrial revenue, Title XI
maritime financings or similar financings), or other Mortgages in connection
with the issuance of tax-exempt industrial revenue bonds;
(6) Mortgages existing as of the date of the Applicable Indenture;
(7) Mortgages for taxes, assessments or other government charges, the
validity of which is being contested in good faith by appropriate proceedings
and materialmen's, mechanics' and other like Mortgages, or deposits to obtain
the release of such Mortgages;
(8) Mortgages created or deposits made to secure the payment of
workers' compensation claims or the performance of, or in connection with,
tenders, bids, leases, public or statutory obligations, surety and appeal
bonds, contracts, performance and return-of-money bonds or to secure (or in
lieu of) surety or appeal bonds and Mortgages made in the ordinary course of
business for similar purposes; and
(9) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Mortgage referred to in
the foregoing clauses (1) to (8), inclusive; provided, however, that such
extension, renewal or replacement shall be limited to all or a part of the
property, shares of stock or Indebtedness which secured the Mortgage so
extended, renewed or replaced (plus improvements on such property).
Notwithstanding the foregoing, the Company or any Restricted Subsidiary
may create or assume Mortgages in addition to those permitted by the
immediately preceding paragraph, and renew, extend or create such Mortgages,
provided, that at the time of such creation, assumption, renewal or
replacement, and after giving effect thereto, the aggregate amount of all
Indebtedness so secured by such a Mortgage as provided above (not including
Indebtedness excluded as provided in clauses (1) through (9) of the immediately
preceding paragraph), plus all Attributable Debt of the Company and its
Restricted Subsidiaries in respect of Sale and Lease-Back Transactions (as
defined below) which would
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<PAGE> 52
not be permitted by either clause (1) or (2) of the first paragraph
under "Limitation on Sale and Lease-Back" below, would not exceed 20% of
Consolidated Assets. (Section 1009)
Limitation on Sale and Lease-Back. The Indentures contain a covenant
providing that so long as Debt Securities of any series entitled by their terms
to the benefits of such covenant shall be Outstanding, the Company will not,
nor will it permit any Restricted Subsidiary to, enter into any arrangement
with any Person (other than the Company or any Restricted Subsidiary) providing
for the leasing by the Company or a Restricted Subsidiary of any Principal
Property owned by the Company or such Restricted Subsidiary (except for leases
for a term of not more than three years), which property has been or is to be
sold or transferred by the Company or such Restricted Subsidiary to such person
on the security of such Principal Property more than 365 days after the
acquisition thereof or the completion of construction and commencement of full
operation thereof (herein referred to as a "Sale and Lease-Back Transaction"),
unless either (1) the Company or such Restricted Subsidiary would be entitled
pursuant to such covenant to incur Indebtedness secured by a Mortgage on the
Principal Property to be leased back equal in amount to the Attributable Debt
with respect to such Sale and Lease-Back Transaction without equally and
ratably securing the Debt Securities of such series, or (2) the Company shall,
and in any such case the Company covenants that it will, apply or cause to be
applied an amount equal to the greater of the net proceeds or the fair value
(as determined by the Board of Directors) of the property so sold to the
purchase of Principal Property or to the retirement (other than any mandatory
retirement), within 365 days of the effective date of any such Sale and
Lease-Back Transaction, of Debt Securities or other Funded Indebtedness;
provided, however, that any such retirement of Debt Securities shall be made in
accordance with the Applicable Indenture; and provided, further, that the
amount to be applied to such retirement of Debt Securities or other Funded
Indebtedness shall be reduced by an amount equal to the sum of (A) an amount
equal to the principal amount of any Debt Securities delivered within 365 days
after the effective date of such Sale and Lease-Back Transaction to the
Applicable Trustee for retirement and cancellation, and (B) the principal
amount of other Funded Indebtedness voluntarily retired by the Company within
such 365-day period, excluding in each case retirements pursuant to mandatory
sinking fund or prepayment provisions and payments at Maturity.
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<PAGE> 53
Notwithstanding the foregoing,
(i) the Company or any Restricted Subsidiary may enter into
Sale and Lease-Back Transactions in addition to any permitted by the
immediately preceding paragraph and without any obligation to retire any
Debt Securities or other Indebtedness; provided, that at the time of
entering into such Sale and Lease-Back Transaction and after giving effect
thereto, Attributable Debt resulting from such Sale and Lease-Back
Transaction, plus the aggregate amount of all Indebtedness secured by a
Mortgage (not including Indebtedness excluded as provided in clauses (1)
through (9) under "-- Limitations on Liens" above), does not exceed 20% of
Consolidated Assets; and
(ii) the Company or any Restricted Subsidiary may, at any time,
enter into a Sale and Lease-Back Transaction with respect to any or all of
the following properties: its plant located in Mooresville, Indiana and
its Precision Forged Products Division manufacturing facilities located in
Gallipolis, Ohio; Plymouth, Michigan and Romulus, Michigan. (Section 1010)
CERTAIN DEFINITIONS
"Attributable Debt", when used in connection with a Sale and
Lease-Back Transaction, shall mean, as of any particular time, the lesser of
(a) the fair value (as determined by the Board of Directors) of the property
subject to such arrangement and (b) the then present value (computed by
discounting at the Composite Rate) of the obligation of a lessee for net rental
payments during the remaining term of any lease in respect of such property
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended). The term "net rental payments" under any
lease for any period shall mean the sum of the rental payments required to be
paid in such period by the lessee thereunder, not including, however, any
amounts required to be paid by such lessee (whether or not designated as rental
or additional rental) on account of maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges required to be paid by such lessee
thereunder or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales, maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges.
"Composite Rate" means, as of any particular time, the rate of
interest, per annum, compounded semiannually, equal to the sum of the rates of
interest borne by each of the Debt Securities Outstanding under the Applicable
Indenture, as specified on the face of each of the Debt Securities, provided,
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<PAGE> 54
that in the case of Debt Securities with variable rates of interest, the
interest rate to be used in calculating the Composite Rate shall be the
interest rate applicable to such Debt Securities at the beginning of the most
recent period for which the interest rate was determined for such Debt
Securities in accordance with the terms thereof and provided, further, that,
in the case of Debt Securities which do not bear interest, the interest rate to
be used in calculating the Composite Rate shall be a rate equal to the yield to
Maturity on such Debt Securities, (calculated at the time of issuance of such
Debt Securities) multiplied, in the case of each of the Debt Securities, by the
percentage of the aggregate principal amount of all of the Debt Securities then
Outstanding represented by such Debt Security.
"Consolidated Assets" means the Company's assets, determined in
accordance with GAAP and consolidated for financial reporting purposes in
accordance with GAAP, such assets to be valued at book value.
"Funded Indebtedness" means all Indebtedness of the Company and its
Restricted Subsidiaries maturing by its terms more than one year after, or
which is renewable or extendable at the option of the Company for a period
ending more than one year after, the date as of which Funded Indebtedness is
being determined.
"GAAP" means such accounting principles as are generally accepted in
the United States at the date of the Applicable Indenture.
"Indebtedness" means, without duplication, (i) all obligations in
respect of borrowed money or for the deferred purchase or acquisition price of
property (including all types of real, personal, tangible, intangible or mixed
property) or services (excluding trade accounts payable, deferred taxes and
accrued liabilities which arise in the ordinary course of business) which are,
in accordance with GAAP, includible as a liability on a balance sheet
consolidated for financial reporting purposes in accordance with GAAP, (ii) all
amounts representing the capitalization of rental obligations in accordance
with GAAP, and (iii) all Contingent Obligations (defined below) with respect to
the foregoing; for purposes of clause (iii), "Contingent Obligation" means, as
to any Person, any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (i)
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to purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (a) for the
purchase or payment of any such primary obligation or (b) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase Property,
securities or services primarily for the purpose of assuring the beneficiary of
any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the beneficiary of such primary obligation against loss in respect thereof;
provided, however, that the term "Contingent Obligation" shall not include the
endorsement of instruments for deposit or collection in the ordinary course of
business. The term "Contingent Obligation" shall also include the liability
of a general partner in respect of the primary obligations of a partnership in
which it is a general partner. The amount of any Contingent Obligation of a
Person shall be deemed to be an amount equal to the principal amount of the
primary obligation in respect to which such Contingent Obligation is made.
"Principal Property" shall mean the principal manufacturing facilities
owned by the Company or a Restricted Subsidiary located in the United States,
except such as the Board of Directors, in its good faith opinion, reasonably
determines is not significant to the business, financial condition and earnings
of the Company and its consolidated Subsidiaries taken as a whole, as
evidenced by a Board resolution, and except for (i) any and all personal
property including, without limitation, (x) motor vehicles and other rolling
stock, and (y) office furnishings and equipment and information and electronic
data processing equipment, (ii) any property financed through obligations
issued by a state, territory or possession of the United States, or any
political subdivision or instrumentality of the foregoing, or (iii) any real
property held for development or sale.
"Restricted Subsidiary" means any consolidated Subsidiary that owns
any Principal Property.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by
one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
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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; (e) a default under
any bond, debenture, note or other evidence of indebtedness for money borrowed
by the Company (including a default with respect to Securities of any series
other than that series), or under any mortgage, indenture or instrument
(including the Applicable Indenture) under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed by
the Company or any consolidated Subsidiary, whether such indebtedness now exists
or shall hereafter be created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been rescinded or annulled,
within a period of 10 days after there shall have been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 10% in principal amount of the Outstanding Debt
Securities of that series a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or cause such
acceleration to be rescinded or annulled, and stating that such notice is a
"Notice of Default" under the Applicable Indenture; and (f) certain events in
bankruptcy, insolvency or reorganization. (Section 501)
If an Event of Default (other than an Event of Default described in
clause (f) 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 Security) to be
due and payable immediately. If an Event of Default described in clause (f)
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
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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
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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
Some or all of the Debt Securities of any series may be represented,
in whole or in part, by one or more Global Securities which will have an
aggregate principal amount equal to that of the Debt Securities represented
thereby. Each Global Security will be registered in the name of a Depositary
or a nominee thereof identified in the applicable Prospectus Supplement, will
be deposited with such Depositary or nominee or a custodian therefor and will
bear a legend regarding the restrictions on exchanges and registration of
transfer thereof referred to below and any such other matters as may be provided
for pursuant to the Applicable Indenture.
Notwithstanding any provision of the Applicable Indenture or any Debt
Security described herein, no Global Security may be exchanged in whole or in
part for Debt Securities registered, and no transfer of a Global Security in
whole or in part may be registered, in the name of any Person other than the
Depositary for such Global Security or any nominee of such Depositary unless
(i) the Depositary has notified the Company that it is unwilling or unable to
continue as Depositary for such Global Security or has ceased to be qualified
to act as such as required by the Applicable Indenture, (ii) there shall have
occurred and be continuing an Event of Default with respect to the Securities
represented by such Global Security or (iii) there shall exist such
circumstances, if any, in addition to or in lieu of those described above as
may be described in the applicable Prospectus Supplement. All securities issued
in exchange for a Global Security or any portion thereof will be registered in
such names as the Depositary may direct. (Sections 204 and 305)
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As long as the Depositary, or its nominee, is the registered Holder
of a Global Security, the Depositary or such nominee, as the case may be, will
be considered the sole owner and Holder of such Global Security and the Debt
Securities represented thereby for all purposes under the Debt Securities and
the Applicable Indenture. Except in the limited circumstances referred to
above, owners of beneficial interests in a Global Security will not be entitled
to have such Global Security or any Debt Securities represented thereby
registered in their names, will not receive or be entitled to receive physical
delivery of certificated Debt Securities in exchange therefor and will not be
considered to be the owners or Holders of such Global Security or any Debt
Securities represented thereby for any purpose under the Debt Securities or the
Applicable Indenture. All payments of principal of and any premium and
interest on a Global Security will be made to the Depositary or its nominee,
as the case may be, as the Holder thereof. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in definitive form. These laws may impair the ability to transfer
beneficial interests in a Global Security.
Ownership of beneficial interests in a Global Security will be
limited to institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Debt Securities represented by the Global
Security to the accounts of its participants. Ownership of beneficial
interests in a Global Security will be shown only on, and the transfer of those
ownership interests will be effected only through, records maintained by the
Depositary (with respect to participants' interests) or any such participant
(with respect to interests of persons held by such participants on their
behalf). Payments, transfers, exchanges and other matters relating to
beneficial interests in a Global Security may be subject to various policies
and procedures adopted by the Depositary from time to time. None of the
Company, the Applicable Trustee or any agent of the Company or the Applicable
Trustee will have any responsibility or liability for any aspect of the
Depositary's or any participant's records relating to, or for payments made on
account of, beneficial interests in a Global Security, or for maintaining,
supervising or reviewing any records relating to such beneficial interests.
Secondary trading in notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, beneficial
interests in a Global Security,
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in some cases, may trade in the Depositary's same-day funds settlement system,
in which secondary market trading activity in those beneficial interests would
be required by the Depositary to settle in immediately available funds. There
is no assurance as to the effect, if any, that settlement in immediately
available funds would have on trading activity in such beneficial interests.
Also, settlement for purchases of beneficial interests in a Global Security
upon the original issuance thereof may be required to be made in immediately
available funds.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of interest on a Debt Security on any Interest Payment Date will be
made to the Person in whose name such Debt Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a
particular series will be payable at the office of such Paying Agent or Paying
Agents as the Company may designate for such purpose from time to time, except
that at the option of the Company payment of any interest may be made by check
mailed to the address of the Person entitled thereto as such address appears
in the applicable Security Register. Unless otherwise indicated in the
applicable Prospectus Supplement, the corporate trust office of the Trustee
in The City of New York will be designated as the Company's sole Paying Agent
for payments with respect to Debt Securities of each series. Any other Paying
Agents initially designated by the Company for the Debt Securities of a
particular series will be named in the applicable Prospectus Supplement. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent or approve a change in the office through which
any Paying Agent acts, except that the Company will be required to maintain a
Paying Agent in each Place of Payment for the Debt Securities of a particular
series. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of
the principal of or any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to the Company, and the Holder of such
Debt Security thereafter may look only to the Company for payment thereof.
(Section 1003)
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the
Outstanding 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 or trust 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)
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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)
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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 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 of 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
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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
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State of New York, without regard to principles of conflicts of laws.
(Section 112)
REGARDING THE TRUSTEE
Continental Bank 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
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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 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
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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 or 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.
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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 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
June 30, 1994, 931,765 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."
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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.
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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 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.
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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 103.75% 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).
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
Depository Receipt relating to the Preferred Stock, included as exhibits to the
Registration Statement of which this Prospectus is a part.
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<PAGE> 72
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
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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.
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
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<PAGE> 74
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 holders 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
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<PAGE> 75
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 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.
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, 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 July 8, 1994, 35,531,510 shares of Common Stock were issued and
outstanding, and an aggregate of 673,669 shares of Common Stock were reserved
for issuance under the Company's incentive stock plans. The Common Stock is
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<PAGE> 76
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 non-assessable. 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 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
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<PAGE> 77
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 Warrants to purchase Preferred Stock
or Common Stock of the Company. 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,
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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 Warrants to purchase shares of Preferred Stock or
Common Stock of the Company. 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)
whether the warrants are exercisable for Preferred Stock or Common Stock of the
Company; (3) the price or prices at which such Warrants will be issued; (4) the
currency or 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
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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. Any such underwriter or agent involved in the offer
and sale of the Securities will be named in the applicable Prospectus
Supplement.
If one or more underwriters or agents are used in the sale of
Securities, the Company will execute an underwriting or similar agreement with
such underwriters or agents 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. The Company also
may, from time to time, authorize underwriters acting as the Company's agents
to offer and sell the Securities upon the terms and conditions as shall be set
forth in the Prospectus Supplement.
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.
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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.
Securities also may be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase,
in accordance with a redemption or repayment pursuant to their terms, by one or
more firms ("remarketing firms") acting as principals for their own account or
as agents for the Company. Any remarketing firm will be identified and their
terms of its agreement, if any, with the Company and its compensation will be
described in the Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Securities remarketed thereby.
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 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
-44-
<PAGE> 81
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 the validity of 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 appearing in Federal-Mogul Corporation's Annual Report (Form 10-K)
for the year ended December 31, 1993, have been audited by Ernst & Young,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedules are incorporated herein by reference in reliance upon such report
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 February 11, 1994, and incorporated herein by reference, have
been audited by Arthur Andersen & Co., independent public accountants, as
indicated in their report, with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
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<PAGE> 82
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
ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUER, BY THE AGENTS OR BY ANY OTHER PERSON. THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION MAY NOT
LAWFULLY BE MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR ANY
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAD BEEN NO CHANGE IN THE
AFFAIRS OF THE ISSUER SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Prospectus Supplement
<S> <C>
Description of Notes . . . . . . . . . . . . . . . . . . . . S-3
Important Currency Information . . . . . . . . . . . . . . . S-25
Currency Risks . . . . . . . . . . . . . . . . . . . . . . . S-25
Certain United States Federal Income
Tax Consequences . . . . . . . . . . . . . . . . . . . . . S-27
Supplemental Plan of Distribution . . . . . . . . . . . . . . S-35
Prospectus
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . . . . . . . . . . 3
Available Information . . . . . . . . . . . . . . . . . . . . 4
The Company . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 5
Recent Developments . . . . . . . . . . . . . . . . . . . . . 5
Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Description of Debt Securities . . . . . . . . . . . . . . . 8
Plan of Distribution . . . . . . . . . . . . . . . . . . . . 43
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . 45
Independent Auditors . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
$200,000,000
FEDERAL-MOGUL
CORPORATION
MEDIUM-TERM NOTES,
SERIES A
WITH MATURITIES OF NINE
MONTHS OR MORE FROM
DATE OF ISSUE
PROSPECTUS
DATED AUGUST 5, 1994
AND
PRELIMINARY PROSPECTUS SUPPLEMENT
DATED AUGUST __, 1994
LEHMAN BROTHERS
CS FIRST BOSTON
SALOMON BROTHERS INC
CHEMICAL SECURITIES INC.
