<PAGE>
Rule 424(b)(2)
Registration No. 33-58507
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 26, 1995)
$100,000,000
ENGELHARD CORPORATION
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
---------------
Engelhard Corporation (the "Company") may offer from time to time its
Medium-Term Notes (the "Notes") having an aggregate initial public offering
price of up to $100,000,000, or the equivalent in one or more other
currencies, including composite currencies such as the European Currency Unit
(a "Specified Currency"). See "Important Currency Exchange Information." Such
aggregate initial offering price is subject to reduction as a result of the
sale by the Company of other securities described in the accompanying
Prospectus. The interest rate on each Note will be either a fixed rate
established by the Company at the date of issue of such Note, which may be
zero in the case of certain Original Issue Discount Notes, or a floating rate,
as set forth therein and specified in the applicable Pricing Supplement.
Interest on each Fixed Rate Note will be payable in arrears each January 15
and July 15, unless otherwise specified in the applicable Pricing Supplement,
and at Maturity (as hereinafter defined). Interest on each Floating Rate Note
will be payable in arrears on the dates set forth therein and in the
applicable Pricing Supplement and at Maturity. Each Note will mature on any
day nine months or more from the date of issue, as set forth in the applicable
Pricing Supplement. See "Description of Notes." Unless otherwise specified in
the applicable Pricing Supplement to this Prospectus Supplement, the Notes
will not be redeemable or repayable prior to Maturity and will be issued in
fully registered form in minimum denominations of $1,000 (or, in the case of
Notes not denominated in U.S. dollars, the equivalent thereof in the Specified
Currency, rounded down to the nearest 1,000 units of the Specified Currency)
or integral multiples thereof. Any terms relating to Notes being denominated
in foreign currencies or composite currencies will be as set forth in the
applicable Pricing Supplement.
Each Note will be represented either by a Global Note registered in the name
of a nominee of The Depository Trust Company, as Depositary (a "Book-Entry
Note"), or by a certificate issued in definitive form (a "Certificated Note"),
as set forth in the applicable Pricing Supplement. Beneficial interests in
Global Notes representing Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary
and its participants. Book-Entry Notes will not be issuable as Certificated
Notes except under the circumstances described in the accompanying Prospectus.
---------------
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, THE PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(2)(3)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.................................. 100% .125%-.750% 99.875%-99.250%
- ---------------------------------------------------------------------------------------------------
Total(4).................................. $100,000,000 $125,000-$750,000 $99,875,000-$99,250,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Unless otherwise indicated in the applicable Pricing Statement, the Notes
will be sold at 100% of their principal amount. If the Company issues any
Notes at a discount from or at a premium over its principal amount, the
Price to the Public of any Note issued at a discount or premium will be
set forth in the applicable Pricing Supplement.
(2) The Company will pay a commission to an Agent (as defined below), in the
form of a discount, from .125% to .750% of the Price to Public of any
Note, depending upon maturity, when such Agent places such Note.
Commissions with respect to Notes with maturities in excess of 30 years
that are sold through an Agent will be negotiated between the Company and
such Agent at the time of such sale. The Company also may sell Notes to
any Agent, as principal, at negotiated discounts, for resale to investors
and other purchasers. The Company has agreed to indemnify each Agent
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Plan of Distribution."
(3) Before deduction of expenses payable by the Company, estimated at
$175,000.
(4) Or the equivalent thereof in other currencies, including composite
currencies.
---------------
Offers to purchase Notes are being solicited from time to time by Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.
Morgan Securities Inc. (each an "Agent" and collectively, the "Agents") on
behalf of the Company. The Agents have agreed or will agree to use their
reasonable efforts to solicit purchases of the Notes. The Company may sell
Notes to the Agents acting as principal for their own account for resale to
one or more investors at varying prices related to prevailing market prices at
the time of resale or, if so agreed, at a fixed public offering price. The
Company reserves the right to sell Notes directly on its own behalf or through
other agents or underwriters. No termination date for the offering has been
established. The Company or any Agent may reject any offer in whole or in
part. The Notes will not be listed on any securities exchange and there can be
no assurance that the Notes offered by this Prospectus will be sold or that
there will be a secondary market for the Notes. See "Plan of Distribution."
---------------
MERRILL LYNCH & CO. J.P. MORGAN SECURITIES INC.
---------------
The date of this Prospectus Supplement is July 26, 1995.
<PAGE>
IN CONNECTION WITH THE OFFERING OF NOTES AT A FIXED PUBLIC OFFERING PRICE,
THE AGENTS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IMPORTANT CURRENCY EXCHANGE INFORMATION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, and premium,
if any, and interest on the Notes will be made in U. S. dollars. Purchasers
are required to pay for any non-U.S. dollar denominated Notes in the Specified
Currency, and payments of principal of, and premium, if any, and interest on
such Notes will be made in the Specified Currency, unless otherwise provided
in the applicable pricing supplement (the "Pricing Supplement"). Currently,
there are limited facilities in the United States for the conversion of U.S.
dollars into foreign currencies and vice versa. In addition, most banks do not
currently offer non-U.S. dollar denominated checking or savings account
facilities in the United States. Accordingly, unless otherwise specified in a
Pricing Supplement or unless alternative arrangements are made, payment of
principal, premium, if any, and interest, if any, on Notes in a Specified
Currency other than U.S. dollars will be made to an account at a bank outside
the United States. See "Description of Notes."
If the applicable Pricing Supplement provides for payments of principal of,
and premium, if any, and interest on a non-U.S. dollar denominated Note to be
made in U.S. dollars, the conversion of the Specified Currency into U.S.
dollars will be handled by the Exchange Rate Agent specified in the applicable
Pricing Supplement. The costs of such conversion will be borne by the holder
of a Note through deductions from such payments.
References herein to "U.S. dollars" or "$" are to the currency of the United
States of America.
----------------
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby 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 reference is hereby made. The particular
terms of the Notes sold pursuant to any Pricing Supplement will be described
therein. The terms and conditions set forth in "Description of Securities" in
the Prospectus or "Description of Notes" in the Prospectus Supplement will
apply to each Note unless otherwise specified herein or in the applicable
Pricing Supplement and in such Note.
If any Note is not to be denominated in U.S. dollars, the applicable Pricing
Supplement will specify the currency or currencies, including composite
currencies such as the European Currency Unit ("ECU"), in which the principal,
premium, if any, and interest with respect to such Note are to be paid, along
with any other terms relating to the non-U.S. dollar denomination.
The statements herein concerning the Notes and the Indenture do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Indenture dated as of July 26, 1995
(the "Indenture"), by and between the Company and The Chase Manhattan Bank,
N.A., as Trustee (the "Trustee"), including the definitions of certain terms
used herein without definition.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured obligations of the Company and will rank pari
passu with all other unsecured and unsubordinated indebtedness of the Company
from time to time outstanding. The Notes may be issued from time to time, and
will be limited to an aggregate initial offering price of up to $100,000,000
or the equivalent thereof in one or more foreign or composite currencies,
subject to reduction as a result of the sale of other debt securities under
the accompanying Prospectus. Such aggregate initial offering price may be
increased from time to time as authorized by, or pursuant to authority
delegated by, the Board of Directors of the Company. The Indenture under which
the Notes are to be issued does not limit the amount of additional
indebtedness the Company may incur.
S-2
<PAGE>
Each Note will mature on any day nine months or more from the date of issue,
as set forth in the applicable Pricing Supplement. Except as may be specified
for Notes denominated in foreign or composite currencies or as otherwise
provided in the Pricing Supplement, the Notes will be issued only in fully
registered form in minimum denominations of $1,000 or any integral multiple
thereof. Interest rates offered by the Company with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount of
the Notes purchased in any single transaction.
Notes denominated in a Specified Currency will be issued in denominations of
the equivalent of $1,000 (rounded down to an integral multiple of 1,000 units
of such Specified Currency), or any integral multiple in excess thereof of
1,000 units of such Specified Currency, as determined by reference to the noon
dollar buying rate in New York City for cable transfers of such Specified
Currency published by the Federal Reserve Bank of New York (the "Market
Exchange Rate") on the Business Day (as defined below) immediately preceding
the date of issuance; provided, however, in the case of ECUs, the Market
Exchange Rate shall be the rate of exchange determined by the Commission of
the European Communities (or any successor thereto) as published in the
Official Journal of the European Communities, or any successor publication, on
the Business Day immediately preceding the date of issuance.
The Notes will be offered on a continuous basis, and each Note will be
issued initially as either a Book-Entry Note or a Certificated Note. Except as
set forth in the Prospectus under "Description of Securities--Global
Securities," Book-Entry Notes will not be issuable as Certificated Notes. See
"Description of Notes--Book-Entry System" below.
The Notes may be presented for payment of principal, premium, if any, and
interest, transfer of the Notes will be registrable and the Notes will be
exchangeable at the agency in The City of New York, maintained by the Company
for such purpose; provided that Book-Entry Notes will be exchangeable only in
the manner and to the extent set forth under "Description of Securities--
Global Securities" in the Prospectus. On the date hereof, the agent for the
payment, transfer and exchange of the Notes is the Trustee, acting through its
corporate trust office at 4 Chase Metrotech Center, 3rd Floor, Brooklyn, New
York 11245. Unless otherwise specified in the applicable Pricing Supplement,
the Trustee also shall act as the Exchange Rate Agent.
The applicable Pricing Supplement will specify the price (the "Issue Price")
of each Note to be sold pursuant thereto, the interest rate or interest rate
formula, maturity, currency and principal amount and any other applicable
terms governing such Note.
Unless otherwise specified in the applicable Pricing Supplement, "Business
Day" means any day, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which banking institutions are authorized or required by
law, regulation or executive order to close in The City of New York and, with
respect to LIBOR Notes (as defined below), is also a London Banking Day.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
An "Interest Payment Date" when used with respect to any series of Notes
means the Stated Maturity of any installment of interest on those Notes.
"Maturity" when used with respect to any Note means the date on which the
principal of such Note or an installment of principal becomes due and payable,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption, put for repayment or otherwise.
"Original Issue Discount Note" means any Note which is initially sold at a
discount from the principal amount thereof and the terms of which provide that
upon redemption or acceleration of the Maturity thereof, an amount less than
the principal amount thereof would become due and payable.
The "Record Date" with respect to any Interest Payment Date shall, unless
otherwise specified, be the date 15 calendar days prior to such Interest
Payment Date, whether or not such Interest Payment Date or Record Date shall
be a Business Day.
S-3
<PAGE>
PAYMENT CURRENCY
If the applicable Pricing Supplement provides for payment of principal of,
and premium, if any, and interest on non-U.S. dollar denominated Notes to be
made, at the option of the holders of Notes, in U.S. dollars, conversion of
the Specified Currency into U.S. dollars will be based on the highest bid
quotation in The City of New York received by the Exchange Rate Agent at
approximately 11:00 A.M., New York City time, on the second Business Day
preceding the applicable payment date from three recognized foreign exchange
dealers (one of which may be the Exchange Rate Agent) for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on
such payment date in the aggregate amount of the Specified Currency payable to
the holders of Notes and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, payments will be made in
the Specified Currency. All currency exchange costs will be borne by the
holders of Notes by deductions from such payments.
Except as set forth below, if the principal of, premium, if any, or interest
on, any Note is payable in a Specified Currency and such Specified Currency is
not available to the Company for making payments thereof due to the imposition
of exchange controls or other circumstances beyond the control of the Company,
or is no longer used by the government of the country issuing such currency or
for the settlement of transactions by public institutions within the
international banking community, then the Company will be entitled to satisfy
its obligations to holders of such Notes by making such payment in U.S.
dollars on the basis of the Market Exchange Rate on the date of such payment
or, if the Market Exchange Rate is not then available, as of the most recent
practicable date. Any payment made under such circumstances in U.S. dollars
where the required payment is in a Specified Currency will not constitute an
Event of Default as defined in the Prospectus under "Description of
Securities--Events of Default."
If payment on a Note is required to be made in ECUs and ECUs are unavailable
due to imposition of exchange controls or other circumstances beyond the
control of the Company, or are no longer used in the European Monetary System,
all payments in respect of such Notes shall be made in U.S. dollars until the
ECUs are available or so used. The amount of each payment in U.S. dollars
shall be computed on the basis of the equivalent of the ECU in U.S. dollars,
determined by the Company or its agent as described below, as of the second
Business Day prior to the date on which such payment is due.
The component currencies of the ECU for this purpose (the "Components")
shall be the currency amounts which were components of the ECU as of the last
date on which the ECU was used in the European Monetary System. The equivalent
of the ECU in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the Components. The U.S. dollar equivalent of each of the
Components shall be determined by the Company or such agent on the basis of
the most recently available Market Exchange Rate for such Components.
If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that currency as a Component shall be
divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any Component is divided into
two or more currencies, the amount of that currency as a Component shall be
replaced by amounts of such two or more currencies, each of which shall have a
value on the date of division equal to the amount of the former component
currency divided by the number of currencies into which that currency was
divided.
All determinations referred to above made by the Company or its agent shall
be at its sole discretion and, in the absence of manifest error, shall be
conclusive for all purposes and binding on holders of the Notes.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided, however,
that the interest payable at Maturity (whether or not the date of Maturity is
an Interest Payment Date) will be payable to the person to whom principal is
payable. The initial
S-4
<PAGE>
interest payment on a Note will be made on the first Interest Payment Date
falling after the date the Note is issued; provided, however, that payments of
interest on a Note issued less than 15 calendar days before an Interest
Payment Date will be paid on the next succeeding Interest Payment Date to the
holder of record on the Record Date with respect to such succeeding Interest
Payment Date. See "United States Taxation--Original Issue Discount Notes"
below.
Payments of principal of, and premium, if any, and interest on any Note
payable at Maturity will be made in immediately available funds at the office
of the Trustee in The City of New York; provided, however, that payments in
such funds will be made only if such Notes are presented to the Trustee in
time for the Trustee to make such payments in such funds in accordance with
its normal procedures.
Interest payments for Fixed Rate Notes and Floating Rate Notes will include
accrued interest from and including the date of issue or from and including
the last date in respect of which interest has been paid or duly made
available for payment, as the case may be, to, but excluding, the Interest
Payment Date or the date of Maturity, as the case may be.
U.S. dollar payments of interest, other than interest due at Maturity, will
be made by check mailed to the address of the person entitled thereto as shown
in the Note register. Notwithstanding the foregoing, a holder of $10,000,000
or more in aggregate principal amount of Notes having the same Interest
Payment Date shall be entitled to receive payments of interest, other than
interest due at Maturity, by wire transfer of immediately available funds if
appropriate wire transfer instructions have been received in writing by the
Trustee not later than 15 calendar days prior to the applicable Interest
Payment Date. Unless otherwise specified in the applicable Pricing Supplement
or unless alternative arrangements are made, payments of principal of, and
premium, if any, and interest on Notes in a Specified Currency will be made by
wire transfer of immediately available funds to an account maintained by the
payee with a bank located outside of the United States and the holder of such
Notes shall provide the Trustee with the appropriate wire transfer
instructions at least 15 calendar days prior to such Interest Payment Date,
provided, that such bank has appropriate facilities therefor and that the
applicable Note is presented at the corporate trust office of the Trustee in
time for the Trustee to make such payments in such Specified Currency in
accordance with its normal procedures. Such wire instructions, upon receipt by
the Trustee, shall remain in effect until revoked by such holder.
Certain Notes, including Original Issue Discount Notes, may be considered to
be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant rate. See "United
States Taxation--Original Issue Discount Notes" below. Unless otherwise
specified in the applicable Pricing Supplement, if the principal of any
Original Issue Discount Note is declared to be due and payable immediately as
described under "Description of Securities--Events of Default" in the
Prospectus, the amount of principal due and payable with respect to such Note
shall be limited to the aggregate principal amount of such Note multiplied by
the sum of its Issue Price (expressed as a percentage of the aggregate
principal amount) plus the original issue discount amortized from the date of
issue to the date of declaration, which amortization shall be calculated using
the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of declaration).
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its date of issue at the
interest rate stated on the face thereof until the principal thereof is paid
or duly made available for payment. Such interest on Fixed Rate Notes will be
computed and paid on the basis of a 360-day year of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, the interest
on each Fixed Rate Note will be payable semiannually in arrears on January 15
and July 15 of each year and at Maturity. If any Interest Payment Date
(including the date of Maturity) for any Fixed Rate Note falls on a day that
is not a Business Day, the interest payments shall be made on the next day
that is a Business Day, and no interest on such payment shall accrue for the
period from and after the Interest Payment Date or the date of Maturity, as
the case may be.
S-5
<PAGE>
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issue until the
principal thereof is paid or made available for payment at a rate determined
by reference to the applicable interest rate basis or bases (each, a "Base
Rate"), which may be adjusted by a Spread or a Spread Multiplier (each as
defined below). The applicable Pricing Supplement will designate one or more
of the following Base Rates as applicable to each Floating Rate Note: (a) the
CD Rate (as defined below) (a "CD Rate Note"), (b) the Commercial Paper Rate
(as defined below) (a "Commercial Paper Rate Note"), (c) the Federal Funds
Rate (as defined below) (a "Federal Funds Rate Note"), (d) LIBOR (as defined
below) (a "LIBOR Note"), (e) the Treasury Rate (as defined below) (a "Treasury
Rate Note"), or (f) such other Base Rate or formula as is set forth in such
Pricing Supplement and in such Floating Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to
the specified Base Rate (i) plus or minus the Spread, if any, and/or
(ii) multiplied by the Spread Multiplier, if any. The "Spread" is the number
of basis points (one one-hundredth of a percentage point) specified in the
applicable Pricing Supplement to be added to or subtracted from the Base Rate
or Rates for such Floating Rate Note, and the "Spread Multiplier" is the
percentage specified in the applicable Pricing Supplement to be multiplied by
the Base Rate or Rates for such Floating Rate Note. The specified Base Rate or
Rates will be based on the Index Maturity. The "Index Maturity" for any
Floating Rate Note is the period of maturity (as specified in the applicable
Pricing Supplement) of the instrument or obligation on which the Base Rate or
Rates are calculated.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum numerical interest
rate limitation, or ceiling, on the rate of interest that may accrue during
any Interest Period (a "Maximum Interest Rate"), and (ii) a minimum numerical
interest rate limitation, or floor, on the rate of interest that may accrue
during any Interest Period (a "Minimum Interest Rate"). The interest rate on
the Notes will in no event be higher than the maximum rate permitted by New
York law as the same may be modified by United States law of general
application.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Interest
Reset Period" for such Note, and the first day of each Interest Reset Period
being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
the "Interest Reset Date" will be, in the case of Floating Rate Notes which
reset (a) daily, each Business Day, (b) weekly, the Wednesday of each week
(with the exception of weekly reset Treasury Rate Notes, which shall reset the
Tuesday of each week, except as provided below), (c) monthly, the third
Wednesday of each month, (d) quarterly, the third Wednesday of March, June,
September and December of each year, (e) semiannually, the third Wednesday of
the two months specified in the Note and in the applicable Pricing Supplement
and (f) annually, the third Wednesday of the month specified in the Note and
in the applicable Pricing Supplement; provided, however, that the interest
rate in effect from the date of issue to the first Interest Reset Date with
respect to a Floating Rate Note will be the initial interest rate set forth in
the applicable Pricing Supplement (the "Initial Interest Rate"). If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that
is not a Business Day for such Floating Rate Note, the Interest Reset Date for
such Floating Rate Note shall be postponed to the next succeeding Business
Day, except that in the case of a Floating Rate Note as to which LIBOR is an
applicable Base Rate, if such Business Day is in the next succeeding calendar
month, such Interest Reset Date shall be the immediately preceding Business
Day.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Payment Dates for Floating Rate Notes will be, in the case of
Floating Rate Notes which reset (a) daily, weekly or monthly, the third
Wednesday of each month or the third Wednesday of March, June, September and
December of each year as specified in the Note and the applicable Pricing
Supplement, (b) quarterly, the third Wednesday of March, June, September and
December of each year, (c) semiannually, the third Wednesday of the two months
of each year specified in the Note and in the applicable Pricing Supplement
and (d) annually, the third Wednesday of the month specified in the Note and
in the applicable Pricing Supplement. If any Interest Payment Date (other than
S-6
<PAGE>
the date of Maturity) for any Floating Rate Note would otherwise be a day that
is not a Business Day, the Interest Payment Date for such Floating Rate Note
shall be postponed to the next succeeding Business Day, except that in the
case of a Floating Rate Note as to which LIBOR is an applicable Base Rate, if
such Business Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding Business Day. If the date of
Maturity of a Floating Rate Note falls on a day that is not a Business Day,
the required payment of principal, premium, if any, and/or interest will be
made on the next succeeding Business Day as if made on the date such payment
was due, and no interest shall accrue on such payment for the period from and
after the date of Maturity to the date of payment on the next succeeding
Business Day.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factor calculated for each day in the period for which accrued
interest is being calculated. The interest factor for each such day is
computed by dividing the interest rate in effect on such day by 360, in the
case of CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes
and LIBOR Notes, or by the actual number of days in the year, in the case of
Treasury Rate Notes.
The applicable Pricing Supplement will specify the particular terms of each
Floating Rate Note, including, but not limited to, the Base Rate or formula
and the Spread and/or Spread Multiplier, if any, the Maximum Interest Rate or
Minimum Interest Rate, if any, the Index Maturity, the Initial Interest Rate,
the Interest Payment Dates, the Regular Record Dates, the Interest Reset Dates
and other applicable terms with respect to such Note.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point (.0000001), with five one-millionths of a percentage point
rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or
.0987655)), and all currency amounts used in or resulting from such
calculation on Floating Rate Notes will be rounded to the nearest one-
hundredth of a unit (with five one-thousandths of a unit being rounded
upward).
The applicable Pricing Supplement shall specify a calculation agent (the
"Calculation Agent") with respect to any issue of Floating Rate Notes. Upon
the request of the holder of any Floating Rate Note, the Calculation Agent
will provide the interest rate then in effect and, if determined, the interest
rate which will become effective on the next Interest Reset Date with respect
to such Floating Rate Note.
"Interest Determination Date" means the date as of which the interest rate
for a Floating Rate Note is to be calculated, to be effective as of the
following Interest Reset Date and calculated on the related Calculation Date.
The Interest Determination Date pertaining to an Interest Reset Date for a CD
Rate Note (the "CD Interest Determination Date"), for a Commercial Paper Rate
Note (the "Commercial Paper Interest Determination Date") and for a Federal
Funds Rate Note (the "Federal Funds Interest Determination Date") will be the
second Business Day next preceding such Interest Reset Date. The Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note (the
"LIBOR Interest Determination Date") will be the second London Banking Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are usually sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is so held on the following Tuesday, except
that such auction may be held on the preceding Friday. If, as the result of a
legal holiday, an auction is so held on the preceding Friday, such Friday will
be the Treasury Interest Determination Date pertaining to the Interest Reset
Date occurring in the next succeeding week. If an auction date shall fall on
any Interest Reset Date for a Treasury Rate Note, then such Interest Reset
Date shall instead be the first Business Day immediately following such
auction date.
The "Calculation Date," where applicable, pertaining to any Interest
Determination Date is the date on which the applicable interest rate must be
calculated and will be the earlier of (i) the tenth calendar day after such
Interest Determination Date or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or the date of Maturity, as the case may be.
S-7
<PAGE>
Interest Rates will be determined by the Calculation Agent as follows:
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified on the face of the CD Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity
designated in the applicable Pricing Supplement as published by the Board of
Governors of The Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication of the Board of
Governors of the Federal Reserve System ("H.15(519)"), under the caption "CDs
(Secondary Market)" or, if not yet published by 3:00 P.M., New York City time,
on the Calculation Date pertaining to such CD Interest Determination Date, the
CD Rate will be the rate on such CD Interest Determination Date for negotiable
certificates of deposit of the Index Maturity designated in the applicable
Pricing Supplement as published by The Federal Reserve Bank of New York in the
daily statistical release entitled "Composite 3:30 P.M. Quotations for U.S.
Government Securities," or any successor publication, published by the Federal
Reserve Bank of New York ("Composite Quotations") under the caption
"Certificates of Deposit." If by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such CD Interest Determination Date such rate
is not yet published in either H.15(519) or Composite Quotations, then the CD
Rate on such CD Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on such CD Interest
Determination Date, of three leading non-bank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York (which may include the
Agents or any of their affiliates) selected by the Calculation Agent (after
consultation with the Company) for negotiable certificates of deposit of major
United States money market banks (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the Index Maturity designated in
the applicable Pricing Supplement in an amount that is representative for a
single transaction in that market at that time; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the rate of interest in effect for the applicable period will be
the same as the CD Rate for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the rate of interest payable
on the CD Rate Notes for which such CD Rate is being determined shall be the
Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified on the face of the Commercial Paper Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as described below) of the rate on
that date for commercial paper having the Index Maturity designated in the
applicable Pricing Supplement as such rate is published by the Board of
Governors of the Federal Reserve System in H.15(519) under the caption
"Commercial Paper." In the event that such rate is not published by 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such Commercial
Paper Interest Determination Date, the Commercial Paper Rate shall be the
Money Market Yield of the rate on that Commercial Paper Interest Determination
Date for commercial paper having the Index Maturity designated in the
applicable Pricing Supplement as published in Composite Quotations under the
heading "Commercial Paper" (with an Index Maturity of one month or three
months being deemed to be equivalent to an Index Maturity of 30 days or 90
days, respectively). If by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such Commercial Paper Interest Determination Date such rate
is not yet published in either H.15(519) or Composite Quotations, the
Commercial Paper Rate for that Commercial Paper Interest Determination Date
shall be calculated by the Calculation Agent and shall be the Money Market
Yield of the arithmetic mean of the offered
S-8
<PAGE>
rates as of approximately 11:00 A.M., New York City time, on that Commercial
Paper Interest Determination Date of three leading dealers of commercial paper
in The City of New York (which may be the Agents or their affiliates) selected
by the Calculation Agent (after consultation with the Company), for commercial
paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized securities rating agency; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent
are not quoting as set forth above, the rate of interest in effect for the
applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or if there was no such Interest
Reset Period, the rate of interest payable on the Commercial Paper Rate Notes
for which such Commercial Paper Rate is being determined shall be the Initial
Interest Rate).
"Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
D x 360
Money Market Yield = ------------------ X 100
360 - (D X M)
where "D" refers to the per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal; and "M" refers to the actual
number of days in the period for which accrued interest is being calculated.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on that day for Federal Funds as published by the Board of
Governors of the Federal Reserve System in H.15(519) under the caption
"Federal Funds (Effective)" or, if not so published by 3:00 P.M., New York
City time, on the Calculation Date pertaining to such Federal Funds Interest
Determination Date, the Federal Funds Rate will be the rate on such Federal
Funds Interest Determination Date, as published in Composite Quotations under
the heading "Federal Funds/Effective Rate." If, by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such Federal Funds Interest
Determination Date such rate is not yet published in either H.15(519) or
Composite Quotations, the Federal Funds Rate for such Federal Funds Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal
Funds arranged by three leading dealers of Federal Funds transactions in The
City of New York (which may be the Agents or their affiliates), which dealers
have been selected by the Calculation Agent, (after consultation with the
Company) prior to 9:00 A.M., New York City time, on such Federal Funds
Interest Determination Date; provided, however, that, if the dealers selected
as aforesaid by the Calculation Agent are not quoting as mentioned as set
forth above, the rate of interest in effect for the applicable period will be
the same as the Federal Funds Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the Federal Funds Rate Notes for which such Federal Funds
Rate is being determined will be the Initial Interest Rate).
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the LIBOR Notes and in the applicable Pricing Supplement.
S-9
<PAGE>
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
will be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will be,
as specified in the applicable Pricing Supplement, either: (a) the
arithmetic mean of the offered rates for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following that
LIBOR Interest Determination Date, that appear on the Reuters Screen LIBO
Page as of 11:00 A.M., London time, on that LIBOR Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page ("LIBOR Reuters"), or (b) the rate for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following that
LIBOR Interest Determination Date, that appears on the Telerate Page 3750
as of 11:00 A.M., London time, on that LIBOR Interest Determination Date
("LIBOR Telerate"). "Reuters Screen LIBO Page" means the display designated
as page "LIBO" on the Reuters Monitor Money Rates Service (or such other
page as may replace the LIBO page on that service for the purpose of
displaying London interbank offered rates of major banks). "Telerate Page
3750" means the display designated as page "3750" on the Telerate Service
(or such other page as may replace the 3750 page on that service or such
other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates
for U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR Telerate is
specified in the applicable Pricing Supplement, LIBOR will be determined as
if LIBOR Telerate had been specified. If fewer than two offered rates
appear on the Reuters Screen LIBO Page, or if no rate appears on the
Telerate Page 3750, as applicable, LIBOR in respect of that LIBOR Interest
Determination Date will be determined as if the parties had specified the
rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page, as specified
in (i)(a) above, or on which no rate appears on Telerate Page 3750, as
specified in (i)(b) above, as applicable, LIBOR will be determined on the
basis of the rates at which deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing Supplement are offered at
approximately 11:00 A.M., London time, on that LIBOR Interest Determination
Date by four major banks in the London interbank market selected by the
Calculation Agent (after consultation with the Company) ("Reference Banks")
to prime banks in the London interbank market commencing on the second
London Business Day immediately following that LIBOR Interest Determination
Date and in a principal amount equal to an amount of not less than
$1,000,000 that is representative for a single transaction in such market
at such time. The Calculation Agent will request the principal London
office of each of the Reference Banks to provide a quotation of its rate.
If at least two such quotations are provided, LIBOR in respect of that
LIBOR Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR in respect of
that LIBOR Interest Determination Date will be the arithmetic mean of the
rates quoted at approximately 11:00 A.M., New York City time, on the LIBOR
Interest Determination Date by three major banks in The City of New York
selected by the Calculation Agent for loans in U.S. dollars to leading
European banks having the Index Maturity designated in the applicable
Pricing Supplement commencing on the second London Business Day immediately
following that LIBOR Interest Determination Date and in a principal amount
equal to an amount of not less than $1,000,000 that is representative for a
single transaction in such market at such time; provided, however, that if
the banks selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR with respect to such LIBOR Interest
Determination Date will be the rate of LIBOR in effect on such date.
If any LIBOR Note is indexed to the offered rates in a Specified Currency
other than U.S. dollars, the applicable Pricing Supplement will set forth the
method for determining such rate.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
S-10
<PAGE>
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the
rate for the auction of direct obligations of the United States ("Treasury
bills") having the Index Maturity designated in the applicable Pricing
Supplement as published by the Board of Governors of the Federal Reserve
System in H.15(519) under the caption "Treasury bills-auction average
(investment)" or, if not so published by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Treasury Interest Determination Date, the
auction average rate for the Treasury Interest Determination Date (expressed
as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the
auction of Treasury bills having the Index Maturity designated in the
applicable Pricing Supplement are not reported as provided above by 3:00 P.M.,
New York City time, on such Calculation Date or no such auction is held in a
particular week, then the Treasury Rate shall be calculated by the Calculation
Agent and shall be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time, on such Treasury Interest
Determination Date, of three leading primary United States government
securities dealers (which may be the Agents or their affiliates) selected by
the Calculation Agent (after consultation with the Company), for the issue of
Treasury bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the Treasury Rate for such Interest Reset Date will be the
same as the Treasury Rate for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the rate of interest payable
on the Treasury Rate Notes for which the Treasury Rate is being determined
shall be the Initial Interest Rate).
CURRENCY INDEXED NOTES
Notes may be issued, from time to time, with the principal amount payable at
Maturity, or the amount of interest payable on any Interest Payment Date, to
be determined by reference to the value of one or more currencies (or
composite currencies) as compared to the value of one or more other currencies
(or composite currencies). Information as to the one or more currencies (or
composite currencies) to which the principal amount payable at Maturity or the
amount of interest payable on any Interest Payment Date is indexed, the
currency in which the face amount of the Note is denominated (the "Denominated
Currency") and the currency in which principal on the Note will be paid (the
"Payment Currency") will be set forth in the applicable Pricing Supplement.
The Denominated Currency and the Payment Currency may be the same currency or
different currencies. Unless otherwise specified in the applicable Pricing
Supplement, interest on currency linked Notes shall be paid in the Denominated
Currency based on the face amount of the Note at the rate per annum and on the
dates set forth in the applicable Pricing Supplement.
NOTES LINKED TO COMMODITY PRICES, EQUITY INDICES OR OTHER FACTORS
Notes may be issued, from time to time, with the principal amount payable at
Maturity, or the amount of interest payable on any Interest Payment Date, to
be determined by reference to one or more commodity prices (such as gold,
platinum or other precious metals), equity indices or other factors (including
the value of one or more currencies (or composite currencies) as set forth
above) and on such other terms as may be set forth in the relevant Pricing
Supplement ("Indexed Notes").
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Book-Entry Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, ranking, Stated Maturity
Date and other terms will be represented by a single Global Note, and all
Floating Rate Book-Entry Notes having the same Issue Date, Initial Interest
Rate, Base Rate, Interest Period, Interest Payment Dates, Index Maturity,
Spread or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, ranking, Stated Maturity Date and other terms will be
represented by a single Global Note. Each Global Note representing Book-Entry
Notes will be deposited with, or on behalf of The Depository Trust Company,
New York, New York or such other depositary as may be specified in the Pricing
Supplement (the "Depositary"), and registered in the name of a nominee of the
Depositary. Certificated Notes will not be exchangeable for Book-Entry Notes
and, except under the circumstances described in the Prospectus under
"Description of Securities--Global Securities," Book-Entry Notes will not be
exchangeable for or otherwise be issuable as Certificated Notes.
S-11
<PAGE>
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership
nominee). One fully registered Global Security will be issued for each
issue of Book-Entry Notes, each in the aggregate principal amount of such
issue, and will be deposited with the Depositary. If, however, the
aggregate principal amount of any issue exceeds $200,000,000, one Global
Security will be issued with respect to each $200,000,000 of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary also
facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct Participants of the Depositary ("Direct Participants") include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. The Depositary is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the Depositary's system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to the Depositary and its Participants
are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for such
Book-Entry Notes on the Depositary's records. The ownership interest of
each actual purchaser of each Book-Entry Note represented by a Global Note
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmation providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in a Global Note
representing Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners of a Global Note representing Book-Entry Notes will not receive
Certificated Notes representing their ownership interests therein, except
in the event that use of the book-entry system for such Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Notes representing Book-
Entry Notes which are deposited with the Depositary are registered in the
name of the Depositary's nominee, Cede & Co. The deposit of Global Notes
with the Depositary and their registration in the name of Cede & Co. effect
no change in beneficial ownership. The Depositary has no knowledge of the
actual Beneficial Owners of the Global Notes representing the Book-Entry
Notes; the Depositary's records reflect only the identity of the Direct
Participants to whose accounts such Book-Entry Notes are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
S-12
<PAGE>
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes of like tenor within an issue are being
redeemed, the Depositary's practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Notes representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments that are payable in
U.S. dollars on the Global Notes representing the Book-Entry Notes will be
made to the Depositary. The Depositary's practice is to credit Direct
Participant's accounts on the applicable payment date in accordance with
their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on such
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participant and
not of the Depositary, the Trustee or the Company, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment
of principal, premium, if any, and interest to the Depositary is the
responsibility of the Company or the Trustee, disbursement of such payments
to Direct Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry
Notes repaid by the Company, through its Participant, to the Trustee, and
shall effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Global Note or
Notes representing such Book-Entry Notes, on the Depositary's records, to
the Trustee. The requirement for physical delivery of Book-Entry Notes in
connection with a demand for repayment will be deemed satisfied when the
ownership rights in the Global Note or Notes representing such Book-Entry
Notes are transferred by Direct Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained,
Certificated Notes are required to be printed and delivered.
The Company may decide to discontinue use of this system of book-entry
transfers through the Depositary (or a successor securities depositary). In
that event, Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes
to be reliable, but the Company takes no responsibility for the accuracy
thereof.
A further description of the Depositary's procedures with respect to Global
Notes representing Book-Entry Notes is set forth in the Prospectus under
"Description of Securities--Global Securities." The Depositary has confirmed
to the Company, the Agents and the Trustee that it intends to follow such
procedures.
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to the Stated Maturity only if an Initial
Redemption Date is specified in the applicable Pricing Supplement. If so
specified, the Notes will be subject to
S-13
<PAGE>
redemption at the option of the Company on any date on and after the
applicable Initial Redemption Date in whole or from time to time in part in
increments of $1,000 or the minimum denomination specified in such Pricing
Supplement (provided that any remaining principal amount thereof shall be at
least $1,000 or such minimum denomination), at the applicable Redemption Price
(as defined below), together with interest thereon payable to the date of
redemption, on notice given not more than 60 nor less than 30 days prior to
the date of redemption and in accordance with the provisions of the Indenture.
"Redemption Price," with respect to a Note, means an amount equal to the
Initial Redemption Percentage specified in such Pricing Supplement (as
adjusted by the Annual Redemption Percentage Reduction, if applicable)
multiplied by the unpaid principal amount or the portion to be redeemed. The
Initial Redemption Percentage, if any, applicable to a Note shall decline at
each anniversary of the Initial Redemption Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until the
Redemption Price is equal to 100% of the unpaid principal amount thereof or
the portion thereof to be redeemed.
REPAYMENT AT THE OPTION OF THE HOLDER
If so specified in the applicable Pricing Supplement, the Notes will by
repayable by the Company in whole or in part at the option of the holders
thereof on their respective Optional Repayment Dates specified in such Pricing
Supplement. If no Optional Repayment Date is specified with respect to a Note,
such Note will not be repayable at the option of the holder thereof prior to
the Stated Maturity date. Any repayment in part will be in increments of
$1,000 or the minimum denomination specified in the applicable Pricing
Supplement (provided that any remaining principal amount thereof shall be at
least $1,000 or such minimum denomination). Unless otherwise specified in the
applicable Pricing Supplement, the repayment price for any Note to be repaid
means an amount equal to the sum of (i) 100% of the unpaid principal amount
thereof or the portion thereof plus (ii) accrued interest to the date of
repayment. For any Note to be repaid, such Note must be received, together
with the form thereon entitled "Option to Elect Repayment" duly completed, by
the Trustee at its corporate trust office (or such other address of which the
Company shall from time to time notify the holders) not more than 60 nor less
than 30 days prior to the date of repayment. Exercise of such repayment option
by the holder will be irrevocable.
While the Book-Entry Notes are represented by the Global Notes held by or on
behalf of the Depositary, and registered in the name of the Depositary or the
Depositary's nominee, the option for repayment may be exercised by the
applicable Participant that has an account with the Depositary, on behalf of
the Beneficial Owners of the Global Note or Notes representing such Book-Entry
Notes, by delivering a written notice substantially similar to the above
mentioned form to the Trustee at its corporate trust office (or such other
address of which the Company shall from time to time notify the holders), not
more than 60 nor less than 30 days prior to the date of repayment. Notices of
elections from Participants on behalf of Beneficial Owners of the Global Note
or Notes representing such Book-Entry Notes to exercise their option to have
such Book-Entry Notes repaid must be received by the Trustee by 5:00 P.M., New
York City time, on the last day for giving such notice. In order to ensure
that a notice is received by the Trustee on a particular day, the Beneficial
Owner of the Global Note or Notes representing such Book-Entry Notes must so
direct the applicable Participant before such Participant's deadline for
accepting instructions for that day. Different firms may have different
deadlines for accepting instructions from their customers. Accordingly,
Beneficial Owners of the Global Note or Notes representing Book-Entry Notes
should consult the Participants through which they own their interest therein
for the respective deadlines for such Participants. All notices shall be
executed by a duly authorized officer of such Participant (with signature
guaranteed) and shall be irrevocable. In addition, Beneficial Owners of the
Global Note or Notes representing Book-Entry Notes shall effect delivery at
the time such notices of election are given to the Depositary by causing the
applicable Participant to transfer such Beneficial Owner's interest in the
Global Note or Notes representing such Book-Entry Notes, on the Depositary's
records, to the Trustee. See "Book-Entry Notes."
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws or regulations in
connection with any such repayment.
S-14
<PAGE>
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates, the date of Maturity or any other variable term
relating thereto may be modified as specified under "Other Provisions" on the
face thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
UNITED STATES TAXATION
The following summary describes the principal United States federal income
tax consequences of ownership and disposition of the Notes to initial
purchasers of Notes. This summary is based on the Internal Revenue Code of
1986, as amended to the date hereof (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations. References to specific sections of Treasury Regulations shall be
denoted herein by "Treas. Reg. (S)." This summary discusses only Notes held as
capital assets within the meaning of Section 1221 of the Code. It does not
discuss all of the tax consequences that may be relevant to a holder of Notes
in light of the holder's particular circumstances or to holders subject to
special rules, such as certain financial institutions, insurance companies,
dealers in securities or foreign currencies, persons holding Notes as part of
a straddle (as defined in Code Section 1092) or as part of a conversion
transaction (as defined in Code Section 1258), persons holding Notes as a
hedge against, or which are hedged against, currency risks, or United States
Holders whose functional currency (as defined in Code Section 985) is not the
U.S. dollar. Persons considering the purchase of Notes should consult their
tax advisor with regard to the application of the United States federal income
tax laws to their particular situation as well as any tax consequences arising
under the laws of any state, local or foreign tax jurisdiction.
As used herein, the term "United States Holder" means an owner of a Note
that (a) is (i) for United States federal income tax purposes a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source
or (b) is not an owner described in (a) above but whose income from a Note is
effectively connected with such holder's conduct of a United States trade or
business. The term also includes certain former citizens of the United States
whose income and gain on the Notes will be taxable.
As used herein, the term "United States Alien Holder" means an owner of a
Note that is for United States federal income tax purposes (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust, or (iv) a foreign partnership one or
more of the members of which is, for United States federal income tax
purposes, a nonresident alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign estate or trust.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
Payments of Interest. Interest paid on a Note, including payments of
qualified stated interest (as defined below), will generally be taxable to a
United States Holder as ordinary interest income at the time it accrues or is
received, in accordance with the United States Holder's method of accounting
for federal income tax purposes. All payments of interest on a Note that
matures one year or less from its date of issuance will be included in the
stated redemption price at maturity of the Note and will be taxed in the
manner described below under "Original Issue Discount Notes." Special rules
governing the treatment of interest paid with respect to Original Issue
S-15
<PAGE>
Discount Notes, including certain Floating Rate Notes, Foreign Currency Notes
(as defined below) and Indexed Notes (as defined below), are described under
"Original Issue Discount Notes," "Foreign Currency Notes" and "Indexed Notes"
below.
Original Issue Discount Notes. Under the Code, a Note which has an issue
price that is less than its stated redemption price at maturity will generally
be considered to have been issued at an original issue discount for federal
income tax purposes (an "Original Issue Discount Note"). The "issue price" of
a Note will be the initial offering price to the public (excluding bond houses
and brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers) at which price a substantial
amount of debt instruments in the issue including such Note is sold. The
stated redemption price at maturity of a Note will equal the sum of all
payments required under the Note other than certain contingent payments and
"qualified stated interest" payments. In general "qualified stated interest"
is stated interest that is unconditionally payable in cash or in property
(other than debt instruments of the issuer) at least annually at (i) a single
fixed rate (as appropriately adjusted to take into account the length of the
interval between payments) or, (ii) in the case of a variable rate debt
instrument described in Treas. Reg. (S) 1.1275-5(a), which has an issue price
that does not exceed the total noncontingent principal payments under the
instrument by more than (x) 1.5% of such noncontingent principal payments
multiplied by the number of complete years from the issue date to maturity
(or, in the case of an installment obligation, the weighted average maturity)
or (y) 15 percent of the total noncontingent principal payments, one or more
qualified floating rates, a single objective rate (as defined in Treas. Reg.
(S) 1.1275-5(c)), or, in accordance with Treas. Reg. (S) 1.1275-5(a)(3)(ii), a
single fixed rate and one or more qualified floating rates or a single
objective rate. Special rules may apply if a Floating Rate Note is subject to
a cap, a floor, a "governor" (i.e., a restriction on the amount of increase or
decrease in the stated interest rate) or a similar restriction.
If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, generally 1/4 of 1 percent
of the stated redemption price at maturity multiplied by the number of
complete years to maturity, then the Note generally will not be considered to
have original issue discount.
United States Holders of Original Issue Discount Notes will be required to
include any qualified stated interest payments in income at the time the same
is accrued or received, in accordance with such holder's method of accounting
for federal income tax purposes. United States Holders of Original Issue
Discount Notes that mature more than one year from their date of issuance will
be required to include original issue discount income for federal income tax
purposes as it accrues, in accordance with a constant yield method based on a
compounding of interest, generally before the receipt of cash payments
attributable to such income.
A Note that matures one year or less from its date of issuance will be
treated as a "short-term Original Issue Discount Note." In general, a cash
method United States Holder of a short-term Original Issue Discount Note is
not required to accrue original issue discount for United States federal
income tax purposes unless it elects to do so. A cash method holder of a
short-term Original Issue Discount Note will, nevertheless, be required to
take stated interest into income as it is received or made available for
receipt. Holders who make such an election, holders who report income for
federal income tax purposes on the accrual method and certain other holders,
including banks and dealers in securities, are required to include original
issue discount in income on such short-term Original Issue Discount Notes as
it accrues on a straight-line basis, unless an election is made to accrue the
original issue discount according to a constant yield method based on daily
compounding. In the case of a holder who is not required, and does not elect
to include original issue discount in income currently, any gain realized on
the sale, exchange or retirement of the short-term Original Issue Discount
Note will be ordinary income to the extent of the original issue discount
accrued on a straight-line basis (or, if elected, according to a constant
yield method based on daily compounding) through the date of sale, exchange or
retirement. In addition, such holders will be required to defer deductions for
any interest paid on indebtedness incurred or continued to purchase or carry
short-term Original Issue Discount Notes in an amount not exceeding the
deferred interest income, until such deferred interest income is recognized.
S-16
<PAGE>
Certain of the Original Issue Discount Notes may be redeemable prior to
maturity. Original Issue Discount Notes containing such a feature may be
subject to rules that differ from the general rules discussed above.
Purchasers of Original Issue Discount Notes with such a feature should
carefully examine the applicable Pricing Supplement and should consult their
tax advisors with respect to such a feature since the tax consequences with
respect to original issue discount will depend, in part, on the particular
terms and the particular features of the purchased Note.
A person who purchases an Original Issue Discount Note for an amount that is
greater than its adjusted issue price as of the purchase date and less than or
equal to the stated redemption price at maturity of the notes will be
considered to have purchased such Note at an "acquisition premium," unless the
holder will be considered to have purchased the Note at a premium as described
below. Under the acquisition premium rules, the daily portion of original
issue discount which such holder must include in its gross income with respect
to such Note for any accrual period will be reduced by the daily portion of
such acquisition premium properly allocable to such period.
Any special U.S. federal income tax considerations applicable to Floating
Rate Notes or Indexed Notes will be described in the applicable Pricing
Supplement.
Bond Premium. If a United States Holder purchases a Note for an amount that
is greater than the stated redemption price at maturity, such holder will be
considered to have purchased such Note with "amortizable bond premium" equal
in amount to such excess. The Note will not be considered to bear original
issue discount in the case of such holder and such holder may elect (in
accordance with applicable Code provisions) to amortize such premium, using a
constant yield method, over the remaining term of the Note (where such Note is
not optionally redeemable prior to its maturity date). If such Note may be
optionally redeemed prior to maturity after such holder has acquired it, the
amount of amortizable bond premium is determined with reference to either the
amount payable on maturity or, if it results in a smaller premium,
attributable to the period of earlier redemption date, with reference to the
amount payable on the earlier redemption date. A holder who elects to amortize
bond premium must reduce such holder's tax basis in the Note by the amount of
the premium amortized in any year. The amount amortized in any year will be
treated as a reduction of the holder's interest income from the Note. An
election to amortize bond premium applies to all taxable debt obligations then
owned and thereafter acquired by the taxpayer and may be revoked only with the
consent of the Internal Revenue Service.
Election. A holder may elect to include in gross income its entire return on
a Note (i.e., the excess of all payments to be received on the Note over the
amount paid for the Note by such holder) in accordance with a constant yield
method based on the compounding of interest. Such an election for a Note with
amortizable bond premium will result in a deemed election to amortize bond
premium for all of the holder's debt instruments with amortizable bond premium
and may be revoked only with the permission of the Internal Revenue Service.
If the foregoing election to include the entire return on a Note is made with
respect to a Note bearing market discount, as discussed below under "Market
Discount," then the electing United States Holder will be treated as having
made the election discussed below under "Market Discount" to include market
discount in income currently over the life of all debt instruments held or
thereafter acquired by such United States Holder.
Market Discount. In general, any gain recognized on the maturity or
disposition will be treated as ordinary income to the extent that such gain
does not exceed the accrued market discount on such Note. A Note, other than a
Short-term Note, will be treated as issued at a market discount if the amount
for which a United States Holder purchased the Note is less than the Note's
stated redemption price at maturity, or its revised issue price on the date of
purchase, for an OID Note, unless, in either case, such difference is less
than a specified de minimis amount (generally 1/4 of 1% of the Note's stated
redemption price at maturity, or its revised issue price, if the Note is an
Original Issue Discount Note, multiplied by the number of complete years to
maturity from the date of acquisition by the holder). A United States Holder
may be required to defer the deduction of all or a portion
S-17
<PAGE>
of the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note
or certain earlier dispositions. Any market discount will be considered to
accrue on a straight-line basis during the period from the date of acquisition
to the maturity date of the Note, unless the holder makes an irrevocable
election to compute the accrual on a constant yield basis. A holder of a Note
may elect to include market discount in income currently as it accrues (on
either a straight-line or a constant yield basis); if such an election is
made, the ordinary income recharacterization and interest deduction deferred
rules do not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations of a holder
acquired on or after the first day of the first taxable year to which the
election applies, and may not be revoked without the consent of the Internal
Revenue Service.
Sale, Exchange or Retirement of the Notes. Upon the sale, exchange or
retirement of a Note, a United States Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (not including any amount attributable to accrued but unpaid
interest other than original issue discount) and such holder's adjusted tax
basis in the Note. A United States Holder's adjusted tax basis in a Note will
equal the cost of the Note to such holder, increased by the amount of any
original issue discount previously included in income by the holder with
respect to such Note and reduced by any amortized premium and any principal
payments received by the holder and, in the case of an Original Issue Discount
Note, by the amounts of any other payments that do not constitute qualified
stated interest.
Subject to the discussion under "Foreign Currency Notes" below, gain or loss
realized on the sale, exchange or retirement of a Note will be capital gain or
loss (except in the case of a short-term Original Issue Discount Note, to the
extent of any original issue discount not previously included in such holder's
taxable income under Code Section 1271(a)(4), and except in the case of such
gain that is attributable to accrued market discount (see discussion under
"Market Discount" above)), and will be long-term capital gain or loss if at
the time of sale, exchange or retirement the Note has been held for more than
one year. See "Original Issue Discount Notes" above. Under current law, the
excess of net long-term capital gains over net short-term capital losses is
taxed at a lower rate than ordinary income for certain non-corporate
taxpayers. The distinction between capital gain or loss and ordinary income or
loss is also relevant for purposes of, among other things, limitations on the
deductibility of capital losses.
Foreign Currency Notes. The following summary relates to Notes that are
denominated, or provide for payments, in a currency or currency unit other
than the U.S. dollar ("Foreign Currency Notes").
A United States Holder of a Foreign Currency Note who uses the cash method
of accounting and who receives a payment of interest (including a payment of
qualified stated interest, but not a payment in respect of original issue
discount) in a foreign currency will be required to include in income the U.S.
dollar value of such foreign currency payment (determined on the date such
payment is received) regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the United
States Holder's tax basis in the foreign currency.
To the extent the above paragraph is not applicable, a United States Holder
will be required to include in income the U.S. dollar value of the amount of
interest income (including original issue discount, but reduced by amortizable
bond premium to the extent applicable) that has accrued and is otherwise
required to be taken into account with respect to a Foreign Currency Note
during an accrual period. The U.S. dollar value of such accrued income will be
determined by translating such income at the average rate of exchange for the
accrual period or, with respect to an accrual period that spans two taxable
years, at the average rate for the partial period within the taxable year.
Such United States Holder will recognize ordinary income or loss with respect
to accrued interest income on the date such income is actually received. The
amount of ordinary income or loss recognized will equal the difference between
the U.S. dollar value of the foreign currency payment received (determined on
the date such payment is received) in respect of such accrual period and the
U.S. dollar value of interest income that has accrued during such accrual
period (as determined above). A United States Holder may elect to translate
interest income (including original issue discount) into U.S. dollars at the
spot rate on the last day of the interest
S-18
<PAGE>
accrual period (or, in the case of a partial accrual period, the spot rate on
the last date of the taxable year) or, if the date of receipt is within five
business days of the last day of the interest accrual period, the spot rate on
the date of receipt. A United States Holder that makes such an election must
apply it consistently to all debt instruments from year to year and cannot
change the election without the consent of the Internal Revenue Service.
Original issue discount, acquisition premium and amortizable bond premium of
a Foreign Currency Note are to be determined in the relevant foreign currency.
Any loss (net of foreign currency exchange gain, if any) realized on the
sale, exchange or retirement of a Foreign Currency Note with amortizable bond
premium by a United States Holder generally will be a capital loss to the
extent of such bond premium. If, however, an election is made under Section
171 of the Code, amortizable bond premium taken into account on a current
basis will reduce interest income in units of the relevant foreign currency.
Market discount is determined in units of the foreign currency, accrued
market discount that is required to be taken into account on the maturity or
upon disposition of a Foreign Currency Note is translated into U.S. dollars at
the exchange rate on the maturity or the disposition date, as the case may be
(and no part is treated as exchange gain or loss), accrued market discount
currently includible in income by an electing United States Holder is
translated into U.S. dollars at the average exchange rate for the accrual
period (or the partial accrual period during which the United States Holder
held the Note), and exchange gain or loss is determined on maturity or
disposition of the Note (as the case may be) in the manner described above
with respect to the computation of exchange gain or loss on the receipt of
accrued interest by an accrual method holder.
A United States Holder's tax basis in a Foreign Currency Note, and the
amount of any subsequent adjustment to such holder's tax basis, will be the
U.S. dollar value of the foreign currency amount paid for such Foreign
Currency Note, or of the foreign currency amount of the adjustment, determined
on the date of such purchase or adjustment. A United States Holder who
purchases a Foreign Currency Note with previously owned foreign currency will
recognize ordinary income or loss in an amount equal to the difference, if
any, between such United States Holder's tax basis in the foreign currency and
the U.S. dollar amount paid for the Foreign Currency Note on date of purchase.
Gain or loss recognized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which generally will not be treated as
interest income or expense, but such income or loss will be taken into account
only to the extent of the total gain or loss on the disposition. Gain or loss
attributable to fluctuations in exchange rates will equal the difference
between (i) the U.S. dollar value of the foreign currency principal amount of
such Note, and any payment with respect to accrued interest, determined on the
date such payment is received or such Note is disposed of, and (ii) the U.S.
dollar value of the foreign currency principal amount of such Note, determined
on the date such United States Holder acquired such Note, and the U.S. dollar
value of the accrued interest received, determined by translating such
interest at the average exchange rate for the accrual period or at a spot rate
for the last day of the accrual period. Such foreign currency gain or loss
will be recognized only to the extent of the total gain or loss realized by a
United States Holder on the sale, exchange or retirement of the Foreign
Currency Note. The source of such foreign currency gain or loss will be
determined by reference to the residence of the holder or the "qualified
business unit" of such holder on whose books the Note is properly reflected.
Any gain or loss realized by such a holder in excess of such foreign currency
gain or loss will be capital gain or loss (except in the case of a short-term
Original Issue Discount Note, to the extent of any original issue discount not
previously included in such holder's income, or in the case of a Note bearing
market discount, to the extent of accrued market discount).
A United States Holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Foreign Currency Note equal
to the U.S. dollar value of such foreign currency, determined at the time of
such sale, exchange or retirement. Regulations issued under Section 988 of the
Code provide a special
S-19
<PAGE>
rule for purchases and sales of publicly traded Foreign Currency Notes by a
cash method taxpayer under which units of foreign currency paid or received
are translated into U.S. dollars at the spot rate on the settlement date of
the purchase or sale. Accordingly, no exchange gain or loss will result from
currency fluctuations between the trade date and the settlement of such a
purchase or sale. An accrual method taxpayer may elect the same treatment
required of cash method taxpayers with respect to the purchase and sale of
publicly traded Foreign Currency Notes provided the election is applied
consistently. Such election cannot be changed without the consent of the
Internal Revenue Service. Any gain or loss realized by a United States Holder
on a sale or other disposition of foreign currency (including its exchange for
U.S. dollars or its use to purchase Foreign Currency Notes) will be ordinary
income or loss.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) payments of principal, interest (including original issue discount,
if any), excluding contingent interest described in Section 871(h)(4) of
the Code, and premium on the Notes by the Company or any paying agent to
any United States Alien Holder will not be subject to United States federal
withholding tax, provided that, in the case of interest (including original
issue discount), (i) such holder does not own, actually or constructively,
10 percent or more of the total combined voting power of all classes of
stock of the Company entitled to vote, is not a controlled foreign
corporation related, directly or indirectly, to the Company through stock
ownership, and is not a bank receiving interest described in Section
881(c)(3)(A) of the Code and (ii) if the Note is a Registered Security, the
beneficial owner thereof fulfills the statement requirement set forth in
Section 871(h) or Section 881(c) of the Code;
(b) a United States Alien Holder of a Note will not be subject to United
States federal income tax on gain realized on the sale, exchange or other
disposition of such Note, unless (i) such holder is an individual who is
present in the United States for 183 days or more in the taxable year of
disposition, and certain conditions are met or (ii) such gain is
effectively connected with the conduct by such holder of a trade or
business in the United States (or attributable to a permanent
establishment, in the case of a United States Alien Holder entitled to the
benefits of a U.S. tax treaty); and
(c) except to the extent that interest on a Note constitutes contingent
interest described in Section 871(h)(4) of the Code, a Note or coupon held
by an individual who is not a citizen or resident of the United States at
the time of death will not be subject to United States federal estate tax
as a result of such individual's death, provided that the individual does
not own, actually or constructively, 10 percent or more of the total
combined voting power of all classes of stock of the Company entitled to
vote and, at the time of such individual's death, payments with respect to
such Note would not have been effectively connected to the conduct in the
United States by such individual of a trade or business in the United
States (or forming part of the business property of a permanent
establishment in the United States in the case of a United States Alien
Holder entitled to the benefits of a U.S. estate tax treaty).
Sections 871(h) and 881(c) of the Code require that, in order to obtain the
portfolio interest exemption from withholding tax described in paragraph (a)
above in the case of a Registered Security, either the beneficial owner of the
Note or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution") and that is holding the Note on
behalf of such beneficial owner, shall file a statement with the withholding
agent to the effect that the beneficial owner of the Note is not a United
States person. Under proposed United States Treasury Regulations, such
requirement will be fulfilled if the beneficial owner of a Note certifies on
Internal Revenue Service Form W-8, under penalties of perjury, that it is not
a United States person and provides its name and address, and any Financial
Institution holding the Note on behalf of the beneficial owner files a
statement with the withholding agent to the effect that it has received such a
statement from the holder (and furnishes the withholding agent with a copy
thereof).
S-20
<PAGE>
If a United States Alien Holder of a Note is engaged in a trade or business
in the United States, and if interest (including original issue discount) on
the Note is effectively connected with the conduct of such trade or business,
the United States Alien Holder, although exempt from the withholding tax
discussed in the preceding paragraph, will generally be subject to regular
United States income tax on interest (including any original issue discount)
and on any gain realized on the sale, exchange or other disposition of a Note
in the same manner as if it were a United States Holder. See "Tax Consequences
to United States Holders" above. In lieu of the certificate described in the
preceding paragraph, such a holder will be required to provide to the Company
a properly executed Internal Revenue Service Form 4224 in order to claim an
exemption from withholding tax. In addition, if such United States Alien
Holder is a foreign corporation, it may be subject to a branch profits tax
equal to 30% of its effectively connected earnings and profits for the taxable
year, subject to certain adjustments. For purposes of the branch profits tax,
interest (including original issue discount) on and any gain recognized on the
sale, exchange or other disposition of a Note will be included in the earnings
and profits of such United States Alien Holder if such interest is effectively
connected with the conduct by the United States Alien Holder of a trade or
business in the United States. However, if the holder is entitled to the
benefits of a U.S. tax treaty (i) interest on and gain from the sale or other
disposition of a Note will be subject to regular U.S. income tax only if it is
attributable to a permanent establishment of the holder in the United States,
(ii) the branch profits tax will apply only to such interest and gain as is
attributable to the holder's United States permanent establishment, and (iii)
such tax treaty may reduce the rate of, or eliminate altogether, the branch
profits tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, a 31% backup withholding
tax and information reporting requirements apply to certain payments of
principal, premium and interest (including accruals of original issue
discount) made to, and to the proceeds of sale before maturity by, certain
holders of the Notes.
In the case of a United States Holder, backup withholding will apply only if
such holder (i) fails to furnish such holder's Taxpayer Identification Number
("TIN") which, for an individual, would be the individual's Social Security
number, (ii) furnishes an incorrect TIN, (iii) is notified by the Internal
Revenue Service that there has been a failure to report properly payments of
interest and dividends or (iv) under certain circumstances, fails to certify,
under penalties of perjury, that such holder has furnished a correct TIN and
has not been notified by the Internal Revenue Service that he or she is
subject to backup withholding for failure to report interest and dividend
payments. United States Holders should consult their tax advisors regarding
their qualification for exemption from backup withholding and the procedure
for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such holder's United States federal
income tax liability and may entitle such holder to a refund, provided that
the required information is furnished to the Internal Revenue Service.
In the case of a United States Alien Holder, under current Treasury
Regulations, backup withholding will not apply to payments of principal,
premium or interest made by the Company or any paying agent thereof on a Note
if the certifications and statements required by Sections 871(h) and 881(c)
are received, provided in each case that the Company or such paying agent, as
the case may be, does not have actual knowledge that the payee is a United
States person. The Company will, where required, report to holders of the
Notes and the Internal Revenue Service the amount of any interest paid or
original issue discount accruing on the Notes in each calendar year and the
amounts of tax withheld, if any, with respect thereto.
Under current Treasury Regulations, if payments of principal, premium or
interest or payments on sale, exchange or disposition are made to or through
the foreign office of a custodian, nominee, broker or other agent acting on
behalf of a beneficial owner of a Note, such custodian, nominee, broker or
other agent will not be required to apply backup withholding to such payments
made to such beneficial owner and generally will not be subject to information
reporting requirements. However, if such custodian, nominee, broker or other
agent is a United States person, a controlled foreign corporation for United
States tax purposes, or a foreign person 50 percent or more of whose gross
income is effectively connected with a United States trade or business for a
S-21
<PAGE>
specified three-year period, such custodian, nominee, broker or other agent
may be subject to certain information reporting requirements with respect to
such payments unless it has in its records documentary evidence that the
beneficial owner is not a United States person and certain conditions are met
or the beneficial owner otherwise establishes an exemption. Under proposed
Treasury Regulations, backup withholding may apply to any payment which such
custodian, nominee, broker or other agent is required to report if such
custodian, nominee, broker or other agent has actual knowledge that the payee
is a United States person. Payments to or through the United States office of
a broker will be subject to backup withholding and information reporting
unless the holder certifies, under penalties of perjury, that it is not a
United States person or otherwise establishes an exemption.
United States Alien Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of any exemption therefrom, and
the procedure for obtaining such an exemption, if available. Any amounts
withheld from a payment to a United States Alien Holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the United States
Internal Revenue Service.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE OWNERSHIP
AND DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE,
LOCAL, FOREIGN AND OTHER LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL
OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company through the
Agents, each of which has agreed or will agree to use its reasonable efforts
to solicit offers to purchase the Notes. The Company also may sell Notes to
any of the Agents or any other person, as principal, at a discount for resale
by such Agent or person at varying prices as will be determined by such Agent
or person at the time of such resale, relating to prevailing market prices or,
if so agreed, at a fixed public offering price. Unless otherwise agreed, the
Notes will be sold at 100% of their principal amount. Unless otherwise agreed
by the Company and the Agents, the Company will have the sole right to accept
offers to purchase Notes and may reject any proposed purchase of Notes in
whole or in part. Each Agent will have the right, in its reasonable
discretion, to reject any offer to purchase Notes received by it, in whole or
in part. The Company will pay each Agent a commission, in connection with
sales of Notes to purchasers solicited by such Agent, ranging from .125% to
.750% of the principal amount of Notes so sold, depending upon the maturity of
the Notes. Commissions with respect to Notes with a Stated Maturity in excess
of 30 years will be negotiated between the Company and the applicable Agent at
the time of issuance. The Company reserves the right to sell Notes from time
to time directly on its own behalf to investors or through other agents,
dealers or underwriters; if the Company grants any discount or pays any
commission to such persons, such discount or commission will be disclosed in
the applicable Pricing Supplement.
The Agents may sell Notes they have purchased from the Company as principal
to other dealers for resale to investors and other purchasers, and may allow
any portion of the discount received in connection with such purchase from the
Company to such dealers. After the initial public offering of Notes, the
public offering price (in the case of Notes to be resold at a fixed public
offering price), the concession and the discount may be changed.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of Notes acquired through an Agent acting as agent is
required to be made in immediately available funds in The City of New York.
S-22
<PAGE>
Upon issuance, the Notes will not have an established trading market. Unless
otherwise specified, the Notes will not be listed on any securities exchange.
The Agents may from time to time purchase and sell Notes in the secondary
market, but the Agents are not obligated to do so, and there can be no
assurance that there will be a secondary market for the Notes or liquidity in
the secondary market if one develops. The Company has been advised by the
Agents that they may from time to time make a market in the Notes, but they
are not obligated to do so and may discontinue such market-making at any time
without notice.
Each Agent, when acting as agent or principal, may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), in respect of the Notes. The Company has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Securities Act.
In addition to offering Notes as described herein, the Company may also sell
Notes pursuant to any other prospectus supplement. Any sales of such Notes
pursuant to another prospectus supplement may reduce the principal amount of
Notes which may be offered by this Prospectus Supplement and the Prospectus.
Concurrently with the offering of Notes described herein, the Company may
issue other Debt Securities described in the accompanying Prospectus.
In the ordinary course of their respective businesses, J.P. Morgan
Securities Inc. and certain of its affiliates have engaged, and may in the
future engage, in investment banking and commercial banking transactions with
the Company and its affiliates.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Notes are being
passed upon for the Company by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York. Certain legal
matters are being passed upon for the Agents by Brown & Wood, New York, New
York.
S-23
<PAGE>
PROSPECTUS
$200,000,000
ENGELHARD CORPORATION
DEBT SECURITIES
Engelhard Corporation ("Engelhard" or the "Company") may offer, from time to
time, in one or more series, its unsecured senior debt securities (the "Senior
Debt Securities") and its unsecured subordinated debt securities (the
"Subordinated Debt Securities" and, together with the Senior Debt Securities,
the "Debt Securities"). The Debt Securities may be convertible into shares of
Common Stock, par value $1.00 per share ("Common Stock"), of the Company and,
to the extent applicable, references herein to the Debt Securities also include
the Common Stock issuable upon any such conversion or exchange. The Debt
Securities will have a maximum aggregate offering price of $200,000,000 (or the
equivalent thereof in foreign currency or currency units) and will be offered
on terms to be determined by market conditions at the time of sale. The Debt
Securities may be offered separately or together, in separate series, in
amounts and at prices and on terms to be set forth in an accompanying
prospectus supplement (a "Prospectus Supplement"). In addition, the specific
terms of the Debt Securities in respect of which this Prospectus is being
delivered, and whether such Debt Securities will be listed on a national
securities exchange, will be set forth in an accompanying Prospectus
Supplement.
The Senior Debt Securities, if issued, will rank equally and ratably with all
other unsecured and unsubordinated indebtedness of the Company, and the
Subordinated Debt Securities, if issued, will be unsecured and subordinated to
all present and future Senior Indebtedness (as defined) of the Company. See
"Description 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 Debt Securities may be sold directly, through agents from time to time or
through underwriters and/or dealers. If any agent of the Company or any
underwriter is involved in the sale of the Debt Securities, the name of such
agent or underwriter and any applicable commission or discount will be set
forth in the accompanying Prospectus Supplement. See "Plan of Distribution."
----------------
This Prospectus may not be used to consummate sales of Debt Securities unless
accompanied by a Prospectus Supplement.
----------------
THE DATE OF THIS PROSPECTUS IS JULY 26, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission") relating to its business, financial position,
results of operations and other matters. Such reports and other information can
be inspected and copied at the Public Reference Section maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at its Regional Offices located at Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New
York, New York 10048. 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. The Common Stock of the Company is
listed on the New York Stock Exchange and such material can also be inspected
at the office of such exchange at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Debt Securities covered by this Prospectus. This Prospectus does
not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Reference is made to the Registration Statement and to the
exhibits relating thereto for further information with respect to the Company
and the Debt Securities covered by this Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference herein its Annual Report on Form
10-K for the fiscal year ended December 31, 1994, as amended by Form 10-K/A
dated May 30, 1995, and its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995. 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
before the termination of the offering of the securities offered hereby shall
be deemed incorporated herein by reference, and such documents shall be deemed
to be a part hereof from the date of filing such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any 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 this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the above documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus
incorporates). Written or oral requests should be directed to: Investor
Relations, Engelhard Corporation, 101 Wood Avenue, Iselin N.J. 08830, telephone
number (908) 205-6000.
2
<PAGE>
THE COMPANY
Engelhard develops, manufactures and markets technology-based specialty
chemical products and engineered materials for a wide spectrum of industrial
customers and provides services to precious metals customers. The Company
operates on a worldwide basis with corporate and operating headquarters and
principal manufacturing facilities and mineral reserves in the United States
with other operations conducted in the European Community, the Russian
Federation and the Asia-Pacific region.
The Company's businesses are organized into three segments: Catalysts and
Chemicals, Pigments and Additives, and Engineered Materials and Precious Metals
Management.
The Catalysts and Chemicals segment develops, manufactures and markets a wide
range of catalysts and related products and processes for the automotive, off-
road vehicle, aircraft, power generation, petroleum refining, chemical,
petrochemical, pharmaceutical and food processing industries, among others. The
Company's products are used by customers in these industries to reduce
emissions, achieve desired manufacturing yields and improve quality and/or
cost-efficiency. The segment comprises four principal product groups:
Automotive Emission Systems, used for automotive exhaust emission control,
pollution abatement in off-road vehicles and high altitude aircraft ozone
removal; Stationary Source Emission Control, used in pollution abatement in
power generation and process industries; Petroleum Catalysts, used by refiners
to treat and make gasoline, diesel fuel, heating oil, lubricants, and other
energy products from crude oil; and Chemical Catalysts, used in the production
of a variety of products or intermediates, including synthetic fibers,
fragrances, antibiotics, vitamins, polymers, plastics, detergents, fuels and
lube oils, solvents, oleochemicals and edible products.
The Pigments and Additives segment develops, manufactures and markets coating
and extender pigments for the paper industry and color pigments and specialty
minerals for a variety of industries. The segment comprises two principal
product groups: Paper Pigments and Chemicals, used principally to make coated
and uncoated paper; and Specialty Minerals and Colors, providing colors used
primarily in paints and coatings, plastics, rubber and printing inks, and
specialty mineral products to the plastics, rubber, wire and cable, coatings,
inks and adhesives industries.
The Engineered Materials and Precious Metals Management segment develops,
manufactures and markets fabricated products and coatings based on precious
metals for a broad spectrum of industries. This segment also engages in
precious metals management on behalf of Engelhard businesses and customers that
use precious metals. The segment comprises the Engineered Materials Group and
the Precious Metals Management Group. The products of the Engineered Materials
Group consist primarily of metal-based materials such as temperature-sensing
devices, crucibles, bushings, gauze, precious metals coating and electroplating
materials, conductive pastes and powders, brazing alloys and precious metal
wire, sheet, and tubing. These products are used in the manufacture of
automotive components, industrial devices, glass and glass fiber, ceramics,
chemicals, instruments, control devices, fine jewelry, dental and medical
supplies, hardware, furniture and air conditioners. The Engineered Materials
Group also provides refining services to internal and external customers.
Precious metals refining is an integral part of these businesses. The Precious
Metals Management Group secures and manages precious metals in world markets to
support the Company and its customers. It also participates in refining of
precious metals and marketing of energy-related services.
Engelhard was organized under the laws of the State of Delaware in 1938. The
Company's address is 101 Wood Avenue, Iselin, New Jersey 08830, and its
telephone number is (908) 205-6000. Unless otherwise indicated or the context
otherwise requires, all references to "Engelhard" or the "Company" herein shall
be deemed to refer to Engelhard Corporation and its consolidated subsidiaries.
USE OF PROCEEDS
Except as otherwise described in the accompanying Prospectus Supplement, the
net proceeds from the sale of the Debt Securities will be used by the Company
for general corporate purposes, which may include the reduction of outstanding
indebtedness, working capital increases, capital expenditures and acquisitions.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for the
Company for the periods indicated. In the calculation of the Company's ratio of
earnings to fixed charges, "earnings" consist of income from continuing
operations before income taxes and fixed charges (excluding capitalized
interest) and "fixed charges" consist of interest expense, including the
interest portion of rental obligations deemed representative of the interest
factor.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------------------------------------------
MARCH 31, 1995 1994 1993 1992 1991 1990
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
5.09 6.79 (a) 7.26 5.45 3.96
</TABLE>
- --------
(a) For fiscal 1993, earnings were insufficient to cover fixed charges by
approximately $8.3 million. Earnings in 1993 were negatively impacted by a
charge of approximately $148 million for the realignment and consolidation
of businesses and environmental matters. Without such charge, the ratio of
earnings to fixed charges for fiscal 1993 would have been 7.14.
DESCRIPTION OF SECURITIES
Senior Debt Securities may be issued from time to time in one or more series
under an indenture (the "Senior Indenture"), between the Company and The Chase
Manhattan Bank, N.A. (the "Senior Trustee"). The Senior Indenture has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. Subordinated Debt Securities may be issued from time to time in one or
more series under an indenture (the "Subordinated Indenture") between the
Company and a trustee to be identified in the applicable Prospectus Supplement
(the "Subordinated Trustee"). The Subordinated Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
Senior Indenture and the Subordinated Indenture are sometimes referred to
collectively as the "Indentures," and the Senior Trustee and the Subordinated
Trustee are sometimes referred to collectively as the "Trustees." The
statements under this caption are brief summaries of certain provisions
contained in the Indentures, do not purport to be complete and are qualified in
their entirety by reference to the Indentures, including the definitions
therein of certain terms, copies of which are included or incorporated by
reference as exhibits to the Registration Statement of which this Prospectus is
a part. Capitalized terms used herein and not defined shall have the meanings
assigned to them in the relevant Indenture. The particular terms of the Debt
Securities and any variations from such general provisions applicable to any
series of Debt Securities will be set forth in the Prospectus Supplement with
respect to such series.
GENERAL
Each Indenture provides for the issuance of Debt Securities in one or more
series with the same or various maturities at par or at a discount. Any Debt
Securities bearing no interest or interest at a rate which at the time of
issuance is below market rates will be sold at a discount (which may be
substantial) from their stated principal amount. Federal income tax
consequences and other special considerations applicable to any such discounted
Debt Securities ("Discounted Securities") will be described in the Prospectus
Supplement relating thereto. Neither Indenture limits the amount of Debt
Securities that can be issued thereunder.
Reference is made to the Prospectus Supplement for the following terms, if
applicable, of the Debt Securities offered thereby: (1) the designation,
aggregate principal amount, currency or composite currency and denominations;
(2) the price at which such Debt Securities will be issued; (3) any index,
formula or other method used for determining amounts of principal or interest
payable on the Debt Securities; (4) the maturity date and other dates, if any,
on which principal will be payable; (5) the interest rate or rates (which may
be fixed or variable), if any, and the date or dates from which interest will
accrue and on which interest will be payable, and the record dates for the
payment of interest; (6) the manner of paying principal or interest; (7) the
place or places where principal and interest will be payable; (8) the terms of
any mandatory or optional
4
<PAGE>
redemption by the Company; (9) the terms of any repayment at the option of
holders; (10) whether such Debt Securities are to be issuable as registered
Debt Securities, bearer Debt Securities, or both, and whether and upon what
terms registered Debt Securities may be exchanged for bearer Debt Securities
and vice versa; (11) whether such Debt Securities are to be represented in
whole or in part by a Debt Security in global form and, if so, the identity of
the depositary ("Depositary") for any global Debt Security; (12) any tax
indemnity provisions; (13) if the Debt Securities provide that payments of
principal or interest may be made in a currency other than that in which Debt
Securities are denominated, the manner for determining such payments; (14) the
portion of principal payable upon acceleration of a Discounted Security; (15)
whether and upon what terms Debt Securities may be defeased; (16) any events of
default or restrictive covenants in addition to or in lieu of those set forth
in the Indentures; (17) provisions for electronic issuance of Debt Securities
or for Debt Securities in uncertificated form; (18) the terms, if any, upon
which the Debt Securities will be convertible into or exchangeable for Common
Stock of the Company; and (19) any additional provisions or other special terms
not inconsistent with the provisions of the Indentures, including any terms
that may be required or advisable under United States or other applicable laws
or regulations, or advisable in connection with the marketing of the Debt
Securities.
RANKING OF DEBT SECURITIES
The Senior Debt Securities will be unsecured and will rank equally and
ratably with other unsecured and unsubordinated debt of the Company.
The obligations of the Company pursuant to any Subordinated Debt Securities
will be subordinate in right of payment to all Senior Indebtedness of the
Company. "Senior Indebtedness" of the Company is defined to mean the principal
of (and premium, if any) and interest on (a) any and all indebtedness and
obligations of the Company (including indebtedness of others guaranteed by the
Company) other than the Subordinated Debt Securities, whether or not contingent
and whether outstanding on the date of the Subordinated Indenture or thereafter
created, incurred or assumed, which (i) are for money borrowed; (ii) are
evidenced by any bond, note, debenture or similar instrument; (iii) represent
the unpaid balance on the purchase price of any property, business, or asset of
any kind; (iv) are obligations of the Company as lessee under any and all
leases of property, equipment or other assets required to be capitalized on the
balance sheet of the lessee under generally accepted accounting principles; (v)
are reimbursement obligations of the Company with respect to letters of credit;
and (b) any deferrals, amendments, renewals, extensions, modifications and
refundings of any indebtedness or obligations of the types referred to above;
provided that Senior Indebtedness shall not include (i) Subordinated Debt
Securities; (ii) any indebtedness or obligation of the Company which, by its
express terms or the express terms of the instrument creating or evidencing it,
is not superior in right of payment to the Subordinated Debt Securities; or
(iii) any indebtedness or obligation incurred by the Company in connection with
the purchase of assets, materials or services in the ordinary course of
business and which constitutes a trade payable.
The Subordinated Indenture does not contain any limitation on the amount of
Senior Indebtedness which may be hereafter incurred by the Company.
In the event of any default in the payment of the principal of, or interest
on, any Senior Indebtedness in an aggregate principal amount of at least
$25,000,000 or any default permitting the acceleration of Senior Indebtedness
in an aggregate amount of at least $25,000,000 where notice of such default has
been given to the Company, no payment with respect to the principal of or
interest on the Subordinated Debt Securities will be made by the Company unless
and until such default has been cured or waived. Upon any payment or
distribution of the Company's assets to creditors of the Company in a
liquidation or dissolution of the Company, or in a reorganization, bankruptcy,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary, the holders of Senior Indebtedness
will first be entitled to receive payment in full of all amounts due thereon
before the holders of the Subordinated Debt Securities will be entitled to
receive any payment upon the principal of or premium, if any, or interest on
the Subordinated Debt Securities. By reason of such subordination, in the event
of insolvency of the Company, holders of Senior Indebtedness of the Company may
receive more, ratably, and holders of the Subordinated Debt Securities may
receive less, ratably, than the other creditors of the Company. Such
subordination will not prevent the occurrence of any Event of Default in
respect of the Subordinated Debt Securities.
5
<PAGE>
COVENANTS
The Senior Indenture contains, among others, the covenants summarized below,
which will be applicable (unless waived or amended) so long as any of the
Senior Debt Securities are outstanding, unless stated otherwise in the
Prospectus Supplement.
Limitations on Liens and Encumbrances. The Company covenants that it will not
nor will it permit any Subsidiary, directly or indirectly, to incur or create
any Lien on any property, assets or stock now owned or hereafter acquired by
the Company or any of its Subsidiaries without equally and ratably securing all
series of Senior Debt Securities then outstanding with the indebtedness secured
by such Lien, other than: (a) Liens for taxes or assessments and similar
charges either (i) not delinquent or (ii) being contested in good faith by
appropriate proceedings and as to which the Company or such Subsidiary, as the
case may be, shall have set aside on its books adequate reserves; (b) Liens
incurred or pledges and deposits made in connection with workmen's
compensation, unemployment insurance, old age pensions and social security
benefits or securing the performance of bids, tenders, leases, contracts (other
than for obligations incurred in connection with the borrowing of money or the
obtaining of advances or credit), and statutory obligations of like nature,
incurred as an incident to and in the ordinary course of business; (c)
materialmen's, mechanics', repairmen's, employees', operators' or other similar
Liens or charges arising in the ordinary course of business incidental to
construction, maintenance or operation of any property of the Company or any
Subsidiary which have not at the time been filed pursuant to law and any such
Liens and charges incidental to construction, maintenance or operation of any
property of the Company or any Subsidiary, which, although filed, relate to
obligations not yet due or the payment of which is being withheld as provided
by law, or to obligations the validity of which is being contested in good
faith by appropriate proceedings; (d) zoning restrictions, easements, licenses,
reservations, provisions, covenants, conditions, waivers, restrictions on the
use of property or minor irregularities of title (and with respect to leasehold
interests, mortgages, obligations, Liens and other encumbrances incurred,
created, assumed or permitted to exist and arising by, through or under or
asserted by a landlord or owner of the leased property, with or without consent
of the lessee), which will not individually or in the aggregate interfere
materially with the use or operation by the Company or any Subsidiary of the
property affected thereby for the purposes for which such property was acquired
or is held by the Company or any Subsidiary; (e) Liens created by or resulting
from any litigation or proceeding which is being contested in good faith by
appropriate proceedings and as to which levy and execution have been stayed and
continue to be stayed; (f) Liens consisting of repurchase agreements, swaps or
other obligations entered into in the ordinary course of business relating to
precious metals purchased, borrowed or otherwise held by the Company or any
Subsidiary; (g) Liens incidental to the conduct of its business or the
ownership of its property and assets which were not incurred in connection with
the borrowing of money or the obtaining of advances or credit and which do not
in the aggregate materially detract from the value of the property or assets
subject thereto or materially impair the use thereof in the operation of its
business; (h) Liens on property or assets of a Subsidiary to secure obligations
of such Subsidiary to the Company or another Subsidiary; (i) Liens arising in
connection with letter of credit trade transactions, provided that the Company
or its Subsidiary, as the case may be, discharges within 60 days its obligation
to pay the indebtedness to banks arising from payments made by such banks under
such letters of credit; and (j) other Liens, provided that the aggregate of all
properties and assets of the Company and the Subsidiaries which are subject to
or affected by such Liens and which would properly be classified as assets on a
consolidated balance sheet prepared in accordance with generally accepted
accounting principles as in effect on the date of the Senior Indenture
(including all leases (other than leases of office space and leases of research
and development facilities, if any) that would be required to be reflected as
capital leases pursuant to such principles) does not at any time have a value
on the books of the Company and its Subsidiaries in excess of 25% of the
Consolidated Tangible Net Worth of the Company and its Subsidiaries calculated
for the quarter most recently ended.
Limitations on Sale and Leaseback Transactions. The Company covenants that it
will not, and will not permit any Significant Subsidiary to, directly or
indirectly, sell or transfer (other than to the Company or a Significant
Subsidiary) any Principal Property with the intention that the Company or any
Significant Subsidiary take back a lease thereof which (i) has a term of more
than three years or (ii) is renewable at the
6
<PAGE>
option of the Company or such Significant Subsidiary for an aggregate period or
periods of more than three years from the date of commencement thereof unless
(a) the Company promptly gives notice thereof to the Senior Trustee, and either
(b) the Principal Property owned by the Company or a Significant Subsidiary
immediately prior to such sale could have been subjected to a Lien to secure
indebtedness without being required to equally and ratably secure Senior Debt
Securities pursuant to the limitations described under "Limitations on Liens
and Encumbrances" or (c) the net proceeds of such sale are applied within 270
days (i) to the retirement of indebtedness of the Company or any Subsidiary or
(ii) to the redemption of Senior Debt Securities of any series at the time
outstanding or (iii) to the purchase of property, securities or other assets
having a value at least equal to the net proceeds of such sale, or (d) the
Company shall deliver to the Senior Trustee for cancellation Senior Debt
Securities of any series at the time outstanding in an aggregate principal
amount at least equal to the net proceeds of such sale (less any amounts
applied in accordance with clause (c)).
Certain Definitions. The term "Consolidated Tangible Net Worth" means the
excess of (i) the net book value of the assets of the Company and its
Subsidiaries (other than patents, patent rights, trademarks, trade names,
franchises, copyrights, licenses, permits, goodwill and other intangible assets
classified as such in accordance with generally accepted accounting principles
as in effect on the date of the Senior Indenture) after all appropriate
deductions in accordance with generally accepted accounting principles as in
effect on the date of the Indenture (including, without limitation, reserves
for doubtful receivables, obsolescence, depreciation and amortization) plus the
amount, if any, by which the market value of precious metals inventories
exceeds the carrying value of those metals on the consolidated books of account
of the Company and its Subsidiaries reduced by taxes estimated to be payable
upon realization as calculated by the Company and reviewed by the Company's
auditors over (ii) the consolidated liabilities (including tax and other proper
accruals) of the Company and its Subsidiaries, in each case computed and
consolidated in accordance with generally accepted accounting principles as in
effect on the date of the Senior Indenture. The term "Lien" means any mortgage,
pledge, security interest, encumbrance, lien or charge of any kind whatsoever
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction). The term
"Principal Property" means, with certain exceptions, any manufacturing plant or
warehouse owned at the date hereof or hereafter acquired by the Company or any
Significant Subsidiary which is located within the United States and the gross
book value of which (before deduction of any applicable depreciation reserves)
is in excess of 5% of the Company's Consolidated Tangible Net Worth. The term
"Significant Subsidiary" shall have the meaning assigned to such term in
Regulation S-X promulgated under the Securities Act of 1933, as amended. The
term "Subsidiary" means any corporation, association or other business entity,
a majority (by number of votes) of the voting stock or control of which is at
the time owned or controlled by the Company or another Subsidiary of the
Company.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more global securities ("Global Securities") that will be deposited
with, or on behalf of, a Depositary identified in the Prospectus Supplement
relating to such series. Global Securities will be issued in registered form
and in either temporary or definitive form. Unless and until it is exchanged in
whole or in part for Notes in definitive form, a Global Security may not be
transferred except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by such Depositary or any
such nominee to a successor of such Depositary or a nominee of such successor.
The specific terms of the Depositary arrangement with respect to Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will
apply to all Depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Notes represented by such
7
<PAGE>
Global Security to the accounts of institutions that have accounts with such
Depositary ("Participants"). The accounts to be credited shall be designated by
the underwriters of such Debt Securities, by certain agents of the Company or
by the Company, if such Debt Securities are offered and sold directly by the
Company. Ownership of beneficial interests in a Global Security will be limited
to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by the Depositary with respect to Participants' beneficial
interests. The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
ownership limits and such laws may impair the ability to transfer beneficial
interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
holder of such Global Security, such Depositary or such nominee, as the case
may be, will be considered the sole owner or holder of the Debt Securities
represented by such Global Security for all purposes under the Indenture
governing such Debt Securities. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities of
the series represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Debt Securities of
such series in definitive form and will not be considered the owners or holders
thereof under the Indenture governing such Debt Securities.
Principal and interest payments on Debt Securities registered in the name of
or held by a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security
representing such Debt Securities. The Company expects that the Depositary for
Debt Securities of a series, upon receipt of any payment of principal or
interest in respect of a Global Security, will immediately credit Participants'
accounts with payments in amounts proportionate to their respective beneficial
interest in the principal amount of such Global Security as shown on the
records of such Depositary. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name," and will be the
responsibility of such Participants. None of the Company, the Trustee for such
Debt Securities, any paying agent or any registrar for such Debt Securities
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interest in a
Global Security for such Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
If a Depositary for Debt Securities of a series is at any time unwilling or
unable to continue as a Depositary and a successor Depositary is not appointed
by the Company within 90 days, the Company will issue Debt Securities of such
series in definitive form in exchange for the Global Security or Debt
Securities representing the Debt Securities of such series represented by one
or more Global Securities.
INTEREST AND FOREIGN CURRENCY
Principal, premium, if any, and interest will be payable, and the Debt
Securities will be transferable, in the manner described in the Prospectus
Supplement relating to such Debt Securities. If any of the Debt Securities are
sold for any foreign currency or currency unit or if principal of, premium, if
any, or any interest on any of the Debt Securities is payable in any foreign
currency or currency unit, the restrictions, elections, tax consequences,
specific terms and other information with respect to such issue of Debt
Securities and such foreign currency or currency unit will be specified in a
Prospectus Supplement.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indentures provide that the Company may not consolidate with or merge
into any other person or convey, transfer or lease its properties and assets
substantially as an entirety to any person and the Company shall not permit any
person to consolidate with or merge into the Company or convey, transfer or
lease its properties and assets substantially as an entirety to the Company,
unless (i) the successor corporation shall
8
<PAGE>
be a corporation organized and validly existing under the laws of the United
States, any State thereof or the District of Columbia, and shall expressly
assume by a supplemental indenture all obligations of the Company under the
applicable Indenture and the Debt Securities issued under such Indenture; (ii)
immediately after giving effect to such transaction, no Event of Default, and
no event which, after notice or lapse of time or both would become an Event of
Default, shall have happened and be continuing; (iii) if, as a result of any
such transaction a Principal Property would become subject to a mortgage,
pledge, lien, security interest or other encumbrance which would not be
permitted by the Senior Indenture, the Company or such successor Person, as the
case may be, secures the Senior Debt Securities equally and ratably with or
prior to such Lien. The successor shall be substituted for the Company and
thereafter all obligations of the Company under the applicable Indenture and
the Debt Securities issued under such Indenture shall terminate.
EVENTS OF DEFAULT
The following shall constitute Events of Default with respect to Debt
Securities of any series: (i) default for a period of 30 days in payment of any
interest on the Debt Securities of that series when due; (ii) default in
payment of principal of (or premium, if any, on) the Debt Securities of that
series when due (whether at maturity, upon redemption or otherwise or in the
making of any required sinking fund payment); (iii) default in performance of
any other covenant, condition or agreement in the Debt Security or in the
applicable Indenture (other than a covenant, condition or agreement included in
the Debt Security or such Indenture solely for the benefit of a series of Debt
Securities other than that series) continued for 60 days after written notice
as provided in the Indenture; (iv) a default under any instrument or other
evidence of indebtedness for money borrowed by the Company (including a default
with respect to Debt Securities of any series other than that series) or under
any instrument (including the applicable Indenture) under which there may be
issued or by which there may be evidenced or secured any indebtedness for money
borrowed by the Company, which default shall involve an amount in excess of
$25,000,000 and shall constitute a failure to pay such indebtedness when due
and payable after the expiration of any grace period and shall have resulted in
the acceleration of such indebtedness, if such accelerated indebtedness is not
discharged, or such acceleration is not annulled, within 30 days after written
notice as provided in the Indenture; and (v) certain events of bankruptcy,
insolvency or reorganization.
If an Event of Default with respect to Debt Securities of any series at the
time outstanding shall occur and be continuing, the Trustee or the holders of
25% in principal amount of the outstanding Debt Securities of that series may
declare the principal and accrued interest of all of the Debt Securities of
that series to be due and payable immediately.
Each Indenture provides that the Trustee will, within 90 days after the
occurrence of a default, give to holders of the Debt Securities of the series
with respect to which a default has occurred notice of all uncured defaults
known to it; but, except in the case of a default in the payment of principal
or interest on Debt Securities of that series, the Trustee shall be protected
in withholding such notice if it in good faith determines that the withholding
of such notice is in the interest of the holders.
Each Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during a default to act with the required standard of care,
to be indemnified by the holders of Debt Securities of the series with respect
to which a default has occurred before proceeding to exercise any right or
power under such Indenture at the request of such holders. Subject to such
right of indemnification, each Indenture provides that the holders of a
majority in principal amount of the outstanding Debt Securities of a series may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred upon the
Trustee with respect to such series.
The Company will be required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
applicable Indenture.
9
<PAGE>
MODIFICATION OF INDENTURES
Unless the resolution establishing the terms of a series otherwise provides,
the applicable Indenture and the Debt Securities of the series may be amended,
and any default may be waived as follows: the Debt Securities and the
applicable Indenture may be amended with the consent of holders of a majority
in principal amount of the Debt Securities of all series affected voting as one
class. A default with respect to a series may be waived with the consent of the
holders of a majority in principal amount of the Debt Securities of the series.
However, without the consent of each holder affected, no amendment or waiver
may (1) reduce the amount of Debt Securities whose holders must consent to an
amendment or waiver, (2) reduce the interest on or change the time for payment
of interest on any Debt Security, (3) change the fixed maturity of any Debt
Security, (4) reduce the principal of any non-Discounted Security or reduce the
amount of principal of any Discounted Security that would be due on
acceleration thereof, (5) change the currency in which principal or interest on
a Debt Security is payable, (6) waive any default in payment of interest on or
principal of a Debt Security or (7) change certain provisions of the applicable
Indenture regarding waiver of past defaults and amendments with the consent of
holders other than to increase the principal amount of Debt Securities required
to consent. Without the consent of any holder, the applicable Indenture or the
Debt Securities may be amended to cure any ambiguity, omission, defect or
inconsistency; to provide for the assumption of Company obligations to holders
in the event of a merger or consolidation requiring such assumption; to provide
that specific provisions in the applicable Indenture not apply to a series of
Debt Securities not previously issued; to create a series and establish its
terms; to provide for a separate Trustee for one or more series; or to make any
change that does not materially adversely affect the rights of any holder.
DEFEASANCE
Debt Securities of a series may be defeased in accordance with their terms
and, unless the resolution establishing the terms of the series otherwise
provides, as set forth below. The Company at any time may terminate as to a
series all of its obligations (except for certain obligations with respect to
the defeasance trust and obligations to register the transfer or exchange of a
Debt Security, to replace destroyed, lost or stolen Debt Securities and to
maintain agencies in respect of the Debt Securities) with respect to the Debt
Securities of that series and the applicable Indenture ("legal defeasance").
The Company at any time may terminate as to a series its obligations with
respect to the Debt Securities of that series under the covenants described
under "Covenants" ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, a series may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option, a series may
not be accelerated by reference to the covenants described under "Covenants."
To exercise either option as to a series, the Company must deposit in the
trust (the "defeasance trust") with the applicable Trustee money or U.S.
Government Obligations for the payment of principal, premium, if any, and
interest on the Debt Securities of the series to redemption or maturity and
must comply with certain other conditions. In particular, if the defeasance
occurs more than twelve months prior to the earlier of the maturity or the date
fixed for redemption of the series to be defeased, the Company must obtain an
opinion of tax counsel that the defeasance will not result in recognition for
Federal income tax purposes of any gain or loss to holders of the series. "U.S.
Government Obligations" are direct obligations of the United States of America
which have the full faith and credit of the United States of America pledged
for payment and which are not callable at the issuer's option, or certificates
representing an ownership interest in such obligations.
CONVERSION RIGHTS OF DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, holders of such series of Debt Securities
will be entitled, at any time prior to the date set forth in
10
<PAGE>
the Prospectus Supplement relating to such series, subject to prior redemption,
to convert such Debt Securities or portions thereof (which are $1,000 or
integral multiples thereof) into or for common stock, par value $1.00 per share
(the "Common Stock") of the Company, at the conversion rate stated in the
Prospectus Supplement, subject to adjustment as described below or in the
applicable Prospectus Supplement. The right to convert Debt Securities called
for redemption will terminate at the close of business on the redemption date,
and will be lost if not exercised prior to that time unless the Company
defaults in making the payments due upon redemption.
To convert a Debt Security, a holder must (i) complete and manually sign the
conversion notice (the "Conversion Notice") on the back of the Debt Security
(or complete and manually sign a facsimile thereof) and deliver such notice to
the Conversion Agent or any other office or agency maintained for such purpose,
(ii) surrender the Debt Security to the Conversion Agent or at such other
office or agency by physical delivery, (iii) if required, furnish appropriate
endorsements and transfer documents, and (iv) if required, pay all transfer or
similar taxes. The date by which such notice shall have been received and the
Debt Security shall have been so surrendered to the Conversion Agent is the
Conversion Date. Such Conversion Notice shall be irrevocable and may not be
withdrawn by a holder for any reason.
Unless otherwise provided in the applicable Prospectus Supplement, the
conversion rate is subject to adjustment upon the occurrence of certain events,
including the issuance of Common Stock as a dividend or distribution on the
Common Stock; subdivisions, combinations and certain reclassifications of
Common Stock; the issuance to all holders of Common Stock of shares or certain
rights or warrants to subscribe for shares of Common Stock at less than the
then current Market Price per share; and the distribution to all holders of
Common Stock of any assets (other than cash dividends paid out of retained
earnings) or debt securities or any rights or warrants to purchase assets or
debt securities. The Company may also increase the conversion rate at any time,
temporarily or otherwise, by any amount so long as the conversion rate does not
cause Common Stock to be issued at less than its par value.
No adjustment in the conversion rate will be required unless such adjustment
would require a change of at least 1% of the conversion rate then in effect;
provided, however, that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
If any Debt Security is converted between the record date for the payment of
interest and the next succeeding interest payment date, such Debt Security must
be accompanied by funds equal to the interest payable on such succeeding
interest payment date on the principal amount so converted (unless such Debt
Security shall have been called for redemption during such period, in which
case no such payment shall be required), and the interest on the principal
amount of the Debt Security being converted will be paid on such next
succeeding interest payment date to the registered holder of such Debt Security
on the immediately preceding record date. A Debt Security converted on an
interest payment date need not be accompanied by any payment, and the interest
on the principal amount of the Debt Security being converted will be paid on
such interest payment date to the registered holder of such Debt Security on
the immediately preceding record date, except as otherwise provided by the
applicable Indenture. Subject to the aforesaid right of the registered holder
to receive interest, no payment or adjustment will be made on conversion for
interest accrued on the converted Debt Security or for dividends on the Common
Stock issued on conversion.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
11
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 200,000,000 shares of Common Stock, par
value $1.00 per share, and 5,000,000 shares of Preferred Stock, without par
value. All outstanding shares of Common Stock are fully paid and non-
assessable.
COMMON STOCK
Subject to the rights of the holders of Preferred Stock, the holders of the
Common Stock of the Company are entitled to receive dividends from funds
legally available therefor when, as and if declared by the Board of Directors,
and are entitled upon liquidation to share ratably in all assets of the Company
after satisfaction in full of the prior rights of creditors of the Company and
holders of any Preferred Stock.
The holders of the Common Stock are entitled to one vote for each share held
on all matters as to which shareholders are entitled to vote. The holders of
the Common Stock do not have cumulative voting rights, any preferential or
preemptive right with respect to any securities of the Company, or any
conversion rights. The Common Stock is not subject to redemption. The
outstanding shares of Common Stock are fully paid and non-assessable.
The Common Stock is listed on the following stock exchanges: New York,
Chicago (options), London, Zurich, Basel and Geneva. The transfer agent for the
Common Stock is Mellon Securities Trust Company.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Preferred Stock which
may be issued from time to time in one or more series with such rights,
preferences and limitations as are determined by the Company's Board of
Directors. Satisfaction of any dividend preferences of outstanding Preferred
Stock would reduce the amount of funds available for the payment of dividends
on Common Stock. Also, holders of Preferred Stock would normally be entitled to
receive a preference payment before any payment is made to holders of Common
Stock in the event of any liquidation, dissolution or winding-up of the
Company. As of the date of the Prospectus, no shares of Preferred Stock are
issued or outstanding.
SUPERMAJORITY VOTING REQUIREMENTS AND CLASSIFIED BOARD OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that, in order
to approve a merger or consolidation with or into, or a sale or other transfer
of all or a portion of the assets of the Company other than in the ordinary
course of business to, or the issuance or transfer of voting securities of the
Company as part of an exchange or acquisition of the securities or assets
(including cash) of, any entity which is the beneficial owner of 5% or more of
the outstanding shares of the Company entitled to vote in the election of
Directors, the affirmative vote of not less than 80% of the outstanding Common
Stock (including at least 50% of the outstanding Common Stock held by
stockholders other than such 5% beneficial owner) is required. The foregoing
provision would not be applicable if the proposed transaction was approved by a
majority of the Board of Directors of the Company who had been duly elected and
acting as members of the Board prior to the time such 5% beneficial owner
became the beneficial owner of 5% or more of the outstanding shares of Common
Stock.
The Company's Restated Certificate of Incorporation also provides for a
classified Board of Directors divided into three classes. All classes shall be
as nearly equal in number as possible and no class shall include less than two
Directors, with one class of Directors to be elected each year for a three-year
term.
Neither provision described in the foregoing paragraphs can be amended
without the affirmative vote of the holders of at least 80% of the outstanding
Common Stock (including at least 50% of the outstanding Common Stock held by
stockholders other than such 5% beneficial owner).
12
<PAGE>
The Company believes that the classified Board and such 80% voting
requirements are desirable to assure continuity in Board membership and in
policy formulated by the Board. Such provisions will serve to moderate the pace
of any change in control of the Company by extending the time required to elect
a majority of the Directors and will better enable the Board to protect the
interests of shareholders in the event that any person or corporation should
attempt to obtain control of the Company.
It is recognized, however, that the effect of such provisions is to make it
more difficult to change Directors even should this be desired by a majority of
the Company's stockholders, and may be to render more difficult or to
discourage a merger, tender offer or proxy contest or the assumption of control
by a holder of a large block of Company securities.
The aforementioned 80% voting requirement for approval of specified
transactions with such 5% beneficial owners, absent Board approval, provides
the Board and minority stockholders with a veto power over such transactions.
Such provision would be beneficial to Company management when confronted with a
hostile tender offer and may deter such offers, thus depriving a stockholder of
the opportunity to dispose of his or her shares to a hostile tender offeror at
a price substantially in excess of market value. The deterrence of such offers
also has the effect of supporting existing management in its present position.
DIRECTORS' LIABILITY
The Company's Restated Certificate of Incorporation, as amended, provides
that, to the fullest extent permitted by Delaware law, no Director of the
Company will be liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a Director, except for liability (i) for any
breach of the Director's duty of loyalty to the Company or its shareholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases, or (iv) for any
transaction from which the Director derived an improper personal benefit. The
effect of the provision in the Restated Certificate of Incorporation will be to
eliminate the rights of the Company and its stockholders (including through
stockholders' derivative suits on behalf of the Company) to recover monetary
damages against a Director for breach of fiduciary duty as a Director
(including breaches resulting from negligent or grossly negligent behavior)
except in the situations described in clauses (i) through (iv) above.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (i) through underwriters or dealers;
(ii) through agents; (iii) directly to purchasers; or (iv) through a
combination of any such methods of sale. Any such underwriter, dealer or agent
may be deemed to be an underwriter within the meaning of the Securities Act of
1933, as amended. The Prospectus Supplement relating to any offering of Debt
Securities will set forth their offering terms, including the name or names of
any underwriters, the purchase price of the Debt Securities and the proceeds to
the Company from such sale, any underwriting discounts, commissions and other
items constituting underwriters' compensation, any initial public offering
price, and any underwriting discounts, commissions and other items allowed or
reallowed or paid to dealers and any securities exchanges on which the Debt
Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, at fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, or at prices related to such
prevailing market prices, or at negotiated prices. The Debt Securities may be
offered to the public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more of such firms. Unless
otherwise set forth in the Prospectus Supplement, the obligations of the
underwriters to purchase the Debt Securities will be subject to certain
conditions precedent and the underwriters will be
13
<PAGE>
obligated to purchase all the offered Debt Securities, if any are purchased.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Debt Securities in respect of which this Prospectus is delivered
will be named, and any commissions payable by the Company to such agent will be
set forth, in the accompanying Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
reasonable efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or agents to solicit offers by certain specified
institutions to purchase Debt Securities from the Company at the public
offering price set forth in the accompanying Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject to any conditions set forth
in the accompanying Prospectus Supplement and such Prospectus Supplement will
set forth the commission payable for solicitation of such contracts. The
underwriters and other persons soliciting such contracts will have no
responsibility for the validity or performance of any such contracts.
Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribution by the Company to payments they may be required to
make in respect thereof.
Certain of the underwriters, agents or dealers and their associates may be
customers of, or engage in transactions with and perform services for the
Company in the ordinary course of business.
LEGAL MATTERS
Certain legal matters in connection with the Debt Securities will be passed
upon for the Company by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York.
EXPERTS
The consolidated balance sheets as of December 31, 1994 and 1993 and the
consolidated statements of earnings, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1994, incorporated by
reference in this Prospectus and elsewhere in the Registration Statement, have
been incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
14
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCOR-
PORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUM-
STANCE, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AF-
FAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS
PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT, THE
APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY NOTES BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Important Currency Exchange Information.................................... S-2
Description of Notes....................................................... S-2
United States Taxation..................................................... S-15
Plan of Distribution....................................................... S-22
Legal Matters.............................................................. S-23
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges......................................... 4
Description of Securities.................................................. 4
Description of Capital Stock............................................... 12
Plan of Distribution....................................................... 13
Legal Matters.............................................................. 14
Experts.................................................................... 14
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
LOGO
ENGELHARD CORPORATION
MEDIUM-TERM NOTES
---------------
PROSPECTUS SUPPLEMENT
---------------
MERRILL LYNCH & CO.
J. P. MORGAN SECURITIES INC.
JULY 26, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
