<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus Dated April 7, 1994)
$300,000,000
W. R. GRACE & CO.-CONN.
MEDIUM-TERM NOTES, SERIES A
DUE MORE THAN NINE MONTHS FROM DATE OF ISSUE
UNCONDITIONALLY GUARANTEED BY
W. R. GRACE & CO.
W. R. Grace & Co.-Conn. ("Company") may offer from time to time pursuant to this
Prospectus Supplement its Medium-Term Notes, Series A ("Notes"), with an
aggregate issue price of up to $300,000,000 (or the equivalent thereof, if any
of the Notes are denominated other than in U.S. dollars), subject to reduction
as a result of the sale of other securities of the Company or W. R. Grace & Co.
("Guarantor"). The Guarantor will guarantee the Notes, and the Notes and such
guarantees ("Guarantees") will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness for borrowed money of the Company and
the Guarantor, respectively. See "Description of Notes and Guarantees --
General" herein and "Description of Debt Securities and Guarantees" in the
accompanying Prospectus.
The terms of each Note will be established prior to issuance and set forth in
one or more pricing supplements to this Prospectus Supplement (each a "Pricing
Supplement"). The Notes may bear interest at either fixed or floating rates and
will have Maturity Dates more than nine months from their respective dates of
issue, as specified in a Pricing Supplement. Interest on each Fixed Rate Note
will be payable on May 15 and November 15 of each year, unless otherwise
specified in the applicable Pricing Supplement, and at Maturity. Interest on
each Floating Rate Note will be payable on the Interest Payment Dates set forth
in the applicable Pricing Supplement and at Maturity. A Note may provide that
the principal thereof will be amortized over the life of such Note. See
"Description of Notes and Guarantees", "Important Currency Exchange Information"
and "Currency Risks".
Except as otherwise specified in the applicable Pricing Supplement, Notes will
be represented by a Global Note registered in the name of a nominee of The
Depository Trust Company, and beneficial interests in Global Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
such depository and its participants. A beneficial interest in a Global Note may
be exchanged for Notes in certificated form only under limited circumstances.
See "Description of Notes and Guarantees -- General" herein and "Description of
Debt Securities and Guarantees -- Book-Entry Debt Securities" in the
accompanying Prospectus.
Unless otherwise specified in the applicable Pricing Supplement, Notes (other
than Global Notes) denominated in U.S. dollars will be issued only in registered
form in authorized denominations of $1,000 and integral multiples thereof. See
"Description of Notes and Guarantees -- General".
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 PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSION(2) COMPANY(2)(3)
<S> <C> <C> <C>
Per Note.......... 100.000% .125%-.875% 99.875%-99.125%
Total(4).......... $300,000,000 $375,000-$2,625,000 $299,625,000-$297,375,000
- --------------------------------------------------------------------------------
<FN>
(1) Unless otherwise specified in the applicable Pricing Supplement, the Price
to Public will be 100% of the principal amount.
(2) The Company will pay to Salomon Brothers Inc, J.P. Morgan Securities Inc. or
UBS Securities Inc. (each an "Agent") a commission of from .125% to .875% of
the principal amount of each Note sold through such Agent, depending upon
the Maturity Date of such Note, except that the commission payable with
respect to a Note with a Maturity Date more than 40 years after its date of
issue will be negotiated at the time of issuance.
(3) Before deducting expenses payable by the Company estimated at $475,000,
including reimbursement of certain expenses of the Agents.
(4) Or the equivalent thereof, if any of the Notes are denominated other than in
U.S. dollars.
</TABLE>
The Notes are being offered on a continuous basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit offers
to purchase Notes. The Company may also sell Notes to an Agent for its own
account or for resale to investors or other purchasers. In addition, each Agent
may offer to other dealers the Notes it has purchased as principal. The Company
reserves the right to sell Notes directly on its own behalf in those
jurisdictions where it is authorized to do so. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be listed on any securities
exchange. There can be no assurance that any Notes offered by this Prospectus
Supplement will be sold or that there will be a secondary market for the Notes.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby or by a Pricing Supplement without notice. The Company and/or any
applicable Agent may reject any order to purchase Notes, whether or not
solicited, in whole or in part. See "Plan of Distribution".
SALOMON BROTHERS INC
J.P. MORGAN SECURITIES INC.
UBS SECURITIES INC.
The date of this Prospectus Supplement is April 7, 1994.
<PAGE>
IN CONNECTION WITH THE DISTRIBUTION OF THE NOTES, THE AGENTS MAY OVERALLOT
OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
GRACE
Grace is primarily engaged in the specialty chemical business on a worldwide
basis and in specialized health care activities. In its chemical operations,
Grace develops, manufactures and markets specialty chemicals and materials and
related application systems. In health care, Grace is primarily engaged in
supplying kidney dialysis and home infusion and respiratory therapy services and
products.
DESCRIPTION OF NOTES AND GUARANTEES
The following description of the terms of the Notes and Guarantees
supplements and, to the extent inconsistent therewith, replaces the description
of the general terms and provisions of Debt Securities and Guarantees set forth
under "Description of Debt Securities and Guarantees" in the accompanying
Prospectus, to which reference is hereby made. The following description of the
material terms of the Notes and Guarantees does not purport to be complete and
is subject to, and qualified in its entirety by reference to, the Indenture and
to the specific terms of Notes that are set forth in the applicable Pricing
Supplement.
A glossary of certain terms used herein is set forth in Appendix A to this
Prospectus Supplement. Capitalized terms used in this Prospectus Supplement that
are not defined in the glossary have the meanings given in the Indenture or in
the accompanying Prospectus.
THE FOLLOWING DESCRIPTION WILL APPLY TO EACH NOTE AND GUARANTEE UNLESS
OTHERWISE SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT.
GENERAL
The Notes offered by this Prospectus Supplement constitute a series of Debt
Securities under the Indenture and will be limited to $300,000,000 aggregate
issue price (or, if any Notes are denominated in a Specified Currency other than
U.S. dollars, the equivalent thereof, as determined by the Company or its agent
("Exchange Rate Agent") on the basis of the Market Exchange Rate for such
Specified Currency on the applicable trade date), subject to reduction as a
result of the sale of other Securities of the Company or of securities of the
Guarantor covered by the Registration Statement of which this Prospectus
Supplement is a part.
The Notes constitute one series of Debt Securities that may be issued by the
Company pursuant to the Indenture. At the date of this Prospectus Supplement, an
aggregate amount of $300,000,000 of Debt Securities (none of which were Notes)
was outstanding under the Indenture. The Company may issue additional Notes of
the same series, medium-term notes of another series or other Debt Securities
(in each case unlimited as to principal amount) under the Indenture. The Company
may also issue additional medium-term notes or other debt securities under one
or more additional indentures.
The Notes will be offered on a continuous basis and will have Maturity Dates
more than nine months from their respective dates of issue, as agreed to by the
purchaser and the Company. If so specified in the applicable Pricing Supplement,
an issue of Notes will be subject to redemption at the option of the Company or
repayment at the option of the holder prior to the Maturity Date. The Notes will
be subject to defeasance and covenant defeasance as described in the
accompanying Prospectus under "Description of Debt Securities and Guarantees --
Defeasance and Covenant Defeasance". The Notes will not be subject to any
sinking fund.
S-2
<PAGE>
Each Note will bear interest from its date of issue at either (i) a fixed
rate (a "Fixed Rate Note"), which may be zero (a "Zero-Coupon Note") or (ii) a
floating rate or rates, determined by reference to a Base Rate (a "Floating Rate
Note"), which may be adjustable by a Spread and/or a Spread Multiplier.
The Notes will have endorsed thereon Guarantees by which the Guarantor will
unconditionally guarantee the due and punctual payment of the principal of (and
premium, if any, on) and interest, if any, on the Notes, when and as the same
become due and payable, whether at the Maturity Date, upon any redemption or
repayment, upon declaration of acceleration or otherwise. See "Description of
Debt Securities and Guarantees" in the accompanying Prospectus.
Each Note will be issued in fully registered form without coupons and will
be represented either by (i) a global security (a "Global Note") registered in
the name of a nominee of DTC or another depository (DTC or such other depository
as is specified in the Pricing Supplement is herein referred to as the
"Depository") or (ii) a Note issued in certificated form (a "Certificated
Note"). Unless otherwise specified in the applicable Pricing Supplement, each
Note will be represented by a Global Note and the Depository will be DTC. All
Notes issued on the same day and having the same terms may be represented by one
or more Global Notes. A beneficial interest in a Global Note will be shown on,
and transfers thereof will be effected only through, records maintained by the
Depository and its participants. A beneficial interest in a Global Note may be
exchanged for Notes in certificated form only in the limited circumstances set
forth in the accompanying Prospectus. Except as indicated below, payments of
principal of (and premium, if any, on) and interest, if any, on Notes
represented by a Global Note will be made by the Company or the Paying Agent to
the Depository. See "Payment of Principal and Interest" below and "Description
of Debt Securities and Guarantees -- Book-Entry Debt Securities" in the
accompanying Prospectus.
The authorized denominations of Notes (other than Global Notes) denominated
in U.S. dollars will be $1,000 and integral multiples thereof. The authorized
denominations of any Notes denominated other than in U.S. dollars will be as set
forth in the applicable Pricing Supplement.
Reference is made to the Pricing Supplement relating to an issue of Notes
for the following:
(1) The aggregate principal amount of such Notes (and, if such Notes are
issued other than at par, the percentage of their principal amount at which
such Notes will be issued) and the date on which such Notes will be issued.
(2) The Maturity Date of such Notes.
(3) Whether such Notes will be Fixed Rate Notes or Floating Rate Notes;
whether any such Notes will be Amortizing Notes; and whether such Notes will
be Indexed Notes and, if so, the special terms thereof.
(4) If such Notes will be Fixed Rate Notes, the rate at which such Notes
will bear interest, if any; whether any such Notes will be Discount Notes or
Zero-Coupon Notes; and whether and in what manner such rate may change prior
to the Maturity Date of such Notes.
(5) If such Notes will be Floating Rate Notes, the Base Rate, the
Initial Interest Period and the Initial Interest Rate (or formula for
determining the same), the Interest Reset Periods and Interest Reset Dates,
the Index Maturity, any Spread or Spread Multiplier, whether any such Spread
or Spread Multiplier may change before the Maturity Date of such Notes, the
Interest Determination Dates, Calculation Dates and Interest Payment Dates,
any Maximum Interest Rate and/or Minimum Interest Rate and any other terms
relating to the particular method of calculating the interest rate on such
Notes.
(6) Whether such Notes may be redeemed at the option of the Company, or
repaid at the option of the holders, prior to their Maturity Date and, if
so, the provisions relating to such redemption or repayment.
S-3
<PAGE>
(7) Whether the interest rate, Spread or Spread Multiplier on such
Notes may be reset upon the occurrence of certain events or at the option of
the Company and, if so, the provisions relating to such reset.
(8) The Specified Currency, if other than U.S. dollars, in which such
Notes will be denominated or in which the principal of (and premium, if any,
on) and interest, if any, on such Notes will be payable.
(9) Any material United States federal income tax consequences of the
purchase, ownership and disposition of such Notes (other than or in addition
to those set forth below under "United States Taxation").
(10) The use of proceeds from the sale of such Notes, if such use
differs materially from that disclosed in the accompanying Prospectus.
(11) Any other terms of such Notes not inconsistent with the provisions
of the Indenture.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of interest on a Global Note (other than interest payable at
Maturity) will be made by the Paying Agent to the Depository in immediately
available funds in accordance with existing arrangements between the Paying
Agent and the Depository. Payments of principal of (and premium, if any, on) and
interest, if any, on a Global Note at Maturity will be made by the Paying Agent
by wire transfer in immediately available funds to an account specified by the
Depository. Beneficial Owners of a Global Note will be paid in accordance with
the procedures of the Depository and the applicable Participant therein, as in
effect from time to time. Beneficial Owners of a Global Note denominated in a
Specified Currency other than U.S. dollars who elect to receive payments of
principal of (or premium, if any, on) or interest, if any, on such Global Note
in such Specified Currency (as provided under "Notes Denominated Other Than in
U.S. Dollars" below) will be paid directly by the Paying Agent. See "Description
of Debt Securities and Guarantees -- Book-Entry Debt Securities" in the
accompanying Prospectus.
The Company will pay any administrative costs imposed by banks in connection
with making payments on the Notes in immediately available funds, but any tax,
assessment or governmental charge imposed upon payments will be borne by the
holders of the Notes in respect of which such payments are made.
Any payment required to be made in respect of a Note on a date that is not a
Business Day for such Note will be made on the next succeeding Business Day with
the same force and effect as if made on such date, and no additional interest
will accrue as a result of such delayed payment; provided that, in the case of
an Interest Payment Date with respect to a LIBOR Note, if such Business Day
would fall in the succeeding calendar month, such payment will be made on the
Business Day immediately preceding such Interest Payment Date. If any Note is
issued between a Regular Record Date and the related Interest Payment Date,
interest for the period beginning on the date of issue of such Note and ending
on such Interest Payment Date will be paid on the Interest Payment Date
following the next succeeding Regular Record Date to the registered holder on
such succeeding Regular Record Date.
The amount of any Discount Note payable in the event of redemption by the
Company, repayment at the option of the holder or declaration of acceleration,
in lieu of the stated principal amount due on the Maturity Date, will be the
Amortized Face Amount of such Discount Note at the date of such redemption,
repayment or acceleration.
In the event that Certificated Notes are initially issued, information
concerning payment and other arrangements with respect to such Certificated
Notes will be set forth in the applicable Pricing Supplement.
NOTES DENOMINATED OTHER THAN IN U.S. DOLLARS
CURRENCY OF PAYMENT. The principal of (and premium, if any, on) and
interest, if any, on each Note denominated in a Specified Currency other than
U.S. dollars will be paid by the Paying Agent in U.S.
S-4
<PAGE>
dollars in the manner described above under "Payment of Principal and Interest"
in an amount calculated by the Exchange Rate Agent; provided that, if the
applicable Pricing Supplement so indicates, the holder of such a Note may elect
to receive all payments in respect thereof in such Specified Currency by
delivering a written election to that effect to the Paying Agent in The City of
New York on or prior to the applicable Regular Record Date or at least 15
calendar days prior to Maturity, as the case may be. Such election will remain
in effect unless and until changed by written notice to the Paying Agent, but
(i) the Paying Agent must receive written notice of any such change on or prior
to the applicable Regular Record Date or at least 15 calendar days prior to
Maturity, as the case may be, and (ii) no such change of election may be made
with respect to payments on any Note with respect to which (a) an Event of
Default has occurred, (b) the Company has exercised any of its defeasance or
covenant defeasance options, (c) the Indenture has been satisfied and discharged
pursuant to Article Four thereof, (d) the Company has given a notice of
redemption or (e) such holder has exercised its repayment option. All currency
exchange costs will be borne by the Company unless any holder of a Note has made
the election referred to above in this paragraph, in which case each electing
holder of a Note will bear the currency exchange costs related to such Note, if
any, by deductions from payments otherwise due such holder.
DETERMINATION OF DOLLAR EQUIVALENT. The amount of U.S. dollar payments in
respect of a Note denominated in a Specified Currency other than U.S. dollars
("Exchange Rate") will be determined by the Exchange Rate Agent, based on the
indicative quotation in The City of New York selected by such Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date, that yields the largest number of
U.S. dollars upon conversion of such Specified Currency. Such selection will be
made from the quotations received by the Exchange Rate Agent from no more than
three nor less than two recognized foreign exchange dealers (one of which may be
the Exchange Rate Agent) in The City of New York, selected by the Exchange Rate
Agent and approved by the Company, for the purchase by the quoting dealer of the
Specified Currency in exchange for U.S. dollars for settlement on such payment
date. If no such bid quotations are available, payments will be made in the
Specified Currency unless such Specified Currency is unavailable, in which case
the Company will be entitled to make payments in U.S. dollars, all as provided
below.
UNAVAILABILITY OF SPECIFIED CURRENCY. If payments on a Note denominated in
a Specified Currency other than U.S. dollars are required to be made in such
Specified Currency (either because (i) the holder thereof has elected to receive
payment in such Specified Currency, as specified above, or (ii) payments in U.S.
dollars may not be made due to the unavailability of the Exchange Rate as of any
particular payment date) and such Specified Currency is unavailable as of the
due date thereof (due to the imposition of exchange controls or other
circumstances beyond the Company's control, or because such Specified Currency
is no longer used by the government of the country issuing such Specified
Currency or for the settlement of transactions by public institutions of or
within the international banking community), the Company will be entitled to
make all payments due on such due date with respect to such Note in U.S. dollars
until such Specified Currency is again available or so used, on the basis of the
noon buying rate in The City of New York for cable transfers in the Specified
Currency, as certified for customs purposes by the Federal Reserve Bank of New
York ("Market Exchange Rate") for such Specified Currency on the second Business
Day prior to such date. In the event such Market Exchange Rate is not then
available, the Company will be entitled to make payments in U.S. dollars (i) if
such Specified Currency is not a composite currency, in an amount determined by
the Exchange Agent on the basis of the most recently available Market Exchange
Rate for such Specified Currency or (ii) if such Specified Currency is a
composite currency (including, without limitation, the ECU), in an amount
determined by the Exchange Rate Agent to be the sum of the amounts obtained by
multiplying the appropriate number of units of each component currency
comprising such composite currency, as of the most recent date on which such
composite currency was used, by the Market Exchange Rate for such component
currency on the second Business Day prior to such payment date (or if such
Market Exchange Rate is not then available, by the most recently available
Market Exchange Rate for such component currency).
S-5
<PAGE>
ALTERATION OF UNIT OF COMPONENT CURRENCY. If the official unit of any
component currency of a composite currency is altered by way of combination or
subdivision, the number of units of that currency as a component will be divided
or multiplied in the same proportion. If two or more component currencies are
consolidated into a single currency, the amounts of those currencies as
components will be replaced by an amount in such single currency equal to the
sum of the amounts of the consolidated component currencies expressed in such
single currency. If any component currency is divided into two or more
currencies, the amount of that currency as a component will be replaced by
amounts of such two or more currencies having an aggregate value on the date of
division equal to the amount of the former component currency immediately before
such division.
The determinations made by the Exchange Rate Agent will be at its sole
discretion (except to the extent expressly provided herein that any
determination is subject to approval by the Company) and, in the absence of
manifest error, will be conclusive for all purposes and binding on the Company
and the holders of Notes, and the Exchange Rate Agent will have no liability
therefor.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from and including its date of issue
to but excluding the date of Maturity at the interest rate set forth or
described in the applicable Pricing Supplement, except that such rate of
interest may be subject to adjustment from time to time if and to the extent
provided for in such Pricing Supplement. The Interest Payment Dates for each
Fixed Rate Note (other than a Zero-Coupon Note) will be each May 15 and November
15 and the date of Maturity. Each payment of interest on a Fixed Rate Note will
include interest accrued from and including the date of issue or the last
Interest Payment Date to which interest has been paid or duly provided for, as
the case may be, to but excluding the next Interest Payment Date or the date of
Maturity, as the case may be. Interest on Fixed Rate Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest for the period ("Initial Interest
Period") from and including its date of issue to but excluding the first
Interest Reset Date for such Note at the interest rate set forth or described in
the applicable Pricing Supplement ("Initial Interest Rate"). Subsequently, each
Floating Rate Note will bear interest for each Interest Reset Period at the
interest rate determined by (i) adding to or subtracting from the interest rate
basis ("Base Rate") applicable to such Note, the Spread, if any, and/ or (ii)
multiplying the Base Rate by the Spread Multiplier, if any, in either case as
set forth in the applicable Pricing Supplement. The interest rate for an
Interest Reset Period will be the interest rate determined on the immediately
preceding Interest Determination Date. The "Interest Reset Period" pertaining to
any Interest Reset Date is the period from and including such Interest Reset
Date to but excluding the immediately succeeding Interest Reset Date, or the
Date of Maturity, as the case may be. The "Interest Reset Date" means the date
or dates on which the interest rate on a Floating Rate Note will be reset. The
"Spread" is the number of basis points, and the "Spread Multiplier" is the
percentage, that in either case may be specified in the applicable Pricing
Supplement. The Spread or Spread Multiplier on a Floating Rate Note may be
subject to adjustment from time to time, if and to the extent specified in the
applicable Pricing Supplement.
One of the following Base Rates will be applicable to a Floating Rate Note:
(i) the CD Rate ("CD Rate Notes"), (ii) the Commercial Paper Rate ("Commercial
Paper Rate Notes"), (iii) the Federal Funds Rate ("Federal Funds Rate Notes"),
(iv) LIBOR ("LIBOR Notes"), (v) the Prime Rate ("Prime Rate Notes"), (vi) the
Treasury Rate ("Treasury Rate Notes") or (vii) another Base Rate, as set forth
in the applicable Pricing Supplement.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually, as specified in the applicable
Pricing Supplement. The following table sets forth the
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<PAGE>
Interest Reset Dates and Interest Payment Dates with respect to Floating Rate
Notes (except that in all instances the interest rate for the ten days
immediately prior to Maturity will be the rate in effect on the tenth day prior
to Maturity):
<TABLE>
<CAPTION>
FREQUENCY OF INTEREST RATE
RESET INTEREST RESET DATES INTEREST PAYMENT DATES
- --------------------------- --------------------------- ------------------------------------------------------
<S> <C> <C>
Daily Each Business Day Third Wednesday of each month or of each February,
May, August and November (as specified in the Pricing
Supplement)
Weekly (other than Treasury Each Wednesday Third Wednesday of each month or of each February,
Rate Notes) May, August and November (as specified in the Pricing
Supplement)
Weekly (Treasury Rate Each Tuesday (except as Third Wednesday of each month or of each February,
Notes) provided under "Treasury May, August and November (as specified in the Pricing
Rate Notes" below) Supplement)
Monthly Third Wednesday of each Third Wednesday of each month or of each February,
month May, August and November (as specified in the Pricing
Supplement)
Quarterly Third Wednesday of each Third Wednesday of each February, May, August and
February, May, August and November
November
Semiannually Third Wednesday of each of Third Wednesday of each of two months specified in the
two months specified in the Pricing Supplement
Pricing Supplement
Annually Third Wednesday of month Third Wednesday of month specified in the Pricing
specified in the Pricing Supplement
Supplement
</TABLE>
Notwithstanding the preceding table, if an Interest Reset Date would otherwise
be a day that is not a Business Day, such Interest Reset Date will be postponed
to the next Business Day, except that, in the case of a LIBOR Note, if such
Business Day would fall in the next calendar month, such Interest Reset Date
will be the immediately preceding Business Day.
Each payment of interest on a Floating Rate Note will include interest
accrued from and including the date of issue or the last Interest Payment Date
to which interest has been paid or duly provided for, as the case may be, to but
excluding the next Interest Payment Date or the date of Maturity, as the case
may be; provided that, in the case of a Floating Rate Note that resets daily or
weekly, each payment of interest will include the interest accrued from and
including the date of issue or from and excluding the last Regular Record Date
to which interest has been paid or duly provided for, as the case may be, to and
including the Regular Record Date immediately preceding the applicable Interest
Payment Date or to but excluding the date of Maturity, as the case may be.
Accrued interest on a Floating Rate Note will be calculated by multiplying
the principal amount of such Note (or, in the case of a Floating Rate Note that
is an Indexed Principal Note, the amount designated by the terms thereof) 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 accrued
interest is being calculated. The interest factor (expressed as a decimal
calculated to seven decimal places, without rounding) for each day in such
period will be computed by dividing the applicable interest rate
S-7
<PAGE>
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 relevant year (in the case of Treasury Rate Notes).
A Floating Rate Note may provide for either or both of the following (in
each case expressed as a rate per annum on a simple interest basis): (i) a
maximum limitation on the rate at which interest may accrue during any interest
period ("Maximum Interest Rate") and (ii) a minimum limitation on the rate at
which interest may accrue during any interest period ("Minimum Interest Rate").
In addition to any Maximum Interest Rate that may be applicable, the interest
rate will in no event be higher than the maximum rate permitted by applicable
New York and United States federal law. Under applicable New York and United
States federal law as of the date of this Prospectus Supplement, the maximum
permitted rate of interest on Notes, with certain exceptions, is 25% per annum.
All percentages resulting from any calculation of the interest rate on a
Floating Rate Note will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward, and
all currency amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest one-hundredth of a unit (with .005 of a
unit being rounded upward).
The "Interest Determination Date" pertaining to an Interest Reset Period (i)
for CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes or
Prime Rate Notes will be the second Business Day preceding the relevant Interest
Reset Date, (ii) for LIBOR Notes will be the second London Banking Day preceding
the relevant Interest Reset Date and (iii) for Treasury Rate Notes will be the
day of the week in which the relevant Interest Reset Date falls on which
treasury bills of the applicable Index Maturity are auctioned. If, as the result
of a legal holiday, a treasury bill auction is held on the Friday preceding the
Interest Reset Date, such Friday will be the Interest Determination Date.
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 any such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day preceding the applicable
Interest Payment Date or date of Maturity, as the case may be.
The Company will appoint an agent ("Calculation Agent") to calculate
interest rates on Floating Rate Notes. Unless otherwise specified in the
applicable Pricing Supplement, NationsBank of Georgia, National Association will
be the Calculation Agent for each Floating Rate Note. All determinations of
interest by the Calculation Agent will, in the absence of manifest error, be
conclusive for all purposes and binding on the Company and the holders of
Floating Rate Notes. Upon the request of any registered holder or Beneficial
Owner of a Floating Rate Note, the Calculation Agent for such Note 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 Note.
CD RATE NOTES. CD Rate Notes will bear interest at the interest rates
(calculated with reference to the CD Rate and the Spread and/or the Spread
Multiplier, if any) specified in the applicable Pricing Supplement.
The "CD Rate" means, with respect to any Interest Determination Date, the
rate on such date for negotiable certificates of deposit having the applicable
Index Maturity, 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)". If such rate is not
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
applicable Index Maturity, 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", or any successor publication of the Federal Reserve Bank
of New York ("Composite Quotations") under the heading "Certificates of
Deposit". If such rate is not published in Composite Quotations by 3:00 p.m.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the CD Rate for such Interest Determination
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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, of three leading nonbank dealers in negotiable
U.S. dollar certificates of deposit in The City of New York, selected by the
Calculation Agent after consultation with the Company, for negotiable
certificates of deposit of major United States money center banks of the highest
credit standing (in the market for negotiable certificates of deposit) with a
remaining maturity closest to the applicable Index Maturity in a denomination of
$5,000,000; provided that, if the dealers selected as aforesaid by the
Calculation Agent are not quoting such rates, the interest rate for the period
commencing on the Interest Reset Date following such Interest Determination Date
will be the interest rate borne by such CD Rate Notes on such Interest
Determination Date.
CD Rate Notes, like other Notes, are not deposit obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER RATE NOTES. Commercial Paper Rate Notes will bear interest
at the interest rates (calculated with reference to the Commercial Paper Rate
and the Spread and/or the Spread Multiplier, if any) specified in the applicable
Pricing Supplement.
The "Commercial Paper Rate" means, with respect to any Interest
Determination Date, the Money Market Yield on such date of the rate for
commercial paper having the applicable Index Maturity, as published in H.15(519)
under the heading "Commercial Paper". If such rate is not published prior to
9:00 a.m., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the Commercial Paper Rate will be the Money Market
Yield on such Interest Determination Date of the rate for commercial paper of
the applicable Index Maturity, as published by the Federal Reserve Bank of New
York in Composite Quotations under the heading "Commercial Paper". If such rate
is not published in Composite Quotations by 3:00 p.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, then the
Commercial Paper Rate for such Interest Determination Date will be calculated by
the Calculation Agent and will 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 after consultation with the Company,
for commercial paper of the applicable Index Maturity, placed for industrial
issuers whose bond rating (as determined by a nationally recognized rating
agency) is "AA" or the equivalent; provided that, if the dealers selected as
aforesaid by the Calculation Agent are not quoting such rates, the interest rate
for the period commencing on the Interest Reset Date following such Interest
Determination Date will be the interest rate borne by such Commercial Paper Rate
Notes on such Interest Determination Date.
"Money Market Yield" will be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360 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 in the applicable period for which interest is being calculated.
FEDERAL FUNDS RATE NOTES. Federal Funds Rate Notes will bear interest at
the interest rates (calculated with reference to the Federal Funds Rate and the
Spread and/or the Spread Multiplier, if any) 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)". If such rate is not 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 by the Federal Reserve Bank of New York in
Composite Quotations under the heading "Federal Funds/Effective Rate". If such
rate is not published in Composite Quotations by 3:00 p.m., New York City time,
on the Calculation Date pertaining to such Interest Determination Date, then the
Federal
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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 arranged by three leading brokers of
federal funds transactions in The City of New York, selected by the Calculation
Agent after consultation with the Company, as of 9:00 a.m., New York City time,
on such Interest Determination Date; provided that, if the brokers selected as
aforesaid by the Calculation Agent are not arranging such transactions, the
interest rate for the period commencing on the Interest Reset Date following
such Interest Determination Date will be the interest rate borne by such Federal
Funds Notes on such Interest Determination Date.
LIBOR NOTES. LIBOR Notes will bear interest at the interest rates
(calculated with reference to LIBOR and the Spread and/or the Spread Multiplier,
if any) specified in the applicable Pricing Supplement.
"LIBOR" means, with respect to any Interest Determination Date, the rate
determined by the Calculation Agent in accordance with either clause (1) or
clause (2) below, as specified in the applicable Pricing Supplement:
(1) The rate for deposits in U.S. dollars of the Index Maturity
specified in the applicable Pricing Supplement, commencing on the second
London Banking Day immediately following such Interest Determination Date,
that appears on the Telerate Page 3750 as of 11:00 a.m., London time, on
such Interest Determination Date ("LIBOR Telerate"). "Telerate Page 3750"
means the display designated as page "3750" on the Telerate Service (or such
other page as may replace the page 3750 on that service or such other
service or services as may be designated by the British Bankers' Association
for the purpose of displaying London interbank offered rates for U.S. dollar
deposits).
(2) The arithmetic mean of the offered rates for deposits in U.S.
dollars having the Index Maturity specified in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, that appear on the Reuters
Screen LIBO Page as of 11:00 a.m., London time, on such Interest
Determination Date, if at least two such offered rates appear on the Reuters
Screen LIBO Page ("LIBOR Reuters"). "Reuters Screen LIBO Page" means the
display designated as Page "LIBO" on the Reuters Monitor Money Rate Service
(or such other page as may replace the LIBO page on that service for the
purpose of displaying London interbank offered rates of major banks).
If neither LIBOR Telerate nor LIBOR Reuters is specified in the applicable
Pricing Supplement, LIBOR will be determined as if LIBOR Telerate had been
specified.
If (i) in the case where paragraph (1) above applies, no rate appears on the
Telerate Page 3750 or (ii) in the case where paragraph (2) above applies, fewer
than two offered rates appear on the Reuters Screen LIBO Page, LIBOR in respect
of such Interest Determination Date will be determined by the Calculation Agent
on the basis of the rates at which deposits in U.S. dollars of the Index
Maturity specified in the applicable Pricing Supplement are offered to prime
banks in the London interbank market at approximately 11:00 a.m., London time,
on such Interest Determination Date by four major banks ("Reference Banks") in
the London interbank market, selected by the Calculation Agent, commencing on
the second London Banking Day immediately following such Interest Determination
Date in a principal amount of not less than $1,000,000 that is representative
for a single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, LIBOR for
such Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two quotations are provided, LIBOR for such Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
a.m., New York City time, on such Interest Determination Date by three major
commercial or investment banks (which may include the Agents or any of their
respective affiliates) in The City of New York, selected by the Calculation
Agent, for U.S. dollar loans of the applicable Index Maturity to leading
European banks, commencing on the second London Banking Day immediately
following such Interest Determination Date, in a principal amount of not less
than $1,000,000 that is representative for a single transaction in such market
at such time; provided that, if the
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banks selected as aforesaid by the Calculation Agent are not quoting such rates,
the interest rate for the period commencing on the Interest Reset Date following
such Interest Determination Date will be the interest rate borne by such LIBOR
Notes on such Interest Determination Date.
If any LIBOR Note is indexed to the offered rates for deposits in a
Specified Currency other than U.S. dollars, the applicable Pricing Supplement
will set forth the method for determining such rates.
PRIME RATE NOTES. Prime Rate Notes will bear interest at the interest rates
(calculated with reference to the Prime Rate and the Spread and/or the Spread
Multiplier, if any) specified in the applicable Pricing Supplement.
The "Prime Rate" means, with respect to any Interest Determination Date, the
rate on such date, as published in H.15(519) under the heading "Bank Prime
Loan". If such rate is not published by 9:00 a.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Prime Rate
will be determined by the Calculation Agent and will be the arithmetic mean of
the rates of interest publicly announced by each bank named on the "Reuters
Screen NYMF Page" as such bank's prime rate or base lending rate as in effect
for such Interest Determination Date. "Reuters Screen NYMF Page" means the
display designated as page "NYMF" on the Reuters Monitor Money Rates Service (or
such other page as may replace the NYMF page on that service for the purpose of
displaying prime rates or base lending rates of major United States banks). If
fewer than four but more than one such rate appears on the Reuters Screen NYMF
Page for such Interest Determination Date, the Prime Rate will be determined by
the Calculation Agent and 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 four major money center
banks in The City of New York, selected by the Calculation Agent after
consultation with the Company. If fewer than two such rates appear on the
Reuters Screen NYMF Page, the Prime Rate will be calculated by the Calculation
Agent and will be the arithmetic mean of the prime rates in effect for such
Interest Determination Date as furnished in The City of New York by at least
three 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 $500,000,000 and subject to supervision or
examination by federal or state authority, selected by the Calculation Agent
after consultation with the Company; provided that, if the banks or trust
companies selected as aforesaid by the Calculation Agent are not quoting such
rates, the interest rate for the period commencing on the Interest Reset Date
following such Interest Determination Date will be the interest rate borne by
such Prime Rate Notes on such Interest Determination Date.
TREASURY RATE NOTES. Treasury Rate Notes will bear interest at the interest
rates (calculated with reference to the Treasury Rate and the Spread and/or the
Spread Multiplier, if any) 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 Interest Determination Date of treasury
bills of the Index Maturity specified in the applicable Pricing Supplement, as
published in H.15(519) under the heading "U.S. Government Securities -- Treasury
bills-auction average (investment)". If such rate is not published by 9:00 a.m.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Prime Rate will be the auction average rate for such
Interest Determination Date (expressed as a bond equivalent, rounded to the
nearest one-hundredth of a percent, with five one-thousandths of a percent
rounded upward, 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 applicable Index Maturity are not published or reported as provided
above by 3:00 p.m., New York City time, on such Calculation Date, or if no such
auction is held on such Interest Determination Date, then the Treasury Rate will
be calculated by the Calculation Agent and will be a yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time,
on such Interest Determination Date, of three leading primary United States
government securities dealers, selected by the Calculation Agent after
consultation with the
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Company, for the issue of treasury bills with a remaining maturity closest to
the applicable Index Maturity; provided that, if the dealers selected as
aforesaid by the Calculation Agent are not quoting such rates, the interest rate
for the period commencing on the Interest Reset Date following such Interest
Determination Date will be the interest rate borne by such Treasury Rate Notes
on such Interest Determination Date.
AMORTIZING NOTES
The Company may from time to time offer "Amortizing Notes", which are Notes
as to which all or a portion of the principal amount is payable prior to the
Maturity Date in accordance with a schedule, by application of a formula, or by
reference to an Index. The terms and conditions of any Amortizing Notes,
including the terms for payment thereof, will be set forth in the applicable
Pricing Supplement.
INDEXED NOTES
The Company may from time to time offer "Indexed Notes", which are Notes as
to which all or certain interest payments ("Indexed Rate Notes") and/or the
principal amount payable at Maturity ("Indexed Principal Notes") are determined
by reference to prices, changes in prices, or differences between prices, of
securities, currencies, intangibles, goods, articles or commodities or by such
other objective price, economic or other measures as are specified in the
applicable Pricing Supplement (each an "Index"). A description of the Index used
in any determination of interest and/or principal payments, and the method or
formula by which interest or principal payments or both will be determined by
reference to such Index, will be set forth in the applicable Pricing Supplement.
If the determination of an Index is calculated or announced by a third party
(which may be NationsBank of Georgia, National Association) and such third party
either suspends the calculation or announcement of such Index or changes the
basis upon which such Index is calculated (other than changes consistent with
policies in effect at the time the related Indexed Note was issued and with
permitted changes described in the applicable Pricing Supplement), then such
Index will be calculated for purposes of such Indexed Note by another third
party (which may be NationsBank of Georgia, National Association) selected by
the Company, subject to the same conditions and controls as applied to the
original third party. If for any reason such Index cannot be calculated on the
same basis and subject to the same conditions and controls as applied to the
original third party, then any indexed interest payments or indexed principal
amount payable with respect to such Indexed Note will be calculated in the
manner set forth in the applicable Pricing Supplement. All determinations of
such third party will, in the absence of manifest error, be conclusive for all
purposes and binding on the Company and the holders of Indexed Notes.
SUBSEQUENT INTEREST PERIODS -- INTEREST RATE RESET
The Pricing Supplement relating to each Note will indicate whether the
Company has the option with respect to such Note to reset the interest rate, in
the case of a Fixed Rate Note, or to reset the Spread or Spread Multiplier, in
the case of a Floating Rate Note, and, if so, the date or dates on which such
interest rate or such Spread or Spread Multiplier, as the case may be, may be
reset (each an "Optional Reset Date"). If the Company has such option with
respect to any Note, the following procedures will apply.
The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise at least 50 but not more than 60 days prior to an
Optional Reset Date for such Note. Not later than 40 days prior to such Optional
Reset Date, the Trustee will mail to the holder of such Note a notice ("Reset
Notice") setting forth (i) the election of the Company to reset the interest
rate in the case of a Fixed Rate Note, or the Spread or Spread Multiplier in the
case of a Floating Rate Note, (ii) such new interest rate or such new Spread or
Spread Multiplier, as the case may be, and (iii) the provisions, if any, for
redemption during the period from such Optional Reset Date to the next Optional
Reset Date or, if there is no such next Optional Reset Date, to the Maturity
Date of such Note (each such period a "Subsequent Interest Period"), including
the date or dates on which or the period or periods during which and the price
or prices at which such redemption may occur during such Subsequent Interest
Period. Upon the transmittal by the Trustee of a Reset Notice to the registered
holder of a Note, such new
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interest rate or such new Spread or Spread Multiplier, as the case may be, will
take effect automatically and, except as modified by the Reset Notice and as
described in the next paragraph, such Note will have the same terms as prior to
the transmittal of such Reset Notice.
Notwithstanding the foregoing, the Company may, at its option, revoke the
interest rate in the case of a Fixed Rate Note, or the Spread or Spread
Multiplier in the case of a Floating Rate Note, as provided for in the Reset
Notice, and establish an interest rate, Spread or Spread Multiplier that is
higher than the interest rate, Spread or Spread Multiplier provided for in the
relevant Reset Notice for the Subsequent Interest Period commencing on such
Optional Reset Date, by causing the Trustee to mail, not later than 20 days
prior to an Optional Reset Date for a Note, notice of such higher interest rate,
Spread or Spread Multiplier to the holder of such Note. Such notice will be
irrevocable. The Company must notify the Trustee of its intentions to revoke
such Reset Notice at least 25 days prior to such Optional Reset Date. Each Note
with respect to which the interest rate, Spread or Spread Multiplier is reset on
an Optional Reset Date and with respect to which the holder of such Note has not
tendered such Note for repayment (or has validly revoked any such tender)
pursuant to the next succeeding paragraph will bear such higher interest rate,
Spread or Spread Multiplier for the Subsequent Interest Period.
If the Company elects to reset the interest rate, Spread or Spread
Multiplier of a Note as described above, the holder of such Note will have the
option to elect repayment of such Note by the Company on any Optional Reset Date
at a price equal to the aggregate principal amount thereof outstanding on, plus
any interest accrued to, such Optional Reset Date. In order for a Note to be so
repaid on an Optional Reset Date, the holder thereof must follow the procedures
set forth below under "Redemption and Repayment" for optional repayment, except
that (i) the period for delivery of such Note or notification to the Trustee
will be at least 25 but not more than 35 days prior to such Optional Reset Date
and (ii) a holder who has tendered a Note for repayment pursuant to a Reset
Notice may, by written notice to the Trustee, revoke any such tender until the
close of business on the tenth day prior to such Optional Reset Date.
REDEMPTION AND REPAYMENT
The Pricing Supplement relating to each Note will indicate either (i) that
such Note cannot be redeemed prior to its Maturity Date or (ii) that such Note
will be redeemable, in whole or in part, at the option of the Company on a
specified date or dates prior to such Maturity Date, at a price or prices set
forth in the applicable Pricing Supplement, together with interest accrued to
the date of redemption. The Company may redeem any of the Notes that are
redeemable either in whole or from time to time in part, upon not less than 30
nor more than 60 days' notice. If less than all of the Notes of like terms are
to be redeemed, the Notes to be redeemed shall be selected by the Trustee by
such method as the Trustee shall deem fair and appropriate.
The Pricing Supplement relating to each Note will indicate either (i) that
such Note cannot be repaid at the option of the holder prior to its Maturity
Date or (ii) that such Note will be repayable at the option of the holder
thereof on a date or dates specified prior to its Maturity Date, at a price or
prices set forth in the applicable Pricing Supplement, together with interest
accrued to the date of repayment.
In order for a Note to be repaid at the option of the holder thereof, the
Company must receive, at least 30 days but not more than 45 days prior to the
repayment date, the Note with the form entitled "Option to Elect Repayment"
thereon duly completed. Exercise of the repayment option by the holder of a Note
will be irrevocable, except as otherwise described above under "Subsequent
Interest Periods -- Interest Rate Reset". The repayment option may be exercised
by the holder of a Note for less than the aggregate principal amount of the Note
then outstanding, provided that the principal amount of the Note remaining
outstanding after repayment is an authorized denomination.
With respect to a Global Note, the Depository's nominee will be the holder
of such Global Note and therefore will be the only entity that can exercise a
right to repayment. See "Description of Debt Securities and Guarantees --
Book-Entry Debt Securities" in the accompanying Prospectus. In order to ensure
that the Depository's nominee will timely exercise a right to repayment with
respect to a particular
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beneficial interest in a Global Note, the Beneficial Owner of such interest must
instruct the broker or other Participant through which it holds a beneficial
interest in such Global Note to notify the Depository of its desire to exercise
a right to repayment. Each Beneficial Owner should consult the broker or other
Participant through which it holds a beneficial interest in a Global Note in
order to ascertain the deadline by which such an instruction must be given in
order for notice to be timely delivered by such broker or other Participant to
the Depository.
REPURCHASE
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, surrendered to the Trustee for
cancellation.
IMPORTANT CURRENCY EXCHANGE INFORMATION
Each purchaser of a Note is required to pay for such Note in the Specified
Currency thereof. Currently, there are limited facilities in the United States
for conversion of U.S. dollars into other Currencies and vice versa, and banks
do not generally offer non-U.S. dollar checking or savings account facilities in
the United States. However, if requested by a prospective purchaser of Notes
denominated in a Specified Currency other than U.S. dollars, the Agent
soliciting the offer to purchase may arrange for the conversion of U.S. dollars
into such Specified Currency to enable the purchaser to pay for such Notes. Such
request must be made on or before the fifth Business Day preceding the date of
delivery of the Notes, or by such other date as is determined by the Agent
presenting such offer to the Company. Each such conversion will be made by the
relevant Agent on such terms and subject to such conditions, limitations and
charges as such Agent may from time to time establish in accordance with its
regular foreign exchange practice. All costs of any such exchange will be borne
by the purchasers of the Notes requesting such conversion.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes denominated in 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 U.S. dollars and such Specified Currency and the possibility of the
imposition or modification of foreign exchange controls with respect to such
Specified Currency. Such risks generally depend on factors over which the
Company has no control, such as economic and political events and the supply of
and demand for the relevant currencies. In recent years, rates of exchange
between the U.S. dollar and certain currencies have been 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 of a Specified Currency against the U.S. dollar would
result in a decrease in the effective yield of a Note denominated in such
Specified Currency below its stated interest rate and, in certain circumstances,
could result in a loss to the investor on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency in respect of Notes denominated in such Currency. There
can be no assurance that exchange controls will not restrict or prohibit
payments of principal of (or premium, if any, on) or interest, if any, on any
Note denominated in such Currency. Even if there are no actual exchange
controls, it is possible that such Currency would not be available to the
Company when payments on such Note are due because of circumstances beyond the
Company's control. In any such event, the Company will make required payments in
U.S. dollars on the basis described herein. See "Description of Notes and
Guarantees -- Payment Currency".
Any Pricing Supplement relating to Notes denominated in a Specified Currency
other than U.S. dollars will contain information concerning historical exchange
rates for such Currency against the U.S.
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dollar, a description of such Currency and any exchange controls affecting such
Currency. The information therein concerning exchange rates will be 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 state that they will be governed by and construed in
accordance with the laws of the State of New York. Courts in the United States
have not customarily rendered judgments for money damages denominated in any
Currency other than the U.S. dollar. New York law provides, however, that a
judgment rendered in an action based upon an obligation denominated in a
Currency other than U.S. dollars will be rendered in the Currency of the
underlying obligation and converted into U.S. dollars at a rate of exchange
prevailing on the date of the entry of the judgment or decree.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT DESCRIBE
ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED IN A CURRENCY OTHER THAN
U.S. DOLLARS, AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE
INVESTORS 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 OF AN INVESTMENT
IN SUCH NOTES. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO
ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
RISKS OF INDEXED NOTES
An investment in an Indexed Note may entail significant risks that are not
associated with a similar investment in a debt instrument that has a fixed
principal amount, is denominated in U.S. dollars and bears interest at either a
fixed rate or a floating rate determined by reference to nationally published
interest rate references. The risks of a particular Indexed Note will depend on
the terms of such Indexed Note, but may include, without limitation, the
possibility of significant changes in the prices of securities, currencies,
intangibles, goods, articles or commodities or of other objective price,
economic or other measures making up the relevant Index ("Underlying Assets").
Such risks generally depend on factors over which the Company has no control,
such as economic and political events and the supply of and demand for the
Underlying Assets. In recent years, currency exchange rates and prices for
various Underlying Assets have been highly volatile, and such volatility can be
expected to continue in the future. Fluctuations in any such rates or prices
that have occurred in the past are not necessarily indicative, however, of
fluctuations that may occur during the term of any Indexed Note.
In considering whether to purchase Indexed Notes, investors should be aware
that the calculation of amounts payable in respect of Indexed Notes may involve
reference to prices that are published solely by third parties or entities that
are not subject to regulation under the laws of the United States.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT DESCRIBE
ALL THE RISKS OF AN INVESTMENT IN INDEXED NOTES, AND THE COMPANY DISCLAIMS ANY
RESPONSIBILITY TO ADVISE PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO
TIME. THE RISK OF LOSS AS A RESULT OF THE LINKAGE OF PRINCIPAL OR INTEREST
PAYMENTS ON INDEXED NOTES TO AN INDEX AND TO THE UNDERLYING ASSETS CAN BE
SUBSTANTIAL. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS OF AN INVESTMENT IN INDEXED NOTES. INDEXED NOTES ARE
NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT
TO TRANSACTIONS IN THE UNDERLYING ASSETS RELEVANT TO SUCH INDEXED NOTES.
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UNITED STATES TAXATION
The following summary of the material United States federal income tax
consequences of the purchase, ownership and disposition of a Note is based on
the advice of Shearman & Sterling, special tax counsel to the Company. Such
advice is based on the United States Internal Revenue Code of 1986, as amended
("Code"), regulations (including proposed regulations and temporary regulations)
promulgated thereunder, rulings, official pronouncements and judicial decisions,
all as in effect on the date of this Prospectus Supplement and all of which are
subject to change, possibly with retroactive effect, or to different
interpretations. This summary provides general information only and does not
purport to address all of the United States federal income tax consequences that
may be applicable to a holder of a Note. It also does not address all of the tax
consequences that may be relevant to certain types of holders subject to special
treatment under the United States federal income tax law, such as individual
retirement and other tax-deferred accounts, dealers in securities or currencies,
life insurance companies, tax-exempt organizations, persons holding Notes as a
hedge or hedged against currency risk, as a position in a straddle for tax
purposes, as part of a "synthetic security" or other integrated investment
comprised of a Note and one or more other investments, or United States persons
(as defined below) whose functional currency is other than the U.S. dollar. It
also does not discuss the tax consequences to subsequent purchasers of Notes and
is limited to investors who hold Notes as a capital asset. The United States
federal income tax consequences of purchasing, holding or disposing of a
particular Note will depend, in part, on the particular terms of such Note as
set forth in the applicable Pricing Supplement. The material United States
federal income tax consequences of purchasing, holding or disposing of
Amortizing Notes, Floating Rate Notes or Indexed Notes will be set forth in the
applicable Pricing Supplement. A person considering the purchase of Notes or
making any election under the Code or the regulations with respect to such Notes
should consult its own tax advisor concerning the application of the United
States federal income tax law to its particular situation, as well as any tax
consequences arising under the law of any state, local or non-U.S. tax
jurisdiction.
"Single Non-U.S. Currency Note" shall mean a Note as to which all payments a
holder is entitled to receive are denominated in or determined by reference to
the value of a single Non-U.S. Currency. "Non-U.S. Currency" shall mean a
Currency, other than a hyperinflationary Currency or the U.S. dollar.
UNITED STATES PERSONS
For purposes of the following discussion, "United States person" means an
individual who is a citizen or resident of the United States, an estate or trust
subject to United States federal income taxation without regard to the the
source of its income, or a corporation, partnership or other entity created or
organized in or under the law of the United States or any state or the District
of Columbia. The following discussion pertains only to a holder of a Note who is
a Beneficial Owner of such Note and who is a United States person.
PAYMENTS OF INTEREST ON NOTES OTHER THAN DISCOUNT NOTES. Except as
discussed below under "Discount Notes" and "Short-Term Notes", a payment of
interest on a Note will be taxable to a holder as ordinary interest income at
the time it is accrued or received in accordance with the holder's method of tax
accounting. If the payment is denominated in or determined with reference to a
single Non-U.S. Currency, the amount required to be included in income by a cash
basis holder will be the U.S. dollar value of the amount paid (determined on the
basis of the "spot rate" on the date such payment is received), regardless of
whether the payment is in fact converted into U.S. dollars. No exchange gain or
loss will be recognized with respect to the receipt of such payment.
Except in the case of a Spot Rate Convention Election (as defined below), a
holder of a Single Non-U.S. Currency Note who is required to accrue interest
income prior to receipt will be required to include in income for each taxable
year the U.S. dollar value of the interest that has accrued during such year,
determined by translating such interest at the average rate of exchange for the
period or periods during which such interest has accrued. The average rate of
exchange for an interest accrual period (or partial period) is the simple
average of the spot exchange rates for each business day of such period (or an
average that is reasonably derived and consistently applied by the holder). Upon
receipt of an interest
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payment, such holder will recognize ordinary gain or loss in an amount equal to
the difference between (i) the U.S. dollar value of the Non-U.S. Currency
received (determined on the basis of the "spot rate" on the date such payment is
received) or, in the case of interest received in U.S. dollars rather than in
Non-U.S. Currency, the amount so received and (ii) the U.S. dollar value of the
interest income that such holder has previously included in income with respect
to such payment. Any such gain or loss generally will not be treated as interest
income or expense, except to the extent provided by administrative
pronouncements of the U.S. Internal Revenue Service ("Service").
A holder may elect to translate accrued interest into U.S. dollars at the
"spot rate" on the last day of an accrual period for the interest, or, in the
case of an accrual period that spans two taxable years, at the spot rate on the
last day of the taxable year (a "Spot Rate Convention Election"). Additionally,
if a payment of interest is received within five business days of the last day
of the accrual period, an electing holder may instead translate such accrued
interest into U.S. dollars at the spot rate on the day of receipt.
For purposes of this discussion, the "spot rate" generally means a rate that
reflects a fair market rate of exchange available to the public for currency
under a "spot contract" in a free market involving representative amounts. A
spot contract is a contract to buy or sell a currency on or before the second
Business Day following the date of execution of the contract. If such a spot
rate cannot be demonstrated, the Service has the authority to determine the spot
rate.
PURCHASE, SALE, EXCHANGE OR RETIREMENT OF NOTES. A holder's tax basis in a
Note generally will be the U.S. dollar cost of the Note to such holder (which,
in the case of a Note purchased with Non-U.S. Currency, will be determined by
translating the purchase price at the spot rate on the date of purchase),
increased by any original issue discount, market discount or acquisition
discount (all as defined below) previously included in the holder's gross income
(as described below), and reduced by any amortized premium (as described below)
and any principal payments and payments of stated interest that are not payments
of fixed periodic interest (as defined below).
Upon the sale, exchange or retirement of a Note, a holder generally will
recognize gain or loss equal to the difference between (i) the amount realized
on such sale, exchange or retirement (or the U.S. dollar value, at the spot rate
on the date of such sale, exchange or retirement, of the amount realized in Non-
U.S. Currency), except to the extent such amount is attributable to accrued
interest and (ii) the holder's tax basis in the Note. Except with respect to (i)
gains or losses attributable to changes in exchange rates (as described in the
next paragraph), (ii) gain attributable to market discount (as described below)
and (iii) gain on the disposition of a Short-Term Note (as defined below), gain
or loss so recognized will be capital gain or loss and will be long-term capital
gain or loss if, at the time of the sale, exchange or retirement, the Note was
held for more than one year. Under current law, long-term capital gains of
individuals are, under certain circumstances, taxed at lower rates than items of
ordinary income.
Gain or loss recognized by a holder on the sale, exchange or retirement of a
Single Non-U.S. Currency Note that is attributable to changes in exchange rates
will be treated as ordinary income or loss and generally will not be treated as
interest income or expense, except to the extent provided by administrative
pronouncements of the Service. Gain or loss attributable to changes in exchange
rates is recognized on the sale, exchange or retirement of a Single Non-U.S.
Currency Note only to the extent of the total gain or loss recognized on such
sale, exchange or retirement.
EXCHANGE OF NON-U.S. CURRENCY. A holder's tax basis in Non-U.S. Currency
purchased by the holder generally will be the U.S. dollar value thereof at the
spot rate on the date such Non-U.S. Currency is purchased. A holder's tax basis
in Non-U.S. Currency received as interest on, or on the sale, exchange or
retirement of, a Single Non-U.S. Currency Note will be the U.S. dollar value
thereof at the spot rate at the time such Non-U.S. Currency is received. The
amount of gain or loss recognized by a holder on a sale, exchange or other
disposition of Non-U.S. Currency will be equal to the difference between (i) the
amount of U.S. dollars, the U.S. dollar value at the spot rate of the Non-U.S.
Currency, or the fair market value in U.S. dollars of the property received by
the holder in the sale, exchange or other disposition, and (ii) the holder's tax
basis in the Non-U.S. Currency.
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Accordingly, a holder that purchases a Note with Non-U.S. Currency will
recognize gain or loss in an amount equal to the difference, if any, between
such holder's tax basis in the Non-U.S. Currency and the U.S. dollar value at
the spot rate of the Non-U.S. Currency on the date of purchase. Generally, any
such gain or loss will be ordinary income or loss and will not be treated as
interest income or expense, except to the extent provided by administrative
pronouncements of the Service.
INTEREST RATE RESET. If so specified in the Pricing Supplement relating to
an issue of Notes, the Company may have the option to reset the interest rate,
in the case of a Fixed Rate Note, or to reset the Spread or the Spread
Multiplier, in the case of a Floating Rate Note. See "Description of Notes and
Guarantees -- Subsequent Interest Periods -- Interest Rate Reset". The treatment
of a holder of Notes with respect to which such an option has been exercised and
who does not elect to have the Company repay such Notes on the applicable
Optional Reset Date or Maturity Date will depend on the terms established for
such Notes by the Company pursuant to the exercise of such option ("revised
terms"). Depending on the particular circumstances, such holder may be treated
as having surrendered such Notes for new Notes with the revised terms in either
a taxable exchange or a recapitalization qualifying for nonrecognition of gain
or loss.
DISCOUNT NOTES. The following is a summary of the material United States
federal income tax consequences to holders of Discount Notes, based on the
original issue discount provisions of the Code as in effect on the date hereof
and on recently issued regulations promulgated thereunder ("OID Regulations").
For United States federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of each Discount Note over
its issue price if such excess is greater than or equal to a DE MINIMIS amount
(generally of 1/4 of 1% of the Discount Note's stated redemption price at
maturity multiplied by the number of complete years to maturity from the issue
date). The issue price of an issue of Discount Notes that is issued for cash
will be equal to the first price at which a substantial amount of the Notes in
such issue is sold. The stated redemption price at maturity of a Discount Note
is the sum of all payments provided by the Discount Note, other than payments of
"qualified stated interest". Under the OID Regulations, "qualified stated
interest" includes stated interest that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually at a
single fixed rate of interest. Interest is payable at a single fixed rate only
if the rate appropriately takes into account the length of the interval between
payments. Except as described below with respect to Short-Term Notes, a holder
of a Discount Note will be required to include original issue discount in income
as it accrues before the receipt of cash attributable to such income, regardless
of such holder's method of accounting for tax purposes.
The amount of original issue discount includible in income by the initial
holder of a Discount Note is the sum of the daily portions of original issue
discount with respect to such Note for each day during the taxable year on which
such holder held such Note ("accrued original issue discount"). Generally, the
daily portion of the original issue discount is determined by allocating to each
day in any "accrual period" a ratable portion of the original issue discount
allocable to such accrual period. Under the OID Regulations, the "accrual
periods" for a Discount Note may be selected by each holder, may be of any
length, and may vary in length over the term of the Discount Note, provided that
each accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the first day or on the final day of an
accrual period. The amount of original issue discount allocable to each accrual
period is the excess (if any) of (i) the product of a Discount Note's adjusted
issue price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
adjusted for the length of such accrual period) over (ii) the amount of the
fixed periodic interest, if any, payable on such Discount Note and allocable to
such accrual period. The "adjusted issue price" of a Discount Note at the
beginning of any accrual period generally is the sum of the issue price of a
Discount Note plus the accrued original issue discount allocable for all prior
accrual periods, reduced by any prior payment on the Discount Note, other than a
payment of fixed periodic interest. Under these rules, a holder of a Discount
Note generally will have to include in income increasingly greater amounts of
original issue discount in successive accrual periods.
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Original issue discount on a Discount Note that is also a Single Non-U.S.
Currency Note will be determined for any accrual period in the applicable
Non-U.S. Currency and then translated into U.S. dollars in the same manner as
interest income accrued by a holder on the accrual basis, including the
application of a Spot Rate Convention Election. See "Payments of Interest on
Notes Other Than Discount Notes". Likewise, upon receipt of payment attributable
to original issue discount (whether in connection with a payment of interest or
the sale, exchange or retirement of a Discount Note), a holder will recognize
exchange gain or loss to the extent of the difference between such holder's
basis in the accrued original issue discount (determined in the same manner as
for accrued interest) and the U.S. dollar value of such payment (determined by
translating any Non-U.S. Currency received at the spot rate on the date of
payment). Generally, any such exchange gain or loss will be ordinary income or
loss and will not be treated as interest income or expense, except to the extent
provided in administrative pronouncements of the Service. For this purpose, all
payments on a Note will be viewed first as the payment of fixed periodic
interest (determined under the original issue discount rules), second as
payments of previously accrued original issue discount (to the extent thereof),
with payments considered made for the earliest accrual periods first, and
thereafter as the payment of principal.
If the basis of a Discount Note, immediately after its purchase, exceeds its
adjusted issue price (the amount of such excess being considered "acquisition
premium") but is not greater than its stated redemption price at maturity, the
amount includible in income in each taxable year as original issue discount is
reduced (but not below zero) by that portion of the excess properly allocable to
such year.
If a holder purchases a Discount Note for an amount in excess of the stated
redemption price at maturity, the holder does not include any original issue
discount in income and generally may be subject to the "bond premium" rules
discussed below. See "Amortizable Bond Premium". If a holder has a tax basis in
a Discount Note that is less than the adjusted issue price, the difference will
be subject to the market discount provisions discussed below. See "Market
Discount".
Under the OID Regulations, a holder of a Note may elect to include in gross
income all interest that accrues on such Note using the constant yield method.
For this purpose, interest includes 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. Special rules apply with respect to
elections made with respect to Notes issued with amortizable bond premium or
market discount. Once made with respect to a Note, the election cannot be
revoked without the consent of the Service. A holder considering an election
under these rules should consult its own tax advisor.
The Company is required to report annually to the Service the amount of
original issue discount accrued on Discount Notes held of record by United
States persons, other than corporations and other exempt holders.
MARKET DISCOUNT. If a holder purchases a Note (other than a Discount Note)
for an amount that is less than its stated redemption price at maturity or
purchases a Discount Note for less than its "revised issue price" (as defined
under the Code) as of the purchase date, the amount of the difference will be
treated as "market discount", unless such difference is less than a specified DE
MINIMIS amount. Under the market discount rules of the Code, a holder will be
required to treat any partial principal payment (or, in the case of a Discount
Note, any payment that does not constitute fixed periodic interest) on, or any
gain realized on the sale, exchange or retirement of, a Note as ordinary income
to the extent of the market discount that has not previously been included in
income and is treated as having accrued on such Note at the time of such payment
or disposition. Further, a disposition of a Note by gift (and in certain other
circumstances) could result in the recognition of market discount income,
computed as if such Note had been sold at its then fair market value. In
addition, a holder who purchases a Note with market discount may be required to
defer the deduction of all or a portion of the interest paid or accrued on any
indebtedness incurred or maintained to purchase or carry such Note until the
Maturity of the Note or its earlier disposition in a taxable transaction.
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Market discount is considered to accrue ratably during the period from the
date of acquisition to the Maturity Date of a Note, unless the holder elects to
accrue market discount under the rules applicable to original issue discount. A
holder may elect to include market discount in income currently as it accrues,
in which case the rules described above regarding the deferral of interest
deductions will not apply.
With respect to a Single Non-U.S. Currency Note, market discount is
determined in the applicable Non-U.S. Currency. In the case of a holder who does
not elect current inclusion, accrued market discount is translated into U.S.
dollars at the spot rate on the date of disposition. No part of such accrued
market discount is treated as exchange gain or loss. In the case of a holder who
elects current inclusion, the amount currently includible in income for a
taxable year is the U.S. dollar value of the market discount that has accrued
during such year, determined by translating such market discount at the average
rate of exchange for the period or periods during which it accrued. Such an
electing holder will recognize exchange gain or loss with respect to accrued
market discount under the same rules as apply to accrued interest on a Single
Non-U.S. Currency Note received by a holder on the accrual basis. See "Payments
of Interest on Notes Other Than Discount Notes".
AMORTIZABLE BOND PREMIUM. Generally, if a holder's tax basis in a Note held
as a capital asset exceeds the stated redemption price at maturity of such Note,
such excess may constitute amortizable bond premium that the holder may elect to
amortize under the constant interest rate method over the period from its
acquisition date to the Note's Maturity Date. Under certain circumstances,
amortizable bond premium may be determined by reference to an early call date.
Special rules apply with respect to Single Non-U.S. Currency Notes.
SHORT-TERM NOTES. In general, an individual or other cash method holder of
a Note that matures one year or less from the date of its issuance (a
"Short-Term Note") is not required to accrue original issue discount on such
Note unless it has elected to do so. Holders who report income for federal
income tax purposes under the accrual method, however, and certain other
holders, including banks, dealers in securities and electing holders, are
required to accrue original issue discount (unless the holder elects to accrue
"acquisition discount" in lieu of original issue discount) on such Note.
"Acquisition discount" is the excess of the remaining stated redemption price at
maturity of the Short-Term Note over the holder's tax basis in the Short-Term
Note at the time of the acquisition. In the case of a holder who is not required
and does not elect to accrue original issue discount on a Short-Term Note, any
gain realized on the sale, exchange or retirement of such Short-Term Note will
be ordinary income to the extent of the original issue discount accrued through
the date of sale, exchange or retirement. Such a holder will be required to
defer, until such Short-Term Note is sold or otherwise disposed of, the
deduction of a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry such Short-Term Note. Original issue discount or
acquisition discount on a Short-Term Note accrues on a straight-line basis
unless an election is made to use the constant yield method (based on daily
compounding).
In the case of a Short-Term Note that is also a Single Non-U.S. Currency
Note, the amount of original issue discount or acquisition discount subject to
current accrual and the amount of any exchange gain or loss on a sale, exchange
or retirement are determined under the same rules that apply to accrued interest
on a Single Non-U.S. Currency Note held by a holder on the accrual basis. See
"Payments of Interest on Notes Other Than Discount Notes".
The market discount rules will not apply to a Short-Term Note having market
discount.
NON-UNITED STATES PERSONS
Subject to the discussion of backup withholding below, payments of principal
of (and premium, if any, on) and interest (including original issue discount) on
Notes by the Company or its agent (in its capacity as such) to any holder who is
a Beneficial Owner of a Note but is not a United States person will not be
subject to United States federal withholding tax; provided, in the case of
premium, if any, and
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interest (including original issue discount) that (i) such holder does not
actually or constructively own 10% of more of the total combined voting power of
all classes of stock of the Company or the Guarantor entitled to vote, (ii) such
holder is not a controlled foreign corporation for United States tax purposes
that is related to the Company through stock ownership, and (iii) either (A) the
Beneficial Owner of the Note certifies to the Company or its agent, under
penalties of perjury, that it is not a United States person and provides its
name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") certifies to the Company or
its agent, under penalties of perjury, that the certification described in
clause (A) hereof has been received from the Beneficial Owner by it or by
another financial institution acting for the Beneficial Owner.
If a holder of a Note who is not a United States person is engaged in a
trade or business in the United States and premium, if any, or interest
(including original issue discount) on the Note is effectively connected with
the conduct of such trade or business, such holder, although exempt from United
States withholding tax, as discussed in the preceding paragraph (or by reason of
the delivery of properly completed Form 4224), will be subject to United States
federal income tax on such premium, if any, and interest (including original
issue discount) in the same manner as if it were a United States person.
Subject to the discussion of "backup" withholding below, any capital gain
realized upon the sale, exchange or retirement of a Note by a holder who is not
a United States person will not be subject to United States federal income or
withholding taxes unless (i) such gain is effectively connected with a United
States trade or business of the holder, or (ii) in the case of an individual,
such holder is present in the United States for 183 days or more in the taxable
year of the retirement or disposition and certain other conditions are met.
Notes held by an individual who is neither a citizen nor a resident of the
United States for United States federal income tax purposes at the time of such
individual's death will not be subject to United States federal estate tax,
provided that the income from the Notes was not or would not have been
effectively connected with a United States trade or business of such individual
and that such individual qualified for the exemption from United States federal
withholding tax (without regard to the certification requirements) described
above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
"Backup" withholding and information reporting requirements may apply to
certain payments of principal of (and premium, if any, on) and interest
(including original issue discount) on a Note and to certain payments of
proceeds of the sale or retirement of a Note. The Company, its agent, a broker,
the Trustee or any Paying Agent, as the case may be, will be required to
withhold tax from any payment that is subject to backup withholding at a rate of
31% of such payment if the holder fails to furnish its taxpayer identification
number (social security number or employee identification number), to certify
that such holder is not subject to backup withholding, or to otherwise comply
with the applicable requirements of the backup withholding rules. Certain
holders (including, among others, all corporations) are not subject to the
backup withholding and reporting requirements.
Under current regulations, backup withholding and information reporting will
not apply to payments made by the Company or any agent thereof (in its capacity
as such) to a holder of a Note who has provided the required certification under
penalties of perjury that it is not a United States person as set forth in
clause (iii) in the first paragraph under "Non-United States Persons" or has
otherwise established an exemption (provided that neither the Company nor such
agent has actual knowledge that the holder is a United States person or that the
conditions of any other exemption are not in fact satisfied).
Any amounts withheld under the backup withholding rules from a payment to a
holder may be claimed as a credit against such holder's United States federal
income tax liability.
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THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE, DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the Company
through the Agents, each of which has agreed to use its reasonable efforts to
solicit offers to purchase the Notes. Unless otherwise specified in the
applicable Pricing Supplement, the Company will pay the Agent through which a
Note has been sold a commission that, depending on the maturity of such Note,
will range from .125% to .875% of the principal amount (or, in the case of a
Note issued with original issue discount, the public offering price) of such
Note. The commission payable by the Company to the Agents with respect to a Note
with a Maturity Date more than 40 years after its date of issue will be
negotiated at the time of issuance.
The Company may also sell Notes to an Agent, as principal. Unless otherwise
specified in the applicable Pricing Supplement, any Note sold to an Agent as
principal will be purchased by such Agent at a price equal to 100% of the
principal amount thereof (or, in the case of a Note issued with Original Issue
Discount, the public offering price), less a percentage equal to the commission
applicable to an agency sale of a Note of identical maturity. Notes may be
resold by an Agent to investors or other purchasers from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined by such Agent at the time of sale, or may
be sold to certain dealers as described below. 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 offering price), concession
and discount may be changed. In addition, any 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 Agents from the Company. The Company has agreed
to reimburse the Agents for certain expenses. The Company reserves the right to
sell Notes directly on its behalf in those jurisdictions where it is authorized
to do so. No commission will be allowed or be payable on any sales made directly
by the Company.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes in whole or in part. An Agent will
have the right, in its reasonable discretion, to reject in whole or in part any
offer to purchase Notes received by it.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act. The Company has agreed to indemnify the Agents against certain
civil liabilities, including liabilities under the Securities Act, or to
contribute to payments the Agents may be required to make in respect thereof.
In the ordinary course of their respective businesses, Salomon Brothers Inc,
J.P. Morgan Securities Inc. and UBS Securities Inc. and/or their affiliates have
engaged, and may in the future engage, in commercial and/or investment banking
transactions with the Company and its affiliates.
The Agents have advised the Company that they may from time to time purchase
and sell Notes in the secondary market, but the Agents are not obligated to do
so. There can be no assurance that there will be a secondary market for the
Notes.
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APPENDIX A
GLOSSARY
Set forth below is a glossary of certain of the terms used in this
Prospectus Supplement. Capitalized terms used herein that are not defined in the
following glossary have the meanings given in the Indenture or in the
accompanying Prospectus. Page references refer to pages of this Prospectus
Supplement.
"Amortized Face Amount" of a Discount Note means the amount equal to (a) the
issue price of such Discount Note set forth in the applicable Pricing Supplement
plus (b) the portion of the difference between the issue price and the stated
principal amount of such Discount Note that has accrued at the Yield to Maturity
set forth in the Pricing Supplement (computed in accordance with generally
accepted United States bond yield computation principles) at the date as of
which the Amortized Face Amount is calculated, but in no event will the
Amortized Face Amount of such Discount Note exceed its stated principal amount.
"Amortizing Notes" has the meaning set forth on page S-12.
"Base Rate" has the meaning set forth on page S-6.
"Beneficial Owner" of a Global Note means the actual owner of an interest
therein.
"Business Day" with respect to any Note or Guarantee means, unless otherwise
specified in the applicable Pricing Supplement, any day, other than a Saturday
or Sunday, that meets each of the following applicable requirements: the day is
(i) not a day on which banking institutions are authorized or required by law or
regulation to be closed in The City of New York; (ii) if the Note is denominated
in a Specified Currency other than U.S. dollars or ECU, (a) not a day on which
banking institutions are authorized or required by law or regulation to close in
the principal financial center of the country issuing the Specified Currency and
(b) a day on which banking institutions in such principal financial center are
carrying out transactions in such Specified Currency; (iii) if the Note is
denominated in ECU, (a) not a day on which banking institutions are authorized
or required by law or regulation to close in Luxembourg and (b) an ECU clearing
day, as determined by the ECU Banking Association in Paris; and (iv) if such
Note is a LIBOR Note, a London Banking Day.
"Calculation Agent" has the meaning set forth on page S-8.
"Calculation Date" has the meaning set forth on page S-8.
"CD Rate" has the meaning set forth on page S-8.
"CD Rate Notes" has the meaning set forth on page S-6.
"Certificated Note" has the meaning set forth on page S-3.
"Commercial Paper Rate" has the meaning set forth on page S-9.
"Commercial Paper Rate Notes" has the meaning set forth on page S-6.
"Composite Quotations" has the meaning set forth on page S-8.
"Currency" means a currency or currencies, a currency unit or currency
units, or a composite currency or currencies.
"Depository" has the meaning set forth on page S-3.
"Discount Note" means (i) a Note, including any Zero-Coupon Note, that has
been issued at an Issue Price lower, by more than a DE MINIMIS amount (as
determined under United States federal income tax rules applicable to original
issue discount instruments), than the principal amount thereof and (ii) any
other Note that for United States federal income tax purposes would be
considered an original issue discount note.
S-23
<PAGE>
"DTC" means The Depository Trust Company of New York, New York.
"ECU" means one or more European Currency Units.
"Exchange Rate" has the meaning set forth on page S-5.
"Exchange Rate Agent" has the meaning set forth on page S-2.
"Federal Funds Rate Notes" has the meaning set forth on page S-6.
"Federal Funds Rate" has the meaning set forth on page S-9.
"Fixed Rate Note" has the meaning set forth on page S-3.
"Floating Rate Note" has the meaning set forth on page S-3.
"Global Note" has the meaning set forth on page S-3.
"Guarantees" has the meaning set forth on the cover page.
"H.15(519)" has the meaning set forth on page S-8.
"Index" has the meaning set forth on page S-12.
"Index Maturity" for any Floating Rate Note means the period of maturity of
the instrument or obligation from which the Base Rate is calculated.
"Indexed Notes", "Indexed Principal Notes" and "Indexed Rate Notes" have the
meanings set forth on page S-12.
"Initial Interest Period" has the meaning set forth on page S-6.
"Initial Interest Rate" has the meaning set forth on page S-6.
"Interest Determination Date" has the meaning set forth on page S-8.
"Interest Payment Date" with respect to any Note means a date (other than at
Maturity) on which, under the terms of such Note, regularly scheduled interest
will be payable.
"Interest Reset Date" has the meaning set forth on page S-6.
"Interest Reset Period" has the meaning set forth on page S-6.
"LIBOR", "LIBOR Telerate" and "LIBOR Reuters" have the meanings set forth on
page S-10.
"LIBOR Notes" has the meaning set forth on page S-6.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Market Exchange Rate" has the meaning set forth on page S-5.
"Maturity" means the date on which the outstanding principal amount of a
Note becomes due and payable in full in accordance with its terms, whether at
its Maturity Date or by declaration of acceleration, call for redemption,
repayment or otherwise.
"Maturity Date" with respect to any Note means the date on which such Note
is scheduled to mature, as specified thereon.
"Maximum Interest Rate" has the meaning set forth on page S-8.
"Minimum Interest Rate" has the meaning set forth on page S-8.
"Money Market Yield" has the meaning set forth on page S-9.
"Notes" has the meaning set forth on the cover page.
"Optional Reset Date" has the meaning set forth on page S-12.
S-24
<PAGE>
"Prime Rate" has the meaning set forth on page S-11.
"Prime Rate Notes" has the meaning set forth on page S-6.
"Reference Banks" has the meaning set forth on page S-10.
"Regular Record Date" with respect to any Interest Payment Date for a Fixed
Rate Note means the first calendar day (whether or not a Business Day) of the
month in which such Interest Payment Date occurs; and with respect to any
Interest Payment Date for a Floating Rate Note means the date (whether or not a
Business Day) 15 calendar days prior to such Interest Payment Date.
"Reset Notice" has the meaning set forth on page S-12.
"Reuters Screen LIBO Page" has the meaning set forth on page S-10.
"Spread" and "Spread Multiplier" have the meanings set forth on page S-6.
"Specified Currency" means the Currency in which a Note is denominated.
"Subsequent Interest Period" has the meaning set forth on page S-12.
"Telerate Page 3750" has the meaning set forth on page S-10.
"Treasury Rate" has the meaning set forth on page S-11.
"Treasury Rate Notes" has the meaning set forth on page S-6.
"Zero Coupon Note" has the meaning set forth on page S-3.
References herein to "U.S. dollars" or "$" are to the currency of the United
States.
S-25
<PAGE>
PROSPECTUS
W. R. GRACE & CO.-CONN.
DEBT SECURITIES
WARRANTS TO PURCHASE DEBT SECURITIES
-----------------
W. R. Grace & Co.-Conn. ("Company"), the principal operating subsidiary of
W. R. Grace & Co. ("Guarantor"), may offer from time to time, together or
separately, its debt securities ("Debt Securities") and warrants to purchase
Debt Securities ("Warrants") on terms to be determined at the time of offering.
The Guarantor will unconditionally guarantee the Debt Securities.
By separate prospectus, the Guarantor may offer from time to time certain of
its securities. Securities with an aggregate issue price of up to $750,000,000
(or the equivalent thereof, if any of the securities are denominated other than
in U.S. dollars) may be issued, in one or more series, under this Prospectus and
such separate prospectus.
The Debt Securities will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness for borrowed money of the Company, and
the guarantees thereon ("Guarantees") will be unsecured and will rank equally
with all other unsecured and unsubordinated indebtedness for borrowed money of
the Guarantor. See "Description of Debt Securities and Guarantees".
The Debt Securities and/or Warrants proposed to be sold pursuant to this
Prospectus and the accompanying prospectus supplement ("Prospectus Supplement")
are referred to as the "Offered Securities", and the Offered Securities,
together with any Debt Securities issuable upon exercise of Warrants, are
referred to as the "Securities".
The Prospectus Supplement sets forth certain terms of each series or issue
of Securities in respect of which this Prospectus and the Prospectus Supplement
are being delivered, including (where applicable): (1) in the case of Debt
Securities (including Debt Securities issuable upon exercise of Warrants), their
title, aggregate principal amount, maturity, rate of any interest (or the manner
of calculation and time of payment thereof), any redemption or repayment terms,
the currency or currencies, currency unit or units or composite currency or
currencies ("Currency") in which such Debt Securities will be denominated or
payable, any index, formula or other method pursuant to which principal, premium
or interest may be determined and the form of such Debt Securities (which may be
in global, registered or bearer form); (2) in the case of Warrants, their
exercise price, detachability date, expiration date and other terms; and (3) any
initial public offering price, the purchase price, the net proceeds to the
Company, and the other terms of the offering of the Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
Offered Securities may be sold directly to purchasers or to or through
underwriters, dealers or agents. If any underwriters, dealers or agents are
involved in the offering of any Offered Securities, their names and any
applicable fee, commission or discount arrangements will be set forth in the
Prospectus Supplement. See "Plan of Distribution".
------------------------
The date of this Prospectus is April 7, 1994.
<PAGE>
AVAILABLE INFORMATION
The Guarantor is subject to the informational requirements of the Securities
Exchange Act of 1934 ("Exchange Act") and in accordance therewith files reports
and other information with the Securities and Exchange Commission ("SEC").
Reports, proxy statements and other information filed by the Guarantor with the
SEC can be inspected and copied at the public reference facilities of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's New York Regional Office, Seven World Trade Center, New York, New York
10048, and Chicago Regional Office, 500 West Madison Street, Chicago, Illinois
60606. Copies of such material can also be obtained at prescribed rates from the
Public Reference Section of the SEC at its Washington address and can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005, and the Chicago Stock Exchange, Inc., One Financial
Place, 440 South LaSalle Street, Chicago, Illinois 60606.
Separate financial information for the Company is not included herein or in
reports filed by the Guarantor pursuant to the Exchange Act, as the Guarantor is
a holding company that has no substantial operations other than those conducted
by the Company and its subsidiaries. The assets and pre-tax income of the
Company and its consolidated subsidiaries are substantially equivalent to those
of the Guarantor and its consolidated subsidiaries.
This Prospectus constitutes a part of a registration statement (together
with all amendments and exhibits, the "Registration Statement") filed by the
Company and the Guarantor with the SEC under the Securities Act of 1933
("Securities Act") with respect to the Securities (and certain other securities
offered by the Guarantor and the Company under a separate prospectus). This
Prospectus does not contain all of the information in the Registration
Statement, certain portions of which have been omitted in accordance with the
rules and regulations of the SEC. Reference is made to the Registration
Statement and the exhibits thereto, as well as the documents incorporated by
reference in this Prospectus, for further information with respect to the
Company and the Guarantor, as well as the Securities.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the SEC are incorporated by reference in
this Prospectus:
(1) The Guarantor's Annual Report on Form 10-K (including Exhibit 12,
"Computation of Ratio of Earnings to Fixed Charges") for the latest fiscal
year for which such a Report has been filed.
(2) All Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
(including, where applicable, Exhibit 12, "Computation of Ratio of Earnings
to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends") filed by the Guarantor since the end of the
latest fiscal year for which an Annual Report on Form 10-K has been filed by
the Guarantor.
All documents filed by the Guarantor pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of any offering of Securities made by this Prospectus shall be
deemed to be incorporated by reference in and to be a part of this Prospectus
from the date any such document is filed.
A copy of any document incorporated by reference in this Prospectus
(including any exhibit incorporated by reference in any such document or in this
Prospectus) may be obtained without charge by contacting Shareholder Services,
W. R. Grace & Co., One Town Center Road, Boca Raton, Florida 33486-1010
(407/362-2000).
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<PAGE>
GRACE
Grace is primarily engaged in the specialty chemical business on a worldwide
basis and in specialized health care activities. In its chemical operations,
Grace develops, manufactures and markets specialty chemicals and materials and
related application systems. In health care, Grace is primarily engaged in
supplying kidney dialysis and home infusion and respiratory therapy services and
products.
As used in this Prospectus, the term "Company" refers to W. R. Grace &
Co.-Conn., a Connecticut corporation wholly owned by W. R. Grace & Co.; the term
"Guarantor" refers to W. R. Grace & Co., a New York corporation; and the term
"Grace" refers to the Guarantor and/or one or more of its subsidiaries
(including the Company). Grace's principal executive offices are located at One
Town Center Road, Boca Raton, Florida 33486-1010, and its telephone number is
407/362-2000.
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement, the net proceeds
from the sale of the Securities will be used by Grace to repay commercial paper
borrowings and/or bank borrowings, with various maturities and bearing interest
at various rates, that were incurred to finance capital expenditures and working
capital requirements and for other general corporate purposes. The amounts and
timing of such repayments will depend upon conditions in the future; pending
such use, the proceeds may be temporarily invested. Information concerning
Grace's capital expenditures is set forth in the documents incorporated herein
by reference and may be set forth in the Prospectus Supplement.
GRACE FINANCIAL INFORMATION
Financial information for Grace, including its ratio of earnings to fixed
charges, is set forth in the documents incorporated herein by reference and may
be set forth in the Prospectus Supplement. See "Documents Incorporated by
Reference".
Separate financial information for the Company is not included herein or in
the documents incorporated herein by reference, as the Guarantor is a holding
company that has no substantial operations other than those conducted by the
Company and its subsidiaries. The assets and pre-tax income of the Company and
its consolidated subsidiaries are substantially equivalent to those of the
Guarantor and its consolidated subsidiaries. See "Available Information".
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The Company may issue Debt Securities either separately or together with
Warrants. The Debt Securities will be issued under an Indenture dated as of
January 28, 1993 ("Indenture") among the Company, the Guarantor and NationsBank
of Georgia, National Association, Trustee ("Trustee"). The Indenture has been
filed as an exhibit to the Registration Statement. The Indenture is subject to
and governed by the Trust Indenture Act of 1939 ("TIA"). The following summary
of the material provisions of the Indenture does not purport to be complete and
is subject to, and qualified in its entirety by reference to, the Indenture,
including the definitions of certain terms therein, and to the specific terms of
the Offered Debt Securities (as defined below) that are described in the
Prospectus Supplement.
GENERAL
The Indenture provides that any Debt Securities proposed to be sold pursuant
to this Prospectus and the Prospectus Supplement ("Offered Debt Securities") and
any Debt Securities issuable upon the exercise of Warrants ("Underlying Debt
Securities"), as well as other unsecured and unsubordinated debt securities of
the Company issuable under the Indenture, may be issued in one or more series,
in each case as authorized from time to time by the Company; the Indenture does
not
3
<PAGE>
limit the aggregate principal amount of debt securities that may be issued
thereunder. Reference is made to the Prospectus Supplement relating to the
Offered Debt Securities, the Underlying Debt Securities or both, as the case may
be, for the following:
(1) The title of such Debt Securities.
(2) The aggregate principal amount of such Debt Securities, the
percentage of their principal amount at which such Debt Securities will be
issued and the date or dates on which the principal of such Debt Securities
will be payable or the method by which such date or dates will be determined
or extended.
(3) The rate or rates (which may be fixed or variable) at which such
Debt Securities will bear interest, if any, and, if variable, the method by
which such rate or rates will be determined.
(4) The date or dates from which any interest will accrue or the method
by which such date or dates will be determined, the date or dates on which
any interest will be payable (including the Regular Record Dates for such
Interest Payment Dates in the case of any Registered Securities) and the
basis on which any interest will be calculated if other than on the basis of
a 360-day year of twelve 30-day months.
(5) The place or places, if any, other than or in addition to New York
City, where the principal of (and premium, if any, on) and interest, if any,
on such Debt Securities will be payable, where any Registered Securities may
be surrendered for registration of transfer, where such Debt Securities may
be surrendered for exchange and where notices or demands to or upon the
Company and the Guarantor in respect of such Debt Securities may be served.
(6) The period or periods within which, the price or prices at which,
the Currency in which, and the other terms and conditions upon which, such
Debt Securities may be redeemed, in whole or in part, at the option of the
Company, if the Company is to have that option.
(7) The obligation, if any, of the Company and the Guarantor to redeem,
purchase or repay such Debt Securities, in whole or in part, pursuant to any
sinking fund or analogous provision or at the option of a holder thereof,
and the period or periods within which, the price or prices at which, the
Currency in which, and the other terms and conditions upon which, such Debt
Securities will be so redeemed, purchased or repaid.
(8) The Currency, if other than U.S. dollars, in which such Debt
Securities will be denominated or in which the principal of (and premium, if
any, on) and interest, if any, on such Debt Securities will be payable.
(9) Whether the amount of payments of principal of (and premium, if
any, on) and interest, if any, on such Debt Securities may be determined
with reference to an index, formula or other method (which index, formula or
method may, without limitation, be based on one or more Currencies,
commodities or equity or other indices) and the manner in which such amounts
will be determined.
(10) Whether the Company, the Guarantor or a holder may elect payment
of the principal of (and premium, if any, on) and interest, if any, on such
Debt Securities in a Currency other than that in which such Debt Securities
are stated to be payable, the period or periods within which, and the terms
and conditions upon which, such election may be made, and the time and
manner of determining the exchange rate between the Currency in which such
Debt Securities are denominated or stated to be payable and the Currency in
which such Debt Securities are to be so payable.
(11) Any deletions from, modifications of or additions to the Events of
Default or covenants of the Company or the Guarantor with respect to such
Debt Securities (which Events of Default or covenants may not be consistent
with the Events of Default or covenants set forth in the general provisions
of the Indenture).
4
<PAGE>
(12) If other than the entire principal amount thereof, the portion of
the principal amount of such Debt Securities that will be payable upon
declaration of acceleration of the maturity thereof or the method by which
such portion will be determined.
(13) Any provisions in modification of, in addition to or in lieu of
any of the provisions concerning defeasance and covenant defeasance
contained in the Indenture that will be applicable to such Debt Securities.
(14) Any provisions granting special rights to the holders of such Debt
Securities upon the occurrence of such events as may be specified.
(15) If other than the Trustee, the designation of any Paying Agent or
Security Registrar for such Debt Securities, and the designation of any
transfer or other agents or depositories for such Debt Securities.
(16) The designation of the Exchange Rate Agent, if any.
(17) Whether such Debt Securities are to be issuable as Registered
Securities, Bearer Securities or both, any restrictions applicable to the
offer, sale or delivery of Bearer Securities and the terms, if any, upon
which Bearer Securities may be exchanged for Registered Securities and vice
versa (if permitted by applicable laws and regulations).
(18) Whether such Debt Securities will be issuable initially in
temporary global form, whether any such Debt Security is to be issuable in
permanent global form (a "Global Security") with or without coupons and, if
so, whether beneficial owners of interests in any Global Security may
exchange such interests for Debt Securities of like tenor of any authorized
form and denomination and the circumstances under which any such exchanges
may occur, if other than in the manner provided in the Indenture, and, if
Registered Securities are to be issuable as a Global Security, the identity
of the depository for such Debt Securities.
(19) The person to whom any interest on any Registered Security will be
payable, if other than the person in whose name such Debt Security (or one
or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, the manner in which, or the
person to whom, any interest on any Bearer Security will be payable, if
otherwise than upon presentation and surrender of the coupons appertaining
thereto as they severally mature, and the extent to which, or the manner in
which, any interest payable on a temporary Debt Security issued in global
form will be paid (if other than as described in "Book-Entry Debt
Securities" below).
(20) The denomination or denominations in which such Debt Securities
will be issuable, if other than $1,000 or any integral multiple thereof in
the case of Registered Securities and $5,000 in the case of Bearer
Securities.
(21) If such Debt Securities will be issuable upon the exercise of
Warrants, the time, manner and place for such Debt Securities to be
authenticated and delivered.
(22) Whether and under what circumstances the Company or the Guarantor
will pay Additional Amounts, as contemplated by Section 1010 of the
Indenture, on such Debt Securities to any holder who is not a United States
person (including any modification of the definition of such term as
contained in the Indenture) in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the option to
redeem such Debt Securities rather than pay such Additional Amounts (and the
terms of any such option).
(23) Any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) of such Debt Securities not
inconsistent with the provisions of the Indenture (Section 301).
If applicable, the Prospectus Supplement will also set forth information
concerning any Warrants offered thereby and a discussion of any relevant federal
income tax considerations.
5
<PAGE>
Debt Securities may provide for less than the entire principal amount
thereof to be due and payable upon a declaration of acceleration of maturity. A
discussion of the federal income tax and other considerations applicable to any
Original Issue Discount Securities will be set forth in the Prospectus
Supplement relating thereto.
If the terms of any series of Debt Securities provide that the Company or
the Guarantor may be required to pay Additional Amounts in respect thereof, for
purposes of this Prospectus, any reference to the payment of the principal of
(and premium, if any, on) or interest, if any, on such Debt Securities will be
deemed to include mention of the payment of the Additional Amounts provided for
by the terms of such Debt Securities.
The Debt Securities will be unsecured obligations of the Company and will
rank on a parity with all other unsecured and unsubordinated indebtedness for
borrowed money of the Company. The Debt Securities will be guaranteed by the
Guarantor as provided below.
The Debt Securities referred to on the cover page of this Prospectus, and
any additional debt securities issued under the Indenture, are herein
collectively referred to, while a single Trustee is acting with respect to all
debt securities issued thereunder, as the "Indenture Securities". The Indenture
provides that there may be more than one Trustee thereunder, each with respect
to one or more series of Indenture Securities. At a time when two or more
Trustees are acting under the Indenture, each with respect to only certain
series, the term "Indenture Securities" as used herein will mean the series with
respect to which each respective Trustee is acting. In the event that there is
more than one Trustee under the Indenture, the powers and trust obligations of
each Trustee as described herein will extend only to the series of Indenture
Securities for which it is the Trustee. If two or more Trustees are acting under
the Indenture, then the Indenture Securities for which each Trustee is acting
would be treated as if issued under separate indentures.
The general provisions of the Indenture do not limit the ability of the
Company or the Guarantor to incur indebtedness and do not afford holders of Debt
Securities protection in the event of highly leveraged or similar transactions
involving the Company or the Guarantor. However, the general provisions of the
Indenture do provide that neither the Company, the Guarantor nor any Restricted
Subsidiary will subject certain of its properties or assets to any mortgage or
other encumbrance unless the Indenture Securities outstanding thereunder, the
related Guarantees or both, as the case may be, are secured equally and ratably
with or prior to such other indebtedness thereby secured. See "Liens" and "Sale
and Leaseback Transactions" under the heading "Certain Covenants". Reference is
made to the Prospectus Supplement for information with respect to any deletions
from, modifications of or additions to the Events of Default or covenants of the
Company and the Guarantor that are described below, including any addition of a
covenant or other provision providing event risk or similar protection.
If any series of Debt Securities is sold for, payable in or denominated in
one or more Currencies other than U.S. dollars, applicable restrictions,
elections, terms and other information with respect to such series and such
Currencies, and a discussion of the federal income tax and other considerations
applicable thereto, will be set forth in the Prospectus Supplement relating
thereto.
Under the Indenture, the Company has the ability to issue Indenture
Securities with terms different from those of Indenture Securities previously
issued thereunder and, without the consent of the holders, to reopen a previous
issue of a series of Indenture Securities and issue additional Indenture
Securities of such series (unless such reopening was restricted when such series
was created) in an aggregate principal amount determined by the Company (Section
301).
There is no requirement that future issues of debt securities of the Company
be issued under the Indenture, and the Company will be free to employ other
indentures or documentation, possibly containing provisions different from those
included in the Indenture or applicable to one or more issues of Indenture
Securities, in connection with such future issues.
6
<PAGE>
GUARANTEES
The Debt Securities will have endorsed thereon Guarantees by which the
Guarantor will unconditionally guarantee the due and punctual payment of the
principal of (and premium, if any, on) and interest, if any, on the Debt
Securities, when and as the same become due and payable, whether at Stated
Maturity, upon redemption or repayment, upon declaration of acceleration or
otherwise.
The Guarantees will be unsecured obligations of the Guarantor and will rank
on a parity with all other unsecured and unsubordinated indebtedness for
borrowed money of the Guarantor (including any other unsecured and
unsubordinated guarantees given by the Guarantor).
The Guarantees will be unconditional obligations of the Guarantor,
regardless of the enforceability of the related Debt Securities or the Indenture
(Section 1701).
FORM AND DENOMINATIONS
Debt Securities of a series may be issuable solely as Registered Securities,
solely as Bearer Securities or as both Registered Securities and Bearer
Securities. Unless otherwise provided in the applicable Prospectus Supplement,
Debt Securities denominated in U.S. dollars (other than Global Securities, which
may be of any denomination) are issuable in denominations of $1,000 and integral
multiples of $1,000 (in the case of Registered Securities) and in the
denomination of $5,000 (in the case of Bearer Securities). The Indenture also
provides that Debt Securities of a series may be issuable in global form. See
"Book-Entry Debt Securities" below. Unless otherwise indicated in the applicable
Prospectus Supplement, Bearer Securities will have interest coupons attached
(Sections 201 and 302).
PAYMENT, TRANSFER AND EXCHANGE
If Debt Securities of a series are issuable solely as Registered Securities,
the Company and the Guarantor will be required to maintain an office or agency
in each Place of Payment for such series, and may from time to time designate
additional offices or agencies, at which the principal of (and premium, if any,
on) and interest, if any, on such series will be payable. If so provided in the
Prospectus Supplement, the Place of Payment for a series issuable solely as
Registered Securities will be New York City, and the Company and the Guarantor
will initially designate the office of the agent of the Trustee in New York City
as an office where such principal, premium and interest will be payable. If so
provided in the Prospectus Supplement, the Company and the Guarantor will also
initially designate the corporate trust office of the Trustee in Atlanta,
Georgia as an additional office or agency for payment of the Debt Securities of
such series. Notwithstanding the foregoing, at the option of the Company or the
Guarantor, interest, if any, may be paid on Registered Securities (1) by check
mailed to the person entitled thereto at such person's address appearing in the
Security Register or (2) by wire transfer to an account located inside the
United States maintained by the person entitled thereto as specified in the
Security Register (Sections 307 and 1002). Unless otherwise provided in the
Prospectus Supplement, payment of any installment of interest on Registered
Securities will be made to the person in whose name such Registered Security is
registered at the close of business on the Regular Record Date for such interest
(Section 307).
If Debt Securities of a series are issuable solely as Bearer Securities or
as both Registered Securities and Bearer Securities and if so provided in the
applicable Prospectus Supplement, the Company and the Guarantor will be required
to maintain an office or agency (1) in each Place of Payment outside the United
States at which, subject to any applicable laws and regulations, the principal
of (and premium, if any, on) and interest, if any, on such series will be
payable and (2) in New York City, for payments with respect to any Registered
Securities of such series (and for payments with respect to Bearer Securities of
such series in the limited circumstances described below, but not otherwise);
provided that, if required in connection with any listing of such Debt
Securities on a stock exchange located outside the United States, the Company
and the Guarantor will maintain an office or agency for such Debt Securities in
any city located outside the United States required by such stock exchange
(Section 1002). The initial locations of such offices or agencies will be
specified in the applicable Prospectus Supplement. Unless otherwise provided in
the Prospectus Supplement, principal of (and premium, if any) and interest, if
any, on Bearer Securities may be paid by wire transfer to
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<PAGE>
an account maintained by the person entitled thereto with a bank located outside
the United States (Sections 307 and 1002). Unless otherwise provided in the
Prospectus Supplement, payment of any installment of interest on any Bearer
Securities on or before maturity will be made only against surrender of coupons
for such interest installments as they severally mature (Section 1001). Unless
otherwise provided in the Prospectus Supplement, no payment with respect to any
Bearer Security will be made at any office or agency of the Company or the
Guarantor in the United States or by check mailed to any address in the United
States or by transfer to an account maintained with a bank located in the United
States; provided that payments of principal of (and premium, if any, on) and
interest, if any, on Bearer Securities payable in U.S. dollars will be made at
the office or agency of the Company and the Guarantor in New York City if (but
only if) payment of the full amount thereof in U.S. dollars at all offices or
agencies outside the United States maintained by the Company and the Guarantor
is illegal or effectively precluded by exchange controls or other similar
restrictions (Section 1002).
The Company and the Guarantor may from time to time designate additional
offices or agencies, approve a change in the location of any office or agency
and, except as provided above, rescind the designation of any office or agency.
Unless otherwise provided in the Prospectus Supplement, with respect to any
series of Debt Securities denominated or payable in one or more Currencies other
than U.S. dollars, the Company and the Guarantor will maintain one or more
Exchange Rate Agents for the purpose of making any exchange determinations
specified in the Prospectus Supplement (Sections 313 and 1002). Unless otherwise
provided in the Prospectus Supplement, all payments of principal of (and
premium, if any, on) and interest, if any, on any Debt Security that is payable
in a Currency other than U.S. dollars will be made in U.S. dollars in the event
that such Currency (1) is a currency, and it ceases to be used both by the
government of the country that issued the currency and by a central bank or
other public institutions of or within the international banking community for
the settlement of transactions, (2) is the ECU, and it ceases to be used both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (3) is any other
currency unit (or composite currency) other than the ECU, and it ceases to be
used for the purposes for which it was established (each of the events described
in clauses (1) through (3), a "Conversion Event") (Section 312).
All moneys paid by the Company or the Guarantor to the Trustee or a Paying
Agent for the payment of principal of (or premium, if any, on) or interest, if
any, on any Debt Security that remains unclaimed for two years after such
principal, premium or interest becomes due and payable will be repaid to the
Company or the Guarantor, as the case may be, and the holder of such Debt
Security or any related coupon will (subject to applicable abandoned property or
similar laws) thereafter look only to the Company or the Guarantor for payment
thereof (Section 1003).
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount. If (but only if) provided in the Prospectus
Supplement, Bearer Securities of any series (with all unmatured coupons, except
as provided below, and all matured coupons in default) may be similarly
exchanged for Registered Securities of the same series of any authorized
denominations. If so provided, Bearer Securities of such series surrendered in
exchange for Registered Securities during the period (1) on or after a Regular
Record Date and before the opening of business on the relevant Interest Payment
Date or (2) on or after a Special Record Date and before the opening of business
on the related proposed date for payment of Defaulted Interest, will be
surrendered without the coupon relating to such Interest Payment Date or
proposed date for payment, and such interest or Defaulted Interest, as the case
may be, will not be payable in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the holder of
such coupon when due in accordance with the terms of the Indenture. Unless
otherwise specified in the Prospectus Supplement, Bearer Securities will not be
issued in exchange for Registered Securities (Section 305).
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Registered Securities of a series may be presented for registration of
transfer and Debt Securities of a series may be presented for exchange (1) at
each office or agency required to be maintained by the Company and the Guarantor
for payment of such series, as described above, and (2) at each other office or
agency that the Company and the Guarantor may designate from time to time for
such purposes. Registration of transfers and exchanges will be effected if the
transfer agent is satisfied with the evidence of ownership and identity of the
person making the request and, in the case of Registered Securities, if the
transfer form thereon is duly executed. No service charge will be made for any
registration of transfer or exchange of Debt Securities, but the Company may
require payment of any tax or other governmental charge payable in connection
therewith (Section 305).
In the event of any redemption in part, the Company will not be required (1)
to register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the date the relevant notice of redemption is mailed or published, as the case
may be, (2) to register the transfer of or exchange any Registered Security or
portion thereof called for redemption, except the unredeemed portion, if any, of
a Registered Security being redeemed in part, (3) to exchange any Bearer
Security called for redemption, except to exchange such Bearer Security for a
Registered Security of that series and like tenor that is simultaneously
surrendered for redemption or (4) to register the transfer of or exchange any
Debt Security that has been surrendered for repayment at the option of the
holder, except the portion, if any, of such Debt Security not to be so repaid
(Section 305).
CONSOLIDATION, MERGER AND SALE OF ASSETS
Neither the Company nor the Guarantor may consolidate with or merge into any
other corporation or other entity, or convey or transfer its properties and
assets substantially as an entirety to any person, unless each of the following
conditions is satisfied:
(1) Immediately thereafter, no Event of Default (or event that with
notice or lapse of time, or both, would be such) with respect to the
Indenture Securities will have happened and be continuing.
(2) The corporation formed by such consolidation or into which the
Company or the Guarantor is merged, or the person to which such properties
and assets will have been conveyed or transferred, assumes the Company's
obligation as to the due and punctual payment of the principal of (and
premium, if any, on) and interest, if any, on the Indenture Securities or
the Guarantor's obligations under the Guarantees, as the case may be, and
the performance and observance of every covenant to be performed by the
Company or the Guarantor, as the case may be, under the Indenture, and will
be organized under the laws of the United States, one of the States thereof
or the District of Columbia; provided that the requirements of this clause
(2) will not apply to a transaction in which the Guarantor consolidates with
or merges into the Company.
(3) In the event of any such consolidation, merger, conveyance or
transfer, the Indenture provides that, if any Principal Facility or any
Restricted Security would thereupon become subject to any Lien, the
Indenture Securities (or the related Guarantees, as the case may be) will be
secured, as to such Principal Facility or Restricted Security, equally and
ratably with (or prior to) the Debt that upon the occurrence of such
transaction would become secured by such Lien, unless such Lien could be
created under the Indenture without equally and ratably securing such
Indenture Securities or Guarantees.
(4) The Company or the Guarantor has delivered to the Trustee an
officers' certificate and opinion of counsel, each stating that the
transaction complies with these conditions (Sections 801 and 803).
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In the event that any transaction described in and complying with the
conditions listed in the immediately preceding paragraph occurs, the Company or
the Guarantor would be discharged from all obligations and covenants under the
Indenture, and all obligations under the Indenture Securities or the Guarantees,
as the case may be, and could be dissolved and liquidated (Section 802).
For the purpose of providing the equal and ratable security referred to in
clause (3) above, the principal amount of Indenture Securities outstanding under
the Indenture that are Original Issue Discount Securities or Indexed Securities
will mean the amount that, at the time of making such provision for such equal
and ratable security, would be due and payable pursuant to Section 502 of the
Indenture and the terms of such Original Issue Discount Securities or Indexed
Securities upon an acceleration thereof (see "Events of Default" below), and the
extent of such equal and ratable security will be adjusted, to the extent
permitted by law, as and when such amount changes over time pursuant to the
terms of such Original Issue Discount Securities or Indexed Securities (Sections
502 and 803).
MODIFICATION AND WAIVER
The Indenture permits the Company, the Guarantor and the applicable Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of outstanding Indenture Securities affected thereby, to
execute supplemental indentures adding any provisions to or changing or
eliminating any provisions of the Indenture or modifying the rights of such
holders, except that no such supplemental indenture may, without the consent of
the holder of each outstanding Indenture Security affected thereby:
(1) Change the Stated Maturity of the principal of (or premium, if any,
on) or any installment of interest on any Indenture Security, or reduce the
principal amount thereof (or any premium, if any, thereon) or the rate of
interest, if any, thereon, or change any obligation of the Company and the
Guarantor to pay Additional Amounts on any Indenture Security as
contemplated by Section 1010 of the Indenture, or change any Place of
Payment where or the Currency in which any such principal, premium or
interest is payable, or reduce the amount of the principal of an Indexed
Security or an Original Issue Discount Security that would be due and
payable upon an acceleration of maturity thereof or the amount thereof
provable in bankruptcy, or adversely affect the right of repayment, if any,
at the option of the holder, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof (or
on or after any Redemption Date or Repayment Date).
(2) Reduce the quorum and voting requirements at meetings of holders.
(3) Change in any manner adverse to the interests of the holders of the
outstanding Indenture Securities the terms and conditions of the obligations
of the Guarantor in respect of the due and punctual payment of the principal
of (and premium, if any, on) and interest, if any, on such Indenture
Securities.
(4) Reduce the percentage in principal amount of outstanding Indenture
Securities (or of outstanding Indenture Securities of any series, as the
case may be), the consent of the holders of which is required for any
supplemental indenture or to waive certain covenants or Events of Default
under the Indenture (Section 902).
The holders of a majority in aggregate principal amount of outstanding
Indenture Securities have the right to waive compliance by the Company and the
Guarantor with certain covenants contained in the Indenture (Section 1011).
Modification and amendment of the Indenture may be made by the Company, the
Guarantor and the Trustee without the consent of any holder, for any of the
following purposes: (1) to evidence the succession of another person to the
Company or the Guarantor as obligor under the Indenture; (2) to add to the
covenants of the Company or the Guarantor for the benefit of the holders of any
series of Indenture Securities and any related coupons; (3) to add Events of
Default for the benefit of the holders of any such series; (4) to add or change
any provisions of the Indenture to facilitate the
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issuance of Bearer Securities; (5) to change or eliminate any provisions of the
Indenture, provided that any such change or elimination will become effective
only when there is no Indenture Security outstanding thereunder of any series
that is entitled to the benefit of such provisions; (6) to secure the Indenture
Securities outstanding under the Indenture or the related Guarantees pursuant to
the requirements of Section 803 or 1008 of the Indenture, or otherwise; (7) to
establish the form or terms of Indenture Securities of any series or the related
Guarantees, as permitted by Sections 201 and 301 of the Indenture; (8) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under the Indenture by more than one Trustee;
(9) to close the Indenture with respect to the authentication and delivery of
additional series of Indenture Securities and to cure any ambiguity or
inconsistency in such Indenture, provided such action does not adversely affect
in any material respect the interests of holders of Indenture Securities of any
series thereunder and related coupons; or (10) to supplement any of the
provisions of the Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of Indenture Securities and the related
Guarantees thereof, provided that such action does not adversely affect in any
material respect the interests of the holders of the Indenture Securities and
related coupons (Section 901).
The Indenture provides that in determining whether the holders of the
requisite principal amount of Indenture Securities of a series then outstanding
have given any request, demand, authorization, direction, notice, consent or
waiver thereunder or whether a quorum is present at a meeting of holders of such
Indenture Securities, (1) the principal amount of an Original Issue Discount
Security that will be deemed to be outstanding will be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon acceleration of the maturity thereof, (2) the principal
amount of an Indenture Security denominated in a Currency other than U.S.
dollars will be the U.S. dollar equivalent, determined as of the date of
original issuance of such Indenture Security, of the principal amount thereof
(or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent as of such date of original issuance of the amount determined as
provided in clause (1) above) and (3) the principal amount of an Indexed
Security that may be counted in making such determination or calculation and
that will be deemed outstanding for such purpose will be equal to the principal
face amount of such Indexed Security at original issuance, unless otherwise
provided with respect to such Indenture Security pursuant to Section 301
(Section 101).
The Indenture contains provisions for convening meetings of holders of
Indenture Securities of a series if Indenture Securities of that series are
issuable as Bearer Securities (Section 1501). A meeting may be called at any
time by (1) the Trustee or (2) upon request by the Company, the Guarantor or the
holders of at least 10% in aggregate principal amount of the Indenture
Securities of such series outstanding, in any such case upon notice given as
provided in the Indenture (Section 1502). Except for any consent that must be
given by the holder of each Indenture Security affected thereby, as described
above, any resolution presented at a meeting (or an adjourned meeting duly
reconvened) at which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the Indenture Securities of
that series; provided that any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken only by the holders of a specified percentage, which is
less than a majority, in principal amount of Indenture Securities of a series
may be adopted at a meeting (or an adjourned meeting duly reconvened) at which a
quorum is present by the affirmative vote of the holders of at least such
specified percentage. Any resolution passed or decision taken at any meeting of
holders of Indenture Securities of a series duly held in accordance with the
Indenture will be binding on all holders of Indenture Securities of that series
and any related coupons. The quorum at any meeting called to adopt a resolution
will be persons holding or representing a majority in principal amount of the
outstanding Indenture Securities of a series; provided that, if any action is to
be taken at such meeting with respect to a consent or waiver that may only be
given by the holders of not less than a specified percentage in principal amount
of the outstanding Indenture Securities of a series, the persons entitled to
vote such specified percentage will constitute a quorum; and provided further
that,
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at the reconvening of any meeting adjourned for lack of a quorum, the holders of
25% in principal amount of the outstanding Indenture Securities of a series at
the time will constitute a quorum for the taking of any action set forth in the
notice of the original meeting.
Notwithstanding the foregoing, if any action is to be taken at a meeting of
holders of Indenture Securities of a series with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that the
Indenture expressly provides may be made, given or taken by the holders of a
specified percentage in principal amount of all outstanding Indenture Securities
affected thereby, or of the holders of that series and one or more additional
series, then (1) there will be no minimum quorum requirement for such meeting
and (2) the principal amount of the outstanding Indenture Securities of that
series that vote in favor of such request, demand, authorization, direction,
notice, consent, waiver or other action will be taken into account in
determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture (Section 1504).
EVENTS OF DEFAULT
The following are Events of Default with respect to any series of Indenture
Securities: (1) default in the payment of any installment of interest upon any
Indenture Security of such series when it becomes due and payable, continued for
30 days; (2) default in the payment of the principal of (or premium, if any, on)
any Indenture Security of such series at its maturity; (3) failure on the part
of the Company or the Guarantor to observe or perform any other covenant or
agreement contained in the Indenture (other than a covenant or agreement
included in the Indenture solely for the benefit of less than all series of
Indenture Securities or a covenant the default in the performance of which would
be covered by clause (6) below) for 60 days after written notice of such
failure, requiring the Company or the Guarantor to remedy the same, has been
given to the Company and the Guarantor by the Trustee or to the Company, the
Guarantor and the Trustee by the holders of at least 25% in aggregate principal
amount of outstanding Indenture Securities; (4) default under any indenture or
instrument under which the Company, the Guarantor or any Restricted Subsidiary
(other than a Restricted Subsidiary principally engaged in business outside the
United States and Canada) has at the time outstanding indebtedness for borrowed
money or guarantees thereof in any individual instance in excess of $25,000,000
and, if not already matured in accordance with its terms, such indebtedness has
been accelerated and such acceleration is not rescinded or annulled within three
Business Days after notice thereof has been given to the Company and the
Guarantor by the Trustee or to the Company, the Guarantor and the Trustee by the
holders of at least 25% in aggregate principal amount of outstanding Indenture
Securities of such series; provided that, if, prior to the entry of judgment in
favor of the Trustee for payment of the Indenture Securities of such series, the
default under such indenture or instrument has been remedied or cured by the
Company, the Guarantor or such Restricted Subsidiary, or waived by the holders
of such indebtedness, then the Event of Default under the Indenture will be
deemed likewise to have been remedied, cured or waived; (5) certain events in
bankruptcy, insolvency or reorganization; and (6) any other Event of Default
included in the Indenture for the benefit of Indenture Securities of such
series.
If an Event of Default described in clause (1), (2), (4) or (6) above with
respect to outstanding Indenture Securities of any series has occurred and is
continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the outstanding Indenture Securities of that series may
declare the principal amount (or, if the Indenture Securities of that series are
Original Issue Discount Securities or Indexed Securities, such portion of the
principal amount as may be specified in the terms of that series) of all
outstanding Indenture Securities of such series to be immediately due and
payable. If an Event of Default described in clause (3) or (5) above has
occurred and is continuing, the Trustee or the holders of not less than 25% in
principal amount of all the outstanding Indenture Securities may declare the
principal amount (or, if any such Indenture Securities are Original Issue
Discount Securities or Indexed Securities, such portion of the principal amount
as may be specified in the terms of that series) of all of the outstanding
Indenture Securities to be immediately due and payable. However, at any time
after such a declaration of acceleration with respect to outstanding
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Indenture Securities of a series (or of all outstanding Indenture Securities, as
the case may be) has been made, but before a judgment has been obtained by the
Trustee, the holders of a majority in principal amount of outstanding Indenture
Securities of such series (or of all outstanding Indenture Securities, as the
case may be) may, subject to certain conditions, rescind and annul such
declaration if all Events of Default (other than the nonpayment of accelerated
principal, or a specified portion thereof, premium, or interest, if any) with
respect to outstanding Indenture Securities of such series (or of all
outstanding Indenture Securities, as the case may be) have been cured or waived
as provided in the Indenture (Section 502). The holders of not less than a
majority in aggregate principal amount of the outstanding Indenture Securities
of a series (or of all outstanding Indenture Securities, as the case may be)
have the right, subject to certain conditions and exceptions, to waive defaults
other than defaults in the payment of the principal of (or premium, if any, on)
or interest, if any, on any Indenture Security of such series and defaults in
respect of a covenant or provision that cannot be modified or amended without
the consent of the holder of each outstanding Indenture Security of such series
affected thereby (Sections 502 and 513). Reference is made to the Prospectus
Supplement relating to any series of Debt Securities that are Original Issue
Discount Securities or Indexed Securities for the particular provisions relating
to acceleration of a portion of the principal amount thereof upon the occurrence
and the continuation of an Event of Default.
No holder of any Indenture Security of any series will have any right to
institute any proceeding with respect to the Indenture, or for any remedy under
the Indenture, unless (1) such holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Indenture
Securities of such series, (2) the holders of at least 25% in aggregate
principal amount of outstanding Indenture Securities of such series in the case
of any Event of Default described in clause (1), (2), (4) or (6) above, or the
holders of at least 25% in aggregate principal amount of all outstanding
Indenture Securities in the case of any Event of Default described in clause (3)
or (5) above, have made a written request and offered reasonable security or
indemnity to the Trustee to institute such proceeding, (3) the Trustee has
failed to institute any such proceeding within 60 days after its receipt of such
notice, request and offer and (4) no direction inconsistent with such written
request has been given to the Trustee during such 60-day period by the holders
of a majority in aggregate principal amount of outstanding Indenture Securities
of such series (or of all outstanding Indenture Securities, as the case may be).
No one or more of such holders will have any right under any provision of the
Indenture to affect, disturb or prejudice the rights of any other holders of
outstanding Indenture Securities of the same series (in the case of an Event of
Default described in clause (1), (2), (4) or (6) above), or holders of all
outstanding Indenture Securities (in the case of an Event of Default described
in clause (3) or (5) above), or to obtain preference or priority over any other
holders, or to enforce any right under the Indenture, except in the manner
provided in the Indenture and for the equal and ratable benefit of all the
holders of outstanding Indenture Securities of the same series (in the case of
an Event of Default described in clause (1), (2), (4) or (6) above), or holders
of all outstanding Indenture Securities (in the case of an Event of Default
described in clause (3) or (5) above) (Section 507).
Subject to provisions relating to the duties of the Trustee in case an Event
of Default has occurred and is continuing, the Trustee is under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any holders unless such holders have offered to the Trustee
reasonable security or indemnity (Section 602 and TIA Section 315). Subject to
such provision for the indemnification of the Trustee and certain limitations
contained in the Indenture, the holders of a majority in principal amount of
outstanding Indenture Securities of a series (or of all outstanding Indenture
Securities, as the case may be) will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee (Section 512).
The Trustee will, within 90 days after the occurrence of a default actually
known to it with respect to the outstanding Indenture Securities of any series,
give notice to all holders of such series of all uncured defaults; provided
that, except in the case of default in the payment of the principal of (or
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premium, if any, on) or interest, if any, on any outstanding Indenture Security
of such series, the Trustee will be protected in withholding such notice if it
determines in good faith that the withholding of such notice is in the interests
of such holders; and provided further that, in the case of a default with
respect to the outstanding Indenture Securities of the character specified in
clause (3) of the definition of Events of Default, no such notice will be given
until at least 30 days after the occurrence thereof (Section 601).
The Company and the Guarantor will be required to furnish annually to the
Trustee a statement as to the fulfillment by the Company and the Guarantor of
all of their respective obligations under the Indenture (Section 1004).
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may elect either (1) to defease and
be discharged, for itself and the Guarantor, from any and all obligations with
respect to all or a portion of the Indenture Securities of any series and any
related coupons (except for the obligations (a) to pay Additional Amounts, if
any; (b) to register the transfer of or exchange such Indenture Securities and
any related coupons; (c) to replace temporary or mutilated, destroyed, lost or
stolen Indenture Securities of such series and any related coupons; (d) to
maintain an office or agency in respect of such Indenture Securities and any
related coupons; and (e) to hold moneys for payment in trust) ("defeasance"); or
(2) to be released, for itself and the Guarantor, from its obligations with
respect to such outstanding Indenture Securities and any related coupons under
Sections 1008 and 1009 of the Indenture (being the restrictions described above
under "Liens" and "Sale and Leaseback Transactions", respectively, under the
heading "Certain Covenants") or, if so provided in the Prospectus Supplement,
its and the Guarantor's obligations with respect to any other covenant, and any
omission to comply with such obligations will not constitute a default or an
Event of Default with respect to such Indenture Securities and any related
coupons ("covenant defeasance"), in the case of either clause (1) or clause (2),
upon the irrevocable deposit by the Company or the Guarantor with the Trustee
(or other qualifying trustee), in trust, of (i) an amount, in the Currency in
which such Indenture Securities and any related coupons are then specified as
payable at Stated Maturity, (ii) Government Obligations (as defined below)
applicable to such Indenture Securities and any related coupons (with such
applicability being determined on the basis of the Currency in which such
Indenture Securities are then specified as payable at Stated Maturity) that,
through the payment of principal and interest in accordance with their terms,
will provide money in an amount, or (iii) a combination thereof in an amount,
sufficient to pay the principal of (and premium, if any, on) and interest, if
any, on such Indenture Securities and any related coupons, and any mandatory
sinking fund or analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company has
delivered to the Trustee an opinion of counsel to the effect that the holders of
such Indenture Securities and any related coupons will not recognize income,
gain or loss for United States federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to United States federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred, and such opinion, in the case of defeasance under clause (1) above,
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable United States federal income tax law occurring after the
date of the Indenture (Article 14).
Unless otherwise provided in the applicable Prospectus Supplement,
"Government Obligations" means securities that are (1) direct obligations of the
government that issued the Currency in which the Indenture Securities of a
series are payable or (2) obligations of a person controlled or supervised by
and acting as an agency or instrumentality of such government, the payment of
which obligations is unconditionally guaranteed by such government, that, in
either case, are full faith and credit obligations of such government payable in
such Currency and are not callable or redeemable at the option of the issuer
thereof. Such term will also include a depository receipt issued by a bank or
trust company
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as custodian with respect to any such Government Obligation or a specific
payment of principal of or interest on any such Government Obligation held by
such custodian for the account of the holder of a depository receipt; provided
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt with
respect to any amount received by the custodian in respect of the Government
Obligation for the specific payment of interest or principal of the Government
Obligation evidenced by such depository receipt (Section 101).
Unless otherwise provided in the Prospectus Supplement, if, after the
Company or the Guarantor has deposited funds, Government Obligations or both to
effect defeasance with respect to any Indenture Securities (1) the holder of
such an Indenture Security is entitled to, and does, elect pursuant to the terms
of such Indenture Security to receive payment in a Currency other than that in
which such deposit has been made or (2) a Conversion Event occurs, the
indebtedness represented by such Indenture Security and any related coupons will
be deemed to have been, and will be, fully discharged and satisfied through the
payment of the principal of (and premium, if any, on) and interest, if any, on
such Indenture Security as they become due out of the proceeds yielded by
converting (from time to time in the case of such an election) the amount so
deposited into the Currency in which such Indenture Security becomes payable as
a result of such election or such cessation of usage based on the applicable
Market Exchange Rate (as defined in the Indenture or in the Prospectus
Supplement) for such Currency in effect on the second Business Day prior to each
payment date (with respect to such an election) or (as nearly as feasible) in
effect at the time of such a cessation of usage (with respect to such a
cessation of usage) (Section 1405).
In the event the Company effects covenant defeasance with respect to any
Indenture Securities and any related coupons and such Indenture Securities and
coupons are declared due and payable because of the occurrence of any Event of
Default other than (a) an Event of Default described in clause (3) under "Events
of Default" with respect to Sections 1008 and 1009 of the Indenture (which
Sections would no longer be applicable to such Indenture Securities or coupons)
or (b) an Event of Default described in clause (3) or (6) under "Events of
Default" with respect to any other covenant as to which there has been
defeasance, the realizable value of the money and Government Obligations on
deposit with the Trustee may not be sufficient to pay amounts due on such Debt
Securities and coupons at the time of the acceleration resulting from such Event
of Default, in that the required deposit with the Trustee is based upon
scheduled cash flows rather than market value, which will vary depending upon
interest rates and other factors. However, the Company and the Guarantor would
remain liable to make payment of such shortfall amounts due at the time of
acceleration.
The Prospectus Supplement may further describe the provisions, if any,
permitting such defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the Indenture Securities of
or within a particular series, any related coupons and the related Guarantees.
CERTAIN COVENANTS
LIENS
The Indenture provides that each of the Company and the Guarantor will not
itself, and will not permit any of its Restricted Subsidiaries to, create,
incur, issue, assume or guarantee any Debt secured by a Lien on any Principal
Facility or on any Restricted Security without in any such case effectively
providing that the Indenture Securities issued thereunder (in the case of the
Company), the related Guarantees (in the case of the Guarantor) or the Indenture
Securities and Guarantees (in the case of a Restricted Subsidiary) (and, at the
option of the Company or the Guarantor, as the case may be, any other Debt of
the Company, the Guarantor or any such Restricted Subsidiary ranking equally
with the Indenture Securities or Guarantees or the senior Debt of such
Restricted Subsidiary, as the case may be) will be secured equally and ratably
with or prior to such secured Debt, except that the foregoing restriction will
not apply to:
(1) Liens existing as of the date of the first issuance by the Company
of any such Indenture Securities.
(2) Liens on property or assets of, or on any shares of stock or Debt
issued by, any corporation existing at the time such corporation becomes a
Restricted Subsidiary.
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(3) Liens in favor of the Company, the Guarantor or any Restricted
Subsidiary.
(4) Liens on any Principal Facility or Restricted Security existing at
the time of acquisition thereof or certain purchase money Liens.
(5) Liens on any Principal Facility to secure all or any part of the
cost of exploration, drilling, development, operation, construction,
alteration, repair or improvement of all or any part of such Principal
Facility or to secure certain Debt incurred for the purpose of financing all
or any part of such cost.
(6) Any extension, renewal, substitution or replacement (or successive
extensions, renewals, substitutions or replacements), in whole or in part,
of any Lien referred to in the foregoing clauses (1) through (5).
Notwithstanding the above, the Company, the Guarantor and any Restricted
Subsidiary may, without securing such Indenture Securities, Guarantees or senior
Debt, create, incur, issue, assume or guarantee Debt secured by a Lien that
would otherwise be subject to the foregoing restrictions, provided that, after
giving effect thereto, the aggregate principal amount of such secured Debt then
outstanding, whenever created, incurred, issued, assumed or guaranteed (not
including Debt secured by Liens permitted or excepted under the foregoing
exceptions) plus all Attributable Debt of the Company, the Guarantor and the
Restricted Subsidiaries in respect of sale and leaseback transactions involving
Principal Facilities, entered into after the date of the first issuance by the
Company of any such Indenture Securities (other than sale and leaseback
transactions described in clause (2) or (3) of the section entitled "Sale and
Leaseback Transactions"), would not exceed 10% of Consolidated Net Tangible
Assets (Section 1008).
SALE AND LEASEBACK TRANSACTIONS
The Indenture further provides that each of the Company and the Guarantor
will not itself, and will not permit any of its Restricted Subsidiaries to,
enter into any sale and leaseback transaction (except a lease for a temporary
period, including renewals, not exceeding three years and except leases with the
Company, the Guarantor or any such Restricted Subsidiary) covering any Principal
Facility that has been or is to be sold or transferred by the Company, the
Guarantor or such Restricted Subsidiary, unless (1) the Attributable Debt of the
Company, the Guarantor and the Restricted Subsidiaries in respect thereof and
all other sale and leaseback transactions covering Principal Facilities,
whenever entered into (other than such sale and leaseback transactions as are in
compliance with the provisions described in clause (2) or (3) of this
paragraph), plus the aggregate principal amount of Debt secured by Liens on
Principal Facilities or on Restricted Securities then outstanding (other than
Debt secured by Liens permitted or excepted without securing the Indenture
Securities outstanding thereunder and the related Guarantees and other than Debt
if such Indenture Securities are secured equally and ratably with or prior to
such Debt), would not exceed 10% of Consolidated Net Tangible Assets or (2) an
amount ("Designated Amount") equal to the greater of the net proceeds of such
sale or the fair market value of such Principal Facility (as determined by the
Company or the Guarantor, as the case may be) is applied within 120 days after
the transaction to the retirement of Funded Debt of the Company or the Guarantor
(other than at maturity or pursuant to any mandatory sinking fund payment or
mandatory prepayment provision), except that the amount to be applied to
retirement of Funded Debt of the Company or the Guarantor will be reduced by (a)
the aggregate principal amount of any such Indenture Securities called for
redemption by the Company within 120 days after such transaction or delivered
within such 120-day period to the Trustee for retirement and cancellation and
(b) the aggregate principal amount of Funded Debt, other than such Indenture
Securities, voluntarily retired by the Company or the Guarantor within 120 days
after such transaction, or (3) the Company, the Guarantor or such Restricted
Subsidiary, within a period commencing 12 months prior to and ending 12 months
after the date of the sale or transfer in respect of such sale and leaseback
transaction, has expended or reasonably expects to expend within such period
moneys to acquire or construct any Principal Facility or Facilities, in which
case the Company, the Guarantor or such Restricted Subsidiary may enter into
such sale and leaseback transaction, but only if the Designated Amount in
respect thereof is less than or equal to such moneys expended or to be expended
within such period (Section 1009).
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DEFINITIONS
"ATTRIBUTABLE DEBT" means, as to any particular lease under which any
person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such person
under such lease during the remaining term thereof (excluding amounts required
to be paid on account of maintenance and repairs, services, insurance, taxes,
assessments, water rates and similar charges and contingent rents), discounted
from the respective due dates thereof at the weighted average of the rates of
interest (or Yields to Maturity, in the case of Original Issue Discount
Securities) borne by the Indenture Securities then outstanding under the
Indenture, compounded annually (Section 101).
"CONSOLIDATED NET TANGIBLE ASSETS" means the aggregate amount of assets of
the Guarantor and its consolidated Subsidiaries after deducting therefrom (1)
applicable reserves and other properly deductible items, (2) all current
liabilities of the Guarantor and its consolidated Subsidiaries (excluding any
current liabilities constituting Funded Debt by reason of being renewable or
extendable) and (3) all goodwill, trade names, trademarks, patents, organization
expenses and other like intangibles of the Guarantor and its consolidated
Subsidiaries, all as set forth on the latest available balance sheet of the
Guarantor and its consolidated Subsidiaries as of the last day of a calendar
quarter (but, in any event, within 150 days of the date of determination),
prepared in accordance with generally accepted accounting principles (Section
101).
"DEBT" means notes, bonds, debentures or other similar evidences of
indebtedness for money borrowed (Section 101).
"FUNDED DEBT" means all Debt having a maturity of more than 12 months from
the date such Debt was incurred or having a maturity of less than 12 months but
by its terms being renewable or extendable, at the option of the borrower,
beyond 12 months from the date such Debt was incurred (Section 101).
"LIEN" means any pledge, mortgage, lien, encumbrance or security interest
(Section 101).
"PRINCIPAL FACILITY" means any manufacturing plant or warehouse, together
with the land upon which it is erected and fixtures comprising a part thereof,
owned by the Company, the Guarantor or any Restricted Subsidiary and located in
the United States, the gross book value of which (without deduction of any
depreciation reserves) on the date as of which the determination is being made
exceeds 1% of Consolidated Net Tangible Assets, other than any such plant or
warehouse or any portion thereof (together with such land and fixtures) that, in
the opinion of the Board of Directors of the Guarantor, is not of material
importance to the business conducted by the Company, the Guarantor and the
Restricted Subsidiaries, taken as a whole (Section 101).
"RESTRICTED SECURITY" means any share of stock or Debt issued by any
Restricted Subsidiary (Section 1008).
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company and/or the
Guarantor, other than an Unrestricted Subsidiary (Section 101).
"SUBSIDIARY" means any corporation or other entity of which at the time of
determination the Company and/or the Guarantor, directly and/or indirectly
through one or more Subsidiaries, owns Voting Stock sufficient to elect a
majority of the directors or comparable officials thereof (Section 101).
"UNRESTRICTED SUBSIDIARY" means (1) any Subsidiary principally engaged in
(a)(i) owning, leasing, managing or otherwise operating, or franchising or
licensing (A) facilities engaged in the retail sale of goods or services to the
general public, or (B) fast food, coffee shop, restaurant or other retail
facilities principally engaged in providing food or beverages to the general
public, or (ii) providing services to the facilities described in clause (i);
(b) owning, leasing, dealing in or developing real property used or to be used
principally by persons other than the Company, the Guarantor or any Subsidiary
for residential, shopping center, industrial, warehouse or office building
purposes; or (c) purchasing or financing accounts receivable, making loans,
extending credit or other activities of a character conducted by a finance
company; (2) any Subsidiary, that is primarily engaged in the business of
developing, testing, manufacturing, marketing or providing products, facilities
or services used or useful in connection with, or constituting, the furnishing
of medical, dental or veterinary care,
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including kidney dialysis and other intravenous therapy products and services
and pharmaceutical products and services; (3) any Subsidiary, the major portion
of the assets of which consists of one or more general or limited partnership
interests, so long as no such interest represents more than 50% of the total
ownership interest in such partnership; and (4) any Subsidiary substantially all
of the assets of which consist of capital stock or securities of the
Subsidiaries described in clauses (1), (2) and/or (3) of this paragraph. If
there is a question as to whether a Subsidiary is an Unrestricted Subsidiary,
such matter will be determined by the Board of Directors of the Company or the
Guarantor, as the case may be (Section 101).
BOOK-ENTRY DEBT SECURITIES
Debt Securities of a series (and the related Guarantees) may be issued in
whole or in part in the form of one or more Global Securities that will be
deposited with, or on behalf of, a depository identified in the Prospectus
Supplement relating to such series. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form. Unless
otherwise provided in the Prospectus Supplement, Debt Securities of a series
(and the related Guarantees) that are represented by a Global Security may be
issued in any denomination, and will be issued in registered form only, without
coupons. Payments of principal of (and premium, if any, on) and interest, if
any, on Debt Securities of such series represented by a Global Security will be
made by the Company or the Trustee to the depository.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of, The Depository Trust Company ("DTC"), New York, New York, that
such Global Securities will be registered in the name of DTC's nominee, and that
the following provisions will apply to the depository arrangements with respect
to any such Global Securities. Additional or differing terms of the depository
arrangement will be described in the Prospectus Supplement relating to Offered
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 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 of Debt Securities under the 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.
If DTC is at any time unwilling or unable to continue as depository and a
successor depository is not appointed by the Company within 90 days following
notice to the Company, 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 of one or more series represented by Global Securities and, in
such event, will issue individual Debt Securities of such series 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 equal in principal
amount to such beneficial interest and to have such Debt Securities in
certificated form registered in its name.
The following is based on information furnished by DTC:
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 $150 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.
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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, 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 SEC.
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 to be recorded on the
Participants' records. A Beneficial Owner will not receive written
confirmation from DTC of its purchase, but such Beneficial Owner is expected
to receive a written confirmation providing details of the transaction, as
well as periodic statements of its holdings, from the Participant through
which such Beneficial Owner entered into the transaction. Transfers of
ownership interests in Debt Securities are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will 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 will be
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 will have no
knowledge of the actual Beneficial Owners of the Debt Securities; DTC
records will 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 will remain responsible for keeping
account of their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote 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, premium and interest payments on the Debt Securities will be
made to DTC. DTC's practice is to credit Direct Participants' accounts on
the payable 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 payable date. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
Participant and not of DTC, the Paying Agent or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the
Company or the Paying Agent, disbursement of such payments to Direct
Participants will be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be 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 Paying Agent. Under such circumstances, in the event that
a successor securities depository is not appointed, Debt Security
certificates are required to be printed and delivered.
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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 (including DTC) that the Company and the
Guarantor believe to be reliable, but the Company and the Guarantor take no
responsibility for the accuracy thereof.
Unless stated otherwise in the applicable Prospectus Supplement, the
underwriters or agents with respect to Offered Debt Securities issued as Global
Securities will be Direct Participants in DTC.
None of the Company, the Guarantor, any underwriter or agent, the Trustee or
any 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 interests.
CONCERNING THE TRUSTEE
NationsBank of Georgia, National Association, Atlanta, Georgia, is the
Trustee under the Indenture. The Trustee is expected to serve as warrant agent
(see "Description of Warrants"). Grace also maintains customary banking
relationships with the Trustee and its banking affiliates, one of which is a
party to a revolving credit agreement with Grace.
DESCRIPTION OF WARRANTS
The Company may issue Warrants either separately or together with Offered
Debt Securities. Each issue of Warrants will be made under a warrant agreement
(each a "Warrant Agreement") to be entered into between the Company and the bank
or trust company specified in the Prospectus Supplement ("Warrant Agent"). The
Warrant Agent is expected to be the Trustee. The form of the Warrant Agreement
has been filed with the SEC as an exhibit to the Registration Statement. The
following summary of the material provisions of the Warrant Agreement does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Warrant Agreement, including the definitions of certain terms
therein, and to the specific terms of the Warrants set forth in the Prospectus
Supplement.
GENERAL
Reference is made to the Prospectus Supplement for the specific terms of the
Warrants in respect of which this Prospectus and the Prospectus Supplement are
being delivered, including the following:
(1) The title and aggregate number of such Warrants.
(2) The offering price of such Warrants.
(3) The title, aggregate principal amount and terms of the Underlying
Debt Securities issuable upon exercise of such Warrants (as specified under
"Description of Debt Securities and Guarantees -- General").
(4) The principal amount of Underlying Debt Securities issuable upon
exercise of each such Warrant, and the price, or the manner of determining
the price, at which such principal amount may be purchased upon such
exercise.
(5) The time or times at which, or period or periods during which, such
Warrants may be exercised and the expiration date of such Warrants.
(6) The terms of any right of the Company to redeem such Warrants.
(7) Whether such Warrants are to be issued with any Offered Debt
Securities and, if so, the title, aggregate principal amount and terms of
such Offered Debt Securities (as specified under "Description of Debt
Securities and Guarantees -- General") and the number of such Warrants to be
issued with each $1,000 principal amount of such Offered Debt Securities (or
such other principal amount as may be established).
(8) The date, if any, on and after which such Warrants and such Offered
Debt Securities will be separately transferable.
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If applicable, the Prospectus Supplement will also set forth information
concerning any Offered Debt Securities offered thereby and a discussion of any
relevant federal income tax considerations.
Certificates representing Warrants ("Warrant Certificates") may be issued in
registered or bearer form, or both, as set forth in the Prospectus Supplement,
and will be exchangeable for new Warrant Certificates of different
denominations. No service charge will be made for any permitted transfer or
exchange of Warrant Certificates, but the Company may require payment of any tax
or other governmental charge payable in connection therewith. Warrants may be
exercised at the corporate trust office of the Warrant Agent or any other office
indicated in the Prospectus Supplement.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder thereof to purchase such amount of
Underlying Debt Securities at the exercise price set forth in, or calculable
from, the Prospectus Supplement relating to such Warrants. After the close of
business on the applicable expiration date, unexercised Warrants will become
void.
Warrants may be exercised by payment to the Warrant Agent of the applicable
exercise price and by delivery to the Warrant Agent of the information specified
on the Warrant Certificate. Warrants will be deemed to have been exercised upon
receipt of the exercise price, subject to the receipt by the Warrant Agent,
within five business days thereafter, of the Warrant Certificate or Certificates
evidencing such Warrants. Upon receipt of such payment and properly completed
Warrant Certificates at the corporate trust office of the Warrant Agent or any
other office indicated in the applicable Prospectus Supplement, the Company
will, as soon as practicable, deliver the amount of Underlying Debt Securities
purchased upon such exercise. If fewer than all of the Warrants represented by
any Warrant Certificate are exercised, a new Warrant Certificate will be issued
for the unexercised Warrants. The holder of a Warrant will be required to pay
any tax or other governmental charge that may be imposed in connection with any
transfer involved in the issuance of Underlying Debt Securities purchased upon
such exercise.
MODIFICATIONS
The Warrant Agreement and the terms of the Warrants may be amended by the
Company and the Warrant Agent, without the consent of any holder, for the
purpose of curing any ambiguity, or of curing, correcting or supplementing any
defective or inconsistent provision contained therein, or in any other manner
that the Company deems necessary or desirable and that will not materially and
adversely affect the interests of the holders of the Warrants.
The Company and the Warrant Agent also may modify or amend the Warrant
Agreement and terms of the Warrants with the consent of the holders of not less
than a majority in number of the then outstanding unexercised Warrants affected
thereby; provided that no such modification or amendment that accelerates the
expiration date, increases the exercise price, reduces the number of outstanding
Warrants the consent of the holders of which is required for modification or
amendment of the Warrant Agreement or the terms of the Warrants, or otherwise
materially and adversely affects the rights of the holders of Warrants, may be
made without the consent of each holder affected thereby.
NO RIGHTS AS HOLDERS OF UNDERLYING DEBT SECURITIES
Holders of Warrants are not entitled, by virtue of being such holders, to
payment of principal of (or premium, if any, on) or interest, if any, on the
related Underlying Debt Securities or to exercise any other rights whatsoever as
holders of such Underlying Debt Securities.
PLAN OF DISTRIBUTION
Offered Securities may be sold directly to one or more purchasers or through
underwriters, dealers or agents.
If underwriters are used in an offering of Offered Securities, the name of
each managing underwriter and any other underwriters and the terms of the
transaction, including any underwriting discounts and other items constituting
compensation of the underwriters and dealers, if any, will be set forth in the
Prospectus Supplement relating to such offering, and the Offered Securities will
be acquired by the underwriters for their own accounts and may be resold from
time to time in one or
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more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
Only underwriters named in a Prospectus Supplement will be deemed to be
underwriters in connection with the Offered Securities described therein; a firm
not so named will have no direct or indirect participation in the underwriting
of such Offered Securities, although such firm may participate in the
distribution of such Offered Securities under circumstances entitling it to a
dealer's commission. It is anticipated that any underwriting agreement
pertaining to any Offered Securities will (1) entitle the underwriters to
indemnification by the Company against certain civil liabilities under the
Securities Act, (2) provide that the obligations of the underwriters will be
subject to certain conditions precedent and (3) provide that the underwriters
will be obligated to purchase all Offered Securities (other than any subject to
Delayed Delivery Contracts) if any are purchased.
If a dealer is used in an offering of Offered Securities, the Company will
sell such Offered Securities to the dealer, as principal. The dealer may then
resell such Offered Securities to the public at varying prices to be determined
by such dealer at the time of resale. The name of the dealer and the terms of
the transaction will be set forth in the Prospectus Supplement relating thereto.
If an agent is used in an offering of Offered Securities, the agent will be
named, and the terms of the agency will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in such Prospectus
Supplement, an agent will act on a best efforts basis for the period of its
appointment.
Dealers and agents named in a Prospectus Supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the Offered
Securities described therein and, under agreements that may be entered into, may
be entitled to indemnification by the Company and the Guarantor against certain
civil liabilities under the Securities Act. Underwriters, dealers and agents may
be customers of, engage in transactions with or perform services for Grace in
the ordinary course of business.
Offers to purchase Offered Securities may be solicited, and sales thereof
may be made, by the Company directly to institutional investors or others, who
may be deemed to be underwriters within the meaning of the Securities Act with
respect to any resales thereof. The terms of any such offers will be set forth
in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other agents of the Company to solicit offers by certain
institutional investors to purchase Offered Securities from the Company pursuant
to contracts providing for payment and delivery at a future date. Institutional
investors with which such contracts may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such purchasers must be
approved by the Company. The obligations of any purchaser under any such
contract will not be subject to any conditions except that (1) the purchase of
the Offered Securities shall not at the time of delivery be prohibited under the
laws of any jurisdiction to which such purchaser is subject and which govern
such investment and (2) if the Offered Securities are also being sold to
underwriters, the Company shall have sold to such underwriters the Offered
Securities not subject to delayed delivery. Underwriters and other agents will
not have any responsibility in respect of the validity or performance of such
contracts.
The anticipated date of delivery of Offered Securities will be set forth in
the Prospectus Supplement relating to each offering.
LEGAL OPINIONS
The validity of the Securities and the Guarantees will be passed upon for
the Company and the Guarantor by Robert H. Beber, General Counsel of the Company
and the Guarantor, and for the underwriters, dealers and agents, if any, by
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022. Mr. Beber
is also an Executive Vice President of the Company and the Guarantor and
beneficially owns certain securities of the Guarantor. Shearman & Sterling
occasionally represents Grace in corporate transactions and antitrust matters.
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EXPERTS
The audited consolidated financial statements and schedules incorporated in
this Prospectus by reference to the Guarantor's filings pursuant to the Exchange
Act have been so incorporated in reliance on the reports of Price Waterhouse,
independent accountants, given upon the authority of such firm as experts in
auditing and accounting.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT (INCLUDING THE ACCOMPANYING PRICING SUPPLEMENT) AND THE
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE GUARANTOR OR ANY OF THE AGENTS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT (INCLUDING THE ACCOMPANYING PRICING
SUPPLEMENT) AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE GUARANTOR SINCE THE DATES AS OF WHICH INFORMATION
IS GIVEN IN THIS PROSPECTUS SUPPLEMENT (INCLUDING THE ACCOMPANYING PRICING
SUPPLEMENT) AND THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT (INCLUDING THE
ACCOMPANYING PRICING SUPPLEMENT) AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
OR SOLICITATION IN ANY JURISDICTION BY ANYONE NOT QUALIFIED TO MAKE SUCH OFFER
OR SOLICITATION OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Grace.......................................... S-2
Description of Notes and Guarantees............ S-2
Important Currency Exchange Information........ S-14
Currency Risks................................. S-14
Risks of Indexed Notes......................... S-15
United States Taxation......................... S-16
Plan of Distribution........................... S-22
Glossary....................................... S-23
PROSPECTUS
Available Information.......................... 2
Documents Incorporated by Reference............ 2
Grace.......................................... 3
Use of Proceeds................................ 3
Grace Financial Information.................... 3
Description of Debt Securities and
Guarantees.................................... 3
Description of Warrants........................ 20
Plan of Distribution........................... 21
Legal Opinions................................. 22
Experts........................................ 23
</TABLE>
$300,000,000
W. R. GRACE & CO.-CONN.
MEDIUM-TERM NOTES, SERIES A
DUE MORE THAN NINE MONTHS
FROM DATE OF ISSUE
UNCONDITIONALLY GUARANTEED BY
W. R. GRACE & CO.
SALOMON BROTHERS INC
J.P. MORGAN SECURITIES INC.
UBS SECURITIES INC.
PROSPECTUS SUPPLEMENT
DATED APRIL 7, 1994
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