<PAGE>
This Prospectus Supplement relates to an effective registration statement under
the Securities Act of 1933, and is subject to completion or amendment. This
preliminary prospectus supplement and the accompanying prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of such jurisdiction.
<PAGE>
Subject To Completion dated July 26, 1996
Prospectus Supplement
(To Prospectus dated July 18, 1996)
Engelhard Corporation
[LOGO]
$150,000,000
% NOTES DUE , 2001
INTEREST PAYABLE AND
Issue price: %
$100,000,000
% NOTES DUE , 2006
INTEREST PAYABLE AND
Issue price: %
Interest on the % Notes due , 2001 (the "2001 Notes") and on the %
Notes due , 2006 (the "2006 Notes") (collectively, the "Notes") is
payable semi-annually on and of each year, commencing ,
1997. The 2001 Notes will not be redeemable prior to maturity and will not be
subject to any sinking fund. The 2006 Notes may be redeemed at any time at the
option of Engelhard Corporation ("Engelhard" or the "Company"), in whole or in
part, at a redemption price equal to the greater of (i) 100% of their principal
amount and (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted, on a semi-annual basis,
at the Treasury Yield (as defined herein) plus basis points, together with
accrued interest, if any, to the date of redemption. See "Description of
Notes--Optional Redemption" herein.
Each series of Notes will be represented by a Global Security registered in the
name of The Depository Trust Company (the "Depositary") or its nominee. Interest
in the Global Securities will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to
beneficial interests of participants) or by participants or persons that hold
interests through participants (with respect to beneficial interests of
beneficial owners). Except as described in the accompanying Prospectus, Notes in
certificated form will not be issued. See "Description of Securities-- Global
Securities" 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 OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (1)(3)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Per 2001 Note % % %
- ---------------------------------------------------------------------------------------------------------------------
Total $ $ $
- ---------------------------------------------------------------------------------------------------------------------
Per 2006 Note % % %
- ---------------------------------------------------------------------------------------------------------------------
Total $ $ $
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from July , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting" herein.
(3) Before deducting expenses payable by the Company estimated at $270,000.
Each series of the Notes is offered, subject to prior sale, when, as and if
accepted by the Underwriters and subject to approval of certain legal matters by
Brown & Wood LLP, counsel for the Underwriters. It is expected that delivery of
the Notes will be made in book-entry form only on or about , 1996
through the facilities of the Depositary, against payment therefor in
immediately available funds.
J.P. Morgan & Co.
Merrill Lynch & Co.
Smith Barney Inc.
July , 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS 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.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and the accompanying
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 Underwriter.
This Prospectus Supplement and the accompanying Prospectus do not constitute an
offer to sell or the solicitation of an offer to buy the 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. Neither the
delivery of this Prospectus Supplement or the Prospectus nor any sale made
hereunder and thereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or thereof or that the information contained or incorporated by reference
herein or therein is correct as of any time subsequent to the date of such
information.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
The Company................................................................................................ S-3
Recent Developments........................................................................................ S-4
Capitalization............................................................................................. S-6
Ratio of Earnings to Fixed Charges......................................................................... S-6
Use of Proceeds............................................................................................ S-6
Selected Pro Forma Financial Information................................................................... S-7
Selected Historical Financial Information.................................................................. S-9
Description of Notes....................................................................................... S-10
Underwriting............................................................................................... S-12
Legal Opinions............................................................................................. S-12
PROSPECTUS
Available Information...................................................................................... 2
Incorporation of Certain Documents by Reference............................................................ 2
The Company................................................................................................ 3
Use of Proceeds............................................................................................ 4
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>
S-2
<PAGE>
THE COMPANY
Engelhard develops, manufactures and markets technology-based specialty chemical
products and engineered materials for a wide spectrum of industrial customers,
provides services to precious and base metals customers and markets
energy-related services. The Company operates on a worldwide basis with
corporate and operating headquarters and principal manufacturing facilities and
mineral reserves in the United States and 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 Industrial
Commodities Management (formerly Precious Metals Management).
The Catalysts and Chemicals segment comprises three principal product groups:
the Environmental Technologies Group, consisting of Automotive Emission Systems,
Heavy Duty Power Systems and Process Emission Systems, serving the automotive,
light and heavy duty truck, aircraft, off-road vehicle, power generation and
process industries; the Petroleum Catalysts Group, serving the petroleum
refining industries; and the Chemical Catalysts Group, serving the chemical,
petrochemical, pharmaceutical and food processing industries. Environmental
technology catalysts are used in applications such as the abatement of carbon
monoxide, oxides of nitrogen and hydrocarbons from gasoline, diesel and
alternate fueled vehicle exhaust gases to meet emission control standards. These
catalysts are also used for the removal of odors, fumes and pollutants generated
by a variety of process industries including but not limited to the painting of
automobiles, appliances and other equipment; printing processes; the manufacture
of nitric acid and tires, in the curing of polymers; and power generation
sources. The petroleum refining catalyst products consist of a variety of
catalysts and processes used in the petroleum refining industry. The principal
products are zeolitic fluid cracking catalysts which are widely used to provide
economies in petroleum processing. The chemical catalysts products consist of
catalysts and sorbents 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 comprises two principal product groups: the
Paper Pigments and Chemicals Group, serving the paper industry, and the
Specialty Minerals and Colors Group, serving the plastics, coatings, paint and
allied industries. Paper pigments and chemicals products consist primarily of
coating and extender pigments. Specialty minerals and colors products are used
as pigments and extenders for a variety of purposes in the manufacture of
plastic, rubber, ink, ceramic, adhesive products and in paint.
The Engineered Materials and Industrial Commodities Management segment includes
the Engineered Materials Group, serving a broad spectrum of industries, and the
Industrial Commodities Management Group, which is responsible for precious and
base metals sourcing and dealing, for managing the precious and base metals
requirements of the Company and its customers, and for power marketing. The
products of the Engineered Materials Group consist primarily of metal-based
materials such as temperature-sensing devices, precious metals coating and
electroplating materials, conductive pastes and powders and brazing alloys. In
June 1995, the Company formed a 50/50 joint venture with CLAL, a Paris-based
precious metal fabricator. The joint venture combined most of the assets of the
Engineered Materials business with CLAL. The Industrial Commodities Management
Group is responsible for procuring precious and base metals to meet the
requirements of the Company's operations and its customers. The Industrial
Commodities Management Group also engages in precious and base metals dealing
operations with industrial consumers, dealers, central banks, miners and
refiners. 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.
S-3
<PAGE>
RECENT DEVELOPMENTS
Net earnings for the three months ended June 30, 1996 increased 9% to $40.1
million from $36.7 million for same period in 1995. Net earnings per share of
Common Stock for the period increased 9% to 28 cents from 26 cents for the same
period a year ago. Net sales for the three months ended June 30, 1996 were up 9%
to $783.9 million from $721.1 million for the same period in 1995. Sales gains
were achieved in all three of Engelhard's business segments. Net earnings for
the six months ended June 30, 1996 were $72.6 million, or 51 cents per share, an
increase of 13% from $64.3 million, or 45 cents per share, for the same period
in 1995. Net sales for the same period were up 10% to $1.56 billion from $1.42
billion for the same period in 1995. Total operating earnings for the three
months ended June 30, 1996 rose 9% to $70.0 million from $64.4 million for the
same period in 1995. The Catalysts and Chemicals segment generated a 24%
increase in operating earnings for the second quarter of 1996 to $34.1 million,
with all three businesses in that segment reporting increased earnings. This
segment also was aided by increased raw material yields resulting from operating
efficiencies. Sales and profitability for auto emission control catalysts were
up as a result of continuing strong customer demand for newer, advanced
technologies. Solid sales increases of fluid cracking catalysts in the United
States and Asia Pacific combined with lower expenses led to increased earnings
from the Company's petroleum catalysts business. In the chemical catalysts
business, higher volumes in almost all product segments and a favorable product
mix contributed to higher profits. Second quarter operating earnings in the
Pigments and Additives segment were flat at $22.8 million. Excluding the
earnings from The Mearl Corporation, earnings in the Pigments and Additives
segment were down 5%. Increased revenues and profits from speciality mineral
products sold to the paint, plastics and inks markets were more than offset by
lower earnings from paper pigments. Continued weak economic conditions in the
paper industry drove the decline. In the Engineered Materials and Industrial
Commodities Management segment, second quarter operating earnings declined 9% to
$13.0 million primarily because results for the 1996 quarter exclude sales and
earnings associated with the businesses placed in a joint venture with CLAL in
June 1995. Sales and earnings increased for industrial commodities management
and for the metal-fabrication businesses that remain part of Engelhard.
Contributing factors to the gains were improved operating efficiencies and
higher business activity. Increased financing costs and lower equity earnings in
the quarter were offset by favorable corporate expenses. Corporate expenses
included an after-tax, non-recurring positive net impact of less than 0.5 cents
per share resulting from an insurance recovery, which was largely offset by a
provision for legal fees related to defending an existing lawsuit.
Engelhard has been advised that the Securities and Exchange Commission has
issued a formal order of investigation in connection with trading in Engelhard's
stock during portions of 1995 following certain public announcements by
Engelhard, which has been the subject of a pending securities class action
litigation since late 1995. Such class action claims that Engelhard and certain
of its officers and directors made false statements and omissions and traded on
nonpublic information.
On May 31, 1996, the Company consummated the acquisition (the "Mearl
Acquisition") of The Mearl Corporation, a New Jersey corporation ("Mearl"), from
the stockholders of Mearl pursuant to a Stock Purchase Agreement (the "Purchase
Agreement") dated as of April 22, 1996, as amended and restated as of May 15,
1996.
The purchase price for the Mearl Acquisition was $272.7 million in cash. The
purchase price is subject to certain post-closing adjustments. The Company
initially financed the acquisition with bank borrowings. See "Use of Proceeds"
herein.
Mearl manufactures and supplies the automotive, cosmetic and industrial markets
with pearlescent pigments. Mearl also manufactures and supplies iridescent film
and other products, including natural pearl essence, lightweight concrete and
associated machinery, mica and high-purity silica sand, to a variety of markets.
It currently operates eight manufacturing facilities, two research and
development laboratories, a domestic sales and administration office and six
foreign sales offices. In 1995, Mearl had sales of approximately $134 million
and operating earnings of approximately $22 million.
S-4
<PAGE>
The Mearl Acquisition represents a strategic expansion of one of Engelhard's
core businesses, Pigments and Additives, which accounted for 36% of Engelhard's
operating earnings in 1995. The Company's operating earnings in this segment
have grown from $55 million in 1993 to $91 million in 1995. The expansion of
this segment will provide value to both Engelhard and Mearl, as Mearl is strong
in automotive finishes and cosmetics with significant manufacturing know-how and
color styling expertise in the pearlescent pigments business while Engelhard is
strong in industrial markets including paper, plastics, and paints and coatings.
The Mearl Acquisition will allow Engelhard to enter new, high-margin, high
growth markets in the Pigments and Additives segment with existing and new
products, further penetrate existing and emerging international markets and
diversify Engelhard's product offerings. The expansion of the markets and
industries served by the Pigments and Additives business will make it less
likely that any single cyclical market would dominate the operating performance
of the Company in this segment.
Following the Mearl Acquisition, Engelhard began developing a plan to integrate
Mearl into the Company to optimize the synergistic benefits of the combined
businesses inclusive of sales, technology and costs. Due to the recent nature of
the acquisition and the complexity of Mearl's operations, Engelhard has not yet
completed this plan. Management expects to have an approved plan completed
during October 1996 and anticipates that the plan could result in additional
costs for some site shutdowns as well as for employee severance and relocation.
Additional costs associated with this plan, if any, will increase the cost of
the acquisition and result in additional goodwill.
S-5
<PAGE>
CAPITALIZATION
The following table sets forth (a) the pro forma consolidated capitalization of
the Company at March 31, 1996 reflecting the Mearl Acquisition and short-term
borrowings incurred to finance the Mearl Acquisition and (b) as adjusted to
reflect the sale of the Notes offered hereby and application of net proceeds
therefrom to repay the indebtedness incurred in connection with the Mearl
Acquisition. See "Use of Proceeds" herein.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
PRO FORMA,
PRO FORMA AS ADJUSTED
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Cash $ 45,069 45,069
------------ ------------
------------ ------------
Short-term debt $ 217,133 $ 217,133
Long-term debt - -
Bank borrowings (1) 250,000 -
Medium-Term Notes due 2000 100,000 100,000
10% Notes due 2000 (2) 99,850 99,850
2001 Notes - 150,000
2006 Notes - 100,000
Other 25,799 25,799
------------ ------------
Total long-term debt 475,649 475,649
Total Debt 692,782 692,782
------------ ------------
------------ ------------
Total Net Debt 647,713 647,713
------------ ------------
------------ ------------
Shareholders' equity 748,825 748,825
Total capitalization $ 1,441,607 $ 1,441,607
</TABLE>
- --------------
(1) Represents $250,000 of short-term bank borrowings which have been classified
as long-term debt for balance sheet purposes.
(2) The 10% Notes due 2000 were redeemed at par on July 15, 1996.
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 ENDED YEAR ENDED DECEMBER 31,
- ----------------------- ---------------------------------------------------------------
MARCH 31, 1996 1995 1994 1993 1992 1991
- ----------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
5.28 6.05 6.79 (a) 7.26 5.45
</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.
USE OF PROCEEDS
The net proceeds from the sale of the Notes are estimated to be $ million.
The Company expects to use the net proceeds from the sale of the Notes to repay
a portion of the Company's borrowings incurred to finance the Mearl Acquisition.
The indebtedness to be repaid with the proceeds of the Notes was incurred
pursuant to a ninety day bridge financing and bears interest at a rate based on
LIBOR over the applicable term of the borrowings.
S-6
<PAGE>
SELECTED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma consolidated income statement data set forth below is
based on historical financial information for the Company for the year ended
December 31, 1995 and for the three months ended March 31, 1996 and historical
financial information for Mearl for the year ended December 31, 1995 and for the
three months ended March 31, 1996. The unaudited pro forma consolidated balance
sheet data set forth below is based on historical financial information for the
Company as of March 31, 1996 and historical financial information for Mearl as
of March 31, 1996. The unaudited pro forma consolidated financial information
reflects the Mearl Acquisition and short-term borrowings (of which $250 million
has been classified as long-term debt for balance sheet purposes) incurred to
finance the Mearl Acquisition as if such transactions had occurred as of January
1, 1995 and accounted for by the purchase method of accounting. Potential future
cost savings, if any, from combining the operations of the Company and Mearl are
not reflected in the unaudited pro forma consolidated statement of income
information. The unaudited pro forma adjustments are based upon available
information and upon certain assumptions that the Company believes are
reasonable. The unaudited pro forma consolidated financial information does not
purport to be indicative of the Company's financial condition or results of
operations that would actually have been achieved had the Mearl Acquisition and
the borrowings incurred to finance the Mearl Acquisition been completed on the
dates set forth above, or that may be obtained in the future. The unaudited pro
forma consolidated financial information should be read in conjunction with the
pro forma financial statements contained in the Company's Current Report on Form
8-K/A filed July 12, 1996 and the historical financial statements and related
notes of the Company included in its Annual Report on Form 10-K for the year
ended December 31, 1995, and in its Quarterly Reports on Form 10-Q for the
quarter ended March 31, 1996, and of Mearl included in the Company's Current
Report on Form 8-K/A filed July 12, 1996, each of which is incorporated herein
by reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 THREE MONTHS ENDED MARCH 31, 1996
----------------------------------------------- -------------------------------------------------
PRO FORMA PRO FORMA
ENGELHARD MEARL ADJUSTMENTS PRO FORMA ENGELHARD MEARL ADJUSTMENTS PRO FORMA
---------- --------- ------------ ---------- ----------- --------- ------------ -----------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $2,840,077 $ 134,417 $ 5,382(1) $2,979,876 $ 774,740 $ 33,739 $ 805(1) $ 809,284
Cost of sales 2,379,474 79,340 - 2,458,814 664,895 20,038 - 684,933
Selling, administrative and
other expenses 244,660 33,391 4,700(2) 282,751 53,860 8,071 1,200(2) 63,131
Equity in earnings (losses)
of affiliates 695 - - 695 (927) - - (927)
Net interest expense 31,326 4,836 19,800(3) 55,962 9,257 1,139 5,000(3) 15,666
Other income - 5,382 (5,382)(1) - - 805 (805)(1) -
Income tax expense (benefit) 47,791 9,295 (7,500)(4) 49,586 12,976 2,225 (1,900)(4) 13,301
Net earnings 137,521 12,937 (17,000) 133,458 32,555 3,071 (4,300) 31,326
Net earnings per share $ 0.96 $ 0.93 $ 0.23 $ 0.22
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------------------------
PRO FORMA
ENGELHARD MEARL ADJUSTMENTS PRO FORMA
---------- --------- -------------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash $ 38,364 $ 16,705 $ (10,000)(7) $ 45,069
Receivables 288,471 30,124 - 318,595
Inventories 244,602 47,382 5,200(5) 297,184
Other current assets 51,491 5,031 - 56,522
---------- --------- -------------- ----------
Total current assets 622,928 99,242 (4,800) 717,370
Investments 223,106 - - 223,106
Property, plant and equipment, net 617,111 62,706 - 679,817
Other noncurrent assets 219,225 33,529 118,880 (5)(6 371,634
---------- --------- -------------- ----------
Total assets $1,682,370 $ 195,477 $ 114,080 $1,991,927
---------- --------- -------------- ----------
---------- --------- -------------- ----------
Short-term bank borrowings $ 203,483 $ - $ 13,650 (5)(7 $ 217,133
Accounts payable 124,700 5,852 130,552
Other current liabilities 192,710 10,511 - 203,221
---------- --------- -------------- ----------
Total current liabilities 520,893 16,363 13,650 550,906
Long-term debt 211,521 42,000 222,128 (5)(6 475,649
Other noncurrent liabilities 201,131 7,016 8,400(5) 216,547
Shareholders' equity 748,825 130,090 (130,098)(5) 748,825
---------- --------- -------------- ----------
Total liabilities and shareholders' equity $1,682,370 $ 195,477 $ 114,080 $1,991,927
---------- --------- -------------- ----------
---------- --------- -------------- ----------
</TABLE>
S-7
<PAGE>
- ------------------
(1) Represents a reclassification to conform Mearl to Engelhard's financial
statement presentation.
(2) Represents amortization of goodwill.
(3) Represents an adjustment to interest expense to reflect Engelhard's cost of
financing the acquisition.
(4) Represents an adjustment to the income tax provision to reflect the impact
of the pro forma adjustments.
(5) Reflects the acquisition of the common stock of Mearl by the Company.
<TABLE>
<S> <C>
Purchase price:
Short-term bank borrowings ($250,000 to be refinanced long term) $ 272,650
Estimated expenses 1,000
----------
$ 273,650
----------
----------
Net assets acquired:
Book value as of March 31, 1996 $ 130,098
Adjustment of net assets to fair value
Inventories 5,200
Deferred income taxes 1,200
Pension/postretirement liabilities (8,400)
Goodwill 145,552
----------
$ 273,650
----------
----------
</TABLE>
These fair value adjustments represent a preliminary allocation based on
currently available information. Future changes are not expected to be
material.
(6) Represents a reclassification of $27,872 in notes receivable to notes
payable pursuant to two advances previously made by Mearl on February 10,
1989 and March 10, 1993 to its majority shareholder, the Estate of H.
Martin, in the amount of $12,872 and $15,000, respectively.
(7) Reflects use of excess cash of Mearl to pay down short-term borrowings.
S-8
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth selected financial information for the Company
for each of the fiscal years in the five year period ended December 31, 1995 and
as of, and for the three month periods ended, March 31, 1996 and 1995
respectively. The selected financial information for the five year periods have
been derived from the Company's audited consolidated financial statements. Such
information is contained in and should be read in conjunction with the
consolidated financial statements and accompanying notes included in the
Company's Annual Reports on Form 10-K for such years, incorporated herein by
reference. The selected financial information for and at the three month period
below has been derived from the Company's unaudited interim financial
statements, which in the opinion of the Company's management include all
adjustments, consisting only of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and
results of operations of the Company for these periods. Operating results and
balance sheet information as of, and for the three months, ended March 31, 1996
are not necessarily indicative of the operating results or financial condition
that may be expected for the full year. The three month information is contained
in and should be read in conjunction with the Company's Quarterly Report on Form
10-Q for such periods, incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
-------------------------- --------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------ ------------ ------------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)*
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $ 774,740 $ 694,455 $ 2,840,077 $ 2,385,802 $ 2,150,865 $ 2,399,749 $ 2,436,356
Cost of sales 664,895 582,505 2,379,474 1,970,563 1,794,438 2,033,012 2,078,397
Selling, administrative
and other expenses 53,860 65,409 244,660 244,611 213,018 224,093 223,756
Special charge (credit) - - - (8,000) 148,000 - -
Equity in earnings
(losses) of affiliates (927) (639) 695 632 3,433 7,445 5,024
Interest expense, net 9,527 8,072 31,326 21,954 13,696 16,231 21,658
Net earnings 32,555 27,609 137,521 117,980 672 10,617 87,942
Net earnings per share(s) 0.23 0.19 0.96 0.82 - 0.07 0.58
BALANCE SHEET DATA
Working capital $ 102,035 $ 64,222 $ 106,534 $ 73,938 $ 53,843 $ 179,233 $ 197,451
Property, plant and
equipment, net 617,111 548,685 609,540 540,361 494,440 514,422 510,016
Total assets 1,682,370 1,506,925 1,645,575 1,440,759 1,279,098 1,287,737 1,256,111
Long-term debt 211,521 111,831 211,533 111,762 112,240 113,941 114,549
Shareholders' equity 748,825 663,668 737,742 614,735 531,318 647,204 756,614
OTHER DATA
Cash dividends paid per
share $ 0.09 $ 0.08 $ 0.35 $ 0.30 $ 0.28 $ 0.25 $ 0.22
Return on average
shareholders' equity(s) 20.0 % 20.3 % 20.3 % 20.6 % 0.1 % 1.5 % 12.0 %
Current ratio 1.2 1.1 1.2 1.1 1.1 1.5 1.5
Capital spending $ 26,615 $ 23,500 $ 147,704 $ 97,531 $ 107,088 $ 54,112 $ 46,333
Depreciation, depletion
and amortization 17,404 16,463 65,450 69,104 68,177 73,798 77,819
Net cash provided by
operating activities 23,348 32,041 138,519 114,788 130,362 169,466 135,411
</TABLE>
- ------------------
* Reflects the three-for-two stock splits as of June 30, 1995, September 30,
1993 and September 31, 1992.
S-9
<PAGE>
DESCRIPTION OF NOTES
The following description of the Notes offered hereby supplements, and to the
extent inconsistent replaces, the description of the Securities (as defined in
the accompanying Prospectus) set forth under the heading "Description of
Securities" in the accompanying Prospectus, to which description reference is
hereby made. Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the accompanying Prospectus.
GENERAL
Each series of the Notes offered hereby will be unsecured general obligations of
the Company and will constitute a separate series of Debt Securities to be
issued under the Senior Indenture referred to in the accompanying Prospectus.
The 2001 Notes will be limited to $150 million aggregate principal amount, will
mature on , 2001, will not be redeemable prior to maturity and will not
be subject to any sinking fund. The 2006 Notes will be limited to $100 million
aggregate principal amount, will mature on , 2006, will be redeemable
prior to Maturity by the Company as provided below and will not be subject to
any sinking fund. Each series of Notes will bear interest at the respective rate
per annum stated on the cover page of this Prospectus Supplement from July ,
1996 or from the most recent Interest Payment Date to which interest has been
paid or provided for, payable semi-annually in arrears on and
of each year (each, an "Interest Payment Date"), commencing ,
1997, to the Person in whose name the related Note is registered at the close of
business on the preceding or , as the case may be (each, a
"Regular Record Date"). Interest on each series of Notes will be computed on the
basis of a 360-day year of twelve 30-day months. The Notes are to be issued only
in registered form without coupons in denominations of $1,000 and integral
multiples thereof.
OPTIONAL REDEMPTION
The 2006 Notes will be redeemable in whole or in part, at the option of the
Company, upon not less than 30 nor more than 60 days prior written notice, at
any time, at a redemption price equal to the greater of (i) 100% of their
principal amount and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted, on a
semi-annual basis, at the Treasury Yield plus basis points, together with
accrued interest to the date of redemption; provided, however, that interest
installments due on an Interest Payment Date which is on or prior to the date of
redemption will be payable to holders who are holders of record of such 2006
Notes (or one or more predecessor 2006 Notes) as of the close of business on the
Regular Record Date preceding such Interest Payment Date.
"Treasury Yield" means, with respect to any redemption date, the rate per annum
equal to the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue, assuming a price of the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security selected
by the Independent Investment Banker as having a maturity most comparable to the
remaining term of the 2006 Notes that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the 2006 Notes.
"Independent Investment Banker" means J.P. Morgan Securities Inc. or, if such
firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing in the United
States appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i) the
average of the bid and asked prices for the Comparable Treasury Issue (expressed
in each case as a percentage of its principal amount) on the third business day
preceding such redemption date, as set forth in the daily statistical release
(or any successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for US Government Securities" or (ii)
if such release (or any successor release) is not published or does not contain
such prices on such business day, the average of the Reference Treasury Dealer
Quotations for such redemption date. "Reference Treasury Dealer Quotations"
means, with respect to each Reference Treasury Dealer
S-10
<PAGE>
and any redemption date, the average, as determined by the Trustee, of the bid
and asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
business day preceding such redemption date.
"Reference Treasury Dealer" means each of J.P. Morgan Securities Inc., Merrill
Lynch Government Securities Inc. and Smith Barney Inc. and their respective
successors; PROVIDED, HOWEVER, that if one of the foregoing ceases to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer") or otherwise fails to provide a Reference Treasury Dealer Quotation,
the Company will substitute therefor another Primary Treasury Dealer.
GLOBAL SECURITIES
Each series of Notes initially will be issued as Global Securities. See
"Description of Securities-Global Securities" in the accompanying Prospectus for
additional information concerning the Notes, the Indenture, and the book-entry
system. The Depository Trust Company will be the Depositary with respect to the
Notes.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for each series of Notes will be made by the Underwriters (as defined
below) in immediately available funds. All payments of principal, premium, if
any, and interest will be made by the Company in immediately available funds to
the Depositary in The City of New York. The Notes will trade in the Depositary's
Same-Day Funds Settlement System until maturity or earlier redemption, as the
case may be, and secondary market trading activity in the Notes will therefore
settle in immediately available funds.
S-11
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Company's Underwriting
Agreement Basic Provisions and the Terms Agreement, dated the date hereof
(collectively, the "Underwriting Agreement"), the Company has agreed to sell to
each of the underwriters named below (the "Underwriters"), and each of the
Underwriters has severally agreed to purchase, the principal amount of Notes set
forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF NOTES
------------------------------
NAME 2001 NOTES 2006 NOTES
- --------------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
J.P. Morgan Securities Inc....................................................... $ $
Merrill Lynch, Pierce, Fenner & Smith Incorporated...............................
Smith Barney Inc.................................................................
-------------- --------------
Total........................................................................ $ 150,000,000 $ 100,000,000
-------------- --------------
-------------- --------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the Underwriters
are obligated to take and pay for all of the Notes if any are taken.
The Underwriters propose to offer the Notes directly to the public initially at
the initial public offering price set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in excess
of % of the principal amount of the 2001 Notes and % of the principal
amount of the 2006 Notes. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of % of the principal amount of the
2001 Notes or % of the principal amount of the 2006 Notes to certain other
dealers. After the initial public offering, the public offering price and such
concessions may be changed by the Underwriters.
The Notes are new issues of securities with no established trading market and
will not be listed on any national securities exchange. The Company has been
advised by the Underwriters that the Underwriters intend to make a market for
the Notes, but are not obligated to do so and may discontinue market making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or contribute to payments which the Underwriters may be required to make in
respect thereof.
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with the Company and its affiliates.
LEGAL OPINIONS
Certain legal matters in connection with the Notes will be passed upon for the
Company by Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York, and for the Underwriters by Brown & Wood LLP,
New York, New York.
S-12
<PAGE>
$350,000,000
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 redeemable for, exchangeable
or convertible into shares of Common Stock, par value $1.00 per share ("Common
Stock"), and, to the extent applicable, references herein to the Debt Securities
also include a reference to Common Stock issuable upon any such redemption,
conversion or exchange. The Debt Securities will have a maximum aggregate
offering price of $350,000,000 (or the equivalent thereof in one or more foreign
or composite currencies) 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 an accompanying Prospectus Supplement. See "Plan of Distribution."
------------------------
THE DATE OF THIS PROSPECTUS IS JULY 18, 1996.
<PAGE>
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any underwriter, dealer, or agent. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy Debt Securities
by anyone in any jurisdiction in which the offer or solicitation is not
authorized or in which the person making the offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make the offer or
solicitation.
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, 15th 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, 1995, its Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996 and its Current Report on Form
8-K filed on June 7, 1996, as amended by Form 8-K/A filed on July 12, 1996. 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 such 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 and base metals customers and
markets energy-related services. 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 Industrial
Commodities Management (formerly Precious Metals Management).
The Catalysts and Chemicals segment comprises three principal product
groups: the Environmental Technologies Group, consisting of Automotive Emission
Systems, Heavy Duty Power Systems and Process Emission Systems, serving the
automotive, light and heavy duty truck, aircraft, off-road vehicle, power
generation and process industries; the Petroleum Catalysts Group, serving the
petroleum refining industries; and the Chemical Catalysts Group, serving the
chemical, petrochemical, pharmaceutical and food processing industries.
Environmental technology catalysts are used in applications such as the
abatement of carbon monoxide, oxides of nitrogen and hydrocarbons from gasoline,
diesel and alternate fueled vehicle exhaust gases to meet emission control
standards. These catalysts are also used for the removal of odors, fumes and
pollutants generated by a variety of process industries including but not
limited to the painting of automobiles, appliances and other equipment; printing
processes; the manufacture of nitric acid and tires, in the curing of polymers;
and power generation sources. The petroleum refining catalyst products consist
of a variety of catalysts and processes used in the petroleum refining industry.
The principal products are zeolitic fluid cracking catalysts which are widely
used to provide economies in petroleum processing. The chemical catalysts
products consist of catalysts and sorbents 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 comprises two principal product groups:
the Paper Pigments and Chemicals Group, serving the paper industry and the
Specialty Minerals and Colors Group, serving the plastics, coatings, paint and
allied industries. Paper pigments and chemicals products consist primarily of
coating and extender pigments. Specialty minerals and colors kaolin based
products are used as pigments and extenders for a variety of purposes in the
manufacture of plastic, rubber, ink, ceramic, adhesive products and in paint.
The Engineered Materials and Industrial Commodities Management segment
includes the Engineered Materials Group, serving a broad spectrum of industries
and the Industrial Commodities Management Group, which is responsible for
precious and base metals sourcing and dealing, for managing the precious and
base metals requirements of the Company and its customers, and for power
marketing. The products of the Engineered Materials Group consist primarily of
metal-based materials such as temperature-sensing devices, precious metals
coating and electroplating materials, conductive pastes and powders and brazing
alloys. In June 1995, the Company formed a 50/50 joint venture with CLAL, a
Paris-based precious metal fabricator. The joint venture combined most of the
assets of the Engineered Materials business with CLAL. The Industrial
Commodities Management Group is responsible for procuring precious and base
metals to meet the requirements of the Company's operations and its customers.
The Industrial Commodities Management Group also engages in precious and base
metals dealing operations with industrial consumers, dealers, central banks,
miners and refiners. 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.
3
<PAGE>
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.
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 ENDED YEAR ENDED DECEMBER 31,
- --------------------- -------------------------------------------------------
MARCH 31, 1996 1995 1994 1993 1992 1991
- --------------------- --------- --------- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
5.28 6.05 6.79 (a) 7.26 5.45
</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 (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
4
<PAGE>
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 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 applicable
Indenture; (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 terms not inconsistent with
the provisions of the applicable Indenture, 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
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), 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 $50,000,000 or
any default permitting the acceleration of Senior Indebtedness in an aggregate
amount of at least $50,000,000 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
5
<PAGE>
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.
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
6
<PAGE>
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 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 either before or after
the effective date of any such transaction (i) to the retirement of indebtedness
of the Company or any Subsidiary (other than securities of any series at the
time outstanding) or (ii) to the redemption of Senior Debt Securities of any
series at the time outstanding, if permissible under the Indenture and the terms
of Securities of such series, at a redemption price equal to the principal
amount thereof plus the then applicable premium, if any, together with accrued
interest, if any, 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 consolidated 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 Senior 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 and investments exceeds the carrying value of those metals on the
consolidated books of account of the Company over (ii) the consolidated
liabilities (including tax and other proper accruals but excluding the
accumulated postretirement benefit obligation resulting from the application of
the provisions of FAS No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions") 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), but
in no event shall "Lien" include any defeasance pursuant to Article 8 of the
Senior Indenture. 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
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"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, the Depositary identified in the Prospectus
Supplement relating to such series. Global Securities will be issued in
registered form and in either temporary or permanent form. Unless and until it
is exchanged in whole or in part for Debt Securities in permanent 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 Debt Securities represented by such 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, premium, if any, 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 holder 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, premium, if any, 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
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Debt Securities or 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 the principal of, or premium, if
any, or any interest on, any of the Debt Securities is payable in any foreign or
composite currency, the restrictions, elections, tax consequences, specific
terms and other information with respect to such Debt Securities and such
foreign or composite currency will be specified in the applicable Prospectus
Supplement.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indentures provide that the Company may not consolidate with or merge
into any other person or transfer all or substantially all of its assets to any
person, unless (i) the person is organized under the laws of the United States
or a State thereof, (ii) the person assumes by supplemental indenture all
obligations of the Company under the applicable Indenture and the Debt
Securities and any coupons issued under such Indenture; (iii) immediately after
giving effect to such transaction, no Event of Default, and no event which,
after notice or passage of time would become an Event of Default, exists; and
(iv) if, as a result of any such transaction, any property or assets of the
Company would become subject to a mortgage, pledge, lien, security interest or
other encumbrance which would not be permitted by the Senior Indenture, then the
Company or such person, as the case may be, secures the Senior Debt Securities
equally and ratably with or prior to all obligations secured by 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 Securities of that series or in the
applicable Indenture 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 $50,000,000 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 at
least 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.
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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.
MODIFICATION OF INDENTURES
Unless the resolution establishing the terms of a series otherwise provides,
the applicable Indenture and the Debt Securities of any 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 the Debt Securities of a series may be waived with the
consent of the holders of a majority in principal amount of the Debt Securities
of such 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, bearer securities, securityholder lists, compensation and
indemnity and replacement of the Trustee 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 a series and the applicable Indenture ("legal
defeasance"). The Company at any time may terminate its obligations with respect
to the Debt Securities of a 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, the Debt Securities
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of a series may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, the Debt Securities of a
series may not be accelerated as a result of noncompliance with the covenants
described under "Covenants."
To exercise either option as to the Debt Securities of a series, the Company
must irrevocably 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 Debt Securities 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 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 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 next succeeding
interest payment date on the principal amount so converted
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(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
above. 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.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 350,000,000 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.
As of June 30, 1996, there were 143,883,435 shares of Common Stock outstanding.
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 Chemical Mellon Shareholder Services L.L.C.
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 this 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 shares
of
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Common Stock (including at least 50% of the outstanding shares of 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
shares of Common Stock (including at least 50% of the outstanding shares of
Common Stock held by stockholders other than a 5% beneficial owner).
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 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 such provisions 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,
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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 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 of Engelhard as of December 31, 1995 and
1994 and the consolidated statements of earnings, shareholders' equity and cash
flows of Engelhard for each of the three years in the period ended December 31,
1995, 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.
The consolidated balance sheet of Mearl Corporation as of December 31, 1995
and the consolidated statements of income, shareholders' equity and cash flows
of Mearl Corporation for the year ended December 31, 1995, 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.
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