<PAGE>
P R O S P E C T U S
Filed Pursuant to Rule 424(b)(3)
Registration Number 333-44113
$2,000,000,000
[LOGO OF HEWLETT PACKARD COMPANY]
LIQUID YIELD OPTION(TM) NOTES DUE 2017
(ZERO COUPON--SUBORDINATED)
This Prospectus relates to $2,000,000,000 aggregate principal amount at
maturity of Liquid Yield Option(TM) Notes ("LYONs") of Hewlett-Packard
Company, a California corporation (the "Company" or "Hewlett-Packard"), that
may be offered and sold from time to time by the several holders thereof (the
"Selling Holders"). The LYONs were issued or deemed issued by the Company on
October 14, 1997 pursuant to an Indenture, dated October 14, 1997 (the
"Indenture"), between the Company and Chase Manhattan Bank and Trust Company,
National Association, as trustee (the "Trustee"), at the issue price of
$537.85 per $1,000 principal amount at maturity (the "Issue Price"). There
will be no periodic payments of interest unless the Company elects to make
such payments after a Tax Event (as defined herein) has occurred. The LYONs
will mature on October 14, 2017. The Issue Price of each LYON represents a
yield to maturity of 3.125% per annum (computed on a semiannual bond
equivalent basis) calculated from October 14, 1997. The LYONs are subordinated
to all existing and future Senior Indebtedness (as defined herein) of the
Company. The LYONs are also effectively subordinated to all existing and
future liabilities of the Company's subsidiaries. At December 31, 1997, the
Company and its subsidiaries had outstanding approximately $4.4 billion of
indebtedness (excluding obligations under foreign exchange and interest rate
swap contracts), of which approximately $1.1 billion relates to the LYONs. See
"Description of LYONs--Subordination of LYONs." The Company will not receive
any proceeds from sales of the LYONs by the Selling Holders. The Company has
agreed to bear certain expenses in connection with the registration of the
LYONs being offered and sold by the Selling Holders.
Each LYON is convertible at the option of the holder thereof (the "Holder")
at any time on or prior to maturity, unless previously redeemed or otherwise
purchased. Upon conversion, the Company may elect to deliver common stock, par
value $1.00 per share, of the Company (the "Common Stock") at a conversion
rate of 5.430 shares per $1,000 principal amount at maturity (the "Conversion
Rate") or cash in an amount based upon the value of the shares of Common Stock
into which the LYONs are convertible. The Conversion Rate will not be adjusted
for accrued Original Issue Discount (as defined herein) but will be subject to
adjustment upon the occurrence of certain events affecting the Common Stock.
Upon conversion, a Holder will not receive any cash payment representing
accrued Original Issue Discount; such accrued Original Issue Discount will be
deemed paid by the Common Stock or cash received on conversion. See
"Description of LYONs--Conversion Rights." The LYONs and the Common Stock
issuable upon conversion thereof are traded on the New York Stock Exchange
(the "NYSE") under the symbol "HWP".
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE LYONS AND COMMON
STOCK OFFERED HEREBY.
----------------
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 DATE OF THIS PROSPECTUS IS MARCH 17, 1998.
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(TM)Trademark of Merrill Lynch & Co., Inc.
<PAGE>
(continued from preceding page)
Each LYON will be purchased by the Company, at the option of the Holder, on
October 14, 2000 (the "Purchase Date") for a Purchase Price per LYON of
$590.29 (which amount represents the Issue Price plus accrued Original Issue
Discount to the Purchase Date). The Company, at its option, may elect to pay
the Purchase Price on the Purchase Date in cash or shares of Common Stock
based on the market value thereof, or in any combination thereof. See
"Description of LYONs--Purchase of LYONs at the Option of the Holder." In
addition, as of 35 business days after the occurrence of any Change in Control
(as defined herein) of the Company occurring on or prior to October 14, 2000,
each LYON will be purchased for cash by the Company, at the option of the
Holder, for a Change in Control Purchase Price (as defined herein) equal to
the Issue Price plus accrued Original Issue Discount to the date set for such
purchase. In certain circumstances, the Company's ability to pay the Change in
Control Purchase Price may be limited. See "Description of LYONs--Change in
Control Requires Purchase of LYONs at the Option of the Holder."
The LYONs are not redeemable by the Company prior to October 14, 2000. On
and after such date, the LYONs are redeemable for cash at any time at the
option of the Company, in whole or in part, at Redemption Prices equal to the
Issue Price plus accrued Original Issue Discount to the date of redemption.
See "Description of LYONs--Redemption of LYONs at the Option of the Company."
From and after a Tax Event, at the option of the Company, interest in lieu
of future Original Issue Discount shall accrue on each LYON from the Option
Exercise Date (as defined herein) at 3.125% per annum on the Restated
Principal Amount (as defined herein) and shall be payable semiannually on each
Interest Payment Date (as defined herein) to Holders of record at the close of
business on each Regular Record Date (as defined herein) immediately preceding
such Interest Payment Date. See "Description of LYONs--Optional Conversion to
Semiannual Coupon Note upon Tax Event."
For a discussion of certain United States federal income tax considerations
for Holders of LYONs, see "Certain United States Federal Income Tax
Considerations."
This Prospectus and the Registration Statement of which this Prospectus
forms a part will not be available for sales during the periods:
<TABLE>
<S> <C> <C>
April 15, 1998 through May 19, 1998
July 15, 1998 through August 18, 1998
October 14, 1998 through November 17, 1998
January 18, 1999 through February 17, 1999
April 14, 1999 through May 18, 1999
July 16, 1999 through August 17, 1999
October 14, 1999 through November 16, 1999
</TABLE>
In addition, the Company has the right to suspend sales under the
Registration Statement up to an aggregate of 30 days in each twelve-month
period under certain circumstances. See "Description of the LYONs--
Registration Rights." Therefore, any sales of LYONs or Common Stock issued
upon conversion of the LYONs may only be offered or sold during the foregoing
periods pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act").
The LYONs and Common Stock issued upon conversion of the LYONs may be
offered for sale and sold by the Selling Holders from time to time in varying
amounts at prices and on terms to be determined at the time of sale. To the
extent required, the name(s) of the Selling Holder(s), the number of LYONs or
shares of Common Stock to be sold, the purchase price, the public offering
price, if applicable, the name of any agent or broker-dealer, and any
applicable commissions, discounts or other items constituting compensation
thereto with respect to a particular offering will be set forth in a
supplement or supplements to this Prospectus (each, a "Prospectus
Supplement"). See "Plan of Distribution." The Company will not receive any
proceeds from any sale of LYONs or Common Stock hereunder.
Selling Holders and any broker-dealers or agents that participate with a
Selling Holder in the distribution of any of the LYONs or Common Stock issued
upon conversion of the LYONs may be deemed to be "underwriters" within the
meaning of the Securities Act and any discount or commission received by them
and any profit on the resale of the LYONs or Common Stock issued upon
conversion of the LYONs purchased by them may be deemed to be underwriting
discounts or commissions under the Securities Act.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
therewith, the Company is required to file periodic reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can also be obtained from the Public Reference Section
of the Commission at the above Washington, D.C. address at prescribed rates.
In addition, the Commission maintains a site on the World Wide Web that
contains reports, proxy statements and other information filed electronically
with the Commission. The address of such Web site is http://www.sec.gov. Such
material can also be inspected and copied at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, NY 10005 and the Pacific Exchange,
Inc., 301 Pine Street, San Francisco, CA 94104 and 233 South Beaudry Avenue,
Los Angeles, California 90012.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
and are hereby incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended October 31, 1997;
(b) Quarterly Report on Form 10-Q for the quarter ended January 31, 1998;
(c) Current Report on Form 8-K dated October 7, 1997; and
(d) The description of the Common Stock contained in (i) the Registration
Statement filed with the Commission on or about November 6, 1957, and
(ii) the Amended and Restated Articles of Incorporation which appeared
as Exhibit 3(a) to the Annual Report on Form 10-K for the fiscal year
ended October 31, 1996.
In addition to the foregoing, all documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the LYONs
and Common Stock issued upon conversion of the LYONs 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 to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus. Subject to the foregoing, all information appearing in this
Prospectus is qualified in its entirety by the information appearing in the
documents incorporated by reference.
This Prospectus incorporates documents by reference with respect to the
Company that are not presented herein or delivered herewith. These documents
(other than the exhibits to any such document, unless specifically requested)
are available without charge to any person, including any beneficial Holder to
whom this Prospectus is delivered, upon written or oral request to Hewlett-
Packard Company, 3000 Hanover Street, Palo Alto, California 94304, telephone
number (650) 857-1501, Attention: Investor Relations.
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RISK FACTORS
Prospective investors should carefully consider the following matters,
together with all other information set forth in this Prospectus.
Competition. Hewlett-Packard encounters aggressive competition in all areas
of its business activity. The Company's competitors are numerous, ranging from
some of the world's largest corporations to many relatively small and highly
specialized firms. Hewlett-Packard competes primarily on the basis of
technology, performance, price, quality, reliability, distribution and
customer service and support. Product life cycles are short and, to remain
competitive, the Company will be required to develop new products,
periodically enhance its existing products and compete effectively on the
basis of the factors described above. In particular, Hewlett-Packard
anticipates that it will have to continue to adjust prices of many of its
products to stay competitive and it will have to effectively manage financial
returns with reduced gross margins.
New Product Introductions. Hewlett-Packard's future operating results may be
adversely affected if it is unable to continue to develop, manufacture and
market innovative products and services rapidly that meet customer
requirements for product performance and reliability. The process of
developing new high technology products and solutions is inherently complex
and uncertain. It requires accurate anticipation of customers' changing needs
and emerging technological trends. Hewlett-Packard consequently must make
long-term investments and commit significant resources before knowing whether
its predictions will eventually result in products that achieve market
acceptance. After a product is developed, the Company must quickly manufacture
sufficient volumes at acceptable costs. This is a process that requires
accurate forecasting of volumes, mix of products and configurations. Moreover,
the supply and timing of a new product or service must match customers' demand
and timing for the particular product or service. Given the wide variety of
systems, products and services Hewlett-Packard offers, the process of planning
production and managing inventory levels becomes increasingly difficult.
Inventory Management. Inventory management has become increasingly complex
as Hewlett-Packard continues to sell a greater mix of products, especially
printers and personal computers, through third-party distribution channels.
Resellers constantly adjust their ordering patterns in response to the
Company's and its competitors' supply into the channel and the timing of their
new product introductions and relative feature sets, as well as seasonal
fluctuations in end-user demand such as the back-to-school and holiday selling
periods. Resellers may increase orders during times of shortages, cancel
orders if the channel is filled with currently available products, or delay
orders in anticipation of new products. Any excess supply could result in
price reductions and inventory writedowns, which in turn would adversely
affect the Company's gross margins.
Short Product Life Cycle. The short life cycles of many of Hewlett-Packard's
products pose a challenge for the effective management of the transition from
existing products to new products and could adversely affect its future
operating results. Product development or manufacturing delays, variations in
product costs, and delays in customer purchases of existing products in
anticipation of new product introductions are among the factors that make a
smooth transition from current products to new products difficult. In
addition, the timing of competitors' introductions of new products and
services may negatively affect the Company's future operating results,
especially when these introductions coincide with periods leading up to
Hewlett-Packard's own introduction of new or enhanced products. Furthermore,
some of Hewlett-Packard's own new products may replace or compete with certain
of its current products.
Intellectual Property. Hewlett-Packard generally relies upon patent,
copyright, trademark and trade secret laws in the United States and in
selected other countries to establish and maintain its proprietary rights in
its technology and products. However, there can be no assurance that any of
the Company's proprietary rights will not be challenged, invalidated or
circumvented, or that any such rights will provide significant competitive
advantages. Moreover, because of the rapid pace of technological change in the
information technology industry, many of Hewlett-Packard's products rely on
key technologies developed by others. There can be no assurance that the
Company will be able to continue to obtain licenses to such technologies. In
addition, from time to time
4
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the Company receives notices from third parties regarding patent or copyright
claims. Any such claims, with or without merit, could be time-consuming to
defend, result in costly litigation, divert management's attention and
resources and cause the Company to incur significant expenses. In the event of
a successful claim of infringement against Hewlett-Packard and failure or
inability of Hewlett-Packard to license the infringed technology or to
substitute similar noninfringing technology, the Company's business could be
adversely affected.
Reliance on Suppliers. Portions of Hewlett-Packard's manufacturing
operations are dependent on the ability of suppliers to deliver quality
components, subassemblies and completed products in time to meet critical
manufacturing and distribution schedules. Hewlett-Packard periodically
experiences constrained supply of certain component parts in some product
lines as a result of strong demand in the industry for those parts. Such
constraints, if persistent, may adversely affect the Company's operating
results until alternative sourcing can be developed. In order to secure
components for production and introduction of new products, Hewlett-Packard at
times makes advance payments to certain suppliers, and often enters into
noncancelable purchase commitments with vendors for such components.
Volatility in the prices of these component parts, the possible inability of
the Company to secure enough components at reasonable prices to build new
products in a timely manner in the quantities and configurations demanded or,
conversely, a temporary oversupply of these parts, could adversely affect its
future operating results.
Reliance on Third-Party Distribution Channels. The Company continues to
expand into third-party distribution channels to accommodate changing customer
preferences. As a result, the financial health of resellers of Hewlett-Packard
products, and the Company's continuing relationships with such resellers, are
becoming more important to its success. Some of these companies are thinly
capitalized and may be unable to withstand changes in business conditions.
Hewlett-Packard's financial results could be adversely affected if the
financial condition of certain of these resellers substantially weakens or if
its relationship with such resellers deteriorates.
International. Sales outside the United States make up more than half of
Hewlett-Packard's revenues. In addition, a portion of the Company's product
and component manufacturing, along with key suppliers, are located outside the
United States. Accordingly, Hewlett-Packard's future results could be
adversely affected by a variety of factors, including changes in a specific
country's or region's political or economic conditions, trade protection
measures, import or export licensing requirements, the overlap of different
tax structures, unexpected changes in regulatory requirements and natural
disasters.
Derivative Financial Instruments. The Company is also exposed to foreign
currency exchange rate risk inherent in its sales commitments, anticipated
sales and assets and liabilities denominated in currencies other than the U.S.
dollar, as well as interest rate risk inherent in the Company's debt,
investment and finance receivable portfolio. As more fully described in the
notes to the Company's annual and interim financial statements incorporated by
reference in this Prospectus, the Company's risk management strategy utilizes
derivative financial instruments, including forwards, swaps, and purchased
options to hedge certain foreign currency and interest rate exposures, with
the intent of offsetting gains and losses that occur on the underlying
exposures with gains and losses on the derivative contracts hedging them. The
Company does not enter into derivatives for trading purposes.
The Company has performed a sensitivity analysis assuming a hypothetical 10%
adverse movement in foreign exchange rates and interest rates applied to the
hedging contracts and underlying exposures described above. As of January 31,
1998, the analysis indicated that such market movements would not have a
material effect on the Company's consolidated financial position, results of
operations or cash flows. Actual gains and losses in the future may differ
materially from that analysis, however, based on changes in the timing and
amount of interest rate and foreign currency exchange rate movements and the
Company's actual exposures and hedges.
Acquisition, Strategic Alliances, Joint Ventures and Divestitures. As a
matter of course, Hewlett-Packard frequently engages in discussions with a
variety of parties relating to possible acquisitions, strategic alliances,
joint ventures and divestitures. Although consummation of most transactions is
unlikely to have a material effect on Hewlett-Packard's results as a whole,
the implementation or integration of a transaction may contribute to its
5
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results differing from the investment community's expectation in a given
quarter. Divestitures may result in the cancellation of orders and charges to
earnings. Acquisitions and strategic alliances may require, among other
things, integration or coordination with a different company culture,
management team organization and business infrastructure. They may also
require the development, manufacture and marketing of product offerings with
Hewlett-Packard's products in a way that enhances the performance of the
combined business or product line. Depending on the size and complexity of the
transaction, successful integration depends on a variety of factors, including
the hiring and retention of key employees, management of geographically
separate facilities, and the integration or coordination of different research
and development and product manufacturing facilities. All of these efforts
require varying levels of management resources, which may temporarily
adversely impact other business operations.
Earthquake. A portion of Hewlett-Packard's research and development
activities, its corporate headquarters, other critical business operations and
certain of its suppliers are located near major earthquake faults. The
ultimate impact on the Company, its significant suppliers and the general
infrastructure is unknown, but operating results could be materially affected
in the event of a major earthquake. Hewlett-Packard is predominantly self-
insured for losses and interruptions caused by earthquakes.
Environmental. Certain of Hewlett-Packard's operations involve the use of
substances regulated under various federal, state and international laws
governing the environment. It is the Company's policy to apply strict
standards for environmental protection to sites inside and outside the U.S.,
even if not subject to regulations imposed by local governments. The liability
for environmental remediation and related costs is accrued when it is
considered probable and the costs can be reasonably estimated. Environmental
costs are presently not material to the Company's operations or financial
position.
Year 2000. Many computer systems experience problems handling dates beyond
the year 1999. Therefore, some computer hardware and software will need to be
modified prior to the year 2000 in order to remain functional. The company is
assessing both the readiness of its internal computer systems and the
compliance of its computer products and software sold to customers for
handling the year 2000. The Company expects to implement successfully the
systems and programming changes necessary to address year 2000 issues and does
not believe that the cost of such actions will have a material effect on the
Company's results of operations or financial condition. There can be no
assurance, however, that there will not be a delay in, or increased costs
associated with, the implementation of such changes, and the Company's
inability to implement such changes could have an adverse effect on future
results of operations or financial condition.
Certain hardware and software products currently installed at customer sites
will require upgrade or other remediation to become year 2000 compliant. The
Company believes that it is not legally responsible for costs incurred by its
customers to achieve their year 2000 compliance. However, the Company is
taking steps to identify affected customers, raise customer awareness related
to non-compliance of the Company's older products, and assist the customer
base to assess their risks. The Company may see increasing customer
satisfaction costs related to these actions over the next few years. Since
customer satisfaction programs are on-going, year 2000 complications are not
fully known, and potential liability issues in certain countries are unclear,
the potential impact on the Company's financial condition and results of
operations is not known at this time.
The Company is also assessing the possible effects on the Company's
operations of the year 2000 readiness of key suppliers and subcontractors. The
Company's reliance on suppliers and subcontractors, and, therefore, on the
proper functioning of their information systems and software, means that
failure to address year 2000 issues could have a material impact on the
Company's operations and financial results; however, the potential impact on,
and related costs to, the Company are not known at this time.
Quarterly Fluctuations and Volatility of Stock Price. Although Hewlett-
Packard believes that it has the product offerings and resources needed for
continuing success, future revenue and margin trends cannot be reliably
predicted and may cause the Company to adjust its operations, which could
cause period-to-period fluctuations in operating results. Hewlett-Packard's
stock price, like that of other technology companies, is
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subject to significant volatility. The announcement of new products, services
or technological innovations by Hewlett-Packard or its competitors, quarterly
variations in its results of operations, changes in revenue or earnings
estimates by the investment community and speculation in the press or
investment community are among the factors affecting its stock price. In
addition, the stock price may be affected by general market conditions and
domestic and international macroeconomic factors unrelated to Hewlett-
Packard's performance. Because of the foregoing reasons, recent trends should
not be considered reliable indicators of future stock prices or financial
results.
Subordination of LYONs to Other Indebtedness. The LYONs are general,
unsecured obligations of the Company, subordinated in right of payment to all
existing and future Senior Indebtedness of Hewlett-Packard. Under the
Indenture, upon any distribution of the Company's assets in the event of: (i)
any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to the Company or its creditors, or to its assets, or (ii)
any liquidation, dissolution or other winding up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (iii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company, then the holders of all
Senior Indebtedness will first be entitled to receive payment in full of all
amounts due or to become due thereon, or payment of such amounts will have
been provided for, before the Holders will be entitled to receive any payment
or distribution with respect to any LYONs. At December 31, 1997, there was
approximately $4.4 billion of indebtedness outstanding (excluding obligations
under foreign exchange and interest rate swap contracts), of which
approximately $1.1 billion relates to the LYONs. In addition, the LYONs are
effectively subordinated to the claims of all creditors of the Company's
subsidiaries, including trade creditors. The Indenture does not restrict the
future incurrence of Senior Indebtedness or other indebtedness by Hewlett-
Packard or any of its subsidiaries. See "Description of LYONs-- Subordination
of LYONs."
A significant percentage of the assets and revenues of Hewlett-Packard is
held by or derived from the operations of its subsidiaries. As a result, trade
creditors and other creditors of these subsidiaries may have claims that are
effectively superior to those of the Holders in respect of their LYONs, whose
recourse to the assets and revenues of these subsidiaries is derived solely
from the equity interest therein of Hewlett-Packard.
THE COMPANY
Hewlett-Packard was incorporated in 1947 under the laws of the State of
California as the successor to a partnership founded in 1939 by William R.
Hewlett and David Packard. On a worldwide basis, the Company designs,
manufactures and services equipment and systems for measurement, computation
and communications. The Company offers a wide variety of systems and
standalone products, including computer systems, personal computers, printers
and other hardcopy and imaging products, calculators and other personal
information products, electronic test equipment and systems, medical
electronic equipment, components based on optoelectronic, silicon and compound
semiconductor technologies, and instrumentation for chemical analysis.
Services such as systems integration, selective-outsourcing management,
consulting, education, product financing and rentals, as well as customer
support and maintenance, are also an integral part of the Company's offerings.
Hewlett-Packard's principal executive offices are located at 3000 Hanover
Street, Palo Alto, California 94304. Its telephone number is (650) 857-1501.
USE OF PROCEEDS
The Company will not receive any proceeds from sales of the LYONs or shares
of Common Stock sold from time to time hereunder. The Company has agreed to
bear certain expenses in connection with the registration of the LYONs and
Common Stock issuable upon conversion of the LYONs being offered and sold by
the Selling Holders.
7
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RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES (1)................. 13.7 9.1 12.4 10.4 9.1
</TABLE>
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(1) The ratio of earnings to fixed charges was computed by dividing earnings
(income from continuing operations before income taxes, adjusted for fixed
charges, minority interest in the income of subsidiaries with fixed
charges and equity in earnings or loss of equity investees) by fixed
charges for the periods indicated. Fixed charges include (i) interest
expense and amortization of debt discount or premium on all indebtedness,
and (ii) a reasonable approximation of the interest factor deemed to be
included in rental expense.
DESCRIPTION OF LYONS
The LYONs were issued under the Indenture. A copy of the Indenture is filed
as an Exhibit to the Registration Statement and is also available for
inspection during normal business hours at the corporate trust office of the
Trustee. The following summaries of certain provisions of the LYONs and the
Indenture do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all of the provisions of the LYONs and the
Indenture, including the definitions therein of certain terms which are not
otherwise defined in this Prospectus. Wherever particular provisions or
defined terms of the Indenture (or of the Form of LYON which is a part
thereof) are referred to, such provisions or defined terms are incorporated
herein by reference. References herein are to sections in the Indenture and
paragraphs in the Form of LYON.
GENERAL
The LYONs are unsecured subordinated obligations of the Company limited to
$2,000,000,000 aggregate principal amount at maturity and will mature on
October 14, 2017. The principal amount at maturity of each LYON is $1,000
(except as may be adjusted upon conversion of the LYONs to semiannual coupon
notes following a Tax Event) and will be payable at the office of the Paying
Agent, which initially will be the Trustee, or an office or agency maintained
by the Company for such purpose in the Borough of Manhattan, The City of New
York.
The LYONs were originally issued at a substantial discount from their
principal amount at maturity. See "Certain United States Federal Income Tax
Considerations--Original Issue Discount." Except as discussed below under "--
Optional Conversion to Semiannual Coupon Note upon Tax Event," there will be
no periodic payments of interest on the LYONs. The calculation of the accrual
of Original Issue Discount (the difference between the Issue Price and the
principal amount at maturity of a LYON) in the period during which a LYON
remains outstanding will be on a semiannual bond equivalent basis using a 360-
day year composed of twelve 30-day months. Such accrual commenced on the issue
date of the LYONs. In the event of the maturity, conversion, purchase by the
Company at the option of a Holder or redemption of a LYON, Original Issue
Discount and interest, if any, will cease to accrue on such LYON, under the
terms and subject to the conditions (summaries of which are set forth below)
of the Indenture. The Company may not reissue a LYON that has matured or been
converted, purchased by the Company at the option of a Holder, redeemed or
otherwise canceled (except for registration of transfer, exchange or
replacement thereof).
Because certain of its operations are conducted through subsidiaries, the
Company's cash flow and consequent ability to meet its debt obligations are
dependent in part upon the earnings of its subsidiaries and on dividends and
other payments therefrom. Since the LYONs are solely an obligation of the
Company, the Company's subsidiaries are not obligated or required to pay any
amounts due pursuant to the LYONs or to make funds available therefor in the
form of dividends or advances to the Company. At December 31, 1997, the
Company and its subsidiaries had outstanding approximately $4.4 billion of
indebtedness (excluding obligations
8
<PAGE>
under foreign exchange and interest rate swap contracts), of which
approximately $1.1 billion relates to the LYONs. In addition, the Company and
its consolidated subsidiaries had outstanding on such date foreign exchange
contracts and interest rate swap contracts to which the LYONs would have been
contractually or effectively subordinated.
FORM, DENOMINATION AND REGISTRATION
The LYONs were issued in definitive registered form, without coupons, in
minimum denominations of $1,000 principal amount at maturity and in integral
multiples of $1,000 in principal amount at maturity in excess thereof. The
LYONs were issued in fully registered book-entry form and are represented by
one or more global LYONs without coupons (each, a "Global LYON") deposited
with a custodian for and registered in the name of Cede & Co. (DTC's
partnership nominee) in New York, New York. Beneficial interests in any such
Global LYONs are shown on, and transfers thereof will be effected only
through, records maintained by DTC and its direct and indirect participants,
and any such interest may not be exchanged for LYONs in certificated form
except in the limited circumstances described herein. The LYONs offered hereby
may be transferred only in denominations of $1,000 principal amount at
maturity and integral multiples thereof.
So long as DTC, or its nominee, is the registered owner or Holder of a
Global LYON, DTC or such nominee, as the case may be, will be considered the
sole owner or Holder of the LYONs represented by such Global LYON for all
purposes under the Indenture and the LYONs. No beneficial owner of an interest
in a Global LYON will be able to transfer that interest except in accordance
with DTC's applicable procedures (in addition to those under the Indenture
referred to herein and, if applicable, those of Euroclear System ("Euroclear")
and Cedel Bank Societe Anonyme ("Cedel")).
No service charge will be made for any registration of transfer or exchange
of LYONs but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Ownership of beneficial interests in a Global LYON is limited to persons who
have accounts with DTC ("participants") or persons who hold interests through
participants. Ownership of beneficial interests in the Global LYONs is shown
on, and the transfer of that ownership will be effected through, records
maintained by DTC (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than
participants).
Payments on Global LYONs will be made to DTC or its nominee, as the
registered owner thereof. Neither the Company, the Trustee nor any Paying
Agent will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global LYONs or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment in
respect of a Global LYON held by it or its nominee, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global LYON as shown on the records
of DTC or its nominee. The Company also expects that payments by participants
to owners of beneficial interests in such Global LYON held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such
payments, however, will be the responsibility of such participants.
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in same-day funds. The laws of some states,
however, require that certain persons take physical delivery of securities in
definitive form.
DTC will take any action permitted to be taken by a Holder of LYONs
(including the presentation of LYONs for exchange as described below) only at
the direction of one or more participants to whose account
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<PAGE>
interests in the Global LYONs are credited and only in respect of such portion
of the aggregate principal amount of the LYONs as to which such participant or
participants has or have given such direction. However, if there is an Event
of Default under the LYONs, DTC will exchange the Global LYONs for LYONs in
certificated form, which it will distribute to its participants.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In such event,
certificates representing the LYONs will be printed and delivered.
In case any LYON in certificated form shall become mutilated, defaced,
destroyed, lost or stolen, the Company will execute and upon the Company's
request the Trustee will authenticate and deliver a new LYON, of like tenor
(including the same date of issuance) and equal principal amount at maturity,
registered in the same manner, dated the date of its authentication in
exchange and substitution for such LYON (upon surrender and cancellation
thereof) or in lieu of and substitution for such LYON. In case such LYON is
destroyed, lost or stolen, the applicant for a substituted LYON shall furnish
to the Company and the Trustee such security or indemnity as may be required
by them to hold each of them harmless, and, in every case of destruction, loss
or theft of such LYON, the applicant shall also furnish to the Company
satisfactory evidence of the destruction, loss or theft of such LYON and of
the ownership thereof. Upon the issuance of any substituted LYON, the Company
may require the payment by the registered Holder thereof of a sum sufficient
to cover fees and expenses connected therewith.
SUBORDINATION OF LYONS
Indebtedness evidenced by the LYONs is subordinated in right of payment as
set forth in the Indenture, to the prior payment in full of all existing and
future Senior Indebtedness. Upon any payment or distribution of assets of the
Company to creditors upon any dissolution, winding up, liquidation or
reorganization of the Company, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other similar proceedings, the holders
of all Senior Indebtedness shall first be entitled to receive payment in full
of all amounts due or to become due thereon, or payment of such amounts shall
have been provided for, before the Holders of LYONs shall be entitled to
receive any payment or distribution with respect to any LYONs.
By reason of the subordination described herein, in the event of insolvency,
upon any distribution of the assets of the Company, (i) Holders are required
to pay over their share of such distribution to the trustee in bankruptcy,
receiver or other person distributing the assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid, to the
extent necessary to pay all holders of Senior Indebtedness in full and (ii)
unsecured creditors of the Company who are not Holders of LYONs or holders of
Senior Indebtedness of the Company may recover less, ratably, than holders of
Senior Indebtedness of the Company and may recover more, ratably, than the
Holders of LYONs.
The term "Senior Indebtedness" means, without duplication, the principal,
premium (if any) and unpaid interest on all present and future (i)
indebtedness of the Company for borrowed money, (ii) obligations of the
Company evidenced by bonds, debentures, notes or similar instruments, (iii)
obligations of the Company under (a) interest rate swaps, caps, collars,
options, and similar arrangements, (b) any foreign exchange contract, currency
swap contract, futures contract, currency option contract, or other foreign
currency hedge, and (c) credit swaps, caps, floors, collars and similar
arrangements, (iv) indebtedness incurred, assumed or guaranteed by the Company
in connection with the acquisition by it or a Subsidiary of any business,
properties or assets (except purchase-money indebtedness classified as
accounts payable under generally accepted accounting principles), (v)
obligations and liabilities (contingent or otherwise) in respect of leases of
the Company required, in conformity with generally accepted accounting
principles, to be accounted for as capitalized lease obligations on the
balance sheet of the Company and all obligations and liabilities (contingent
or otherwise) under any lease or related document (including a purchase
agreement) in connection with the lease of real property which provides that
the Company is contractually obligated to purchase or cause a third party to
purchase the leased property and thereby guarantee a minimum residual value of
the leased property to the lessor and the obligations of the Company under
such lease or related document to purchase or to cause a third party to
purchase such leased property, (vi)
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<PAGE>
reimbursement obligations of the Company in respect of letters of credit
relating to indebtedness or other obligations of the Company that qualify as
indebtedness or obligations of the kind referred to in clauses (i) through (v)
above, and (vii) obligations of the Company under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others of the kinds referred to
in clauses (i) through (vi) above, in each case unless in the instrument
creating or evidencing the indebtedness or obligation or pursuant to which the
same is outstanding it is provided that such indebtedness or obligation is not
superior in right of payment to the LYONs.
The LYONs are effectively subordinated to all existing and future
liabilities of the Company's subsidiaries. Any right of the Company to
participate in any distribution of the assets of any of its subsidiaries upon
the liquidation, reorganization or insolvency of such subsidiary (and the
consequent right of Holders to participate in those assets) will be subject to
the claims of the creditors (including trade creditors) of such subsidiary,
except to the extent that claims of the Company itself as a creditor of such
subsidiary may be recognized, in which case the claims of the Company would
still be subordinate to any security interest in the assets of such subsidiary
and any indebtedness of such subsidiary senior to that held by the Company. At
December 31, 1997, the Company and its subsidiaries had outstanding
approximately $4.4 billion of indebtedness (excluding obligations under
foreign exchange and interest rate swap contracts), of which approximately
$1.1 billion relates to the LYONs. In addition, the Company and its
consolidated subsidiaries had outstanding on such date foreign exchange
contracts and interest rate swap contracts to which the LYONs would have been
contractually or effectively subordinated. There is no restriction under the
Indenture on the Company's incurring additional indebtedness, including Senior
Indebtedness.
CONVERSION RIGHTS
A Holder of a LYON may convert it into shares of Common Stock at any time
before the close of business on October 14, 2017; provided, however, that if a
LYON is called for redemption, the Holder may convert it at any time before
the close of business on the Redemption Date. Upon conversion of a LYON, the
Company may elect to deliver shares of Common Stock or an amount of cash
determined as described below. A LYON in respect of which a Holder has
delivered a Purchase Notice or a Change in Control Purchase Notice exercising
the option of such Holder to require the Company to purchase such LYON may be
converted only if such notice is withdrawn by a written notice of withdrawal
delivered by the Holder to the Paying Agent prior to the close of business on
the Purchase Date or the Change in Control Purchase Date, as the case may be,
in accordance with the terms of the Indenture.
The initial Conversion Rate for the LYONs is 5.430 shares of Common Stock
per $1,000 principal amount at maturity, subject to adjustment upon the
occurrence of certain events described below. A Holder otherwise entitled to a
fractional share of Common Stock will receive cash in an amount equal to the
product of such fractional share and the Sale Price on the Trading Day
immediately preceding the Conversion Date. A Holder may convert a portion of
such Holder's LYONs so long as such portion is $1,000 principal amount at
maturity or an integral multiple thereof.
To convert a LYON, a Holder must (i) complete and manually sign the
conversion notice on the back of the LYON (or complete and manually sign a
facsimile thereof) and deliver such notice to the Conversion Agent (initially
the Trustee) at the office maintained by the Conversion Agent for such
purpose, (ii) surrender the LYON to the Conversion Agent, (iii) if required,
furnish appropriate endorsements and transfer documents, and (iv) if required,
pay all transfer or similar taxes. Pursuant to the Indenture, the date on
which all of the foregoing requirements have been satisfied is the Conversion
Date.
Upon conversion of a LYON, a Holder will not receive any cash payment
representing accrued Original Issue Discount. The Company's delivery to the
Holder of the fixed number of shares of Common Stock (or cash
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<PAGE>
in the applicable amount as described below) into which the LYON is
convertible (together with the cash payment, if any, in lieu of any fractional
shares) will satisfy the Company's obligation to pay the principal amount at
maturity of the LYON, including the accrued Original Issue Discount
attributable to the period from the Issue Date to the Conversion Date. Thus,
the accrued Original Issue Discount will be deemed to be paid in full rather
than cancelled, extinguished or forfeited. The Conversion Rate will not be
adjusted at any time during the term of the LYONs for accrued Original Issue
Discount. A certificate for the number of full shares of Common Stock into
which any LYON is converted (and for cash in lieu of fractional shares) will
be delivered through the Conversion Agent no later than the seventh business
day following the Conversion Date. For a discussion of the tax treatment of a
Holder receiving Common Stock upon conversion, see "Certain United States
Federal Income Tax Considerations--Disposition or Conversion of LYONs."
In lieu of delivering shares of Common Stock upon notice or conversion of
any LYONs, the Company may elect to pay the Holder surrendering such LYONs an
amount in cash per LYON equal to the Sale Price (as defined under "--Purchase
of LYONs at the Option of the Holder") of a share of Common Stock on the
Trading Day immediately prior to the Conversion Date multiplied by the
Conversion Rate in effect on such Trading Day, subject to adjustment upon the
occurrence of certain events described below; provided, that if such payment
of cash is not permitted pursuant to the provisions of the Indenture or
otherwise, the Company shall deliver shares of Common Stock (and cash in lieu
of fractional shares) as set forth below. Upon conversion of any LYONs, the
Company shall inform the Holders through the Conversion Agent of its election
to deliver shares of Common Stock or to pay cash in lieu of delivery of such
shares no later than two business days following the Conversion Date. If the
Company elects to deliver shares of Common Stock, such shares will be
delivered through the Conversion Agent no later than the seventh business day
following the Conversion Date. If the Company elects to pay cash, such cash
payment will be made to the Holder surrendering such LYONs no later than the
fifth business day following such Conversion Date.
The Company may not pay cash upon conversion of any LYONs (other than cash
in lieu of fractional shares) if there has occurred and is continuing an Event
of Default described under "--Events of Default; Notice and Waiver" below
(other than a default in such payment on such LYONs).
The Conversion Rate will be adjusted for dividends or distributions on
Common Stock payable in Common Stock or other capital stock of the Company;
certain subdivisions, combinations or reclassifications of Common Stock;
distributions to all holders of Common Stock of certain rights, warrants or
options to purchase Common Stock or securities convertible into Common Stock
for a period expiring within 60 days after the record date for such
distribution at a price per share less than the Sale Price at the time; and
distributions to all holders of Common Stock of assets or debt securities of
the Company or rights, warrants or options to purchase securities of the
Company (excluding cash dividends or other cash distributions (except to the
extent cash dividends or other cash distributions constitute Extraordinary
Cash Dividends) from consolidated current net earnings or earned surplus or
dividends payable in Common Stock). However, no adjustment need be made if
Holders may participate in the transactions on a basis and with notice that
the Board of Directors of the Company determines to be fair and appropriate,
or in certain other cases. In cases where the fair market value of the portion
of assets, debt securities or rights, warrants or options to purchase
securities of the Company applicable to one share of Common Stock distributed
to shareholders exceeds the Average Sale Price (as defined below) per share of
Common Stock, or such Average Sale Price exceeds such fair market value of
such portion of assets, debt securities or rights, warrants or options so
distributed by less than $1.00, rather than being entitled to an adjustment in
the Conversion Rate, the Holder of a LYON upon conversion thereof will be
entitled to receive, in addition to the shares of Common Stock into which such
LYON is convertible, the kind and amounts of assets, debt securities or
rights, options or warrants comprising the distribution that such Holder would
have received if such Holder had converted such LYON immediately prior to the
record date for determining the shareholders entitled to receive the
distribution. The Indenture permits the Company to increase the Conversion
Rate from time to time.
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"Average Sale Price" means the average of the Sale Prices of the Common
Stock for the shorter of: (i) 30 consecutive Trading Days ending on the last
full Trading Day prior to the Time of Determination with respect to the
rights, options, warrants or distribution in respect of which the Average Sale
Price is being calculated, or (ii) the period (x) commencing on the date next
succeeding the first public announcement of (a) the issuance of rights,
options or warrants or (b) the distribution, in each case, in respect of which
the Average Sale Price is being calculated and (y) proceeding through the last
full Trading Day prior to the Time of Determination with respect to the
rights, warrants or distribution in respect of which the Average Sale Price is
being calculated, or (iii) the period, if any, (x) commencing on the date next
succeeding the Ex-Dividend Time with respect to the next preceding (a)
issuance of rights, warrants, or options or (b) distribution, in each case,
for which an adjustment is required by the provisions of the Indenture and (y)
proceeding through the last full Trading Day prior to the Time of
Determination with respect to the rights, warrants, or options or distribution
in respect of which the Average Sale Price is being calculated. "Time of
Determination" means the time and date of the earlier of (i) the determination
of stockholders entitled to receive rights, warrants, or options or a
distribution, in each case, to which Sections 10.07 and 10.08 of the Indenture
apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, options, warrants or
distribution on the NYSE or such other national or regional exchange or market
on which shares of the Common Stock are then listed or quoted.
If the Company is party to a consolidation, merger or binding share exchange
or a transfer of all or substantially all of its assets which is otherwise
permitted under the terms of the Indenture, the right to convert a LYON into
Common Stock may be changed into a right to convert it into the kind and
amount of securities, cash or other assets which the Holder would have
received if the Holder had converted such Holder's LYONs immediately prior to
the transaction.
In the event of a taxable distribution to holders of Common Stock which
results in an adjustment of the Conversion Rate (or in which Holders otherwise
participate) or in the event the Conversion Rate is increased at the
discretion of the Company, the Holders may in certain circumstances, be deemed
to have received a distribution subject to United States federal income tax as
a dividend. See "Certain United States Federal Income Tax Considerations--
Adjustment of Conversion Price."
In the event the Company exercises its option to have interest in lieu of
Original Issue Discount accrue on a LYON following a Tax Event, the Holder
will be entitled on conversion to receive the same number of shares of Common
Stock such Holder would have received if the Company had not exercised such
option. If the Company exercises such option, LYONs surrendered for conversion
during the period from the close of business on any Regular Record Date (as
defined herein) next preceding any Interest Payment Date (as defined herein)
to the opening of business of such Interest Payment Date (except LYONs to be
redeemed on a date within such period) must be accompanied by payment of an
amount equal to the interest thereon that the registered Holder is to receive.
Except where LYONs surrendered for conversion must be accompanied by payment
as described above, no interest on converted LYONs will be payable by the
Company on any Interest Payment Date subsequent to the date of conversion. See
"--Optional Conversion to Semiannual Coupon Note upon Tax Event."
REDEMPTION OF LYONS AT THE OPTION OF THE COMPANY
No sinking fund is provided for the LYONs. Prior to October 14, 2000, the
LYONs will not be redeemable at the option of the Company. Thereafter, the
Company may redeem the LYONs as a whole for cash at any time, or from time to
time in part, upon not less than 15 days' nor more than 60 days' notice of
redemption given by mail to the Holders (unless a shorter notice shall be
satisfactory to the Trustee). Any such redemption must be in multiples of
$1,000 principal amount at maturity.
The table below shows Redemption Prices of a LYON per $1,000 principal
amount at maturity on October 14, 2000, at each October thereafter prior to
maturity, and at maturity on October 14, 2017, which prices reflect
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<PAGE>
the accrued Original Issue Discount calculated to each such date. The
Redemption Price of a LYON redeemed between such dates would include an
additional amount reflecting the additional Original Issue Discount accrued
since the next preceding date in the table to, but excluding, the Redemption
Date.
<TABLE>
<CAPTION>
(2)
(1) ACCRUED ORIGINAL (3)
LYON ISSUE DISCOUNT REDEMPTION PRICE
REDEMPTION DATE ISSUE PRICE AT 3.125% (1) + (2)
--------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
October 14, 2000 537.85 52.44 590.29
October 14, 2001 537.85 71.03 608.88
October 14, 2002 537.85 90.20 628.05
October 14, 2003 537.85 109.98 647.83
October 14, 2004 537.85 130.39 668.24
October 14, 2005 537.85 151.43 689.28
October 14, 2006 537.85 173.14 710.99
October 14, 2007 537.85 195.53 733.38
October 14, 2008 537.85 218.63 756.48
October 14, 2009 537.85 242.46 780.31
October 14, 2010 537.85 267.03 804.88
October 14, 2011 537.85 292.38 830.23
October 14, 2012 537.85 318.53 856.38
October 14, 2013 537.85 345.50 883.35
October 14, 2014 537.85 373.32 911.17
October 14, 2015 537.85 402.02 939.87
October 14, 2016 537.85 431.62 969.47
At Stated Maturity 537.85 462.15 1,000.00
</TABLE>
If converted to semiannual coupon notes following the occurrence of a Tax
Event, the LYONs will be redeemable at the Restated Principal Amount plus
accrued and unpaid interest from the date of such conversion to, but
excluding, the Redemption Date; provided, however, that in no event may the
LYONs be redeemed prior to October 14, 2000. See "--Optional Conversion to
Semiannual Coupon Note upon Tax Event."
If fewer than all of the LYONs are to be redeemed, the Trustee shall select
the LYONs to be redeemed in principal amounts at maturity of $1,000 or
integral multiples thereof by lot, pro rata or by another method the Trustee
considers fair and appropriate. If a portion of a Holder's LYONs is selected
for partial redemption and such Holder converts a portion of such LYONs prior
to such redemption, such converted portion shall be deemed, solely for
purposes of determining the aggregate Principal Amount of LYONs to be redeemed
by the Company, to be of the portion selected for redemption.
PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
On October 14, 2000 (the "Purchase Date"), the Company will become obligated
to purchase, at the option of the Holder thereof, any outstanding LYON for
which a written notice (a "Purchase Notice") has been delivered by the Holder
to the Paying Agent or an office or agency maintained by the Company for such
purpose in the Borough of Manhattan, The City of New York, at any time from
the opening of business on the date that is 20 business days preceding the
Purchase Date until the close of business on the Purchase Date and for which
such Purchase Notice has not been withdrawn, subject to certain additional
conditions set forth in part in the following paragraphs. The Purchase Price
for such LYONs will be $590.29 per $1,000 principal amount at maturity.
If prior to the Purchase Date the LYONs have been converted to semiannual
coupon notes following the occurrence of a Tax Event, the Purchase Price will
be equal to the Restated Principal Amount plus accrued and unpaid interest
from the date of such conversion to, but excluding, the Purchase Date. See "--
Optional Conversion to Semiannual Coupon Note upon Tax Event."
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<PAGE>
The Company, at its option, may elect to pay such Purchase Price in cash or
Common Stock, or any combination thereof. For a discussion of the tax
treatment of such a transaction, see "Certain United States Federal Income Tax
Considerations--Disposition or Conversion of LYONs."
The Company will give notice (the "Company Notice") not less than 20
business days prior to the Purchase Date (the "Company Notice Date") to all
Holders at their addresses shown in the register of the Registrar (and to
beneficial owners as required by applicable law) stating, among other things
(i) whether the Company will pay the Purchase Price of the LYONs in cash or
Common Stock, or any combination thereof, and (ii) the procedures that Holders
must follow to require the Company to purchase LYONs from such Holders.
The Purchase Notice given by any Holder requiring the Company to purchase
LYONs shall state (i) the certificate numbers of the LYONs to be delivered by
such Holder for purchase by the Company; (ii) the portion of the principal
amount at maturity of LYONs to be purchased, which portion must be $1,000 or
an integral multiple thereof; (iii) that such LYONs are to be purchased by the
Company pursuant to the applicable provisions of the LYONs; and (iv) if the
Company elects, pursuant to the Company Notice, to pay a specified percentage
of the Purchase Price in Common Stock but such specified percentage is
ultimately to be paid in cash because any of the conditions to payment of such
specified percentage of the Purchase Price in Common Stock contained in the
Indenture is not satisfied prior to the close of business on the Purchase
Date, as described below, that such Holder elects (a) to withdraw such
Purchase Notice as to some or all of the LYONs to which it relates (stating
the principal amount at maturity and certificate numbers of the LYONs as to
which such withdrawal shall relate) or (b) to receive cash in respect of the
Purchase Price of all LYONs subject to such Purchase Notice. If the Holder
fails to indicate such Holder's choice with respect to the election described
in clause (iv) above in the Purchase Notice, such Holder shall be deemed to
have elected to receive cash for the specified percentage that was to have
been payable in Common Stock. See "Certain United States Federal Income Tax
Considerations(Disposition or Conversion of LYONs."
Any Purchase Notice may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Paying Agent prior to the close of business on the
Purchase Date. The notice of withdrawal shall state the principal amount at
maturity and the certificate numbers of the LYONs as to which the withdrawal
notice relates and the principal amount at maturity, if any, which remains
subject to the Purchase Notice.
If the Company elects to pay the Purchase Price, in whole or in part, in
shares of Common Stock, the number of shares to be delivered in respect of the
specified percentage of the Purchase Price to be paid in Common Stock shall be
equal to the dollar amount of such specified percentage of the Purchase Price
divided by the Market Price (as defined below) of a share of Common Stock.
However, no fractional shares of Common Stock will be delivered upon any
purchase by the Company of LYONs in payment, in whole or in part, of the
Purchase Price. Instead, the Company will pay cash based on the Market Price
for all fractional shares of Common Stock. Each Holder whose LYONs are
purchased at the option of such Holder as of the Purchase Date shall receive
the same percentage of cash or Common Stock in payment of the Purchase Price
for such LYONs, except as described above with regard to the payment of cash
in lieu of fractional shares of Common Stock. For a discussion of the
resulting tax consequences, see "Certain United States Federal Income Tax
Considerations--Disposition or Conversion of LYONs."
The "Market Price" means the average of the Sale Price of the Common Stock
for the five Trading Day period ending on the third Trading Day prior to the
applicable Purchase Date, appropriately adjusted to take into account the
actual occurrence, during the seven Trading Days preceding such Purchase Date,
of certain events that would result in an adjustment of the Conversion Rate
with respect to the Common Stock. The "Sale Price" on any Trading Day means
the closing per share sale price for the Common Stock (or, if no closing sale
price is reported, the average of the bid and ask prices or, if more than one
in either case the average of the average bid and average ask prices) on such
Trading Day as reported in the composite transactions for the principal United
States securities exchange on which the Common Stock is traded or, if the
Common Stock is not listed on a United States national or regional securities
exchange, as reported by the National Association of Securities Dealers
Automated Quotation System. A "Trading Day" means each day on which the
securities exchange or
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<PAGE>
quotation system which is used to determine the Sale Price is open for trading
or quotation. Because the Market Price of the Common Stock is determined prior
to the Purchase Date, Holders of LYONs bear the market risk with respect to
the value of the Common Stock to be received from the date such Market Price
is determined to the Purchase Date. The Company may pay the Purchase Price, in
whole or in part, in Common Stock only if the information necessary to
calculate the Market Price at that time is reported in The Wall Street Journal
or another daily newspaper of national circulation.
Upon determination of the actual number of shares of Common Stock issuable
in accordance with the foregoing provisions, the Company will post such
information on the Company's site on the World Wide Web.
The Company's right to purchase LYONs, in whole or in part, with shares of
Common Stock is subject to the Company's satisfying various conditions,
including the registration of the Common Stock under the Securities Act and
the Exchange Act, unless there exists an applicable exemption from
registration thereunder. If such conditions are not satisfied prior to the
close of business on the Purchase Date, the Company will pay the Purchase
Price of the LYONs in cash. The Company will comply with the provisions of
Rule 13e-4 and any other tender offer rules under the Exchange Act which may
then be applicable and will file Schedule 13E-4 or any other schedule required
thereunder in connection with any offer by the Company to purchase LYONs at
the option of the Holders thereof on a Purchase Date. The Company may not
change the form of consideration (or components or percentages of components
thereof) to be paid once the Company has given its Company Notice to Holders
of LYONs except as described in the second sentence of this paragraph.
Payment of the Purchase Price for a LYON for which a Purchase Notice has
been delivered and not withdrawn is conditioned upon delivery of such LYON
(together with any necessary endorsements) to the Paying Agent or an office or
agency maintained by the Company for such purpose in the Borough of Manhattan,
The City of New York, at any time (whether prior to, on or after the Purchase
Date) after delivery of such Purchase Notice. Payment of the Purchase Price
for such LYON will be made promptly following the later of the business day
following the Purchase Date and the time of delivery of such LYON. If the
Paying Agent holds, in accordance with the terms of the Indenture, money or
securities sufficient to pay the Purchase Price of such LYON on the business
day following the Purchase Date, then, on and after the Purchase Date, such
LYON will cease to be outstanding and Original Issue Discount on such LYON
(or, if converted to semiannual coupon notes following the occurrence of a Tax
Event, interest on such notes) will cease to accrue and will be deemed paid,
whether or not such LYON is delivered to the Paying Agent, and all other
rights of the Holder shall terminate (other than the right to receive the
Purchase Price upon delivery of such LYON).
The Company's ability to purchase LYONs with cash may be limited by the
terms of its then-existing borrowing agreements. No LYONs may be purchased
pursuant to the provisions described above if there has occurred and is
continuing an Event of Default described under "--Events of Default; Notice
and Waiver" below (other than a default in the payment of the Purchase Price
with respect to such LYONs).
CHANGE IN CONTROL REQUIRES PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
In the event of any Change in Control (as defined below) of the Company
occurring on or prior to October 14, 2000, each Holder of LYONs will have the
right, at the Holder's option, subject to the terms and conditions of the
Indenture, to require the Company to purchase all or any part (provided that
the principal amount at maturity must be $1,000 or an integral multiple
thereof) of the Holder's LYONs on the date that is 35 business days after the
occurrence of such Change in Control (the "Change in Control Purchase Date")
at a cash price equal to the Issue Price plus accrued Original Issue Discount
to the Change in Control Purchase Date (the "Change in Control Purchase
Price"). If prior to a Change in Control Purchase Date the LYONs have been
converted to semiannual coupon notes following the occurrence of a Tax Event,
the Company will be required to purchase the LYONs at a cash price equal to
the Restated Principal Amount plus accrued and unpaid interest from the date
of such conversion to, but excluding, the Change in Control Purchase Date.
Holders will not have any right to require the Company to purchase LYONs in
the event of any Change in Control of the Company occurring after October 14,
2000.
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Within 15 business days after the Change in Control, the Company shall mail
to the Trustee and to each Holder (and to beneficial owners as required by
applicable law) a notice regarding the Change in Control, which notice shall
state, among other things: (i) the date of such Change in Control and,
briefly, the events causing such Change in Control, (ii) the date by which the
Change in Control Purchase Notice (as defined below) must be given, (iii) the
Change in Control Purchase Date, (iv) the Change in Control Purchase Price,
(v) the name and address of the Paying Agent and the Conversion Agent, (vi)
the Conversion Rate and any adjustments thereto, (vii) that LYONs with respect
to which a Change in Control Purchase Notice is given by the Holder may be
converted into shares of Common Stock only if the Change in Control Purchase
Notice has been withdrawn in accordance with the terms of the Indenture,
(viii) the procedures that Holders must follow to exercise these rights, (ix)
the procedures for withdrawing a Change in Control Purchase Notice, (x) that
Holders who want to convert LYONs must satisfy the requirements set forth in
the LYONs and (xi) briefly, the conversion rights of Holders of LYONs.
To exercise this purchase right, the Holder must deliver written notice of
the exercise of such right (a "Change in Control Purchase Notice") to the
Paying Agent or an office or agency maintained by the Company for such purpose
in the Borough of Manhattan, The City of New York, prior to the close of
business on the Change in Control Purchase Date. The Change in Control
Purchase Notice shall state (i) the certificate numbers of the LYONs to be
delivered by the Holder thereof for purchase by the Company; (ii) the portion
of the principal amount at maturity of LYONs to be purchased, which portion
must be $1,000 or an integral multiple thereof; and (iii) that such LYONs are
to be purchased by the Company pursuant to the applicable provisions of the
LYONs.
Any Change in Control Purchase Notice may be withdrawn by the Holder by a
written notice of withdrawal delivered to the Paying Agent prior to the close
of business on the Change in Control Purchase Date. The notice of withdrawal
shall state the principal amount at maturity and the certificate numbers of
the LYONs as to which the withdrawal notice relates and the principal amount
at maturity, if any, which remains subject to a Change in Control Purchase
Notice.
Payment of the Change in Control Purchase Price for a LYON for which a
Change in Control Purchase Notice has been delivered and not withdrawn is
conditioned upon delivery of such LYON (together with any necessary
endorsements) to the Paying Agent or an office or agency maintained by the
Company for such purpose in the Borough of Manhattan, The City of New York, at
any time (whether prior to, on or after the Change in Control Purchase Date)
after the delivery of such Change in Control Purchase Notice. Payment of the
Change in Control Purchase Price for such LYON will be made promptly following
the later of the business day following the Change in Control Purchase Date
and the time of delivery of such LYON. If the Paying Agent holds, in
accordance with the terms of the Indenture, money sufficient to pay the Change
in Control Purchase Price of such LYON on the business day following the
Change in Control Purchase Date, then, on and after the Change in Control
Purchase Date, such LYON will cease to be outstanding and Original Issue
Discount on such LYON (or, if such LYONs have been converted to semiannual
coupon notes, interest thereon) will cease to accrue and will be deemed paid,
whether or not such LYON is delivered to the Paying Agent, and all other
rights of the Holder shall terminate (other than the right to receive the
Change in Control Purchase Price upon delivery of such LYON).
Under the Indenture, a "Change in Control" of the Company is deemed to have
occurred at such time as (i) any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) (other than the
Company, any Subsidiary of the Company, or any employee benefit plan of either
the Company or any Subsidiary of the Company), files a Schedule 13D or
Schedule l4D-1 under the Exchange Act (or any successor schedule, form or
report) disclosing that such person has become the beneficial owner of 50% or
more of the total voting power in the aggregate of all classes of Capital
Stock of the Company then outstanding normally entitled to vote in elections
of directors, or (ii) there shall be consummated any consolidation or merger
of the Company pursuant to which the Common Stock would be converted into
cash, securities or other property, in each case other than a consolidation or
merger of the Company in which the holders of Common Stock immediately prior
to the consolidation or merger have, directly or indirectly, at least a
majority of the total voting
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power in the aggregate of all classes of capital stock of the continuing or
surviving corporation immediately after the consolidation or merger. The
Indenture does not permit the Company's Board of Directors to waive the
Company's obligation to purchase LYONs at the option of a Holder in the event
of a Change in Control of the Company.
The Company will comply with the provisions of Rule 13e-4, Rule l4e-l and
any other tender offer rules under the Exchange Act which may then be
applicable, and will file Schedule l3E-4 or any other schedule required
thereunder in connection with any offer by the Company to purchase LYONs at
the option of the Holders thereof upon a Change in Control. The Change in
Control purchase feature of the LYONs may in certain circumstances make more
difficult or discourage a takeover of the Company and, thus, the removal of
incumbent management. The Change in Control purchase feature, however, is not
the result of management's knowledge of any specific effort to accumulate
shares of Common Stock or to obtain control of the Company by means of a
merger, tender offer, solicitation or otherwise, or part of a plan by
management to adopt a series of anti-takeover provisions. Instead, the Change
in Control purchase feature is a standard term contained in other LYONs
offerings that have been marketed by Merrill Lynch & Co., Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and the terms of such
feature resulted from negotiations between the Company and Merrill Lynch.
If a Change in Control were to occur, there can be no assurance that the
Company would have funds sufficient to pay the Change in Control Purchase
Price for all of the LYONs that might be delivered by Holders seeking to
exercise the purchase right since the Company might also be required to prepay
certain Senior Indebtedness having financial covenants with change of control
provisions in favor of the holders thereof. In addition, the Senior
Indebtedness of the Company may have cross-default provisions that could be
triggered by a default under the change of control provisions in such Senior
Indebtedness, thereby possibly accelerating the maturity of such Senior
Indebtedness. In such case, the Holders of the LYONs would be subordinated to
the prior claims of the holders of such Senior Indebtedness. In addition, the
Company's ability to purchase LYONs with cash may be limited by the terms of
its then-existing borrowing agreements. No LYONs may be purchased pursuant to
the provisions described above if there has occurred and is continuing an
Event of Default described under "--Events of Default; Notice and Waiver"
below (other than a default in the payment of the Change in Control Purchase
Price with respect to such LYONs).
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, dated as of October 14, 1997,
between the Company and Merrill Lynch & Co., Inc., the Company has agreed to
use reasonable efforts to keep the Registration Statement effective with
respect to the LYONs until one year from the date of initial issuance of the
LYONs or, in the case of the Common Stock issued upon conversion of the LYONs,
until two years from the date of initial issuance of the LYONs or such earlier
date as all securities registrable thereunder (the "Registrable Securities")
have been disposed of (the "Effectiveness Period"). The Registration Statement
will not be available for sales of Registrable Securities (i) for up to an
aggregate of 30 days in any twelve-month period upon notice by the Company to
the holders of Registrable Securities (the "Unavailability Notice") in the
event of certain material developments and (ii) during the periods from April
15, 1998 through and including May 19, 1998, July 15, 1998 through and
including August 18, 1998, October 14, 1998 through and including November 17,
1998, January 18, 1999 through and including February 17, 1999, April 14, 1999
through and including May 18, 1999, July 16, 1999 through and including August
17, 1999 and October 14, 1999 through and including November 16, 1999. Each
day that the Registration Statement is unavailable with respect to the sale of
LYONs because of the Company's delivery of an Unavailability Notice will
increase by one day the one-year period described in the first sentence of
this paragraph during which the Company will maintain the effectiveness of the
Registration Statement with respect to the LYONs.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may, without the consent of any Holders of outstanding LYONs,
consolidate with or merge into, or transfer or lease its assets substantially
as an entirety to, any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
limited liability company (each a
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"Person") organized under the laws of any United States jurisdiction, provided
that (i) the successor Person assumes the Company's obligations on the LYONs
and under the Indenture and (ii) immediately after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time would become an Event of Default, shall have occurred and be continuing.
Certain of the foregoing transactions, if they occur on or prior to October
14, 2000, could constitute a Change in Control of the Company permitting each
Holder to require the Company to purchase the LYONs of such Holder as
described above.
OPTIONAL CONVERSION TO SEMIANNUAL COUPON NOTE UPON TAX EVENT
From and after the date (the "Tax Event Date") of the occurrence of a Tax
Event, the Company shall have the option to elect to have interest in lieu of
future Original Issue discount accrue at 3.125% per annum on a principal
amount per LYON (the "Restated Principal Amount") equal to the Issue Price
plus Original Issue Discount accrued to the date immediately prior to the Tax
Event Date or the date on which the Company exercises the option described
herein, whichever is later (such date hereinafter referred to as the "Option
Exercise Date"). Such interest shall accrue from the Option Exercise Date and
shall be payable semiannually on April 14 and October 14 of each year (each an
"Interest Payment Date") to holders of record at the close of business on
March 30 or September 29 (each a "Regular Record Date") immediately preceding
such Interest Payment Date. Interest will be computed on the basis of a 360-
day year comprised of twelve 30-day months and will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the Option Exercise Date.
A "Tax Event" means that the Company shall have received an opinion from
independent tax counsel experienced in such matters to the effect that, on or
after the date of this Prospectus, as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein or (b) any amendment to, or change in, an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority, in each case which
amendment or change is enacted, promulgated, issued or announced or which
interpretation is issued or announced or which action is taken, on or after
the date of this Prospectus, there is more than an insubstantial risk that
interest (including original issue discount) payable on the LYONs either (i)
would not be deductible on a current accrual basis or (ii) would not be
deductible under any other method, in either case in whole or in part, by the
Company (by reason of deferral, disallowance, or otherwise) for United States
federal income tax purposes.
President Clinton's 1998 budget proposed a series of tax law changes that
would have, if enacted and made applicable to the LYONs, prevented the Company
from deducting interest (including Original Issue Discount) payable on the
LYONs on a current accrual basis for United States federal income tax purposes
and could have caused some or all of the interest (including Original Issue
Discount) payable on the LYONs to fail to be deductible by the Company under
any other method for United States federal income tax purposes. This proposal
was not adopted by Congress and was not part of the Taxpayer Relief Act of
1997 which was recently enacted into law. Nevertheless, if a similar proposal
were ever introduced and made applicable to the LYONs in a manner that would
limit the ability of the Company to either (i) deduct the interest (including
Original Issue Discount) payable on the LYONs on a current accrual basis or
(ii) deduct the interest (including Original Issue Discount) payable on the
LYONs under any other method for United States federal income tax purposes,
such enactment would result in a Tax Event and the terms of the LYONs would be
subject to modification at the option of the Company as described above. The
modification of the terms of LYONs by the Company upon a Tax Event as
described above could possibly alter the timing of income recognition by
holders of the LYONs with respect to the semiannual payments of interest due
on the LYONs after the Option Exercise Date. See "Certain United States
Federal Income Tax Considerations."
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein shall
have occurred and be continuing, either the Trustee or the Holders of not less
than 25% in aggregate principal amount at maturity of the LYONs
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then outstanding may declare the Issue Price plus Original Issue Discount
accrued (or if the LYONs have been converted to semiannual coupon notes
following a Tax Event, the Restated Principal Amount, plus accrued and unpaid
interest) to the date of default (in the case of an Event of Default specified
in (i) or (ii) of the following paragraph) or to the date of such declaration
(in the case of an Event of Default specified in (iii) or (iv) of the
following paragraph) on all the LYONs to be immediately due and payable. In
the case of certain events of bankruptcy or insolvency, the Issue Price of the
LYONs plus the Original Issue Discount accrued thereon (or if the LYONs have
been converted to semiannual coupon notes following a Tax Event, the Restated
Principal Amount, plus accrued and unpaid interest) to the occurrence of such
event shall automatically become and be immediately due and payable. Under
certain circumstances, the Holders of a majority in aggregate principal amount
at maturity of the outstanding LYONs may rescind any such acceleration with
respect to the LYONs and its consequences. Interest shall accrue and be
payable on demand upon a default in the payment of principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Purchase Price, Change in Control Purchase Price or shares of Common Stock
(and cash in lieu of fractional shares) or cash in lieu of such Common Stock
to be delivered on conversion of LYONs, in each case to the extent that the
payment of such interest shall be legally enforceable.
Under the Indenture, Events of Default include: (i) default in payment of
the principal amount at maturity, Issue Price, accrued Original Issue
Discount, interest upon conversion to a semiannual coupon note following a Tax
Event (if such default in payment of interest shall continue for 31 days),
Redemption Price, Purchase Price or Change in Control Purchase Price with
respect to any LYON, when the same becomes due and payable (whether or not
such payment is prohibited by the provisions of the Indenture); (ii) failure
by the Company to deliver shares of Common Stock (including cash in lieu of
fractional shares) or cash in lieu thereof when such Common Stock (and cash in
lieu of fractional shares) or cash is required to be delivered following
conversion of a LYON and continuance of such default for 10 days; (iii)
failure by the Company to comply with any of its other agreements in the LYONs
or the Indenture upon the receipt by the Company of notice of such default
from the Trustee or from Holders of not less than 25% in aggregate principal
amount at maturity of the LYONs then outstanding and the Company's failure to
cure such default within 90 days after receipt by the Company of such notice;
or (iv) certain events of bankruptcy or insolvency.
The Trustee shall, within 90 days after the occurrence of any default, mail
to all Holders of the LYONs notice of all defaults of which the Trustee shall
be aware, unless such defaults shall have been cured or waived before the
giving of such notice; provided, that the Trustee may withhold such notice as
to any default other than a payment default, if it determines in good faith
that withholding the notice is in the interests of the Holders.
The Holders of a majority in aggregate principal amount at maturity of the
outstanding LYONs may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that such direction shall not be in
conflict with any law or the Indenture and subject to certain other
limitations. The Trustee may refuse to perform any duty or exercise any right
or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives indemnity satisfactory to it against any loss,
liability or expense. No Holder of any LYON will have any right to pursue any
remedy with respect to the Indenture or the LYONs, unless (i) such Holder
shall have previously given the Trustee written notice of a continuing Event
of Default; (ii) the Holders of at least 25% in aggregate principal amount at
maturity of the outstanding LYONs shall have made a written request to the
Trustee to pursue such remedy; (iii) such Holder or Holders shall have offered
to the Trustee reasonable security or indemnity against any loss, liability or
expense satisfactory to it; (iv) the Trustee shall have failed to comply with
the request within 60 days after receipt of such notice, request and offer of
security or indemnity; and (v) the Holders of a majority in aggregate
principal amount at maturity of the outstanding LYONs shall not have given the
Trustee a direction inconsistent with such request within 60 days after
receipt of such request.
The right of any Holder: (a) to receive payment of the principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Purchase Price, Change in Control Purchase Price or interest, if any, in
respect of the LYONs held by such Holder on or after the respective due dates
expressed in the LYONs or as
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of any Redemption Date or (b) to bring suit for the enforcement of any such
payment on or after such respective dates or the right to convert, shall not
be impaired or adversely affected without such Holder's consent.
The Holders of a majority in aggregate principal amount at maturity of LYONs
at the time outstanding may waive any existing default and its consequences
except (i) any default in any payment on the LYONs, (ii) any default with
respect to the conversion rights of the LYONs, or (iii) any default in respect
of certain covenants or provisions in the Indenture which may not be modified
without the consent of the Holder of each LYON as described in "--
Modification" below. When a default is waived, it is deemed cured and shall
cease to exist, but no such waiver shall extend to any subsequent or other
default or impair any consequent right.
The Company is required to furnish to the Trustee annually a statement as to
any default by the Company in the performance and observance of its
obligations under the Indenture. In addition, the Company shall file with the
Trustee written notice of the occurrence or any default or Event of Default
within five Business Days of its becoming aware of such default or Event of
Default.
MODIFICATION
Modification and amendment of the Indenture or the LYONs may be effected by
the Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount at maturity of the LYONs then
outstanding. However, without the consent of each Holder affected thereby, no
amendment may, among other things, (i) reduce the principal amount at
maturity, Issue Price, Purchase Price, Change in Control Purchase Price,
Redemption Price or amount of cash paid in lieu of shares of Common Stock on
conversion with respect to any LYON, or extend the stated maturity of any LYON
or alter the manner or rate of accrual of Original Issue Discount or interest,
or make any LYON payable in money or securities other than that stated in the
LYON; (ii) make any change to the principal amount at maturity of LYONs whose
Holders must consent to an amendment or any waiver under the Indenture or
modify the Indenture provisions relating to such amendments or waivers; (iii)
make any change that adversely affects the right to convert any LYON or the
right to require the Company to purchase a LYON; (iv) modify the provisions of
the Indenture relating to the subordination of the LYONs in a manner adverse
to the Holders of the LYONs; or (v) impair the right to institute suit for the
enforcement of any payment with respect to, or conversion of, the LYONs. No
change that adversely affects the rights of any holder of Senior Indebtedness
of the Company under the subordination provisions of the Indenture may be made
unless requisite consents to such change are obtained from holders of Senior
Indebtedness pursuant to the terms of the related Senior Indebtedness
instrument.
Without the consent of any Holder of LYONs, the Company and the Trustee may
amend the Indenture to (i) cure any ambiguity, defect or inconsistency,
provided, however, that such amendment does not materially adversely affect
the rights of any Holder, (ii) provide for the assumption by a successor to
the Company of the obligations of the Company under the Indenture, (iii)
provide for uncertificated LYONs in addition to certificated LYONs, as long as
such uncertificated LYONs are in registered form for United States federal
income tax purposes, (iv) make any change that does not materially adversely
affect the rights of any Holder of LYONs, (v) make any change necessary to
comply with the Trust Indenture Act of 1939, as amended, or (vi) add to the
covenants or obligations of the Company under the Indenture or surrender any
right, power or option conferred by the Indenture on the Company.
DISCHARGE OF THE INDENTURE
The Company may satisfy and discharge its obligations under the Indenture by
delivering to the Trustee for cancellation all outstanding LYONs or by
depositing with the Trustee, the Paying Agent or the Conversion Agent, if
applicable, after the LYONs have become due and payable, whether at stated
maturity, or any Redemption Date, or any Purchase Date, a Change of Control
Purchase Date, or upon conversion or otherwise, cash or Common Stock (as
applicable under the terms of the Indenture) sufficient to pay all of the
outstanding LYONs and paying all other sums payable under the Indenture by the
Company.
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LIMITATIONS OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of the Company, under
Title 11 of the United States Code, the claim of the Holder of a LYON may be
limited to the Issue Price of the LYON plus that portion of the Original Issue
Discount that is deemed to have accrued from the date of issue to the
commencement of the proceeding.
INFORMATION CONCERNING THE TRUSTEE
Chase Manhattan Bank and Trust Company, National Association is the Trustee,
Registrar, Paying Agent and Conversion Agent under the Indenture. The Company
has banking and certain other relationships with one or more affiliates of the
Trustee.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
consequences of the purchase, ownership, disposition, and conversion of LYONs.
Unless otherwise stated, this summary deals only with LYONs held as capital
assets (generally, assets held for investment under the Internal Revenue Code
of 1986, as amended (the "Code")), by Holders who purchase LYONs upon original
issuance. The tax treatment of a holder of LYONs may vary depending on his
particular situation. This summary does not address all of the tax
consequences that may be relevant to Holders who may be subject to special tax
treatment such as, for example, insurance companies, broker-dealers, tax-
exempt organizations, or, except to the extent described below, foreign
taxpayers. In addition, this summary does not address any aspects of state,
local, or foreign tax laws. This summary is based on the United States federal
income tax law in effect as of the date hereof, which is subject to change,
possibly on a retroactive basis. Each investor is urged to consult his tax
advisor as to the particular tax consequences of purchasing, owning, and
disposing of LYONs, including the application and effect of United States
federal, state, local, and foreign tax laws.
The Company has been advised by its counsel that in such counsel's opinion,
the LYONs will be treated as indebtedness for United States federal income tax
purposes. Counsel has further advised the Company that it is counsel's opinion
that, while the following does not purport to discuss all tax matters relating
to the LYONs, based upon the LYONs being treated as indebtedness, the
following are the material federal income tax consequences of the ownership
and conversion or disposition of the LYONs, subject to the qualifications set
forth above.
ORIGINAL ISSUE DISCOUNT
The LYONs were issued at a substantial discount from their stated principal
amount at maturity. For United States federal income tax purposes, the
difference between the issue price (the initial offering price to the public
at which the LYONs were sold) and the stated principal amount at maturity of
each LYON constitutes original issue discount ("Original Issue Discount").
Holders of LYONs will be required to include Original Issue Discount in income
periodically over the term of the LYONs before receipt of the cash or other
payment attributable to such income.
For United States federal income tax purposes, each Holder of a LYON must
generally include in gross income a portion of the Original Issue Discount in
each taxable year during which the LYON is held in an amount equal to the
Original Issue Discount that accrues on the LYON during such period,
determined by using a constant yield to maturity method. The Original Issue
Discount included in income for each year will be calculated under a
compounding formula that will result in the allocation of less Original Issue
Discount to the earlier years of the term of the LYON and more Original Issue
Discount to later years. For the approximate cumulative total amount of the
Original Issue Discount accrued annually, see the chart under "Description of
LYONs(Redemption of LYONs at the Option of the Company." Any amount included
in income as Original Issue Discount will increase a Holder's basis in the
LYON.
DISPOSITION OR CONVERSION OF LYONS
Except as described below, gain or loss upon a sale or other disposition of
a LYON will generally be capital gain or loss, which will be subject to tax as
described below in the discussion of the Taxpayer Relief Act of 1997. If a
Holder elects to exercise his option to tender a LYON to the Company on a
Purchase Date or a Change in Control Purchase Date for cash, such tender will
be treated as a sale of the LYON.
A Holder that receives Common Stock in exchange for a LYON (whether upon
conversion of a LYON or at the Company's option upon tender of a LYON) will
generally not recognize gain or loss (except with respect to cash received in
lieu of a fractional share). A Holder's tax basis in the Common Stock received
on conversion or tender of a LYON will be the same as the Holder's adjusted
tax basis in the LYON at the time of conversion or tender (exclusive of any
basis allocable to a fractional share), and the holding period for the Common
Stock received on conversion or tender will include the holding period of the
LYON converted. It is possible, however, the Internal Revenue Service may
argue that the holding period of the Common Stock allocable to accrued
Original Issue Discount will commence on the date of the conversion.
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If a Holder elects to exercise his option to tender a LYON to the Company on
the Purchase Date and the Company issues Common Stock in satisfaction of the
Purchase Price, such exchange will be treated the same as a conversion. If a
Holder elects to exercise his option to tender a LYON to the Company on the
Purchase Date and the Company delivers a combination of cash and Common Stock
in satisfaction of the Purchase Price, a Holder that is an original purchaser
of the LYON generally should not have gain or loss. A Holder's basis in the
Common Stock received would be the same as the Holder's basis in the LYON,
reduced by the cash received and increased by any gain recognized (exclusive
of any basis allocable to a fractional share).
Under the recently enacted Taxpayer Relief Act of 1997, net capital gain
(i.e., generally, capital gain in excess of capital loss) recognized by the
Holder upon the disposition of such Common Stock or LYONs that has been held
for more than 18 months will generally be subject to tax at a rate not to
exceed 20%. Net capital gain recognized by the Holder upon the disposition of
such Common Stock or LYONs that has been held for more than 12 months but not
for more than 18 months will continue to be subject to tax at a rate not to
exceed 28% and capital gain recognized from the disposition of Common Stock or
LYONs that has been held for 12 months or less will continue to be subject to
tax at ordinary income tax rates. In, addition, capital gain recognized by a
corporate taxpayer will continue to be subject to tax at the ordinary income
tax rates applicable to corporations.
ADJUSTMENT OF CONVERSION PRICE
If at any time the Company makes a distribution of property to shareholders
that would be taxable to such shareholders as a dividend for United States
federal income tax purposes and, in accordance with the anti-dilution
provisions of the LYONs, the Conversion Rate of the LYONs is increased, the
amount of such increase may be deemed to be the payment of a taxable dividend
to holders of the LYONs. For example, an increase in the Conversion Rate in
the event of distributions of evidences of indebtedness or assets of the
Company will generally result in deemed dividend treatment to holders of the
LYONs, but generally a decrease in the event of stock dividends or stock split
will not. In addition, if the Conversion Rate is increased at the discretion
of the Company, such increase may result in taxable income for the Holders of
the LYONs.
TAX EVENT
The modification of the terms of the LYONs by the Company upon a Tax Event
as described in "Description of LYONs--Optional Conversion to Semiannual
Coupon Note upon Tax Event." could possibly alter the timing of income
recognition by the Holders of the LYONs with respect to the semiannual
payments of interest due on the LYONs after the Option Exercise Date.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
General. The following is a summary of certain special tax consequences to
Non-U.S. Holders. As used herein, "Non-U.S. Holder" means a beneficial owner
of the LYONs or Common Stock that is not a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof or an
estate that is subject to United States federal income taxation without regard
to the source of its income or a trust whose administration is subject to the
primary supervision of a United States court and which has one or more
fiduciaries who have authority to control substantial decisions of the trust.
(a) Payments of Interest. No withholding of United States federal income
tax will be required with respect to accruals of Original Issue Discount and
payments by the Company of interest (including amounts in respect of Original
Issue Discount) on a LYON to a Non-U.S. Holder of such LYON, provided that, in
the case of Original Issue Discount (i) the Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, is not a controlled foreign
corporation that is related to the Company through stock ownership, a foreign
tax-exempt organization or foreign private foundation for United States
federal income tax purposes, and (ii) the requirements of section 871(h) or
881(c) of the Code, as set forth in paragraph (f), are satisfied.
Notwithstanding the above, a Non-U.S. Holder
24
<PAGE>
that is engaged in the conduct of a United States trade or business will be
subject to (i) United States federal income tax on Original Issue Discount and
interest that is effectively connected with such trade or business and (ii) if
the Non-U.S. Holder is a corporation, a United States branch profits tax equal
to 30% of its "effectively connected earnings and profits" (as adjusted) for
the taxable year, unless it qualifies for an exemption from such tax or a
lower tax rate under an applicable treaty.
(b) Gain on Sale of LYONs or Common Stock. An individual Non-U.S. Holder
who does not have a United States trade or business will generally not be
subject to tax on any capital gains recognized upon the sale, exchange,
redemption or other disposition of a LYON or upon a sale, exchange, redemption
or other disposition of Common Stock unless (i) such gain is effectively
connected with the conduct of a United States trade or business by the Non-
U.S. Holder or (ii) in the case of a Non-U.S. Holder who is a nonresident
alien individual, such holder is present in the United States for 183 or more
days in the taxable year and certain other requirements are met. In such a
case, the Non-US Holder will be subject to tax at a rate of 30% on any such
capital gains to the extent that such capital gains exceed his United States
source capital losses.
(c) Conversion of LYONs. No United States federal income tax will be
imposed upon the conversion of a LYON into shares of Common Stock for a Non-
U.S. Holder who does not have a connection with or status with respect to the
United States as described in paragraph (a) above except that such Holder may
be subject to United States federal withholding tax on constructive dividends,
if any, upon conversion.
(d) Dividends. Dividends on shares of Common Stock held by a Non-U.S.
Holders will be subject to United States withholding tax at a rate of 30% (or
graduated rates if such dividends are effectively connected with the conduct
of a trade or business within the United States) or such lower rate as may be
provided by an applicable tax treaty and the Company must report to the
Internal Revenue Service the amount of the dividends paid to the registered
holder of the Common Stock but the payment will not be subject to any
additional backup withholding or information reporting.
(e) Federal Estate Tax. A LYON held by an individual who at the time of
death is not a citizen or resident of the United States will not be subject to
United States federal estate tax as a result of such individual's death,
provided that the individual does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote and that the Original Issue Discount accrued on such LYON was
not effectively connected with a United States trade or business. Shares of
Common Stock held by an individual at the time of his death (or theretofore
transferred subject to certain rights and powers) will be subject to United
States federal estate tax unless otherwise provided by applicable treaty.
(f) Owner Statement Requirement. Sections 871(h) and 881(c) of the Code
require that either the beneficial owner of a LYON or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and that holds a LYON on behalf of such owner file a statement
with the Company or its agent to the effect that the beneficial owner is not a
U.S. person in order to avoid withholding of United States federal income tax.
Under current regulations, this requirement will be satisfied if the Company
or its agent receives (i) a statement (an "Owner's Statement") from the
beneficial owner of a LYON in which such owner certifies, under penalties of
perjury, that such owner is not a U.S. person and provides such owner's name
and address, or (ii) a statement from the Financial Institution holding the
LYON on behalf of the beneficial owner in which the Financial Institution
certifies, under penalties of perjury, that it has received the Owner's
Statement together with a copy of the Owner's Statement. The beneficial owner
must inform the Company or its agent (or, in the case of a statement described
in clause (ii) of the immediately preceding sentence, the Financial
Institution) within 30 days of any change in information on the Owner's
Statement.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, a 31% "backup"
withholding tax is applied to certain payments (including amounts in respect
of Original Issue Discount) made to, and to the proceeds of sales before
25
<PAGE>
maturity by, certain U.S. persons if such persons (i) fail to furnish their
taxpayer identification numbers which, for an individual, would be his Social
Security Number or (ii) in certain circumstances, fail to certify, under
penalties of perjury, that they have both furnished a correct taxpayer
identification number and not been notified by the Internal Revenue Service
that they are subject to backup withholding for failure to report interest and
dividend payments. Under current regulations, this backup withholding will not
apply to payments made outside the United States by the Company or a paying
agent on a LYON if the Owner's Statement is received; provided in each case
that the Company or the paying agent, as the case may be, does not have actual
knowledge that the payee is a U.S. person.
Under current regulations, payments of the proceeds of the sale of a LYON or
Common Stock to or through a foreign office of a "broker" will not be subject
to backup withholding but will be subject to information reporting if the
broker is a U.S. person, a controlled foreign corporation for United States
federal income tax purposes, or a foreign person 50% or more of whose gross
income is from a United States trade or business for a specified three-year
period ("U.S. Connected Broker"), unless the broker has in its records
documentary evidence that the holder of a LYON or Common Stock is not a U.S.
person and certain conditions are met or the holder of a LYON or Common Stock
otherwise establishes an exemption. Payment of the proceeds of a sale to or
through the United States office of a broker is subject to backup withholding
and information reporting unless the holder certifies its non-United States
status under penalties of perjury or otherwise establishes an exemption.
On October 7, 1997, the Treasury Department released new Treasury
Regulations governing the backup withholding and information reporting
requirements described above. The new regulations would not generally alter
the treatment of Non-U.S. Holders who furnish an Owner's Statement to the
payor. The new regulations would alter the procedures for claiming treaty
benefits, such as in the case of dividends, and may change certain procedures
applicable to U.S. Connected Brokers. The new regulations are generally
effective for payments made after December 31, 1998.
26
<PAGE>
SELLING SECURITY HOLDERS
The LYONs were originally issued by the Company and resold by Merrill Lynch
as initial purchaser, in transactions exempt from the registration
requirements of the Securities Act, to persons reasonably believed by Merrill
Lynch to be "qualified institutional buyers," as defined in Rule 144A
promulgated under the Securities Act or in transactions complying with the
provisions of Regulation S under the Securities Act. The Selling Holders
(which term includes their transferees, pledgees, donees or their successors)
may from time to time offer and sell pursuant to this Prospectus any or all of
the LYONs and Common Stock issued upon conversion of the LYONs.
The following table sets forth information with respect to the Selling
Holders and the respective principal amounts at maturity of LYONs beneficially
owned by each Selling Holder. Such information has been obtained from the
Selling Holders. Except as otherwise disclosed herein, none of the Selling
Holders has, or within the past three years has had, any position, office or
other material relationship with the Company or any of its predecessors or
affiliates. Because the Selling Holders may offer all or some portion of the
LYONs or the Common Stock issuable upon conversion thereof pursuant to this
Prospectus, no estimate can be given as to the amount of the LYONs or the
Common Stock issuable upon conversion thereof that will be held by the Selling
Holders upon termination of any such sales. In addition, the Selling Holders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their LYONs, since the date on which they provided to the Company
the information regarding their LYONs, in transactions exempt from the
registration requirements of the Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT AT
MATURITY OF
LYONS BENEFICIALLY
OWNED AND THAT
MAY BE OFFERED HEREBY
SELLING HOLDER (IN THOUSANDS)
- -------------- ---------------------
<S> <C>
Aeltus Investment Management $ 9,000
Allegheny Ludlum Master Trust 25,000
Allied Irish Banks Plc 7,000
Allmerica Select Growth & Income Fund 10,700
Allstate Insurance Company 8,000
Allstate Life Insurance Company 14,000
Argent Classic Convertible Arbitrage Fund 22,500
Argent Classic Convertible Arbitrage Fund (Bermuda) 27,500
Associated Electric & Gas Insurance Services 1,500
BT Alex Brown 30,908
Baker Fentress & Co. 11,935
Bancroft Convertible Fund 3,500
Bank Lips Ltd - Zuerick 500
Banque Indust Et Mobil Privee 1,100
Banque Nationale De Paris Georgetown Branch 20,000
Banque Paribas 47,400
Bayer USA Inc. Retirement Fund 10,165
Bavaria TRR Corporation, Delaware 41,000
Bear Stearns Securities Corporation (Convertible Dept.) 106,118
CBR Cement Corp Pension Plan - Master Trust 65
CPR (USA) Inc. 500
Capital Markets Transactions Inc. 8,000
Champion International Corporation Master Trust 1,550
City of Birmingham Retirement & Relief System 3,000
Concert Growth Income 9,000
Connecticut General Life Insurance Co. 11,500
Continental Assurance Company Separate Account E 8,200
Continental Casualty Company 10,000
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT AT
MATURITY OF
LYONS BENEFICIALLY
OWNED AND THAT
MAY BE OFFERED HEREBY
SELLING HOLDER (IN THOUSANDS)
- -------------- ---------------------
<S> <C>
Continental Casualty Company on Behalf of its Subaccount
Convertible Bond Strategy 10,000
Continental Casualty Company on Behalf of its Subaccount
Designated Gov't Account 13,800
Cova Bond Debenture Fund 500
Credit Agricole/Indosuez Luxembourg 13,000
Credit Suisse First Boston 5,000
Davis Convertible Fund 7,512
Delta Airlines Master Trust 3,600
Deutsche Bank AG 21,000
Deutsche Morgan Grenfell Inc. 13,200
Diocese of Buffalo - Priest Ret. Fund 45
Diocese of Buffalo - Pension Fund 70
Donaldson Lufkin & Jenrette Securities Corporation 3,000
Dorinco Reinsurance Company 2,500
Eastern Utilities Assoc. Retirement Plan 140
Elf Acquitaine Pension 200
Ellsworth Convertible Growth and Income Fund 1,500
FTI Capital Mgmt 50,000
Fuji US Income Open 2,800
Gencorp Foundation Inc. 300
General Electric Mortgage Insurance Corporation 9,000
General Electric Mortgage Insurance Corporation 5,000
General Motors Employee Domestic Group Pension Trust 4,000
Genesee County Employees' Retirement System 800
Goldman, Sachs & Co. 28,020
HSBC Securities Inc. 2,900
Harris Investment Management 1,400
Healthcare Underwriters Mutual Insurance Co. 2,000
HighBridge Capital Corporation 51,500
IDS Bond Fund 12,500
IDS Life Special Income Fund 10,000
Illinois Annuity & Insurance Co. 20,000
International Convertible Growth Fund 5,500
Ixion Investment Co. 50,000
JP Morgan Securities Incorporated 17,600
Kennilworth Partners LP 28,250
Key Trust Company of Ohio 5,500
Lehman Brothers Inc. 49,500
LibertyView Fund LLC 100
LibertyView Plus Fund 400
Lord Abbett Bond Debenture Fund 19,000
Mass Mutual Life Ins Co. 24,450
Mass Mutual Life Ins Co. 24,390
Mass Mutual Corp Value Fund 3,260
Medical Liability Mutual Insurance Co. 60,000
Merrill Lynch International Ltd. 148,500
Merrill Lynch Pierce Fenner & Smith Inc.(1) 63,085
Merrill Lynch Life Insurance Company 6,000
Michigan Mutual Insurance Company 2,000
Mt-Hawley Insurance Co. 250
NH BD, LP 2,000
NationsBanc Montgomery Securities, Inc. 6,000
New York Life Insurance Co. (NYLIC) 60,000
</TABLE>
- --------
(1) Merrill Lynch was the initial purchaser of the LYONs. Merrill Lynch has
provided from time to time, and may continue to provide in the future,
investment banking and investment advisory services to the Company, for
which it has received and may receive customary fees and commissions.
28
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT AT
MATURITY OF
LYONS BENEFICIALLY
OWNED AND THAT
MAY BE OFFERED HEREBY
SELLING HOLDER (IN THOUSANDS)
- -------------- ---------------------
<S> <C>
New York Life Insurance Co. (NYLIC) 45,000
New York Life Insurance Co. & Annuity Co. (NYLIAC) 5,000
Nomura International PLC 25,000
Pacific Life 30,000
Pell Asset Management 100
Pell Rudman Trust Co. 1,500
Physician's Reciprocal Insurers Account #7 2,200
Port Authority of Allegheny County Retirement and
Disability Allowance for the Employees Represented by
Local 85 1,875
Potlach Corporation 1,200
Public Service Electric & Gas Company Master Retirement
Trust 13,552
Q Investments LP 9,775
QCI 200
Quality Income Portfolio 10,000
R/2/ Investments LDC 5,225
RJR Nabisco, Inc. Defined Benefit Master Trust 1,550
SARABOND 1,000
SBC Warburg Dillon Read Inc. 24,900
SEI Balanced Fund 1,000
Silverson International Fund Limited 2,500
Smith Barney Inc. 2,700
Special Short Term Fund II 100,000
Southern Farm Bureau Life Insurance Company 1,000
STI Classic Balanced Fund 3,000
STI Classic Cap Growth Fund 1,500
STI Capital Management 50,000
Strong Asset Allocation Fund Inc. 8,000
Strong Corporate Bond Fund Inc. 8,500
Strong Short Term Bond Inc. 24,500
Swiss Bank Corporation - London Branch 50,550
Teacher Retirement Systems of Texas 40,000
Tennessee Consolidated Retirement System 20,000
The Dow Chemical Company Employees' Retirement Plan 2,775
The Field Foundation of Illinois 150
The Fondren Foundation 250
The Minnesota Mutual Life Insurance Company 3,090
The Vanguard Equity Income Fund 7,400
Toronto Dominion (New York), Inc. 13,175
Tote/SEC-CCE 25
TQA Arbitrage Fund, L.P. 2,000
Transamerica Occidental Life Insurance Co "Pension" 90,000
Triton Capital Investments Ltd 875
Tuffs Associated Health Plan 2,400
United Food and Commercial Workers Local 1262 and
Employees Pension Fund 650
UBS Securities LLC 20,200
University of Massachusetts Medical Center Trust 2,050
University of South Florida Foundation 350
Van Kampen American Capital Growth & Income Fund 8,375
Van Kampen American Capital Life Inv. Tr. Growth &
Income Portfolio 125
Van Kampen American Capital Equity Income Fund 24,000
Van Kampen American Capital Harbor Fund 11,250
Westinghouse Electric Corporation Master Trust 10,165
</TABLE>
29
<PAGE>
PLAN OF DISTRIBUTION
The LYONs and Common Stock issued upon conversion thereof may be offered for
sale and sold by the several Selling Holders in one or more transactions,
including block transactions, at a fixed price or fixed prices (which may be
changed), at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at prices determined on a negotiated or
competitive bid basis. LYONs and Common Stock issued upon conversion thereof
may be sold by a Selling Holder directly, through agents designated from time
to time or to or through broker-dealers designated from time to time, or by
such other means as may be specified in the applicable Prospectus Supplement.
LYONs and Common Stock issued upon conversion thereof may be sold through a
broker-dealer acting as agent or broker for the Selling Holders or to a
broker-dealer acting as principal. In the latter case, the broker-dealer may
then resell such LYONs or Common Stock to the public at varying prices to be
determined by such broker-dealer at the time of resale.
The Selling Holders and any agents or broker-dealers that participate with
the Selling Holders in the distribution of any of the LYONs or Common Stock
issued upon conversion thereof may be deemed to be "underwriters" within the
meaning of the Securities Act, and any discount or commission received by them
and any profit on the resale of the LYONs or Common Stock issued upon
conversion thereof purchased by them may be deemed to be underwriting
discounts or commissions under the Securities Act.
To the extent required, the number of LYONs or shares of Common Stock issued
upon conversion thereof to be sold, certain information relating to the
Selling Holders, the purchase price, the public offering price, if applicable,
the name of any underwriter, agent or broker-dealer, and any applicable
commissions, discounts or other items constituting compensation to such
underwriters, agents or broker-dealers with respect to a particular offering
will be set forth in an accompanying Prospectus Supplement.
LEGAL MATTERS
The validity of the LYONs and the shares of Common Stock issuable upon
conversion thereof was passed upon for the Company by Gibson, Dunn & Crutcher
LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of the Company at October 31, 1996 and
1997, and for each of the years ended October 31, 1995, 1996 and 1997,
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
of the Company for the year ended October 31, 1997, have been so incorporated
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of such firm as experts in auditing and accounting.
30
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFERING MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING HOLDER OR ANY OF THEIR RESPECTIVE AFFILIATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY ANY PERSON IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Risk Factors............................................................... 4
The Company................................................................ 7
Use of Proceeds............................................................ 7
Ratio of Earnings to Fixed Charges......................................... 8
Description of LYONs....................................................... 8
Certain United States Federal Income Tax Considerations.................... 23
Selling Security Holders................................................... 27
Plan of Distribution....................................................... 30
Legal Matters.............................................................. 30
Experts.................................................................... 30
</TABLE>
(TM) Trademark of Merrill Lynch & Co., Inc.
================================================================================
================================================================================
$2,000,000,000
[HEWLETT-PACKARD LOGO]
LIQUID YIELD OPTION(TM) NOTES
DUE 2017
(ZERO COUPON--SUBORDINATED)
-----------------
PROSPECTUS
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MARCH 17, 1998
================================================================================
