<PAGE>
Filed pursuant to Rule 424(b)(5)
Registration No. 333-21073
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 6, 1997)
[LOGO]
$1,000,000,000
INTERNATIONAL BUSINESS MACHINES CORPORATION
$500,000,000 6.45% NOTES DUE 2007
$500,000,000 6.22% DEBENTURES DUE 2027
--------------
INTEREST PAYABLE FEBRUARY 1 AND AUGUST 1
---------------------
THE NOTES AND THE DEBENTURES (COLLECTIVELY, THE "OFFERED SECURITIES") WILL
MATURE ON AUGUST 1, 2007 AND AUGUST 1, 2027, RESPECTIVELY. THE NOTES WILL BE
REDEEMABLE IN WHOLE OR IN PART, AT THE OPTION OF INTERNATIONAL BUSINESS
MACHINES CORPORATION (THE "COMPANY") AT ANY TIME, AND THE DEBENTURES
WILL BE REDEEMABLE IN WHOLE OR IN PART, AT THE OPTION OF THE COMPANY
AT ANY TIME ON OR AFTER AUGUST 2, 2004 AT A REDEMPTION PRICE AS SET
FORTH HEREIN UNDER "DESCRIPTION OF OFFERED SECURITIES -- OPTIONAL
REDEMPTION." THE DEBENTURES WILL ALSO BE REDEEMABLE AT THE OPTION
OF THE HOLDERS THEREOF ON AUGUST 1, 2004 AT 100% OF THEIR
PRINCIPAL AMOUNT PLUS ACCRUED INTEREST. EACH SERIES OF
OFFERED SECURITIES WILL BE REPRESENTED BY ONE OR MORE
GLOBAL SECURITIES (THE "GLOBAL SECURITIES") REGISTERED
IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC")
OR ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL
SECURITIES WILL BE SHOWN ON, AND TRANSFERS WILL
BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED
BY DTC AND ITS PARTICIPANTS. EXCEPT AS
DESCRIBED HEREIN, OFFERED SECURITIES IN
DEFINITIVE FORM WILL NOT BE ISSUED.
SEE "DESCRIPTION OF OFFERED
SECURITIES." APPLICATION WILL BE
MADE TO LIST THE OFFERED
SECURITIES ON THE NEW
YORK STOCK EXCHANGE.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PRICE OF NOTES 99.694% AND ACCRUED INTEREST
PRICE OF DEBENTURES 100% AND ACCRUED INTEREST
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
---------------- --------------- ----------------
<S> <C> <C> <C>
PER NOTE.......................................................... 99.694% .650% 99.044%
TOTAL........................................................... $ 498,470,000 $ 3,250,000 $ 495,220,000
PER DEBENTURE..................................................... 100.000% .625% 99.375%
TOTAL........................................................... $ 500,000,000 $ 3,125,000 $ 496,875,000
</TABLE>
- ---------
(1) PLUS ACCRUED INTEREST FROM AUGUST 1, 1997.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE SEVERAL UNDERWRITERS AGAINST
CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SEE"UNDERWRITING."
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $625,000.
------------------------
THE OFFERED SECURITIES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF
ACCEPTED BY THE UNDERWRITERS AND
SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY DAVIS, POLK & WARDWELL, COUNSEL
FOR THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY OF THE OFFERED SECURITIES
WILL BE MADE ON OR ABOUT AUGUST 4, 1997 THROUGH THE BOOK-ENTRY FACILITIES OF DTC
AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
JULY 30, 1997
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Use of Proceeds............................................................................................ S-3
Capitalization............................................................................................. S-3
Ratios of Earnings to Fixed Charges........................................................................ S-3
Recent Developments........................................................................................ S-4
Description of Offered Securities.......................................................................... S-4
Underwriting............................................................................................... S-8
Legal Opinions............................................................................................. S-9
PROSPECTUS
Available Information...................................................................................... 2
Information Incorporated by Reference...................................................................... 2
The Company................................................................................................ 3
Use of Proceeds............................................................................................ 3
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends... 3
Description of the Debt Securities......................................................................... 3
Description of the Preferred Stock......................................................................... 17
Description of the Depositary Shares....................................................................... 20
Description of the Capital Stock........................................................................... 23
Description of the Warrants................................................................................ 23
Plan of Distribution....................................................................................... 24
Legal Opinions............................................................................................. 25
Experts.................................................................................................... 25
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
SECURITIES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH ANY
OFFERING OF THE OFFERED SECURITIES, AND MAY BID FOR, AND PURCHASE, THE OFFERED
SECURITIES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
S-2
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Offered Securities will be used for
general corporate purposes.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1997, and as adjusted to give effect to the issuance of the
Offered Securities offered hereby.
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
<S> <C> <C>
OUTSTANDING AS ADJUSTED
----------- -----------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C>
Short-Term Debt........................................................................ $ 14,028 $ 14,028
----------- -----------
Long-Term Debt:
International Business Machines Corporation.......................................... $ 6,944 $ 7,936
Consolidated Subsidiaries............................................................ 4,731 4,731
----------- -----------
Total Long-Term Debt............................................................... 11,675 12,667
----------- -----------
Stockholders' Equity:
Preferred Stock--par value $.01 per share; 150,000,000 shares authorized; 2,597,361
shares outstanding................................................................. 253 253
Capital Stock--par value $.50 per share; 1,875,000,000 shares authorized; 982,261,297
shares outstanding................................................................. 8,290 8,290
Retained Earnings.................................................................... 13,411 13,411
Translation and Other Adjustments.................................................... 1,764 1,764
Treasury Stock, at cost; 47,374,997 shares........................................... (3,609) (3,609)
----------- -----------
Total Stockholders' Equity......................................................... 20,109 20,109
----------- -----------
Total Capitalization............................................................... $ 45,812 $ 46,804
----------- -----------
----------- -----------
</TABLE>
Pursuant to action taken at the Company's annual shareholder meeting on
April 29, 1997, the par value of the Company's Capital Stock was reduced from
$1.25 per share to $.50 per share and the number of shares authorized was
increased from 750,000,000 to 1,875,000,000.
Since January 31, 1995, the Company has repurchased more than $14.3 billion
of its Capital Stock under a series of authorizations from the Company's Board
of Directors. On April 29, 1997, the Company announced that its Board of
Directors had authorized the Company to repurchase up to an additional $3.5
billion of the Company's Capital Stock.
RATIOS OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes (which excludes the cumulative and transition
effects of accounting changes) and fixed charges by fixed charges. "Fixed
charges" consist of interest on debt and that portion of rental expense deemed
to be representative of interest.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEAR ENDED DECEMBER 31,
------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
----- ----- ----- ----- -----
Ratio of earnings to fixed charges............................... 5.2 4.7 5.3 5.0 3.1
<CAPTION>
<S> <C> <C>
1993 1992
----- -----
Ratio of earnings to fixed charges............................... (a) (a)
</TABLE>
- ------------------------
(a) No ratios are shown for these periods as earnings were insufficient to cover
fixed charges. As a result of the net loss incurred for the year ended
December 31, 1993, earnings were inadequate to cover fixed charges by $8,478
million. As a result of the net loss incurred for the year ended December
31, 1992, earnings were inadequate to cover fixed charges by $8,962 million.
S-3
<PAGE>
RECENT DEVELOPMENTS
On July 21, 1997, the Company announced second-quarter 1997 net earnings of
$1.4 billion, or $1.46 per common share, compared with net earnings of $1.3
billion, or $1.26 per common share, in the second quarter of 1996.
Second-quarter 1997 revenues were $18.9 billion, an increase of 4 percent (8
percent at constant currency) from the second quarter of last year.
For further information, see the Current Report of the Company on Form 8-K
dated July 21, 1997, incorporated herein by reference.
DESCRIPTION OF OFFERED SECURITIES
The following description of the particular terms of the Offered Securities
offered hereby supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which description reference is hereby made.
GENERAL
The Offered Securities will be issued under an Indenture (the "Senior
Indenture") dated as of October 1, 1993, between the Company and The Chase
Manhattan Bank, as Trustee, as supplemented by the First Supplemental Indenture
dated as of December 15, 1995, filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The Offered Securities will bear interest
from August 1, 1997, at the rates of interest stated on the cover page hereof.
Interest on the Offered Securities will be payable semiannually on February 1
and August 1, commencing February 1, 1998, to the persons in whose names such
securities are registered at the close of business on the January 15 or July 15
preceding such February 1 or August 1. The Notes will mature on August 1, 2007
and the Debentures will mature on August 1, 2027.
The Offered Securities will be subject to defeasance and covenant defeasance
as provided in "Description of the Debt Securities--Satisfaction and Discharge;
Defeasance" in the accompanying Prospectus.
GLOBAL SECURITIES
DTC will act as securities depository for the Offered Securities. The
Offered Securities will be issued in fully-registered form in the name of Cede &
Co. (DTC's partnership nominee). One or more fully-registered certificates will
be issued as Global Securities for each of the Offered Securities in the
aggregate principal amount of such Offered Securities, and will be deposited
with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Direct Participants")
deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry charges in Direct
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly
S-4
<PAGE>
or indirectly ("Indirect Participants" and together with Direct Participants,
"Participants"). The Rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Offered Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Offered
Securities on DTC's records. The ownership interest of each actual purchaser of
Offered Securities ("Beneficial Owner") is in turn to be recorded on the
Participant's records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the
Offered Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Offered
Securities except in the event that use of the book-entry system for the Offered
Securities is discontinued or upon request during the continuance of an Event of
Default with respect to the Offered Securities.
To facilitate subsequent transfers, all Offered Securities deposited by
Direct Participants with DTC are registered in the name of the DTC's partnership
nominee, Cede & Co. The deposit of Offered Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the Offered Securities;
DTC's records reflect only the identity of the Direct Participants to whose
accounts such Offered Securities are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Offered
Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to the
Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Offered Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Principal and interest payments on the Offered Securities will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on the payable
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such Participants and not of DTC, the Company, or
the Trustee, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to DTC is the
responsibility of the Company or the Trustee, disbursement of such payments to
Direct Participants shall be the responsibility of DTC, and disbursements of
such payments to the Beneficial Owners shall be the responsibility of
Participants.
DTC may discontinue providing its services as securities depository with
respect to the Offered Securities at any time by giving reasonable notice to the
Company or the Trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, Offered Securities certificates are
required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Offered Securities certificates will be printed and delivered.
During the continuance of an Event of Default with respect to the Offered
Securities, upon the request of any Beneficial Owner through DTC, Offered
Securities certificates will be printed and delivered to such Beneficial Owner.
S-5
<PAGE>
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable
(including DTC), but the Company takes no responsibility for the accuracy
thereof.
Neither the Company, the Trustee nor the Underwriters will have any
responsibility or obligation to Participants, or the persons for whom they act
as nominees, with respect to the accuracy of the records of DTC, its nominee or
any Participant with respect to any ownership interest in the Offered
Securities, or payments to, or the providing of notice for, Participants or
Beneficial Owners.
OPTIONAL REDEMPTION
REDEMPTION OF THE OFFERED SECURITIES AT THE OPTION OF THE COMPANY.
The Notes will be redeemable as a whole or in part, at the option of the
Company at any time, and the Debentures will be redeemable as a whole or in
part, at the option of the Company at any time on or after August 2, 2004, each
at a redemption price equal to the greater of (i) 100% of the principal amount
of the Offered Securities to be redeemed and (ii) the sum of the present values
of the Remaining Scheduled Payments (as hereinafter defined) thereon discounted
to the redemption date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate plus 10 basis points, plus in
either case accrued interest on the principal amount being redeemed to the date
of redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Offered Securities to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Offered Securities. "Independent
Investment Banker" means one of the Reference Treasury Dealers appointed by the
Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption
date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated,
Bear, Stearns & Co. Inc., Goldman, Sachs & Co., Lehman Brothers Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc, and their
respective successors; provided, however, that if any of the foregoing shall
cease to be a primary U.S. Government securities dealer in New York City (a
"Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any Offered
Securities, the remaining scheduled payments of the principal thereof to be
redeemed and interest thereon that would be due after
S-6
<PAGE>
the related redemption date but for such redemption; PROVIDED, HOWEVER, that, if
such redemption date is not an interest payment date with respect to such
Offered Securities, the amount of the next succeeding scheduled interest payment
thereon will be reduced by the amount of interest accrued thereon to such
redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Offered Securities to be
redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date interest will cease to accrue on the Offered Securities or
portions thereof called for redemption.
REDEMPTION OF DEBENTURES AT THE OPTION OF THE HOLDERS.
The Notes will not be redeemable at the option of the holders thereof prior
to maturity.
The Debentures will be redeemable on August 1, 2004, at the option of the
holders thereof, at 100% of their principal amount, together with interest
payable to the date of redemption. Less than the entire principal amount of any
Debenture may be redeemed, provided the principal amount which is to be redeemed
is equal to $1,000 or an integral multiple of $1,000.
DTC or its nominee, as registered holder of the Debentures, will be entitled
to tender the Debentures on August 1, 2004 for repayment. During the period from
and including June 1, 2004 to and including July 1, 2004, DTC will receive
instructions from its participants (acting on behalf of owners of beneficial
interests in the Debentures) to tender the Debentures for repayment under DTC's
procedures. Such tenders for repayment will be made by DTC, provided that DTC
receives instructions from tendering participants by Noon on July 1, 2004. DTC
will notify the Paying Agent designated pursuant to the Indenture by the close
of business on July 1, 2004 as to the aggregate principal amount of the
Debentures, if any, for which DTC shall have received instructions to tender for
repayments. OWNERS OF BENEFICIAL INTERESTS IN THE DEBENTURES WHO WISH TO
EFFECTUATE THE TENDER AND REPAYMENT OF SUCH DEBENTURES MUST INSTRUCT THEIR
RESPECTIVE DTC PARTICIPANT OR PARTICIPANTS A REASONABLE PERIOD OF TIME IN
ADVANCE OF JULY 1, 2004.
If at any time the use of a book-entry only system through DTC (or any
successor securities depositary) is discontinued with respect to the Debentures,
tenders for repayment of any Debenture on August 1, 2004 shall be made according
to the following procedures. The Company must receive at the principal office of
the Paying Agent, during the period from and including June 1, 2004 to and
including July 1, 2004: (i) the Debenture with the form entitled "Option to
Elect Repayment" on the reverse of the Debenture duly completed; or (ii)(x) a
telegram, facsimile transmission or letter from a member of a national
securities exchange or the National Association of Securities Dealers, Inc., or
a commercial bank or a trust company in the United States of America, setting
forth the name of the registered holder of the Debenture, the principal amount
of the Debenture, the amount of the Debenture to be repaid, a statement that the
option to elect repayment is being exercised thereby and a guarantee that the
Debenture to be repaid with the form entitled "Option to Elect Repayment" on the
reverse of the Debenture duly completed will be received by the Company not
later than five business days after the date of such telegram, facsimile
transmission or letter; and (y) such Debenture and form duly completed are
received by the Company by such fifth business day. Any such notice received by
the Company during the period from and including June 1, 2004 to and including
July 1, 2004 shall be irrevocable. All questions as to the validity, eligibility
(including time of receipt) and the acceptance of any Debenture for repayment
will be determined by the Company, whose determination will be final and
binding.
For all purposes of this section, if August 1, 2004 is not a business day,
it shall be deemed to refer to the next succeeding business day.
S-7
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement, dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amount of the Offered Securities set forth opposite their
respective names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
NAME OF NOTES OF DEBENTURES
- --------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated........................ $ 83,335,000 $ 83,335,000
Bear, Stearns & Co. Inc.................................. $ 83,333,000 $ 83,333,000
Goldman, Sachs & Co...................................... $ 83,333,000 $ 83,333,000
Lehman Brothers Inc...................................... $ 83,333,000 $ 83,333,000
Merrill Lynch, Pierce, Fenner &
Smith Incorporated..................................... $ 83,333,000 $ 83,333,000
Salomon Brothers Inc..................................... $ 83,333,000 $ 83,333,000
Total............................................ $ 500,000,000 $ 500,000,000
---------------- -----------------
---------------- -----------------
</TABLE>
The Underwriting Agreement provides that the obligation of the several
Underwriters to pay for and accept delivery of the Offered Securities is subject
to the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the
Offered Securities if any are taken.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Notes and the Debentures to the public initially at the
respective public offering prices set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in excess
of .400% of the principal amount per Note and .375% of the principal amount per
Debenture. The Underwriters may allow and such dealers may reallow a discount
not in excess of .250% of the principal amount per Note and .250% of the
principal amount per Debenture on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Offered Securities are a new issue of securities with no established
trading market. The Underwriters have informed the Company that they intend to
make a market in the Offered Securities but are under no obligation to do so and
such market making may be terminated at any time without notice. Application
will be made to list the Offered Securities on the New York Stock Exchange.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, or
contribute to payments which the Underwriters may be required to make in respect
thereof.
In order to facilitate the offering of the Offered Securities, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the prices of the Offered Securities. Specifically, the Underwriters may
overallot in connection with the offering, creating a short position in the
Offered Securities for their own account. In addition, to cover overallotments
or to stabilize the price of the Offered Securities, the Underwriters may bid
for, and purchase, the Offered Securities in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an underwriter
or dealer for distributing the Offered Securities in the offering, if the
syndicate repurchases previously distributed Offered Securities in transactions
to cover syndicate short positions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market prices of the
Offered Securities above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
S-8
<PAGE>
The Underwriters and certain of their affiliates and associates may engage
in transactions with, and/or perform services, including investment banking
services, for, the Company and its subsidiaries in the ordinary course of
business.
LEGAL OPINIONS
The validity of the Offered Securities offered hereby will be passed upon
for the Company by David S. Hershberg, Vice President and Assistant General
Counsel of the Company, and for the Underwriters by Davis Polk & Wardwell, New
York, New York. Mr. Hershberg, together with members of his family, owns, has
options to purchase and has other interests in shares of common stock of the
Company totaling less than 1% of all such stock currently outstanding.
S-9
<PAGE>
[LOGO]
<PAGE>
PROSPECTUS
INTERNATIONAL BUSINESS MACHINES CORPORATION
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
CAPITAL STOCK
WARRANTS
International Business Machines Corporation (the "Company") intends from
time to time to issue, in one or more series, up to an aggregate of
$3,230,000,000 of its debt securities (the "Debt Securities"), which may be
either senior (the "Senior Debt Securities") or subordinated (the "Subordinated
Debt Securities") in priority of payment, preferred stock (the "Preferred
Stock"), depositary shares (the "Depositary Shares") representing a fractional
interest in a share of Preferred Stock, Capital Stock (the "Capital Stock") and
warrants to purchase Debt Securities, Preferred Stock or Capital Stock (the
"Warrants") (the Debt Securities, Preferred Stock, Depositary Shares, Capital
Stock and Warrants being collectively referred to herein as the "Securities").
When a particular series of Securities is offered, a supplement to this
Prospectus (the "Prospectus Supplement") will be delivered with the Prospectus.
For Debt Securities, the Prospectus Supplement will set forth with respect to
such series: whether it is a series of Senior Debt Securities or Subordinated
Debt Securities; the designation and principal amount offered; the rate (or
method of calculation) and time of payment of interest, if any; the authorized
denominations; the maturity or maturities; the terms for a sinking, purchase or
analogous fund, if any; the terms for redemption or early repayment, if any; the
currency or currencies or currency unit or currency units in which principal,
premium, if any, or interest, if any, is payable; the purchase price and other
terms of the offering; and any listing on a securities exchange. For Preferred
Stock and Depositary Shares, the Prospectus Supplement will set forth with
respect to such series: the designation; aggregate number of shares; liquidation
preference per share; dividend rate (or method of calculation); dates on which
dividends shall be payable, whether dividends shall be cumulative, noncumulative
or partially cumulative and dates from which dividends shall accrue; any
redemption or sinking fund provisions; the purchase price and other terms of the
offering; any listing on a securities exchange; and if Depositary Shares will be
offered, the fraction of a share of Preferred Stock represented by each
Depositary Share. For Capital Stock, the Prospectus Supplement will set forth
with respect to such series: the number of shares; and the purchase price and
other terms of the offering. For Warrants, the Prospectus Supplement will set
forth with respect to such series: the number and terms thereof; the designation
and the number of securities issuable upon exercise; the purchase price and
other terms of the offering; the exercise price; and, where applicable, the
duration and detachability thereof.
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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.
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The Securities may be sold (i) through underwriting syndicates represented
by managing underwriters or by underwriters without a syndicate; (ii) through
agents designated from time to time; or (iii) directly. The names of any
underwriters or agents of the Company involved in the sale of the Securities in
respect of which this Prospectus is being delivered and any applicable
commissions or discounts are set forth in the Prospectus Supplement. The net
proceeds to the Company from such sale are also set forth in the Prospectus
Supplement.
THE DATE OF THIS PROSPECTUS IS MARCH 6, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and copies of such
material may be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a Website that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission ("http://www.sec.gov"). Such reports, proxy statements and other
information may also be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, 7th Floor, New York, New York, the Chicago Stock
Exchange, Incorporated, 440 South LaSalle Street, Suite 518, Chicago, Illinois
and the Pacific Stock Exchange Incorporated, 115 Sansome Street, 2nd Floor, San
Francisco, California.
INFORMATION INCORPORATED BY REFERENCE
The Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1995, the Quarterly Reports of the Company on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, and the
Current Report of the Company on Form 8-K dated February 8, 1996, July 25, 1996,
October 21, 1996, December 5, 1996, December 6, 1996, January 21, 1997 and
January 29, 1997, filed by the Company under Exchange Act file number 1-2360,
are incorporated herein by reference. All documents filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date hereof and prior to the termination of the offering of the Securities
offered hereby shall be deemed to be incorporated herein by reference.
The Company will cause to be furnished without charge to each person to whom
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all the documents described above, other than exhibits to such
documents. Requests should be addressed to: First Chicago Trust Company of New
York, Mail Suite 4688, P.O. Box 2530, Jersey City, New Jersey, 07303-2530;
telephone: (201) 324-0405.
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THE COMPANY
The Company develops, manufactures and sells advanced information processing
products, including computers and microelectronic technology, software,
networking systems and information technology-related services. The Company
offers value worldwide through its North America, Europe/Middle East/ Africa,
Latin America, Asia/Pacific, Global Services and Worldwide Client Server
Computing business units, by providing comprehensive and competitive product
choices.
The Company's principal executive offices are located at Armonk, New York
10504, and its telephone number is (914) 765-1900.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes.
The Company expects that it will, on a recurring basis, engage in additional
financings in character and amount to be determined as the need arises.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes (which excludes the cumulative and transition
effects of accounting changes) and fixed charges by fixed charges. The ratio of
earnings to combined fixed charges and preferred stock dividends has been
computed by dividing earnings before income taxes (which excludes the cumulative
and transition effects of accounting changes) and fixed charges by the sum of
fixed charges and dividends on preferred stock. For purposes of calculating the
ratio of earnings to combined fixed charges and preferred stock dividends, the
preferred stock dividend requirements were assumed to be equal to the pre-tax
earnings that would be required to cover such dividend requirements based on the
Company's effective income tax rates for the respective periods. "Fixed charges"
consist of interest on debt and that portion of rental expense deemed to be
representative of interest.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------ -------------------------------------
1996 1995 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges......................... 4.9 4.5 5.0 3.1 (a)
Ratio of earnings to combined fixed charges and preferred
stock dividends.......................................... 4.8 4.4 4.9 2.9 (a)
<CAPTION>
1992 1991
----- -----
<S> <C> <C>
Ratio of earnings to fixed charges......................... (a) 1.0
Ratio of earnings to combined fixed charges and preferred
stock dividends.......................................... (a) 1.0
</TABLE>
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(a) No ratios are shown for these periods as earnings were insufficient to
cover fixed charges and, in 1993, combined fixed charges and preferred stock
dividends. As a result of the net loss incurred for the year ended December
31, 1993, earnings were inadequate to cover fixed charges and combined fixed
charges and preferred stock dividends by $8,478 million and $8,525 million,
respectively. As a result of the net loss incurred for the year ended
December 31, 1992, earnings were inadequate to cover fixed charges by $8,962
million.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities will constitute either Senior Debt Securities or
Subordinated Debt Securities. The Senior Debt Securities are to be issued under
an Indenture (the "Senior Indenture") dated as of October 1, 1993, between the
Company and The Chase Manhattan Bank (National Association), as Trustee (the
"Senior Trustee"), as supplemented by the First Supplemental Indenture thereto
dated as of December 15, 1995, filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The
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Subordinated Debt Securities will be issued under an Indenture (the
"Subordinated Indenture") to be entered into between the Company and the trustee
named in the applicable Prospectus Supplement (the "Subordinated Trustee"), a
form of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Senior Indenture and the Subordinated Indentures are
collectively referred to herein as the "Indentures". The following statements
are subject to the detailed provisions of the applicable Indenture; whenever
particular provisions of the applicable Indenture are referred to, such
provisions are incorporated by reference as a part of the statement made, and
the statement is qualified in its entirety by such reference. Whenever a defined
term is referred to and not defined under "Description of the Debt Securities",
the definition thereof is contained in the applicable Indenture. Cross
references to Sections of the Indentures relate to both the Senior Indenture and
the Subordinated Indenture, unless otherwise indicated.
GENERAL
Each Indenture provides for the issuance from time to time of Debt
Securities in an unlimited aggregate principal amount and an unlimited number of
series.
Reference is made to the applicable Prospectus Supplement for the following
terms of the series of Debt Securities offered thereby: (i) the title of the
Debt Securities of such series; (ii) any limit upon the aggregate principal
amount of such Debt Securities; (iii) the date or dates on which such Debt
Securities will mature or the method of determination of such date or dates;
(iv) the rate or rates, or the method of determination thereof, at which such
Debt Securities will bear interest, if any, the date or dates from which such
interest will accrue, the date or dates such interest will be payable and, for
Registered Debt Securities, the Regular Record Dates; (v) the place or places
where the principal of, and premium and interest, if any, on, such Debt
Securities will be payable; (vi) the periods, prices and terms and conditions
upon which any such Debt Security may be redeemed, in whole or in part, at the
option of the Company; (vii) any terms for redemption or repurchase pursuant to
any sinking fund or analogous provision or at the option of a Holder; (viii) any
terms for conversion of the Debt Securities into Preferred Stock, Depositary
Shares or Capital Stock or for exchange of the Debt Securities for the
securities of any other corporation at the option of a holder; (ix) any terms
for the attachment to such Debt Securities of warrants, options or other rights
to purchase or sell Debt Securities, Preferred Stock, Depositary Shares or
Capital Stock; (x) if other than the principal amount thereof, the portion of
the principal amount of such Debt Securities that will be payable upon
acceleration of maturity (Debt Securities subject to such provisions being
referred to as "Original Issue Discount Securities"); (xi) any deletions or
modifications of, or additions to, the Events of Default or covenants of the
Company under the Indenture with respect to such Debt Securities (including
whether the covenants described below under "Certain Covenants of the Company"
will not apply to such Debt Securities); (xii) if other than U.S. dollars, the
currency, currencies or currency unit or units in which such Debt Securities
will be denominated and in which the principal of, and premium and interest, if
any, on, such Securities will be payable; (xiii) whether, and the terms and
conditions on which, the Company or a Holder may elect that, or the other
circumstances under which, payment of principal of, or premium or interest, if
any, on, such Debt Securities is to be made in a currency or currencies or
currency unit or units other than that in which such Debt Securities are
denominated; (xiv) any matter of determining the amount of principal of, or
premium or interest, if any, on, any such Debt Securities to be determined with
reference to an index based on a currency or currency unit, or units other than
that in which such Debt Securities are stated to be payable or an index based on
any other method; (xv) whether such Debt Securities will be issued in fully
registered form without coupons ("Registered Debt Securities") or in bearer form
with or without coupons ("Bearer Debt Securities"), or any combination thereof,
whether such Debt Securities will be issued in the form of one or more global
securities (each a "Global Debt Security") and whether such Debt Securities are
to be issuable in temporary global form or definitive global form; (xvi) if such
Debt Securities are to be issued upon the exercise of warrants, the time, manner
and place for such Debt Securities to be authenticated and delivered; (xvii)
whether and under what circumstances the Company will pay additional amounts to
any holder of such Debt Securities who is not a
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United States person (as defined below under "Temporary Global Securities") in
respect of any tax, assessment or governmental charge withheld or deducted and,
if so, whether and on what terms the Company will have the option to redeem such
Debt Securities rather than pay any additional amounts; and (xviii) any other
terms of any of such Debt Securities not inconsistent with the Indenture.
(SECTIONS 202 AND 301)
Unless otherwise specified in the applicable Prospectus Supplement, (x) the
Debt Securities will be Registered Debt Securities and (y) Debt Securities
denominated in U.S. dollars will be issued, in the case of Registered Debt
Securities, in denominations of $1,000 or an integral multiple thereof and, in
the case of Bearer Debt Securities, in denominations of $5,000. Debt Securities
may bear legends required by United States Federal tax law and regulations.
(SECTION 401)
If any of the Debt Securities are sold for any foreign currency or currency
unit or if the principal of, or premium or interest, if any, on, any of the Debt
Securities is payable in any foreign currency or currency unit, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such Debt Securities and such foreign currency or currency unit
will be set forth in the Prospectus Supplement relating thereto.
EXCHANGE, REGISTRATION AND TRANSFER
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. If Debt Securities of
any series are issuable as both Registered Debt Securities and Bearer Debt
Securities, the Bearer Debt Securities of such series (with all unmatured
coupons, except as provided below, and all matured coupons in default) will be
exchangeable for Registered Debt Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. If a Bearer
Debt Security with coupons appertaining thereto is surrendered in exchange for a
Registered Debt Security after a Regular Record Date or Special Record Date and
before the relevant date for payment of interest, such Bearer Debt Security
shall be surrendered without the coupon relating to such date for payment of
interest and interest will not be payable on such date in respect of the
Registered Debt Security issued in exchange for such Bearer Debt Security, but
will be payable only to the holder of such coupon when due in accordance with
the terms thereof and of the Indenture. Bearer Debt Securities will not be
issued in exchange for Registered Debt Securities (unless otherwise specified in
the applicable Prospectus Supplement and permitted by applicable rules and
regulations). No service charge will be made for any transfer or exchange of the
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge in connection therewith. (SECTION
404)
Debt Securities may be presented for exchange as provided above, and
Registered Debt Securities (other than U.S. Book-Entry Debt Securities (as
defined below under "Definitive Global Securities--U.S. BOOK-ENTRY SECURITIES"))
may be presented for registration of transfer (with the form of transfer
endorsed thereon duly executed), at the office of the Security Registrar or at
the office of any additional transfer agent designated by the Company for such
purpose with respect to any series of Debt Securities and referred to in the
applicable Prospectus Supplement. (SECTIONS 404 AND 1102) The Chase Manhattan
Bank (National Association), located at One Chase Manhattan Plaza, New York, New
York 10081, is the Security Registrar under the Senior Indenture, and the
Security Registrar under the Subordinated Indenture will be designated in the
applicable Prospectus Supplement. (SECTION 404) The Company may at any time
designate, or rescind the designation of, the Security Registrar or any
additional transfer agent or approve a change in the location through which the
Security Registrar or any such transfer agent acts, except that, if Debt
Securities of a series are issuable solely as Registered Debt Securities, the
Company will be required to maintain a transfer agent in each Place of Payment
for such series and, if Debt Securities of a series are issuable as both
Registered Debt Securities and Bearer Debt Securities or solely as Bearer Debt
Securities, the Company will be required to maintain (in addition to the
Security Registrar) a transfer agent in a Place of Payment for such series
located outside of the United States. The Company
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may at any time designate additional transfer agents with respect to any series
of Debt Securities. (SECTION 1102)
In the event of any redemption in part of any series of Debt Securities, the
Company will not be required to: (i) issue, register the transfer of, or
exchange, Debt Securities of any series during a period beginning at the opening
of business 15 Business Days before any selection of Debt Securities of that
series to be redeemed and ending at the close of business on (a) if Debt
Securities of the series are issuable only as Registered Debt Securities, the
day of mailing of the relevant notice of redemption and (b) if Debt Securities
of the series are issuable as Bearer Debt Securities, the day of the first
publication of the relevant notice of redemption or, if Debt Securities of the
series are also issuable as Registered Debt Securities and there is no
publication, the day of mailing of the relevant notice of redemption; (ii)
register the transfer of, or exchange, any Registered Debt Security selected for
redemption, in whole or in part, except the unredeemed portion of any Registered
Debt Security being redeemed in part; or (iii) exchange any Bearer Debt Security
selected for redemption, except to exchange such Bearer Debt Security for a
Registered Debt Security of that series and like tenor which is simultaneously
surrendered for redemption. (SECTION 404)
For a discussion of restrictions on the exchange, registration and transfer
of Global Debt Securities, see "Global Securities" below.
PAYMENT AND PAYING AGENTS
Payment of principal of, and premium and interest, if any, on, Registered
Debt Securities will be made in the designated currency or currency unit at the
office of such Paying Agent or Paying Agents as the Company may designate from
time to time. At the option of the Company, payment of any interest on
Registered Debt Securities may be made by check mailed to the address of the
person entitled thereto as such address shall appear in the Security Register.
Payment of any installment of interest on Registered Debt Securities will be
made to the person in whose name such Registered Debt Security is registered at
the close of business on the Regular Record Date for such interest. (SECTIONS
406 AND 410)
Payment of principal of, and premium and interest, if any, on, Bearer Debt
Securities will be made in the designated currency unit at the offices of such
Paying Agents outside the United States as the Company may designate from time
to time. On the applicable payment date therefor payments of principal of, and
premium, if any, on, Bearer Debt Securities will be made against surrender of
such Debt Securities, and payment of interest on Bearer Debt Securities with
coupons appertaining thereto on any Interest Payment Date will be made only
against surrender of the coupon relating to such Interest Payment Date.
(SECTIONS 410 AND 1102) No payment with respect to any Bearer Debt Security will
be made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to any account
maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of principal of, and premium and interest, if any, on,
Bearer Debt Securities denominated and payable in U.S. dollars will be made at
the office of the Company's Paying Agent in the Borough of Manhattan, The City
of New York, if (but only if) payment of the full amount thereof in U.S. dollars
at all offices or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions. (SECTION 1102)
Unless otherwise indicated in the applicable Prospectus Supplement with
respect to Senior Debt Securities, The Chase Manhattan Bank (National
Association), located at One Chase Manhattan Plaza, New York, New York 10081,
will be designated as the Company's Paying Agent for payments with respect to
Senior Debt Securities that are issuable solely as Registered Debt Securities
and as the Company's Paying Agent in the Borough of Manhattan, The City of New
York for payments with respect to Senior Debt Securities (subject to the
limitations described above in the case of Bearer Debt Securities) that are
issuable solely as Bearer Debt Securities or as both Registered Debt Securities
and Bearer Debt Securities. With respect to Subordinated Debt Securities, the
Company's Paying Agent for payments with respect to
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Subordinated Debt Securities that are issuable solely as Registered Debt
Securities and the Company's Paying Agent in the Borough of Manhattan, The City
of New York for payments with respect to Subordinated Debt Securities (subject
to the limitations described above in the case of Bearer Debt Securities) that
are issuable solely as Bearer Debt Securities or as both Registrable Debt
Securities and Bearer Debt Securities will be designated in the applicable
Prospectus Supplement. Any Paying Agents outside the United States and any other
Paying Agents in the United States initially designated by the Company for the
Debt Securities of a series will be named in the applicable Prospectus
Supplement. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that, if Debt Securities of a series
are issuable solely as Registered Debt Securities, the Company will be required
to maintain a Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series are issuable as both Registered Debt Securities or Bearer
Debt Securities or solely as Bearer Debt Securities, the Company will be
required to maintain (i) a Paying Agent in the Borough of Manhattan, The City of
New York for payments with respect to any Registered Debt Securities of the
series (and for payments with respect to Bearer Debt Securities of the series in
the circumstances described above, but not otherwise), and (ii) a Paying Agent
in a Place of Payment located outside the United States where Debt Securities of
such series and any coupons appertaining thereto may be presented and
surrendered for payment; provided that if the Debt Securities of such series are
listed on any stock exchange located outside the United States and such stock
exchange shall so require, the Company will maintain a Paying Agent in any
required city located outside the United States for the Debt Securities of such
series. (SECTION 1102)
All moneys deposited with a Trustee or Paying Agent, or then held by the
Company, in trust for the payment of principal of, and premium and interest, if
any, on, any Debt Security or coupon that remains unclaimed at the end of two
years after such principal, premium or interest shall have become due and
payable will be repaid to the Company, or, if then held by the Company,
discharged from such trust, and the holder of such Debt Security or coupon will
thereafter look only to the Company for payment thereof. (SECTION 1103)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part as one or
more Global Debt Securities in either registered or bearer form and in either
temporary or definitive form. The Global Debt Security or Securities of a series
will be deposited with, or on behalf of, a depositary located in the United
States (a "U.S. Depositary") or a common depositary located outside the United
States (a "Common Depositary") identified in the Prospectus Supplement relating
to such series. All temporary or definitive Global Debt Securities in bearer
form will be deposited with a Common Depositary.
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series issued in global form will be described in the Prospectus
Supplement relating to such series. For purposes other than making payments on a
definitive Global Debt Security, the Company may treat a person having a
beneficial interest in such definitive Global Debt Security as the holder of
such principal amount of Outstanding Debt Securities represented by such
definitive Global Debt Security as shall be specified in a written statement of
the holder of such definitive Global Debt Security, or, in the case of a
definitive Global Debt Security in bearer form, of Euro-clear or Cedel Bank (as
defined below), which is delivered to the Trustee by such person. (SECTION 411)
None of the Company, the Trustee, any Paying Agent or the Security Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Debt Security or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests. (SECTION 411) The Company anticipates
that the following provisions will apply to all depositary arrangements with a
U.S. Depositary or Common Depositary.
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TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Debt Securities of a series that are issuable as Bearer Debt Securities
initially will be represented by one or more temporary Global Debt Securities,
without interest coupons, to be deposited with a Common Depositary in London for
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euro-clear System ("Euro-clear"), and Cedel Bank, societe anonyme ("Cedel Bank")
for credit to the respective accounts of the beneficial owners of such Debt
Securities (or to such other accounts as they may direct). On and after the
exchange date determined as provided in any such temporary Global Debt Security
and described in the applicable Prospectus Supplement, each such temporary
Global Debt Security will be exchangeable for definitive Debt Securities in
bearer form, registered form, definitive global bearer form or any combination
thereof, as specified in the applicable Prospectus Supplement. No Bearer Debt
Security (including a Debt Security in definitive global bearer form) delivered
in exchange for a portion of a temporary Global Debt Security will be mailed or
otherwise delivered to any location in the United States in connection with such
exchange. (SECTIONS 402 AND 403)
Unless otherwise specified in the applicable Prospectus Supplement, interest
on any portion of a temporary Global Debt Security payable in respect of an
Interest Payment date occurring prior to the issuance of definitive Debt
Securities will be paid to each of Euro-clear and Cedel Bank with respect to the
portion of the temporary Global Debt Security held for its account upon delivery
to the applicable Trustee of a certificate signed by Euro-clear or Cedel Bank,
as the case may be, in the form required by the applicable Indenture dated no
earlier than such Interest Payment Date, which certificate must be based on
statements provided to it by its account holders who are beneficial owners of
interests in such temporary Global Debt Security to the effect that such portion
is not beneficially owned by a United States person, and has not been acquired
by or on behalf of a United States person or for offer to resell or for resale
to a United States person or any person inside the United States or, if a
beneficial interest in such portion has been acquired by a United States person,
(i) that such person is a financial institution, as defined in applicable
regulations promulgated under the Internal Revenue Code of 1986, as amended (the
"Code"), purchasing for its own account or has acquired such Debt Security
through a financial institution and (ii) that such Debt Securities are held by a
financial institution that has agreed in writing to comply with the requirements
of Section 165(j)(3)(A), (B) or (C) of the Code and the regulations thereunder
and that it did not purchase for offer to resell or for resale inside the United
States. Each of Euro-clear and Cedel Bank will in such circumstances credit the
interest received by it in respect of such temporary Global Debt Security to the
accounts of the beneficial owners thereof (or to such other accounts as they may
direct). (SECTION 403)
As used herein, "United States person" means 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 an estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
DEFINITIVE GLOBAL SECURITIES
BEARER SECURITIES. If any Debt Securities of a series are issuable in
definitive global bearer form, the applicable Prospectus Supplement will
describe the circumstances, if any, under which beneficial owners of interests
in any such definitive global Bearer Debt Security may exchange such interests
for Debt Securities of such series and of like tenor and principal amount in any
authorized form and denomination. No Bearer Debt Security delivered in exchange
for a portion of a definitive Global Debt Security will be mailed or otherwise
delivered to any location in the United States in connection with such exchange.
(SECTION 404) Principal of, and premium and interest, if any, on, a definitive
global Bearer Debt Security will be payable in the manner described in the
applicable Prospectus Supplement.
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U.S. BOOK-ENTRY SECURITIES. If Debt Securities of a series are to be
represented by a definitive global Registered Debt Security to be deposited with
or on behalf of a U.S. Depositary, such Debt Securities ("U.S. Book-Entry Debt
Securities") will be represented by a definitive Global Debt Security registered
in the name of the U.S. Depositary or its nominee. Upon the issuance of a
definitive Global Debt Security registered in the name of the U.S. Depositary,
the U.S. Depositary will credit, on its book-entry registration and transfer
system, the respective principal amounts of the U.S. Book-Entry Debt Securities
represented by such Global Debt Security to the accounts of institutions that
have accounts with such depositary or its nominee ("participants"). The accounts
to be credited shall be designated by the underwriters or agents for the sale of
such U.S. Book-Entry Debt Securities or by the Company, if such Debt Securities
are offered and sold directly by the Company. Ownership of U.S. Book-Entry Debt
Securities will be limited to participants or persons that may hold interests
through participants. Ownership of U.S. Book-Entry Debt Securities will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by the U.S. Depositary or its nominee for the applicable definitive
Global Security or by participants or persons that hold through participants. So
long as the U.S. Depositary, or its nominee, is the registered owner of such
Global Debt Security, such depositary or such nominee, as the case may be, will
be considered the sole owner or holder of the U.S. Book-Entry Debt Securities
represented by such Global Debt Security for all purposes under the Indenture.
Payment of principal of, and premium and interest, if any, on, U.S. Book-Entry
Debt Securities will be made to the U.S. Depositary or its nominee, as the case
may be, as the registered owner or the holder of the Global Debt Security
representing such U.S. Book-Entry Debt Securities. Owners of U.S. Book-Entry
Debt Securities will not be entitled to have such Debt Securities registered in
their names in the Security Register, will not receive or be entitled to receive
physical delivery of such Debt Securities in definitive form and will not be
considered the owners or holders thereof under the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws impair
the ability to purchase or transfer U.S. Book-Entry Debt Securities.
The Company expects that the U.S. Depositary for U.S. Book-Entry Debt
Securities of a series, upon receipt of any payment of principal of, or premium
or interest, if any, on, the related definitive Global Debt Security, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Debt Security as shown on the records of such Depositary. The Company also
expects that payments by participants to owners of beneficial interests in such
Global Debt Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such participants.
CERTAIN COVENANTS OF THE COMPANY
LIMITATION ON MERGER, CONSOLIDATION AND CERTAIN SALES OF ASSETS. The
Company will covenant that it will not merge into or consolidate with any other
corporation, or convey or transfer its properties and assets substantially as an
entirety, to, any person unless (a) the successor is a U.S. corporation, (b) the
successor assumes on the same terms and conditions all the obligations under the
Debt Securities and the Indentures and (c) immediately after giving effect to
the transaction, there is no default under the applicable Indenture. (SECTION
901) Upon any such merger, consolidation, conveyance or transfer, the successor
will succeed to, and will be substituted in lieu of, the Company. (SECTION 902)
EVENT RISK. Except for the limitations on Secured Indebtedness and Sale and
Leaseback Transactions described below under Senior Debt Securities, the
Indentures and Debt Securities do not contain any covenants or other provisions
designed to afford holders of the Debt Securities protection in the event of a
highly leveraged transaction involving the Company.
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SATISFACTION AND DISCHARGE; DEFEASANCE
At the request of the Company, the applicable Indenture will cease to be in
effect as to the Debt Securities of any series (except for certain obligations
to register the transfer or exchange of such Debt Securities and related
coupons, if any, and hold moneys for payment of such Debt Securities and coupons
in trust) when either (a) all such Debt Securities and coupons have been
delivered to the applicable Trustee for cancellation or (b) all such Debt
Securities and coupons have become due and payable or will become due and
payable at their stated maturity within one year, or are to be called for
redemption within one year, and the Company has deposited with the applicable
Trustee, in trust money, in the currency, currencies or currency unit or units
in which such Debt Securities are payable, in an amount sufficient to pay all
the principal of, and premium and interest, if any, on, such Debt Securities on
the dates such payments are due in accordance with the terms of such Debt
Securities. (SECTION 501)
Unless otherwise specified in the applicable Prospectus Supplement, the
Company, at its option, (a) will be Discharged after 90 days from any and all
obligations in respect of any series of Debt Securities (except for certain
obligations to register the transfer of or exchange Debt Securities and related
coupons, replace stolen, lost or mutilated Debt Securities and coupons, maintain
paying agencies and hold moneys for payment in trust) or (b) need not comply
with certain restrictive covenants of the Indenture in respect of such series
(including those described under "Certain Covenants of the Company"), in each
case if the Company deposits with the trustee in trust, money, or, in the case
of Debt Securities and coupons denominated in U.S. dollars, U.S. Government
Obligations or, in the case of Debt Securities and coupons denominated in a
foreign currency, Foreign Government Securities, which through the payment of
interest thereon and principal thereof in accordance with their terms will
provide money, in an amount sufficient to pay in the currency, currencies or
currency unit or units in which such Debt Securities are payable all the
principal (including any mandatory sinking fund payments) of, and interest on,
such series on the dates such payments are due in accordance with the terms of
such series. Among the conditions to the Company's exercising any such option,
the Company is required to deliver to the applicable Trustee an opinion of
counsel to the effect that the deposit and related defeasance would not cause
the holders of such series to recognize income, gain or loss for United States
Federal income tax purposes and that the holders of such series will be subject
to United States Federal income tax in the same amounts, in the same manner and
at the same times as would have been the case if such option had not been
exercised. (SECTION 503)
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that, if an Event of Default specified therein with
respect to any series of Debt Securities shall have happened and be continuing,
either the applicable Trustee or the holders of 25% in principal amount of the
outstanding Debt Securities of such series (in the case of certain events of
bankruptcy, insolvency and reorganization, voting as one class with all other
outstanding Debt Securities) may declare the principal of all the Debt
Securities of such series, together with accrued interest thereon, if any, to be
immediately due and payable by notice in writing to the Company (and to the
applicable Trustee if given by the holders). (SECTION 602)
Events of Default in respect of any series are defined in the Indentures as
being: default for 30 days in payment of any interest installment when due;
default in payment of principal of, or premium, if any, on, Debt Securities of
such series when due (other than any sinking fund payments) at their stated
maturity, by declaration, when called for redemption or otherwise; default for
30 days in the making of any sinking fund payment when due; default for 90 days
after notice to the Company by the applicable Trustee or by holders of 25% in
principal amount of the outstanding Debt Securities of such series in the
performance of any covenant in the Debt Securities of such series or in the
applicable Indenture with respect to Debt Securities of such series; and certain
events of bankruptcy, insolvency and reorganization. No Event of Default with
respect to a single series of indebtedness issued under an Indenture (and any
supplemental
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indentures) necessarily constitutes an Event of Default with respect to any
other series of indebtedness issued thereunder. (SECTION 601)
Each Indenture provides that the applicable Trustee will, within 90 days
after the occurrence of a default with respect to the Debt Securities of any
series, give to the holders of the Debt Securities of such series notice of all
uncured and unwaived defaults known to it; provided that, except in the case of
default in the payment of principal of, or premiums or interest, if any, on, or
a sinking fund installment, if any, with respect to any of the Debt Securities
of such series, such Trustee will be protected in withholding such notice if it
in good faith determines that the withholding of such notice is in the interest
of the holders of the Debt Securities of such series. The term "default" for the
purpose of this provision only means the happening of any of the Events of
Default specified above, except that any grace period of notice requirement is
eliminated. (SECTION 702)
Each Indenture contains provisions entitling the applicable Trustee, subject
to the duty of such Trustee during an Event of Default to act with the required
standard of care, to be indemnified by the holders of the Debt Securities before
proceeding to exercise any right or power under such Indenture at the request of
holders of the Debt Securities. (SECTION 703)
Each Indenture provides that the holders of a majority in principal amount
of the outstanding Debt Securities of any series may in certain circumstances
direct the time, method and place of conducting proceedings for remedies
available to the applicable Trustee or exercising any trust or power conferred
on such Trustee in respect of such series. (SECTION 612)
Each Indenture includes a covenant that the Company will file annually with
the applicable Trustee an Officers' Certificate stating whether any default
exists and specifying any default that exists. (SECTION 1106)
In certain cases, the holders of a majority in principal amount of the
outstanding Debt Securities of any series may on behalf of the holders of all
Debt Securities of such series waive any past default or Event of Default with
respect to the Debt Securities of such series or compliance with certain
provisions of the Indenture, except, among other things, a default not
theretofore cured in payment of the principal of, or premium or interest, if
any, on, any of the Debt Securities of such series. (SECTION 613) The holders of
a majority in principal amount of a series of outstanding Debt Securities also
have certain rights to rescind any declaration of acceleration with respect to
such series after all Events of Default with respect to such series not arising
from such declaration shall have been cured. (SECTION 602)
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee thereunder may,
without the consent of any holders of Debt Securities, enter into supplemental
indentures for the purposes, among other things, of adding to the Company's
covenants, adding additional Events of Default, establishing the form or terms
of any series of Debt Securities issued under such supplemental indentures or
curing ambiguities or inconsistencies in the applicable Indenture or making
other provisions, provided such other provisions shall not adversely affect the
interests of the holders of any series of Debt Securities in any material
respect. (SECTION 1001)
Each Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the outstanding Debt Securities of all affected series (acting as one class),
to execute supplemental indentures adding any provisions to or changing or
eliminating any of the provisions of the applicable Indenture or modifying the
rights of the holders of the Debt Securities of such series, except that no such
supplemental indenture may, without the consent of the holders of all the
outstanding Debt Securities affected thereby, among other things: (i) change the
Stated Maturity of the principal of, or any installment of principal of or
interest on, any Debt Security; (ii) reduce the principal amount of, the rate of
interest on, or any premium payable upon the redemption of, any Debt Security;
(iii) reduce the amount of the principal of an Original Issue Discount Security
that would be due
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and payable upon acceleration of the Maturity thereof; (iv) change any Place of
Payment where, or the currency, currencies or currency unit or units in which,
any Debt Security or any premium or interest thereon is payable; (v) impair the
right to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date); (vi) affect adversely the terms, if any, of conversion of any
Debt Security into stock or other securities of the Company or of any other
corporation; (vii) reduce the percentage in principal amount of the outstanding
Debt Securities of any series, the consent of whose holders is required for any
such supplemental indenture, or the consent of whose holders is required for any
waiver (of compliance with certain provisions of the applicable Indenture or
certain defaults thereunder and their consequences) provided for in such
Indenture; (viii) change any obligation of the Company, with respect to
outstanding Debt Securities of a series, to maintain an office or agency in the
places and for the purposes specified in the Indenture for such series; or (ix)
modify any of the foregoing provisions or the provisions for the waiver of
certain covenants and defaults, except to increase any applicable percentage of
the aggregate principal amount of outstanding Debt Securities the consent of the
holders of which is required or to provide with respect to any particular series
the right to condition the effectiveness of any supplemental indenture as to
that series on the consent of the holders of a specified percentage of the
aggregate principal amount of outstanding Debt Securities of such series or to
provide that certain other provisions of the Indentures cannot be modified or
waived without the consent of the holder of each outstanding Debt Security
affected thereby. (SECTION 1002)
MEETINGS
The Indentures contain provisions for convening meetings of the holders of
Debt Securities of any series. (SECTION 1401) A meeting may be called at any
time by the Trustee under the applicable Indenture, and also, upon request, by
the Company or the holders of at least 10% in principal amount of the
outstanding Debt Securities of such series, in any such case upon notice given
in accordance with "Notices" below. (SECTION 1402) Persons entitled to vote a
majority in principal amount of the outstanding Debt Securities of a series will
constitute a quorum at a meeting of holders of Debt Securities of such series,
except that in the absence of a quorum, if the meeting was called by the Company
or the Trustee, it may be adjourned for a period of not less than 10 days, and
in the absence of a quorum at any such adjourned meeting, the meeting may be
further adjourned for a period of not less than 10 days. Except for any consent
which must be given by the holder of each outstanding Debt Security affected
thereby, as described above under "Modification of the Indentures", and subject
to the provisions described in the last sentence under this subheading, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present may be adopted by the affirmative vote of the holders of a
majority in principal amount of the outstanding Debt Securities of that series;
PROVIDED, HOWEVER, that any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which may be
made, given or taken by the holders of a specified percentage, which is equal to
or less than a majority, in principal amount of outstanding Debt Securities of a
series may be adopted at a meeting or an adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the holders of such
specified percentage in principal amount of the outstanding Debt Securities of
that series. Any resolution passed or decision taken at any meeting of holders
of Debt Securities of any series duly held in accordance with an Indenture will
be binding on all holders of Debt Securities of that series and the related
coupons. With respect to any consent, waiver or other action which the
Indentures expressly provide may be given by the holders of a specified
percentage of outstanding Debt Securities of all series affected thereby (acting
as one class), only the principal amount of outstanding Debt Securities of any
series represented at a meeting or an adjourned meeting duly reconvened at which
a quorum is present as aforesaid and voting in favor of such action will be
counted for purposes of calculating the aggregate principal amount of
outstanding Debt Securities of all series affected thereby favoring such action.
(SECTION 1404)
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NOTICES
Except as otherwise provided in the applicable Indenture, notices to holders
of Bearer Debt Securities will be given by publication at least once in a daily
newspaper in The City of New York and in London and in such other city or cities
as may be specified in such Bearer Debt Securities and will be mailed to such
persons whose names and addresses were previously filed with the applicable
Trustee, within the time prescribed for the giving of such notice. Notice to
holders of Registered Debt Securities will be given by mail to the addresses of
such holders as they appear in the Security Register. (SECTION 106)
TITLE
Title to any Bearer Debt Securities and any coupons appertaining thereto
will pass by delivery. The Company, the Trustee and any agent of the Company or
the Trustee may treat the bearer of any Bearer Debt Security or related coupon
and, prior to due presentment for registration of transfer, the registered owner
of any Registered Debt Security (including Registered Debt Securities in global
registered form), as the absolute owner thereof (whether or not such Debt
Security or coupon shall be overdue and notwithstanding any notice to the
contrary) for the purpose of making payment and for all other purposes. (SECTION
407)
REPLACEMENT OF SECURITIES COUPONS
Any mutilated Debt Security and any Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
holder upon surrender of such mutilated Debt Security or Debt Security with a
mutilated coupon to the Security Registrar. Debt Securities or coupons that
become destroyed, stolen or lost will be replaced by the Company at the expense
of the holder upon delivery to the Security Registrar of evidence of the
destruction, loss or theft thereof satisfactory to the Company and the Security
Registrar; in the case of any coupon which becomes destroyed, stolen or lost,
such coupon will be replaced (upon surrender to the Security Registrar of the
Debt Security with all appurtenant coupons not destroyed, stolen or lost) by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon, an indemnity satisfactory to the Security Registrar and the Company may
be required at the expense of the holder of such Debt Security or coupon before
a replacement Debt Security will be issued. (SECTION 405)
GOVERNING LAW
The Indentures, the Debt Securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York.
CONCERNING THE TRUSTEES
The Company may from time to time maintain lines of credit, and have other
customary banking relationships, with the Senior Trustee or the Subordinated
Trustee.
SENIOR DEBT SECURITIES
The Senior Debt Securities will be unsecured and will rank PARI PASSU with
all other unsecured and non-subordinated debt of the Company.
CERTAIN COVENANTS IN SENIOR INDENTURE
LIMITATION ON SECURED INDEBTEDNESS. The Senior Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, create,
assume, incur or guarantee any Secured Indebtedness without securing the Debt
Securities equally and ratably with, or prior to, such Secured Indebtedness
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unless immediately thereafter the aggregate amount of all Secured Indebtedness
(exclusive of Secured Indebtedness if the Debt Securities are secured equally
and ratably with, or prior to, such Secured Indebtedness) and the discounted
present value of all net rentals payable under leases entered into in connection
with Sale and Leaseback Transactions (as defined below) entered into after July
15, 1985 (except any such leases entered into by a Restricted Subsidiary before
the time it became a Restricted Subsidiary) would not exceed 10% of Consolidated
Net Tangible Assets. (SECTION 1104 OF SENIOR INDENTURE)
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Senior Indenture
provides that the Company will not, and will not permit any Restricted
Subsidiary to, enter any lease longer than three years (excluding leases of
newly acquired, improved or constructed property) covering any Principal
Property of the Company or any Restricted Subsidiary that is sold to any other
person in connection with such lease (a "Sale and Leaseback Transaction"),
unless either (a) immediately thereafter, the sum of (i) the discounted present
value of all net rentals payable under all such leases entered into after July
15, 1985 (except any such leases entered into by a Restricted Subsidiary before
the time it became a Restricted Subsidiary) and (ii) the aggregate amount of all
Secured Indebtedness (exclusive of Secured Indebtedness if the Debt Securities
are secured equally and ratably with, or prior to, such Secured Indebtedness)
does not exceed 10% of Consolidated Net Tangible Assets, or (b) an amount equal
to the greater of (x) the net proceeds to the Company or a Restricted Subsidiary
from such sale and (y) the discounted present value of all net rentals payable
thereunder, is applied within 180 days to the retirement of long-term debt of
the Company or a Restricted Subsidiary (other than such debt which is
subordinated to the Debt Securities or which is owing to the Company or a
Restricted Subsidiary). (SECTION 1105 OF SENIOR INDENTURE)
CERTAIN DEFINITIONS. "SECURED INDEBTEDNESS" will mean indebtedness of the
Company or any Restricted Subsidiary for borrowed money secured by any lien upon
(or in respect of any conditional sale or other title retention agreement
covering) any Principal Property or any stock or indebtedness of a Restricted
Subsidiary, but excluding from such definition all indebtedness: (i) outstanding
on July 15, 1985, secured by liens (or arising from conditional sale or other
title retention agreements) existing on that date; (ii) incurred after July 15,
1985 to finance the acquisition, improvement or construction of property and
either secured by purchase money mortgages or liens placed on such property
within 180 days of acquisition, improvement or construction or arising from
conditional sale or other title retention agreements; (iii) secured by liens on
Principal Property or on the stock or indebtedness of Restricted Subsidiaries,
and, in either case, existing at the time of acquisition thereof; (iv) owing to
the Company or any Restricted Subsidiary; (v) secured by liens (or conditional
sale or other title retention devices) existing at the time a corporation became
or becomes a Restricted Subsidiary in the case of a corporation which shall have
become or becomes a Restricted Subsidiary after July 15, 1985; (vi) arising from
any Sale and Leaseback Transaction; (vii) incurred to finance the acquisition or
construction of property secured by liens in favor of any country or any
political subdivision thereof; and (viii) constituting any replacement,
extension or renewal of any such indebtedness (to the extent such indebtedness
is not increased). "PRINCIPAL PROPERTY" will mean land, land improvements,
buildings and associated factory, laboratory and office equipment (excluding all
products marketed by the Company or any of its subsidiaries) constituting a
manufacturing, development, warehouse, service or office facility owned by or
leased to the Company or a Restricted Subsidiary, located within the United
States and having an acquisition cost plus capitalized improvements in excess of
0.15% of Consolidated Net Tangible Assets as of the date of such determination,
other than any such property financed through the issuance of tax-exempt
governmental obligations, or which the Board of Directors determines is not of
material importance to the Company and its Restricted Subsidiaries taken as a
whole, or in which the interest of the Company and all its subsidiaries does not
exceed 50%. "CONSOLIDATED NET TANGIBLE ASSETS" will mean the total assets of the
Company and its subsidiaries, less current liabilities and certain intangible
assets (not including program products). "RESTRICTED SUBSIDIARY" will mean (i)
any subsidiary of the Company which has substantially all its property in the
United States, which owns or is a lessee of any Principal Property and in which
the investment of the Company and all its subsidiaries exceeds 0.15% of
Consolidated Net Tangible Assets as of the date of such determination, other
than certain financing subsidiaries and subsidiaries formed or acquired after
July 15,
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1985 for the purpose of acquiring the stock, business or assets of another
person and that have not and do not acquire all or any substantial part of the
business or assets of the Company or any Restricted Subsidiary and (ii) any
other subsidiary designated by the Board of Directors as a Restricted
Subsidiary. (SECTION 101 OF SENIOR INDENTURE)
The Senior Indenture provides that the Company may omit to comply with the
restrictive covenants described above under "Limitation on Secured Indebtedness"
and "Limitation on Sale and Leaseback Transactions" if the holders of not less
than a majority in principal amount of all series of outstanding Debt Securities
affected thereby (acting as one class) waive compliance with such restrictive
covenants. (SECTION 1107 OF SENIOR INDENTURE)
SUBORDINATED DEBT SECURITIES
The Subordinated Debt Securities will be unsecured and will be subject to
the subordination provisions described below.
The payment of the principal of, premium (if any) and interest on the
Subordinated Debt Securities is subordinated in right of payment, as set forth
in the Subordinated Indenture, to the payment when due of all Senior
Indebtedness. (SECTION 1501 OF SUBORDINATED INDENTURE) However, payment from the
money or the proceeds of U.S. government obligations held in any defeasance
trust is not subordinate to any Senior Indebtedness or subject to the
restrictions described herein. (SECTION 1512 OF SUBORDINATED INDENTURE). Claims
of creditors of the Company's subsidiaries, including trade creditors, secured
creditors and creditors holding guarantees issued by such subsidiaries, and
claims of preferred stockholders (if any) of such subsidiaries generally will
have priority with respect to the assets and earnings of such subsidiaries over
the claims of creditors of the Company, including holders of the Subordinated
Debt Securities, even though such obligations may not constitute Senior
Indebtedness. The Subordinated Debt Securities therefore will be effectively
subordinated to creditors (including trade creditors) and preferred stockholders
(if any) of subsidiaries of the Company.
Senior Indebtedness is defined in the Subordinated Indenture as the
principal of, premium, if any, and interest on, (i) all the Company's
indebtedness for money borrowed, other than the subordinated securities issued
under the Subordinated Indenture, whether outstanding on the date of execution
of the Subordinated Indenture or thereafter created, assumed or incurred, except
such indebtedness as is by its terms expressly stated to be not superior in
right of payment to the subordinated securities issued under the Subordinated
Indenture or to rank PARI PASSU with the subordinated securities issued under
the Subordinated Indenture and (ii) any deferrals, renewals or extensions of any
such Senior Indebtedness, except that Senior Indebtedness will not include (1)
any obligation of the Company to any subsidiary, (2) any liability for Federal,
state, local or other taxes owed or owing by the Company, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any indebtedness, guarantee or obligation of the Company which
is expressly subordinate or junior in right of payment in any respect to any
other indebtedness, guarantee or obligation of the Company, including any senior
subordinated indebtedness and any subordinated obligations, (5) any obligations
with respect to any capital stock, or (6) any indebtedness incurred in violation
of the Subordinated Indenture. The term "indebtedness for money borrowed" as
used in the foregoing sentence includes, without limitation, any obligation of,
or any obligation guaranteed by, the Company for the repayment of borrowed
money, whether or not evidenced by bonds, debentures, notes or other written
instruments, and any deferred obligation for the payment of the purchase price
of property or assets. (SECTION 101 OF SUBORDINATED INDENTURE) There is no
limitation on the issuance of additional Senior Indebtedness of the Company. The
Senior Debt Securities constitute Senior Indebtedness under the Subordinated
Indenture. The Subordinated Debt Securities will rank PARI PASSU with other
subordinated indebtedness of the Company.
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The Company may not pay principal of, premium (if any) or interest on the
Subordinated Debt Securities, make any deposits pursuant to the defeasance
provisions in the Subordinated Indenture or otherwise purchase, redeem or retire
any Subordinated Debt Securities (collectively, "pay the Subordinated Debt
Securities") if (i) any Senior Indebtedness is not paid when due or (ii) any
other default on Senior Indebtedness occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms unless the default has
been cured or waived and any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full. However, the Company may pay the
Subordinated Securities without regard to the foregoing if the Company and the
Subordinated Trustee receive written notice approving such payment from the
Representatives of the holders of Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the second
preceding sentence) with respect to any Senior Indebtedness pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Company may not pay the
Subordinated Securities for a period (a "Payment Blockage Period") commencing
upon the receipt by the Subordinated Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representatives of
the holders of Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (1) by written notice to the Subordinated Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (2)
because the default giving rise to such Blockage Notice is no longer continuing
or (3) because such Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of Senior Indebtedness or the Representatives of such holders
have accelerated the maturity of such Senior Indebtedness, the Company may
resume payments on the Subordinated Debt Securities after the end of such
Payment Blockage Period. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Senior Indebtedness during such period. (SECTION 1503 OF SUBORDINATED
INDENTURE)
Upon any payment or distribution of the assets of the Company to creditors
upon a total or partial liquidation or dissolution or reorganization of or
similar proceeding relating to the Company or their property, the holders of
Senior Indebtedness will be entitled to receive payment in full of the Senior
Indebtedness before the holders of Subordinated Debt Securities are entitled to
receive any payment, and until the Senior Indebtedness is paid in full, any
payment or distribution to which holders of Subordinated Debt Securities would
be entitled but for the subordination provisions of the Subordinated Indenture
(other than distributions of stock and certain debt securities subordinated to
the Senior Indebtedness) will be made to holders of the Senior Indebtedness as
their interests may appear. (SECTION 1502 OF SUBORDINATED INDENTURE) If a
distribution is made to holders of Subordinated Debt Securities that, due to the
subordination provisions, should not have been made to them, such holders of
Subordinated Debt Securities are required to hold it in trust for the holders of
Senior Indebtedness, and pay it over to them as their interests may appear.
(SECTION 1505 OF SUBORDINATED INDENTURE)
If payment of the Subordinated Debt Securities is accelerated because of an
Event of Default, the Company or the Subordinated Trustee will promptly notify
the holders of Senior Indebtedness or the Representatives of such holders of the
acceleration. The Company may not pay the Subordinated Securities until five
Business Days after such holders or the Representatives of the Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Subordinated Securities only if the subordination provisions of the Subordinated
Indenture otherwise permit payment at that time. (SECTION 1505 OF SUBORDINATED
INDENTURE)
By reason of such subordination provisions contained in the Subordinated
Indenture, in the event of insolvency, creditors of the Company who are holders
of Senior Indebtedness may recover more, ratably, than the holders of
Subordinated Debt Securities, and creditors of the Company who are not holders
of Senior Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the holders of Subordinated
Indebtedness.
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DESCRIPTION OF THE PREFERRED STOCK
The following is a description of certain general terms and provisions of
the Preferred Stock. The particular terms of any series of Preferred Stock will
be described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below.
The summary of terms of the Company's Preferred Stock contained in this
Prospectus does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Company's Certificate of Incorporation
and the certificate of amendment relating to each series of the Preferred Stock
(the "Certificate of Amendment"), which will be filed as an exhibit to or
incorporated by reference in the Registration Statement of which this Prospectus
is a part at or prior to the time of issuance of such series of the Preferred
Stock.
The Company's Certificate of Incorporation authorizes the issuance of
150,000,000 shares of Preferred Stock, par value $.01 per share. As of December
31, 1996, 2,610,711 shares of Series A 7 1/2% Preferred Stock, liquidation
preference $100 per share, were outstanding. Subject to limitations prescribed
by law, the Board of Directors is authorized at any time to issue one or more
series of Preferred Stock; to determine the designation for any such series by
number, letter, or title that shall distinguish such series from any other
series of Preferred Stock; and to determine the number of shares in any such
series (including a determination that such series shall consist of a single
share).
The Board of Directors is authorized to determine, for each series of
Preferred Stock, and the Prospectus Supplement shall set forth with respect to
such series: (i) whether the holders thereof shall be entitled to cumulative,
noncumulative, or partially cumulative dividends and, with respect to shares
entitled to dividends, the dividend rate or rates, including without limitation
the methods and procedures for determining such rate or rates, and any other
terms and conditions relating to such dividends; (ii) whether, and if so to what
extent and upon what terms and conditions, the holders thereof shall be entitled
to rights upon the liquidation of, or upon any distribution of the assets of,
the Company; (iii) whether, and if so upon what terms and conditions, such
shares shall be convertible into Debt Securities, any other series of Preferred
Stock, Depositary Shares or Capital Stock, or exchangeable for the securities of
any other corporation; (iv) whether, and if so upon what terms and conditions,
such shares shall be redeemable; (v) whether the shares shall be redeemable and
subject to any sinking fund provided for the purchase or redemption of such
shares and, if so, the terms of such fund; (vi) whether the holders thereof
shall be entitled to voting rights and, if so, the terms and conditions for the
exercise thereof; PROVIDED that the holders of shares of Preferred Stock (A)
will not be entitled to more than the lesser of (x) one vote per $100 of
liquidation value or (y) one vote per share, when voting as a class with the
holders of shares of capital stock, and (B) will not be entitled to vote on any
matter separately as a class, except to the extent specified with respect to
each series, (x) with respect to any amendment or alteration of the provisions
of the Certificate of Incorporation that would adversely affect the powers,
preferences, or special rights of the applicable series of Preferred Stock or
(y) in the event the Corporation fails to pay dividends on any series of
Preferred Stock in full for any six quarterly dividend payment periods, whether
or not consecutive, in which event the number of directors may be increased by
two and the holders of outstanding shares of Preferred Stock then similarly
entitled shall be entitled to elect the two additional directors until full
accumulated dividends on all such shares of Preferred Stock shall have been
paid; and (vii) whether the holders thereof shall be entitled to other
preferences or rights, and, if so, the qualifications, limitations, or
restrictions of such preferences or rights.
DIVIDENDS
Holders of shares of Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds of the Company legally
available for payment, cash dividends payable at such dates and at such rates
per share per annum as set forth in the applicable Prospectus Supplement. The
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Prospectus Supplement will also state applicable record dates regarding the
payment of dividends. Except as set forth below, no dividends shall be declared
or paid or set apart for payment on any series of Preferred Stock unless full
dividends for all series of Preferred Stock (including any accumulation in
respect of unpaid dividends for prior dividend periods, if dividends on such
Preferred Stock are cumulative) have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is set apart for
such payment. When dividends are not so paid in full (or a sum sufficient for
such full payment is not so set apart) upon the Preferred Stock, dividends
declared (if any) on the Preferred Stock shall be declared pro-rata so that the
amount of dividends declared per share on each series of Preferred Stock shall
in all cases bear to each other series the same ratio that (x) accrued dividends
(including any accumulation with respect to unpaid dividends for prior dividend
periods, if dividends for such series are cumulative) for the then-current
dividend period per share for each respective series of Preferred Stock bear to
(y) aggregate accrued dividends for the then-current dividend period (including
all accumulations with respect to unpaid dividends for prior periods for all
series which are cumulative) for all outstanding shares of Preferred Stock.
Unless all dividends on the Preferred Stock shall have been paid in full (i)
no dividend shall be declared and paid or declared and a sum sufficient thereof
set apart for payment (other than a dividend in the Company's capital stock or
in any other class ranking junior to the Preferred Stock as to dividends and
liquidation preferences) or other distribution declared or made upon the shares
of the Company's capital stock or upon any other class ranking junior to the
Preferred Stock as to dividends or liquidation preferences and (ii) no shares of
the Company's capital stock or class of stock ranking junior to the Preferred
Stock as to dividends or liquidation preferences may be redeemed, purchased or
otherwise acquired by the Company except by conversion into or exchange for
shares of the Company ranking junior to the Preferred Stock as to dividends and
liquidation preferences.
CONVERTIBILITY
No series of Preferred Stock will be convertible into, or exchangeable for,
other securities or property except as set forth in the related Prospectus
Supplement.
REDEMPTION AND SINKING FUND
No series of Preferred Stock will be redeemable or receive the benefit of a
sinking fund except as set forth in the related Prospectus Supplement.
LIQUIDATION
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, holders of any series of Preferred Stock will be entitled to
receive the liquidation preference per share specified in the Prospectus
Supplement, if any, in each case together with any applicable accrued and unpaid
dividends and before any distribution to holders of the Company's capital stock
or any class of stock ranking junior to the Preferred Stock as to dividends and
liquidation preferences. In the event there are insufficient assets to pay such
liquidation preferences for all classes of Preferred Stock in full, the
remaining assets shall be allocated ratably among all series of Preferred Stock
based upon the aggregate liquidation preference for all outstanding shares for
each such series. After payment of the full amount of the liquidation preference
to which they are entitled, the holders of shares of Preferred Stock will not be
entitled to any further participation in any distribution of assets by the
Company unless otherwise provided in a Prospectus Supplement, and the remaining
assets of the Company shall be distributable exclusively among the holders of
the Company's capital stock and any class of stock ranking junior to the
Preferred Stock as to dividends and liquidation preferences, according to their
respective interests.
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VOTING
No series of Preferred Stock will be entitled to vote except as provided
below or in the related Prospectus Supplement. Unless otherwise specified in the
related Prospectus Supplement, if at any time the Company shall have failed to
declare and pay in full dividends for six quarterly periods, whether consecutive
or not, on any applicable series of Preferred Stock and all such preferred
dividends remain unpaid (a "Preferred Dividend Default"), the number of
directors of the Company shall be increased by two and the holders of such
series of Preferred Stock, voting together as a class with all other series of
Preferred Stock then entitled to vote on such election of directors, shall be
entitled to elect such two additional directors until the full dividends
accumulated on all outstanding shares of such series shall have been declared
and paid in full. Upon the occurrence of a Preferred Dividend Default, the Board
of Directors shall within 10 business days of such default call a special
meeting of the holders of shares of all affected series, for which there is a
Preferred Dividend Default, for the purpose of electing the additional
directors. In lieu of holding such meeting, the holders of record of a majority
of the outstanding shares of all series for which there is a Preferred Dividend
Default who are then entitled to participate in the election of directors may,
by action taken by written consent, elect such additional directors. If and when
all accumulated dividends on any series of Preferred Stock have been paid in
full, the holders of shares of such series shall be divested of the foregoing
voting rights subject to revesting in the event of each and every Preferred
Dividend Default. Upon termination of such special voting rights attributable to
all series for which there has been a Preferred Dividend Default, the term of
office of each director so elected (a "Preferred Stock Director") shall
terminate and the number of directors of the Company shall, without further
action, be reduced by two, subject always to the increase in the number of
directors pursuant to the foregoing provisions in case of a future Preferred
Dividend Default. Any Preferred Stock Director may be removed at any time with
or without cause by, and shall not be removed otherwise than by, the vote of the
holders of record of a majority of the outstanding shares of all series of
Preferred Stock who were entitled to participate in such director's election,
voting as a separate class, at a meeting called for such purpose or by written
consent. So long as a Preferred Stock Default shall continue, any vacancy in the
office of a Preferred Stock Director may be filled by written consent of the
Preferred Stock Director remaining in office, or if none remains in office, by a
vote of the holders of record of a majority of the outstanding series of
Preferred Stock who are then entitled to participate in the election of such
Preferred Stock Directors as provided above. As long as the Preferred Dividend
Default shall continue, holders of the Preferred Stock shall not, as such
stockholders, be entitled to vote on the election or removal of directors, other
than Preferred Stock Directors, but shall not be divested of any other voting
rights provided to the holders of Preferred Stock by law with respect to any
other matter to be acted upon by the stockholders of the Company. The Preferred
Stock Directors shall each be entitled to one vote per director on any matter.
Additionally, unless otherwise specified in a Prospectus Supplement, the
affirmative vote of the holders of a majority of the outstanding shares of each
series of Preferred Stock voting together as a class, is required to authorize
any amendment, alteration or repeal of the Restated Certificate of Incorporation
or any Certificate of Amendment which would adversely affect the powers,
preferences, or special rights of the Preferred Stock including authorizing any
class of stock with superior dividend and liquidation preferences.
MISCELLANEOUS
The holders of Preferred Stock will have no preemptive rights. The Preferred
Stock, upon issuance against full payment of the purchase price therefor, will
be fully paid and nonassessable. Shares of Preferred Stock redeemed or otherwise
reacquired by the Company shall resume the status of authorized and unissued
shares of Preferred Stock undesignated as to series, and shall be available for
subsequent issuance. There are no restrictions on repurchase or redemption of
the Preferred Stock while there is any arrearage on sinking fund installments
except as may be set forth in a Prospectus Supplement. Neither the par value nor
the liquidation preference is indicative of the price at which the Preferred
Stock will actually trade on or after the date of issuance. Payment of dividends
on any series of Preferred Stock may be restricted by loan agreements,
indentures and other transactions entered into by the Company.
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NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the related Prospectus Supplement, the
Certificate of Incorporation or Certificate of Amendment or as otherwise
required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be described in
the related Prospectus Supplement.
DESCRIPTION OF THE DEPOSITARY SHARES
The Company may, at its option, elect to offer Depositary Shares rather than
full shares of Preferred Stock. In the event such option is exercised, each of
the Depositary Shares will represent ownership of and entitlement to all rights
and preferences of a fraction of a share of Preferred Stock of a specified
series (including dividend, voting, redemption and liquidation rights). The
applicable fraction will be specified in the Prospectus Supplement. The shares
of Preferred Stock represented by the Depositary Shares will be deposited with a
Depositary (the "Depositary") named in the applicable Prospectus Supplement,
under a Deposit Agreement (the "Deposit Agreement"), among the Company, the
Depositary and the holders of the Depositary Receipts. Certificates evidencing
Depositary Shares ("Depositary Receipts") will be delivered to those persons
purchasing Depositary Shares in the offering. The Depositary will be the
transfer agent, registrar and dividend disbursing agent for the Depositary
Shares. Holders of Depositary Receipts agree to be bound by the Deposit
Agreement, which requires holders to take certain actions such as filing proof
of residence and paying certain charges.
The summary of terms of the Company's Depositary Shares contained in this
Prospectus does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Deposit Agreement, the Company's
Certificate of Incorporation and the Certificate of Amendment for the applicable
series of Preferred Stock.
DIVIDENDS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the series of Preferred Stock represented
by the Depositary Shares to the record holders of Depositary Receipts in
proportion to the number of Depositary Shares owned by such holders on the
relevant record date, which will be the same date as the record date fixed by
the Company for the applicable series of Preferred Stock. The Depositary,
however, will distribute only such amount as can be distributed without
attributing to any Depositary Share a fraction of one cent, and any balance not
so distributed will be added to and treated as part of the next sum received by
the Depositary for distribution to record holders of Depositary Receipts then
outstanding.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Receipts
entitled thereto, in proportion, as nearly as may be practicable, to the number
of Depositary Shares owned by such holders on the relevant record date, unless
the Depositary determines (after consultation with the Company) that it is not
feasible to make such distribution, in which case the Depositary may (with the
approval of the Company) adopt any other method for such distribution as it
deems appropriate, including the sale of such property and distribution of the
net proceeds from such sale to such holders.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the affairs of
the Company, whether voluntary or involuntary, the holders of each Depositary
Share will be entitled to the fraction of the
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liquidation preference accorded each share of the applicable series of Preferred
Stock, as set forth in the Prospectus Supplement.
REDEMPTION
If the series of Preferred Stock represented by the applicable series of
Depositary Shares is redeemable, such Depositary Shares will be redeemed from
the proceeds received by the Depositary resulting from the redemption, in whole
or in part, of Preferred Stock held by the Depositary. Whenever the Company
redeems any Preferred Stock held by the Depositary, the Depositary will redeem
as of the same redemption date the number of Depositary Shares representing the
Preferred Stock so redeemed. The Depositary will mail the notice of redemption
promptly upon receipt of such notice from the Company and not less than 35 nor
more than 60 days prior to the date fixed for redemption of the Preferred Stock
and the Depositary Shares to the record holders of the Depositary Receipts.
VOTING
Promptly upon receipt of notice of any meeting at which the holders of the
series of Preferred Stock represented by the applicable series of Depositary
Shares are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Receipts as of
the record date for such meeting. Each such record holder of Depositary Receipts
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the number of shares of Preferred Stock represented by such
record holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote such Preferred Stock represented by such Depositary Shares
in accordance with such instructions, and the Company will agree to take all
action which may be deemed necessary by the Depositary in order to enable the
Depositary to do so. The Depositary will abstain from voting any of the
Preferred Stock to the extent that it does not receive specific instructions
from the holders of Depositary Receipts.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of Depositary Receipts at the principal office of the
Depositary, upon payment of any unpaid amount due the Depositary, and subject to
the terms of the Deposit Agreement, the owner of the Depositary Shares evidenced
thereby is entitled to delivery of the number of whole shares of Preferred Stock
and all money and other property, if any, represented by such Depositary Shares.
Partial shares of Preferred Stock will not be issued. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of whole shares of Preferred
Stock to be withdrawn, the Depositary will deliver to such holder at the same
time a new Depositary Receipt evidencing such excess number of Depositary
Shares. Holders of Preferred Stock thus withdrawn will not thereafter be
entitled to deposit such shares under the Deposit Agreement or to receive
Depositary Receipts evidencing Depositary Shares therefor.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time and from time to time be
amended by agreement between the Company and the Depositary. However, any
amendment which materially and adversely alters the rights of the holders (other
than any change in fees) of Depositary Shares will not be effective unless such
amendment has been approved by at least a majority of the Depositary Shares then
outstanding. No such amendment may impair the right, subject to the terms of the
Deposit Agreement, of any owner of any Depositary Shares to surrender the
Depositary Receipt evidencing such Depositary Shares with instructions to the
Depositary to deliver to the holder the Preferred Stock and all money and other
property, if any, represented thereby, except in order to comply with mandatory
provisions of applicable law. The Deposit Agreement may be terminated by the
Company or the Depositary only if (i) all outstanding Depositary Shares have
been
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redeemed or (ii) there has been a final distribution in respect of the Preferred
Stock in connection with any dissolution of the Company and such distribution
has been made to all the holders of Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and the initial issuance of the Depositary Shares, any
redemption of the Preferred Stock and all withdrawals of Preferred Stock by
owners of Depositary Shares. Holders of Depositary Receipts will pay transfer,
income and other taxes and governmental charges and certain other charges as are
provided in the Deposit Agreement to be for their accounts. In certain
circumstances, the Depositary may refuse to transfer Depositary Shares, may
withhold dividends and distributions and sell the Depositary Shares evidenced by
such Depositary Receipt if such charges are not paid.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Receipts all
reports and communications from the Company which are delivered to the
Depositary and which the Company is required to furnish to the holders of the
Preferred Stock. In addition, the Depositary will make available for inspection
by holders of Depositary Receipts at the principal office of the Depositary, and
at such other places as it may from time to time deem advisable, any reports and
communications received from the Company which are received by the Depositary as
the holder of Preferred Stock.
Neither the Depositary nor the Company assumes any obligation or will be
subject to any liability under the Deposit Agreement to holders of Depositary
Receipts other than for its negligence or willful misconduct. Neither the
Depositary nor the Company will be liable if it is prevented or delayed by law
or any circumstance beyond its control in performing its obligations under the
Deposit Agreement. The obligations of the Company and the Depositary under the
Deposit Agreement will be limited to performance in good faith of their duties
thereunder, and they will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Depositary may rely on
written advice of counsel or accountants, on information provided by holders of
Depositary Receipts or other persons believed in good faith to be competent to
give such information and on documents believed to be genuine and to have been
signed or presented by the proper party or parties.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice for
resignation or removal and must be a bank or trust company having its principal
office in the United States of America and having a combined capital and surplus
of at least $150,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of the Depositary Shares will be treated for Federal income tax
purposes as if they were owners of the Preferred Stock represented by such
Depositary Shares. Accordingly, such owners will be entitled to take into
account for Federal income tax purposes income and deductions to which they
would be entitled if they were holders of such Preferred Stock. In addition, (i)
no gain or loss will be recognized for Federal income tax purposes upon the
withdrawal of Preferred Stock in exchange for Depositary Shares, (ii) the tax
basis of each share of Preferred Stock to an exchanging owner of Depositary
Shares will,
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upon such exchange, be the same as the aggregate tax basis of the Depositary
Shares exchanged therefor, and (iii) the holding period for Preferred Stock in
the hands of an exchanging owner of Depositary Shares will include the period
during which such person owned such Depositary Shares.
DESCRIPTION OF THE CAPITAL STOCK
As of the date of this Prospectus, the Company's Certificate of
Incorporation authorizes the issuance of 750,000,000 shares of Capital Stock,
$1.25 par value per share. As of December 31, 1996, 507,981,009 shares of
Capital Stock were outstanding.
Subject to the rights of the holders of any outstanding shares of preferred
stock, holders of Capital Stock are entitled to receive such dividends, in cash,
securities, or property, as may from time to time be declared by the Board of
Directors. Subject to the provisions of the Company's By-laws, as from time to
time amended, with respect to the closing of the transfer books and the fixing
of a record date, holders of shares of Capital Stock are entitled to one vote
per share of Capital Stock held on all matters requiring a vote of the
stockholders. In the event of any liquidation, dissolution, or winding up of the
Company, either voluntary or involuntary, after payment shall have been made to
the holders of preferred stock of the full amount to which they shall be
entitled, the holders of Capital Stock shall be entitled to share ratably,
according to the number of shares held by them, in all remaining assets of the
Company available for distribution. Shares of Capital Stock are not redeemable
and have no subscription, conversion or preemptive rights.
DESCRIPTION OF THE WARRANTS
The Company may issue Warrants for the purchase of Debt Securities,
Preferred Stock or Capital Stock. Warrants may be issued independently or
together with Debt Securities, Preferred Stock or Capital Stock offered by any
Prospectus Supplement and may be attached to or separate from any such
Securities. Each series of Warrants will be issued under a separate warrant
agreement (a "Warrant Agreement") to be entered into between the Company and a
bank or trust company, as warrant agent (the "Warrant Agent"). The Warrant Agent
will act solely as an agent of the Company in connection with the Warrants and
will not assume any obligation or relationship of agency or trust for or with
any holders or beneficial owners of Warrants. The following summary of certain
provisions of the Warrants does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the Warrant
Agreement that will be filed with the Commission in connection with the offering
of such Warrants.
DEBT WARRANTS
The Prospectus Supplement relating to a particular issue of Warrants to
issue Debt Securities ("Debt Warrants") will describe the terms of such Debt
Warrants, including the following: (a) the title of such Debt Warrants; (b) the
offering price for such Debt Warrants, if any; (c) the aggregate number of such
Debt Warrants; (d) the designation and terms of the Debt Securities purchasable
upon exercise of such Debt Warrants; (e) if applicable, the designation and
terms of the Debt Securities with which such Debt Warrants are issued and the
number of such Debt Warrants issued with each such Debt Security; (f) if
applicable, the date from and after which such Debt Warrants and any Debt
Securities issued therewith will be separately transferable; (g) the principal
amount of Debt Securities purchasable upon exercise of a Debt Warrant and the
price at which such principal amount of Debt Securities may be purchased upon
exercise (which price may be payable in cash, securities, or other property);
(h) the date on which the right to exercise such Debt Warrants shall commence
and the date on which such right shall expire; (i) if applicable, the minimum or
maximum amount of such Debt Warrants that may be exercised at any one time; (j)
whether the Debt Warrants represented by the Debt Warrant certificates or Debt
Securities that may be issued upon exercise of the Debt Warrants will be issued
in registered or bearer form; (k) information with respect to book-entry
procedures, if any; (l) the currency or currency units in which the offering
price, if any, and the exercise price are payable; (m) if applicable, a
discussion of material United
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States federal income tax considerations; (n) the antidilution provisions of
such Debt Warrants, if any; (o) the redemption or call provisions, if any,
applicable to such Debt Warrants; and (p) any additional terms of the Debt
Warrants, including terms, procedures, and limitations relating to the exchange
and exercise of such Debt Warrants.
STOCK WARRANTS
The Prospectus Supplement relating to any particular issue of Warrants to
issue Capital Stock or Preferred Stock will describe the terms of such Warrants,
including the following: (a) the title of such Warrants; (b) the offering price
for such Warrants, if any; (c) the aggregate number of such Warrants; (d) the
designation and terms of the Capital Stock or Preferred Stock purchasable upon
exercise of such Warrants; (e) if applicable, the designation and terms of the
Securities with which such Warrants are issued and the number of such Warrants
issued with each such Security; (f) if applicable, the date from and after which
such Warrants and any Securities issued therewith will be separately
transferable; (g) the number of shares of Capital Stock or Preferred Stock
purchasable upon exercise of a Warrant and the price at which such shares may be
purchased upon exercise; (h) the date on which the right to exercise such
Warrants shall commence and the date on which such right shall expire; (i) if
applicable, the minimum or maximum amount of such Warrants that may be exercised
at any one time; (j) the currency or currency units in which the offering price,
if any, and the exercise price are payable; (k) if applicable, a discussion of
material United States federal income tax considerations; (l) the antidilution
provisions of such Warrants, if any; (m) the redemption or call provisions, if
any, applicable to such Warrants; and (n) any additional terms of the Warrants,
including terms, procedures, and limitations relating to the exchange and
exercise of such Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) through
underwriters; (ii) through agents; or (iii) directly to a limited number of
institutional purchasers or to a single purchaser. The Prospectus Supplement
with respect to each series of Securities will set forth the terms of the
offering of the Securities of such series, including the name or names of any
underwriters, the purchase price and the proceeds to the Company from such sale,
any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers, and any securities exchanges on which
the Securities of such series may be listed.
If underwriters are used in the sale, the Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The Securities may be
either offered to the public through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Unless otherwise
set forth in the Prospectus Supplement, the obligations of the underwriters to
purchase Securities will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all the Securities of a series if any
are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
Securities may be sold directly by the Company or through agents designated
by the Company from time to time. Any agent involved in the offer or sale of the
Securities in respect of which this Prospectus is delivered will be named, and
any commissions payable by the Company to such agent will be set forth, in the
Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement,
any such agent will be acting on a best efforts basis for the period of its
appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents or underwriters to solicit offers by certain types of institutions to
purchase Securities from the Company at the public offering
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price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commissions payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contribution with
respect to payments which the agents or underwriters may be required to make in
respect thereof. Agents and underwriters may be customers of, engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
Each series of Securities will be a new issue of securities with no
established trading market. Any underwriters to whom Securities are sold by the
Company for public offering and sale may make a market in such Securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for any Securities.
LEGAL OPINIONS
Except as may be otherwise specified in the Prospectus Supplement
accompanying this Prospectus, the legality of the securities will be passed upon
for the Company by David S. Hershberg, Vice President and Assistant General
Counsel of the Company. Mr. Hershberg, together with members of his family,
owns, has options to purchase and has other interests in shares of common stock
of the Company.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
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