<PAGE> 1
INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS SUBJECT TO
COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO RULE 415 UNDER THE SECURITIES ACT OF 1933, AS AMENDED. A FINAL PROSPECTUS
SUPPLEMENT AND PROSPECTUS WILL BE DELIVERED TO PURCHASERS OF THESE SECURITIES.
THE PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Filed Pursuant To Rule 424(b)(3)
Registration No. 33-63855
PROSPECTUS SUPPLEMENT (Subject to Completion, Issued March 20, 1998)
(To Prospectus dated January 4, 1996)
$50,000,000
Ferro Logo
Ferro Corporation
% DEBENTURES DUE
------------------------
Interest payable and
------------------------
THE DEBENTURES WILL MATURE ON , . THE DEBENTURES WILL BE
REDEEMABLE, IN WHOLE OR FROM TIME TO TIME IN PART, AT THE OPTION OF THE COMPANY
AT ANY TIME AT A REDEMPTION PRICE EQUAL TO THE GREATER OF (I) 100% OF THE
PRINCIPAL AMOUNT OF THE DEBENTURES TO BE REDEEMED OR (II) THE SUM OF THE PRESENT
VALUES OF THE REMAINING SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST THEREON
(EXCLUSIVE OF INTEREST ACCRUED TO THE DATE OF REDEMPTION) DISCOUNTED TO THE DATE
OF REDEMPTION ON A SEMIANNUAL BASIS (ASSUMING A 360-DAY YEAR CONSISTING OF
TWELVE 30-DAY MONTHS) AT THE TREASURY RATE (AS DEFINED HEREIN) PLUS BASIS
POINTS, PLUS, IN EITHER CASE, ACCRUED AND UNPAID INTEREST ON THE PRINCIPAL
AMOUNT BEING REDEEMED TO THE DATE OF REDEMPTION. THE DEBENTURES WILL BE
REPRESENTED BY A GLOBAL NOTE REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY OR ITS NOMINEE (THE "DEPOSITARY"). INTERESTS IN SUCH GLOBAL NOTE WILL BE
SHOWN ON, AND TRANSFER THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED
BY THE DEPOSITARY AND ITS PARTICIPANTS. EXCEPT AS DESCRIBED HEREIN, DEBENTURES
IN DEFINITIVE FORM WILL NOT BE ISSUED. SEE "DESCRIPTION OF DEBENTURES."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE % AND ACCRUED INTEREST
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
--------- -------------- -------------
<S> <C> <C> <C>
Per Debenture............................... % % %
Total....................................... $ $ $
</TABLE>
- ------------
(1) Plus accrued interest from , 1998.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deduction of expenses payable by the Company estimated at $ .
------------------------
The Debentures are offered, subject to prior sale, when, as and if accepted
by the Underwriter and subject to approval of certain legal matters by Baker &
Hostetler LLP, counsel for the Underwriter. It is expected that delivery of the
Debentures will be made on or about , 1998 through the book-entry
facilities of the Depositary against payment therefor in immediately available
funds.
------------------------
MORGAN STANLEY DEAN WITTER
March , 1998
<PAGE> 2
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE 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 COMPANY
OR BY THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN
OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: 7 World Trade Center, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material can also be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, on which
Exchange the Common Stock of the Company is listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, 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 set forth in the Registration Statement, certain portions
of which are omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities, reference is made to the Registration Statement. Statements
contained therein concerning any document filed as an exhibit to the
Registration Statement are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement for a full statement of the provisions thereof. Each such
statement in the Prospectus is qualified in all respects by such reference. The
Registration Statement may be inspected, without charge, at the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20459, and copies
thereof may also be obtained from the Commission upon the payment of prescribed
fees. The Commission also maintains a Web site at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants, including the Company, that file electronically with the
Commission.
---------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES.
SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH ANY OFFERING OF
THE DEBENTURES, AND MAY BID FOR, AND PURCHASE, THE DEBENTURES IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE> 3
THE COMPANY
Established in 1919 as a manufacturer of porcelain enamel frit, Ferro
Corporation, an Ohio corporation (the "Company"), is now a producer of specialty
materials for industry, including coatings, colors, ceramics, chemicals and
plastics. Ferro's major markets are building and renovation, major appliances,
household furnishings, transportation, industrial products, packaging and
leisure products.
Ferro has had an international presence since 1927, when it initiated
operations in Canada, followed by Great Britain and Holland. Over the years, the
Company expanded further into Europe, Latin America, Australia and the Far East.
Thus, a global perspective has influenced the organization's philosophy and
management throughout most of its business history.
The Company's strong worldwide status stems from its current manufacturing
presence in 19 countries and its leading position in market segments within each
country and regional area. The Company's products are sold in over 100
countries.
Over the years, the Company's geographic diversification has been
strengthened by product development, as the Company applied its growing
technology base to other specialty materials related to its core businesses.
Increasing requirements for materials that can deliver higher performance,
greater durability and cost effectiveness have led to increased demand for
specialty materials. Many of these materials are custom formulated for
particular uses in manufactured products. Skilled application of materials
sciences and chemical technology to create innovative products has made the
Company a leading source for specialty materials throughout the world.
The Company's principal executive offices are located at 1000 Lakeside
Avenue, Cleveland, Ohio 44114-1183 and its telephone number is (216) 641-8580.
USE OF PROCEEDS
The net proceeds received by the Company from the sale of the Debentures
will be used for general corporate purposes. Funds not required immediately for
such purposes may be invested temporarily in short-term marketable securities.
S-3
<PAGE> 4
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 and as adjusted to give effect to the issuance of the
Debentures and the application of the net proceeds of the Offering. This
information should be read in conjunction with the consolidated financial
statements and notes thereto of the Company incorporated by reference into the
Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SHORT-TERM DEBT
Notes and Loans Payable................................... $ 23,269 $ 23,269
======== ========
LONG-TERM DEBT
Debentures, 7 5/8%, due 2013.............................. $ 24,801 $ 24,801
Debentures, 8%, due 2025.................................. 49,364 49,364
Debentures, 7 3/8%, due 2015.............................. 24,936 24,936
Debentures, %, due ................................ 0 50,000
Mortgages, 7.207%, payable to 2017........................ 74 74
Foreign debt.............................................. 2,845 2,845
-------- --------
Total Long-term Debt (less current portion)....... $102,020 $152,020
-------- --------
SHAREHOLDERS' EQUITY
Serial convertible preferred stock, without par value.
Authorized 2,000,000 shares; 1,520,215 shares issued... $ 70,500 $ 70,500
Guaranteed ESOP Obligation................................ (13,815) (13,815)
Common stock, par value $1 per share.
Authorized 150,000,000 shares; 47,323,053 shares
issued................................................ 47,323 47,323
Paid-in capital........................................... 1,908 1,908
Retained earnings......................................... 405,768 405,768
Foreign currency translation adjustment................... (51,771) (51,771)
Other..................................................... (7,630) (7,630)
-------- --------
452,283 452,283
Less cost of treasury stock:
Common................................................. 167,974 167,974
Preferred.............................................. 11,158 11,158
-------- --------
Total Shareholders' Equity........................ $273,151 $273,151
-------- --------
Total Capitalization...................................... $375,171 $425,171
======== ========
</TABLE>
S-4
<PAGE> 5
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
of the Company. This information should be read in conjunction with the
consolidated financial statements and notes thereto of the Company incorporated
by reference into the Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1997(1) 1996 1995 1994 1993(2)
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................. $1,381,280 $1,355,685 $1,322,954 $1,194,247 $1,065,748
Net income (loss).......................... (37,277) 54,586 49,254 47,394 36,955
BALANCE SHEET DATA:
Total assets............................... 785,679 870,468 872,112 801,376 767,894
Long-term Debt (less current portion)...... 102,020 105,308 104,910 77,611 79,349
Shareholders' equity....................... 273,151 384,204 382,150 366,744 358,797
OTHER DATA:
Ratio of earnings to fixed charges......... (2.20) 6.52 5.69 6.74 5.21
Ratio of earnings to combined fixed charges
and preferred stock dividends............ (1.72) 5.11 4.49 4.95 3.74
</TABLE>
- ---------------
(1) Included in 1997 is a realignment charge of $152.8 million, which on an
after-tax basis is $100.0 million.
(2) Included in 1993 is the cumulative effect of accounting changes (accounting
for post-retirement benefits other than pensions and accounting for income
taxes) of $20.6 million on an after-tax basis. Also included in 1993 is a
pretax restructuring charge of $3.0 million which on an after-tax basis is
$1.8 million.
S-5
<PAGE> 6
DESCRIPTION OF DEBENTURES
GENERAL
The following description of the particular terms of the Debentures offered
hereby (referred to herein as the "Debentures" and in the accompanying
Prospectus as the "Debt Securities") supplements, and to the extent inconsistent
therewith, replaces, the description of the general terms and provisions of the
Debt Securities set forth in the Prospectus, to which description reference is
hereby made. The Debentures offered hereby will be limited to $50,000,000
aggregate principal amount and are to be issued under an Indenture, dated as of
March , 1998 (the "Indenture"), between the Company and Chase Manhattan Trust
Company, National Association as trustee (the "Trustee"). The basic terms of the
Indenture are more fully described in the accompanying Prospectus. The
Debentures will be issued only in fully registered form in denominations of
$1,000 and integral multiples thereof.
INTEREST AND MATURITY
The Debentures will bear interest at the rate of % per annum from
, 1998. Interest will be payable semi-annually on each and
(the "Interest Payment Dates"), commencing , 1998, to the
persons in whose names the Debentures are registered at the close of business on
or (the "Record Dates"), as the case may be, next preceding the
respective Interest Payment Date. Interest will be calculated on the basis of a
360-day year of twelve 30-day months and will be payable at the corporate trust
office or agency of the Trustee in New York, New York or Cleveland, Ohio;
provided, that at the option of the Company, interest payments may be made by
checks mailed to the registered holders of the Debentures. The Debentures will
mature on , (the "Maturity Date"). The Debentures will not be
entitled to the benefit of any sinking fund.
The principal of the Debentures will be payable on the Maturity Date at the
corporate trust office or agency of the Trustee in New York, New York or
Cleveland, Ohio.
Any interest or principal payment required to be made on a day that is not
a Business Day (as defined below) need not be made on such day, but may be made
on the next succeeding Business Day with the same force and effect as if made on
such day, and no additional interest shall accrue as a result of such delayed
payment. "Business Day" means any day, other than a Saturday or a Sunday, that
is not a day on which banking institutions in New York, New York and Cleveland,
Ohio are authorized or obligated by law or executive order to close.
REDEMPTION AT THE OPTION OF THE COMPANY
The Debentures will be redeemable, in whole or from time to time in part,
at the option of the Company on any date (a "Redemption Date"), at a redemption
price equal to the greater of (i) 100% of the principal amount of the Debentures
to be redeemed, or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon (exclusive of interest accrued to
such Redemption Date) discounted to such Redemption Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus basis points, plus, in either case, accrued and unpaid interest
on the principal amount being redeemed to such Redemption Date; provided that
installments of interest on Debentures which are due and payable on an Interest
Payment Date falling on or prior to the relevant Redemption Date shall be
payable to the holders of such Debentures, registered as such at the close of
business on the relevant Regular Record Date, according to the terms and the
provisions of the Indenture.
"Treasury Rate" means, with respect to any Redemption Date for the
Debentures, (i) the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the Maturity Date, yields for the two
published maturities most closely corresponding to the Comparable
S-6
<PAGE> 7
Treasury Issue shall be determined and the Treasury Rate shall be interpolated
or extrapolated from such yields on a straight line basis, rounding to the
nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (as expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date. The Treasury
Rate shall be calculated on the third Business Day preceding the Redemption
Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the Debentures to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Debentures.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated or,
if such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee after consultation with the Company.
"Comparable Treasury Price" means with respect to any Redemption Date for
the Debentures (i) the average of five Reference Treasury Dealer Quotations for
such Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than five such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Reference Treasury Dealer" means: (i) Morgan Stanley & Co. Incorporated
and its successor; provided, however, that if the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company will substitute therefore another Primary Treasury Dealer,
and (ii) any other Primary Treasury Dealer selected by the Independent
Investment Banker after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. New York
City time, on the third Business Day preceding such Redemption Date.
Notice of any redemption by the Company will be mailed at least 30 days but
not more than 60 days before any Redemption Date to each holder of Debentures to
be redeemed. If less than all the Debentures are to be redeemed at the option of
the Company, the Trustee shall select, in such manner as it deems fair and
appropriate, the Debentures to be redeemed in whole or in part.
Unless the Company defaults in payment of the redemption price, on or after
any Redemption Date interest will cease to accrue on the Debentures or portions
thereof called for redemption.
BOOK-ENTRY, DELIVERY AND FORM
The Debentures will be represented by one or more fully registered Global
Notes which will be deposited with, or on behalf of, the Depositary and
registered in the name of the Depositary's nominee. Unless and until it is
exchanged in whole or in part for Debentures in certificated form, no Global
Note may be transferred except as a whole by the Depositary to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary.
The Depositary has advised the Company as follows: It is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934 (the "Exchange Act"). The
Depositary was created to hold securities for its participating organizations
(the "Participants") and to facilitate the clearance and settlement of
securities transactions between Participants in such securities through
electronic book-entry changes in accounts of its Participants. Participants
S-7
<PAGE> 8
include securities brokers and dealers (including the Underwriter), banks, trust
companies, clearing corporations and certain other organizations, some of whom
or representatives of which own the Depositary. Access to the Depositary's
system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("indirect participants"). Persons
who are not Participants may beneficially own securities held by the Depositary
only through Participants or indirect participants.
The Depositary has advised the Company that upon the issuance of the Global
Notes, the Depositary will credit on its book-entry system the respective
principal amounts of the individual Debentures represented by such Global Notes
to the accounts of the appropriate Participants. The accounts to be credited
shall be designated by the Underwriter. Ownership of beneficial interests in the
Global Notes will be limited to Participants or persons that own beneficial
interests through Participants. Ownership of beneficial interests in the Global
Notes will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depositary's Participants or persons that
hold through Participants. The laws of some states require that certain
purchasers of securities take physical delivery of such securities. Such laws
may limit the market for beneficial interests in the Global Notes.
So long as the Depositary, or its nominee, is the registered owner of the
Global Notes, the Depositary or its nominee, as the case may be, will be
considered the sole owner or holder of the Global Notes for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in the
Global Notes will not be entitled to have Debentures registered in their names,
will not receive or be entitled to receive physical delivery of Debentures in
certificated form and will not be considered the owners or holders thereof under
the Indenture. Accordingly, each person owning a beneficial interest in the
Global Notes must rely on the procedures of the Depositary and, if such person
is not a Participant, on the procedures of the Participant through which such
person owns its interest, to exercise any rights of a holder under the
Indenture. The Company understands that under existing industry practices, in
the event that the Company requests any consent or action of holders or if an
owner of a beneficial interest in the Global Notes desires to give a consent or
take any action which a holder is entitled to give or take under the Indenture,
the Depositary would authorize the Participants holding the relevant beneficial
interests to give such consent or take such action, and such Participants would
authorize beneficial owners holding through such Participants to give such
consent or take such action or would otherwise act upon the instructions of
beneficial owners holding through them.
Principal, premium, if any, and interest payments on the Global Notes
registered in the name of the Depositary or its nominee will be made by the
Trustee to the Depositary or such nominee as the registered owner of the Global
Notes. Under the terms of the Indenture, the Company and the Trustee will treat
the persons in whose names the Global Notes are registered as the sole owner or
holder of the Global Notes for the purpose of receiving payment of principal,
premium, if any, and interest on the Global Notes and for all other purposes
whatsoever. Therefore, neither the Company, the Trustee nor any paying agent has
any direct responsibility or liability for the payment of principal, premium, if
any, or interest on the Global Notes to owners of beneficial interests in the
Global Notes. Neither the Company, the Trustee nor any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Debentures, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for any action or inaction of the Depositary
or its nominee or any Participant.
If (x) the Depositary is at any time unwilling or unable to continue as
Depositary or the Depositary ceases to be a clearing agency registered under the
Exchange Act, (y) the Company executes and delivers to the Trustee an order to
the effect that the Global Notes shall be transferable and exchangeable for
Debentures in definitive form or (z) an Event of Default has occurred and is
continuing with respect to the Debentures, the Global Notes will be transferable
or exchangeable for Debentures in definitive form of like tenor in an equal
aggregate principal amount. Such definitive Debentures shall be registered in
such name or names as the Depositary shall instruct the Trustee.
S-8
<PAGE> 9
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated March , 1998 (the "Underwriting Agreement"), between the Company and
Morgan Stanley & Co. Incorporated (the "Underwriter"), the Company has agreed to
sell to the Underwriter, and the Underwriter has agreed to purchase from the
Company, all of the Debentures offered hereby.
The Underwriter proposes to offer the Debentures in part directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such prices
less a concession not to exceed % of the principal amount of the
Debentures. The Underwriter may allow, and such dealers may reallow, a
concession not to exceed % of the principal amount of the Debentures to
certain brokers and dealers. After the Debentures are released for sale to the
public, the offering prices and other selling terms may from time to time be
varied by the Underwriter.
The Underwriting Agreement provides that the obligations of the Underwriter
to pay for and accept delivery of the Debentures is subject to certain
conditions, including delivery of certain legal opinions by counsel for the
Underwriter.
The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain liabilities under the Securities Act of 1933 and
will contribute to payments the Underwriter may be required to make in respect
thereof.
The Debentures will be a new issue of securities for which there is
currently no market. Although the Underwriter has informed the Company that it
currently intends to make a market in the Debentures, it is not obligated to do
so, and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Debentures. The Company does not intend to apply for listing of
the Debentures on a national securities exchange.
In the ordinary course of its businesses, the Underwriter may in the future
provide investment banking services to the Company and its affiliates in
connection with various transactions and proposed transactions.
In order to facilitate the offering of the Debentures, the Underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Debentures. Specifically, the Underwriter may over-allot in connection with
the offering, creating a short position in the Debentures for its own account.
In addition, to cover over-allotments or to stabilize the price of the
Debentures, the Underwriter may bid for, and purchase, the Debentures in the
open market. Finally, the Underwriter may reclaim selling concessions allowed to
a dealer for distributing the Debentures in the offering, if the Underwriter
repurchases previously distributed Debentures in transactions to cover syndicate
short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Debentures above
independent market levels. The Underwriter is not required to engage in these
activities and may end any of these activities at any time.
VALIDITY OF DEBENTURES
The validity of the Debentures to be offered hereby will be passed upon for
the Company by Squire, Sanders & Dempsey L.L.P., Cleveland, Ohio. Certain legal
matters in connection with the Debentures to be offered hereby will be passed
upon for the Underwriter by Baker & Hostetler LLP, Cleveland, Ohio. Mark A.
Cusick, Esq., a partner in the firm of Squire, Sanders & Dempsey L.L.P., is
Secretary of the Company.
S-9
<PAGE> 10
PROSPECTUS
$300,000,000
Ferro Corporation
DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
DEPOSITARY SHARES
------------------------
Ferro Corporation (the "Company") may offer from time to time (a) unsecured
debt securities (the "Debt Securities") consisting of debentures, notes and/or
other evidences of indebtedness, which may be either senior or subordinated, (b)
shares of its Common Stock, $1.00 par value per share (the "Common Stock"), (c)
shares of its Serial Preferred Stock, without par value (the "Preferred Stock"),
which may be issued in the form of depositary shares evidenced by depositary
receipts (the "Depositary Shares") and which may be convertible into or
exchangeable for Common Stock issued hereunder, (d) warrants to purchase Debt
Securities, Common Stock or Preferred Stock (the "Warrants"), (e) Stock Purchase
Contracts ("Stock Purchase Contracts") to purchase Common Stock and/or Preferred
Stock, and (f) Stock Purchase Units ("Stock Purchase Units"), each representing
ownership of a Stock Purchase Contract and debt obligations of the United States
of America or agencies or instrumentalities thereof securing the holder's
obligation to purchase Common Stock and/or Preferred Stock under the Stock
Purchase Contract, with an aggregate initial public offering price of up to
$300,000,000, on terms to be determined at the time or times of offering. The
Debt Securities, Common Stock, Preferred Stock, Warrants, Stock Purchase
Contracts, Stock Purchase Units and Depositary Shares (collectively, the
"Securities") may be offered, separately or together, in separate classes or
series, in amounts, at prices and on terms to be set forth in one or more
supplements to this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable and without limitation: (a) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), ranking as
senior or subordinated debt, authorized denominations, maturity, rate (or manner
of calculation thereof) and time of payment of interest, terms of redemption at
the option of the Company or repayment at the option of the holder, terms for
sinking fund payments, terms for conversion into Common Stock, Preferred Stock
or other Company securities, additional covenants and any initial public
offering price; (b) in the case of Common Stock, the number of shares and any
initial public offering price; (c) in the case of Preferred Stock, the number of
shares, the specific title, any dividend, liquidation, redemption, sinking fund,
conversion or exchange or other rights and any initial public offering price;
(d) in the case of Warrants, the duration, offering price, exercise price and
detachability, (e) in the case of Stock Purchase Contracts, the designation and
number of shares of Common Stock or Preferred Stock issuable thereunder, the
purchase price of the Common Stock or Preferred Stock, the date or dates on
which the Common Stock or Preferred Stock is required to be purchased by the
holders of the Stock Purchase Contracts, any periodic payments required to be
made by the Company to the holders of the Stock Purchase Contract or vice versa,
and the terms of the offering and sale thereof; (f) in the case of Stock
Purchase Units, the specific terms of the Stock Purchase Contracts and any debt
obligations securing the holder's obligation to purchase Common Stock or
Preferred Stock under the Stock Purchase Contracts, and the terms of the
offering and sale thereof; and (h) in the case of the Depositary Shares, the
fraction of a share of Preferred Stock represented by one Depositary Share. The
Prospectus Supplement will also contain information, where applicable, about
certain United States federal income tax and other considerations relating to
the Securities covered thereby.
The Securities may be offered by the Company directly to one or more
purchasers, through agents designated from time to time by the Company, or to or
through underwriters or dealers. If any agents or underwriters are involved in
the sale of any of the Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable Prospectus Supplement. See "Plan of Distribution." No Securities may
be sold without delivery of the applicable Prospectus Supplement describing the
method and terms of the offering of such class or series of Securities.
------------------------
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 date of this Prospectus is January 4, 1996
<PAGE> 11
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any
accompanying Prospectus Supplement in connection with the offering described
herein and therein, and, if given or made, such other information or
representation must not be relied upon as having been authorized by the Company
or by any underwriter, dealer or agent. Neither this Prospectus nor any
Prospectus Supplement shall constitute an offer to sell or a solicitation of an
offer to buy any securities offered hereunder in any jurisdiction to any person
to whom it is unlawful to make such offer or solicitation or sale in such
jurisdiction. Neither the delivery of this Prospectus or any Prospectus
Supplement nor any sale made hereunder implies that there has been no change in
the affairs of the Company at any time subsequent to the date hereof or that the
information herein is correct as of any time subsequent to its date.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: 7 World Trade Center, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material can also be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, on which
Exchange the Common Stock of the Company is listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, 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 set forth in the Registration Statement, certain portions
of which are omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities, reference is made to the Registration Statement. Statements
contained therein concerning any document filed as an exhibit to the
Registration Statement are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement for a full statement of the provisions thereof. Each such
statement in the Prospectus is qualified in all respects by such reference. The
Registration Statement may be inspected, without charge, at the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20459, and copies
thereof may also be obtained from the Commission upon the payment of prescribed
fees.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company (Commission File No. 1-584)
with the Commission are incorporated herein by reference and made a part hereof:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1994.
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995, June 30, 1995 and September 30, 1995.
(c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form S-8 (Registration No. 33-12397)
filed March 2, 1987, and any amendments or reports filed for the purpose of
updating such description.
(d) The description of the Company's Common Stock Rights contained in
the Company's Registration Statement on Form 8-A filed March 27, 1986, as
amended by the Company's Current Report on Form 8-K dated April 6, 1989.
(e) The description of the Company's Preferred Stock contained in the
Company's Registration Statement on Form S-8 (Registration No. 33-28520)
filed May 3, 1989.
2
<PAGE> 12
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this Prospectus and prior to the
termination of the offering of the Securities hereby, shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing such documents. Any statement contained herein, or in a document
all or a portion of which is incorporated or deemed to be incorporated by
reference herein, shall be deemed to be modified or superseded for the purposes
of this Prospectus to the extent that a statement contained herein, or in a
Prospectus Supplement, 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.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon written or oral request of such person,
a copy of any or all of the documents which have been incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference to such documents). Requests for such
copies should be directed to the Office of the Treasurer, Ferro Corporation,
1000 Lakeside Avenue, Cleveland, Ohio 44114-1183, telephone (216) 641-8580.
THE COMPANY
The Company produces specialty materials through the application of organic
and inorganic chemistry for sale to various industries throughout the world. It
operates principal manufacturing facilities on all six major continents. The
Company produces a variety of specialty coatings, colors, chemicals, ceramics,
plastics and related products and services. The Company's most important product
is frit, which is produced for use in porcelain enamels and ceramic glazes.
Most of the products produced by the Company are classified as specialty
materials, rather than commodities, because they are formulated or designed to
perform a specific and important function in the manufacturing processes of the
Company's customers or in their end products. These specialty materials are not
sold in the high volume normally associated with commodity businesses.
The Company's specialty materials require a high degree of technical
service on an individual customer basis. The value of these specialty materials
stems not just from their raw material composition, but from the result and
performance they achieve in actual use.
Ferro Corporation was incorporated in Ohio in 1919. Its principal executive
offices are located at 1000 Lakeside Avenue, Cleveland, Ohio 44114-1183 and its
telephone number is (216) 641-8580.
USE OF PROCEEDS
Except as otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, which may include capital expenditures, acquisitions
and reductions of other indebtedness of the Company. Funds not required
immediately for such purposes may be invested temporarily in short-term
marketable securities.
3
<PAGE> 13
RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------
1995 1994 1993 1992 1991 1990
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Historical ratio of earnings to fixed
charges................................. 5.82 6.74 5.21(1) 9.99 2.51(2) 3.27(2)
Historical ratio of earnings to combined
fixed charges and preferred stock
dividends............................... 4.58 4.95 3.74(1) 6.93 1.80(2) 2.59(2)
</TABLE>
- ---------------
(1) In 1993, the Company adopted changes in accounting required by the Financial
Accounting Standards Board. Prior to the accounting changes, the ratio of
earnings to fixed charges for 1993 would have been 8.36 and the ratio of
earnings to combined fixed charges and preferred stock dividends for 1993
would have been 6.01.
(2) Included in 1991 is a pretax restructuring charge of $45.3 million. A pretax
litigation charge of $12.0 million is included in 1990. Excluding these
charges, the ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preferred stock dividends for 1991 would have
been 6.16 and 4.42, respectively, and for 1990 would have been 3.91 and 3.10
respectively.
For the purposes of computing these ratios, "earnings" consist of income
before income taxes and fixed charges (as reported in the Company's consolidated
statement of income). "Fixed charges" consist of interest (including both
amounts expended and amounts capitalized) and the interest portion of rental
expense.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be general unsecured obligations of the Company
and will constitute either senior debt securities ("Senior Debt Securities") or
subordinated debt securities ("Subordinated Debt Securities"). The Debt
Securities will be issued under one or more indentures, each dated as of the
date of or a date prior to the issuance of the Debt Securities to which it
relates. Senior Debt Securities and Subordinated Debt Securities may be issued
under separate indentures (respectively, a "Senior Indenture" and a
"Subordinated Indenture"), in each case between the Company and a trustee
("Trustee"), in a form filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Senior Indenture and the Subordinated
Indenture are sometimes hereinafter referred to collectively as the "Indentures"
or individually as an "Indenture". The Indentures relating to the Debt
Securities do not limit the amount of Debt Securities that may be issued
thereunder and provide that Debt Securities may be issued thereunder from time
to time in one or more series as from time to time authorized by the Company.
The particular terms of the Debt Securities offered by any Prospectus
Supplement (the "Offered Debt Securities") will be described in the Prospectus
Supplement relating to such Offered Debt Securities (the "Applicable Prospectus
Supplement"). The following summaries under this heading relating to Debt
Securities and the Indentures are summaries of the anticipated provisions
thereof, do not purport to be complete and are qualified in their entirety by
reference to the Indentures, the Debt Securities and the Applicable Prospectus
Supplement.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the Indentures.
GENERAL
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of, premium, if any, and interest, if any, on the Debt Securities will
be payable, and the transfer of Debt Securities will be registrable, at the
office or agency to be maintained by the Company in Cleveland, Ohio and at any
other office or agency maintained by the Company for such purpose. (Sections
301, 305 and 1002) The Debt Securities will be issued only in fully registered
form without coupons and, unless otherwise indicated in the Applicable
Prospectus Supplement, in denominations of $1,000 or integral multiples thereof.
(Section 302) No service charge will be made for any registration of transfer or
exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. (Section 305)
4
<PAGE> 14
The Applicable Prospectus Supplement will describe the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt Securities and
whether such Offered Debt Securities are to be Senior Debt Securities or
Subordinated Debt Securities; (2) any limit on the aggregate principal amount of
the Offered Debt Securities; (3) the price or prices (generally expressed as a
percentage of the aggregate principal amount thereof) at which the Offered Debt
Securities will be issued; (4) the Person to whom any interest on the Offered
Debt Securities shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) 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 Offered Debt Securities is payable; (6) the rate or
rates at which the Offered Debt Securities shall bear interest, if any, the date
or dates from which any such interest shall accrue, the Interest Payment Dates
on which any such interest shall be payable and the Regular Record Date for the
interest payable on any Interest Payment Date; (7) the place or places where the
principal of and any premium and interest on the Offered Debt Securities shall
be payable; (8) the period or periods within which, the price or prices at which
and the terms and conditions upon which the Offered Debt Securities may be
redeemed, in whole or in part, at the option of the Company; (9) the obligation,
if any, of the Company to redeem or purchase the Offered Debt Securities
pursuant to any sinking fund or analogous provisions or at the option of a
Holder thereof and the period or periods within which, the price or prices at
which and the terms and conditions upon which the Offered Debt Securities shall
be redeemed or purchased, in whole or in part, pursuant to such obligation; (10)
if other than denominations of $1,000 and any integral multiple thereof, the
denominations in which the Offered Debt Securities shall be issuable; (11) the
currency, currencies or currency units in which payment of the principal of and
any premium and interest on any Offered Debt Securities shall be payable if
other than the currency of the United States of America; (12) if the amount of
payments of principal of or any premium or interest on any Offered Debt
Securities may be determined with reference to an index or formula, the manner
in which such amounts shall be determined; (13) if the principal of or any
premium or interest on any Offered Debt Securities is to be payable, at the
election of the Company or a Holder thereof, in one or more currencies or
currency units other than that or those in which the Securities are stated to be
payable, the currency, currencies or currency units in which payment of the
principal of and any premium and interest on the Offered Debt Securities as to
which such election is made shall be payable, and the periods within which and
the terms and conditions upon which such election is to be made; (14) if other
than the principal amount thereof, the portion of the principal amount of the
Offered Debt Securities which shall be payable upon declaration of acceleration
of the Maturity thereof; (5) the applicability of the provisions described under
"Defeasance and Covenant Defeasance"; (16) if the Offered Debt Securities will
be issuable only in the form of a Book-Entry Security as described under "Book-
Entry Debt Securities," the Depository or its nominee with respect to the
Offered Debt Securities and the circumstances under which the Book-Entry
Security may be registered for transfer or exchange or authenticated and
delivered in the name of a Person other than the Depository or its nominee; and
(17) any other terms of the Offered Debt Securities. (Section 301)
The Debt Securities may be issued as Original Issue Discount Debt
Securities to be offered and sold at a substantial discount below their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any such Original Issue Discount Debt Securities
will be described in the Applicable Prospectus Supplement. "Original Issue
Discount Debt Securities" means any Debt Security which provides for an amount
less than the principal amount thereof to be due and payable upon the
declaration of acceleration of the Maturity thereof upon the occurrence of an
Event of Default and the continuation thereof. (Section 101) In addition,
pursuant to regulations issued under the Internal Revenue Code (the
"Regulations"), Debt Securities that have interest reset dates that would cause
any accrual period to be longer than one year would be subject to the original
issue discount rules of the Internal Revenue Code and the Regulations, whether
or not such Debt Securities are Original Issue Discount Debt Securities.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Book-Entry Securities that will be deposited with a Depository or its nominee
identified in the Applicable Prospectus Supplement. In such a case, one or more
Book-Entry Securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal amount of
Outstanding Debt Securities of the series to be represented by such Book-Entry
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in
5
<PAGE> 15
definitive registered form, a Book-Entry Security may not be registered for
transfer or exchange except as a whole by the Depository for such Book-Entry
Security to a nominee of such Depository and except in the circumstances
described in the Applicable Prospectus Supplement. (Sections 204 and 205)
The specific terms of the depository arrangement with respect to any
portion of a series of Debt Securities to be represented by a Book-Entry
Security will be described in the Applicable Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY
Subsidiaries. The term "Subsidiary" will be defined as a corporation more
than 50% of the outstanding voting Stock of which is owned directly or
indirectly by the Company and/or one or more Subsidiaries. The term "Domestic
Subsidiary" will be defined as a Subsidiary substantially all the fixed assets
of which are located, or substantially all the business of which is carried on,
within the United States, or which owns or leases any Principal Domestic
Manufacturing Property, but such term excludes any Subsidiary the principal
business of which is the financing or ownership of the operations of the Company
or its Subsidiaries outside the United States (but such Subsidiary is excluded
only so long as it neither owns nor leases any Principal Domestic Manufacturing
Property). (Section 101)
Restrictions on Secured Debt and Limitations on Liens. If the Company or
any Domestic Subsidiary shall incur, issue, assume or guarantee any debt secured
by a Mortgage on any Principal Domestic Manufacturing Property of the Company or
any Domestic Subsidiary or on any shares of stock or Debt of any Domestic
Subsidiary, the Company will secure, or cause such Domestic Subsidiary to
secure, the Outstanding Debt Securities, and any other Debt of the Company or
such Domestic Subsidiary which may be then outstanding and entitled to the
benefit of a covenant similar in effect to this covenant, equally and ratably
with (or prior to) such secured Debt, unless after giving effect thereto the
aggregate amount of all such secured Debt together with all Attributable Debt of
the Company and its Domestic Subsidiaries in respect of sale and leaseback
transactions involving Principal Domestic Manufacturing Properties would not
exceed 10% of the Consolidated Net Tangible Assets of the Company and its
consolidated Subsidiaries. For the purpose of providing such equal and ratable
security, the principal amount of Outstanding Debt Securities of any series of
Original Issue Discount Securities shall be such portion of the principal amount
as specified in the terms of that series that would be payable upon acceleration
of the Maturity thereof at the time of such determination. This restriction will
not apply to, and there shall be excluded in computing secured Debt for the
purpose of such restriction, Debt secured by (a) Mortgages on property of, or on
any shares of stock or Debt of, any corporation existing at the time such
corporation becomes a Domestic Subsidiary, (b) Mortgages in favor of the Company
or a Domestic Subsidiary, (c) Mortgages in favor of governmental bodies of the
United States or any State or Puerto Rico or any other country or any political
subdivision thereof to secure partial, progress or advance payments pursuant to
any contract or statute, (d) Mortgages on property, shares of stock or Debt,
purchase money Mortgages and construction Mortgages existing at or incurred
within 120 days of the time of acquisition thereof (including acquisition
through merger or consolidation), (e) Mortgages securing obligations issued by a
State, territory or possession of the United States, any political subdivision
of any of the foregoing, or the District of Columbia, or any instrumentality of
the foregoing to finance the acquisition or construction of property, and on
which the interest is not includable in gross income of the Holder under the
Internal Revenue Code, and (f) certain extensions, renewals or replacements of
Mortgages referred to in the foregoing clauses (a) through (e) inclusive.
(Section 1008) The Indentures will not restrict the incurrence of unsecured Debt
by the Company or its Subsidiaries.
"Principal Domestic Manufacturing Property" will be defined to include any
facility (together with the land on which it is erected and fixtures comprising
a part thereof) used primarily for manufacturing, processing or warehousing of
the Company's products and located in the United States, owned or leased by the
Company or a Subsidiary and having a gross book value in excess of 1% of
Consolidated Net Tangible Assets, other than any such facility or portion
thereof (i) which is financed by certain governmental obligations the interest
on which is excludable from gross income of the holder thereof pursuant to the
provisions of Section 103(a) of the Internal Revenue Code or Section 745 of
Title 48 of the United States code or (ii) which in the opinion of the Board of
Directors of the Company is not of material importance to the total business
conducted by the Company and its Subsidiaries as an entirety. "Consolidated Net
Tangible Assets" will be defined as the aggregate amount of all assets (after
deducting intangible assets and the amount of all current liabilities) of the
Company and its
6
<PAGE> 16
consolidated Subsidiaries. "Mortgage" will be defined as any mortgage, pledge,
lien, security interest, conditional sale or other title retention agreement or
similar encumbrance. "Attributable Debt" will be defined to mean the total net
amount of rent (discounted at the rate of 1% per annum over the weighted average
Yield to Maturity of the Outstanding Debt Securities compounded semi-annually)
required to be paid during the remaining term of any lease. (Section 101)
Restrictions on Sale and Leaseback Transactions. Neither the Company nor
any Domestic Subsidiary may, after the effective date of the Indentures, enter
into any sale and leaseback transaction involving any Principal Domestic
Manufacturing Property which has been or is to be sold or transferred, more than
120 days after the acquisition thereof or the completion of construction and
commencement of full operations thereof, unless (a) the Company or such Domestic
Subsidiary could create Debt secured by a Mortgage on such property as described
under "Restrictions on Secured Debt and Limitations on Liens" in an amount equal
to the Attributable Debt with respect to the sale and leaseback transaction
without equally and ratably securing the Outstanding Debt Securities or (b) the
Company, within 120 days, applies to the retirement of its Funded Debt which is
pari passu (as defined in the Indentures) with the Outstanding Securities an
amount equal to the greater of (i) the net proceeds of the sale of the Principal
Domestic Manufacturing Property leased pursuant to such arrangement or (ii) the
fair market value of the Principal Domestic Manufacturing Property so leased
(subject to credits for certain voluntary retirements of Funded Debt). (Section
1009) "Funded Debt" will be defined as indebtedness for money borrowed having a
maturity at or being renewable or extendible to a date more than 12 months from
the date of determination. (Section 101) This restriction will not apply to any
sale and leaseback transaction (a) between the Company and a Domestic
Subsidiary, between Domestic Subsidiaries, or between a Domestic Subsidiary and
a Foreign Subsidiary, or (b) involving the taking back of a lease for a period
of three years or less. (Section 1009)
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
each Indenture with respect to Securities of any series: (a) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(b) failure to pay principal of or any premium on any Debt Security of that
series when due; (c) failure to deposit any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) failure to perform, or breach
of any covenant or warranty of the Company in such Indenture (other than a
covenant included in such Indenture solely for the benefit of a series of Debt
Securities thereunder other than that series) continued for 90 days after
written notice as provided in such Indenture; (e) or default under indebtedness
for money borrowed in an aggregate principal amount exceeding $10,000,000 under
an instrument to which the Company or any Domestic Subsidiary is a party as an
obligor or by which either is bound, which default shall have resulted in such
indebtedness becoming due and payable prior to the date on which it would
otherwise be due and payable, without such default being cured or such
indebtedness having been discharged within ten days after written notice as
provided in each Indenture; (f) certain events in bankruptcy, insolvency or
reorganization of the Company; or (g) any other Event of Default provided with
respect to Debt Securities of that series. (Section 501)
If any Event of Default with respect to the Debt Securities of any series
at the time Outstanding occurs and is continuing, either the Trustee or the
Holders of at least 25 percent in aggregate principal amount of the Outstanding
Debt Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Debt Securities, such
portion of the principal amount as may be specified in the terms thereof) of all
the Debt Securities of that series to be due and payable immediately. At any
time after a declaration of acceleration with respect to Debt Securities of any
series has been made, but before a judgment or decree based on acceleration has
been obtained, the Holders of a majority in aggregate principal amount of
Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration. (Section 502)
Reference is made to the Applicable Prospectus Supplement relating to any
series of Offered Debt Securities that are Original Issue Discount Debt
Securities for the particular provisions relating to acceleration of the Stated
Maturity of a portion of the principal amount of such series of Original Issue
Discount Debt Securities upon the occurrence of an Event of Default and the
continuation thereof.
7
<PAGE> 17
Each Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under such Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Section 603) Subject to such
provisions for the indemnification of the Trustee and to certain other
conditions, 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 Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series. (Section 512)
No Holder of any series of Debt Securities will have any right to institute
any proceeding with respect to any Indenture or for any remedy thereunder,
unless such Holder shall have previously given to the Trustee written notice of
a continuing Event of Default and unless the Holders of at least 25 percent in
principal amount of the Outstanding Debt Securities of that series shall have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of that series a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days. (Section 507)
However, such limitations do not apply to a suit instituted by a Holder of a
Debt Security for enforcement of payment of the principal of and premium, if
any, or interest, if any, on such Debt Security on or after the respective due
dates expressed in such Debt Security. (Section 508)
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under each
Indenture and as to any default in such performance. (Section 1004)
MODIFICATION AND WAIVER
Modifications and amendments of each Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than the majority in
aggregate principal amount of the Outstanding Debt Securities of each series
issued under such Indenture and affected by the modification or amendments;
provided, however, that no such modification or amendment may, without the
consent of the Holders of all Debt Securities affected thereby, (i) change the
Stated Maturity of the principal of, or any installment of principal of or
interest on, any Debt Security; (ii) reduce the principal amount of, or the
premium, if any, or interest on, any Debt Security (including in the case of an
Original Issue Discount Debt Security the amount payable upon acceleration of
the maturity thereof); (iii) change the place or currency of payment of
principal of, premium, if any, or interest on any Debt Security; (iv) impair the
right to institute suit for the enforcement of any payment on any Debt Security
on or after the Stated Maturity thereof (or in the case of redemption, on or
after the Redemption Date); or (v) 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 Indentures or for waiver of
compliance with certain provisions of the Indentures or for waiver of certain
defaults. (Section 902)
The Holders of at least a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all Holders of that
series, waive compliance by the Company with certain restrictive provisions of
each Indenture. (Section 1010) The Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of any series may,
on behalf of all Holders of that series, waive any past default under each
Indenture, except a default in the payment of principal, premium or interest and
in respect of a covenant or provision of such Indenture that cannot be modified
or amended without the consent of the Holder of each Outstanding Debt Security
of such series affected thereby. (Section 513)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge into any other Person or
transfer or lease its assets substantially as an entirety to any Person and may
not permit any Person to merge into or consolidate with the Company or transfer
or lease its assets substantially as an entirety to the Company, unless (i) any
successor or purchaser is a corporation, partnership, or trust organized under
the laws of the United States of America, any State or the District of Columbia,
and any such successor or purchaser expressly assumes the Company's
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obligations on the Debt Securities under a supplemental Indenture, (ii)
immediately 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, (iii) if properties or assets of
the Company become subject to a Mortgage not permitted by the Indentures, the
Company or such successor Person, as the case may be, takes such steps as shall
be necessary effectively to secure the Securities equally and ratably with (or
prior to) all indebtedness secured thereby, and (iv) the Company has delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel stating
compliance with these provisions. (Section 801)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide, unless otherwise indicated in the Applicable
Prospectus Supplement with respect to the Offered Debt Securities, that the
Company, at the Company's option, (a) will be discharged from any and all
obligations in respect of the Debt Securities of any series (except for certain
obligations to register the transfer of or exchange of Debt Securities of such
series, replace stolen, lost or mutilated Debt Securities of such series,
maintain paying agencies and hold moneys for payment in trust) or (b) need not
comply with certain restrictive covenants of the Indentures, including those
described under "Certain Covenants of the Company," and the occurrence of an
event described in clause (d) under "Events of Default" shall no longer be an
Event of Default, in each case, if the Company deposits, in trust, with the
Trustee money or U.S. Government Obligations, which through the payment of
interest thereon and principal thereof in accordance with their terms will
provide money, in an amount sufficient to pay all the principal of (and premium,
if any) and interest on the Debt Securities of such series on the dates such
payments are due (which may include one or more redemption dates designated by
the Company) in accordance with the terms of the Debt Securities of such series.
Such a trust may only be established if, among other things, (i) no Event of
Default or event which with the giving of notice or lapse of time, or both,
would become an Event of Default under the Indentures shall have occurred and be
continuing on the date of such deposit, (ii) such deposit will not cause the
Trustee to have any conflicting interest with respect to other securities of the
Company, and (iii) the Company shall have delivered an Opinion of Counsel to the
effect that the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit or defeasance and will be
subject to Federal income tax in the same manner as if such defeasance had not
occurred. In the event the Company omits to comply with its remaining
obligations under each Indenture after a defeasance of the Indentures with
respect to the Debt Securities of any series as described under clause (b) above
and the Debt Securities of such series are declared due and payable because of
the occurrence of any Event of Default, the amount of money and U.S. Government
Obligations on deposit with the Trustee 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 amounts. (Article Thirteen)
PROVISIONS APPLICABLE TO SUBORDINATED DEBT SECURITIES
The Subordinated Debt Securities will be subordinate and junior in right of
payment, as set forth in the Subordinated Indenture, to the prior payment in
full of all Senior Indebtedness of the Company. (Section 1401) "Senior
Indebtedness" is defined in the Subordinated Indenture as the principal
(including sinking fund payments) of, and premium, if any, and interest on any
indebtedness, whether outstanding at the date of the Subordinated Indenture or
thereafter created, incurred or assumed, which is for (a) money borrowed by the
Company, (b) indebtedness of the Company evidenced by notes, debentures, bonds,
securities or other instruments of indebtedness for the payment of which the
Company is responsible or liable, by guarantees or otherwise, (c) obligations of
the Company evidencing the purchase price for acquisitions by the Company or a
subsidiary other than in the ordinary course of business, (d) money borrowed by
others and assumed or guaranteed by the Company, (e) capitalized lease
obligations of the Company, and (f) renewals, extensions, refundings, amendments
and modifications of any indebtedness, of the kind described in the foregoing
clauses or of the instruments creating or evidencing such indebtedness, unless,
in each case, by the terms of the instruments evidencing such indebtedness or
such renewal, extension, refunding, amendment or modification, it is provided
that such indebtedness is not senior in rights of payment to the Subordinated
Debt Securities. (Section 101)
In the event of any distribution of assets of the Company upon its
dissolution, winding up, liquidation or reorganization, the holders of Senior
Indebtedness shall first be paid in full in respect of principal, premium, if
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any, and interest before any such payments are made on account of the
Subordinated Debt Securities. (Section 1403) In addition, in the event that (a)
Subordinated Debt Securities or any other debt securities issued under the
Subordinated Indenture are declared due and payable because of an Event of
Default (other than the circumstances described in the preceding sentence) or
(b) any default by the Company has occurred and is continuing in the payment of
principal, premium, if any, sinking funds or interest on any Senior
Indebtedness, then no payment shall be made on account of principal, premium, if
any, sinking funds or interest on the Subordinated Debt Securities until all
such payments due in respect of such Senior Indebtedness shall have been paid in
full. (Section 1402)
By reason of such subordination, creditors of the Company who are holders
of Senior Indebtedness may, subject to any subordination provisions that may be
applicable to such creditors, recover more ratably than holders of the
Subordinated Debt Securities.
If this Prospectus is being delivered in connection with a series of
Subordinated Debt Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Indebtedness outstanding as of the most recent practicable date
and any limitation on the issuance of additional Senior Indebtedness.
CONCERNING THE TRUSTEE
The Trustee under each Indenture will be identified in the Applicable
Prospectus Supplement. The Trustee may perform services for the Company in the
ordinary course of business.
Under the Indentures, the Trustee is required to transmit annual reports to
all Holders regarding its eligibility and qualifications as Trustee under the
Indentures and certain related matters. (Section 703)
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DESCRIPTION OF CAPITAL STOCK
The description of the Company's capital stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Amended Articles of Incorporation (the "Articles of Incorporation")
and Code of Regulations (the "Regulations").
GENERAL
Under the Articles of Incorporation of the Company, the total number of
shares of all classes of stock that the Company has authority to issue is
152,000,000, consisting of 150,000,000 shares of Common Stock, par value $1.00
per share, and 2,000,000 shares of Preferred Stock, without par value. In 1989,
the Company established a series of Preferred Stock called Series A ESOP
Convertible Preferred Stock ("Series A Preferred Stock") and authorized the
issuance of 1,762,500 shares of such stock to National City Bank, trustee for
the Company's Employee Stock Ownership Plan. At September 30, 1995, the Company
had 27,344,105 shares of Common Stock and 1,388,443 shares of Preferred Stock
issued and outstanding. The Common Stock is listed on the New York Stock
Exchange under the symbol "FOE".
Each share of outstanding Common Stock represents ownership of one right
("Right") under the terms of a Shareholder Rights Plan maintained by the
Company. Each Right entitles its holders to buy one share of the Company's
Common Stock upon the occurrence of certain events. See "Certain Antitakeover
Provisions -- Shareholder Rights Plan" for a description of the Rights and the
Shareholder Rights Plan.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters presented to shareholders. Subject to any preferential rights of
outstanding series of Preferred Stock, the holders of Common Stock are entitled
to such distributions as may be declared from time to time by the Board of
Directors from funds available therefor, and upon liquidation are entitled to
receive pro rata all assets of the Company available for distribution to such
holders. A procedure for invoking cumulative voting for the election of
directors is provided by the statutory law of Ohio. All shares of Common Stock
issued in the offering will be fully paid and non assessable and the holders
thereof will not have preemptive rights. As described above, one Right will be
issued along with each share of Common Stock issued in the offering.
PREFERRED STOCK
The Articles of Incorporation provide that all shares of Preferred Stock
shall be of equal rank and shall be identical except with respect to those
matters that may be fixed by the Board of Directors. The Board is authorized to
provide for the issuance of such Preferred Stock in one or more series and to
determine such matters as the annual dividend rate, conversion rights,
redemption rights and prices, the terms of any sinking funds established for the
purchase or redemption of Preferred Stock, the amounts payable to holders in the
event of a voluntary liquidation, dissolution or winding up of the Company and
restrictions on issuance. In the event of involuntary liquidation, dissolution
or winding up of the Company's affairs, the Preferred Stock will be entitled to
a liquidation preference of $25.00 per share, plus accrued and unpaid dividends.
The holders of shares of Preferred Stock will not be entitled to any preemptive
right to purchase or have offered to them any shares or other securities of the
Company whether now or hereafter authorized.
The Board is not authorized to establish the voting rights of Preferred
Stock. Holders of Preferred Stock are generally entitled to one vote for each
share of such stock upon all matters presented to the shareholders, plus special
voting rights in the event of a default in the payment of preferred dividends.
If the Company is in default in the payment of six (6) full quarterly dividends
(whether or not consecutive), the holders of Preferred Stock shall be entitled
to vote for the election of two additional directors of the Company, who shall
remain in office until such dividends in arrears are paid (the "Preferred
Director Rights"). The vote of the holders of at least two-thirds of the
outstanding shares of Preferred Stock will be necessary to effect (i) any
amendment, alteration or repeal of any of the provisions of the Articles of
Incorporation or of the Regulations of the Company which affects adversely the
voting powers, rights or preferences of the holders of Preferred Stock (certain
types of amendments being deemed not adverse for this purpose), or (ii) the
authorization or creation of, or the increase in
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the authorized amount of, any shares of any class, or any security convertible
into shares of any class, ranking prior to the Preferred Stock, or (iii) the
purchase or redemption of less than all the Preferred Stock then outstanding
(except in accordance with a stock purchase offer made to all holders of
Preferred Stock) when any dividends or sinking fund obligations on the Preferred
Stock are in arrears.
The vote of the holders of at least a majority of the outstanding shares of
Preferred Stock will be necessary to effect (i) the sale, lease or conveyance by
the Company of all or substantially all of its property or business, or its
consolidation with or merger into any other corporation, unless the resulting
corporation will have no shares authorized or outstanding ranking prior to or on
a parity with the Preferred Stock except the same number with the same rights
and preferences as those of the Company authorized and outstanding immediately
preceding such consolidation or merger, and each holder of Preferred Stock
immediately prior thereto receives the same number of shares, with the same
rights and preferences, of the resulting corporation, or (ii) the authorization
of any shares ranking on a parity with the Preferred Stock or an increase in the
authorized number of shares of Preferred Stock.
The Company believes that the ability of the Board of Directors to issue
one or more classes or series of Preferred Stock provides the Company with
increased flexibility in structuring possible future financings and
acquisitions, and in meeting other corporate needs which might arise. The
authorized shares of Preferred Stock, as well as shares of Common Stock, are
available for issuance without further action by the Company's shareholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities may be
listed or traded.
The issuance of any such series of Preferred Stock may have an adverse
effect on the rights of holders of Common Stock.
The terms of the Preferred Stock offered by any Prospectus Supplement will
be set forth in the applicable Prospectus Supplement. Among the terms which
would be specified in the applicable Prospectus Supplement are the following:
(i) the annual dividend rate, if any, or the means by which such dividend rate
may be calculated (including without limitation the possibility that the rate of
such dividends may bear an inverse relationship to some index or standard) and
the date or dates from which such dividends shall accrue and the date or dates
on which such dividends shall be paid and whether such dividends shall be
cumulative; (ii) the price at which and the terms and conditions on which the
share of such series of Preferred Stock may be redeemed, including the period of
time during which such share may be redeemed, any premium to be paid over and
above the par value of such shares of Preferred Stock, whether and to what
extent accumulated dividends on such shares of Preferred Stock will be paid upon
the redemption of such shares; (iii) the liquidation preference, if any, over
and above the par value of such shares of Preferred Stock and whether and to
what extent the holders of such shares of Preferred Stock shall be entitled to
accumulated dividends in the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Company; (iv) whether the share
of Preferred Stock shall be subject to the operation of a retirement or sinking
fund and, if so, a description of the operation of such retirement or sinking
fund; (v) the terms and conditions, if any, on which the shares of Preferred
Stock may be convertible into, or exchangeable for, shares of any other class or
classes of stock of the Company, including the price or rate of conversion or
exchange and the method for effecting such conversion or exchange, provided that
no shares of Preferred Stock will be convertible into shares of a class that has
superior rights or preferences as to dividends or distribution of assets of the
Company upon the voluntary or involuntary dissolution or liquidation of the
Company; and (vi) other preferences, rights, qualifications or restrictions or
material terms of such shares of Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock and Preferred Stock
is National City Bank.
DESCRIPTION OF DEPOSITARY SHARES
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,
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each of which will represent a fraction (to be set forth in the Prospectus
Supplement relating to the Preferred Stock) of a share of such Preferred Stock.
The shares 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 applicable Prospectus Supplement will describe the terms of any
Depositary Shares. The description in the Prospectus Supplement will not purport
to be complete and will be qualified in its entirety by reference to the Deposit
Agreement.
CERTAIN ANTITAKEOVER PROVISIONS
The Articles of Incorporation and the Regulations contain certain
provisions that could make more difficult the acquisition of the Company by
means of a tender offer, a proxy contest or otherwise. These provisions are
expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
the Company to negotiate first with the Board of Directors. The Company believes
that the benefits of these provisions outweigh the potential disadvantages of
discouraging such proposals because, among other things, negotiation of such
proposals might result in an improvement of their terms. The description set
forth below is intended as a summary only and is qualified in its entirety by
reference to the Articles of Incorporation and the Regulations, which have been
incorporated by reference as exhibits to the Registration Statement of which
this Prospectus is a part, and the laws of the State of Ohio.
CLASSIFIED BOARD OF DIRECTORS
The Regulations provide that the Board of Directors is divided into three
classes of directors, each consisting of not less than three nor more than five
directors and with the classes serving staggered three-year terms. The
classification of directors has the effect of making it more difficult for
shareholders to change the composition of the Board of Directors. The Company
believes, however, that the longer time required to elect a majority of a
classified Board of Directors helps to ensure continuity and stability of the
Company's management and policies.
The classification provisions could also have the effect of discouraging a
third party from accumulating large blocks of the Company's stock or attempting
to obtain control of the Company, even though such an attempt might be
beneficial to the Company and its shareholders. Accordingly, shareholders could
be deprived of certain opportunities to sell their shares of Common Stock at a
higher market price than might otherwise be the case.
NUMBER OF DIRECTORS; FILLING VACANCIES
The Regulations provide that the number of directors shall be not less than
nine nor more than fifteen as may be determined by the vote of the shareholders
at any annual meeting or special meeting called for the purpose of electing
directors. In addition to the authority of shareholders to fix or change the
number of directors, the Board may change the number of directors and may fill
any director's office that is created by an increase in the number of directors;
provided, however, the Board may not change the number of directors by more than
two from the number authorized by the shareholders at the last annual or special
meeting. In no event may the directors fix the numbers of directors at less than
nine nor more than fifteen. The Regulations provide that any vacancies may be
filled by a vote of a majority of the remaining directors, though less than a
quorum.
SPECIAL MEETINGS
The Regulations provide that the call by shareholders of a special meeting
of shareholders shall require that holders of 25% of the outstanding shares of
the Company participate in such call. This provision may have the effect of
delaying consideration of a shareholder proposal until the next annual meeting.
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SHAREHOLDER RIGHTS PLAN
The Company maintains a Shareholder Rights Plan under which, until the
occurrence of certain events, each share of outstanding Common Stock represents
ownership of one right ("Right"). The Rights become exercisable only if a person
or group acquires 20% or more of the Common Stock (10% under certain
circumstances) or commences a tender or exchange offer upon consummation of
which such person or group would control 20% or more of the Common Stock. Each
Right entitles holders to buy, from the Company, one share of its Common Stock
at an exercise price of $20.00 per share. The Rights, which do not entitle the
holders to the right to vote or receive dividends, expire on April 9, 1996.
Rights may be redeemed by the Company at $.022 per Right at any time until the
fifteenth day following public announcement that a person or group has acquired
20% or more of the voting power, unless such period is extended by the Board of
Directors while the Rights are redeemable.
If any person becomes the owner of 20% or more of the Common Stock (10%
under certain circumstances), or if the Company is the surviving corporation in
a merger with a 20% or more stockholder and its Common Stock is not changed or
converted, or if a 20% or more stockholder engages in certain self-dealing
transactions with the Company, then each Right not owned by such person or
related parties will entitle its holder to purchase one share of Common Stock at
a purchase price of 20% of the then current market price of the Common Stock.
In the event the Company engages in a merger or other business combination
transaction in which the Company is not the surviving corporation or the Company
is the surviving corporation but its Common Stock is changed or exchanged or 50%
or more of the Company's assets or earning power is sold or transferred, each
holder of a Right shall have the right to receive, upon exercise thereof at the
then current exercise price of the Right, that number of shares of common stock
of the surviving company which at the time of the transaction would have a
market value of two times the exercise price of the Right.
DESCRIPTION OF WARRANTS
The Company has no Warrants outstanding. The Company may issue Warrants for
the purchase of Debt Securities, Common Stock or Preferred Stock. Warrants may
be issued independently of or together with any other Securities offered by an
applicable Prospectus Supplement and may be attached to or separate from such
Securities. Warrants may be issued under a Warrant Agreement (each, a Warrant
Agreement") to be entered into between the Company and a warrant agent specified
in the applicable Prospectus Supplement (the Warrant Agent"). The Warrant Agent
will act solely as an agent of the Company in connection with the Warrants of a
particular series and will not assume any obligation or relationship of agency
or trust for or with any holders or beneficial owners of Warrants. The following
sets forth certain general terms and provisions of the Warrants. Further terms
of the Warrants and the applicable Warrant Agreement will be set forth in the
applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following: (1) the title of such Warrants; (2) the
aggregate number of such Warrants; (3) the price or prices at which such
Warrants will be issued; (4) the designation, number and terms of the Debt
Securities and/or shares of Common Stock or Preferred Stock purchasable upon
exercise of such Warrants; (5) the designation and terms of the other
Securities, if any, with which such Warrants are issued and the number of such
Warrants issued with each such Security; (6) the date, if any, on and after
which such Warrants and the related Debt Securities and/or Common Stock or
Preferred Stock, if any, will be separately transferable; (7) the price at which
Debt Securities and/or each share of Common Stock or Preferred Stock purchasable
upon exercise of such Warrants may be purchased and provisions, if any, for
changes to or adjustments in the exercise price; (8) the date on which the right
to exercise such Warrants shall commence and the date on which such right shall
expire; (9) the minimum or maximum amount of such Warrants which may be
exercised at any one time; (10) information with respect to book-entry
procedures, if any; (11) a discussion of certain federal income tax
considerations; and (12) any other terms of such Warrants, including terms,
procedures and limitations relating to the transferability, exchange and
exercise of such Warrants.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, including contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Common Stock or Preferred Stock at a
future date or dates. The price per share of Preferred Stock or Common Stock may
be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. The Stock Purchase Contracts may be issued separately or as a part of
units ("Stock Purchase Units"), each consisting of a Stock Purchase Contract and
debt obligations of the United States of America or agencies or
instrumentalities thereof securing the holders' obligations to purchase the
Preferred Stock or the Common Stock under the Stock Purchase Contracts. The
Stock Purchase Contracts may require the Company to make periodic payments to
the holders of the Stock Purchase Units or vice versa, and such payments may be
unsecured or prefunded on a specified basis. The Stock Purchase Contracts may
require holders to secure their obligations thereunder in a specified manner.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will not purport to be complete and will be qualified in its entirety
by reference to the Stock Purchase Contracts, and, if applicable, collateral
arrangements and depositary arrangements, relating to such Stock Purchase
Contracts or Stock Purchase Units.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
the Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, at prices related to the prevailing market prices at the
time of sale, or at negotiated prices. 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 will be set forth in the applicable
Prospectus Supplement. In connection with the sale of the Securities,
underwriters may be deemed to have received compensation from the Company in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of Securities for whom they act as agent. Underwriters may sell
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions from the underwriters and/or commissions from
the purchasers for whom they act as agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities and any discounts, concessions or
commissions allowed by underwriters to participating dealers will be set forth
in the applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Securities may be deemed to be underwriting
discounts and commissions under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements entered into with the Company, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters, dealers or agents to solicit offers by certain
institutions to purchase Securities from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a future date. Institutions with
whom delayed delivery contracts 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. The applicable Prospectus Supplement
will set forth the commission payable for solicitation of such offers.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
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LEGAL MATTERS
Certain legal matters in connection with the Securities to be offered
hereby, including their legality, will be passed upon for the Company by Squire,
Sanders & Dempsey, Cleveland, Ohio. Mark A. Cusick, Esq., a partner in such
firm, is Secretary of the Company.
EXPERTS
The consolidated financial statements of the Company at December 31, 1994
and 1993 and for each of the three years in the period ended December 31, 1994,
appearing in its Annual Report on Form 10-K for the fiscal year ended December
31, 1994 and incorporated by reference herein and in the Registration Statement
in reliance upon the report of KPMG Peat Marwick LLP, independent public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in auditing and accounting. To the extent that KPMG Peat Marwick
LLP audits and reports on the consolidated financial statements of the Company
issued at future dates, and consents to the use of their report thereon, such
consolidated financial statements also will be incorporated by reference in the
Registration Statement in reliance upon their report and said authority.
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