<PAGE>
Filed pursuant to Rule 424(b)(5)
Registration No. 33-62415
PROSPECTUS SUPPLEMENT
(To Prospectus dated January 23, 1997)
$400,000,000
FMC Corporation LOGO
MEDIUM-TERM NOTES, SERIES A
----------------
Due More Than Nine Months From Date of Issue
----------------
FMC Corporation (the "Company") may offer from time to time its Medium-Term
Notes, Series A (the "Notes"), at an aggregate initial public offering price of
up to U.S. $400,000,000, or the equivalent thereof in other currencies,
including composite currencies such as the European Currency Unit (the
"Specified Currency"). See "Important Currency Exchange Information." Such
aggregate offering price is subject to reduction as a result of the sale by the
Company of certain other Offered Securities. See "Plan of Distribution." The
interest rate on each Note will be either a fixed rate established by the
Company at the date of issue of such Note, which may be zero in the case of
certain Original Issue Discount Notes, or a floating rate as set forth therein
and specified in the applicable Pricing Supplement. A Note bearing interest at
a fixed rate may pay a level amount in respect of both interest and principal
amortized over the life of the Note (an "Amortizing Note").
Interest on each Note is payable on each Interest Payment Date (as defined
below) specified in the applicable Pricing Supplement. Each Note will mature on
any day more than nine months from the date of issue, as set forth in the
applicable Pricing Supplement. See "Description of Notes." Unless otherwise
specified in the applicable Pricing Supplement, the Notes may not be redeemed
by the Company or the holder prior to maturity and will be issued in fully
registered form in denominations of $1,000 (or, in the case of Notes not
denominated in U.S. dollars, the equivalent thereof in the Specified Currency,
rounded to the nearest 1,000 units of the Specified Currency) or any amount in
excess thereof which is an integral multiple or $1,000 (or, in the case of
Notes not denominated in U.S. dollars, 1,000 units of the Specified Currency).
Any terms relating to Notes being denominated in foreign currencies or
composite currencies will be set forth in the applicable Pricing Supplement.
Each Note will be represented either by a Global Security registered in the
name of a nominee of The Depository Trust Company, as Depository (a "Global
Note"), or by a certificate issued in definitive form (a "Definitive Note"), as
set forth in the applicable Pricing Supplement. Interests in Global Securities
representing Global Notes will be shown on, and transfer thereof will be
effected only through, records maintained by the Depository (with respect to
participants' interests) and its participants. Global Notes will not be
issuable as Definitive Notes except under the circumstances described in the
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,
ANY SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE
----------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (2)(3)
------------ ------------------- -------------------------
<S> <C> <C> <C>
Per Note............ 100% .125%-.750% 99.875%-99.250%
Total (4)........... $400,000,000 $500,000-$3,000,000 $399,500,000-$397,000,000
</TABLE>
- --------
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Company issues
any Note at a discount from or at a premium over its principal amount,
the Price to Public of any Note issued at a discount or premium will
be set forth in the applicable Pricing Supplement.
(2) The commission payable to an Agent for each Note sold through such
Agent shall range from .125% to .750% of the principal amount of such
Note, provided, however, that commissions with respect to Notes
maturing more than thirty years from the date of issue will be
negotiated. The Company may also sell Notes to an Agent as principal
at negotiated discounts, for resale to investors and other purchasers.
(3) Before deducting expenses payable by the Company estimated at
$700,000.
(4) Or the equivalent thereof in other currencies including composite
currencies.
----------------
Offers to purchase the Notes are being solicited from time to time by Morgan
Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and Salomon Brothers
Inc (individually an "Agent" and collectively, the "Agents"), on behalf of the
Company. The Agents have agreed to use reasonable efforts to solicit purchases
of such Notes. The Company may also sell Notes to an Agent acting as principal
for its own account or otherwise, to be determined by such Agent. No
termination date for the offering of the Notes has been established. The
Company or an Agent may reject any order in whole or in part. The Notes will
not be listed on any securities exchange, and there can be no assurance that
the Notes offered hereby will be sold or that there will be a secondary market
for the Notes. See "Plan of Distribution."
----------------
MORGAN STANLEY & CO.
Incorporated
J.P. MORGAN & CO.
SALOMON BROTHERS INC
January 23, 1997
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT (INCLUDING THE ACCOMPANYING PRICING
SUPPLEMENT) AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE AGENTS. THIS PROSPECTUS SUPPLEMENT (INCLUDING
THE ACCOMPANYING PRICING SUPPLEMENT) AND THE ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT (INCLUDING THE ACCOMPANYING PRICING SUPPLEMENT) AND
THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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PROSPECTUS SUPPLEMENT
<S> <C>
Important Currency Exchange Information.................................... S-2
Description of Notes....................................................... S-3
Foreign Currency Risks..................................................... S-17
United States Federal Taxation............................................. S-19
Plan of Distribution....................................................... S-28
Validity of Notes.......................................................... S-29
PROSPECTUS
Available Information...................................................... 2
Documents Incorporated by Reference........................................ 3
The Company................................................................ 4
Use of Proceeds............................................................ 5
Ratio of Earnings to Fixed Charges......................................... 5
General Description of the Offered Securities.............................. 5
Description of the Common Stock............................................ 5
Description of the Preferred Stock......................................... 7
Description of Depository Shares........................................... 8
Description of the Debt Securities......................................... 11
Description of the Warrants to Purchase Common Stock or Preferred Stock.... 20
Description of the Warrants to Purchase Debt Securities.................... 22
Plan of Distribution....................................................... 23
Legal Matters.............................................................. 24
Experts.................................................................... 24
</TABLE>
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IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in U.S. dollars, and payments
of principal, premium, if any, and interest on the Notes will also be made in
U.S. dollars, unless the applicable Pricing Supplement provides that
purchasers are instead required to pay for the Notes in a Specified Currency,
and/or that payments of principal, premium, if any, and interest on such Notes
will be made in a Specified Currency. Currently, there are limited facilities
in the United States for the conversion of U.S. dollars into foreign
currencies and vice versa. In addition, most banks do not currently offer non-
U.S. dollar denominated checking or savings account facilities in the United
States. Accordingly, unless otherwise specified in a Pricing Supplement or
unless alternative arrangements are made, payment of principal, premium, if
any, and interest on Notes in a Specified Currency other than U.S. dollars
will be made to an account at a bank outside the United States. See
"Description of Notes" and "Foreign Currency Risks."
S-2
<PAGE>
If the applicable Pricing Supplement provides for payments of principal of
and interest on a non-U.S. dollar denominated Note to be made in U.S. dollars
or for payments of principal of and interest on a U.S. dollar denominated Note
to be made in a Specified Currency other than U.S. dollars, the conversion of
the Specified Currency into U.S. dollars or U.S. dollars into the Specified
Currency, as the case may be, will be handled by the entity appointed by the
Company to act as the exchange rate agent (the "Exchange Rate Agent"). On the
date hereof, the Exchange Rate Agent is Harris Trust and Savings Bank. The
costs of such conversion will be borne by the holder of a Note through
deductions from such payments.
Reference herein to "U.S. dollars" or "U.S. $" or "$" are to the currency of
the United States of America.
----------------
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Senior Debt Securities
set forth in the Prospectus, to which reference is hereby made. The particular
terms of the Notes sold pursuant to any pricing supplement (a "Pricing
Supplement") will be described therein. The terms and conditions set forth in
"Description of Notes" will apply to each Note unless otherwise specified in
the applicable Pricing Supplement and in such Note.
If any Note is not to be denominated in U.S. dollars, the applicable Pricing
Supplement will specify the currency or currencies, including composite
currencies such as the European Currency Unit ("ECU"), in which the principal,
premium, if any, and interest, if any, with respect to such Note are to be
paid, along with any other terms relating to the non-U.S. dollar denomination,
including exchange rates for the Specified Currency as against the U.S. dollar
at selected times during the last five years, and any exchange controls
affecting such Specified Currency. See "Foreign Currency Risks."
GENERAL
The Notes will be issued under the Indenture dated as of July 1, 1996, as
amended or supplemented from time to time (the "Senior Indenture"), between
the Company and Harris Trust and Savings Bank, as trustee (the "Trustee"). The
Notes issued under the Senior Indenture will constitute one series under such
Senior Indenture. The Notes will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Company. The Notes may be issued from time
to time in an aggregate principal amount of up to $400,000,000 or the
equivalent thereof in one or more foreign or composite currencies, subject to
reduction as a result of the sale by the Company of other Offered Securities
referred to in the accompanying Prospectus. For the purpose of this Prospectus
Supplement, (i) the principal amount of any Original Issue Discount Note (as
defined below) means the Issue Price (as defined below) of such Note and (ii)
the principal amount of any Note issued in a foreign currency or composite
currency means the U.S. dollar equivalent on the date of issue of the Issue
Price of such Note.
The Notes will mature on any day more than nine months from the date of
issue, as set forth in the applicable Pricing Supplement. Except as may be
provided in the applicable Pricing Supplement, the Notes will be issued only
in fully registered form. Unless otherwise provided in the applicable Pricing
Supplement, Notes will be denominated in Authorized Denominations (as defined
below).
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a Global Note or a Definitive Note. Except as set
forth in the Prospectus under "Description of the Debt Securities--Global Debt
Securities," Global Notes will not be issuable as Definitive Notes. The laws
of some states may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to own, transfer or pledge beneficial interests in Global
Securities. See "Description of Notes--Book-Entry System" below.
S-3
<PAGE>
The Notes may be presented for payment of principal and interest, transfer
of the Notes will be registrable and the Notes will be exchangeable at the
office or offices or agency maintained by the Company for such purpose;
provided that Global Notes will be exchangeable only in the manner and to the
extent set forth in the Prospectus under "Description of the Debt Securities--
Global Debt Securities." On the date hereof, the agent for the payment,
transfer and exchange of the Notes (the "Paying Agent") is Harris Trust and
Savings Bank, acting through its corporate trust office at 111 West Monroe
Street, Chicago, Illinois 60603.
The applicable Pricing Supplement will specify the price (the "Issue Price")
of each Note to be sold pursuant thereto (unless such Note is to be sold at
100% of its principal amount), the interest rate or interest rate formula,
maturity, currency or composite currency and principal amount and any other
terms on which each Note will be issued.
As used herein, the following terms shall have the meanings set forth below:
"Authorized Denominations" means, unless otherwise provided in the
applicable Pricing Supplement (i) with respect to Notes denominated in U.S.
dollars, U.S. $1,000 or any amount in excess thereof which is an integral
multiple of U.S. $1,000 and (ii) with respect to Notes denominated in
foreign or composite currencies, the equivalent of $1,000 (rounded to an
integral multiple of 1,000 units of such Specified Currency), or any amount
in excess thereof which is an integral multiple of 1,000 units of such
Specified Currency, as determined by reference to the noon dollar buying
rate in New York City for cable transfers of such Specified Currency
published by the Federal Reserve Bank of New York (the "Market Exchange
Rate") on the Business Day (as defined below) immediately preceding the
date of issuance; provided, however, that in the case of ECU's, the Market
Exchange Rate shall be the rate of exchange determined by the Commission of
the European Communities (or any successor thereto) as published in the
Official Journal of the European Communities, or any successor publication,
on the Business Day immediately preceding the date of issuance.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New
York or Chicago, Illinois and (i) with respect to LIBOR Notes (as defined
below), is also a London Banking Day, (ii) with respect to Notes
denominated in a Specified Currency other than U.S. dollars, Australian
dollars or ECUs, in the principal financial center of the country of the
Specified Currency, (iii) with respect to Notes denominated in Australian
dollars, in Sydney and (iv) with respect to Notes denominated in ECUs, that
is not a non-ECU clearing day, as determined by the ECU Banking Association
in Paris.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable. Such Interest Payment Date shall be specified in the applicable
Pricing Supplement.
"London Banking Day" means any day on which dealings in deposits in the
Index Currency (as defined below) are transacted in the London interbank
market.
"Original Issue Discount Note" means any Note that provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to the Senior
Indenture.
The "Record Date" with respect to any Interest Payment Date shall be the
date 15 calendar days prior to such Interest Payment Date, whether or not
such date shall be a Business Day.
PAYMENT CURRENCY
If the applicable Pricing Supplement provides for payments of interest and
principal on a non-U.S. dollar denominated Note to be made, at the option of
the holder of such Note, in U.S. dollars, conversion of the Specified Currency
into U.S. dollars will be based on the highest bid quotation in The City of
New York received by the Exchange Rate Agent at approximately 11:00 A.M., New
York City time, on the second Business Day preceding the applicable payment
date from three recognized foreign exchange dealers (one of which may be the
S-4
<PAGE>
Exchange Rate Agent) for the purchase by the quoting dealer of the Specified
Currency for U.S. dollars for settlement on such payment date in the aggregate
amount of the Specified Currency payable to the holders of Notes and at which
the applicable dealer commits to execute a contract. If such bid quotations
are not available, payments will be made in the Specified Currency. All
currency exchange costs will be borne by the holders of Notes by deductions
from such payments.
Except as set forth below, if the principal of, premium, if any, or interest
on, any Note is payable in a Specified Currency other than U.S. dollars and
such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances
beyond the control of the Company or is no longer used by the government of
the country issuing such currency or for the settlement of transactions by
public institutions of or within the international banking community, then the
Company will be entitled to satisfy its obligations to holders of the Notes by
making such payments in U.S. dollars on the basis of the Market Exchange Rate
on the date of such payment or, if the Market Exchange Rate is not available
on such date, as of the most recent practicable date. Any payment made under
such circumstances in U.S. dollars where the required payment is in a
Specified Currency other than U.S. dollars will not constitute an Event of
Default.
If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or are no longer used in the European Monetary
System, then all payments in respect of such Note shall be made in U.S.
dollars until ECUs are again available or so used. The amount of each payment
in U.S. dollars shall be computed on the basis of the equivalent of the ECU in
U.S. dollars, determined as described below, as of the second Business Day
prior to the date on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date shall be determined
by the Company or the Exchange Rate Agent on the following basis. The
component currencies of the ECU for this purpose (the "Components") shall be
the currency amounts that were components of the ECU as of the last date on
which the ECU was used in the European Monetary System. The equivalent of the
ECU in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the Components. The U.S. dollar equivalent of each of the
Components shall be determined by the Company or the Exchange Rate Agent on
the basis of the most recently available Market Exchange Rates for such
Components.
If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that currency as a Component shall be
divided or multiplied in the same proportion. If two or more Components are
consolidated into a single currency, the amounts of those currencies as
Components shall be replaced by an amount in such single currency equal to the
sum of the appropriate amounts of the consolidated component currencies
expressed in such single currency. If any Component is divided into two or
more currencies, the amount of the original component currency shall be
replaced by the appropriate amounts of such two or more currencies, the sum of
which shall be equal to the amount of the original component currency.
All determinations referred to above made by the Company or its agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether or not the
date of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. The initial interest
payment on a Note will be made on the first Interest Payment Date falling
after the date the Note is issued; provided, however, that payments of
interest (or, in the case of an Amortizing Note, principal and interest) on a
Note issued less than 15 calendar days before an Interest Payment Date will be
paid on the next succeeding Interest Payment Date to the holder of record on
the Record Date with respect to such succeeding Interest Payment Date, unless
otherwise specified in the applicable Pricing Supplement. See "United States
Federal Taxation--Tax Consequences to United States Holders--Notes Issued with
Original Issue Discount" below.
S-5
<PAGE>
U.S. dollar payments of interest, other than interest payable at maturity
(or on the date of redemption or repayment, if a Note is redeemed or repaid by
the Company prior to maturity), will be made by check mailed to the address of
the person entitled thereto as shown on the Note register. U.S. dollar payment
of principal, premium, if any, and interest upon maturity, redemption or
repayment will be made in immediately available funds against presentation and
surrender of the Note. Notwithstanding the foregoing, (a) the Depository (as
defined below), as holder of Global Notes, shall be entitled to receive
payments of interest by wire transfer of immediately available funds and (b) a
holder of U.S. $10,000,000 (or the equivalent) or more in aggregate principal
amount of Definitive Notes having the same Interest Payment Date shall be
entitled to receive payments of interest by wire transfer of immediately
available funds upon written request to the Paying Agent, provided such
request is received not later than 15 calendar days prior to the applicable
Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of Global Notes denominated in a Specified Currency electing
to receive payments of principal or any premium or interest in a currency
other than U.S. dollars must notify the participant through which its interest
is held on or prior to the applicable Record Date, in the case of a payment of
interest, and on or prior to the sixteenth day prior to maturity, in the case
of principal or premium of such beneficial owner's election to receive all or
a portion of such payment in a Specified Currency. Such participant must
notify the Depository of such election on or prior to the third Business Day
after such Record Date. The Depository will notify the Paying Agent of such
election on or prior to the fifth Business Day after such Record Date. If
complete instructions are received by the participant and forwarded by the
participant to the Depository, and by the Depository to the Paying Agent, on
or prior to such dates, the beneficial owner will receive payments in the
Specified Currency by wire transfer of immediately available funds to an
account maintained by the payee with a bank located outside the United States;
otherwise the beneficial owner will receive payments in U.S. dollars.
Certain Notes, including Original Issue Discount Notes, may be considered to
be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant rate. See "United
States Federal Taxation--Tax Consequences to United States Holders--Notes
Issued with Original Issue Discount" below. Unless otherwise specified in the
applicable Pricing Supplement, if the principal of any Original Issue Discount
Note is declared to be due and payable immediately as described under
"Description of the Debt Securities--Events of Default" in the Prospectus, the
amount of principal due and payable with respect to such Note shall be limited
to the aggregate principal amount of such Note multiplied by the sum of its
Issue Price (expressed as a percentage of the aggregate principal amount) plus
the original issue discount amortized from the date of issue to the date of
declaration, which amortization shall be calculated using the "interest
method" (computed in accordance with generally accepted accounting principles
in effect on the date of declaration). Special considerations applicable to
any such Notes will be set forth in the applicable Pricing Supplement.
FIXED RATE NOTES
Each Note bearing interest at a fixed rate (a "Fixed Rate Note") will bear
interest from the date of issuance at the annual rate stated on the face
thereof, except as described below under "Extension of Maturity," until the
principal thereof is paid or made available for payment. Unless otherwise
specified in the applicable Pricing Supplement, such interest will be computed
on the basis of a 360-day year of twelve 30-day months. Unless otherwise
specified in the applicable Pricing Supplement, payments of interest on Fixed
Rate Notes other than Amortizing Notes will be made semiannually on each
Interest Payment Date specified in the Pricing Supplement and at maturity or
upon any earlier redemption or repayment. Payments of principal and interest
on Amortizing Notes, which are securities on which payments of principal and
interest are made in equal installments over the life of the security, will be
made either quarterly on each Interest Payment Date or semiannually on each
Interest Payment Date, as set forth in the applicable Pricing Supplement, and
at maturity or upon any earlier redemption or repayment. Payments with respect
to Amortizing Notes will be applied first to interest due and payable thereon
and then to the reduction of the unpaid principal amount thereof. A table
setting forth repayment information in respect of each Amortizing Note will be
provided to the original purchaser and will be available, upon request, to
subsequent holders.
S-6
<PAGE>
If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, the interest payment shall be made on the next day that is
a Business Day, and no interest on such payment shall accrue for the period
from and after the Interest Payment Date. If the maturity (or date of
redemption or repayment) of any Fixed Rate Note falls on a day that is not a
Business Day, the payment of interest and principal (and premium, if any) will
be made on the next succeeding Business Day, and no interest on such payment
shall accrue for the period from and after the maturity date (or date of
redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from
and including the date of issue or from and including the last date in respect
of which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be. The interest rates the Company will agree to
pay on newly issued Fixed Rate Notes are subject to change without notice by
the Company from time to time, but no such change will affect any Fixed Rate
Notes theretofore issued or that the Company has agreed to issue.
FLOATING RATE NOTES
Each Note bearing interest at a floating rate (a "Floating Rate Note") will
bear interest from the date of issuance until the principal thereof is paid or
made available for payment at a rate determined by reference to an interest
rate basis or formula (the "Base Rate"), which may be adjusted by a Spread
and/or Spread Multiplier (each as defined below). The applicable Pricing
Supplement will designate one or more of the following Base Rates as
applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate Note"), (b)
the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the Federal
Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the
Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury Rate
Note"), (g) the CMT Rate (a "CMT Rate Note") or (h) such other Base Rate or
interest rate formula as is set forth in such Pricing Supplement and in such
Floating Rate Note. The "Index Maturity" for any Floating Rate Note is the
period of maturity of the instrument or obligation from which the Base Rate is
calculated and will be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to
the specified Base Rate (i) plus or minus the Spread, if any, and/or (ii)
multiplied by the Spread Multiplier, if any. The "Spread" is the number of
basis points (one one-hundredth of a percentage point) specified in the
applicable Pricing Supplement to be added to or subtracted from the Base Rate
for such Floating Rate Note, and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement to be applied to the Base Rate
for such Floating Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any interest period
("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the
rate of interest which may accrue during any interest period ("Minimum
Interest Rate"). In addition to any Maximum Interest Rate that may be
applicable to any Floating Rate Note pursuant to the above provisions, the
interest rate on a Floating Rate Note will in no event be higher than the
maximum rate permitted by Illinois law, as the same may be modified by United
States law of general application. Under current Illinois law, no maximum rate
of interest would apply to the Notes.
Unless otherwise specified in the applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being
an "Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the Pricing Supplement, the Interest Reset Date
will be, in the case of Floating Rate Notes which reset daily, each Business
Day, in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week, except as provided below; in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September, and December; in the case of
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<PAGE>
Floating Rate Notes which reset semi-annually, the third Wednesday of two
months of each year, as specified in the applicable Pricing Supplement; and in
the case of Floating Rate Notes which reset annually, the third Wednesday of
one month of each year, as specified in the applicable Pricing Supplement;
provided, however, that (a) the interest rate in effect from the date of issue
to the first Interest Reset Date with respect to a Floating Rate Note will be
the initial interest rate set forth in the applicable Pricing Supplement (the
"Initial Interest Rate") and (b) unless otherwise specified in the applicable
Pricing Supplement the interest rate in effect for the ten calendar days
immediately prior to maturity, redemption or repayment will be that in effect
on the tenth calendar day preceding such maturity, redemption or repayment
date. If any Interest Reset Date for any Floating Rate Note would otherwise be
a day that is not a Business Day, such Interest Reset Date shall be postponed
to the next succeeding Business Day, except that in the case of a LIBOR Note,
if such Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the immediately preceding Business Day.
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in
the case of Floating Rate Notes with a daily, weekly or monthly Interest Reset
Date, on the third Wednesday of each month or on the third Wednesday of March,
June, September and December, as specified in the applicable Pricing
Supplement; (ii) in the case of Floating Rate Notes with a quarterly Interest
Reset Date, on the third Wednesday of March, June, September and December;
(iii) in the case of Floating Rate Notes with a semiannual Interest Reset
Date, on the third Wednesday of the two months specified in the applicable
Pricing Supplement; and (iv) in the case of Floating Rate Notes with an annual
Interest Reset Date, on the third Wednesday of the month specified in the
applicable Pricing Supplement. If any Interest Payment Date for any Floating
Rate Note would fall on a day that is not a Business Day with respect to such
Floating Rate Note, such Interest Payment Date will be postponed to the
following day that is a Business Day with respect to such Floating Rate Note,
except that, in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Payment Date shall be the immediately
preceding day that is a Business Day with respect to such LIBOR Note. If the
maturity date or any earlier redemption or repayment date of a Floating Rate
Note would fall on a day that is not a Business Day, the payment of principal,
premium, if any, and interest will be made on the next succeeding Business
Day, and no interest on such payment shall accrue for the period from and
after such maturity, redemption or repayment date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from
and including the date of issue or from and including the last date to which
interest has been paid to, but excluding, the Interest Payment Date or
maturity date or date of redemption or repayment.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement,
the interest factor for each such day is computed by dividing the interest
rate applicable to such day by 360, in the case of CD Rate Notes, Commercial
Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate Notes
or by the actual number of days in the year, in the case of Treasury Rate
Notes and CMT Rate Notes. All percentages used in or resulting from any
calculation of the rate of interest on a Floating Rate Note will be rounded,
if necessary, to the nearest one hundred-thousandth of a percentage point,
with five one-millionths of a percentage point rounded upward, and all dollar
amounts used in or resulting from such calculation on Floating Rate Notes will
be rounded to the nearest cent, with one-half cent rounded upward. The
interest rate in effect on any Interest Reset Date will be the applicable rate
as reset on such date. The interest rate applicable to any other day is the
interest rate from the immediately preceding Interest Reset Date (or, if none,
the Initial Interest Rate).
Unless otherwise stated in the applicable Pricing Supplement, the
calculation agent (the "Calculation Agent") with respect to any issue of
Floating Rate Notes shall be Harris Trust and Savings Bank. Upon the request
of the holder of any Floating Rate Note, the Calculation Agent will provide
the interest rate then in effect and, if determined, the interest rate that
will become effective on the next Interest Reset Date with respect to such
Floating Rate Note.
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The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes and Prime Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day preceding
such Interest Reset Date. The Interest Determination Date pertaining to an
Interest Reset Date for a Treasury Rate Note will be the day of the week in
which such Interest Reset Date falls on which Treasury bills would normally be
auctioned. Treasury bills are normally sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is normally held
on the following Tuesday, but such auction may be held on the preceding
Friday. If, as the result of a legal holiday, an auction is so held on the
preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week.
If an auction falls on a day that is an Interest Reset Date, such Interest
Reset Date will be the next following Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest
Payment Date or Maturity Date, as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected
Interest Rates," or any successor publication of the Board of Governors of the
Federal Reserve System ("H.15(519)") under the heading "CDs (Secondary
Market)," or, if not so published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate
will be the rate on such Interest Determination Date for negotiable
certificates of deposit of the Index Maturity designated in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in its
daily statistical release "Composite 3:30 P.M. Quotations for U.S. Government
Securities" (the "Composite Quotations") under the heading "Certificates of
Deposit." If such rate is not yet published in either H.15(519) or the
Composite Quotations by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate on such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 A.M., New
York City time, on such Interest Determination Date for certificates of
deposit in an amount that is representative for a single transaction at that
time with a remaining maturity closest to the Index Maturity designated in the
Pricing Supplement of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money
center banks; provided, however, that if the dealers selected as aforesaid by
the Calculation Agent are not quoting as set forth above, the CD Rate in
effect for the applicable period will be the same as the CD Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the CD Rate Notes for which such
CD Rate is being determined shall be the Initial Interest Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes
and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on such date for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement, as
such rate shall be published in H.15(519), under the heading "Commercial
Paper." In the event that such rate is not published by 9:00 A.M., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, then the Commercial Paper Rate shall be the Money Market Yield of the
rate on such Interest Determination Date for commercial paper of the specified
Index Maturity as published in Composite Quotations under the heading
"Commercial Paper." If by 3:00 P.M., New York City time, on such Calculation
Date such rate is not yet available in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate shall be the Money Market Yield of
the arithmetic mean of the offered rates as of 11:00 A.M., New York City time,
on such Interest Determination Date of three leading dealers of commercial
paper in The City of New York selected by the Calculation Agent for commercial
paper of the specified Index Maturity, placed for an industrial issuer whose
bond rating is "AA" or the equivalent, from a nationally recognized
statistical rating agency; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting offered rates as mentioned
in this sentence, the Commercial Paper Rate in effect for the applicable
period will be the same as the Commercial Paper Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the Commercial Paper Rate Notes for
which such Commercial Paper Rate is being determined shall be the Initial
Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = ------------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days for which interest is being calculated.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date,
the rate on such date for Federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)" or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate will be the rate on such Interest
Determination Date as published in the Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not yet published in either
H.15(519) or the Composite Quotations by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate for such Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight Federal funds, as of 9:00 A.M., New York City time,
on such Interest Determination Date, arranged by three leading brokers of
Federal funds transactions in The City of New York selected by the Calculation
Agent; provided, however, that if the brokers selected as aforesaid by the
Calculation Agent are not quoting as set forth above, the Federal Funds Rate
in effect for the applicable period will be the same as the Federal Funds Rate
for the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the Federal Funds Rate
Notes for which such Federal Funds Rate is being determined shall be the
Initial Interest Rate).
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the LIBOR Notes and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Determination Date will be determined by the Calculation Agent
as follows:
(i) As of the Interest Determination Date, LIBOR will be either: (a) if
"LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified Designated LIBOR
Page (as defined below) by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, that appear on the Designated
LIBOR Page as of 11:00 A.M., London time, on that Interest Determination
Date, if at least two such offered rates appear (unless, as aforesaid, only
a single rate is required) on such Designated LIBOR Page, or (b) if "LIBOR
Telerate" is specified in the applicable Pricing Supplement, the rate for
deposits in the Index Currency (as defined below) having the Index Maturity
designated in the applicable Pricing Supplement, commencing on the second
London Banking Day immediately following such Interest Determination Date,
that appears on such Designated LIBOR Page as of 11:00 A.M., London time,
on that Interest Determination Date. If fewer than two offered rates appear
(if "LIBOR Reuters" is specified in the applicable Pricing Supplement) or
no rate appears (if "LIBOR Telerate" is specified in the applicable Pricing
Supplement), LIBOR in respect of the related Interest Determination Date
will be determined as if the parties had specified the rate described in
clause (ii) below.
(ii) With respect to an Interest Determination Date on which fewer than
two offered rates appear (if "LIBOR Reuters" is specified in the applicable
Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified in
the applicable Pricing Supplement), the Calculation Agent will request the
principal London offices of each of four major reference banks in the
London interbank market, as selected by the Calculation Agent, to provide
the Calculation Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, to prime banks in the London
interbank market at approximately 11:00 A.M., London time, on such Interest
Determination Date and in a principal amount of not less than $1,000,000
(or the equivalent in the Index Currency, if the Index Currency is not the
U.S. dollar) that is representative of a single transaction in such Index
Currency in such market at such time. If at least two such quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M. (or such
other time specified in the applicable Pricing Supplement), in the
applicable principal financial center for the country of the Index Currency
on such Interest Determination Date, by three major banks in such principal
financial center selected by the Calculation Agent for loans in the Index
Currency to leading European banks, having the Index Maturity designated in
the applicable Pricing Supplement and in a principal amount of not less
than $1,000,000 commencing on the second London Banking Day immediately
following such Interest Determination Date (or the equivalent in the Index
Currency, if the Index Currency is not the U.S. dollar) that is
representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
in effect for the applicable period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the LIBOR Notes for
which such LIBOR is being determined shall be the Initial Interest Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable
Pricing Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency, or (b) if
"LIBOR Telerate" is designated in the applicable Pricing Supplement, the
display on the Dow Jones Telerate Service for the purpose of displaying
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the London interbank rates of major banks for the applicable Index Currency.
If neither LIBOR Reuters nor LIBOR Telerate is specified in the applicable
Pricing Supplement, LIBOR for the applicable Index Currency will be determined
as if LIBOR Telerate had been specified. If the U.S. dollar is the Index
Currency, LIBOR will be determined as if Page 3750 had been specified. "Page
3750" means the display designated as page "3750" on the Dow Jones Telerate
Service (or such other page as may replace the 3750 page on that service or
such other service or services as may be nominated by the British Bankers'
Association for the purposes of displaying London interbank offered rates for
U.S. dollar deposits).
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Maximum Interest Rate and the Maximum Interest Rate, if
any) specified in the Prime Rate Notes and in the applicable Pricing
Supplement.)
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set
forth in H.15(519) for such date opposite the caption "Bank Prime Loan." If
such rate is not yet published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Prime
Rate for such Interest Determination Date will be the arithmetic mean of the
rates of interest publicly announced by each bank named on the Reuters Screen
NYMF Page (as defined below) as such bank's prime rate or base lending rate as
in effect for such Interest Determination Date as quoted on the Reuters Screen
NYMF Page on such Interest Determination Date, or, if fewer than four such
rates appear on the Reuters Screen NYMF Page for such Interest Determination
Rate, the rate will be the arithmetic mean of the prime rates quoted on the
basis of the actual number of days in the year divided by 360 as of the close
of business on such Interest Determination Date by at least two of the three
major money center banks in The City of New York selected by the Calculation
Agent from which quotations are requested. If fewer than two quotations are
provided, the Prime Rate shall be calculated by the Calculation Agent and
shall be determined as the arithmetic mean on the basis of the prime rates in
The City of New York by the appropriate number of substitute banks or trust
companies organized and doing business under the laws of the United States, or
any State thereof, in each case having total equity capital of at least U.S.
$500 million and being subject to supervision or examination by federal or
state authority, selected by the Calculation Agent to quote such rate or
rates; provided, however, that if the banks or trust companies selected as
aforesaid by the Calculation Agent are not quoting as set forth above, the
"Prime Rate" in effect for the applicable period will be the same as the Prime
Rate for the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the rate of interest payable on the Prime Rate
Notes for which such Prime Rate is being determined shall be the Initial
Interest Rate). "Reuters Screen NYMF Page" means the display designated as
Page "NYMF" on the Reuters Monitor Money Rates Services (or such other page as
may replace the NYMF Page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the Maximum Interest Rate,
if any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such date of direct obligations of the United
States ("Treasury Bills") having the Index Maturity designated in the
applicable Pricing Supplement, as published in H.15(519) under the heading
"Treasury Bills auction average (investment)" or, if not so published by 9:00
A.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination
Date (expressed as a bond equivalent, on the basis of a year of 365 or 366
days as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the auction of Treasury Bills having the Index Maturity designated in the
applicable Pricing Supplement are not published or reported as provided above
by
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3:00 P.M., New York City time, on such Calculation Date or if no such auction
is held on such Interest Determination Date, then the Treasury Rate shall be
calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) calculated using the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New York
City time, on such Interest Determination Date, of three leading primary
United States government securities dealers selected by the Calculation Agent
for the issue of Treasury Bills with a remaining maturity closest to the Index
Maturity designated in the applicable Pricing Supplement; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting bid rates as mentioned in this sentence, the Treasury Rate for such
Interest Reset Date will be the same as the Treasury Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the Treasury Rate Notes for which the
Treasury Rate is being determined shall be the Initial Interest Rate).
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed on
the Designated CMT Telerate Page (as defined below) under the caption " . . .
Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . .
Mondays Approximately 3:45 p.m.," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page
is 7055, the rate on such Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week or the month, as applicable,
ended immediately preceding the week in which the related Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such Interest Determination Date will
be such Treasury Constant Maturity rate for the Designated CMT Maturity Index
as is published in the relevant H.15(519). If such rate is no longer
published, or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate for such Interest Determination
Date will be such Treasury Constant Maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the Designated CMT
Maturity Index) for the Interest Determination Date with respect to such
Interest Reset Date as may then be published by either the Board of Governors
of the Federal Reserve System or the United States Department of the Treasury
that the Calculation Agent determines to be comparable to the rate formerly
displayed on the Designated CMT Telerate Page and published in the relevant
H.15(519). If such information is not provided by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for the Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time on
the Interest Determination Date reported, according to their written records,
by three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include the Agents or
affiliates of the Agents) selected by the Calculation Agent (from five such
Reference Dealers selected by the Calculation Agent, after consultation with
the Company, and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury notes") with an
original maturity of approximately the Designated CMT Maturity Index and
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent cannot obtain three such Treasury
notes quotations, the CMT Rate for such Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on the Interest Determination
Date of three Reference Dealers in The City of New York (from five such
Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the
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lowest)), for Treasury notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100,000,000. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate for such Interest Reset Date will be the same
as the CMT Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on the
CMT Rate Notes for which the CMT Rate is being determined shall be the Initial
Interest Rate). If two Treasury notes with an original maturity as described
in the second preceding sentence have remaining terms to maturity equally
close to the Designated CMT Maturity Index, the quotes for the Treasury note
with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in an applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in an applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate
(calculated with reference to a Base Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Renewable Notes and in the applicable
Pricing Supplement.
The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates
(each such Interest Payment Date, an "Election Date"), the maturity of the
Renewable Notes will be extended to the Interest Payment Date occurring twelve
months after such Election Date, unless the holder thereof elects to terminate
the automatic extension of the maturity of the Renewable Notes or of any
portion thereof having a principal amount of $1,000 or any multiple of $1,000
in excess thereof by delivering a notice to such effect to the Paying Agent
not less than nor more than a number of days to be specified in the applicable
Pricing Supplement prior to such Election Date. Such option may be exercised
with respect to less than the entire principal amount of the Renewable Notes;
provided that the principal amount for which such option is not exercised is
at least $1,000 or any larger amount that is an integral multiple of $1,000.
Notwithstanding the foregoing, the maturity of the Renewable Notes may not be
extended beyond the Final Maturity Date (as hereafter defined), as specified
in the applicable Pricing Supplement. If the holder elects to terminate the
automatic extension of the maturity of any portion of the principal amount of
the Renewable Notes and such election is not revoked as described below, such
portion will become due and payable on the Interest Payment Date falling six
months (unless another period is specified in the applicable Pricing
Supplement) after the Election Date prior to which the holder made such
election.
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $1,000
or any multiple of $1,000 in excess thereof by delivering a notice to such
effect to the Paying Agent on any day following the effective date of the
election to terminate the automatic extension of maturity and prior to the
date 15 days before the date on which such portion would
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otherwise mature. Such a revocation may be made for less than the entire
principal amount of the Renewable Notes for which the automatic extension of
maturity has been terminated; provided that the principal amount of the
Renewable Notes for which the automatic extension of maturity has been
terminated and for which such a revocation has not been made is at least
$1,000 or any larger amount that is an integral multiple of $1,000.
Notwithstanding the foregoing, a revocation may not be made during the period
from and including a Record Date to but excluding the immediately succeeding
Interest Payment Date.
An election to terminate the automate extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent
holder.
The Renewable Notes may be redeemed in whole or in part at the option of the
Company on the Interest Payment Dates in each year specified in the applicable
Pricing Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement, at a redemption price as stated in the
applicable Pricing Supplement, together with accrued and unpaid interest to
the date of redemption. Notwithstanding anything to the contrary in this
Prospectus Supplement, notice of redemption will be provided by mailing a
notice of such redemption to each holder by first class mail, postage prepaid,
at least 180 days prior to the date fixed for redemption.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors
(the "Indexed Notes"), as indicated in the applicable Pricing Supplement.
Holders of Indexed Notes may receive a principal amount at maturity that is
greater than or less than the face amount of such Notes depending upon the
fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value,
rate or price of the specified index and the face amount of the Indexed Note
and certain additional United States federal tax considerations will be
described in the applicable Pricing Supplement.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note (other than an Amortizing Note)
will indicate whether the Company has the option to extend the maturity of
such Note for one or more periods of one or more whole years (each an
"Extension Period") up to but not beyond the date (the "Final Maturity Date")
set forth in such Pricing Supplement. If the Company has such option with
respect to any such Note (an "Extendible Note"), the following procedures will
apply, unless modified as set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to an Extendible Note by
notifying the Paying Agent of such exercise at least 45 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has
already been extended, prior to the maturity date then if effect (an "Extended
Maturity Date"). No later than 38 days prior to the Original Maturity Date or
an Extended Maturity Date, as the case may be (each, a "Maturity Date"), the
Paying Agent will mail to the holder of such Note a notice (the "Extension
Notice") relating to such Extension Period, by first class mail, postage
prepaid, setting forth (a) the election of the Company to extend the maturity
of such Note; (b) the new Extended Maturity Date; (c) the interest rate
applicable to the Extension Period (which, in the case of a Floating Rate
Note, will be calculated with reference to a Base Rate and the Spread and/or
Spread Multiplier, if any); and (d) the provisions, if any, for redemption
during the Extension Period, including the date or dates on which, the period
or periods during which and the price or prices at which such redemption may
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occur during the Extension Period. Upon the mailing by the Paying Agent of an
Extension Notice to the holder of an Extendible Note, the maturity of such
Note shall be extended automatically, and, except as modified by the Extension
Notice and as described in the next paragraph, such Note will have the same
terms it had prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 A.M., New York City
time, on the twentieth calendar day prior to the Maturity Date then in effect
for an Extendible Note (or, if such day is not a Business Day, not later than
10:00 A.M., New York City time, on the immediately succeeding Business Day),
the Company may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period by causing the Paying Agent to send notice of such higher
interest rate (or, in the case of a Floating Rate Note, a higher Spread and/or
Spread Multiplier, if any) to the holder of such Note by first class mail,
postage prepaid, or by such other means as shall be agreed between the Company
and the Paying Agent. Such notice shall be irrevocable. All Extendible Notes
with respect to which the Maturity Date is extended in accordance with an
Extension Notice will bear such higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period, whether or not tendered for repayment.
If the Company elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Company to repay such
Note on the Maturity Date then in effect at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date, unless such
Note is an Original Issue Discount Note, in which case the Pricing Supplement
will specify the amount payable upon such repayment. In order for an
Extendible Note to be repaid on such Maturity Date, the holder thereof must
follow the procedures set forth below under "Repayment at the Noteholders'
Option; Repurchase" for optional repayment, except that the period for
delivery of such Note or notification to the Paying Agent shall be at least 25
but not more than 35 days prior to the Maturity Date then in effect and except
that a holder who has tendered an Extendible Note for repayment pursuant to an
Extension Notice may, by written notice to the Paying Agent, revoke any such
tender for repayment until 3:00 P.M., New York City time, on the twentieth
calendar day prior to the Maturity Date then in effect (or, if such day is not
a Business Day, until 3:00 P.M., New York City time, on the immediately
succeeding Business Day).
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Global Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, maturity date and other
terms, if any, will be represented by one or more Global Securities, and all
Floating Rate Global Notes having the same Issue Date, Initial Interest Rate,
Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity,
Spread and/or Spread Multiplier, if any, Minimum Interest Rate, if any,
Maximum Interest Rate, if any, maturity date and other terms, if any, will be
represented by one or more Global Securities. Each Global Security
representing Global Notes will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York (the "Depository"), and
registered in the name of a nominee of the Depository. Global Notes will not
be exchangeable for Definitive Notes, except under the circumstances described
in the Prospectus under "Description of the Debt Securities--Global Debt
Securities." Definitive Notes will not be exchangeable for Global Notes and
will not otherwise be issuable as Global Notes.
A further description of the Depository's procedures with respect to Global
Securities representing Global Notes is set forth in the Prospectus under
"Description of the Debt Securities--Global Debt Securities." The Depository
has confirmed to the Company, the Agents and the Trustee that it intends to
follow such procedures.
OPTIONAL REDEMPTIONS
The Pricing Supplement will indicate that the Notes cannot be redeemed prior
to maturity or will indicate the terms on which the Notes will be redeemable
at the option of the Company. Notice of redemption will be provided by mailing
a notice of such redemption to each holder by first class mail, postage
prepaid, at least 30
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days and not more than 60 days prior to the date fixed for redemption to the
respective address of each holder as that address appears upon the books
maintained by the Paying Agent. Unless otherwise provided in the applicable
Pricing Supplement, the Notes, except for Amortizing Notes, will not be
subject to any sinking fund.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment, unless such Note is
an Original Issue Discount Note, in which case the Pricing Supplement will
specify the amount payable upon such repayment.
In order for such a Note to be repaid, the Paying Agent must receive at
least 30 days but not more than 60 days prior to the repayment date (i) the
Note with the form entitled "Option to Elect Repayment" on the reverse of the
Note duly completed or (ii) a telegram, telex, facsimile transmission or a
letter from a member of a national securities exchange, or the National
Association of Securities Dealers, Inc. (the "NASD") or a commercial bank or
trust company in the United States setting forth the name of the holder of the
Note, the principal amount of the Note, the principal amount of the Note to be
repaid, the certificate number or a description of the tenor and terms of the
Note, a statement that the option to elect repayment is being exercised
thereby and a guarantee that the Note to be repaid, together with the duly
completed form entitled "Option to Elect Repayment" on the reverse of the
Note, will be received by the Paying Agent not later than the fifth Business
Day after the date of such telegram, telex, facsimile transmission or letter,
provided, however, that such telegram, telex, facsimile transmission or letter
shall only be effective if such Note and form duly completed are received by
the Paying Agent by such fifth Business Day. Except in the case of Renewable
Notes or Extendible Notes, and unless otherwise specified in the applicable
Pricing Supplement, exercise of the repayment option by the holder of a Note
will be irrevocable. The repayment option may be exercised by the holder of a
Note for less than the principal amount of the Note but, in that event, the
principal amount of the Note remaining outstanding after repayment must be an
Authorized Denomination.
If a Note is represented by a Global Security, the Depository's nominee will
be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depository's
nominee will timely exercise a right to repayment with respect to a particular
Note, the beneficial owner of such Note must instruct the broker or other
direct or indirect participant through which it holds an interest in such Note
to notify the Depository of its desire to exercise a right to repayment.
Different firms have different deadlines for accepting instructions from their
customers and, accordingly, each beneficial owner should consult the broker or
other direct or indirect participant through which it holds an interest in a
Note in order to ascertain the deadline by which such an instruction must be
given in order for timely notice to be delivered to the Depository.
The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be
held or resold or surrendered to the relevant Trustee for cancellation.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
Any investment in Notes that are denominated in, or the payment of which is
related to the value of, a specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either
the U.S. or a foreign government. Such risks generally depend on economic and
political events over which the Company has no control. In recent years, rates
of exchange between U.S. dollars and certain foreign currencies have been
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highly volatile and such volatility may be expected to continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past
are not necessarily indicative, however, of fluctuations in such rate that may
occur during the term of any Note. Depreciation against the U.S. dollar of the
currency in which a Note is payable would result in a decrease in the
effective yield of such Note below its coupon rate and, in certain
circumstances, could result in a loss to the investor on a U.S. dollar basis.
In addition, depending on the specific terms of a currency linked Note,
changes in exchange rates relating to any of the currencies involved may
result in a decrease in its effective yield and, in certain circumstances,
could result in a loss of all or a substantial portion of the principal of a
Note to the investor.
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN CURRENCY OR
A COMPOSITE CURRENCY, AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS
TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN, OR THE PAYMENT
OF WHICH IS RELATED TO THE VALUE OF, SPECIFIED CURRENCIES OTHER THAN U.S.
DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, premium, if any, and interest on the Notes. Such persons should
consult their own counsel with regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the
availability of a specified foreign currency at the time of payment of
principal of, premium, if any, or interest on a Note. Even if there are no
actual exchange controls, it is possible that the Specified Currency for any
particular Note not denominated in U.S. dollars would not be available when
payments on such Note are due. In that event, the Company would make required
payments in U.S. dollars on the basis of the Market Exchange Rate on the date
of such payment, or if such rate of exchange is not then available, on the
basis of the Market Exchange Rate as of the most recent practicable date. See
"Description of Notes--Payment Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current
exchange controls, if any, and historic exchange rate information on such
currency or currency unit. The information contained therein shall constitute
a part of this Prospectus Supplement and is furnished as a matter of
information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the
future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of Illinois. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a court in the
United States, it is likely that such court would grant a judgment relating to
the Notes only in U.S. dollars.
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UNITED STATES FEDERAL TAXATION
The following is a summary of the principal United States federal income tax
consequences of ownership and disposition of the Notes to initial holders
purchasing Notes at their original issue. This summary is based on the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code"),
administrative pronouncements, judicial decisions and existing and proposed
Treasury Regulations, including regulations concerning the treatment of debt
instruments issued with original issue discount (the "OID Regulations"),
changes to any of which subsequent to the date of this Prospectus Supplement,
including with retroactive effect, may affect the tax consequences described
herein. This summary discusses only Notes held as capital assets within the
meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to a holder in light of his particular
circumstances or to holders subject to special rules, such as certain
financial institutions, tax-exempt organizations, regulated investment
companies, insurance companies, dealers in securities or foreign currencies,
persons holding Notes as a hedge against, or which are hedged against,
currency risks, or holders whose functional currency (as defined in Code
Section 985) is not the U.S. dollar. Additional United States federal income
tax considerations applicable to particular Notes may be set forth in the
applicable Pricing Supplement. This summary does not discuss Original Issue
Discount Notes which qualify as "applicable high-yield discount obligations"
under Section 163(i) of the Code. Finally, this Summary is subject to the
requirement that a taxpayer obtain the consent of the Internal Revenue Service
before changing a method of tax accounting. Holders of Original Issue Discount
Notes which are "applicable high-yield discount obligations" may be subject to
special rules. Persons considering the purchase, ownership or disposition of
Notes should consult their tax advisors with regard to the application of the
United States federal income tax laws to their particular situations as well
as any tax consequences arising under the laws of any state, local or foreign
taxing jurisdiction.
As used herein, the term "United States Holder" means an owner of a Note for
United States federal income tax purposes (including, where applicable, a
beneficial owner) that is (i) for United States federal income tax purposes a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source,
(iv) a "United States trust" (as defined below) or (v) any other person or
entity that otherwise is subject to United States federal income taxation on a
net income basis in respect of a Note. A "United States trust" means (a) for
taxable years beginning after December 31, 1996 (or to the extent the trustee
of the trust elects to apply the definition within this clause (a) to an
earlier taxable year), any trust if, and only if, (x) a court within the
United States is able to exercise primary supervision over the administration
of the trust and (y) one or more trustees which are United States persons have
the authority to control all substantial decisions of the trust and (b) for
all other taxable years, any trust whose income is subject to United States
federal income taxation, regardless of its source.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
Payments of Interest
Interest paid on a Note, to the extent treated as "qualified stated
interest" (as defined below), will generally be taxable to a United States
Holder as ordinary interest income at the time it accrues or is received in
accordance with the holder's method of accounting for federal income tax
purposes. Special rules governing the treatment of interest paid with respect
to Notes issued with original issue discount for federal income tax purposes,
including certain Floating Rate Notes, Indexed Notes, Foreign Currency Notes
(as defined below), Currency Indexed Notes (as defined below), Notes providing
for payments of principal or interest linked to commodity prices, equity
indices or other factors, are discussed below. Under the OID Regulations, all
payments of interest on a Note that matures one year or less from its date of
issuance will be included in the stated redemption price at maturity of the
Note and will be taxed in the manner described below under "Notes Issued with
Original Issue Discount."
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Notes Issued with Original Issue Discount
Under the Code and the OID Regulations, a Note which is issued for an amount
less than its stated redemption price at maturity will generally be considered
to have been issued at an original issue discount for federal income tax
purposes. The "issue price" of a Note will equal the first price at which a
substantial amount of the Notes is sold to the public (not including bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). The stated redemption price at
maturity of a Note will equal the sum of all payments required under the Note
other than payments of "qualified stated interest." "Qualified stated
interest" is stated interest unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually during the
entire term of the Note and equal to the outstanding principal balance of the
Note multiplied by a single fixed rate or certain variable rates of interest,
or certain combinations thereof. The OID Regulations set forth a set of
special rules for "variable rate debt instruments," as a consequence of which
certain Notes (in particular, Floating Rate Notes and Indexed Notes) may or
may not be issued with original issue discount. Notice will be given in the
applicable Pricing Supplement when a particular Note will be issued with
original issue discount. Unless an applicable Pricing Supplement so indicates,
the Notes will not be issued with original issue discount. Under the OID
Regulations, if a Note that provides for a variable rate of interest does not
qualify as a variable rate debt instrument, the Note will be a contingent
payment debt instrument, as discussed below. Special tax considerations
(including possible original issue discount) may arise with respect to
Floating Rate Notes providing for (i) one Base Rate followed by one or more
different Base Rates, (ii) a single fixed rate followed by a floating rate or
(iii) a Spread Multiplier. Purchasers of Floating Rate Notes with any of such
features should carefully examine the applicable Pricing Supplement and should
consult their tax advisors with respect to such a feature since the tax
consequences will depend, in part, on the particular terms of the purchased
Note. Special rules may also apply if a Floating Rate Note is subject to a
cap, floor, governor or similar restriction that is not fixed throughout the
term of the Note or is reasonably expected as of the issue date to cause the
yield on the Note to be significantly less or more than the expected yield
determined without the restriction.
If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of
the stated redemption price at maturity multiplied by the number of complete
years to maturity, then the Note generally will not be considered to have
original issue discount. Holders of Notes with a de minimis amount of original
issue discount will generally include such original issue discount in income,
as capital gain, on a pro rata basis as principal payments are made on the
Note.
A United States Holder of a Note issued with original issue discount will be
required to include any qualified stated interest payments in income in
accordance with the United States Holder's method of accounting for federal
income tax purposes. A United States Holder of such a Note that matures more
than one year from its date of issuance will be required to include original
issue in income for federal income tax purposes as it accrues for each day
during the taxable year on which it holds such Note, in accordance with a
constant yield method based on a compounding of interest, before the receipt
of cash payments attributable to such income. Under this method, a United
States Holder of such a Note generally will be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
Under the OID Regulations, a Note that matures one year or less from its
date of issuance will be treated as a "short-term original issue discount
Note." In general, a cash method United States Holder of a short-term original
issue discount Note is not required to accrue original issue discount for
United States federal income tax purposes unless it elects to do so. United
States Holders who make such an election, United States Holders who report
income for federal income tax purposes on the accrual method and certain other
United States Holders, including banks and dealers in securities, are required
to include original issue discount in income on such short-term original issue
discount Notes as it accrues on a straight-line basis, unless an election is
made to accrue the original issue discount according to a constant yield
method based on daily compounding. In the case of a United States Holder who
is not required and who does not elect to include original issue discount in
income currently, any gain realized on the sale, exchange or retirement of the
short-term original issue discount Note will be ordinary income to the extent
of the original issue discount accrued on a straight-line basis (or, if
elected,
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according to a constant yield method based on daily compounding) through the
date of sale, exchange or retirement. In addition, such United States Holders
will be required to defer deductions for any interest paid on indebtedness
incurred or continued to purchase or carry short-term original issue discount
Notes up to an amount not exceeding the accrued original issue discount not
previously included in income.
Under the OID Regulations, an accrual basis United States Holder may make an
election (the "Constant Yield Election") to include in gross income all
interest that accrues on a Note (including stated interest, acquisition
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount, and unstated interest, as adjusted by
any amortizable bond premium or acquisition premium) in accordance with a
constant yield method based on the compounding of interest. If a United States
Holder makes this election for a Note with market discount or amortizable bond
premium, the election is treated as an election under the market discount or
amortizable bond premium provisions, described below, and the electing United
States Holder will be required to amortize bond premium or include market
discount in income currently for all of the United States Holder's other debt
instruments with market discount or amortizable bond premium. The election is
to be made for the taxable year in which the United States Holder acquired the
Note and may not be revoked without the consent of the Internal Revenue
Service. United States Holders should consult with their own tax advisors
about this election.
Certain of the Notes may be redeemed or extended prior to maturity. Notes
containing such a feature may be subject to rules that differ from the general
rules discussed above. Purchasers of Notes with such a feature should
carefully examine the applicable Pricing Supplement and should consult their
tax advisors with respect to such a feature since the tax consequences with
respect to original issue discount will depend, in part, on the particular
terms and the particular features of the purchased Note.
The OID Regulations contain aggregation rules stating that in certain
circumstances if more than one type of Note is issued as part of the same
issuance of securities to a single holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price,
maturity date, yield to maturity and stated redemption price at maturity for
purposes of calculating and accruing any original issue discount. Unless
otherwise provided in the related Pricing Supplement, the Company does not
expect to treat any of the Notes as being subject to the aggregation rules for
purposes of computing original issue discount.
Under the OID Regulations, Notes (other than Foreign Currency Notes (defined
below)) that provide for contingent payments (e.g., certain payments on Notes
that are not treated as variable rate debt instruments, as described above)
and that are issued for money will be subject to the "noncontingent bond
method" of recognizing original issue discount. Under this method, the issuer
must determine a projected payment schedule for the debt instrument as of the
issue date (which must be followed by each United States Holder, unless
disclosed on such holder's federal income tax return) and, based on such
schedule (and the issue price), determine the instrument's projected yield and
the daily portions of interest that accrue on the debt instrument
(effectively, original issue discount). (The applicable Pricing Supplement
will include any such projected payment schedule and projected yield.) Such
accruals will be required to be included in income even though, for example,
contingent payments are not yet fixed. Under the OID Regulations, the
projected payment schedule includes each noncontingent payment and an amount
for each contingent payment, if such payment is based on market information,
equal to the forward price which one party would agree, as of the issue date,
to pay an unrelated party for the contingent payment on the date the
contingent payment is made, or otherwise the expected value of such contingent
payment. Investors should consult their own tax advisors concerning the
possible application of the OID Regulations relating to contingent payments on
the Notes.
Integration of Notes with Other Financial Instruments
Any United States Holder of Notes that also acquires or has acquired any
financial instrument which, in combination with such Notes, would permit the
calculation of a single yield to maturity or could generally constitute a
"variable-rate" debt instrument that pays a qualified floating rate or rates
of an equivalent term, may in certain circumstances treat such Notes and such
financial instrument as an integrated debt instrument for
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purposes of the Code, with a single determination of issue price and the
character and timing of income, deductions, gains and losses. (For purposes of
determining OID, none of the payments under the integrated debt instrument
will be treated as qualified stated interest.) Moreover, the Internal Revenue
Service may require in certain circumstances that a United States Holder who
owns Notes integrate such Notes with a financial instrument held or acquired
by such holder or a related party. United States Holders should consult their
tax advisors as to the possible integration of the Notes under the OID
Regulations.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a United States Holder will
generally recognize taxable gain or loss equal to the difference between the
amount realized on the sale, exchange or retirement and such United States
Holder's adjusted tax basis in the Note. For these purposes, the amount
realized does not include any amount attributable to accrued interest on the
Note. Amounts attributable to accrued interest are treated as interest as
described under "Payments of Interest" above, in accordance with the United
States Holder's method of accounting for federal income tax purposes as
described therein. A United States Holder's adjusted tax basis in a Note will
equal the cost of the Note to such United States Holder, increased by the
amount of any original issue discount and market discount previously included
in income by the United States Holder with respect to such Note and reduced by
any amortized premium (each as described below) and by the amounts of any
other payments that do not constitute qualified stated interest (as defined
above), such as principal payments.
Subject to the discussion under "Foreign Currency Notes" below, gain or loss
realized on the sale, exchange or retirement of a Note will be capital gain or
loss (except in the case of a short-term original issue discount Note in
certain cases, to the extent of any original issue discount not previously
included in the United States Holder's taxable income and to the extent of
market discount as described below), and will be long-term capital gain or
loss if at the time of sale, exchange or retirement the Note has been held for
more than one year. See "Notes Issued with Original Issue Discount" above. The
excess of net long-term capital gains over net short-term capital losses is
currently taxed at a lower rate than ordinary income for certain non-corporate
taxpayers. The distinction between capital gain or loss and ordinary income or
loss is also relevant for purposes of, among other things, limitations on the
deductibility of capital losses.
Notes Purchased at a Premium or Market Discount
A United States Holder that purchases a Note at a premium (defined under the
OID Regulations as an amount paid in excess of all amounts payable on the
instrument after the purchase other than qualified stated interest) will not
be subject to the original issue discount rules, and may elect to amortize the
"amortizable bond premium" (defined generally under the Code as an amount paid
in excess of the amount payable at maturity), in which case the amount
required to be included in the United States Holder's income each year with
respect to interest on the Note will be reduced by the amount of amortizable
bond premium allocable (based on the United States Holder's yield to maturity)
to such year. Any such election shall apply to all bonds (other than bonds the
interest on which is excludable from gross income) held by the United States
Holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the United States Holder and is irrevocable
without the consent of the Internal Revenue Service.
On June 27, 1996, the Internal Revenue Service published in the Federal
Register proposed regulations (the "Proposed Premium Regulations") on the
amortization of bond premium. The Proposed Premium Regulations describe the
constant yield method under which such premium is amortized and provide that
the resulting offset to interest income can be taken into account only as a
United States Holder takes the corresponding interest income into account
under such holder's regular accounting method. In the case of instruments that
may be called or repurchased prior to maturity, the Proposed Premium
Regulations provide that the premium is calculated by assuming that the
Company or holder will exercise or not exercise its rights in the manner that
minimizes or maximizes the yield of the Company or the holder, respectively.
The Proposed Premium Regulations are proposed to be effective for debt
instruments acquired on or after the date 60 days after the date final
regulations
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are published in the Federal Register. However, if a United States Holder
elects to amortize bond premium for the taxable year containing such effective
date, the Proposed Premium Regulations would apply to all the United States
Holder's debt instruments held on or after the first day of that taxable year.
It cannot be predicted at this time whether the Proposed Premium Regulations
will become effective or what, if any, modifications will be made to them
prior to their becoming effective.
A United States Holder that purchases a Note issued with original issue
discount at an acquisition premium (defined under the OID Regulations as an
amount paid in excess of its adjusted issue price but less than or equal to
all amounts payable on the instrument after the purchase other than qualified
stated interest) will be subject to the original issue discount rules, but
will proportionately reduce the daily portions of original issue discount
includible in income to reflect the premium paid relative to issue price. In
lieu of such offset, the United States Holder may compute original issue
discount accruals by treating the purchase price as the issue price and
applying the constant yield method.
If a United States Holder of a Note, other than a short-term original issue
discount Note, that had an initial tax basis in such Note which is less than
the issue price of such Note, subsequently disposes of such Note, holds it
until maturity or receives a principal payment, the tax consequences are the
same as described above, except that any gain upon a sale or other disposition
(including certain nontaxable dispositions such as a gift and the receipt of
principal payments) will be recognized and treated as ordinary income to the
extent of any "market discount" accrued for the period that such purchaser
holds the Note.
Market discount generally will equal the excess, if any, of the adjusted
basis that the Note would have in the hands of the original holder (or in the
case of a Note issued with original issue discount, the issue price plus the
aggregate amount of original issue discount previously accrued thereon) over
the purchaser's basis in the Note immediately after such purchaser acquired
the Note. In general, market discount on a Note will be treated as accruing
ratably over the term of such Note, or at the irrevocable election of the
United States Holder, under a constant yield method.
A United States Holder of a Note with market discount may be required to
defer, until the maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note. Such United
States Holder may instead elect to include market discount in income as it
accrues, in which case the rule described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on
or after the first taxable year to which the election applies, and may not be
revoked without the consent of the Internal Revenue Service.
In lieu of the foregoing rules, different rules apply in the case of Notes
with contingent payments where a holder's tax basis in such Note is different
than the Note's adjusted issue price (determined under special rules set out
in the OID Regulations). Accordingly, prospective purchasers of such Notes
should consult with their tax advisors with respect to the application of such
rules to such Notes.
Foreign Currency Notes
The following summary relates to Notes that are denominated in a currency or
currency unit other than the U.S. dollar ("Foreign Currency Notes").
A United States Holder who uses the cash method of accounting and who
receives a payment of qualified stated interest in a foreign currency with
respect to a Foreign Currency Note will be required to include in income the
U.S. dollar value of the foreign currency payment (determined on the date such
payment is received) regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the United
States Holder's tax basis in the foreign currency. No foreign currency gain or
loss will be recognized with respect to the receipt of such payment. A cash
method United States Holder who receives such a payment in U.S. dollars
pursuant to an option available under such Note will be required to include
the amount
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of such payment in income upon receipt. A cash method United States Holder of
a Foreign Currency Note will take into account original issue discount on a
Note in the same manner as an accrual method United States Holder, as
described below, including the recognition of ordinary foreign currency
exchange gain or loss.
In the case of accrual method United States Holders holding Notes, a United
States Holder will be required to include in income the U.S. dollar value of
the amount of interest income (including original issue discount, but reduced
by amortizable bond premium to the extent applicable) that has accrued and is
otherwise required to be taken into account with respect to a Foreign Currency
Note during an accrual period. Unless the United States Holder elects the
"spot rate convention," the U.S. dollar value of such accrued income and
original issue discount will be determined by translating such income at the
average rate of exchange for the accrual period or, with respect to an accrual
period that spans two taxable years, at the average rate for the partial
period within the taxable year. In addition, such United States Holder will
recognize ordinary foreign currency exchange gain or loss with respect to
accrued interest income on the date such income is actually received. The
amount of such ordinary gain or loss recognized will equal the difference
between the U.S. dollar value of the foreign currency payment received (based
on the exchange rate in effect on the date such payment is received) in
respect of such accrual period (or, where a United States Holder receives U.S.
dollars, the amount of such payment in respect of such accrual period) and the
U.S. dollar value of interest income that has accrued during such accrual
period (as determined above). Any such foreign currency gain or loss generally
will not be treated as interest income or expense, except to the extent
provided in regulations or administrative pronouncements of the Internal
Revenue Service. A United States Holder may elect the spot rate election to
translate original issue discount (and, in the case of an accrual basis United
States Holder, accrued interest) into U.S. dollars at the exchange rate on the
last day of the interest accrual period (or, in the case of a partial accrual
period, the exchange rate on the last date of the taxable year) or, if the
date of receipt is within five business days of the last day of the interest
accrual period or taxable year, the exchange rate on the date of receipt. A
United States Holder that makes such an election must apply it consistently to
all debt instruments from year to year and cannot change the election without
the consent of the Internal Revenue Service. United States Holders should
consult with their own tax advisors about this election.
Original issue discount, market discount and amortizable bond premium on a
Foreign Currency Note are to be determined in the relevant foreign currency.
Any gain or loss realized on the sale, exchange or retirement of a Foreign
Currency Note with amortizable bond premium by a United States Holder who has
not elected to amortize such premium will be ordinary income or loss to the
extent attributable to fluctuations in exchange rates determined as described
below. If such an election is made, amortizable bond premium taken into
account on a current basis shall reduce interest income as measured in the
relevant foreign currency. Ordinary foreign currency exchange gain or loss
will be realized with respect to amortizable premium based on the difference
between the spot exchange rate on the date the premium is paid to acquire the
Note and the spot exchange rate on the date the premium is treated as being
returned as part of the stated principal. The principles described in this
paragraph also apply to acquisition premium.
Accrued market discount on a Foreign Currency Note that is not currently
included in the United States Holder's income will not result in exchange gain
or loss. Exchange gain or loss with respect to accrued market discount
currently includible in income is calculated in the same manner as exchange
gain or loss with respect to accrued interest income, as described above.
A United States Holder's tax basis in a Foreign Currency Note, and the
amount of any subsequent adjustment to such United States Holder's tax basis
in respect of original issue discount and premium, will be the U.S. dollar
value of the foreign currency amount paid for such Foreign Currency Note, or
of the foreign currency amount of the adjustment, determined on the date of
such purchase or adjustment. A United States Holder who purchases a Foreign
Currency Note with previously owned foreign currency will recognize ordinary
foreign currency exchange gain or loss in an amount equal to the difference,
if any, between such United States Holder's tax basis in the foreign currency
and the U.S. dollar fair market value of the Foreign Currency Note on
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date of purchase. However, the conversion of U.S. dollars to a foreign
currency and the immediate use of that currency to purchase a Note generally
will not result in taxable foreign currency exchange gain or loss for a United
States Holder.
If a United States Holder receives foreign currency in respect of the sale,
exchange or retirement of a Foreign Currency Note, the amount realized
generally will be the U.S. dollar value of the foreign currency received (on
the date that payment is received or the Note is disposed of, in accordance
with the United States Holder's method of tax accounting). In addition, gain
or loss realized upon the sale, exchange or retirement of a Foreign Currency
Note that is attributable to fluctuations in currency exchange rates will be
ordinary income or loss which will not be treated as interest income or
expense (unless otherwise provided in future regulations or administrative
pronouncements). Gain or loss attributable to fluctuations in exchange rates
will equal the difference between (i) the U.S. dollar value of the foreign
currency principal amount of such Note, and any payment with respect to
accrued interest, determined on the date such payment is received or such Note
is disposed of, and (ii) the U.S. dollar value of the foreign currency
principal amount of such Note, determined on the date such United States
Holder acquired such Note, and the U.S. dollar value of the accrued interest
received, determined by translating such interest at the average exchange rate
for the accrual period. Such foreign currency gain or loss will be recognized
only to the extent of the total gain or loss realized by a United States
Holder on the sale, exchange or retirement of the Foreign Currency Note. Any
gain or loss realized by such a United States Holder in excess of such foreign
currency gain or loss will generally be capital gain or loss except in the
case of a short-term Original Issue Discount Note, to the extent of any
original issue discount not previously included in the United States Holder's
income.
A United States Holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Foreign Currency Note equal
to the U.S. dollar value of such foreign currency, determined at the time of
such sale, exchange or retirement. An additional foreign currency gain or loss
could result on the sale or other disposition of the foreign currency received
if the exchange rate on the date of sale or other disposition differs from the
exchange rate on the date of receipt. Regulations issued under Section 988 of
the Code provide a special rule for purchases and sales of publicly traded
Foreign Currency Notes by a cash method taxpayer under which units of foreign
currency paid or received are translated into U.S. dollars at the spot rate on
the settlement date of the purchase or sale. Accordingly, no exchange gain or
loss will result from currency fluctuations between the trade date and the
settlement of such a purchase or sale. An accrual method taxpayer may elect
the same treatment required of cash-method taxpayers with respect to the
purchases and sale of publicly traded Foreign Currency Notes provided the
election is applied consistently. Such election cannot be changed without the
consent of the Internal Revenue Service. Any gain or loss realized by a United
States Holder on a sale or other disposition of foreign currency (including
its exchange for U.S. dollars or its use to purchase Foreign Currency Notes)
will be ordinary income or loss.
A United States Holder who receives U.S. dollar payments on the sale,
exchange or retirement of a Foreign Currency Note may have a different amount
realized for United States federal income tax purposes than the amount it
receives in cash, because the relevant exchange rates required to be used for
United States federal income tax purposes may not be the same as the exchange
rates used by the Agent to convert foreign currency payments into U.S. dollar
payments.
Currency Indexed Notes
Indexed Notes, the payment of principal or interest of which is determined
by reference to one or more currency exchange rates ("Currency Indexed
Notes"), should constitute debt obligations of the Company for United States
federal income tax purposes and no portion of the issue price of the Currency
Indexed Notes should be separately allocated to the foreign exchange feature
of the Notes. However, the proper treatment of payments of principal of and
interest on such Currency Indexed Notes is uncertain at this time.
United States Holders of Currency Indexed Notes should consult with their
tax advisors as to the federal income tax consequences of the ownership and
disposition of such Notes.
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Extension of Maturity
If so indicated in the Pricing Supplement relating to a Note, the Company
will have the option to extend the maturity of such Note. See "Description of
Notes--Renewable Notes" above. The treatment of a United States Holder of
Notes with respect to which such an option has been exercised who does not
elect to have the Company repay such Notes on the Initial Maturity Date will
depend on the terms established for such Notes by the Company pursuant to the
exercise of such option (the "Revised Terms"). Such United States Holder may
be treated for United States federal income tax purposes as having exchanged
such Notes (the "Old Notes") for new Notes with Revised Terms (the "New
Notes"). If the United States Holder is treated as having exchanged Old Notes
for New Notes, such exchange may be treated as either a taxable exchange or a
tax-free recapitalization.
If the exercise of the option by the Company is not treated as an exchange
of Old Notes for New Notes, no gain or loss will be recognized by a United
States Holder as a result thereof. If the exercise of the option is treated as
a taxable exchange of Old Notes for New Notes, a United States Holder would
recognize gain or loss equal to the difference between the issue price of the
New Notes (increased, in the case of Notes which provide for contingent
payments (described above), where the Old Note is not traded on an established
market, by the fair market value of such contingent payments) and such United
States Holder's adjusted tax basis in the Old Notes. If the exercise of the
option is treated as a tax-free recapitalization, no loss would be recognized
by a United States Holder as a result thereof and gain, if any, would be
recognized to the extent of the fair market value of the excess, if any, of
the principal amount of securities received over the principal amount of
securities surrendered. In this regard, the meaning of the term "principal
amount" is not clear. Such term could be interpreted to mean "issue price"
with respect to securities that are received and "adjusted issue price" with
respect to securities that are surrendered. Legislation to that effect has
been introduced in the past. It is not possible to determine whether such
legislation will be reintroduced, and if so, enacted and, if enacted, whether
it would apply to recapitalizations occurring prior to the date of enactment.
However, whether or not such exercise results in an exchange of the Old
Notes for New Notes, the Old Notes may be treated as retired and then reissued
on the date of exercise for the adjusted issue price of the Old Notes solely
for purposes of calculating original issue discount.
Notes Linked to Commodity Prices, Equity Indices or Other Factors
The United States federal income tax consequences to a holder of the
ownership and disposition of Indexed Notes and Notes that are exchangeable
into the stock or a debt instrument of another issuer may vary depending on
the exact terms of the Notes. United States Holders intending to purchase such
Notes should refer to the discussion relating to taxation in the applicable
Pricing Supplement.
United States Alien Holders
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of United States Alien Holders. "United States Alien
Holder" means any owner of a Note for United States federal income tax
purposes (including, where applicable, a beneficial owner), who is not a
United States Holder. The 1996 Proposed Regulations are generally proposed to
be effective for payments after December 31, 1997, regardless of the issue
date of the Note with respect to which such payments are made, subject to
certain transition rules. It cannot be predicted at this time whether the 1996
Proposed Regulations will become effective as proposed or what, if any,
modifications may be made to them. The discussion under this heading and under
"Information Reporting and Backup Withholding" below, is not intended to
include a complete discussion of the provisions of the 1996 Proposed
Regulations, and prospective investors are urged to consult their tax advisors
with respect to the effect the 1996 Proposed Regulations may have if adopted.
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Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below:
(i) interest and principal payments, including premium, and original
issue discount on a Note, made by the Company or any of its paying agents
to any United States Alien Holder, will not be subject to United States
withholding tax; provided, that in the case of original issue discount or
interest, (a) the holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote, (b) the holder is not a controlled foreign
corporation that is related to the Company through stock ownership, (c) the
holder is not a bank receiving interest described in section 881(c)(3)(A)
of the Code, (d) the interest is not contingent interest under Code Section
871(h)(4)(A), and (e) either (1) the beneficial owner of the Note certifies
to the Company or its agent, under penalties of perjury, that it is not a
United States Holder and provides its name and address or (2) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note on behalf of the beneficial
owner certifies to the Company or its agent, under penalties of perjury,
that such statement has been received from the beneficial owner by it or by
a financial institution between it and the beneficial owner and furnishes
the payor with a copy thereof;
(ii) a United States Alien Holder will not be subject to United States
federal income tax on gain realized on the sale, exchange or retirement of
a Note if such gain is not effectively connected with the conduct of a
United States trade or business and, in the case of a United States Alien
Holder who is an individual, such holder is not present in the United
States for a total of 183 days or more during the taxable year in which
such gain is realized; and
(iii) a Note held by an individual who at the time of death is not a
citizen or resident of the United States (including its territories,
possessions and other areas subject to its jurisdiction, such as the
Commonwealth of Puerto Rico) will not be subject to United States federal
estate tax as a result of such individual's death if the individual does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, the interest
is not contingent interest under Code Section 871(h)(4)(A), and at the time
of the individual's death, payments with respect to the Note would not have
been effectively connected with the conduct of a trade or business by the
individual in the United States.
The 1996 Proposed Regulations provide optional documentation procedures
designed to simplify compliance by withholding agents. The 1996 Proposed
Regulations would not affect the documentation rules described above, but
would add "intermediary certification" options for certain qualifying
withholding agents. For purposes of the certification requirements, the 1996
Proposed Regulations, if adopted, would treat the partners of a foreign
partnership, rather than the partnership, as the beneficial owners of payments
on the Notes (subject to certain exceptions). The status of an entity as a
"partnership" for this purpose (but not for purposes of determining the
application of treaties) would generally be determined under U.S. tax
principles. Thus, subject to certain exceptions, each partner, rather than the
partnership, would be required to provide the required certifications to
qualify for the withholding exemption described above. Finally, the 1996
Proposed Regulations provide certain presumptions with respect to withholding
for holders not providing the required certifications to qualify for the
withholding exemption described above.
If an United States Alien Holder is engaged in a trade or business in the
United States and interest (including OID) on the Note is effectively
connected with the conduct of such trade or business, the United States Alien
Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest (including OID)
in the same manner as if it were a United States Holder. In lieu of the
certification described above, such holder will be required to provide a
properly executed IRS Form 4224 in order to claim an exemption from
withholding tax. In addition, if such holder is a foreign corporation, it may
be subject to a branch profits tax equal to 30% (or such lower rate as may be
specified by an applicable treaty) of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose,
interest (including OID) on a Note will be included in the earnings and
profits of such holder if such interest
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(including OID) is effectively connected with the conduct by such holder of a
trade or business in the United States.
United States Alien Holders should consult their own tax advisors with
respect to their particular circumstances.
Information Reporting and Backup Withholding
Under current United States federal income tax law, a 31% "backup"
withholding tax is applied to certain interest and principal payments
(including premium and original issue discount) made to, and to the proceeds
of sale before maturity by, certain United States persons if such persons fail
to supply taxpayer identification numbers and other information. In addition,
certain persons making such payments are required to submit information
returns to the United States Treasury Department with regard to those
payments. Backup withholding and information reporting, however, generally do
not apply to any such payments made to certain "exempt recipients" such as
corporations. Under current law, backup withholding and information reporting
will not apply to interest and principal payments (including premium and
original issue discount) made by the Company or any of its paying agents on a
Note if the Company or such paying agents, as the case may be, receive the
certification described in section (i)(e) under "United States Alien Holders"
above and do not have actual knowledge that the payee is a United States
person, and in the case of principal payments (including premium), receive
certification from the payee as to the absence of the conditions set forth in
section (ii) under "United States Alien Holders" above.
Under current regulations, payments on the sale, exchange or retirement of a
Note to or through a foreign office of a broker will not be subject to backup
withholding. Such payments, however, will be subject to information reporting
if the broker is a United States person, a controlled foreign corporation for
United States federal income tax purposes or a foreign person 50% or more of
whose gross income is effectively connected with the conduct of a United
States trade or business for a specified three-year period, unless the broker
has in its records documentary evidence that the beneficial owner is not a
United States person and certain other conditions are met, or the beneficial
owner otherwise establishes an exemption. Under proposed Treasury regulations,
backup withholding may apply to any payment which such broker is required to
report if such broker has actual knowledge that the payee is a United States
person.
The Company will withhold all amounts required by law to be withheld from
reportable payments made and with respect to the Notes. The amount of any
backup withholding from a payment to a holder of a Note will be allowed as a
credit against such holder's United States federal income tax liability and
may entitle such holder to a refund, provided that the required information is
furnished to the Internal Revenue Service. The 1996 Proposed Regulations, if
adopted in their present form, would modify some of the information reporting
and disclosure requirements described above.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF
NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES OF
HOLDING, EXCHANGING OR SELLING THE NOTES INCLUDING THE APPLICATION AND EFFECT
OF ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGES IN
APPLICABLE TAX LAWS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through the
Agents, who have agreed to use reasonable efforts to solicit offers to
purchase Notes. The Company will have the sole right to accept offers to
purchase Notes and may reject any offer to purchase Notes in whole or in part.
An Agent will have the right to reject any offer to purchase Notes solicited
by it in whole or in part. Payment of the purchase price of the
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Notes will be required to be made in immediately available funds. The Company
will pay an Agent, in connection with sales of Notes resulting from a
solicitation made or an offer to purchase received by such Agent, a commission
ranging from .125% to .750% of the principal amount of Notes to be sold,
provided, however, that commissions with respect to Notes maturing more than
thirty years from the date of issue will be negotiated.
The Company may also sell Notes to any Agent as principal for its own
account at discounts to be agreed upon at the time of sale. Such Notes may be
resold to investors and other purchasers at prevailing market prices, or
prices related thereto at the time of such resale, as determined by such Agent
or, if so agreed, at a fixed public offering price. In addition, an Agent may
offer the Notes that such Agent purchased as principal to other dealers. An
Agent may sell Notes to any dealer at a discount and, unless otherwise
specified in the applicable Pricing Supplement, such discount allowed to any
dealer will not be in excess of the discount to be received by the Agent from
the Company. After the initial public offering of Notes to be resold to
investors and other purchasers, the public offering price (in the case of
Notes to be resold at a fixed public offering price) concession and discount
may be changed.
The Company has reserved the right to sell the Notes directly to investors,
and may solicit and accept offers to purchase Notes directly from investors
from time to time on its own behalf. The Company may accept (but not solicit)
offers to purchase Notes through additional agents and may appoint additional
agents for the purpose of soliciting offers to purchase Notes, in either case
on terms substantially identical to the terms contained in the Distribution
Agreement. Such other agents, if any, will be named in the applicable Pricing
Supplement.
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company and the Agents have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments made in
respect thereof. The Company has also agreed to reimburse the Agents for
certain expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange. The Company has been advised by the Agents that
the Agents intend to make a market in the Notes, as permitted by applicable
laws and regulations. The Agents are not obligated to do so, however, and the
Agents may discontinue making a market at any time without notice. No
assurance can be given as to the liquidity of any trading market for the
Notes.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Offered Securities as described in the
accompanying Prospectus.
The Agents and/or certain of the Agents' affiliates may engage in
transactions with and perform services for the Company and certain of its
affiliates in the ordinary course of business.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Winston &
Strawn, Chicago, Illinois, counsel for the Company, or such other attorney of
the Company as the Company may designate, and for the Agents by Mayer, Brown &
Platt, Chicago, Illinois. The Chairman of the Executive Committee of Winston &
Strawn, Governor James R. Thompson, serves as a member of the Company's Board
of Directors and as of December 31, 1996 beneficially owned 1,606 shares of
Common Stock. Mayer, Brown & Platt from time to time acts as counsel in
certain matters for the Company.
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PROSPECTUS
$400,000,000
FMC CORPORATION
COMMON STOCK, PREFERRED STOCK, DEPOSITORY SHARES, DEBT SECURITIES, WARRANTS TO
PURCHASE COMMON STOCK, WARRANTS TO PURCHASE PREFERRED STOCK AND WARRANTS TO
PURCHASE DEBT SECURITIES
FMC Corporation, a Delaware corporation (the "Company"), may from time to
time offer in one or more series (i) shares of Common Stock, $.10 par value
per share ("Common Stock"), (ii) whole or fractional shares of Preferred
Stock, no par value (collectively, "Preferred Stock"), (iii) Preferred Stock
represented by depository shares ("Depository Shares"), (iv) unsecured debt
securities ("Debt Securities"), which may be senior debt securities ("Senior
Debt Securities") or subordinated debt securities ("Subordinated Debt
Securities"), (v) warrants to purchase Common Stock ("Common Stock Warrants"),
(vi) warrants to purchase Preferred Stock ("Preferred Stock Warrants"), and
(vii) warrants to purchase Debt Securities ("Debt Warrants"), with an
aggregate public offering price of up to $400,000,000, on terms to be
determined at the time or times of offering. The Common Stock, Preferred
Stock, Depository Shares, Debt Securities, Common Stock Warrants, Preferred
Stock Warrants and Debt Warrants (collectively referred to herein as the
"Offered Securities") may be offered, separately or together, in separate
classes or series, in amounts, at prices and on terms to be set forth in one
or more supplements to this Prospectus (each, a "Prospectus Supplement").
All specific terms of the offering and sale of the Offered Securities in
respect of which this Prospectus is being delivered will be set forth in the
applicable Prospectus Supplement and will include, when applicable: (i) in the
case of Common Stock, any public offering price and the aggregate number of
shares offered; (ii) in the case of Preferred Stock, the specific class,
series, title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, any dividend payment dates, any sinking
fund provisions, the aggregate number of shares offered and any public
offering price; (iii) in the case of Depository Shares, the aggregate number
of shares offered, the shares of whole or fractional Preferred Stock
represented by each such Depository Share and any public offering price; (iv)
in the case of Debt Securities, the specific title, aggregate principal
amount, ranking as Senior Debt Securities or as Subordinated Debt Securities,
currency, form (which may be registered or bearer or certificated or global),
authorized denominations, maturity, rate (or manner of calculation thereof)
and time of payment of interest, if any, terms for redemption at the option of
the Company or repayment at the option of the holder thereof, terms for
sinking fund payments, terms for conversion into Common Stock or Preferred
Stock and any public offering price; (v) in the case of Common Stock Warrants,
the duration, offering price, exercise price and detachability features; (vi)
in the case of Preferred Stock Warrants, description of the Preferred Stock
for which each warrant will be exercisable and the duration, offering price,
exercise price and detachability features; and (vii) in the case of Debt
Warrants, description of the Debt Securities for which each warrant will be
exercisable and the duration, offering price, exercise price and detachability
features.
The applicable Prospectus Supplement will also contain information, when
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered
Securities covered by that Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names and any applicable purchase price, fee, commission or
discount arrangement between or among them will be set forth in or will be
calculable from the information set forth in the applicable Prospectus
Supplement. No Offered Securities may be sold without delivery of the
applicable Prospectus Supplement describing the method and terms of the
offering of those Offered Securities. See "Plan of Distribution" for possible
indemnification arrangements with underwriters, dealers and agents.
----------------
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.
----------------
This Prospectus may not be used to consummate sales of the Offered Securities
unless accompanied by a Prospectus Supplement.
----------------
January 23, 1997
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR AN APPLICABLE PROSPECTUS
SUPPLEMENT 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 AND ANY APPLICABLE PROSPECTUS SUPPLEMENT DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER 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.
IN CONNECTION WITH THIS OFFERING, UNDERWRITERS, IF ANY, MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
OFFERED SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZATION, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
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"). Reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy
statements and other information concerning the Company may be inspected and
copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005, the Chicago Stock Exchange, 440 South LaSalle
Street, Chicago, Illinois 60605, and the Pacific Stock Exchange, Inc., 301
Pine Street, San Francisco, California 94104 or 618 South Spring Street, Los
Angeles, California 90014. The Commission also maintains a web site
(http://www.sec.gov) that contains reports and other information regarding
registrants that file electronically with the Commission.
The Company has filed with the Commission on September 7, 1995 a
Registration Statement on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), which relates to the Offered Securities (the
"Registration Statement"). This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto as permitted by the rules and regulations of the Commission.
For information with respect to the Company and the Offered Securities,
reference is hereby made to such Registration Statement, exhibits and
schedules. The Registration Statement may be inspected without charge by
anyone at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of all or any part thereof may be obtained from the
Commission upon payment of the prescribed fees. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in all
respects by such reference.
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<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission (File No. 1-2376) are
incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1995;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996; and
(iii) the Company's Current Reports on Form 8-K dated February 9, 1996,
March 11, 1996, May 3, 1996, May 6, 1996, June 13, 1996, July 2, 1996, July
24, 1996, October 16, 1996 and January 21, 1997 and on Form 8-K/A dated
October 17, 1996.
A description of the Common Stock is incorporated by reference to Item 1 of
the Company's Registration Statement on Form 8-A dated May 12, 1986. A
description of the Company's Preferred Stock Purchase Rights is incorporated
by reference to Item 1 of the Company's Registration Statement on Form 8-A
dated March 6, 1986, as amended.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Offered Securities shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of 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 the applicable Prospectus
Supplement) or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge to any person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person,
a copy of any document incorporated by reference herein other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
in such document. Requests should be directed to Robert L. Day, Secretary, FMC
Corporation, 200 East Randolph Drive, Chicago, Illinois 60601 (telephone:
(312) 861-6000).
3
<PAGE>
THE COMPANY
The Company is one of the world's leading producers of chemicals and
machinery for industry, agriculture and government. The Company, incorporated
in 1928, operates on a worldwide basis in selected segments of four broad
markets: Performance Chemicals, Industrial Chemicals, Machinery and Equipment
and Defense Systems. The Company operates over 100 manufacturing facilities
and mines in approximately 26 states and 24 countries. Performance Chemicals
develops, manufactures and markets proprietary specialty chemicals for the
agricultural, food and pharmaceutical industries. Industrial Chemicals
businesses manufacture a wide variety of chemicals including soda ash,
phosphates, hydrogen peroxide and lithium. Major customers include detergent,
glass and paper producers, as well as food processors and other chemical
companies. Machinery and Equipment businesses provide specialized machinery to
the food, petroleum, transportation and material handling industries. Defense
Systems develops, manufactures and supplies ground combat vehicles and naval
weapons systems to the armed forces of the United States and other
governments. In the first quarter of 1994 the Company and Harsco Corporation
("Harsco") announced the establishment of a joint venture, United Defense,
L.P., which was a combination of certain assets and liabilities of the
Company's Defense Systems Group and Harsco's BMY Combat Systems Division and
pursuant to which the Company is the Managing General Partner with a 60%
equity interest.
Between July 31, 1996 and August 9, 1996, the Company sold all of its 80%
interest in FMC Gold Company through a secondary offering. Results of the
Precious Metals business are now classified as a discontinued operation in the
Company's consolidated statements of income, and all consolidated information
of the Company has been restated accordingly for comparative purposes.
The Company is a corporation organized under the laws of the State of
Delaware. As used hereunder, "FMC" or the "Company" refers to FMC Corporation
and its subsidiaries, unless otherwise indicated by the context. The Company's
principal executive offices are located at 200 East Randolph Drive, Chicago,
Illinois 60601 (telephone number: (312) 861-6000).
4
<PAGE>
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered
Securities for general corporate purposes, which may include the repayment of
existing indebtedness and the financing of capital expenditures and
acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of the
Company for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
3.9x 3.9(/1/)x 3.6(/1/)x 4.6x 1.9(/2/)x 3.1x 2.6x
</TABLE>
- --------
(/1/)The ratios of earnings to fixed charges for the nine months ended
September 30, 1995 and the year ended December 31, 1995 before the gain
on sale of FMC Wyoming stock, restructuring and other charges and write-
off of acquired in-process research and development were 4.5x and 4.0x,
respectively.
(/2/)The ratio of earnings to fixed charges for the year ended December 31,
1993 before restructuring and other charges was 3.2x.
For purposes of calculating this ratio, earnings consist of income from
continuing operations before income taxes and extraordinary items, plus
minority interests, less undistributed earnings (and plus losses) of
affiliates, plus interest expense and amortization of debt discount, fees and
expenses, plus amortization of capitalized interest, plus one-third of
rentals. Fixed charges consist of interest expense and amortization of debt
discount, fees and expenses, interest capitalized as part of fixed assets and
interest included in rental expense.
GENERAL DESCRIPTION OF THE OFFERED SECURITIES
The Company may offer under this Prospectus Common Stock, Preferred Stock,
Depository Shares, Debt Securities, Common Stock Warrants, Preferred Stock
Warrants, or Debt Warrants or any combination of the foregoing, either
individually or as units consisting of two or more Offered Securities. The
aggregate offering price of Offered Securities offered by the Company under
this Prospectus will not exceed $400,000,000. If Offered Securities are
offered as units, the terms of the units will be set forth in a Prospectus
Supplement.
DESCRIPTION OF THE COMMON STOCK
GENERAL
Under the Company's Restated Certificate of Incorporation (the "Certificate
of Incorporation"), the Company is authorized to issue up to 60,000,000 shares
of Common Stock. As of December 31, 1996, there were 37,180,427 shares of
Common Stock issued and outstanding. In addition, up to 5,568,900 shares have
been reserved as of December 31, 1996 for issuance upon the exercise of
options and awards under the Company's incentive compensation plans. The
shares of Common Stock are listed on the New York Stock Exchange under the
symbol "FMC". Harris Trust and Savings Bank, Chicago, Illinois, is the
transfer agent and registrar of the shares of Common Stock.
The Common Stock is not redeemable, does not have any conversion rights and
is not subject to call. Holders of shares of Common Stock have no preemptive
rights to maintain their percentage of ownership in future offerings or sales
of stock of the Company. Holders of shares of Common Stock have one vote per
share in all elections of directors and on all other matters submitted to a
vote of stockholders of the Company. The holders of Common Stock are entitled
to receive dividends, if any, as and when declared from time to time by
5
<PAGE>
the Board of Directors of the Company out of funds legally available therefor.
Upon liquidation, dissolution or winding up of the affairs of the Company, the
holders of Common Stock will be entitled to participate equally and ratably,
in proportion to the number of shares held, in the net assets of the Company
available for distribution to holders of Common Stock. The shares of Common
Stock currently outstanding are fully paid and nonassessable. The shares of
Common Stock offered hereby, upon issuance against full payment of the
purchase price therefor, will be fully paid and nonassessable.
CERTAIN CERTIFICATE OF INCORPORATION PROVISIONS
General Effect
The Company has adopted a number of provisions in its Certificate of
Incorporation that might discourage certain types of transactions that involve
an actual or threatened change of control of the Company. The provisions may
make it more difficult and time-consuming to change majority control of the
Board of Directors and thus reduce the vulnerability of the Company to an
unsolicited offer, particularly an offer that does not contemplate the
acquisition of all of the Company's outstanding shares.
These provisions are intended to encourage persons seeking to acquire
control of the Company to initiate such an acquisition through arm's-length
negotiations with the Company's management and Board of Directors.
Additionally, such provisions provide management with the time and information
necessary to evaluate a takeover proposal and to study alternative proposals.
Nonetheless, the provisions could have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control of
the Company, even though such an attempt might be beneficial to the Company
and its stockholders.
Business Combination
The Certificate of Incorporation provides that significant asset sales,
dispositions of stock, liquidations, mergers and certain other business
combinations ("Business Combinations") involving the Company and persons
beneficially owning 10% or more of the voting power of the outstanding shares
of Common Stock (an "Interested Stockholder") must be approved by the holders
of at least 80% of the voting power of the Company's outstanding voting stock
("Voting Stock"). The Certificate of Incorporation requires the affirmative
vote of the holders of 80% or more of the outstanding Voting Stock to amend,
alter or repeal, or to adopt any provisions inconsistent with, such
provisions.
Stockholders' Meetings
The Certificate of Incorporation provides that special meetings of the
stockholders may only be called pursuant to a resolution approved by a
majority of the Board of Directors. This limitation prevents a stockholder or
group of stockholders from forcing the Company to conduct a stockholders'
meeting at any time not sanctioned by the Board of Directors, regardless of
the number of shares of Common Stock held by such stockholder or group of
stockholders.
No Action by Stockholder Consent
The Company's Certificate of Incorporation prohibits action that is required
or permitted to be taken at any annual or special meeting of stockholders of
the Company from being taken by the written consent of stockholders without a
meeting. This provision may be altered, amended or repealed only if the
holders of 80% or more of Voting Stock vote in favor of such action.
PREFERRED STOCK PURCHASE RIGHTS
The Company has adopted a preferred stock purchase rights plan and has
distributed preferred stock purchase rights (the "Rights") to holders of the
Company's Common Stock. The preferred stock purchase rights
6
<PAGE>
plan enables the holder of such Rights to purchase, under certain
circumstances, one one-hundredth ( 1/100) of a share of Junior Participating
Preferred Stock, Series A, without par value (the "Series A Preferred Stock"),
of the Company at a price of $300 per one one-hundredth ( 1/100) of a share,
subject to certain adjustments. The Rights are intended to deter attempts to
acquire the Company on terms not approved by the Company's Board of Directors.
DESCRIPTION OF THE PREFERRED STOCK
Under the Certificate of Incorporation, the Board of Directors of the
Company may direct the issuance of up to 5,000,000 shares of Preferred Stock
in one or more series and with rights, preferences, privileges and
restrictions, including dividend rights, voting rights, conversion rights,
terms of redemption and liquidation preferences, that may be fixed or
designated by the Board of Directors pursuant to a certificate of designation
without any further vote or action by the Company's stockholders. As of
December 31, 1996 the Board of Directors had designated 400,000 shares of the
Preferred Stock as Junior Participating Preferred Stock, Series A for possible
issuance in connection with the Rights. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of
the Company. Preferred Stock, upon issuance against full payment of the
purchase price therefor, will be fully paid and nonassessable. The specific
terms of a particular series of Preferred Stock will be described in the
Prospectus Supplement relating to that series. The description of Preferred
Stock set forth below and the description of the terms of a particular series
of Preferred Stock set forth in the related Prospectus Supplement do not
purport to be complete and are qualified in their entirety by reference to the
certificate of designation relating to that series. The related Prospectus
Supplement will contain a description of certain United States federal income
tax consequences relating to the purchase and ownership of the series of
Preferred Stock described in such Prospectus Supplement.
As of December 31, 1996 no shares of Preferred Stock were issued or
outstanding.
The rights, preferences, privileges and restrictions of the Preferred Stock
of each series will be fixed by the certificate of designation relating to
such series. A Prospectus Supplement, relating to each series, will specify
the terms of the Preferred Stock as follows:
(a) The maximum number of shares to constitute the series and the
distinctive designation thereof;
(b) The annual dividend rate, if any, on shares of the series, whether
such rate is fixed or variable or both, the date or dates from which
dividends will begin to accrue or accumulate and whether dividends will be
cumulative;
(c) The price at and the terms and conditions on which the shares of the
series may be redeemed, including the time during which shares of the
series may be redeemed and any accumulated dividends thereon that the
holders of shares of the series shall be entitled to receive upon the
redemption thereof;
(d) The liquidation preference, if any, and any accumulated dividends
thereon, that the holders of shares of the series shall be entitled to
receive upon the liquidation, dissolution or winding up of the affairs of
the Company;
(e) Whether or not the shares of the series will be subject to operation
of a retirement or sinking fund, and, if so, the extent and manner in which
any such fund shall be applied to the purchase or redemption of the shares
of the series for retirement or for other corporate purposes, and the terms
and provisions relating to the operation of such fund;
(f) The terms and conditions, if any, on which the shares of the series
shall be convertible into, or exchangeable for, shares of any other class
or classes of capital stock of the Company or a third party or of any other
series of the same class, including the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting the
same and whether such conversion is mandatory or optional;
(g) The stated value of the shares of such series;
(h) The voting rights, if any, of the shares of the series; and
7
<PAGE>
(i) Any or all other preferences and relative, participating, optional or
other special rights or qualifications, limitations or restrictions
thereof.
In the event of any voluntary liquidation, dissolution or winding up of the
affairs of the Company, the holders of any series of any class of Preferred
Stock shall be entitled to receive in full out of the assets of the Company,
including its capital, before any amount shall be paid or distributed among
the holders of the Common Stock or any other shares ranking junior to such
series, the amounts fixed by the Board of Directors with respect to such
series and set forth in the applicable Prospectus Supplement plus an amount
equal to all dividends accrued and unpaid thereon to the date of payment of
the amount due pursuant to such liquidation, dissolution or winding up the
affairs of the Company. After payment to the holders of the Preferred Stock of
the full preferential amounts to which they are entitled, the holders of
Preferred Stock, as such, shall have no right or claim to any of the remaining
assets of the Company.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed
among the holders of any other classes or series of capital stock ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case
according to their respective numbers of shares. The merger or consolidation
of the Company into or with any other corporation, or the sale, lease or
conveyance of all or substantially all of the assets of the Company, shall not
constitute a dissolution, liquidation or winding up of the Company.
DESCRIPTION OF DEPOSITORY SHARES
GENERAL
The Company may offer receipts ("Depository Receipts") for Depository
Shares, each of which will represent a fractional interest in a share of a
particular series of a class of Preferred Stock, as specified in the
applicable Prospectus Supplement. Preferred Stock of each series of each class
represented by Depository Shares will be deposited under a separate Deposit
Agreement (each, a "Deposit Agreement") among the Company, the depository
named therein (such depository or its successor, the "Preferred Stock
Depository") and the holders from time to time of the Depository Receipts.
Subject to the terms of the Deposit Agreement, each owner of a Depository
Receipt will be entitled, in proportion to the fractional interest of a share
of the particular series of a class of Preferred Stock represented by the
Depository Shares evidenced by such Depository Receipt, to all the rights and
preferences of the Preferred Stock represented by such Depository Shares
(including dividend, voting, conversion, redemption and liquidation rights).
The Depository Shares will be evidenced by Depository Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the Preferred Stock by the Company to the Preferred
Stock Depository, the Company will cause the Preferred Stock Depository to
issue, on behalf of the Company, the Depository Receipts. Copies of the
applicable form of Deposit Agreement and Depository Receipt may be obtained
from the Company upon request.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depository will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of the Depository Receipts evidencing the related Depository Shares in
proportion to the number of such Depository Receipts owned by such holder,
subject to certain obligations of holders to file proofs, certificates and
other information and to pay certain charges and expenses to the Preferred
Stock Depository.
In the event of a distribution other than in cash, the Preferred Stock
Depository will distribute property received by it to the record holders of
Depository Receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred
8
<PAGE>
Stock Depository, unless the Preferred Stock Depository determines that it is
not feasible to make such distribution, in which case the Preferred Stock
Depository may, with the approval of the Company, sell such property and
distribute the net proceeds from such sale to such holders.
WITHDRAWAL OF SHARES
Upon surrender of the Depository Receipts at the corporate trust office of
the Preferred Stock Depository (unless the related Depository Shares have
previously been called for redemption), the holders thereof will be entitled
to delivery at such office, to or upon such holder's order, of the number of
whole shares of Preferred Stock and any money or other property represented by
the Depository Shares evidenced by such Depository Receipts. Holders of
Depository Receipts will be entitled to receive whole shares of the related
Preferred Stock on the basis of the proportion of Preferred Stock represented
by each Depository Share as specified in the applicable Prospectus Supplement,
but holders of such Preferred Stock will not thereafter be entitled to receive
Depository Shares therefor. If the Depository Receipts delivered by the holder
evidence a number of Depository Shares in excess of the number of Depository
Shares representing the number of shares of Preferred Stock to be withdrawn,
the Preferred Stock Depository will deliver to such holder at the same time a
new Depository Receipt evidencing such excess number of Depository Shares.
REDEMPTION OF DEPOSITORY SHARES
Whenever the Company redeems Preferred Stock held by the Preferred Stock
Depository, the Preferred Stock Depository will redeem as of the same
redemption date the number of Depository Shares representing the Preferred
Stock so redeemed, provided the Company shall have paid in full to the
Preferred Stock Depository the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid dividends (except,
with respect to noncumulative shares of Preferred Stock, dividends for the
current dividend period only) thereon to the date fixed for redemption. The
redemption price per Depository Share will be equal to the redemption price
and any other amounts per share payable with respect to the Preferred Stock.
If less than all the Depository Shares are to be redeemed, the Depository
Shares to be redeemed will be selected by the Preferred Stock Depository by
lot.
After the date fixed for redemption, the Depository Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depository Receipts evidencing the Depository Shares so called
for redemption will cease, except the right to receive any moneys payable upon
such redemption and any money or other property to which the holders of such
Depository Receipts were entitled upon such redemption upon surrender thereof
to the Preferred Stock Depository.
VOTING OF THE UNDERLYING PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depository will mail the
information contained in such notice of meeting to the record holders of the
Depository Receipts evidencing the Depository Shares which represent such
Preferred Stock. Each record holder of Depository Receipts evidencing
Depository Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the
Preferred Stock Depository as to the exercise of the voting rights pertaining
to the amount of Preferred Stock represented by such holder's Depository
Shares. The Preferred Stock Depository will vote the amount of Preferred Stock
represented by such Depository Shares in accordance with such instructions,
and the Company will agree to take all reasonable action which may be deemed
necessary by the Preferred Stock Depository in order to enable the Preferred
Stock Depository to do so. The Preferred Stock Depository will abstain from
voting the amount of Preferred Stock represented by such Depository Shares to
the extent it does not receive specific instructions from the holders of
Depository Receipts evidencing such Depository Shares.
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<PAGE>
LIQUIDATION PREFERENCE
In the event of liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, each holder of a Depository Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depository Share evidenced by such
Depository Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depository Shares, as such, are not convertible into Common Stock or any
securities or property of the Company. Nevertheless, if so specified in the
applicable Prospectus Supplement relating to an offering of Depository Shares,
the Depository Receipts may be surrendered by holders thereof to the Preferred
Stock Depository with written instructions to the Preferred Stock Depository
to instruct the Company to cause conversion of the Preferred Stock represented
by the Depository Shares evidenced by such Depository Receipts into whole
shares of Common Stock, other Preferred Stock of the Company or other shares
of capital stock, and the Company has agreed that upon receipt of such
instructions and any amounts payable in respect thereof, it will cause the
conversion thereof utilizing the same procedures as those provided for
delivery of Preferred Stock to effect such conversion. If the Depository
Shares evidenced by a Depository Receipt are to be converted in part only, one
or more new Depository Receipts will be issued for any Depository Shares not
to be converted. No fractional shares of Common Stock will be issued upon
conversion, and if such conversion will result in a fractional share being
issued, an amount will be paid in cash by the Company equal to the value of
the fractional interest based upon the closing price of the Common Stock on
the last business day prior to the conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depository Receipt evidencing the Depository Shares which
represent the Preferred Stock and any provision of the Deposit Agreement may
at any time be amended by agreement between the Company and the Preferred
Stock Depository. However, any amendment that materially and adversely alters
the rights of the holders of Depository Receipts will not be effective unless
such amendment has been approved by the existing holders of at least a
majority of the Depository Shares evidenced by the Depository Receipts then
outstanding.
The Deposit Agreement may be terminated by the Company upon not less than 30
days' prior written notice to the Preferred Stock Depository if a majority of
each class of Depository Shares affected by such termination consents to such
termination, whereupon the Preferred Stock Depository shall deliver or make
available to each holder of Depository Receipts, upon surrender of the
Depository Receipts held by such holder, such number of whole or fractional
shares of Preferred Stock as are represented by the Depository Shares
evidenced by such Depository Receipts. In addition, the Deposit Agreement will
automatically terminate if (i) all outstanding Depository Shares shall have
been redeemed, (ii) there shall have been a final distribution in respect of
the related Preferred Stock in connection with any liquidation, dissolution or
winding up of the Company and such distribution shall have been distributed to
the holders of Depository Receipts evidencing the Depository Shares
representing such Preferred Stock or (iii) each related share of Preferred
Stock shall have been converted into capital stock of the Company not so
represented by Depository Shares.
CHARGES OF PREFERRED STOCK DEPOSITORY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Stock Depository in
connection with the performance of its duties under the Deposit Agreement.
However, holders of the Depository Receipts will pay the fees and expenses of
the Preferred Stock Depository for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
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RESIGNATION AND REMOVAL OF PREFERRED STOCK DEPOSITORY
The Preferred Stock Depository may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time
remove the Preferred Stock Depository, any such resignation or removal to take
effect upon the appointment of a successor Preferred Stock Depository. A
successor Preferred Stock Depository must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Stock Depository will forward to holders of Depository
Receipts any reports and communications from the Company that are received by
the Preferred Stock Depository with respect to the related Preferred Stock.
Neither the Preferred Stock Depository nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the Deposit Agreement. The
obligations of the Company and the Preferred Stock Depository under the
Deposit Agreement will be limited to performing their duties thereunder in
good faith and without gross negligence or willful misconduct, and the Company
and the Preferred Stock Depository will not be obligated to prosecute or
defend any legal proceeding in respect of any Depository Receipts, Depository
Shares or Preferred Stock represented thereby unless satisfactory indemnity is
furnished. The Company and the Preferred Stock Depository may rely on written
advice of counsel or accountants, or information provided by persons
presenting Preferred Stock represented thereby for deposit, holders of
Depository Receipts or other persons believed to be competent to give such
information, and on documents believed to be genuine and signed by a proper
party.
If the Preferred Stock Depository shall receive conflicting claims, requests
or instructions from any holders of Depository Receipts, on the one hand, and
the Company, on the other hand, the Preferred Stock Depository shall be
entitled to act on such claims, requests or instructions received from the
Company.
DESCRIPTION OF THE DEBT SECURITIES
The Senior Debt Securities will be issued under an Indenture, as amended or
supplemented from time to time (the "Senior Indenture"), between the Company
and Harris Trust and Savings Bank, as trustee (the "Trustee"). The
Subordinated Debt Securities will be issued under an Indenture, as amended or
supplemented from time to time (the "Subordinated Indenture"), between the
Company and the Trustee. The Senior Indenture and the Subordinated Indenture
are sometimes referred to herein collectively as the "Indentures" and each
individually as an "Indenture".
The forms of the Indentures have been filed as exhibits to the Registration
Statement of which this Prospectus is a part and are available for inspection
at the corporate trust office of the Trustee at 111 West Monroe Street,
Chicago, Illinois 60603. The Indentures are subject to, and are governed by,
the Trust Indenture Act of 1939, as amended. The statements made hereunder
relating to the Indentures and the Debt Securities to be issued hereunder are
summaries of certain provisions thereof and do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all
provisions of the Indentures and such Debt Securities. All section references
appearing in this section "Description of the Debt Securities" are to sections
of the applicable Indenture, and capitalized terms used but not defined herein
shall have the respective meanings set forth in the applicable Indenture.
GENERAL
The Indentures do not limit the amount of Debt Securities that can be issued
thereunder and provide that Debt Securities of any series may be issued
thereunder up to the aggregate principal amount which may be
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authorized from time to time by the Company. The Indentures do not limit the
amount of other indebtedness or securities, other than certain secured
indebtedness as described below which is limited by the Senior Indenture, that
may be issued by the Company or its subsidiaries.
The Debt Securities will be direct, unsecured obligations of the Company and
will constitute Senior Debt Securities and/or Subordinated Debt Securities.
Creditors of the Company's subsidiaries are entitled to a claim on the assets
of such subsidiaries. Consequently, in the event of a liquidation or
reorganization of any subsidiary, creditors of the subsidiary are likely to be
paid in full before any distribution is made to the Company and holders of
Debt Securities, except to the extent that the Company is itself recognized as
a creditor of such subsidiary, in which case the claims of the Company would
still be subordinate to any security interests in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by the
Company.
Reference is made to the Prospectus Supplement for the following and other
possible terms of each series of the Debt Securities in respect of which this
Prospectus is being delivered: (i) the title of the Debt Securities; (ii) any
limit upon the aggregate principal amount of the Debt Securities; (iii) if
other than 100% of the principal amount, the percentage of their principal
amount at which the Debt Securities will be offered; (iv) the date or dates on
which the principal of the Debt Securities will be payable (or method of
determination thereof); (v) the rate or rates (or method of determination
thereof) at which the Debt Securities will bear interest, if any, the date or
dates from which any such interest will accrue and on which such interest will
be payable, and the record dates for the determination of the holders to whom
interest is payable; (vi) if other than as set forth herein, the place or
places where the principal of and interest, if any, on the Debt Securities
will be payable; (vii) the price or prices at which, the period or periods
within which and the terms and conditions upon which Debt Securities may be
redeemed, in whole or in part, at the option of the Company; (viii) if other
than the principal amount thereof, the portion of the principal amount of the
Debt Securities payable upon declaration of acceleration of the maturity
thereof; (ix) the obligation, if any, of the Company to redeem, repurchase or
repay Debt Securities, whether pursuant to any sinking fund or analogous
provisions or pursuant to other provisions set forth therein or at the option
of a Holder thereof; (x) whether the Debt Securities will be represented in
whole or in part by one or more global notes registered in the names of a
depository or its nominee; (xi) any conversion or exchange provisions and
whether such conversion or exchange is optional or mandatory; (xii) the
ranking of such Debt Securities as Senior Debt Securities or Subordinated Debt
Securities; and (xiii) any other terms or conditions not inconsistent with the
provisions of the Indenture under which the Debt Securities will be issued.
(Section 2.3) "Principal" when used herein includes, when appropriate, the
premium, if any, on the Debt Securities.
Unless otherwise provided in the Prospectus Supplement relating to any Debt
Securities, principal and interest, if any, will be payable, and the Debt
Securities will be transferable, at the office or offices or agency maintained
by the Company for such purposes, provided that payment of interest on the
Debt Securities will be paid at such place of payment by check mailed to the
persons entitled thereto at the addresses of such persons appearing on the
Security register. Interest on the Debt Securities will be payable on any
interest payment date to the persons in whose name the Debt Securities are
registered at the close of business on the record date with respect to such
interest payment date.
The Debt Securities may be issued only in fully registered form in minimum
denominations of $1,000 and any integral multiple thereof. Additionally, the
Debt Securities may be represented in whole or in part by one or more global
notes registered in the name of a depository or its nominee and, if so
represented, interests in such global note will be shown on, and transfers
thereof will be effected only through, records maintained by the designated
depository and its participants.
The Debt Securities may be exchanged for an equal aggregate principal amount
of Debt Securities of the same series and date of maturity in such authorized
denominations as may be requested upon surrender of the Debt Securities at an
agency of the Company maintained for such purpose and upon fulfillment of all
other requirements of such agent. No service charge will be made for any
transfer or exchange of the Debt Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. (Section 2.8)
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The Indentures require the annual filing by the Company with the Trustee of
a certificate as to compliance with certain covenants contained in the
Indentures. (Section 3.4)
The Company will comply with Section 14(e) under the Exchange Act, to the
extent applicable, and any other tender offer rules under the Exchange Act
which may then be applicable, in connection with any obligation of the Company
to purchase Debt Securities at the option of the holders thereof. Any such
obligation applicable to a series of Debt Securities will be described in the
Prospectus Supplement relating thereto.
Unless otherwise described in a Prospectus Supplement relating to any Debt
Securities, there are no covenants or provisions contained in the Indentures
which may afford the holders of Debt Securities protection in the event of a
highly leveraged transaction involving the Company.
CONVERSION AND EXCHANGE
The terms, if any, on which Debt Securities of any series are convertible
into or exchangeable for Common Stock or Preferred Stock, property or cash, or
a combination of any of the foregoing, will be set forth in the Prospectus
Supplement relating thereto. Such terms may include provisions for conversion
or exchange, either mandatory, at the option of the holder, or at the option
of the Company, in which the number of shares of Common Stock or Preferred
Stock to be received by the holders of the Debt Securities would be calculated
according to the factors and at such time as set forth in the related
Prospectus Supplement.
COVENANTS APPLICABLE TO SENIOR DEBT SECURITIES
Limitations on Liens
The Senior Indenture provides that, so long as any of the Senior Debt
Securities of a series remain outstanding, the Company will not, nor will it
permit any Restricted Subsidiary (as hereinafter defined) to, secure
indebtedness for money borrowed ("Secured Debt") by placing a Lien (as
hereinafter defined) on any Principal Property (as hereinafter defined) now or
hereafter owned by the Company or any Restricted Subsidiary or on any shares
of stock or securing indebtedness for money borrowed of any Restricted
Subsidiary without equally and ratably securing the Debt Securities of such
series, unless (i) the aggregate principal amount of such Secured Debt then
outstanding plus (ii) all Attributable Debt (as hereinafter defined) of the
Company and its Restricted Subsidiaries in respect of sale and leaseback
transactions described below covering Principal Properties (other than sale
and leaseback transactions under (b) of the following paragraph) does not
exceed an amount equal to 10% of Consolidated Net Tangible Assets (as
hereinafter defined). This restriction will not apply to, and there shall be
excluded in computing such Secured Debt for purposes of this restriction,
certain permitted Liens, including (a) with respect to each series of Senior
Debt Securities, Liens existing as of the date of the issuance of Senior Debt
Securities of such series; (b) Liens on property or assets of, or any shares
of stock or securing indebtedness for money borrowed of, any corporation
existing at the time such corporation becomes a Restricted Subsidiary; (c)
Liens on property or assets or shares of stock or securing indebtedness for
money borrowed existing at the time of acquisition (including acquisition
through merger or consolidation) and certain Liens to secure indebtedness
incurred prior to, at the time of or within 120 days after the later of the
acquisition of, or the completion of the construction of and commencement of
operation of, any such property, for the purpose of financing all or any part
of the purchase price or construction cost thereof; (d) Liens to secure
certain development, operation, construction, alteration, repair or
improvement costs; (e) Liens in favor of, or which secure indebtedness owing
to, the Company or a Restricted Subsidiary; (f) Liens in connection with
government contracts, including the assignment of moneys due or to come due
thereon; (g) certain Liens in connection with legal proceedings to the extent
such proceedings are being contested in good faith; (h) certain Liens arising
in the ordinary course of business and not in connection with the borrowing of
money such as mechanics', materialmens', carriers' or other similar Liens; (i)
Liens on property securing obligations issued by a domestic governmental
issuer to finance the cost of acquisition or construction of such property;
and (j) extensions, substitutions, replacements or renewals of the foregoing.
(Section 3.5)
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Limitations on Sale and Leaseback Transactions
The Senior Indenture provides that, so long as any of the Senior Debt
Securities of a series remain outstanding, the Company will not, nor will it
permit any Restricted Subsidiary to, enter into any sale and leaseback
transaction (except a lease for a period not exceeding three years) covering
any Principal Property which was or is owned by the Company or a Restricted
Subsidiary and which has been or is to be sold or transferred more than 120
days after such property has been owned by the Company or such Restricted
Subsidiary and completion of construction and commencement of full operation
thereof, unless (a) the Attributable Debt in respect thereto and all other
sale and leaseback transactions entered into after the date of the first
issuance of Senior Debt Securities of such series (other than those the
proceeds of which are applied to reduce indebtedness or acquire additional
property under (b) following), plus the aggregate principal amount of then
outstanding Secured Debt not otherwise permitted or excepted without equally
and ratably securing the Senior Debt Securities does not exceed 10% of
Consolidated Net Tangible Assets; or (b) an amount equal to the value of the
Principal Property sold and leased back is applied within 120 days after the
sale or transfer to (x) the voluntary retirement of Funded Debt (as
hereinafter defined), including Senior Debt Securities, or (y) the acquisition
of properties, facilities or equipment used for general operating purposes for
the Company or any Restricted Subsidiary. (Section 3.6)
Certain Definitions
The term "Subsidiary" is defined to mean (i) a corporation, a majority of
whose capital stock with voting power, under ordinary circumstances, to elect
directors is, at the date of determination, directly or indirectly owned by
the Company, by one or more Subsidiaries of the Company or by the Company and
one or more Subsidiaries of the Company, (ii) a partnership in which the
Company or a Subsidiary of the Company holds a majority interest in the equity
capital or profits of such partnership, or (iii) any other person (other than
a corporation) in which the Company, a Subsidiary of the Company or the
Company and one or more Subsidiaries of the Company, directly or indirectly,
at the date of determination, has (x) at least a majority ownership interest
or (y) the power to elect or direct the election of a majority of the
directors or other governing body of such person.
The term "Restricted Subsidiary" is defined to mean any Subsidiary (i)
substantially all the property of which is located within the continental
United States of America or Canada and (ii) which owns or leases a Principal
Property.
The term "Principal Property" is defined to mean any manufacturing or
processing plant or facility (other than any pollution control facility) or
any mineral producing property which is located within the continental United
States of America and is owned by the Company or any Subsidiary, whether owned
at or acquired after the date of the applicable Indenture, the gross book
value on the books of the Company or such Subsidiary (without deduction of any
depreciation reserve) of which on the date as of which the determination is
being made exceeds 1% of Consolidated Net Tangible Assets, other than any such
property, plant or facility, or any portion thereof, which in the opinion of
the Board of Directors is not of material importance to the total business
conducted by the Company and its Restricted Subsidiaries as an entirety or
which is financed with certain tax exempt securities.
The term "Attributable Debt", in respect of the sale and leaseback
transactions described above, is defined to mean the amount determined by
multiplying the greater, at the time such transaction is entered into, of (i)
the fair value of the property, plant or facility subject to such arrangement
(as determined by the Company); or (ii) the net proceeds of the sale of such
property, plant or facility to the lender or investor, by a fraction of which
the numerator shall be the unexpired initial term of the lease of such real
property as of the date of determination of such computation and of which the
denominator shall be the full initial term of such lease. Sale and leasebacks
with respect to facilities financed with certain tax exempt securities are
excepted from the definition.
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The term "Consolidated Net Tangible Assets" is defined to mean the aggregate
amount of assets (less applicable reserves and other properly deductible
items) after deducting therefrom (a) all current liabilities (excluding any
thereof constituting Funded Debt by reason of being extendible or renewable);
and (b) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, all as set forth on the books
and records of the Company and its consolidated subsidiaries and computed in
accordance with generally accepted accounting principles.
The term "Funded Debt" is defined to mean all indebtedness whether or not
evidenced by a bond, debenture, note or similar instrument or agreement, for
the repayment of money borrowed, having a maturity of more than 12 months from
the date of its creation or having a maturity of less than 12 months from the
date of its creation but by its terms being renewable or extendible beyond 12
months from such date at the option of the borrower. For the purpose of
determining "Funded Debt" of any corporation, there shall be excluded any
particular indebtedness if, on or prior to the maturity thereof, there shall
have been deposited with the proper depository in trust the necessary funds
for the payment, redemption or satisfaction of such indebtedness. (Section
1.1)
The term "Lien" is defined to mean any pledge, mortgage or other lien
(including lease purchase, installment purchase and other title retention
financing arrangements) on or in respect of any Principal Property owned by
the Company or any Restricted Subsidiary, or on any shares of stock or
indebtedness for money borrowed of any Restricted Subsidiary. (Section 3.5)
EVENTS OF DEFAULT
An Event of Default with respect to the Debt Securities of any series is
defined in the Indentures as: (i) default in the payment of any installment of
interest upon any of the Debt Securities of such series as and when the same
shall become due and payable, and continuance of such default for a period of
30 days; (ii) default in the payment of all or any part of the principal of
any of the Debt Securities of such series as and when the same shall become
due and payable either at maturity, upon any redemption, by declaration or
otherwise; (iii) default in the performance, or breach, of any other covenant
or warranty of the Company contained in the Debt Securities of such series or
set forth in the applicable Indenture (other than a covenant or warranty
included in the applicable Indenture solely for the benefit of a series of
Debt Securities other than such series) and continuance of such default or
breach for a period of 90 days after due notice by the Trustee or by the
holders of at least 25% in principal amount of the outstanding securities of
that series; or (iv) certain events of bankruptcy, insolvency or
reorganization of the Company. (Section 5.1) Additional Events of Default may
be added for the benefit of holders of certain series of Debt Securities
which, if added, will be described in the Prospectus Supplement relating to
such Debt Securities. The Indentures provide that the Trustee shall notify the
holders of Debt Securities of each series of any continuing default known to
the Trustee which has occurred with respect to that series within 90 days
after the occurrence thereof. The Indentures provide that notwithstanding the
foregoing, except in the case of default in the payment of the principal of,
or interest, if any, on any of the Debt Securities of such series, the Trustee
may withhold such notice if the Trustee in good faith determines that the
withholding of such notice is in the interests of the holders of Debt
Securities of such series. (Section 6.5)
The Indentures provide that if an Event of Default with respect to any
series of Debt Securities shall have occurred and be continuing, either the
Trustee or the holders of not less than 25% in aggregate principal amount of
Debt Securities of that series then outstanding may declare the principal
amount of all Debt Securities of that series to be due and payable
immediately, but upon certain conditions such declaration may be annulled.
(Section 5.1) Any past defaults and the consequences thereof (except a default
in the payment of principal of or interest, if any, on Debt Securities of that
series) may be waived by the holders of a majority in principal amount of the
Debt Securities of that series then outstanding. (Section 5.9) The Senior
Indenture also permits the Company to omit compliance with certain covenants
in such Indentures with respect to Senior Debt Securities of any series upon
waiver by the holders of a majority in principal amount of the Senior Debt
Securities of such series then outstanding. (Section 3.7)
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Subject to the provisions of the Indentures relating to the duties of the
Trustee, in case an Event of Default with respect to any series of Debt
Securities shall occur and be continuing, the Trustee shall not be under any
obligation to exercise any of the trusts or powers vested in it by the
Indentures at the request or direction of any of the holders of that series,
unless such holders shall have offered to such Trustee reasonable security or
indemnity. (Sections 6.1 and 6.2) The holders of a majority in aggregate
principal amount of the Debt Securities of each series affected and then
outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee under the
applicable Indenture or exercising any trust or power conferred on the Trustee
with respect to the Debt Securities of that series; provided that the Trustee
may refuse to follow any direction which is in conflict with any law or such
Indenture and subject to certain other limitations. (Section 5.8)
No holder of any Debt Security of any series will have any right by virtue
or by availing of any provision of the Indentures to institute any proceeding
at law or in equity or in bankruptcy or otherwise upon or under or with
respect to the Indentures or for any remedy thereunder, unless such holder
shall have previously given the Trustee written notice of an Event of Default
with respect to Debt Securities of that series and unless the holders of at
least 25% in aggregate principal amount of the outstanding Debt Securities of
that series shall also have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee and the
Trustee shall have failed to institute such proceeding within 60 days after
its receipt of such request, and the Trustee shall not have received from the
holders of a majority in aggregate principal amount of the outstanding Debt
Securities of that series a direction inconsistent with such request. (Section
5.5) However, the right of a holder of any Debt Security to receive payment of
the principal of and interest, if any, on such Debt Security on or after the
due dates expressed in such Debt Security, or to institute suit for the
enforcement of any such payment on or after such dates, shall not be impaired
or affected without the consent of such holder. (Section 5.6)
MERGER
Each Indenture provides that the Company may consolidate with, or sell,
convey or lease all or substantially all of its assets to, or merge with or
into, any other corporation, if (i) either the Company is the continuing
corporation or the successor corporation is a domestic corporation and
expressly assumes the due and punctual payment of the principal of and
interest on all the Debt Securities outstanding under such Indenture according
to their tenor and the due and punctual performance and observance of all of
the covenants and conditions of such Indenture to be performed or observed by
the Company; and (ii) the Company or such successor corporation, as the case
may be, is not, immediately after such merger or consolidation, or such sale,
conveyance or lease, in material default in the performance or observance of
any such covenant or condition. (Section 9.1)
SATISFACTION AND DISCHARGE OF INDENTURES
The Indenture with respect to any series of Debt Securities (except for
certain specified surviving obligations including, among other things, the
Company's obligation to pay the principal of and interest on the Debt
Securities of such series) will be discharged and cancelled upon the
satisfaction of certain conditions, including the payment of all the Debt
Securities of such series or the deposit with the Trustee under such Indenture
of cash or appropriate Government Obligations or a combination thereof
sufficient for such payment or redemption in accordance with the applicable
Indenture and the terms of the Debt Securities of such series. (Section 10.1)
MODIFICATION OF THE INDENTURES
The Indentures contain provisions permitting the Company and the Trustee
thereunder, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debt Securities of each series at the time
outstanding under the applicable Indenture, to execute supplemental indentures
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, the applicable Indenture or any supplemental indenture with
respect to the Debt Securities of such series or modifying in any manner the
rights of the holders
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of the Debt Securities of such series; provided that no such supplemental
indenture may (i) extend the final maturity of any Debt Security, or reduce
the principal amount thereof, or reduce the rate or extend the time of payment
of any interest thereon, or reduce any amount payable on redemption thereof,
or impair or affect the right of any holder of Debt Securities to institute
suit for payment thereof or, if the Debt Securities provide therefor, any
right of repayment at the option of the holders of the Debt Securities,
without the consent of the holder of each Debt Security so affected or (ii)
reduce the aforesaid percentage of Debt Securities of such series, the consent
of the holders of which is required for any such supplemental indenture,
without the consent of the holders of all Debt Securities of such series so
affected. (Section 8.2) Additionally, in certain prescribed instances, the
Company and the Trustee may execute supplemental indentures without the
consent of the holders of Debt Securities. (Section 8.1)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide, if such provision is made applicable to the Debt
Securities of any series, that the Company may elect either (a) to terminate
(and be deemed to have satisfied) all its obligations with respect to such
Debt Securities (except for the obligations to register the transfer or
exchange of such Debt Securities, to replace mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of the Debt
Securities, to compensate and indemnify the Trustee and to punctually pay or
cause to be paid the principal of, and interest, if any, on all Debt
Securities of such series when due) ("defeasance"); or (b) in the case of the
Senior Indenture, to be released from its obligations with respect to Senior
Debt Securities under Sections 3.5 and 3.6 of the Senior Indenture (being the
restrictions described above under "Limitations on Liens" and "Limitations on
Sale and Leaseback Transactions") ("covenant defeasance"), upon the deposit
with the Trustee, in trust for such purpose, of money and/or Government
Obligations which through the payment of principal and interest in accordance
with their terms will provide money, in an amount sufficient (in the opinion
of a nationally recognized firm of independent public accountants) to pay the
principal of and premium and interest, if any, on the outstanding Debt
Securities of such series, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor. Such a trust may be
established only if, among other things, the Company has delivered to the
Trustee an opinion of counsel (as specified in the applicable Indenture) with
regard to certain matters, including an opinion to the effect that the Holders
of such Debt Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and discharge and will be
subject to federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance
or covenant defeasance, as the case may be, had not occurred. The Prospectus
Supplement may further describe these or other provisions, if any, permitting
defeasance or covenant defeasance with respect to the Debt Securities of any
series. (Section 10.1)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
The Senior Debt Securities will constitute part of the Senior Indebtedness
(as defined below) of the Company and will rank pari passu with all
outstanding senior debt. Except as set forth in the related Prospectus
Supplement, the Subordinated Debt Securities will be subordinated, in right of
payment, to the prior payment in full of the Senior Indebtedness (as defined
below), including the Senior Debt Securities, whether outstanding at the date
of the Subordinated Indenture or thereafter incurred, assumed or guaranteed.
The term "Senior Indebtedness" means (1) the principal of and premium, if any,
and unpaid interest on indebtedness for money borrowed, (2) purchase money and
similar obligations, (3) obligations under capital leases, (4) guarantees,
assumptions or purchase commitments relating to, or other transactions as a
result of which the Company is responsible for the payment of, such
indebtedness of others, (5) renewals, extensions and refunding of any such
indebtedness, (6) interest or obligations in respect of any such indebtedness
accruing after the commencement of any insolvency or bankruptcy proceedings
and (7) obligations associated with derivative products such as interest rate
and currency exchange contracts, foreign exchange contracts, commodity
contracts, and similar arrangements, unless, in each case, the instrument by
which the Company incurred, assumed or guaranteed the indebtedness or
obligations described in clauses (1) through (7) hereof expressly provides
that such indebtedness or obligation is not senior in right of payment to the
Subordinated Debt Securities.
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Upon any distribution of assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company, whether
in a bankruptcy, insolvency, reorganization or receivership proceeding or upon
an assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of the Company or otherwise, except a distribution in
connection with a merger or consolidation or a conveyance or transfer of all
or substantially all of the properties of the Company in accordance with the
Subordinated Indenture, the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount due thereon, or provision shall
be made for such payment in money or money's worth, before the holders of any
of the Subordinated Debt Securities are entitled to receive any payment in
respect of the Subordinated Debt Securities. In the event that a payment
default shall have occurred and be continuing with respect to the Senior
Indebtedness, the holders of all Senior Indebtedness shall first be entitled
to receive payment of the full amount due thereon, or provision shall be made
for such payment in money or money's worth, before the holders of any of the
Subordinated Debt Securities are entitled to receive any payment in respect of
the Subordinated Debt Securities. In the event that the principal of the
Subordinated Debt Securities of any series shall have been declared due and
payable pursuant to the Subordinated Indenture and such declaration shall not
have been rescinded and annulled, the holders of all Senior Indebtedness
outstanding at the time of such declaration shall first be entitled to receive
payment of the full amount due thereon, or provision shall be made for such
payment in money or money's worth, before the holders of any of the
Subordinated Debt Securities are entitled to receive any payment in respect of
the Subordinated Debt Securities.
This subordination will not prevent the occurrence of any event of default
with respect to the Subordinated Debt Securities. There is no limitation on
the issuance of additional Senior Indebtedness in the Subordinated Indenture.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (each, a "Global Security") that will be
deposited with, or on behalf of, a Debt Depository identified in the
applicable Prospectus Supplement. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form. Unless
otherwise provided in such Prospectus Supplement, Debt Securities that are
represented by a Global Security will be issued in denominations of $1,000 or
any integral multiple thereof and will be issued in registered form only,
without coupons. Payments of principal of, and interest, if any, on Debt
Securities represented by a Global Security will be made by the Company to the
Trustee under the applicable Indenture, and then forwarded to the Debt
Depository.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York ("DTC"), and
that such Global Securities will be registered in the name of Cede & Co.,
DTC's nominee. The Company further anticipates that the following provisions
will apply to the depository arrangements with respect to any such Global
Securities. Any additional or differing terms of the depository arrangements
will be described in the Prospectus Supplement relating to a particular series
of Debt Securities issued in the form of Global Securities.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Debt Securities represented by such Global Security for all purposes under
the applicable Indenture. Except as described below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities
represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of Debt Securities in
certificated form and will not be considered the owners or Holders thereof
under the applicable Indenture. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in a Global Security.
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If DTC is at any time unwilling or unable to continue as depository or if at
any time DTC ceases to be a clearing agency registered under the Exchange Act
if so required by applicable law or regulation, and, in either case, a
successor Debt Depository is not appointed by the Company within 90 days, the
Company will issue individual Debt Securities in certificated form in exchange
for the Global Securities. In addition, the Company may at any time, and in
its sole discretion, determine not to have any Debt Securities represented by
one or more Global Securities, and, in such event, will issue individual Debt
Securities in certificated form in exchange for the relevant Global
Securities. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery of individual Debt
Securities in certificated form of like tenor and rank, equal in principal
amount to such beneficial interest, and to have such Debt Securities in
certificated form registered in its name. Unless otherwise described in the
applicable Prospectus Supplement, Debt Securities so issued in certificated
form will be issued in denominations of $1,000 or any integral multiple
thereof, and will be issued in registered form only, without coupons.
DTC will act as securities depository for the Debt Securities. The Debt
Securities will be issued as fully registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One fully registered Debt
Security certificate will be issued with respect to each $200 million of
principal amount of the Debt Securities of a series, and an additional
certificate will be issued with respect to any remaining principal amount of
such series.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others, such as securities brokers and dealers, and banks and trust companies
that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the Commission.
Purchases of Debt Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Debt Securities on
DTC's records. The ownership interest of each actual purchaser of each Debt
Security ("Beneficial Owner") is in turn recorded on the Direct and Indirect
Participants' records. A Beneficial Owner does not receive written
confirmation from DTC of its purchase, but is expected to received a written
confirmation providing details of the transaction, as well as periodic
statements of its holdings, from the Direct or Indirect Participants through
which such Beneficial Owner entered into the action. Transfers of ownership
interests in Debt Securities are accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners do not
receive certificates representing their ownership interests in Debt
Securities, except in the event that use of the book-entry system for the Debt
Securities is discontinued.
To facilitate subsequent transfers, the Debt Securities are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of the Debt
Securities with DTC and their registration in the name of Cede & Co. will
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Debt Securities; DTC records reflect only the
identity of the Direct Participants to whose accounts Debt Securities are
credited, which may or may not be the Beneficial Owners. The Participants
remain responsible for keeping account of their holdings on behalf of their
customers.
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Delivery of notice and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants
and Indirect Participants to Beneficial Owners are governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. consents or votes with respect to the Debt
Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the Debt Securities are credited on the record date
(identified on a list attached to the Omnibus Proxy).
Principal and interest payments, if any, on the Debt Securities are made to
DTC. DTC's practice is to credit Direct Participants' accounts on the payment
date in accordance with their respective holdings as shown on DTC's records
unless DTC has reason to believe that it will not receive payment on the
payment date. Payments by Participants to Beneficial Owners are governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name" and are the responsibility of such Participant and not of DTC, the
Trustee or the Company, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest, if any,
to DTC is the responsibility of the Company or the Trustee, disbursement of
such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility
of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Debt Securities at any time by giving reasonable notice to the
Company or the Trustee. Under such circumstances, in the event that a
successor securities depository is not appointed, Debt Security certificates
are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Debt Security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Unless stated otherwise in the Prospectus Supplement, the underwriters or
agents with respect to a series of Debt Securities issued as Global Securities
will be Direct Participants in DTC.
None of the Company, any underwriter or agent, the Trustee or any applicable
paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in a
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial interest.
CONCERNING THE TRUSTEE
The Trustee has extended credit facilities to the Company and conducts other
business with the Company and certain of its affiliates, including cash
management and stock transfer services and serving as the trustee for the FMC
Employees' Thrift and Stock Purchase Plan.
DESCRIPTION OF THE WARRANTS TO PURCHASE COMMON STOCK OR PREFERRED STOCK
The following statements with respect to the Common Stock Warrants and
Preferred Stock Warrants (collectively, the "Stock Warrants") are summaries
of, and subject to, the detailed provisions of a warrant agreement ("Stock
Warrant Agreement") to be entered into by the Company and a warrant agent to
be selected
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at the time of issue (the "Stock Warrant Agent"), which Stock Warrant
Agreement may include or incorporate by reference standard warrant provisions
substantially in the form of the Standard Stock Warrant Provisions (the "Stock
Warrant Provisions") filed as an exhibit to the Registration Statement.
GENERAL
The Stock Warrants, evidenced by warrant certificates (the "Stock Warrant
Certificates"), may be issued under the Stock Warrant Agreement independently
or together with any Offered Securities offered by any Prospectus Supplement
and may be attached to or separate from such Offered Securities. If Stock
Warrants are offered, the related Prospectus Supplement will describe the
terms of the Stock Warrants, including without limitation the following: (1)
the offering price, if any; (2) the designation and terms of the Common or
Preferred Stock purchasable upon exercise of the Stock Warrants; (3) the
number of shares of Common or Preferred Stock purchasable upon exercise of one
Stock Warrant and the initial price at which such shares may be purchased upon
exercise; (4) the date on which the right to exercise the Stock Warrants shall
commence and the date on which such right shall expire; (5) a discussion of
certain federal income tax considerations; (6) the call provisions, if any;
(7) the currency, currencies or currency units in which the offering price, if
any, and exercise price are payable; (8) the antidilution provisions of the
Stock Warrants; and (9) any other terms of the Stock Warrants. The shares of
Common or Preferred Stock issuable upon exercise of the Stock Warrants will,
when issued in accordance with the Stock Warrant Agreement, be fully paid and
nonassessable.
EXERCISE OF STOCK WARRANTS
Stock Warrants may be exercised by surrendering to the Stock Warrant Agent
the Stock Warrant certificate signed by the warrantholder, or its duly
authorized agent, indicating the warrantholder's election to exercise all or a
portion of the Stock Warrants evidenced by the certificate. Surrendered Stock
Warrant certificates shall be accompanied by payment of the aggregate exercise
price of the Stock Warrants to be exercised, as set forth in the related
Prospectus Supplement, which payment may be made in the form of cash or a
check equal to the exercise price. Certificates evidencing duly exercised
Stock Warrants will be delivered by the Stock Warrant Agent to the transfer
agent for the Common Stock or the Preferred Stock, as the case may be. Upon
receipt thereof, the transfer agent shall deliver or cause to be delivered, to
or upon the written order of the exercising warrantholder, a certificate
representing the number of shares of Common Stock or Preferred Stock
purchased. If fewer than all of the Stock Warrants evidenced by any
certificate are exercised, the Stock Warrant Agent shall deliver to the
exercising warrantholder a new Stock Warrant certificate representing the
unexercised Stock Warrants.
ANTIDILUTION PROVISIONS
The exercise price payable and the number of shares of Common or Preferred
Stock purchasable upon the exercise of each Stock Warrant will be subject to
adjustment in certain events, including the issuance of a stock dividend to
holders of Common or Preferred Stock, respectively, or a combination,
subdivision or reclassification of Common or Preferred Stock, respectively. In
lieu of adjusting the number of shares of Common or Preferred Stock
purchasable upon exercise of each Stock Warrant, the Company may elect to
adjust the number of Stock Warrants. No adjustment in the number of shares
purchasable upon exercise of the Stock Warrants will be required until
cumulative adjustments require an adjustment of at least 1% thereof. The
Company may, at its option, reduce the exercise price at any time. No
fractional shares will be issued upon exercise of Stock Warrants, but the
Company will pay the cash value of any fractional shares otherwise issuable.
Notwithstanding the foregoing, in case of any consolidation, merger, or sale
or conveyance of the property of the Company as an entirety or substantially
as an entirety, the holder of each outstanding Stock Warrant shall have the
right to the kind and amount of shares of stock and other securities and
property (including cash) receivable by a holder of the number of shares of
Common or Preferred Stock into which such Stock Warrants were exercisable
immediately prior thereto.
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NO RIGHTS AS STOCKHOLDERS
Holders of Stock Warrants will not be entitled, by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
stockholders with respect to any meeting of stockholders for the election of
directors of the Company or any other matter, or to exercise any rights
whatsoever as stockholders of the Company.
DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES
The following statements with respect to the Debt Warrants are summaries of,
and subject to, the detailed provisions of a warrant agreement (the "Debt
Warrant Agreement") to be entered into by the Company and a warrant agent to
be selected at the time of issue (the "Debt Warrant Agent"), which Debt
Warrant Agreement may include or incorporate by reference standard warrant
provisions substantially in the form of the Standard Debt Securities Warrant
Provisions (the "Debt Warrant Provisions") filed as an exhibit to the
Registration Statement.
GENERAL
The Debt Warrants, evidenced by warrant certificates (the "Debt Warrant
Certificates"), may be issued under the Debt Warrant Agreement independently
or together with any Offered Securities offered by any Prospectus Supplement
and may be attached to or separate from such Offered Securities. If Debt
Warrants are offered, the related Prospectus Supplement will describe the
terms of the warrants, including without limitation the following: (1) the
offering price, if any; (2) the designation, aggregate principal amount and
terms of the Debt Securities purchasable upon exercise of the warrants; (3) if
applicable, the designation and terms of the Debt Securities with which the
Debt Warrants are issued and the number of Debt Warrants issued with each such
Debt Security; (4) if applicable, the date on and after which the Debt
Warrants and the related Offered Securities will be separately transferable;
(5) the principal amount of Debt Securities purchasable upon exercise of one
Debt Warrant and the price at which such principal amount of Debt Securities
may be purchased upon exercise; (6) the date on which the right to exercise
the Debt Warrants shall commence and the date on which such right shall
expire; (7) a discussion of certain federal income tax considerations; (8)
whether the warrants represented by the Debt Warrant Certificates will be
issued in registered or bearer form; (9) the currency, currencies or currency
units in which the offering price, if any, and exercise price are payable;
(10) the antidilution provisions of the Debt Warrants; and (11) any other
terms of the Debt Warrants.
Debt Warrant Certificates may be exchanged for new Debt Warrant Certificates
of different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Debt Warrant
Agent, which will be listed in the related Prospectus Supplement, or at such
other office as may be set forth therein. Warrantholders do not have any of
the rights of holders of Debt Securities (except to the extent that the
consent of warrantholders may be required for certain modifications of the
terms of an Indenture or form of the Debt Security, as the case may be, and
the series of Debt Securities issuable upon exercise of the Debt Warrants) and
are not entitled to payments of principal of and interest, if any, on the Debt
Securities.
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EXERCISE OF DEBT WARRANTS
Debt Warrants may be exercised by surrendering the Debt Warrant Certificate
at the corporate trust office of the Debt Warrant Agent, with the form of
election to purchase on the reverse side of the Debt Warrant Certificate
properly completed and executed, and by payment in full of the exercise price,
as set forth in the Prospectus Supplement. Upon the exercise of Debt Warrants,
the Debt Warrant Agent will, as soon as practicable, deliver the Debt
Securities in authorized denominations in accordance with the instructions of
the exercising warrantholder and at the sole cost and risk of such holder. If
less than all of the Debt Warrants evidenced by the Debt Warrant Certificate
are exercised, a new Debt Warrant Certificate will be issued for the remaining
amount of Debt Warrants.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities (1) through underwriters or dealers,
(2) directly to one or more purchasers, or (3) through agents. A Prospectus
Supplement will set forth the terms of the offering of the Offered Securities
offered thereby, including the name or names of any underwriters, the purchase
price of the Offered Securities, and the proceeds to the Company from the
sale, any underwriting discounts and other items constituting underwriters'
compensation, any public offering price, any discounts or concessions allowed
or reallowed or paid to dealers, and any securities exchange or market on
which the Offered Securities may be listed. Only underwriters so named in such
Prospectus Supplement are deemed to be underwriters in connection with the
Offered Securities offered thereby.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the Offered Securities
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all the Offered Securities of the series offered by the
Prospectus Supplement if any of the Offered Securities are purchased. Any
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
Offered Securities may also be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offering and sale of Offered 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 Prospectus Supplement. Unless otherwise
indicated in the related Prospectus Supplement, any such agent will be acting
on a best-efforts basis for the period of its appointment.
All Offered Securities offered other than Common Stock will be a new issue
of securities with no established trading market. Any underwriters to whom
such Offered Securities are sold by the Company for public offering and sale
may make a market in such Offered Securities, but such underwriters will not
be obligated to do so and may discontinue any market making at any time
without notice. No assurance can be given as to the liquidity of or the
trading markets for any such Offered Securities.
Agents and underwriters 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 that may arise
from any untrue statement or alleged untrue statement of a material fact or
any omission or alleged omission to state a material fact in this Prospectus,
any supplement or amendment hereto, or in the registration statement of which
this Prospectus forms a part, or to contribution with respect to payments
which the agents or underwriters may be required to make in respect thereof.
Agents and underwriters may engage in transactions with, or perform services
for, the Company in the ordinary course of business.
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LEGAL MATTERS
Certain legal matters with respect to the validity of the Offered Securities
will be passed upon for the Company by Winston & Strawn, Chicago, Illinois.
The Chairman of the Executive Committee of Winston & Strawn, Governor James R.
Thompson, serves as a member of the Company's Board of Directors and as of
December 31, 1996 beneficially owned 1,606 shares of Common Stock. Certain
legal matters with respect to the Offered Securities will be passed upon for
any underwriters or agents by Mayer, Brown & Platt, Chicago, Illinois. Mayer,
Brown & Platt from time to time acts as counsel in certain matters for the
Company.
EXPERTS
The consolidated financial statements of the Company and its consolidated
subsidiaries as of December 31, 1994 and 1995 and for the years ended December
31, 1993, 1994 and 1995 incorporated by reference herein and elsewhere in the
Registration Statement have been audited by KPMG Peat Marwick LLP ("KPMG"),
independent certified public accountants, as set forth in their report thereon
incorporated by reference herein which, as to 1994 and 1995, is based in part
on the report of Ernst & Young LLP ("Ernst & Young"), independent auditors,
that also is incorporated by reference herein. The financial statements
referred to above are incorporated by reference in reliance upon such reports
given upon the authority of such firms as experts in accounting and auditing.
To the extent that KPMG audits and reports on consolidated financial
statements of the Company and consolidated subsidiaries issued at future
dates, and consents to the use of their reports thereon, such consolidated
financial statements also will be incorporated by reference in the
Registration Statement in reliance upon their reports given upon the authority
of such firm as experts in accounting and auditing. To the extent that Ernst &
Young audits and reports on financial statements of United Defense, L.P., a
subsidiary of the Company, issued at future dates, and consents to the use of
their reports thereon, such reports also will be incorporated by reference in
the Registration Statement in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
With respect to the unaudited interim financial information of the Company
and its consolidated subsidiaries for the periods ended March 31, 1996 and
1995, June 30, 1996 and 1995 and September 30, 1996 and 1995, incorporated by
reference herein, KPMG has reported that they applied limited procedures in
accordance with professional standards for a review of such information. The
reports of KPMG for such periods state that such reports are based on the
reports of other accountants with respect to interim financial information of
United Defense, L.P. With respect to the unaudited interim financial
information of United Defense, L.P., for the periods ended March 31, 1996 and
1995, June 30, 1996 and 1995 and September 30, 1996 and 1995, Ernst & Young
has reported that they applied limited procedures in accordance with
professional standards for a review of such information. However, the separate
reports of KPMG and Ernst & Young included in the Company's Quarterly reports
on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and
September 30, 1996, and incorporated by reference herein, state that they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the review
procedures applied. Neither KPMG nor Ernst & Young is subject to the liability
provisions of Section 11 of the Securities Act for their reports on the
unaudited interim financial information because neither report is a "report"
or a "part" of the Registration Statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Securities Act.
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