<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration No. 33-54183
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 20, 1995)
(HERTZ LOGO)
THE HERTZ CORPORATION
$150,000,000
6.70% Senior Notes due June 15, 2002
Interest payable June 15 and December 15
ISSUE PRICE: 99.663%
Interest on the 6.70% Senior Notes due June 15, 2002 (the "Notes") is payable
semiannually on June 15 and December 15 of each year, beginning December 15,
1995. The Notes will not be redeemable prior to maturity and will not be subject
to any sinking fund. The Notes will be represented by a Global Note (as defined
herein) registered in the name of The Depository Trust Company (the
"Depository") or its nominee. Interests in the Global Note will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository and its participants. Except as described herein, Notes in definitive
form will not be issued. See "Description of Notes."
Settlement for the Notes will be made in immediately available funds. So long as
the Notes are represented by the Global Note registered in the name of the
Depository or its nominee, the Notes will trade in the Depository's Same-Day
Funds Settlement System, and secondary market trading activity in the Notes will
therefore settle in immediately available funds. So long as the Notes are
represented by the Global Note, all payments of principal and interest will be
made by The Hertz Corporation (the "Corporation") in immediately available
funds. See "Description of Notes -- Same-Day Settlement and Payment" in this
Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) CORPORATION(1)(3)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 99.663% .400% 99.263%
- ----------------------------------------------------------------------------------------------------
Total $149,494,500 $600,000 $148,894,500
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from June 27, 1995.
(2) The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Corporation.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriters, and subject to approval of certain legal matters by Brown & Wood,
counsel for the Underwriters. It is expected that delivery of the Notes will be
made in book-entry form only on or about June 27, 1995 through the facilities of
the Depository, against payment therefor in immediately available funds. As June
27, 1995 is the fifth business day following the date hereof, purchasers of the
Notes should be aware that trading of the Notes on the date hereof and the next
succeeding business day may be affected by such five-day settlement.
J.P. MORGAN SECURITIES INC.
BA SECURITIES, INC.
CITICORP SECURITIES, INC.
June 20, 1995
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized. This
Prospectus Supplement and the Prospectus do not constitute an offer to sell or
the solicitation of an offer to buy any securities other than the securities to
which they relate or any offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus Supplement or the Prospectus
nor any sale made hereunder or thereunder shall, under any circumstances, create
any implication that the information contained herein or therein is correct as
of any time subsequent to the date of such information.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Description of Notes.................................................................. S-3
Underwriting.......................................................................... S-4
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
The Corporation....................................................................... 3
Use of Proceeds....................................................................... 3
Selected Financial Data of the Corporation............................................ 4
Certain Relationships................................................................. 6
Description of Debt Securities........................................................ 6
Plan of Distribution.................................................................. 18
Legal Opinions........................................................................ 18
Experts............................................................................... 18
</TABLE>
S-2
<PAGE> 3
DESCRIPTION OF NOTES
GENERAL
The Notes are to be issued as a series of Senior Debt Securities under the
Indenture, dated as of December 1, 1994 (the "Indenture") between the
Corporation and First Fidelity Bank, National Association, as Trustee (the
"Trustee"), which is more fully described in the accompanying Prospectus.
The Notes will bear interest at an annual rate of 6.70%. Interest on the
Notes will accrue from June 27, 1995 and will be payable semiannually on each
June 15 and December 15, commencing December 15, 1995, to the persons in whose
names the Notes are registered on the June 1 and December 1 next preceding such
June 15 and December 15, respectively. Principal and interest payable with
respect to certificated Notes, if any, will be payable at an office to be
maintained by the Corporation in The City of New York, except that, at the
option of the Corporation, interest payable with respect to such certificated
Notes may be paid by check mailed to the person entitled thereto.
The Notes will not be subject to redemption by the Company or repayment at
the option of the holder prior to maturity and are not entitled to any sinking
fund. Beneficial interests in the Notes may be acquired, or subsequently
transferred, only in denominations of $1,000 and integral multiples thereof.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of a secondary market for the Notes.
BOOK-ENTRY
Upon issuance, all Notes will be represented by one or more fully
registered global securities.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Global Notes will be made by the Underwriters in
immediately available funds. All payments of principal and interest on the Notes
will be made by the Corporation in immediately available funds so long as the
Notes are maintained in book-entry form.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in the Depository's Same-Day Funds Settlement System and secondary
trading activity in the Notes will therefore be required by the Depository to
settle in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on trading activity
in the Notes.
S-3
<PAGE> 4
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
dated as of June 20, 1995 (the "Underwriting Agreement"), the Corporation has
agreed to sell to each of the Underwriters named below (the "Underwriters"), and
each of the Underwriters has severally agreed to purchase, the principal amount
of the Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF UNDERWRITER OF NOTES
----------------
<S> <C>
J.P. Morgan Securities Inc................................................. $ 90,000,000
BA Securities, Inc......................................................... 30,000,000
Citicorp Securities, Inc................................................... 30,000,000
-------------
Total............................................................ $150,000,000
=============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all of the Notes if any are
taken.
The Underwriters initially propose to offer the Notes directly to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such price less a concession
not in excess of .300% of the principal amount of the Notes. The Underwriters
may allow, and such dealers may reallow, a discount not in excess of .200% of
the principal amount of the Notes to certain other dealers. After the initial
public offering, the public offering price and such concessions may be changed.
The Corporation does not intend to apply for listing of the Notes on a
national securities exchange, but has been advised by the Underwriters that they
intend to make a market in the Notes. The Underwriters are not obligated,
however, to make a market in the Notes and may discontinue market making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may in the future engage in
investment banking and/or commercial banking transactions with the Corporation
and its affiliates.
S-4
<PAGE> 5
PROSPECTUS [LOGO]
THE HERTZ CORPORATION
DEBT SECURITIES
------------------------
The Hertz Corporation (the "Corporation") may offer from time to time in
one or more series its unsecured debt securities (the "Debt Securities"), which
may be senior (the "Senior Debt Securities"), senior subordinated (the "Senior
Subordinated Debt Securities") or junior subordinated (the "Junior Subordinated
Debt Securities") in priority of payment. The aggregate offering price of Debt
Securities offered hereby will not exceed $850,000,000. The Debt Securities may
be offered as separate series in amounts, at prices and on terms to be
determined at the time of sale and to be set forth in supplements to this
Prospectus.
The Debt Securities may be denominated in and sold for U.S. dollars,
foreign currency or ECU, and principal of and any interest on the Debt
Securities may likewise be payable in U.S. dollars, foreign currency or ECU. The
currency for which the Debt Securities may be purchased and the currency in
which principal of and any interest on the Debt Securities may be payable will
be specifically designated by the Corporation. The specific designation,
priority of payment, aggregate principal amount, authorized denominations,
maturity, rate or method of calculation and time of payment of any interest,
purchase price, any redemption terms, other special terms, and any listing on a
securities exchange of the Debt Securities in respect of which this Prospectus
is being delivered, and the net proceeds to the Corporation from the sale
thereof, will be set forth in an accompanying Prospectus Supplement (the
"Prospectus Supplement").
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------
The Debt Securities will be sold directly or through agents designated from
time to time or through underwriters or dealers or a group of underwriters. If
agents of the Corporation or underwriters are involved in the sale of the Debt
Securities in respect of which this Prospectus is being delivered, the names of
such agents or underwriters and any applicable commissions or discounts shall be
set forth in the Prospectus Supplement with respect to such Debt Securities.
June 20, 1995
<PAGE> 6
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Reports and other information filed by the Corporation can
be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 5th Street, N.W., Washington, D.C. 20549, and
at the following Regional Offices of the Commission: Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621; and New York Regional Office, Seven World Trade Center, New
York, New York 10048. Copies of such materials can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 5th Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Copies of such materials may also be
inspected and copied at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Corporation's Annual Report on Form 10-K for the year ended December
31, 1994, its Quarterly Report on Form 10-Q for the quarter ended March 31, 1995
and the Current Report on Form 8-K dated February 1, 1995 are hereby
incorporated by reference into this Prospectus.
All documents subsequently filed by the Corporation pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Debt Securities shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and the Prospectus Supplement to the extent that
a statement contained herein, therein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or the Prospectus Supplement.
The Corporation will provide without charge to each person to whom this
Prospectus is delivered, on written or oral request of such person, a copy
(without exhibits) of any or all documents incorporated by reference into this
Prospectus. Requests for such copies should be directed to The Hertz
Corporation, Attention: Investor Relations, at its mailing address or its
telephone number.
The mailing address of the Corporation's principal executive office is 225
Brae Boulevard, Park Ridge, New Jersey 07656-0713 and its telephone number is
(201) 307-2000.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS PROSPECTUS AND ANY
PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF ANY PROSPECTUS
SUPPLEMENT.
2
<PAGE> 7
THE CORPORATION
The Corporation and its subsidiaries ("Hertz"), affiliates and independent
licensees are engaged principally in the business of renting automobiles and
renting and leasing trucks, without drivers, to customers in the United States
and in over 150 foreign countries. Collectively, they operate what the
Corporation believes is the largest rent a car business in the world and one of
the largest one-way truck rental businesses in the United States. In addition,
through its wholly-owned subsidiary, Hertz Equipment Rental Corporation
("HERC"), the Corporation operates what it believes to be the largest rental,
lease and sale of construction and materials handling equipment business in the
United States. Other activities of Hertz include the sale of its used vehicles;
the leasing of automobiles in Australia and New Zealand and in Europe through
its independent licensees; and providing claim management and telecommunication
services in the United States.
The Corporation, which was incorporated in Delaware in 1967, is a successor
to corporations which were engaged in the automobile and truck leasing and
rental business since 1924. UAL Corporation ("UAL") (formerly Allegis
Corporation) purchased all of the Corporation's outstanding capital stock from
RCA Corporation ("RCA") on August 30, 1985. Park Ridge Corporation ("Park
Ridge") purchased all of the Corporation's outstanding capital stock from UAL on
December 30, 1987. On July 19, 1993, Park Ridge (which had no material assets
other than the Corporation) was merged with and into the Corporation, with the
prior stockholders of Park Ridge becoming the stockholders of the Corporation.
In March 1994, Ford Motor Company ("Ford") acquired the Corporation's common
stock owned by Commerzbank Aktiengesellschaft. On April 29, 1994, Ford purchased
all of the common stock of the Corporation owned by Park Ridge Limited
Partnership. The Corporation then redeemed the preferred and common stock of the
Corporation owned by AB Volvo, borrowing the funds to pay for the redemption. In
addition, a subordinated promissory note of the Corporation held by Ford Motor
Credit Company ("FMCC") was exchanged for an equivalent amount of preferred
stock of the Corporation.
Currently, 100% of the outstanding common stock of the Corporation is owned
by Ford and 100% of the outstanding preferred stock of the Corporation is owned
by FMCC. The Debt Securities will not be obligations of, or guaranteed by,
either stockholder of the Corporation. The terms of the Corporation's debt
agreements limit the payment of cash dividends. At March 31, 1995, approximately
$105 million of consolidated shareholders' equity was free of such limitations.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities will be added to the
general funds of the Corporation. It is anticipated that the proceeds will be
used for general corporate purposes and to reduce short-term borrowings. The
Corporation expects to issue additional long-term and short-term debt, and the
proportionate amounts of each can be expected to vary from time to time as a
result of business requirements, market conditions and other factors.
3
<PAGE> 8
SELECTED FINANCIAL DATA OF THE CORPORATION
(IN MILLIONS OF DOLLARS)
The following table presents selected consolidated financial information of
the Corporation, which is unaudited for the three months ended March 31, 1995
and 1994, and which is extracted from the audited financial statements for the
years ended December 31, 1994, 1993, 1992, 1991 and 1990. The operating results
for the three months ended March 31, 1995 and 1994 include all adjustments
(consisting only of normal recurring adjustments) that the Corporation considers
necessary for a fair presentation of the results for such interim periods. The
interim results are not necessarily an indication of the results for the full
year. The information in the table and notes thereto should be read in
conjunction with the financial statements and the related notes thereto
contained in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994, and its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
<TABLE>
<CAPTION>
Three Months
Ended
March 31, Years Ended December 31,
----------------- --------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 736 $ 695 $3,294 $2,855 $2,816 $2,626 $2,667
------ ------ ------ ------ ------ ------ ------
EXPENSES:
Direct operating................... 401 407 1,766 1,647 1,627 1,486 1,470
Depreciation of revenue earning
equipment........................ 170(a) 149 703(a) 524(a) 497(b) 493(b) 526
Selling, general and
administrative................... 96 85 385 336 353 339 348
Interest, net of interest income of
$3, $1, $7, $11, $4, $10 and
$25.............................. 70 56 277 246 307 304 300
------ ------ ------ ------ ------ ------ ------
737 697 3,131 2,753 2,784 2,622 2,644
------ ------ ------ ------ ------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES.... (1) (2) 163 102 32 4(b) 23
PROVISION (BENEFIT) FOR TAXES ON
INCOME............................. (1) (1) 72 49(a) 22(b) (1)(b) (11)(b)
------ ------ ------ ------ ------ ------ ------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES......................... -- (1) 91 53 10 5 34
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGES IN METHOD OF ACCOUNTING
FOR --
Postretirement Benefits (c)........ -- -- -- -- (4) -- --
Vehicle Warranties (d)............. -- -- -- -- -- (4) --
------ ------ ------ ------ ------ ------ ------
NET INCOME (LOSS).................... $ -- $ (1) $ 91 $ 53 $ 6 $ 1 $ 34
====== ====== ====== ====== ====== ====== ======
Ratio of Earnings to Fixed
Charges (e)........................ .99 .98 1.4 1.3 1.1 1.0 1.1
Balance Sheet Data at End of Period:
Total Assets....................... $6,814 $5,541 $6,521 $4,688 $4,222 $4,294 $4,334
Total Debt......................... 4,608 3,713 4,414 2,940 2,550 2,702 2,798
Shareholders' Equity............... 760 622 736 617 580 599 600
Ratio of Total Debt to
Shareholders' Equity............. 6.1 6.0 6.0 4.8 4.4 4.5 4.7
</TABLE>
4
<PAGE> 9
- ---------------
(a) Effective July 1, 1994, certain lives being used to compute the provision
for depreciation of revenue earning equipment were increased to reflect
changes in the estimated residual values to be realized when the equipment
is sold. As a result of this change, depreciation of revenue earning
equipment for the three months ended March 31, 1995 and the year 1994 were
decreased by $10.8 million and $9.6 million, respectively. Depreciation of
revenue earning equipment for the year 1993 includes net credits of $28.1
million as compared to net credits of $16.9 million in 1992, primarily
attributable to higher proceeds received in 1993 on disposal of the
equipment. The tax provision for the year 1993 includes a $1.1 million
charge relating to the increase in net deferred tax liabilities as of
January 1, 1993 due to changes in the tax laws enacted in August 1993, and
a $2.0 million credit resulting from adjustments made to tax accruals in
connection with tax audit evaluations and the effects of prior years' tax
sharing arrangements between the Corporation and its former parent
companies, UAL and RCA.
Effective January 1, 1993, the Corporation adopted the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which did not have a material effect on the Corporation's
consolidated financial position, results of operations or cash flows.
(b) Depreciation of revenue earning equipment for the year 1992 includes net
credits of $16.9 million as compared to net charges of $5.4 million in
1991, primarily attributable to higher proceeds received in 1992 on
disposal of the equipment and the elimination of losses incurred in 1991
due to the increase in 1992 of "non-risk" vehicles acquired which are
returned to the vehicle manufacturers at pre-established prices.
The tax provision includes credits of $9.8 million, $16.7 million, and
$38.8 million for the years 1992, 1991 and 1990, respectively, resulting
from adjustments made to tax accruals in connection with tax audit
evaluations and the effects of prior years' tax sharing arrangements
between the Corporation and its former parent companies, UAL and RCA, and
the reversal of tax accruals no longer required and benefits realized
relating to certain foreign operations. The tax provision for the year 1991
also includes benefits of $5.5 million related to the close down and sale
of certain unprofitable foreign operations.
The decrease in income before income taxes for the year ended December 31,
1991, as compared to the prior year, was due to provisions made in 1991 of
approximately $20 million primarily incurred to close down certain
unprofitable foreign operations and depreciation adjustments made to
residual values of certain vehicles, $15 million of lower interest income
in 1991 primarily relating to refunds of prior years' income taxes, and the
adverse effects of the decrease in travel due to the war in the Persian
Gulf and a slowdown in the economy. The decrease was partly offset by net
credits of $8.9 million relating to the sale and disposition of certain
properties.
(c) Effective January 1, 1992, the Corporation adopted the provisions of
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other than Pensions ("FAS No. 106"), which
requires that postretirement health care and other non-pension benefits be
accrued during the years the employee renders the necessary service. Prior
to 1992, the Corporation accrued for such benefits on a pay-as-you-go
basis. As of January 1, 1992, the Corporation recorded a cumulative
decrease in net income of $4.3 million (net of $2.7 million tax benefit) as
a result of implementing FAS No. 106.
(d) Effective January 1, 1991, the Corporation adopted the provisions of FASB
Technical Bulletin No. 90-1, Accounting for Separately Priced Extended
Warranty and Product Maintenance Contracts ("FAS No. 90-1"), which requires
that proceeds received from warranty contracts should be deferred and
recognized in income on a straight line basis over the contract period, and
costs of services performed under the contract should be charged to expense
as incurred. Prior to 1991, when vehicles were sold under an extended
warranty contract, the proceeds received by the Corporation under such
contract, net of estimated costs to be incurred in fulfilling obligations
under those contracts, were recorded in income when the sale occurred. As
of January 1, 1991, the Corporation recorded a cumulative decrease in net
income of $3.5 million (net of $2.2 million tax benefit) as a result of
implementing FAS No. 90-1.
(e) Earnings have been calculated by adding interest expense and the portion of
rentals estimated to represent the interest factor to income before income
taxes. Fixed charges include interest charges (including capitalized
interest) and the portion of rentals estimated to represent the interest
factor. For the three months ended March 31, 1995 and 1994, an additional
$.8 million and $2.0 million of income before income taxes, respectively,
would have been required to reflect a ratio of 1.0x.
5
<PAGE> 10
CERTAIN RELATIONSHIPS
Hertz is a party to a cooperative advertising agreement with Ford (see Note
1 to the "Notes to Consolidated Financial Statements" in the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994). Hertz'
domestic revenue earning vehicles at December 31, 1994 include approximately 65%
Ford products, which are acquired from dealers who are independent from Ford.
The percentage of Ford products acquired by Hertz is expected to continue at
approximately this level in the future, pursuant to a long-term supply contract
between the Corporation and Ford. Hertz purchases the vehicles from Ford dealers
at competitive prices.
On June 8, 1994, the Corporation and Ford entered into a revolving loan
agreement under which Hertz may borrow from Ford from time to time in amounts of
up to $250 million outstanding at any one time. Obligations of the Corporation
under the agreement would rank pari passu with the Corporation's Senior Debt
Securities. This agreement by its terms expires on June 30, 1999, on which date
any amounts then outstanding thereunder are required to be repaid. In addition,
at March 31, 1995, the Corporation had $268.9 million of outstanding loans from
Ford.
Effective January 1, 1995, the Corporation sold its European car leasing
and car dealership operations to Hertz Leasing International, Inc. ("HLI"), at
an amount equal to their book value of approximately $61 million. HLI is wholly
owned by Ford. In addition, except for Australia and New Zealand, Ford is to
receive the worldwide rights (subject to certain existing license rights) to use
and sublicense others to use the "Hertz" name in the conduct of motor vehicle
leasing businesses, and a subsidiary of the Corporation will receive a license
fee from Ford payable over five years. The unaudited total assets as of December
31, 1994 and unaudited total revenues and net income for the year ended December
31, 1994 of the Corporation's European car leasing and car dealership operations
were (in millions) $482, $295 and $6, respectively. The Corporation believes
that this transaction will not have a material effect on its financial position
or future operations.
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an indenture, dated as of
December 1, 1994 (the "Senior Indenture"), between the Corporation and First
Fidelity Bank, National Association, as Trustee (the "Senior Trustee"). The
Senior Subordinated Debt Securities are to be issued under an indenture, dated
as of June 1, 1989 (the "Senior Subordinated Indenture"), between the
Corporation and The Bank of New York, as Trustee (the "Senior Subordinated
Trustee"). The Junior Subordinated Debt Securities are to be issued under an
indenture, dated as of July 1, 1993 (the "Junior Subordinated Indenture"),
between the Corporation and Citibank, N.A., as trustee (the "Junior Subordinated
Trustee"). The Senior Subordinated Indenture and the Junior Subordinated
Indenture are referred to herein collectively as the "Subordinated Indentures,"
the Senior Subordinated Securities and the Junior Subordinated Securities are
referred to herein collectively as the "Subordinated Securities," and the Senior
Subordinated Trustee and the Junior Subordinated Trustee are referred to herein
collectively as the "Subordinated Trustees."
A copy of the Senior Indenture, the Senior Subordinated Indenture and the
Junior Subordinated Indenture are exhibits to the Registration Statement of
which this Prospectus forms a part. The Senior Indenture, the Senior
Subordinated Indenture and the Junior Subordinated Indenture are sometimes
referred to collectively as the "Indentures" and the Senior Trustee, the Senior
Subordinated Trustee and the Junior Subordinated Trustee are sometimes referred
to collectively as the "Trustees."
The following summaries of certain provisions of the Indentures do not
purport to be complete and are subject to and are qualified in their entirety by
reference to all the provisions of the Indentures, including the definitions
therein of certain terms. References to Sections are applicable to each
Indenture, except (i) references to sections included under the caption
"Subordination of Senior Subordinated Debt Securities" are applicable to the
Senior Subordinated Indenture only, (ii) references to sections included under
the caption "Subordination of Junior Subordinated Debt Securities" are
applicable to the Junior Subordinated Indenture only, (iii) references to
sections included under the caption "Certain Covenants -- Dividend Restrictions
and Limitations on Certain Loans and Advances" are applicable to the
Subordinated Indentures
6
<PAGE> 11
only, and (iv) as otherwise expressly provided. The following sets forth certain
general terms and provisions of the Senior Debt Securities, the Senior
Subordinated Debt Securities and the Junior Subordinated Debt Securities
(together the "Debt Securities") offered hereby. Further terms of the Debt
Securities shall be set forth in applicable Prospectus Supplements.
GENERAL
The Debt Securities to be offered by this Prospectus are limited to
$850,000,000 in aggregate principal amount. However, the Indentures do not limit
the amount of Debt Securities which can be issued thereunder and provide that
additional securities may be issued thereunder up to the aggregate principal
amount which may be authorized from time to time by the Corporation. (Section
301)
While the covenants contained in each Indenture may provide limited
protection to debt holders in the event of a highly leveraged transaction
involving the Corporation, the Indentures do not prohibit the incurrence of
additional Senior, Senior Subordinated or Junior Subordinated Debt. Subject to
certain exceptions described below under "Limitations on Secured Debt,"
outstanding Debt Securities and other qualified indebtedness shall be secured
equally and ratably (subject, however, to applicable priorities of payment) with
any additional Secured Debt incurred by the Corporation. (Section 1004) Unless
otherwise indicated in the applicable Prospectus Supplement, the Debt Securities
will not have the benefit of any covenant requiring redemption or repurchase of
the Debt Securities by the Corporation, or adjustment to any terms of the Debt
Securities, upon any change in control or recapitalization of the Corporation.
Reference is made to the applicable Prospectus Supplement for the following
terms of the particular series of Debt Securities being offered thereby: (i) the
designation and any limitation on the aggregate principal amount of the series;
(ii) whether the securities are Senior Debt Securities, Senior Subordinated Debt
Securities, or Junior Subordinated Debt Securities; (iii) the currency or
currencies for which Debt Securities may be purchased and currency or currencies
in which principal and any interest may be payable; (iv) if the currency for
which Debt Securities may be purchased or in which principal and any interest
may be payable is at the purchaser's election, the manner in which such an
election may be made; (v) the percentage of principal amount at which the series
will be issued; (vi) the date or dates on which the principal of the series will
be payable; (vii) the rate or rates per annum, if any, at which the series will
bear interest or the method of calculation thereof; (viii) the date or dates
from which any interest will accrue and the times at which any interest will be
payable; (ix) the place or places where the principal and interest, if any, on
Debt Securities of the series shall be payable; (x) the terms, if any, on which
Debt Securities of the series may be redeemed at the option of the Corporation;
(xi) the obligation, if any, of the Corporation to redeem, purchase or repay
Debt Securities of the series; (xii) the minimum denomination in which Debt
Securities of the series will be issued; (xiii) if other than the principal
amount, the portion of the principal amount of the Debt Securities of the series
that will be payable upon a declaration of acceleration of the maturity thereof;
(xiv) whether the Debt Securities of the series may be issuable in the form of
one or more global securities; and (xv) any other special terms.
Debt Securities may be issued as discounted Debt Securities (bearing no
interest or interest at a rate which at the time of issuance is below market
rates) to be sold at a substantial discount below their stated principal amount.
Federal income tax consequences and other special considerations applicable to
any such discounted Debt Securities will be described in the applicable
Prospectus Supplement relating thereto.
The Debt Securities will be issued only in registered form without coupons
and will be unsecured obligations of the Corporation. The Senior Debt Securities
will rank on a parity with other senior debt securities of the Corporation. The
Senior Subordinated Debt Securities will rank on a parity with other senior
subordinated debt securities and be subordinated in right of payment to the
prior payment in full of Senior Indebtedness (as defined in the Senior
Subordinated Indenture) of the Corporation, as described below under
"Subordination of Senior Subordinated Debt Securities." The Junior Subordinated
Debt Securities will rank on a parity with other junior subordinated debt
securities and be subordinated in right of payment to the prior payment in full
of Senior Indebtedness (as defined in the Junior Subordinated Indenture) of the
Corporation (which term, when used in connection with Junior Subordinated Debt
Securities, includes Senior Debt
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Securities and Senior Subordinated Debt Securities), as described under
"Subordination of Junior Subordinated Debt Securities."
Unless otherwise provided in the applicable Prospectus Supplement relating
to a particular series of Debt Securities being offered thereby, principal,
premium, if any, and interest, if any, will be payable at an office or agency to
be maintained by the Corporation in such place or places described in the
applicable Prospectus Supplement, which place is currently contemplated to be in
The City of New York, except that, at the option of the Corporation, interest
may be paid by check mailed to the person entitled thereto. The Debt Securities
may be presented to the corporate trust office of the applicable Trustee for
registration of transfer or exchange. Senior Debt Securities of any series
subject to repayment prior to their stated maturity at the option of the Holder
thereof may be so repaid by submitting the appropriate form to the place of
payment specified in the terms of such debt security and as provided in the
applicable Prospectus Supplement. Debt Securities of a particular series may be
exchanged for a like aggregate amount of Debt Securities of such series of other
authorized denominations without service charge, except for any tax or other
governmental charge that may be imposed. (Sections 301, 302, 305 and 1002)
BOOK-ENTRY
If so indicated in the applicable Prospectus Supplement, upon issuance, all
Debt Securities will be represented by one or more fully registered global
securities (the "Global Notes"). In any such case, the Depository Trust Company
(the "Depository"), New York, New York, will act as securities depository for
such issue of Debt Securities. Any such Debt Securities will be issued as
fully-registered Global Notes registered in the name of Cede & Co. (the
Depository's partnership nominee). One fully-registered Global Note will be
issued for each such issue of Debt Securities, in the aggregate principal amount
of such issue, and will be deposited with the Depository; provided, however,
that if the aggregate principal amount of any such issue exceeds $200 million,
one Global Note will be issued with respect to each $200 million of principal
amount and an additional Global Note will be issued with respect to any
remaining principal amount of such issue.
The Depository has advised the Corporation as follows: The Depository is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. The Depository holds securities that its participants ("Participants")
deposit with the Depository. The Depository 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. Participants include securities brokers and dealers,
banks trust companies, clearing corporations, and certain other organizations.
The Depository is owned by a number of its 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 Depository's book-entry
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 Participant, either directly or indirectly ("Indirect
Participants"). The Rules applicable to the Depository and its Participants are
on file with the Securities and Exchange Commission.
Purchases of Debt Securities represented by one or more Global Notes under
the Depository's book-entry system must be made by or through Participants,
which will receive a credit for such Debt Securities on the Depository's
records. The ownership interest of each actual purchaser of each Debt Security
(a "Beneficial Owner") is in turn to be recorded on the Participants' and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depository of their purchases, but each Beneficial Owner
is expected to receive written confirmation providing details of the
transaction, as well as periodic statements of its holdings, from the
Participant or Indirect Participant through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in such Debt Securities
will 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 any Debt Securities, except in the
event that use of the book-entry system for the Debt Securities is discontinued.
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To facilitate subsequent transfers, all Debt Securities represented by one
or more Global Notes deposited by Participants with the Depository will be
registered in the name of the Depository partnership nominee, Cede & Co. The
deposit of one or more Global Notes with the Depository and their registration
in the name of Cede & Co. effect no change in beneficial ownership. The
Depository will have no knowledge of the actual Beneficial Owners of any Debt
Securities represented by Global Notes; the Depository records will reflect only
the identity of the Participants to whose accounts the Debt Securities
represented by such Global Notes are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depository to
Participants, by Participants to Indirect Participants, and by Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time. Neither the Depository nor Cede & Co. will consent or
vote with respect to any Debt Securities represented by one or more Global
Notes.
Principal and interest payments on the Debt Securities represented by one
or more Global Notes will be made to the Depository. The Depository's practice
is to credit Participants' accounts on payable date in accordance with their
respective holdings shown on the Depository's records unless the Depository has
reason to believe that it will not receive payment on 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 the Depository, or the
Corporation, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to the Depository
will be the responsibility of the Corporation, disbursement of such payments to
Participants shall be the responsibility of the Depository, and disbursement of
such payments to the Beneficial Owners shall be the responsibility of
Participants and Indirect Participants.
The Depository may discontinue providing its services as securities
depository with respect to any issue of Debt Securities represented by one or
more Global Notes at any time by giving reasonable notice to the Corporation.
Under such circumstances, in the event that a successor securities depository is
not obtained, definitive certificates representing Debt Securities will be
required to be printed and delivered. The Corporation may decide to discontinue
use of the system of book-entry transfers through the Depository (or a successor
securities depository). In such event definitive certificates representing Debt
Securities will be printed and delivered.
The information in this section concerning the Depository's book-entry
system has been obtained from sources that the Corporation believes to be
reliable, but the Corporation takes no responsibility for the accuracy thereof.
SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES
Payment of the principal of, premium, if any, and interest on the Senior
Subordinated Debt Securities is expressly subordinated in right of payment, as
set forth in the Senior Subordinated Indenture, to payment when due of all
Senior Indebtedness of the Corporation, as such term is defined with respect to
the Senior Subordinated Debt Securities. (Section 1401) "Senior Indebtedness" is
used under this caption "Subordination of Senior Subordinated Debt Securities"
as defined in the Senior Subordinated Indenture. "Senior Indebtedness" is
defined in the Senior Subordinated Indenture as (a) outstanding indebtedness of
the Corporation listed on Schedule A to the Senior Subordinated Indenture, (b)
any promissory notes (other than any referred to in the foregoing clause (a))
issued by the Corporation pursuant to any agreement between the Corporation and
any bank or banks and any commercial paper issued by the Corporation, (c) all
indebtedness incurred by the Corporation after the date of the Senior
Subordinated Indenture for money borrowed which is, in the discretion of the
Corporation, specifically designated by the Corporation as superior to
subordinated debt (senior debt) of the Corporation in the instruments evidencing
said indebtedness at the time of the issuance thereof, (d) all indebtedness
previously incurred by the Corporation outstanding at the date of the Senior
Subordinated Indenture for money borrowed which is, in the discretion of the
Corporation, specifically designated by the Corporation as Senior Indebtedness
for the purposes of the Senior Subordinated Indenture at the date of the Senior
Subordinated Indenture (all of such indebtedness is set forth on Schedule B
attached
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to the Senior Subordinated Indenture), (e) indebtedness of the Corporation for
money borrowed from or guaranteed to persons, firms or corporations which engage
in lending money, including, without limitation, banks, trust companies,
insurance companies and other financing institutions and charitable trusts,
pension trusts and other investing organizations, evidenced by notes or similar
obligations, unless such indebtedness shall, in the instrument evidencing the
same, be specifically designated as not being superior to the Senior
Subordinated Debt Securities and (f) any amendments, modifications, supplements,
deferrals, renewals or extensions of any such Senior Indebtedness. Senior
Indebtedness will not include, and the Senior Subordinated Debt Securities will
rank pari passu in right of payment to, the Corporation's 9 1/8% Senior
Subordinated Notes due August 1, 1996, 10 1/8% Senior Subordinated Notes due
March 1, 1997 and 9 1/2% Senior Subordinated Notes due May 15, 1998. (Section
101)
No payment on account of principal, premium, if any, sinking fund, or
interest on the Senior Subordinated Debt Securities may be made, nor may any
property or assets of the Corporation be applied to the purchase or other
acquisition or retirement of the Senior Subordinated Debt Securities, unless
full payment of amounts then due for principal, premium, if any, sinking fund,
and interest on Senior Indebtedness has been made or duly provided for in money
or money's worth. No payment by the Corporation on account of principal,
premium, if any, sinking fund, or interest on the Senior Subordinated Debt
Securities may be made, nor may any property or assets of the Corporation be
applied to the purchase or other acquisition or retirement of the Senior
Subordinated Debt Securities, if, at the time of such payment or application or
immediately after giving effect thereto, (i) there exists under the Senior
Indebtedness referred to in clause (a) of the immediately preceding paragraph or
any agreement pursuant to which any such Senior Indebtedness is issued any
default or any condition, event or act, which with notice or lapse of time, or
both, would constitute a default or (ii) there exists under any other Senior
Indebtedness or any agreement pursuant to which such other Senior Indebtedness
is issued any event of default permitting the holders of such other Senior
Indebtedness (or a trustee on behalf of such holders) to accelerate the maturity
thereof; provided, however, that in the case of such an event of default (other
than in payment of such other Senior Indebtedness when due) the foregoing
provisions of this clause (ii) will not prevent any such payment or application
for a period longer than 90 days after the date on which the holders of such
Senior Indebtedness (or such trustee) shall have first obtained written notice
of such event of default from the Corporation or the holder of any Senior
Subordinated Debt Securities, if the maturity of such other Senior Indebtedness
is not so accelerated within such 90 day period. (Section 1402)
Subject to the foregoing, if there shall have occurred any Event of Default
on the Senior Subordinated Debt Securities as described below under "Events of
Default and Notice Thereof," other than with respect to certain events of
bankruptcy, insolvency or reorganization, then unless and until either such
Event of Default shall have been cured or waived or shall have ceased to exist
or the principal of, premium, if any, and interest on all Senior Indebtedness
shall have been paid in full in money or money's worth, no payment shall be made
by the Corporation on account of the principal of, premium, if any, or interest
on the Senior Subordinated Debt Securities or on account of the purchase or
other acquisition of Senior Subordinated Debt Securities, except (a) payments at
the expressed maturity of the Senior Subordinated Debt Securities (subject to
the next paragraph), (b) current interest payments as provided in the Senior
Subordinated Debt Securities, (c) payments for the purpose of curing any such
Event of Default, and (d) payments pursuant to the required sinking fund for the
Senior Subordinated Debt Securities. (Section 1402)
Upon any payment or distribution of assets of the Corporation to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Corporation or similar proceeding relating to the
Corporation or its property, whether voluntary or involuntary and whether or not
the Corporation is a party thereto, or in bankruptcy, insolvency, receivership
or other proceedings, all principal, premium, if any, and interest due upon all
Senior Indebtedness must be paid in full before the holders of the Senior
Subordinated Debt Securities are entitled to receive or retain any assets so
paid or distributed. Subject to the payment in full of all Senior Indebtedness,
the holders of the Senior Subordinated Debt Securities are to be subrogated to
the rights of holders of Senior Indebtedness to receive payments or
distributions of assets of the Corporation or other payments applicable to
Senior Indebtedness to the extent of the application to Senior Indebtedness of
moneys or other assets which would have been received by the holders of the
Senior Subordinated Debt
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Securities but for the subordination provisions contained in the Senior
Subordinated Indenture until the Senior Subordinated Debt Securities are paid in
full. (Sections 1403 and 1405)
The Corporation expects to issue from time to time additional indebtedness
constituting Senior Indebtedness and senior subordinated debt (see "Use of
Proceeds"). None of the Indentures prohibits or limits the incurrence of
additional Senior Indebtedness.
By reason of the subordination provisions contained in the Senior
Subordinated Indenture, in the event of insolvency, creditors of the Corporation
who are holders of Senior Indebtedness, as well as certain general creditors of
the Corporation, may recover more, ratably, than the holders of the Senior
Subordinated Debt Securities.
SUBORDINATION OF JUNIOR SUBORDINATED DEBT SECURITIES
Payment of the principal of, premium, if any, and interest on the Junior
Subordinated Debt Securities is expressly subordinated in right of payment, as
set forth in the Junior Subordinated Indenture, to payment when due of all
Senior Indebtedness of the Corporation, as such term is defined with respect to
the Junior Subordinated Debt Securities. (Section 1401) "Senior Indebtedness" is
defined in the Junior Subordinated Indenture as (a) any promissory notes issued
by the Corporation pursuant to any agreement between the Corporation and any
bank or banks and any commercial paper issued by the Corporation, (b) all
existing and future indebtedness for borrowed money of the Corporation
(including guarantees by the Corporation of indebtedness for borrowed money of
others), (c) all obligations of the Corporation specified on Schedule A to the
Junior Subordinated Indenture, (d) indebtedness of the Corporation for money
borrowed from or guaranteed to persons, firms or corporations which engage in
lending money, including, without limitation, banks, trust companies, insurance
companies and other financing institutions and charitable trusts, pension trusts
and other investing organizations, evidenced by notes or similar obligations,
unless such indebtedness shall, in the instrument evidencing the same, be
specifically designated as not being superior to the Junior Subordinated Debt
Securities of any series, (e) all other existing and future obligations of the
Corporation (including but not limited to (x) obligations under interest rate
and currency swaps, caps, collars, options and similar arrangements and (y)
guarantees by the Corporation of obligations of others) that are designated in
the instruments evidencing said obligations as being superior in right of
payment to the Junior Subordinated Debt Securities, and (f) any amendments,
modifications, supplements, deferrals, renewals or extensions of any such Senior
Indebtedness; provided, that Senior Indebtedness shall not include (x) the
Junior Subordinated Debt Securities of any series and (y) any other indebtedness
for borrowed money or other obligation of the Corporation (including guarantees
by the Corporation of such indebtedness of others) which is expressly
subordinated in right of payment to all senior subordinated debt securities that
are or may be outstanding under the Senior Subordinated Indenture. (Section 101)
No payment on account of principal, premium, if any, sinking fund, or
interest on the Junior Subordinated Debt Securities may be made, nor may any
property or assets of the Corporation be applied to the purchase or other
acquisition or retirement of the Junior Subordinated Debt Securities, unless
full payment of amounts then due for principal, premium, if any, sinking fund,
and interest on Senior Indebtedness has been made or duly provided for in money
or money's worth. No payment by the Corporation on account of principal,
premium, if any, sinking fund, or interest on the Junior Subordinated Debt
Securities may be made, nor may any property or assets of the Corporation be
applied to the purchase or other acquisition or retirement of the Junior
Subordinated Debt Securities, if, at the time of such payment or application or
immediately after giving effect thereto, there exists under any Senior
Indebtedness or any agreement pursuant to which such Senior Indebtedness is
issued any event of default permitting the holders of such Senior Indebtedness
(or a trustee on behalf of such holders) to accelerate the maturity thereof;
provided, however, that in the case of such an event of default (other than in
payment of such Senior Indebtedness when due) the foregoing provisions of this
sentence will not prevent any such payment or application for a period longer
than 90 days after the date on which the holders of such Senior Indebtedness (or
such trustee) shall have first obtained written notice of such event of default
from the Corporation or the holder of any Junior Subordinated Debt Securities,
if the maturity of such Senior Indebtedness is not so accelerated within such 90
day period. (Section 1402)
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Subject to the foregoing, if there shall have occurred any Event of Default
on the Junior Subordinated Debt Securities as described below under "Events of
Default and Notice Thereof," other than with respect to certain events of
bankruptcy, insolvency or reorganization, then unless and until either such
Event of Default shall have been cured or waived or shall have ceased to exist
or the principal of, premium, if any, and interest on all Senior Indebtedness
shall have been paid in full in money or money's worth, no payment shall be made
by the Corporation on account of the principal of, premium, if any, or interest
on the Junior Subordinated Debt Securities or on account of the purchase or
other acquisition of Junior Subordinated Debt Securities, except (a) payments at
the expressed maturity of the Junior Subordinated Debt Securities (subject to
the next paragraph), (b) current interest payments as provided in the Junior
Subordinated Debt Securities, (c) payments for the purpose of curing any such
Event of Default, and (d) payments pursuant to the required sinking fund for the
Junior Subordinated Debt Securities. (Section 1402)
Upon any payment or distribution of assets of the Corporation to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Corporation or similar proceeding relating to the
Corporation or its property, whether voluntary or involuntary and whether or not
the Corporation is a party thereto, or in bankruptcy, insolvency, receivership
or other proceedings, all principal, premium, if any, and interest due upon all
Senior Indebtedness must be paid in full before the holders of the Junior
Subordinated Debt Securities are entitled to receive or retain any assets so
paid or distributed. Subject to the payment in full of all Senior Indebtedness,
the holders of the Junior Subordinated Debt Securities are to be subrogated to
the rights of holders of Senior Indebtedness to receive payments or
distributions of assets of the Corporation or other payments applicable to
Senior Indebtedness to the extent of the application to Senior Indebtedness of
moneys or other assets which would have been received by the holders of the
Junior Subordinated Debt Securities but for the subordination provisions
contained in the Junior Subordinated Indenture until the Junior Subordinated
Debt Securities are paid in full. (Sections 1403 and 1405)
The Corporation expects to issue from time to time additional indebtedness
constituting Senior Indebtedness (see "Use of Proceeds"). None of the Indentures
prohibits or limits the incurrence of additional Senior Indebtedness.
By reason of the subordination provisions contained in the Junior
Subordinated Indenture, in the event of insolvency, creditors of the Corporation
who are holders of Senior Indebtedness, as well as certain general creditors of
the Corporation, may recover more, ratably, than the holders of the Junior
Subordinated Debt Securities.
CERTAIN COVENANTS
Dividend Restrictions. Each Subordinated Indenture provides that the
Corporation may not (a) declare or pay any dividend or make any other
distribution (other than dividends or distributions made in capital stock of the
Corporation) on or in respect of any capital stock of the Corporation, (b)
purchase, redeem or otherwise acquire for value any shares of the capital stock
of the Corporation, except shares acquired upon the conversion thereof into
other shares of capital stock of the Corporation, or (c) permit any Restricted
Subsidiary to purchase, redeem or otherwise acquire for value any shares of
capital stock of the Corporation; if immediately thereafter the aggregate amount
of all such dividends, distributions, purchases, redemptions, acquisitions or
payments (other than dividends or distributions payable in shares of capital
stock of the Corporation) during the period from and after December 31, 1985,
plus the amount of total investments in Unrestricted Subsidiaries made during
such period, would exceed the sum of (1) $185,000,000 plus (or minus in the case
of a deficit), (2) the consolidated net income (or net loss) of the Corporation
and its Restricted Subsidiaries earned subsequent to December 31, 1985, plus (3)
the aggregate net proceeds received by the Corporation in respect of the issue,
sale or exchange after December 31, 1985, of (i) any shares of capital stock of
the Corporation and any rights or warrants entitling the holders to purchase or
subscribe for shares of such capital stock, or (ii) any indebtedness of the
Corporation which is converted into shares of its capital stock after December
31, 1985. (Section 1007)
The foregoing will not prohibit the Corporation from paying any management,
administrative, general overhead or similar charge to any controlling
stockholder or other Affiliate of the Corporation, or paying to any member of
the same consolidated group for tax purposes any amounts in lieu of taxes.
(Section 1007)
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Limitations on Mergers. The Indentures provide that the Corporation may
not consolidate with, merge into, or sell, convey or transfer its properties and
assets substantially as an entirety to, another Person, if, as a result thereof,
any property owned by the Corporation or a Restricted Subsidiary immediately
prior thereto would become subject to any Security Interest, unless (i)(x) in
the case of the Senior Indenture, the Senior Debt Securities (equally and
ratably with any other indebtedness of the Corporation then entitled thereto)
shall be secured by a prior lien on such property, (y) in the case of the Senior
Subordinated Indenture, the Senior Subordinated Debt Securities (equally and
ratably with any other indebtedness of the Corporation then entitled thereto)
shall be secured equally and ratably with (or prior to) the debt secured by such
Security Interest or (z) in the case of the Junior Subordinated Indenture, the
Junior Subordinated Debt Securities (equally and ratably with any other
indebtedness of the Corporation entitled thereto) shall be secured equally and
ratably with (or prior to) the debt secured by such Security Interest or (ii)
such Security Interest would otherwise be permitted under the Indentures.
(Section 803) (See "Limitations on Secured Debt")
Limitations on Certain Loans and Advances. Each Subordinated Indenture
provides that the Corporation may not, and may not permit any Restricted
Subsidiary to, make any loan or advance to any Person owning more than 50% of
the outstanding voting stock of the Corporation or to any Affiliate of such
Person (other than the Corporation or a Restricted Subsidiary) if the aggregate
outstanding amount of Senior Debt of the Corporation and its Restricted
Subsidiaries exceeds 400% of Consolidated Net Worth and Subordinated Debt, as
defined in the applicable Indenture. (Section 1005) The term Senior Debt for
purposes of this limitation shall mean Senior Indebtedness when referring to the
Senior Subordinated Indenture or the Junior Subordinated Indenture as such term
is used in each such Indenture.
Limitations on Secured Debt. Each Indenture provides that the Corporation
will not at any time create, incur, assume or guarantee, and will not cause,
suffer or permit a Restricted Subsidiary to create, incur, assume or guarantee,
any Secured Debt without making effective provisions whereby the Debt Securities
then outstanding under such Indenture and any other indebtedness of or
guaranteed by the Corporation or such Restricted Subsidiary then entitled
thereto, subject to applicable priorities of payment, shall be secured by the
Security Interest securing such Secured Debt equally and ratably with any and
all other obligations and indebtedness thereby secured (subject, however, to
applicable priorities of payment) so long as such Secured Debt remains
outstanding; provided, however, that the foregoing prohibition shall not be
applicable to (a) any Security Interest in favor of the Corporation or a
Restricted Subsidiary; (b) Security Interests existing on December 1, 1994 in
the case of Senior Debt Securities, Security Interests existing on June 1, 1989
in the case of Senior Subordinated Debt Securities and Security Interests
existing on July 1, 1993 in the case of Junior Subordinated Debt Securities; (c)
Security Interests existing on property at the time it is acquired by the
Corporation or a Restricted Subsidiary, provided such Security Interest is
limited to all or part of the property so acquired; (d)(i) any Security Interest
existing on the property of or on the outstanding shares or indebtedness of a
corporation at the time such corporation shall become a Restricted Subsidiary,
or (ii) subject to the provisions referred to above under "Limitations on
Mergers," any Security Interest on property of a corporation existing at the
time such corporation is merged into or consolidated with the Corporation or a
Restricted Subsidiary or at the time of a sale, lease or other disposition of
the properties of a corporation as an entirety or substantially as an entirety
to the Corporation or a Restricted Subsidiary, provided, in each such case, that
such Security Interest does not extend to any property owned prior to such
transaction by the Corporation or any Restricted Subsidiary which was a
Restricted Subsidiary prior to such transaction; (e) mechanics', materialmen's,
carriers' or other like liens, arising in the ordinary course of business; (f)
certain tax liens or assessments, and certain judgment liens; (g) certain
Security Interests in favor of the United States of America or any state or any
agency thereof; (h) Security Interests on Business Equipment; (i) in the case of
property (other than Rental Equipment) acquired after December 1, 1994 as it
pertains to Senior Debt Securities, after June 1, 1989, as it pertains to Senior
Subordinated Debt Securities and after July 1, 1993, as it pertains to Junior
Subordinated Debt Securities, by the Corporation or any Restricted Subsidiary,
any Security Interest which secures an amount not in excess of the purchase
price or fair value of such property at the time of acquisition, whichever, in
the opinion of the Corporation, shall be less, provided that such Security
Interest is limited to the property so acquired; (j) Security Interests on
properties financed through tax-exempt municipal obligations, provided that such
Security Interest is limited to the property so financed; or (k) any refunding,
renewal, extension or replacement (or successive refunding,
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renewals, extensions, or replacements), in whole or in part, of any Security
Interest referred to in the foregoing clauses (a) through (j), provided that the
principal amount of indebtedness secured in such refunding, renewal, extension
or replacement does not exceed that secured at the time by such Security
Interest and that such renewal, refunding, extension or replacement of such
Security Interest is limited to all or part of the same property subject to the
Security Interest being refunded, renewed, extended or replaced.
Notwithstanding the foregoing provisions, the Corporation and any one or
more Restricted Subsidiaries may issue, assume, or guarantee Secured Debt which
would otherwise be subject to the foregoing restrictions in an aggregate amount
which, together with all other Secured Debt of the Corporation and its
Restricted Subsidiaries which would otherwise be subject to the foregoing
restrictions (not including Secured Debt permitted to be secured under
subparagraphs (a) through (k) above), and the aggregate value of the Sale and
Leaseback Transactions in existence at such time (not including Sale and
Leaseback Transactions the proceeds of which have been or will be applied in
accordance with subsection (b) under "Limitations on Sale and Leaseback
Transactions" below), do not at the time of incurrence exceed 10% of
Consolidated Net Worth and Subordinated Debt (as defined in the applicable
Indenture). (Section 1004)
Limitations on Sale and Leaseback Transactions. Each Indenture provides
that the Corporation may not, and may not permit any Restricted Subsidiary to,
engage in any Sale and Leaseback Transaction unless (a) the Corporation or such
Restricted Subsidiary would be entitled, without reference to the provisions of
Section 1004 described in subparagraphs (a) through (k) above, to incur Secured
Debt in an amount equal to the amount realized or to be realized upon the sale
or transfer involved in such Sale and Leaseback Transaction, secured by a
Security Interest on the property to be leased without equally and ratably
securing the Debt Securities outstanding under such Indenture as provided under
"Limitations on Secured Debt," or (b) the Corporation or a Restricted Subsidiary
shall apply, within 120 days after such sale or transfer, an amount equal to the
fair value of the property so leased (as determined by the Board of Directors of
the Corporation) to the repayment of Senior Debt of the Corporation or of any
Restricted Subsidiary (other than Senior Debt owed to the Corporation or any
Restricted Subsidiary) then prepayable, on a pro rata basis, according to the
respective principal amounts of Senior Debt then held by the various holders
thereof. (Senior Indenture Section 1005; Subordinated Indentures Section 1006)
The term Senior Debt for purposes of this limitation shall mean Senior
Indebtedness when referring to the Senior Subordinated Indenture or the Junior
Subordinated Indenture as such term is used in each such Indenture.
CERTAIN DEFINITIONS
"Business Equipment" shall mean all motor vehicles, tractors and trailers,
construction equipment, factory, commercial and office equipment and other
revenue-earning personalty owned, financed or otherwise held by or for the
Corporation or any of its Restricted Subsidiaries for rental, lease, sale or
disposition in the ordinary course of the business of the Corporation and its
Restricted Subsidiaries, other than Rental Equipment. "Consolidated Net Worth
and Subordinated Debt" shall mean the aggregate of (i) the capital and surplus
accounts of the Corporation and its Restricted Subsidiaries, as shown in the
most recent consolidated balance sheet of the Corporation and its Restricted
Subsidiaries, prepared in accordance with generally accepted accounting
principles, plus (ii) the aggregate outstanding principal amount of Subordinated
Debt (as defined in the Indentures) of the Corporation and its Restricted
Subsidiaries, as reflected on the same consolidated balance sheet. "Principal
Property" shall mean any building, structure or other facility (including land
or fixtures) owned by the Corporation or any Restricted Subsidiary having a
gross book value in excess of 2% of Consolidated Net Worth and Subordinated
Debt, other than any such building, structure or other facility which, in the
opinion of the Board of Directors of the Corporation, is not of material
importance to the total business conducted by the Corporation and its
subsidiaries as an entirety. "Rental Equipment" shall mean all automobiles
owned, financed or otherwise held by the Corporation or any of its Restricted
Subsidiaries which, in the ordinary course of business, are offered for rental
within the United States of America for periods of less than 30 days.
"Restricted Subsidiary" shall mean certain identified Subsidiaries of the
Corporation, and any other Subsidiaries designated after the date of the
Indentures as a Restricted Subsidiary by the Board of Directors of the
Corporation, subject to redesignation by the Board of Directors
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and to certain other restrictions. "Sale and Leaseback Transaction" shall mean
any sale or transfer by the Corporation or one or more Restricted Subsidiaries
(except a sale or transfer to the Corporation or one or more Restricted
Subsidiaries) of any Principal Property, made more than 180 days after the later
of the acquisition of such Principal Property or the completion of construction
or full commencement of operations thereof, if such sale or transfer is made
with the intention of, or as part of an arrangement involving, the lease of such
Principal Property to the Corporation or a Restricted Subsidiary (with certain
exceptions). "Secured Debt" shall mean all indebtedness for borrowed money of
the Corporation or a Restricted Subsidiary which is secured by a Security
Interest upon any assets of the Corporation or any Restricted Subsidiary,
including any capital stock or indebtedness of any Restricted Subsidiary.
"Security Interest" shall mean any mortgage, pledge, lien, encumbrance,
conditional sales contract, title retention agreement or other similar
arrangement which secures payment or performance of an obligation. (Section 101)
MODIFICATION OF THE INDENTURES
Subject to certain exceptions, each Indenture contains provisions
permitting the Corporation and the Trustee, with the consent of the Holders of
not less than a majority in principal amount of all securities at the time
outstanding, or of the Holders of the then outstanding Debt Securities of each
series to be affected thereby, to modify the Indentures or any supplemental
Indentures or the rights of the Holders of all Debt Securities, or of the Debt
Securities of a particular series, as the case may be; provided that no such
modification shall (i) change the fixed maturity of the principal of, or any
installment of principal or interest on, any Debt Security, or reduce the
principal amount thereof or the rate of interest, if any, thereon, or change the
place of payment or the currency in which any Debt Security or the interest, if
any, thereon is payable, without the consent of the Holder of each Debt Security
affected, or (ii) reduce the aforesaid percentage of Debt Securities the consent
of the holders of which is required for any such modification, without the
consent of the Holder of each Debt Security affected. (Section 902)
EVENTS OF DEFAULT AND NOTICE THEREOF
The following events are defined in the Senior Indenture as Events of
Default with respect to the Senior Debt Securities of a particular series:
failure for 30 days to pay interest on any Senior Debt Securities of such series
when due; failure to pay principal of any Senior Debt Securities of such series
when due at maturity thereof or otherwise, which failure shall continue
unremedied for 5 Business Days; failure to deposit any sinking fund payment when
and as due, which failure shall continue unremedied for 5 Business Days; the
acceleration of any other indebtedness in excess of $25 million of the
Corporation, including another series of Senior Debt Securities, under its
terms, if such acceleration is not rescinded or annulled within 10 days after
written notice thereof to the Corporation; failure to perform any other covenant
in the Senior Debt Securities of such series within 90 days after written notice
thereof to the Corporation specifying the failure and requiring its remedy;
certain events of bankruptcy, insolvency or reorganization and any other Event
of Default provided with respect to the Senior Debt Securities of such series.
(Section 501) The Corporation is required to file annually with the Senior
Trustee an officer's certificate as to the absence of certain defaults under the
terms of the Senior Indenture. (Section 1006)
The following events are defined in each Subordinated Indenture as Events
of Default with respect to the Subordinated Debt Securities of a particular
series: failure for 30 days to pay interest on any Subordinated Debt Securities
of such series when due; failure to pay principal of any Subordinated Debt
Securities of such series when due at maturity; the acceleration of any other
indebtedness in excess of $10 million of the Corporation, including another
series of Subordinated Debt Securities, under its terms, if such acceleration is
not rescinded or annulled with 10 days after written notice thereof to the
Corporation; failure to perform any other covenant in the Subordinated Debt
Securities of such series or in the applicable Subordinated Indenture within 60
days after written notice thereof to the Corporation specifying the failure and
requiring its remedy; certain events of bankruptcy, insolvency or reorganization
and any other Event of Default provided with respect to the Subordinated Debt
Securities of such series. (Section 501) The Corporation is required to file
with each Trustee annually an officer's certificate as to the absence of certain
defaults under the terms of the applicable Subordinated Indenture. (Section
1008)
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Upon any Event of Default with respect to Debt Securities of a particular
series, the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Debt Securities of such series then outstanding may declare the
principal of all the Debt Securities of such series (or, in the case of any
series of discounted Debt Securities, such lesser principal amount as may be
provided for in such series of discounted Debt Securities) to be due and
payable. (Section 502)
Each Indenture provides that the Holders of not less than a majority in
principal amount of the Debt Securities of any series may on behalf of the
Holders of all of the Debt Securities of such series waive any past default
under such Indenture with respect to such series and its consequences, except a
default (i) in the payment of the principal of or interest, if any, on any of
the Debt Securities of such series or (ii) in respect of a covenant or provision
of such Indenture which, under the terms of such Indenture, cannot be modified
or amended without the consent of the Holders of all of the Debt Securities of
such series affected thereby. The terms of the Senior Indenture do not permit
any such waiver with respect to Debt Securities of any such series subsequent to
the acceleration of principal thereof. (Section 513)
Each Indenture provides that the Trustee may withhold notice to the Holders
of the Debt Securities of any default (except a default in the payment of
principal or interest) if it determines that the withholding of such notice is
in the interest of the Holders of the Debt Securities. (Section 602)
Subject to provisions of each Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under such
Indenture at the request of any of the Holders of the Debt Securities issued
thereunder, unless they shall have offered to the Trustee reasonable indemnity.
(Sections 601(a) and 603(e)) Subject to such provisions for the indemnification
of the Trustee and to certain other limitations, the Holders of a majority in
principal amount of the Debt Securities of a particular series at the time
outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Debt Securities
of such series. (Section 512)
DEFEASANCE OF DEBT SECURITIES
Unless the Prospectus Supplement relating to the applicable Senior Debt
Securities provides otherwise, the Corporation at its option (a) will be deemed
to have paid and discharged the entire indebtedness represented by the
outstanding Senior Debt Securities of such series, and to have satisfied all its
other obligations under such Senior Debt Securities (except for obligations
relating to the rights of Holders to receive payments from the trust fund,
certain obligations to register the transfer and exchange of Senior Debt
Securities, replace stolen, lost or mutilated Senior Debt Securities, maintain
paying agencies, hold moneys for payment in trust and the Corporation's
obligations with respect to Global Securities and defeasance and covenant
defeasance generally) or (b) shall be released from its obligations described
above under "Certain Covenants -- Limitations on Mergers," "-- Limitations on
Secured Debt" and "-- Limitations on Sale and Leaseback Transactions" with
respect to the outstanding Senior Debt Securities of such series, if the
Corporation irrevocably deposits or causes to be deposited with the Senior
Trustee money or U.S. Government Obligations or a combination thereof
sufficient, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the Senior
Trustee, to pay and discharge (i) the principal of (and premium, if any) and
interest, if any, on the outstanding Senior Debt Securities of such series and
(ii) any mandatory sinking fund payments applicable to the outstanding Senior
Debt Securities of such series. Among the conditions to exercising any such
option, the Corporation is required to deliver to the Senior Trustee an opinion
of counsel (which opinion shall state, in the case of a defeasance described in
clause (a) above, that (x) the Corporation has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since the date of
the first issuance by the Corporation of Senior Debt Securities pursuant to the
Senior Indenture, there has been a change in the applicable Federal income tax
law) to the effect that the Holders of the outstanding Senior Debt Securities of
such series will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance and will be subject to 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, as the case may be, had
not occurred. (Sections 1401, 1402, 1403 and 1404)
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If the Corporation, at its option, deposits or causes to be deposited with
the applicable Subordinated Trustee as trust funds, for the purpose hereinafter
stated, an amount, in money or the equivalent in securities of the government
which issued the currency in which the Subordinated Debt Securities of any then
outstanding series are denominated or securities issued by government agencies
backed by the full faith and credit of such government, sufficient to pay and
discharge the entire indebtedness on the Subordinated Debt Securities of such
series for principal and interest, if any, to the date or dates of maturity of
the Subordinated Debt Securities of such series, and if the Corporation has paid
or caused to be paid all other sums payable by it under the Subordinated
Indenture with respect to such series, then the Subordinated Indenture will
cease to be of further effect with respect to such series (except as to the
Corporation's obligations to compensate, reimburse and indemnify the
Subordinated Trustee pursuant to the Subordinated Indenture with respect to such
series), and the Corporation will be deemed to have satisfied and discharged the
Indenture with respect to such series; provided, however, that no series of
Subordinated Debt Securities may be so defeased unless all of the securities of
such series will become due and payable at their Stated Maturity within one year
of such defeasance. (Section 401) In the event of any such defeasance, holders
of such Subordinated Debt Securities would be able to look only to such trust
funds for payment of principal and premium, if any, and interest, if any on
their Subordinated Debt Securities.
With respect to the Subordinated Indentures, if securities have been
deposited with the applicable Subordinated Trustee as trust funds, the
Corporation, in order to exercise its option, is required to deliver to the
Trustee an opinion of counsel to the effect that the deposit and related
defeasance (a) will not cause the holders of the Subordinated Debt Securities of
such series to recognize income, gain or loss for Federal income tax purposes
and (b) will not result in the delisting of the Subordinated Debt Securities of
such series from any nationally-recognized exchange on which they are listed, if
any.
Unless the Prospectus Supplement relating to the applicable Subordinated
Debt Securities provides otherwise, the Corporation at its option (a) will be
discharged from any and all obligations in respect of such Subordinated Debt
Securities (except for certain obligations to register the transfer or exchange
of Subordinated Debt Securities, replace stolen, lost or mutilated Subordinated
Debt Securities, maintain paying agencies and hold moneys for payment in trust)
or (b) need not comply with certain restrictive covenants of the applicable
Subordinated Indenture (including all or some of those described above under
"Certain Subordinated Covenants"), if there is deposited with the applicable
Subordinated Trustee money or, in the case of Subordinated Debt Securities
denominated in U.S. dollars, U.S. Government Obligations or, in the case of
Subordinated Debt Securities denominated in a foreign currency, Foreign
Government Securities, which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money (or a
combination of money and U.S. Government Obligations or Foreign Government
Securities, as the case may be) in an amount sufficient to pay in the currency,
currencies or currency unit or units in which such Subordinated Debt Securities
are payable all the principal of, and interest on, such Subordinated Debt
Securities on the dates such payments are due in accordance with the terms of
such Subordinated Debt Securities. Among the conditions to the Corporation
exercising any such option, the Corporation is required to deliver to the
applicable Subordinated Trustee an opinion of counsel to the effect that the
deposit and related defeasance would not cause the holders of such Subordinated
Debt Securities to recognize income, gain or loss for United States Federal
income tax purposes, and that the holders will be subject to United States
Federal income tax in the same amounts, in the same manner and at the same times
as would have been the case if such deposit and related defeasance had not
occurred. (Section 403)
THE TRUSTEES
First Fidelity Bank, National Association is the Senior Trustee under the
Senior Indenture. Chemical Bank (successor by merger to Manufacturers Hanover
Trust Company) is trustee under an Indenture dated as of April 1, 1986, as
amended by a First Supplemental Indenture dated as of April 2, 1990, pursuant to
which approximately $1,375.2 million aggregate principal amount of the
Corporation's senior debt securities remained outstanding at March 31, 1995, and
is also trustee under an Indenture dated as of May 1, 1983 pursuant to which
approximately $2.7 million aggregate principal amount of the Corporation's
senior debt securities remained outstanding at March 31, 1995. The Bank of New
York is the Senior Subordinated
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Trustee under the Senior Subordinated Indenture. Citibank, N.A. is the Junior
Subordinated Trustee under the Junior Subordinated Indenture. Each Trustee may
act as depository for funds of, provide lines of credit to and perform other
services for, the Corporation and its subsidiaries in the normal course of
business.
PLAN OF DISTRIBUTION
The Corporation may sell the Debt Securities in any of four ways: (i)
through underwriters or dealers, (ii) directly to a limited number of
institutional purchasers or to a single institutional purchaser, (iii) through
agents or (iv) through a combination of any such methods of sale. The Prospectus
Supplement with respect to the Debt Securities of a particular series sets forth
the terms of the offering of such Debt Securities, including the name or names
of any underwriters or agents, the purchase price of such Debt Securities and
the proceeds to the Corporation from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers and
any securities exchanges on which such Debt Securities may be listed.
If underwriters are used in the sale of Debt Securities of a particular
series, such Debt Securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The Debt Securities of a
particular series may be offered to the public through underwriting syndicates
represented by managing underwriters.
If so indicated in any Prospectus Supplement, the Corporation will
authorize the underwriters and agents to solicit offers by certain institutions
to purchase the Debt Securities described in such Prospectus Supplement from the
Corporation at the public offering price set forth therein pursuant to Delayed
Delivery Contracts ("Contracts"), which will provide for payment and delivery on
the date stated in such Prospectus Supplement. Each of the Contracts will be for
an amount not less than, and unless the Corporation otherwise agrees the
aggregate principal amount of Debt Securities sold pursuant to Contracts shall
be not more than, the respective amounts stated in such Prospectus Supplement.
The underwriters, dealers and agents may be entitled, under agreements
which may be entered into with the Corporation, to indemnification by the
Corporation against certain civil liabilities, including liabilities under the
Securities Act of 1933, or to contribution to payments that the underwriters,
dealers and agents may be required to make in respect thereof.
LEGAL OPINIONS
Certain legal matters in connection with the Securities will be passed upon
for the Corporation by Paul M. Tschirhart, Esq., 225 Brae Boulevard, Park Ridge,
New Jersey, Senior Vice President and General Counsel of the Corporation, and
for any underwriters or agents by Brown & Wood, One World Trade Center, New
York, New York.
EXPERTS
The consolidated financial statements and supporting schedules of the
Corporation at December 31, 1994 and 1993, and for each of the three years in
the period ended December 31, 1994 included in the Corporation's Annual Report
on Form 10-K for the year ended December 31, 1994, incorporated by reference in
this Prospectus and in the Registration Statement of which this Prospectus forms
a part, have been audited by Coopers & Lybrand L.L.P., independent public
accountants, at December 31, 1994 and for the year then ended, and by Arthur
Andersen LLP, independent public accountants, at December 31, 1993 and for each
of the two years in the period ended December 31, 1993, as indicated in their
report incorporated by reference herein. Reference is made to Arthur Andersen
LLP's report, which includes an explanatory paragraph with respect to the change
in the method of accounting for postretirement benefits other than pensions in
1992, as discussed in Note 1 to such consolidated financial statements. The
consolidated financial statements and supporting schedules referred to above
have been incorporated by reference herein in reliance upon the authority of
said firms as experts in accounting and auditing.
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