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PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 13, 1994)
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U.S. $400,000,000
International Paper Company
Medium-Term Notes, Series E
DUE 9 MONTHS OR MORE FROM DATE OF ISSUE
----------------
INTERNATIONAL PAPER COMPANY (THE "COMPANY") MAY OFFER FROM TIME TO TIME ITS
MEDIUM-TERM NOTES WHICH ARE ISSUABLE IN ONE OR MORE SERIES AND MAY BE OFFERED
AND SOLD EITHER IN THE UNITED STATES OR OUTSIDE THE UNITED STATES OR BOTH
SIMULTANEOUSLY. THE MEDIUM-TERM NOTES, SERIES E (THE "NOTES", WHICH TERM
SHALL INCLUDE FOREIGN CURRENCY NOTES (AS DEFINED BELOW UNLESS OTHERWISE
INDICATED)), OFFERED BY THIS PROSPECTUS SUPPLEMENT ARE OFFERED IN THE UNITED
STATES AND MAY BE DENOMINATED IN SUCH FOREIGN CURRENCIES OR CURRENCY UNITS
AS MAY BE DESIGNATED BY THE COMPANY AT THE TIME OF OFFERING (THE "FOREIGN
CURRENCY NOTES"). THE NOTES ARE OFFERED IN AN AGGREGATE OFFERING PRICE
OF UP TO U.S. $400,000,000 OR THE EQUIVALENT, AT THE MARKET EXCHANGE
RATE ON THE APPLICABLE TRADE DATES, IN ONE OR MORE FOREIGN CURRENCIES
OR CURRENCY UNITS IN THE CASE OF FOREIGN CURRENCY NOTES, AND IN ANY
CASE SUBJECT TO REDUCTION AS A RESULT OF THE SALE OF OTHER DEBT
SECURITIES (AS DEFINED BELOW) OF THE COMPANY. SEE "DESCRIPTION OF
NOTES" AND "PLAN OF DISTRIBUTION OF NOTES". EACH NOTE WILL MATURE ON A
BUSINESS DAY 9 MONTHS OR MORE FROM ITS DATE OF ISSUE, AS SELECTED BY
THE INITIAL PURCHASER AND AGREED TO BY THE COMPANY. THE NOTES MAY BE
SUBJECT TO REDEMPTION AT THE OPTION OF THE COMPANY OR, UPON THE
OCCURRENCE OF CERTAIN EVENTS, AT THE OPTION OF THE HOLDERS THEREOF,
PRIOR TO THEIR STATED MATURITY, AS DESCRIBED HEREIN AND IN THE
PROSPECTUS OR AS SET FORTH IN AN ACCOMPANYING PRICING SUPPLEMENT
TO THIS PROSPECTUS SUPPLEMENT (THE "PRICING SUPPLEMENT"). UNLESS
OTHERWISE INDICATED IN THE APPLICABLE PRICING SUPPLEMENT, THE
INTEREST PAYMENT DATES FOR EACH FIXED RATE NOTE, OTHER THAN
ZERO-COUPON NOTES, WILL BE APRIL 1 AND OCTOBER 1 OF EACH YEAR.
THE NOTES WILL BE ISSUED IN FULLY REGISTERED FORM IN
DENOMINATIONS OF U.S. $100,000 AND INTEGRAL MULTIPLES OF U.S.
$1,000 IN EXCESS THEREOF, OR, IN THE CASE OF FOREIGN CURRENCY
NOTES, IN THE DENOMINATIONS INDICATED IN THE APPLICABLE
PRICING SUPPLEMENT. SEE "SPECIAL PROVISIONS RELATING TO
FOREIGN CURRENCY NOTES."
EACH NOTE WILL BE REPRESENTED BY EITHER A PERMANENT GLOBAL SECURITY (A "GLOBAL
NOTE") REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY, AS DEPOSITARY
(THE "DEPOSITORY"), OR A NOMINEE OF THE DEPOSITORY (EACH SUCH NOTE REPRESENTED
BY A GLOBAL NOTE BEING REFERRED TO HEREIN AS A "BOOK-ENTRY NOTE"), OR A
CERTIFICATE ISSUED IN DEFINITIVE FORM (A "CERTIFICATED NOTE"), AS SET FORTH
IN THE APPLICABLE PRICING SUPPLEMENT. BENEFICIAL INTERESTS IN BOOK-ENTRY
NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH,
RECORDS MAINTAINED BY THE DEPOSITORY (WITH RESPECT TO ITS PARTICIPANTS'
INTERESTS) AND ITS PARTICIPANTS. EXCEPT AS DESCRIBED BELOW UNDER
"DESCRIPTION OF NOTES -- BOOK-ENTRY NOTES," OWNERS OF BENEFICIAL INTERESTS
IN A GLOBAL NOTE WILL NOT BE ENTITLED TO RECEIVE PHYSICAL DELIVERY OF
NOTES IN DEFINITIVE FORM AND WILL NOT BE CONSIDERED THE HOLDERS THEREOF.
THE INTEREST RATE OR INTEREST RATE FORMULA, IF ANY, ISSUE PRICE, STATED
MATURITY, INTEREST PAYMENT DATES, CURRENCY DENOMINATIONS AND REDEMPTION
PROVISIONS, IF ANY, FOR EACH NOTE WILL BE ESTABLISHED BY THE COMPANY AT THE
TIME OF ISSUANCE OF SUCH NOTE AND WILL BE INDICATED IN A PRICING SUPPLEMENT.
UNLESS OTHERWISE INDICATED IN THE APPLICABLE PRICING SUPPLEMENT, THE NOTES,
EXCEPT ZERO-COUPON NOTES, WILL BEAR INTEREST AT A FIXED RATE OR A RATE OR
RATES DETERMINED BY REFERENCE TO LIBOR, THE TREASURY RATE, THE
COMMERCIAL PAPER RATE, THE PRIME RATE, THE CD RATE, THE FEDERAL FUNDS
RATE, OR OTHER RATE FORMULA, AS INDICATED IN THE APPLICABLE PRICING
SUPPLEMENT, AS ADJUSTED BY A SPREAD OR SPREAD MULTIPLIER, IF ANY IS
APPLICABLE TO SUCH NOTES. ZERO-COUPON NOTES WILL BE ISSUED AT A
DISCOUNT FROM THE PRINCIPAL AMOUNT PAYABLE AT MATURITY THEREOF,
BUT HOLDERS OF ZERO-COUPON NOTES WILL NOT RECEIVE PERIODIC
PAYMENTS OF INTEREST ON SUCH NOTES. INTEREST RATES AND INTEREST
RATE FORMULAS ARE SUBJECT TO CHANGE BY THE COMPANY, BUT NO SUCH
CHANGE WILL AFFECT THE INTEREST RATE ON ANY NOTE THERETOFORE
ISSUED OR WHICH THE COMPANY HAS AGREED TO SELL.
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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
SUPPLEMENT, ANY SUPPLEMENT HERETO OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<S> <C> <C> <C>
PRICE TO AGENTS' PROCEEDS
PUBLIC (1) COMMISSIONS (2) TO COMPANY (2)(3)
PER NOTE 100% .125%-.75% 99.25%-99.875%
TOTAL (4) $400,000,000 $500,000-$3,000,000 $397,000,000-$399,500,000
<FN>
(1) UNLESS OTHERWISE INDICATED IN A PRICING SUPPLEMENT, NOTES WILL BE ISSUED AT
100% OF THEIR PRINCIPAL AMOUNT.
(2) THE COMPANY WILL PAY CS FIRST BOSTON CORPORATION AND KIDDER, PEABODY & CO.
INCORPORATED (THE "AGENTS"), AS AGENTS, A COMMISSION RANGING FROM .125% TO
.75% OF THE PRINCIPAL AMOUNT OF ANY NOTE, DEPENDING ON ITS STATED MATURITY,
SOLD THROUGH ANY SUCH AGENTS. THIS COMMISSION SCALE APPLIES TO NOTES THAT
MATURE BETWEEN NINE MONTHS AND THIRTY YEARS (INCLUSIVE) FROM THEIR DATE OF
ISSUE. THE COMMISSION APPLICABLE TO THE SALE OF ANY NOTE THAT MATURES MORE
THAN THIRTY YEARS FROM ITS DATE OF ISSUE WILL BE DETERMINED BY THE RELEVANT
AGENT AND THE COMPANY AT THE TIME OF SUCH SALE AND DISCLOSED IN THE
APPLICABLE PRICING SUPPLEMENT. THE COMPANY ALSO MAY SELL NOTES TO ANY AGENT
AT A DISCOUNT FOR RESALE TO ONE OR MORE INVESTORS AT VARYING PRICES RELATED
TO PREVAILING MARKET PRICES AT THE TIME OF RESALE, AS DETERMINED BY SUCH
AGENT.
(3) BEFORE DEDUCTING OTHER EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT
$50,000.
(4) OR THE EQUIVALENT THEREOF IN OTHER CURRENCIES, INCLUDING COMPOSITE
CURRENCIES.
</TABLE>
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THE NOTES MAY BE OFFERED ON A CONTINUING BASIS BY THE COMPANY THROUGH THE
AGENTS, EACH OF WHICH HAS AGREED TO USE REASONABLE EFFORTS TO SOLICIT OFFERS TO
PURCHASE THE NOTES. THE COMPANY ALSO MAY SELL NOTES TO ANY AGENT ACTING AS
PRINCIPAL FOR RESALE TO ONE OR MORE INVESTORS. THE COMPANY HAS RESERVED THE
RIGHT TO SELL NOTES DIRECTLY OR INDIRECTLY TO INVESTORS ON ITS OWN BEHALF. THERE
CAN BE NO ASSURANCE THAT THE NOTES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL BE
SOLD OR THAT THERE WILL BE A SECONDARY MARKET FOR THE NOTES. THE COMPANY
RESERVES THE RIGHT TO WITHDRAW, CANCEL OR MODIFY THE OFFER MADE HEREBY WITHOUT
NOTICE. THE COMPANY OR ANY AGENT MAY REJECT ANY OFFER TO PURCHASE NOTES, IN
WHOLE OR IN PART. SEE "PLAN OF DISTRIBUTION OF NOTES."
CS First Boston Kidder, Peabody P Co.
Incorporated
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THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MAY 2, 1994.
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IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR DEFINITIONS OF CERTAIN TERMS USED IN THIS PROSPECTUS SUPPLEMENT AND
ACCOMPANYING PROSPECTUS, SEE "GLOSSARY" ON PAGE S-19 OF THIS PROSPECTUS
SUPPLEMENT.
DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY (REFERRED TO IN THE PROSPECTUS AS "SENIOR DEBT SECURITIES") SUPPLEMENTS,
AND TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE DESCRIPTION OF THE
GENERAL TERMS AND PROVISIONS OF SENIOR DEBT SECURITIES SET FORTH UNDER THE
HEADING "DESCRIPTION OF DEBT SECURITIES" IN THE ACCOMPANYING PROSPECTUS, TO
WHICH DESCRIPTION REFERENCE IS HEREBY MADE. CAPITALIZED TERMS NOT DEFINED HEREIN
HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE PROSPECTUS. SECTION REFERENCES
HEREIN ARE TO SECTIONS OF THE INDENTURE, DATED AS OF MAY 22, 1992, BETWEEN THE
COMPANY AND THE BANK OF NEW YORK, AS TRUSTEE, AS AMENDED BY THE FIRST
SUPPLEMENTAL INDENTURE, DATED AS OF JUNE 26, 1992 (THE "INDENTURE") OR, WHERE SO
INDICATED, TO THE OFFICERS' CERTIFICATE ESTABLISHING CERTAIN TERMS OF THE NOTES
PURSUANT TO SECTION 301 OF THE INDENTURE (THE "OFFICERS' CERTIFICATE").
The Notes constitute a single series for purposes of the Indenture and are
limited to an aggregate offering price of U.S. $400,000,000 or the equivalent,
in the case of Foreign Currency Notes, at the Market Exchange Rate on the
applicable trade date, in one or more foreign currencies or currency units, and
in any case subject to reduction by action of the Company's board of directors.
Unless previously redeemed, each Note will mature on a business day 9 months
or more from its date of issue, as selected by the initial purchaser and agreed
to by the Company.
The Notes, other than Foreign Currency Notes, will be issuable only in fully
registered form in denominations of U.S. $100,000 and integral multiples of U.S.
$1,000 in excess thereof. For a description of the denominations of Foreign
Currency Notes, see "Special Provisions Relating to Foreign Currency Notes."
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth below under "Book-Entry Notes,"
Book-Entry Notes will not be issuable in definitive form.
The Notes may be issued as Original Issue Discount Notes. An Original Issue
Discount Note is a Note, including any Zero-Coupon Note, which is issued at a
price lower than the amount payable at the Stated Maturity thereof and which
provides that upon redemption or acceleration of the maturity thereof an amount
less than the amount payable at the Stated Maturity thereof and determined in
accordance with the terms thereof shall become due and payable. Original Issue
Discount Notes, as well as certain other Notes offered hereunder, may, for
United States federal income tax purposes, be considered Discount Securities.
The principal United States federal income tax consequences of the ownership of
a Discount Security are described under "United States Taxation -- Original
Issue Discount and Acquisition Discount on Short-Term Notes."
The Notes may be issued as Indexed Notes. An Indexed Note is a Note that may
receive a principal amount at Maturity that is either greater than or less than
the face amount of such Note, depending upon the fluctuation of the relative
value, rate or price of the specified index. Specific information pertaining to
the method for determining the principal amount payable at Maturity, a
historical comparison of the relative value, rate or price of the specified
index and the face amount of the Indexed Note and certain additional tax
considerations will be described in the applicable Pricing Supplement.
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Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, premium, if
any, and interest on the Notes will be made in U.S. dollars. If any of the Notes
are to be denominated in a currency other than U.S. dollars, or if the principal
of, premium, if any, and interest on any of the Notes is to be payable at the
option of the Holder or the Company in a currency other than that in which such
Note is denominated, the applicable Pricing Supplement will provide additional
information pertaining to the terms of such Notes and other matters of interest
to the Holders thereof.
Payments of principal of, premium, if any, and interest payable at Maturity
or upon acceleration or redemption, if any, on a Certificated Note will be made
in immediately available funds at the offices of The Bank of New York, in the
Borough of Manhattan, The City of New York, as Paying Agent, provided that the
Note is presented to the Paying Agent in time for the Paying Agent to make such
payments in such funds in accordance with its normal procedures.
The total amount of any principal, premium, if any, and/or interest due on
any Global Note representing one or more Book-Entry Notes on any Interest
Payment Date or at the Stated Maturity will be made available to the Trustee on
such date. As soon as possible thereafter, the Trustee will make such payments
to the Depository, in accordance with existing arrangements between the Trustee
and the Depository. The Depository will allocate such payments to each
Book-Entry Note represented by such Global Note and make payments to the owners
or holders thereof in accordance with its existing operating procedures. Neither
the Company nor the Trustee shall have any responsibility or liability for such
payments by the Depository. So long as the Depository or its nominee is the
registered owner of any Global Note, the Depository or its nominee, as the case
may be, will be considered the sole owner or holder of the Book-Entry Note or
Notes represented by such Global Note for all purposes under the Indenture. The
Company understands, however, that under existing industry practice, the
Depository will authorize the persons on whose behalf it holds a Global Note to
exercise certain rights of holders of Notes. See "Description of Notes --
Book-Entry Notes."
Certificated Notes may be presented for registration of transfer or exchange
at the principal corporate trust office of The Bank of New York (the "Trustee"),
in the Borough of Manhattan, The City of New York. With respect to transfers of
Book-Entry Notes and exchanges of Global Notes representing Book-Entry Notes,
see "Description of Notes -- Book-Entry Notes."
The applicable Pricing Supplement will indicate either that the Notes cannot
be redeemed at the option of the Company prior to their Stated Maturity or that
the Notes may be redeemable at the option of the Company on or after a specified
date prior to their Stated Maturity at specified prices (which may include a
premium), together with accrued interest to the date of redemption. Unless
otherwise indicated in the applicable Pricing Supplement, the Notes will be
subject to redemption at the option of Holders of the Notes upon the occurrence
of certain events. For a description of terms of redemption at the option of
Holders, see "Description of Debt Securities -- Redemption at the Option of
Holders Upon Change of Control" in the Prospectus.
The Notes will not be subject to any sinking fund.
The Notes will not be convertible into or exchangeable for the Company's
common stock or other securities of the Company.
The Indenture provisions relating to legal and covenant defeasance which are
described in the accompanying Prospectus under "Description of Debt Securities
- -- Defeasance" will apply to the Notes.
The Indenture contains certain covenants substantially similar to those
contained in the Senior Note Indenture, dated as of April 1, 1994, between the
Company and The Chase Manhattan Bank, N.A., as trustee, as set forth under the
heading "Description of Debt Securities -- Certain Covenants of the Company" in
the accompanying Prospectus, except that (i) the restrictions relating to the
incurrence of additional Debt (as defined therein) by the Company or any
Subsidiary shall not, in addition to the other exceptions and subject to the
conditions set forth therein, apply to mortgages on any property acquired,
constructed or improved by the Company or any Subsidiary after May 22, 1992 to
secure or provide for the
S-3
<PAGE>
payment of the purchase price or cost thereof or existing mortgages on property
acquired (or, in each case, any extension, renewal or replacement, in whole or
in part, thereof) and (ii) the term "Forestlands," as used therein, is defined
as "Timberlands" under the Indenture.
INTEREST
Each Note, except a Zero-Coupon Note, will bear interest from and including
the date of issue or from and including the most recent Interest Payment Date to
which interest on such Note has been paid or duly provided for to, but
excluding, the relevant Interest Payment Date at the fixed rate per annum, or at
the rate per annum determined pursuant to the interest rate formula stated
therein and in the applicable Pricing Supplement, until the principal thereof is
paid or made available for payment. Interest payments, if any, will be in the
amount of interest accrued from and including the next preceding Interest
Payment Date in respect of which interest has been paid or duly provided for (or
from and including the date of issue, if no interest has been paid with respect
to such Note) to, but excluding, the applicable Interest Payment Date.
Interest, if any, will be payable on each Interest Payment Date and at
Maturity; provided, however, if a Note is issued between a Regular Record Date
and an Interest Payment Date, the interest so payable for the period from the
date of issue to such Interest Payment Date shall be paid on the next succeeding
Interest Payment Date to the Registered Holder thereof on the related Regular
Record Date. Interest will be payable to the person (which in the case of a
Global Note representing Book-Entry Notes shall be the Depositary) in whose name
an interest-bearing Note is registered at the close of business on the Regular
Record Date next preceding each Interest Payment Date; PROVIDED, HOWEVER, that
interest payable at Maturity or, if applicable, upon redemption, will be payable
to the person to whom principal shall be payable. Unless otherwise indicated in
the applicable Pricing Supplement, the Regular Record Date with respect to
Floating Rate Notes shall be the date 15 calendar days prior to each Interest
Payment Date, whether or not such date shall be a Business Day, and the Regular
Record Dates with respect to Fixed Rate Notes shall be the March 15 and
September 15 next preceding the April 1 and October 1 Interest Payment Dates.
Each Note, except a Zero-Coupon Note, will bear interest at either (a) a
fixed rate or rates (a "Fixed Rate Note") or (b) a variable rate determined by
reference to an interest rate formula (a "Floating Rate Note"), which may be
adjusted by adding or subtracting the Spread or multiplying by the Spread
Multiplier, unless otherwise specified therein and in the applicable Pricing
Supplement. Holders of Zero-Coupon Notes will receive no periodic payments of
interest on such Notes.
Interest rates are subject to change by the Company from time to time, but
no such change will affect any Note already issued or as to which an offer to
purchase has been accepted by the Company.
FIXED RATE NOTES
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Note. Unless
otherwise indicated in the applicable Pricing Supplement, the Interest Payment
Dates for Fixed Rate Notes will be April 1 and October 1 of each year and at
Maturity, and, if applicable, upon redemption. Unless otherwise indicated in the
applicable Pricing Supplement, interest payments for Fixed Rate Notes shall be
the amount of interest accrued to but excluding the relevant Interest Payment
Date. Interest on such Note will be computed on the basis of a 360-day year of
twelve 30-day months.
FLOATING RATE NOTES
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis for such Floating Rate Note. Such basis may be:
(a) the Commercial Paper Rate, in which case such Note will be a Commercial
Paper Rate Note, (b) the Prime Rate, in which case such Note will be a Prime
Rate Note, (c) the CD Rate, in which case such Note will be a CD Rate Note, (d)
the Federal Funds Rate, in which case such Note will be a Federal Funds Rate
Note, (e) LIBOR, in which case such Note will be a LIBOR Note, (f) the Treasury
Rate, in which case such Note will be a Treasury Rate Note, or (g) such other
interest rate formula as may be agreed to between the Company and the purchaser
and set forth in such Pricing Supplement. In addition, a Floating Rate Note may
bear interest at the lowest or highest or average of two or more interest rate
formulae. The applicable Pricing Supplement for a Floating Rate Note also will
specify
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the Spread or Spread Multiplier, if any, and the maximum or minimum interest
rate limitation, if any, applicable to each Note. In addition, such Pricing
Supplement will define or particularize for each Floating Rate Note the
following terms, if applicable: Calculation Agent; Calculation Dates; Initial
Interest Rate (which rate shall be determined on the same basis as that
subsequently applicable to such Note); Interest Payment Dates; Regular Record
Dates; Index Maturity; Interest Determination Dates; Interest Reset Dates;
Redemption Prices; and Redemption Dates with respect to such Note. See
"Glossary" for definitions of certain terms used in this Prospectus Supplement.
The rate of interest on a Floating Rate Note in effect on any date will be
(a) if such day is an Interest Reset Date with respect to such Floating Rate
Note, the interest rate on such Floating Rate Note determined as of the Interest
Determination Date pertaining to such Interest Reset Date, or (b) if such day is
not an Interest Reset Date with respect to such Floating Rate Note, the interest
rate on such Floating Rate Note determined as of the Interest Determination Date
pertaining to the immediately preceding Interest Reset Date with respect to such
Floating Rate Note; PROVIDED, HOWEVER, that the interest rate in effect from the
Issue Date of a Floating Rate Note (or that of a predecessor Note) to but
excluding the first Interest Reset Date with respect to such Floating Rate Note
will be the Initial Interest Rate (as set forth in the applicable Pricing
Supplement). Subject to applicable provisions of law and except as described
herein, the rate of interest on a Floating Rate Note on any Interest Reset Date
with respect thereto will be the rate of interest determined with respect to the
Interest Determination Date pertaining to such Interest Reset Date as determined
in accordance with the applicable provisions described below.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (each an "Interest Reset Date"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Reset Date will be, in the case
of Floating Rate Notes which reset daily, each Business Day; in the case of
Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
except as provided in the following paragraph, the Tuesday of each week; in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each year,
as indicated in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of one month of each year,
as indicated in the applicable Pricing Supplement. If any Interest Reset Date
for any Floating Rate Note would otherwise be a day that is not a Business Day
with respect to such Note, such Interest Reset Date shall be the next succeeding
Business Day with respect to such Note, except that if such Note is a LIBOR Note
and the next succeeding Business Day falls in the next succeeding calendar
month, such Interest Reset Date shall be the immediately preceding Business Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
a Prime Rate Note (the "Prime Rate Interest Determination Date"), a CD Rate Note
(the "CD Rate Interest Determination Date") or a Federal Funds Rate Note (the
"Federal Funds Interest Determination Date") will be the second Business Day
preceding the Interest Reset Date with respect to such Note. The Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note (the
"LIBOR Interest Determination Date") will be the second London Business Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day on which Treasury bills are auctioned for
the week in which such Interest Reset Date falls, or if no auction is held for
such week, the Monday of such week (or if Monday is a legal holiday, the next
succeeding Business Day) and the Interest Reset Date will be the Business Day
immediately following such Treasury Interest Determination Date. Treasury bills
are usually sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the following Tuesday,
except that such auction may be held on the preceding Friday. If an auction for
such week is held on Monday or the preceding Friday, such Monday or preceding
Friday shall be the Treasury Interest Determination Date for such week, and the
Interest Reset Date for such week shall be the Tuesday of such week (or, if such
Tuesday is not a
S-5
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Business Day, the next succeeding Business Day). If the auction for such week is
held on any day of such week other than Monday, then such day shall be the
Treasury Interest Determination Date and the Interest Reset Date for such week
shall be the next succeeding Business Day.
A Floating Rate Note may have either or both of the following: (a) a maximum
numerical interest rate limitation, or ceiling, on the rate of interest which
may accrue during any interest period; and (b) a minimum numerical interest rate
limitation, or floor, on the rate of interest which may accrue during any
interest period. In addition to any maximum interest rate which may be
applicable to any Floating Rate Note, the interest rate on such Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by United States law of general application. Under
present New York law the maximum rate of interest, with certain exceptions, is
25% per annum on a simple interest basis. The limit may not apply to Notes in
which $2,500,000 or more has been invested.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, the Interest Payment Date will be, in the case of Floating
Rate Notes which reset daily, weekly or monthly, the third Wednesday of each
month or the third Wednesday of March, June, September and December of each year
(as indicated in the applicable Pricing Supplement); in the case of Floating
Rate Notes which reset quarterly, the third Wednesday of March, June, September
and December of each year; in the case of Floating Rate Notes which reset
semiannually, the third Wednesday of the two months of each year specified in
the applicable Pricing Supplement; and in the case of Floating Rate Notes which
reset annually, the third Wednesday of the month specified in the applicable
Pricing Supplement. If, pursuant to the preceding sentence, an Interest Payment
Date with respect to any Floating Rate Note (other than an Interest Payment Date
at Maturity) would otherwise be a day that is not a Business Day with respect to
such Note, such Interest Payment Date shall be the next succeeding Business Day
with respect to such Note, except that if such Note is a LIBOR Note and the next
succeeding Business Day falls in the next succeeding calendar month, such
Interest Payment Date shall be the immediately preceeding Business Day. If the
Maturity of a Floating Rate Note falls on a day that is not a Business Day, the
payment of principal, premium, if any, and interest will be made on the next
succeeding Business Day, and no interest on such payment shall accrue from and
after such Maturity. Unless otherwise indicated in the applicable Pricing
Supplement the Regular Record Date with respect to Floating Rate Notes shall be
the date 15 calendar days prior to each Interest Payment Date, whether or not
such date shall be a Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
interest accrued from and including the date of issue, or from and including the
last date to which interest has been paid or duly provided for, is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day in such period from and including the date of issue, or
from and including the last date to which interest has been paid or duly
provided for, to but excluding the date for which accrued interest is being
calculated. Unless otherwise specified in the Note and the applicable Pricing
Supplement, the interest factor (expressed as a decimal rounded upwards, if
necessary, as described below) for each such day is computed by dividing the
interest rate (expressed as a decimal rounded upwards, if necessary, as
described below) applicable to such date by 360, (or, in the case of the
Treasury Rate Notes, by the actual number of days in the year). The interest
factor for Notes for which two or more interest rate formulae are applicable
will be calculated in each period in the same manner as if only the lowest,
highest or average of, as the case may be, such interest rate formulae applied.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation on Floating Rate Notes will be
rounded, upwards if necessary, to the next higher one-hundred thousandth of a
percentage point, with five one-millionths of a percentage point rounded upwards
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and
9.876544% (or .09876544) being rounded to 9.87654% (or .0987654)), and all
dollar amounts used in or resulting from such calculation on Floating Rate Notes
will be rounded to the nearest cent or, in the case of Foreign Currency Notes,
the nearest unit (with one-half cent or five one-thousandths of a unit being
rounded upwards).
S-6
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Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if different, the
interest rate which will become effective as a result of a determination made on
the most recent Interest Determination Date with respect to such Floating Rate
Note.
COMMERCIAL PAPER RATE NOTES
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any), and will be payable on the dates, specified on the face of
such Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as described below) of the rate on such
date for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement as published by the Board of Governors of the Federal Reserve
System in "Statistical Release H.15 (519), Selected Interest Rates" ("H.15
(519)"), or any successor publication of the Board of Governors of the Federal
Reserve System, under the heading "Commercial Paper." In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Commercial Paper Interest Determination Date, then the
Commercial Paper Rate shall be the Money Market Yield of the rate on such
Commercial Paper Interest Determination Date for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release,
"Composite 3:30 p.m. Quotations for U.S. Government Securities" ("Composite
Quotations") under the heading "Commercial Paper." If by 3:00 p.m., New York
City time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, the Commercial Paper Rate for that Commercial
Paper Interest Determination Date shall be the Money Market Yield of the
arithmetic mean, as calculated by the Calculation Agent on such Calculation
Date, of the offered rates, as of 11:00 a.m., New York City time, on that
Commercial Paper Interest Determination Date, of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized rating agency; PROVIDED, HOWEVER, that
if fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Commercial Paper Rate will be the
Commercial Paper Rate in effect on such Commercial Paper Interest Determination
Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded
upwards, if necessary, to the next higher one hundred thousandth of a percentage
point) calculated in accordance with the following formula:
<TABLE>
<C> <C> <S> <C>
D X 360
Money Market Yield = -------------- = 100
360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
PRIME RATE NOTES
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified on the face of such Prime Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Interest Determination Date, the
rate set forth on such date in H.15(519) under the heading "Bank Prime Loan." In
the event that such rate is not published prior to 3:00 p.m., New York City
time, on such Prime Rate Interest Determination Date, then the Prime Rate will
be determined by the Calculation Agent and will be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the Reuters
Screen NYMF Page as such bank's prime rate or base lending rate as in effect for
that Prime
S-7
<PAGE>
Rate Interest Determination Date. If fewer than four such rates appear on the
Reuters Screen NYMF Page for the Prime Rate Interest Determination Date, the
Prime Rate will be the arithmetic mean of the announced prime rates quoted on
the basis of the actual number of days in the year divided by 360 as of the
close of business on such Prime Rate Interest Determination Date by at least two
of three major money center banks in The City of New York selected by the
Calculation Agent. If fewer than two such quotations are provided, the Prime
Rate shall be determined on the basis of the rates furnished in The City of New
York by the appropriate number of substitute banks or trust companies organized
and doing business under the laws of the United States, or any state thereof,
having total equity capital of at least $500 million and being subject to
supervision or examination by federal or state authority, selected by the
Calculation Agent to provide such rate or rates; PROVIDED, HOWEVER, that if the
banks or trust companies selected as aforesaid are not quoting as mentioned in
this sentence, the Prime Rate will be the Prime Rate then in effect on such
Prime Rate Interest Determination Date.
CD RATE NOTES
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) specified
on the face of such CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Rate Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15(519) under the heading
"CDs (Secondary Market)." In the event that such rate is not published prior to
3:00 p.m., New York City time, on the Calculation Date pertaining to such CD
Rate Interest Determination Date, then the CD Rate shall be the rate on such CD
Rate Interest Determination Date for negotiable certificates of deposit having
the Index Maturity specified in the applicable Pricing Supplement as published
in Composite Quotations under the heading "Certificates of Deposit." If by 3:00
p.m., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, the CD Rate for that CD
Interest Determination Date shall be calculated by the Calculation Agent and
shall be the arithmetic mean (rounded upwards, if necessary, to the next higher
one-hundred thousandth of a percentage point) of the secondary market offered
rates, as of 10:00 a.m., New York City time, on that CD Rate Interest
Determination Date, of three leading nonbank dealers of negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money market
banks with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement in a denomination of $5,000,000; PROVIDED,
HOWEVER, that if fewer than three dealers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the CD Rate will be
the CD Rate in effect on such CD Rate Interest Determination Date.
FEDERAL FUNDS RATE NOTES
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any) specified on the face of such Federal Funds Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Federal Funds (Effective)." In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Federal Funds Interest Determination Date, then the Federal
Funds Rate will be the rate on such Federal Funds Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate." If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, the Federal
Funds Rate for that Federal Funds Interest Determination Date shall be the
arithmetic mean, as calculated by the Calculation Agent on such Calculation
Date, of the rates, prior to 9:00 a.m., New York City time, on that Federal
Funds Interest Determination Date, for the last transaction in overnight Federal
Funds arranged by three leading brokers of Federal Funds transactions in The
City of New York selected by the
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<PAGE>
Calculation Agent; PROVIDED, HOWEVER, that if fewer than three brokers selected
as aforesaid by the Calculation Agent are quoting as mentioned in this sentence,
the Federal Funds Rate will be the Federal Funds Rate in effect on such Federal
Funds Interest Determination Date.
LIBOR NOTES
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified on the
face of such LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions: On each LIBOR Interest Determination Date, LIBOR will be determined
on the basis of the offered rate for deposits in U.S. dollars having the Index
Maturity specified in the applicable Pricing Supplement, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date, which appears on the Telerate Page 3750 as of 11:00 a.m.,
London time, on that LIBOR Interest Determination Date. If such rate does not so
appear on the Telerate Page 3750, the rate in respect of such LIBOR Interest
Determination Date will be determined on the basis of the rates at which
deposits in U.S. dollars are offered by four major banks in the London interbank
market (selected by the Calculation Agent) at approximately 11:00 a.m., London
time, on the LIBOR Interest Determination Date next preceding the relevant
Interest Reset Date to prime banks in the London interbank market for a period
of the Index Maturity commencing on that Interest Reset Date and in a principal
amount equal to an amount not less than $1,000,000 that is representative for a
single transaction in such market at such time. In such case, the Calculation
Agent will request the principal London office of each of the aforesaid major
banks to provide a quotation of such rate. If at least two such quotations are
provided in respect of such LIBOR Interest Determination Date, the rate for that
Interest Rate Date will be the arithmetic mean of the quotations, and, if fewer
than two quotations are provided as requested in respect of such LIBOR Interest
Determination Date, the rate for that Interest Reset Date will be the arithmetic
mean of the rates quoted by three major banks in The City of New York, selected
by the Calculation Agent, at approximately 11:00 a.m., New York City time, on
that LIBOR Interest Determination Date for loans in U.S. dollars to leading
European banks for a period of the Index Maturity commencing on that Interest
Reset Date and in a principal amount equal to an amount not less than $1,000,000
that is representative for a single transaction in such market at such time;
PROVIDED, HOWEVER, if the aforesaid rate cannot be determined by the Calculation
Agent, LIBOR in respect of such LIBOR Interest Determination Date will be LIBOR
then in effect on such LIBOR Interest Determination Date.
TREASURY RATE NOTES
Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any), and will be payable on the dates, specified on the face of such Note and
in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the heading, "U.S. Government
Securities/Treasury bills -- Auction Average (Investment)" or, if not so
published by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such Treasury Interest Determination Date, the auction average rate
(expressed as a bond equivalent, rounded, upwards if necessary, to the next
higher one hundred thousandth of a percentage point, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) for such auction
as otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury bills having the Index
Maturity specified in the applicable Pricing Supplement are not published or
reported as provided above by 3:00 p.m., New York City time, on such Calculation
Date, or if no such auction is held in a particular week, then the Treasury Rate
shall be the rate as published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills/Secondary Market." In the event that such rate is not
so published by 3:00 p.m., New York City time, on such Calculation Date, then
the Treasury Rate shall be
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<PAGE>
calculated by the Calculation Agent and shall be a yield to maturity (expressed
as a bond equivalent rounded, upwards if necessary, to the next higher one
hundred thousandth of a percentage point, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) of the arithmetic mean, as
calculated by the Calculation Agent on such Calculation Date, of the secondary
market bid rates as of approximately 3:30 p.m., New York City time, on such
Treasury Interest Determination Date, of three leading primary United States
government securities dealers in The City of New York selected by the
Calculation Agent, for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; PROVIDED, HOWEVER, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Treasury Rate will be the Treasury Rate in effect on such
Treasury Interest Determination Date.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor having the same original
issuance date, interest rate, redemption provisions, if any, and Stated
Maturity, will be represented by a single Global Note. Each Global Note
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depository, located in the Borough of Manhattan, The City of New York, and
registered in the name of a nominee of the Depository.
Ownership of beneficial interests in a Global Note representing Book-Entry
Notes will be limited to institutions that have accounts with the Depository or
its nominee ("participants") or persons that may hold interests through
participants. In addition, ownership of beneficial interests by participants in
such a Global Note will only be evidenced by, and the transfer of that ownership
interest will only be effected through, records maintained by the Depository or
its nominee for such Global Note. Ownership of beneficial interests in such a
Global Note by persons that hold through participants will only be evidenced by,
and the transfer of that ownership interest will only be effected through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws may impair the ability to transfer beneficial
interests in such a Global Note.
The Company has been advised by the Depository that upon the issuance of a
Global Note representing Book-Entry Notes, and the deposit of such Global Note
with the Depository, the Depository will immediately credit, on its book-entry
registration and transfer systems, the respective principal amounts of the
Book-Entry Notes represented by such Global Note to the accounts of
participants. The accounts to be credited shall be designated by the Agents or,
to the extent that the Book-Entry Notes are offered and sold directly, by the
Company.
Payment of principal of, premium, if any, and interest on Book-Entry Notes
represented by any Global Note registered in the name of or held by the
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner and Holder of the Global Note representing
such Book-Entry Notes. None of the Company, the Trustee or any agent of the
Company or the Trustee will have any responsibility or liability for any aspect
of the Depository's records or any participant's records relating to, or
payments made on account of, beneficial ownership interests in a Global Note
representing such Book-Entry Notes or for maintaining, supervising or reviewing
any of the Depository's records or any participant's records relating to such
beneficial ownership interests.
The Company has been advised by the Depository that upon receipt of any
payment of principal of, premium, if any, or interest in respect of a Global
Note, the Depository will immediately credit, on its book-entry registration and
transfer system, accounts of participants with payments in amounts proportionate
to their respective beneficial interest in the principal amount of such Global
Note as shown on the records of the Depository. Payments by participants to
owners of beneficial interests in a Global Note held through such participants
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in "street
name," and will be the sole responsibility of such participants.
No Global Note described above may be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
another nominee of the Depository.
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<PAGE>
A Global Note representing Book-Entry Notes is exchangeable for definitive
Notes in registered form, of like tenor and of an equal aggregate principal
amount, only if (x) the Depository notifies the Company that it is unwilling or
unable to continue as Depository for such Global Note or if at any time the
Depository ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (y) the Company in its
sole discretion determines that such Global Note shall be exchangeable for
definitive Notes in registered form or (z) any event shall have happened and be
continuing which, after notice or lapse of time, or both, would be an Event of
Default with respect to the Notes. Any Global Note that is exchangeable pursuant
to the preceding sentence shall be exchangeable in whole for definitive Notes in
registered form, of like tenor and of an equal aggregate principal amount, in
denominations of $100,000 and integral multiples of $1,000 in excess thereof.
Such definitive Notes shall be registered in the name or names of such person or
persons as the Depository shall instruct the Trustee. It is expected that such
instructions may be based upon directions received by the Depository from its
participants with respect to ownership of beneficial interests in such Global
Note.
Except as provided above, owners of beneficial interests in such Global Note
will not be entitled to receive physical delivery of Notes in definitive form
and will not be considered the Holders thereof for any purpose under the
Indenture, and no Global Note representing Book-Entry Notes shall be
exchangeable, except for another Global Note of like denomination and tenor to
be registered in the name of the Depository or its nominee. Accordingly, each
person owning a beneficial interest in such Global Note must rely on the
procedures of the Depository and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a Holder under the Indenture. The Indenture allows the
Depository, as a Holder, to appoint agents and otherwise authorize participants
to give or take any request, demand, authorization, direction, notice, consent,
waiver or other action which a Holder is entitled to give or take under the
Indenture. The Company understands that under existing industry practices, in
the event that the Company requests any action of Holders or an owner of a
beneficial interest in such permanent Global Note desires to give or take any
action that a Holder is entitled to give or take under the Indenture, the
Depository would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
The Depository has advised the Company and the Agents as follows: The
Depository is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depository was created to hold securities of its participants
and to facilitate the clearance and settlement of securities transactions among
its participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depository's participants include securities
brokers and dealers (including the Agents), banks, trust companies, clearing
corporations, and certain other organizations, some of whom (and/or their
representatives) own the Depository. Access to the Depository's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, premium, if
any, and interest on the Notes will be made in U.S. dollars. If any of the Notes
are to be denominated in a currency or currency unit other than U.S. dollars,
the following provisions shall apply, which are in addition to, and to the
extent inconsistent therewith replace, the description of general terms and
provisions of Notes set forth in the accompanying Prospectus and elsewhere in
this Prospectus Supplement. For a description of certain risks associated with
Foreign Currency Notes, see "Foreign Currency Risks."
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<PAGE>
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES
THAT RESULT FROM SUCH NOTES BEING DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY
UNIT EITHER AS SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS
SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT
THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED IN AN INVESTMENT
IN FOREIGN CURRENCY NOTES AND AS TO ANY MATTERS THAT MAY AFFECT THE PURCHASE OR
HOLDING OF A FOREIGN CURRENCY NOTE OR THE RECEIPT OF PAYMENTS OF PRINCIPAL OF
AND ANY PREMIUM AND INTEREST ON A FOREIGN CURRENCY NOTE IN A SPECIFIED CURRENCY.
FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Unless otherwise indicated in the applicable Pricing Supplement, a Foreign
Currency Note will not be sold in, or to a resident of, the country of the
Specified Currency in which such Note is denominated.
Foreign Currency Notes are issuable in registered form only, without
coupons. The denominations for particular Foreign Currency Notes will be
specified in the applicable Pricing Supplement.
Unless otherwise provided in the applicable Pricing Supplement, payment of
the purchase price of Foreign Currency Notes will be made in immediately
available funds.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers of Notes who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase or holding of, or receipt of payments of principal, premium
or interest in respect of, Notes. Such persons should consult their own advisors
with regard to such matters.
CURRENCIES
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the currency or currency unit
specified in the applicable Pricing Supplement (the "Specified Currency"). At
the present time there are limited facilities in the United States for the
conversion of U.S. dollars into the Specified Currencies and vice versa, and
banks do not offer non--U.S. dollar checking or savings account facilities in
the United States. However, if requested on or prior to the fifth Business Day
preceding the date of delivery of the Notes, or by such other day as determined
by the Agent who presented such offer to purchase Notes to the Company, such
Agent is prepared to arrange for the conversion of U.S. dollars into the
Specified Currency set forth in the applicable Pricing Supplement to enable the
purchasers to pay for the Notes. Each such conversion will be made by the
applicable Agent on such terms and subject to such conditions, limitations and
charges as the applicable Agent may from time to time establish in accordance
with its regular foreign exchange practices. All costs of exchange will be borne
by the purchasers of the Notes.
Specific information about the foreign currency or currency units in which a
particular Foreign Currency Note is denominated, including historical exchange
rates and a description of the currency and any exchange controls, will be
contained in the applicable Pricing Supplement. Such information contained
therein shall be furnished as a matter of information only and should not be
regarded as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future. See "Foreign Currency Risks --
Exchange Rates and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
The principal of, premium, if any, and interest on Foreign Currency Notes
are payable by the Company in the Specified Currency. Unless otherwise specified
in the applicable Pricing Supplement, since banks do not now have non-U.S.
dollar bank accounts in their offices in the United States, the Exchange Rate
Agent will convert all payments of principal of and interest on Foreign Currency
Notes to U.S. dollars. However, unless otherwise specified in the applicable
Pricing Supplement, the Holder of a Foreign Currency Note may elect to receive
such payments in the Specified Currency as described below.
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<PAGE>
Any U.S. dollar amount to be received by a Holder of a Foreign Currency Note
will be based on the highest bid quotation in The City of New York received by
the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the
second Business Day preceding the applicable payment date from three recognized
foreign exchange dealers (one of which may be the Exchange Rate Agent) selected
by the Exchange Rate Agent and approved by the Company for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on such
payment date in the aggregate amount of the Specified Currency payable to all
Holders of Foreign Currency Notes scheduled to receive U.S. dollar payments and
at which the applicable dealer commits to execute a contract. If such bid
quotations are not available, payments will be made in the Specified Currency.
All currency exchange costs will be borne by the Holder of the Foreign Currency
Note by deductions from such payments.
Notwithstanding the foregoing, unless otherwise specified in the applicable
Pricing Supplement, a Holder of Foreign Currency Notes may elect to receive
payment of the principal of, premium, if any, and interest on the Notes in the
Specified Currency by transmitting a written request for such payment to the
principal offices of The Bank of New York in the Borough of Manhattan, The City
of New York, as Paying Agent, on or prior to the Regular Record Date or at least
sixteen days prior to maturity, as the case may be. Such request may be in
writing (mailed or hand delivered) or by cable, telex or other form of facsimile
transmission. A Holder of a Foreign Currency Note may elect to receive payment
in the Specified Currency for all principal, premium, if any, and interest
payments and need not file a separate election for each payment. Such election
will remain in effect until revoked by written notice to The Bank of New York in
the Borough of Manhattan, The City of New York, but written notice of any such
revocation must be received by The Bank of New York in the Borough of Manhattan,
The City of New York on or prior to the relevant Regular Record Date or at least
sixteen days prior to the maturity date, as the case may be. Holders of Foreign
Currency Notes whose Foreign Currency Notes are to be held in the name of a
broker or nominee should contact such broker or nominee to determine whether and
how an election to receive payments in the Specified Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of Book-Entry Notes denominated in a Specified Currency
electing to receive payments of principal or any premium or interest in the
Specified Currency must notify the participant through which its interest is
held on or prior to the applicable Regular Record Date or at least sixteen days
prior to maturity, as the case may be, of such beneficial owner's election to
receive all or a portion of such payment in a Specified Currency. Such
participant must notify the Depository of such election on or prior to the third
Business Day after such Regular Record Date. The Depository will notify the
Paying Agent of such election on or prior to the fifth Business Day after such
Regular Record Date. If complete instructions are received by the participant
and forwarded by the participant to the Depository, and by the Depository to the
Paying Agent, on or prior to such dates, the beneficial owner will receive
payments in the Specified Currency.
Interest on Foreign Currency Notes paid in U.S. dollars will be paid in the
manner specified in the accompanying Prospectus and this Prospectus Supplement
for interest on Notes denominated in U.S. dollars. Interest on Foreign Currency
Notes paid in the Specified Currency will be paid by a check drawn on account
maintained at a bank outside the United States, unless other arrangements have
been made. The principal of Foreign Currency Notes, together with interest
accrued and unpaid thereon, due at maturity will be paid in immediately
available funds against presentation of such Foreign Currency Notes at the
principal offices of The Bank of New York in the Borough of Manhattan, The City
of New York, as Paying Agent. Any payment of principal or interest required to
be made on an Interest Payment Date or at maturity of a Foreign Currency Note
which is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on the
Interest Payment Date or at maturity, as the case may be, and no interest shall
accrue for the period from and after such Interest Payment Date or maturity.
PAYMENT CURRENCY
If a Specified Currency is not available for the payment of principal,
premium, if any, or interest with respect to a Foreign Currency Note due to the
imposition of exchange controls or other circumstances
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beyond the control of the Company, the Company will be entitled to satisfy its
obligations to Holders of Foreign Currency Notes by making such payment in U.S.
dollars on the basis of the Market Exchange Rate on the date of such payment, or
if such Market Exchange Rate is not then available, on the basis of the most
recently available Market Exchange Rate. See "Foreign Currency Risks -- Exchange
Rates and Exchange Controls."
FOREIGN CURRENCY RISKS
GENERAL
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of significant
changes in the rate of exchange between the U.S. dollar and the Specified
Currency and the possibility of the imposition or modification of foreign
exchange controls by either the United States or foreign governments. Such risks
generally depend on economic and political events over which the Company has no
control. In recent years, rates of exchange between the U.S. dollar and certain
foreign currencies have been highly volatile and such volatility may be expected
in the future. Fluctuations in any particular exchange rate that have occurred
in the past are not necessarily indicative, however, of fluctuations in the rate
that may occur during the term of any Foreign Currency Note. Depreciation of the
Specified Currency applicable to a Foreign Currency Note against the U.S. dollar
would result in a decrease in the U.S. dollar-equivalent yield of such Note, in
the U.S. dollar-equivalent value of the principal repayable at maturity of such
Note and, generally, in the U.S. dollar-equivalent market value of such Note.
JUDGMENTS
In the event an action based on Foreign Currency Notes were commenced in a
court of the United States, it is likely that such court would grant judgment
relating to such Notes only in U.S. dollars. It is not clear, however, whether,
in granting such judgment, the rate of conversion into U.S. dollars would be
determined with reference to the date of default, the date judgment is rendered
or some other date.
EXCHANGE CONTROLS, ETC.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to a Note's maturity. Even
if there are not exchange controls, it is possible that the Specified Currency
for any particular Foreign Currency Note would not be available at such Note's
maturity. In that event, the Company will pay in U.S. dollars on the basis of
the Market Exchange Rate on the date of such payment, or if such Market Exchange
Rate is not then available, on the basis of the most recently available Market
Exchange Rate.
UNITED STATES TAXATION
GENERAL
The following is a summary of certain United States federal income tax
consequences to initial purchasers of the Notes. The summary does not discuss
all aspects of federal income taxation which may be relevant to particular
investors in light of their specific investment circumstances, nor does it
discuss any foreign, state or local income or other tax considerations. The
summary is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), and on regulations, rulings and decisions that are in effect as of the
date of this Prospectus, all of which are subject to change.
The summary assumes that the Notes are held as "capital assets" (generally,
property held for investment purposes) within the meaning of Section 1221 of the
Code. Except to the extent discussed below under "Holders Who are United States
Aliens," this summary may not be applicable to non-United States persons not
subject to United States federal income tax on their worldwide income. "United
States Alien" means any person who, for federal income tax purposes, is a
foreign corporation, a non-resident alien individual, a non-
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resident alien fiduciary of a foreign estate or trust, or a foreign partnership
one or more of the members of which is, for federal income tax purposes, a
foreign corporation, a non-resident alien individual or a non-resident alien
fiduciary of a foreign estate or trust.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF
PURCHASING, HOLDING AND DISPOSING OF THE NOTES.
STATED INTEREST
In general, interest payments on a Note calculated on the basis of a single
fixed rate of interest, or a variable rate tied to a single objective index of
market interest rates, that is actually and unconditionally payable at fixed
periodic intervals of one year or less over the entire term of the Note
(including short periods) will be includable in the Holder's gross income as
ordinary interest income in accordance with such Holder's method of tax
accounting.
ORIGINAL ISSUE DISCOUNT
Notes with a term greater than one year may be issued with original issue
discount for federal income tax purposes. Original issue discount will arise if
the stated principal amount at maturity of a Note exceeds its issue price by
more than a DE MINIMIS amount, or if a Note has certain interest payment
characteristics (e.g., interest holidays, interest payable in additional Note,
stepped rates or rates based on multiple indices). If a Notes is issued with
original issue discount, the holder of the Note will be required to include
amounts in gross income for federal income tax purposes in advance of the
receipt of the cash payment to which such income is attributable. The amount of
original issue discount to be included in income in any tax period will be
determined using a constant yield to maturity method. Any amounts included in
income as original issue discount will, however, increase a holder's tax basis
in the Note.
Any Note issued with original issue discount will bear a legend setting
forth the total amount of original issue discount with respect to such Note, and
the Company will report annually to the Internal Revenue Service (the "IRS") and
to each holder of such Note the original issue discount accrued with respect to
the Note. Prospective holders are advised to consult their tax advisors with
respect to the particular original issue discount characteristics of the Note
that is being purchased.
ACQUISITION DISCOUNT ON SHORT-TERM NOTES
Notes that have a fixed maturity of one year or less may be issued with
acquisition discount. Acquisition discount will arise under the circumstances
set forth above with respect to original issue discount. Accrual basis taxpayers
making an appropriate election under the Code and taxpayers in certain specified
classes would be required to include acquisition discount in income currently in
an amount and manner similar to that applicable to original issue discount. A
cash basis holder who makes such an election cannot revoke such election without
the consent of the IRS, and such election applies to all short-term obligations
acquired by the holder in the taxable year in which the election is made and in
all subsequent taxable years. Individuals and other cash basis taxpayers holding
Notes with acquisition discount are not required to include accrued acquisition
discount in income until the cash payments attributable to such amounts are
received, which amounts will be treated as ordinary income. A U.S. Holder who
does not recognize acquisition discount currently may also be subject to
limitations on the deductibility of interest on indebtedness incurred to
purchase or, in certain circumstances, carry such a Note.
DISPOSITION OF NOTES
In general, and subject to the foregoing discussion of acquisition discount,
an initial holder of a Note will recognize capital gain or loss on the sale,
redemption, exchange or other disposition of the Note measured by the difference
between the amount of cash received (except to the extent attributable to
accrued interest) and the holder's adjusted tax basis in the Note.
FOREIGN CURRENCY NOTES
For purposes of the following discussion, it is assumed that the functional
currency of a United States Holder (a Holder who is not a United States Alien)
is the U.S. dollar.
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INTEREST PAYMENTS AND ORIGINAL ISSUE DISCOUNT
In general, interest on a Foreign Currency Note (whether received in the
Specified Currency or U.S. dollars) will be taxable to a United States Holder as
ordinary interest income at the time it is accrued or received in accordance
with such Holder's method of accounting for tax purposes. Regardless of whether
an interest payment is in fact converted to U.S. dollars, the amount of interest
income (including any original issue discount) required to be included in income
(the "Includible Amount") will generally be (i) in the case of a cash basis
taxpayer, the U.S. dollar value of the foreign currency interest payment based
on the exchange rate in effect on the date of receipt or payment plus the amount
of any accrued original issue discount and (ii) in the case of an accrual basis
taxpayer, the U.S. dollar value of the accrued amounts based on (x) the average
exchange rate in effect during the interest accrual period or (y) if an election
is made under Treasury Regulation Section 1.988-2(b)(2)(iii) (the "Section 988
Election"), the exchange rate on the last day of the interest accrual period or
on the date of the receipt of the interest payment (if such date is within five
business days of the last day of the interest accrual period). The amount of
original issue discount on a Foreign Currency Note required to be included in
income for a cash basis taxpayer will be computed for any accrual period in the
relevant foreign currency and then translated into a U.S. dollar value based on
(i) the average exchange rate in effect during such accrual period or (ii) the
exchange rate on the last day of the interest accrual period if a Section 988
Election is made. The Section 988 Election is made by filing a statement with
the Holder's first return for a taxable year in which the Section 988 Election
is effective. The Section 988 Election must be applied consistently to all debt
instruments held by the Holder and cannot be changed without the consent of
Commissioner of the IRS.
Until a Section 988 Election is effective, an accrual basis taxpayer will be
required to recognize gain or loss upon the receipt of interest payments on a
Foreign Currency Note attributable to fluctuations in currency exchange rates
("Foreign Currency Exchange Gain or Loss") between the dates of accrual and
receipt, equal to the difference, if any, between (i) the U.S. dollar value of
the Specified Currency interest payment based on the exchange rate in effect on
the date of receipt and (ii) the Includible Amount. Any such Foreign Currency
Exchange Gain or Loss will be ordinary income or loss. Rules similar to those
described above with respect to accrual basis taxpayers apply to both cash and
accrual basis Holders of Foreign Currency Notes that are issued with original
issue discount.
PURCHASE, SALE AND RETIREMENT OF FOREIGN CURRENCY NOTES
A United States Holder's tax basis in a Foreign Currency Note will be (i)
the U.S. dollar value of the Specified Currency amount paid for such Foreign
Currency Note based on the exchange rate in effect on the date of purchase of
the Foreign Currency Note plus (ii) the U.S. dollar value of any accrued
original issue discount on the Foreign Currency Note which the Holder has
reported in gross income. A Holder who converts U.S. dollars to a foreign
currency and immediately uses that currency to purchase a Foreign Currency Note
denominated in the same currency will ordinarily not recognize Foreign Currency
Exchange Gain or Loss in connection with such conversion and purchase. If a
Holder purchases a Foreign Currency Note with previously owned foreign currency,
the Holder will recognize Foreign Currency Exchange Gain or Loss in an amount
equal to the difference, if any, between the Holder's U.S. dollar tax basis in
such foreign currency and the U.S. dollar fair market value of the Foreign
Currency Note based on the exchange rate in effect on the date of purchase.
Gain or loss will be recognized upon the sale, exchange or retirement of a
Foreign Currency Note equal to the U.S. dollar value of the foreign currency
received upon such disposition less the U.S. dollar tax basis in the Foreign
Currency Note. Such gain or loss will be ordinary income or loss to the extent
it is treated as Foreign Currency Exchange Gain or Loss. Any gain or loss that
is recognized in excess of Foreign Currency Exchange Gain or Loss will be
capital gain or loss.
EXCHANGE OF FOREIGN CURRENCY
Foreign currency received as interest on a Foreign Currency Note or on the
sale or retirement of a Foreign Currency Note will have a tax basis equal to its
U.S. dollar value determined at the time such interest is received or at the
time of sale or retirement. Any gain or loss recognized on a sale or other
disposition of the foreign currency will be ordinary income or loss.
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HOLDERS WHO ARE UNITED STATES ALIENS
Under present United States federal income and estate tax law and subject to
the discussion of backup withholding below:
(a) payments of interest (including any original issue discount, if any)
on the Notes to any United States Alien Holder will not be subject to
federal income or withholding tax, provided that (1) the Holder does not
actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (2) the
Holder is not (i) a bank receiving interest pursuant to a loan agreement
entered into in the ordinary course of its trade or business or (ii) a
controlled foreign corporation that is related to the Company through stock
ownership, (3) such interest payments are not effectively connected with a
United States trade or business of the Holder and (4) either (i) the Holder
certifies to the Company or its agent, under penalties of perjury, that it
is not a United States person and provides its name and address or (ii) a
securities clearing organization, bank or other financial institution which
holds the Note and customers' securities in the ordinary course of its trade
or business (a "financial institution") certifies to the Company or its
agent under penalties of perjury that such statement has been received from
the Holder by it (or by a financial institution between it and the Holder)
and furnishes the payor with a copy thereof;
(b) a United States Alien Holder will not be subject to federal income
tax on gain realized on the sale, exchange, retirement or other disposition
of a Note, unless (1) the Holder is an individual who is present in the
United States for 183 days or more during the taxable year and certain
requirements are met or (2) the gain is effectively connected with a United
States trade or business of the Holder; and
(c) a Note held by an individual who at the time of death is not a
citizen or resident of the United States for federal estate tax purposes
will not be subject to federal estate tax as a result of such individual's
death unless (1) the income from the Note is effectively connected with a
United States trade or business of the Holder or (2) the individual actually
or constructively owns 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Interest paid with respect to a Note, and payment of the proceeds for a sale
of a Note to or through the United States office of a broker, received by a
United States Alien will not be subject to information reporting and backup
withholding if the payor has received the appropriate certification statement.
The appropriate certification procedures require that the Holder certify as to
its status as a United States Alien and provide its name and address. In
addition, payments of the proceeds from the sale of a Note to or through a
foreign office of a broker or the foreign office of a custodian, nominee or
other agent acting on behalf of the beneficial owner of a Note will not be
subject to information reporting or backup withholding; however, if the broker,
custodian, nominee or other agent is a United States person, a controlled
foreign corporation for federal income tax purposes or a foreign person 50% or
more of whose gross income, over a specified three-year period, is from a United
States trade or business, information reporting may be required with respect to
such payments.
Any amounts withheld under the backup withholding rules from a payment to a
Holder would be allowed as a refund or a credit against such Holder's federal
income tax liability, provided that the required information is furnished to the
IRS.
PLAN OF DISTRIBUTION OF NOTES
Under the terms of an Agency Agreement, dated July 20, 1992, as amended by
an Amendment to Agency Agreement, dated April 29, 1994 (the "Agency Agreement"),
the Notes may be offered on a continuing basis by the Company through the
Agents, each of which has agreed to use reasonable efforts to solicit purchases
of the Notes. The Company will pay each Agent a commission from .125% to .75% of
the principal amount of each Note, depending on its Stated Maturity, sold
through such Agent. This commission scale applies to Notes that mature between
nine months and thirty years (inclusive) from their date of issue. The
commission applicable to the sale of any Note that matures more than thirty
years from its date of issue
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will be determined by the relevant Agent and the Company at the time of such
sale and disclosed in the applicable Pricing Supplement. The Company has
reserved the right to sell Notes directly or indirectly to investors on its own
behalf. The Company may accept offers to purchase Notes through additional
agents on substantially the same terms and conditions (including commission
rates) as would apply to purchases under the Agency Agreement. Such other
agents, if any, will be named in the applicable Pricing Supplement. The Company
will have the sole right to accept offers to purchase Notes and may reject any
such offer, in whole or in part. Each Agent shall have the right, in its
discretion reasonably exercised, without notice to the Company, to reject any
offer to purchase Notes received by it, in whole or in part. The Company also
may sell Notes to an Agent, acting as principal, at a discount to be agreed upon
at the time of sale, for resale to one or more investors at varying prices
related to prevailing market prices at the time of such resale, as determined by
such Agent, or for resale to certain securities dealers at the offering price
set forth on the cover page of the applicable Pricing Supplement, less the
applicable concession, of the principal amount of the Notes. The offering price
and other selling terms for such resales may from time to time be varied by such
Agent.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in funds immediately
available in The City of New York.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Act"). The Company has agreed to indemnify the
Agents against and contribute toward certain liabilities, including liabilities
under the Act. The Company has agreed to reimburse the Agents for certain
expenses.
In addition to offering Notes through the Agents as described herein, senior
debt securities which are medium-term notes and may have terms substantially
similar to the terms of the Notes offered hereby (but constituting one or more
separate series of senior debt securities for purposes of the Indenture) may be
offered, concurrently with the offering of the Notes, on a continuing basis
outside the United States (as defined under "Limitations on Issuance of Bearer
Securities" in the Prospectus) by the Company pursuant to a placement agency
agreement. The terms of the placement agency agreement are expected to be
substantially similar to the terms of the Agency Agreement, except that such
placement agency agreement will contain certain selling restrictions.
CS First Boston Corporation and Kidder, Peabody & Co. Incorporated each
engage in transactions with and perform services for the Company in the ordinary
course of business.
VALIDITY OF THE NOTES
The validity of the Notes offered hereby will be passed upon for the Company
by James W. Guedry, Esquire, Associate General Counsel and Secretary of the
Company, and for the Agents by Skadden, Arps, Slate, Meagher & Flom, New York,
New York. The opinions of James W. Guedry and Skadden, Arps, Slate, Meagher &
Flom will be conditioned upon, and subject to certain assumptions regarding,
future action required to be taken by the Company and the Trustee at the request
of the Company in connection with the issuance and sale of any particular Note,
the specific terms of Notes and other matters which may affect the validity of
Notes but which cannot be ascertained on the date of such opinions. Mr. Guedry
does not own a material or significant amount of the outstanding shares of the
Company's common stock. He participates in the Company's Stock Option Plan and
its Salaried Savings Plan, having an interest in a fund under that plan which
invests in the Company's common stock.
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GLOSSARY
SET FORTH BELOW ARE DEFINITIONS, OR THE LOCATIONS ELSEWHERE OF DEFINITIONS,
OF SOME OF THE TERMS USED IN THIS PROSPECTUS SUPPLEMENT.
"BUSINESS DAY" means (a) with respect to any Note (unless otherwise provided
in this definition), any day that is a Business Day in The City of New York, (b)
with respect to LIBOR Notes only, any Business Day in The City of New York that
is also a London Business Day, (c) with respect to Foreign Currency Notes (other
than Foreign Currency Notes denominated in European Currency Units ("ECUs"))
only, any day that is a Business Day both in The City of New York and in the
principal financial center of the country of the Specified Currency and (d) with
respect to Foreign Currency Notes denominated in ECU, any Business Day in The
City of New York that is also designated as an ECU settlement day by the ECU
Banking Association in Paris or otherwise generally regarded in the ECU
interbank market as a day in which payments in EUC are made.
"CALCULATION AGENT" means the agent appointed by the Company to calculate
interest rates for Floating Rate Notes. Unless otherwise provided in a Pricing
Supplement, the Calculation Agent will be The Bank of New York.
"CALCULATION DATE" means the date on which the Calculation Agent is to
calculate an interest rate for a Floating Rate Note, which is the applicable
date set forth below, unless otherwise specified in the applicable Pricing
Supplement:
CD RATE -- The earlier of (i) the tenth day after the related CD Rate
Interest Determination Date or, if such day is not a Business Day, the
next succeeding Business Day; and (ii) the Business Day next preceding
the relevant Interest Payment Date or date of Stated Maturity, as the
case may be.
COMMERCIAL PAPER RATE -- The earlier of (i) the tenth day after the
related Commercial Paper Interest Determination Date or, if such day is
not a Business Day, the next succeeding Business Day; and (ii) the
Business Day next preceding the relevant Interest Payment Date or date of
Stated Maturity, as the case may be.
FEDERAL FUNDS RATE -- The earlier of (i) the tenth day after the related
Federal Funds Interest Determination Date or, if such day is not a
Business Day, the next succeeding Business Day; and (ii) the Business Day
next preceding the relevant Interest Payment Date or date of Stated
Maturity, as the case may be.
LIBOR -- The LIBOR Interest Determination Date.
PRIME RATE -- The Prime Rate Interest Determination Date.
TREASURY RATE -- The earlier of (i) the tenth day after the related
Treasury Interest Determination Date or, if such day is not a Business
Day, the next succeeding Business Day; and (ii) the Business Day next
preceding the relevant Interest Payment Date or date of Stated Maturity,
as the case may be.
"CD RATE" means the rate calculated as set forth under the heading
"Description of Notes -- Floating Rate Notes -- CD Rate Notes," unless otherwise
indicated in the applicable Pricing Supplement.
"COMMERCIAL PAPER RATE" means the rate calculated as set forth under the
heading "Description of Notes -- Floating Rate Notes -- Commercial Paper Rate
Notes," unless otherwise indicated in the applicable Pricing Supplement.
"COMPOSITE QUOTATIONS" means the daily statistical release entitled
"Composite 3:30 P.M. Quotations for U.S. Government Securities," or any
successor publication, published by the Federal Reserve Bank of New York.
"EXCHANGE RATE AGENT" means the agent appointed by the Company to convert
principal and any premium and interest payments in respect of Foreign Currency
Notes to U.S. dollars. Unless otherwise provided in a Pricing Supplement, the
Exchange Rate Agent will be The Bank of New York.
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"FEDERAL FUNDS RATE" means the rate calculated as set forth under the
heading "Description of Notes -- Floating Rate Notes -- Federal Funds Rate
Notes," unless otherwise indicated in the applicable Pricing Supplement.
"FIXED RATE NOTE" shall have the meaning set forth under the heading
"Description of Notes -- Fixed Rate Notes."
"FLOATING RATE NOTES" shall have the meaning set forth under the heading
"Description of Notes -- Floating Rate Notes."
"FOREIGN CURRENCY EXCHANGE GAIN OR LOSS" shall have the meaning set forth
under the heading "United States Taxation -- Foreign Currency Notes -- Interest
Payments and Original Issue Discount."
"H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15(519), Selected Interest Rates," or any successor publication,
published by the Board of Governors of the Federal Reserve System.
"INDEX MATURITY" means, with respect to a Floating Rate Note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as specified in the applicable Pricing Supplement.
"INITIAL INTEREST RATE" means the rate at which an interest--bearing Note
other than a Fixed Rate Note will bear interest from the date of issue to the
first Reset Date, as set forth in the applicable Pricing Supplement.
"INTEREST DETERMINATION DATE" means the date as of which the interest rate
for a Floating Rate Note is to be calculated, to be effective as of the
following Reset Date and calculated on the related Calculation Date (except in
the case of Prime Rate and LIBOR, which are calculated on the related Prime Rate
Interest Determination Date and LIBOR Interest Determination Date,
respectively). See the fourth paragraph under the heading "Description of Notes
- -- Floating Rate Notes" for the Interest Determination Dates for Floating Rate
Notes. The Interest Determination Dates for any Floating Rate Note will also be
set forth in the applicable Pricing Supplement and in such Note.
"INTEREST RESET DATE" means the date on which a Floating Rate Note will
begin to bear interest at the variable interest rate determined as of any
Interest Determination Date. See the third paragraph under the heading
"Description of Notes -- Floating Rate Notes" for the applicable Reset Dates for
such Notes. The Reset Dates with respect to any interest-bearing Note will also
be set forth in the applicable Pricing Supplement and on such Note.
"LIBOR" means the rate calculated as set forth under the heading
"Description of Notes -- Floating Rate Notes -- LIBOR Notes," unless otherwise
indicated in the applicable Prospectus Supplement.
"LONDON BUSINESS DAY" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"MARKET EXCHANGE RATE" for any Specified Currency means the noon buying rate
in The City of New York for cable transfers for such Specified Currency as
certified for customs purposes by (or if not so certified as otherwise
determined by) the Federal Reserve Bank of New York.
"PRIME RATE" means the rate calculated as set forth under the heading
"Description of Notes -- Floating Rate Notes -- Prime Rate Notes," unless
otherwise indicated in the applicable Pricing Supplement.
"REGULAR RECORD DATE" shall have the meaning set forth under the heading
"Description of Notes -- Interest."
"REUTERS SCREEN NYMF PAGE" means the display designated as page "NYMF" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF page on that service for the purpose of displaying the prime rate or base
lending rate of major United States banks).
"SECTION 988 ELECTION" shall have the meaning set forth under the heading
"United States Taxation -- Foreign Currency Notes -- Interest Payments and
Original Issue Discount."
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"SPECIFIED CURRENCY" shall have the meaning set forth in the first paragraph
under the heading "Special Provisions Relating to Foreign Currency Notes --
Currencies."
"SPREAD" means the number of basis points specified in the Note and the
applicable Pricing Supplement as being applicable to the Interest Rate for a
particular Floating Rate Note.
"SPREAD MULTIPLIER" means the percentage specified in the applicable Pricing
Supplement as being applicable to the interest rate for a particular Floating
Rate Note.
"TELERATE PAGE 3750" means the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service or
such other service as may be nominated as the information vendor, for the
purpose of displaying rates or pricing relating to LIBOR).
"TREASURY RATE" means the interest rate calculated as set forth under the
heading "Description of Notes -- Floating Rate Notes -- Treasury Rate Notes,"
unless otherwise indicated in the applicable Pricing Supplement.
"ZERO-COUPON NOTE" means a Note which does not bear interest prior to
Maturity.
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- --------------------------------------------------------------------------------
PROSPECTUS
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INTERNATIONAL PAPER
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK AND WARRANTS
--------------
International Paper Company (the "Company") may offer from time to time,
together or separately, its (i) debt securities (the "Debt Securities"), which
may be either senior debt securities (the "Senior Debt Securities") or
subordinated debt securities (the "Subordinated Debt Securities"), consisting of
notes, debentures or other unsecured evidences of indebtedness in one or more
series, (ii) shares of its serial preferred stock, par value $1.00 per share
(the "Preferred Stock"), which, for any or all series of Preferred Stock, may be
issued in the form of depositary shares evidenced by depositary receipts (the
"Depositary Shares"); (iii) shares of its common stock, par value $1.00 per
share (the "Common Stock"), including Common Share Purchase Rights to purchase
Common Stock, and (iv) warrants to purchase Debt Securities, Preferred Stock,
Depositary Shares or Common Stock, or any combination thereof, as shall be
designated by the Company at the time of the offering (the "Warrants") in
amounts, at prices and on terms to be determined at the time of the offering.
The Debt Securities, Preferred Stock, Depositary Shares, Common Stock and
Warrants are collectively called the "Securities."
The Securities may be offered as separate series or issuances at an
aggregate initial offering price not to exceed $2,400,000,000 or, if applicable,
the equivalent thereof in one or more foreign currencies, currency units,
composite currencies or in amounts determined by reference to an index as shall
be designated by the Company, in amounts, at prices and on terms to be
determined in light of market conditions at the time of sale and set forth in a
Prospectus Supplement or Prospectus Supplements.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company. The Subordinated
Debt Securities, when issued, will be subordinated in right of payment to all
Senior Indebtedness of the Company. Certain specific terms of the particular
Securities in respect of which this Prospectus is being delivered are set forth
in the Prospectus Supplement, including, where applicable, (i) in the case of
Debt Securities, the title, aggregate principal amount, denominations, maturity,
any interest rate (which may be fixed or variable) and time of payment of any
interest, any terms for redemption at the option of the Company or the holder,
any terms for sinking fund payments, any terms for conversion or exchange into
other Securities, currency or currencies of denomination and payment, if other
than U.S. dollars, any listing on a securities exchange and any other terms in
connection with the offering and sale of the Debt Securities in respect of which
this Prospectus is delivered, as well as the initial public offering price; (ii)
in the case of Preferred Stock, the specific title, the aggregate amount, any
dividend (including the method of calculating payment of dividends), seniority,
liquidation, redemption, voting and other rights, any terms for any conversion
or exchange into other Securities, any listing on a securities exchange, the
initial public offering price and any other terms; (iii) in the case of Common
Stock, the number of shares of Common Stock and the terms of offering thereof;
and (iv) in the case of Warrants, the designation and number, the exercise
price, any listing of the Warrants or the underlying Securities on a securities
exchange and any other terms in connection with the offering, sale and exercise
of the Warrants.
The Debt Securities may be issued in registered form or, subject to certain
limitations set forth herein, bearer form with coupons, or both. In addition,
all or a portion of the Debt Securities of a series may be issuable in temporary
or permanent global form and may be issued in the name of a depository
institution as book-entry securities. Subject to certain exceptions, Debt
Securities in bearer form may not be offered or sold to persons within the
United States or its possessions or to United States persons. See "Limitations
on Issuance of Bearer Securities."
The Company's Common Stock is listed on the New York Stock Exchange under
the trading symbol "IP." Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on such exchange, subject to official notice of
issuance.
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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.
--------------
The Securities may be sold directly, through agents, underwriters or dealers
as designated from time to time, or through a combination of such methods. See
"Plan of Distribution." If agents of the Company or any dealers or underwriters
are involved in the sale of the Securities in respect of which this Prospectus
is being delivered, the names of such agents, dealers or underwriters and any
applicable commissions or discounts will be set forth in or may be calculated
from the Prospectus Supplement with respect to such Securities. The net proceeds
to the Company from such sale also will be set forth in a Prospectus Supplement.
--------------
The date of this Prospectus is April 13, 1994
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE ACCOMPANYING
PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY
REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN OR
THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY
ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS OR PROSPECTUS SUPPLEMENT DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the United
States Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith file reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements, and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material may also be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Certain securities of the Company
are listed on, and reports, proxy statements and other information concerning
the Company can be inspected at the offices of, the New York Stock Exchange,
Inc. ("New York Stock Exchange"), 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered hereby (the "Registration Statement"). This Prospectus does
not contain all information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Reference is made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
Securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 1-3157) are incorporated in this Prospectus by
reference: (a) Annual Report on Form 10-K for the year ended December 31, 1993;
(b) the description of the Company's capital stock which is contained in the
Company's registration statement on Form 8-A, dated July 20, 1976, as amended,
and the Company's registration statements on Form S-3, filed January 8, 1992
(No. 33-44855) and December 23, 1993 (No. 33-51447); and (c) the Company's
registration statement on Form 8-A, dated April 17, 1987, as amended December
14, 1989 (relating to the Common Share Purchase Rights) and the related Current
Report on Form 8-K, dated April 17, 1987.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the filing of a post-effective amendment which indicates
the termination of the offering of the Securities made by this Prospectus shall
be deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of filing of such document.
Any statement contained in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated by reference in this Prospectus (without exhibits to such documents
other than exhibits specifically incorporated by reference into such documents).
Such written or oral request should be directed to International Paper Company,
Two Manhattanville Road, Purchase, New York 10577, Attention: Investor Relations
Department ((914) 397-1632).
--------------
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars," "U.S.
dollars" or "U.S.$").
2
<PAGE>
THE COMPANY
The Company, a New York corporation incorporated in 1941 as the successor to
the New York corporation of the same name organized in 1898, is a worldwide
producer of printing and writing papers, paperboard and packaging, and wood
products and distributes paper and office supply products in both the United
States and Europe. It also produces pulp, laminated products, and specialty
products, including photosensitive films and papers, nonwovens, chemicals and
minerals.
In the United States, the Company operates 26 pulp and paper mills, 54
converting and packaging plants, 43 wood products facilities, 15 specialty
panels and laminated products plants, six nonwoven products facilities and seven
envelope manufacturing plants. Production facilities in Europe, Asia, Latin
America and Canada include 14 pulp and paper mills, 32 converting and packaging
plants, three wood products facilities, three specialty panels and laminated
products plants and five nonwoven products facilities.
The Company distributes fine paper, printing and industrial products and
building materials, primarily manufactured by other companies, through about 255
distribution branches located principally in the United States. In addition, the
Company produces photosensitive films and papers and photographic equipment
(three United States and six international locations) and specialty chemicals
(seven United States and two international locations), and engages in domestic
oil and gas and real estate activities.
In March 1994, the Company, through a subsidiary, acquired approximately
one-half of Brierley Investments Limited's ("Brierley") holdings in Carter Holt
Harvey Limited ("Carter Holt"), a major New Zealand forest products and paper
company with substantial assets in Chile. The purchase increased the Company's
ownership of Carter Holt to 24% and leaves Brierley with 8%.
In April 1993, the Company acquired certain assets of the Los Angeles-based
Ingram Paper Company, a distributor of industrial and fine printing papers. In
December, JB Papers Inc., a paper distribution company located in Union, New
Jersey, was purchased. Also in December, the assets of the Monsanto Company's
Kentucky-based Fome-Cor division, a manufacturer of polystyrene foam products,
were acquired.
In the first quarter of 1992, the operating assets of Western Paper Company
(Western Pacific), a printing and industrial paper distribution business based
in Portland, Oregon, were purchased. In the second quarter, the Company acquired
an equity interest in Scitex Corporation Ltd., an Israel-based world leader in
color electronic prepress systems for the graphic design, printing and
publishing industries. In the third quarter, Zaklady Celulozowa-Papierniecze
S.A. w Kwidzynie ("Kwidzyn") was acquired from the Government of the Republic of
Poland. Kwidzyn is Poland's largest white paper manufacturer and the only
integrated bleached pulp and paper company in Poland. In the fourth quarter,
certain assets of the chemical division of Norway-based M. Peterson & Son AS
were acquired.
In the first quarter of 1991, the Company purchased certain packaging and
sheeting facilities located in France (the Rhone Valley packaging business) from
the Georgia-Pacific Corporation. In April 1991, the packaging equipment division
of United Dominion Industries, Ltd. (Evergreen Packaging Equipment) was
purchased. Also in April, the Company acquired the common stock of Dillard Paper
Company, a wholesale distributor of printing and industrial papers, packaging
equipment and supplies based in the southern United States. In August 1991, the
Company completed a merger with Leslie Paper Co., a paper distribution firm
headquartered in Minneapolis, Minnesota, using the pooling-of-interests method
of accounting. In November 1991, the Company entered into a joint venture
agreement with Brierley to control 32% of Carter Holt. In December 1991, the
common stock of Scaldia Papier BV, a paper distribution company based in
Nijmegen, Netherlands, was purchased.
All of the 1993, 1992 and 1991 acquisitions, except the merger with Leslie
Paper Co., were accounted for using the purchase method. The effects of these
mergers and acquisitions, individually or in the aggregate, were not significant
to the Company's financial statements.
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<PAGE>
From 1989 through 1993, the Company's capital expenditures approximated $5.7
billion, excluding mergers and acquisitions. These expenditures reflect
continuing efforts to improve product quality, environmental performance, lower
costs, expand production capacity, and acquire and improve forestlands. Capital
spending in 1993 was $954 million and is expected to exceed $1.1 billion in
1994.
The Company, which owns a majority interest in IP Timberlands, Ltd., a Texas
limited partnership ("IPT"), controlled approximately 6.2 million acres of
forestlands in the United States at December 31, 1993. IPT was formed to succeed
to substantially all of the Company's forest products business for the period
1985 through 2035, unless earlier terminated.
SUPPLEMENTAL INFORMATION
In November 1992, the Company recorded pretax charges of $370 million to
establish a productivity improvement reserve and $28 million for environmental
remediation and clean-up. Of the total productivity improvement charge, $126
million was related to plant shutdowns, $138 million was for plant
consolidations and other asset write-offs, $64 million was for employee
relocation and severance and $42 million was for legal, warranty and
miscellaneous items.
Approximately $250 million of the productivity improvement charge was for
non-cash items, primarily the write-down of fixed assets. The remaining $120
million consisted of cash expenditures. Approximately 40% has been expended in
1993 and, except for legal costs, the Company expects the remainder to be spent
about equally in 1994 and 1995.
The Company originally projected that annual savings would approach $75
million by the end of 1994. The Company realized 45% of that level in 1993, and
expects to reach 85% by the end of 1994 and to exceed $75 million when actions
are completed in 1995. The savings result primarily from lower personnel costs
and depreciation, as well as the elimination of operating losses.
No overall adjustment to the reserve balances are anticipated as of the date
of this Prospectus.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
The following table sets forth the Company's ratio of earnings to fixed
charges and ratio of earnings to combined fixed charges and preferred stock
dividends for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1989 1990 1991 1992 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges........................... 6.34 3.53 2.44 1.42 2.26
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends......................... 5.67 3.53 2.44 1.42 2.26
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
include pre-tax earnings before an extraordinary charge and the cumulative
effect of an accounting change, interest expense and the estimated interest
factor in rent expense (which, in the opinion of the Company, approximates
one-third of rent expense), and adjustments for undistributed equity earnings
and the amortization of capitalized interest. Fixed charges include interest
incurred (including amounts capitalized) and the estimated interest factor in
rent expense. Dividends on the Company's $4 Preferred Stock ($4 per share per
annum) are insignificant and, as a result, for the years ended December 31, 1990
through 1993, the ratios of earnings to combined fixed charges and preferred
stock dividends were the same as the ratios of earnings to fixed charges.
USE OF PROCEEDS
Except as otherwise described in an accompanying Prospectus Supplement, the
net proceeds to be received from the sale of the Securities offered hereby will
be used for general corporate purposes. The
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<PAGE>
Company may also apply proceeds to expenditures for plant and equipment, and
possibly for acquisitions of the stock or assets of other companies, for the
repurchase of shares of the Company's Common Stock or to retire other short-term
or long-term indebtedness. The Company expects that it will continue to incur
indebtedness from time to time.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions may not apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
The Senior Debt Securities will be issued under an Indenture (the "Senior
Indenture"), to be entered into between the Company and The Chase Manhattan
Bank, N.A., as trustee. The Subordinated Debt Securities will be issued under a
separate Indenture (the "Subordinated Indenture"), to be entered into between
the Company and The Chase Manhattan Bank, N.A., as trustee. The Senior Indenture
and the Subordinated Indenture are sometimes referred to collectively as the
"Indentures." Copies of the Senior Indenture and the Subordinated Indenture have
been filed as exhibits to the Registration Statement. The Chase Manhattan Bank,
N.A., as trustee under the Senior Indenture and under the Subordinated
Indenture, is referred to herein as the "Trustee."
The following summaries of certain provisions of the Senior Debt Securities,
the Subordinated Debt Securities and the Indentures do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
all the provisions of the Indenture applicable to a particular series of Debt
Securities, including the definitions therein of certain terms. Wherever
particular Sections, Articles or defined terms of the Indentures are referred to
herein or in a Prospectus Supplement, it is intended that such Sections,
Articles or defined terms shall be incorporated by reference herein or therein,
as the case may be. Section and Article references used herein are references to
the applicable Indenture. Except as otherwise indicated, the terms of the Senior
Indenture and the Subordinated Indenture are identical. Capitalized terms not
otherwise defined herein shall have the meanings given to them in the applicable
Indenture.
GENERAL
The Indentures will not limit the aggregate principal amount of Debt
Securities which may be issued thereunder, and each Indenture provides that Debt
Securities may be issued thereunder from time to time in one or more series up
to the aggregate amount from time to time authorized by the Company for each
series. Unless otherwise specified in the Prospectus Supplement, the Senior Debt
Securities when issued will be unsecured and unsubordinated obligations of the
Company and will rank equally and ratably with all other unsecured and
unsubordinated indebtedness of the Company. The Subordinated Debt Securities
when issued will be subordinated in right of payment to the prior payment in
full of all Senior Indebtedness (as defined in the Subordinated Indenture) of
the Company as described in the Prospectus Supplement applicable to the offering
of Subordinated Debt Securities.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for a description of the following
terms or additional provisions of the Debt Securities: (1) the title of the Debt
Securities; (2) whether the Debt Securities are Senior Debt Securities or
Subordinated Debt Securities; (3) any limit on the aggregate principal amount of
the Debt Securities; (4) whether the Debt Securities are to be issuable as
Registered Securities or Bearer Securities or both, whether any of the Debt
Securities shall be issuable in whole or in part in temporary or permanent
global form or in the form of Book-Entry Securities and, if so, the
circumstances under which any such global security or global securities or
Book-Entry Securities may be exchanged for Debt Securities registered in the
name of, and any transfer of such global or Book-Entry Securities may be
registered to, a Person other than the depository for such temporary or
permanent global securities or Book-Entry Securities or its nominee; (5) the
price or prices (expressed as a
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<PAGE>
percentage of the aggregate principal amount thereof) at which the Debt
Securities will be issued; (6) the date or dates on which the Debt Securities
will mature; (7) the rate or rates per annum at which the Debt Securities will
bear interest, if any, and the date from which any such interest will accrue;
(8) the Interest Payment Dates on which any such interest on the Debt Securities
will be payable, the Regular Record Date for any interest payable on any Debt
Securities which are Registered Securities on any Interest Payment Date and the
extent to which, or the manner in which, any interest payable on a temporary
global Security on an Interest Payment Date will be paid if other than in the
manner described under "Temporary Global Securities" below; (9) any mandatory or
optional sinking fund or analogous provisions; (10) each office or agency where,
subject to the terms of the applicable Indenture as described below under
"Payment and Paying Agents," the principal of and any premium and interest on
the Debt Securities will be payable and each office or agency where, subject to
the terms of the applicable Indenture as described below under "Form, Exchange,
Registration and Transfer," the Debt Securities may be presented for
registration of transfer or exchange; (11) the date, if any, after which and the
price or prices at which the Debt Securities may, pursuant to any optional or
mandatory redemption provisions, be redeemed, in whole or in part, and the other
detailed terms and provisions of any such optional or mandatory redemption
provisions, which may include with respect to a particular series or particular
Debt Securities within a series, a redemption option of Holders upon certain
conditions, as defined in the applicable Indenture; (12) the denominations in
which any Debt Securities which are Registered Securities will be issuable, if
other than denominations of $1,000 and any integral multiple thereof, and the
denomination or denominations in which any Debt Securities which are Bearer
Securities will be issuable, if other than the denomination of $5,000; (13) the
currency or currency units of payment of principal of and any premium and
interest on the Debt Securities; (14) any index used to determine the amount of
payments of principal of and any premium and interest on the Debt Securities and
the manner in which such amounts shall be determined; (15) the terms and
conditions, if any, pursuant to which such Debt Securities are convertible or
exchangeable into a security or securities of the Company; and (16) any other
terms of the Debt Securities not inconsistent with the provisions of the
applicable Indenture. (Section 3.1) Any such Prospectus Supplement will also
describe any special provisions for the payment of additional amounts with
respect to the Debt Securities.
Debt Securities may also be issued under the Indenture upon the exercise of
Warrants. See "Description of Warrants."
Debt Securities may be issued as Original Issue Discount Securities. An
Original Issue Discount Security is a Debt Security, including any Zero-Coupon
Security, which is issued at a price lower than the amount payable upon the
Stated Maturity thereof and which provides that upon redemption or acceleration
of the maturity, an amount less than the amount payable upon the Stated
Maturity, determined in accordance with the terms of such Debt Security, shall
become due and payable. Certain special United States federal income tax
considerations applicable to Debt Securities sold at an original issue discount
will be described in the Prospectus Supplement relating thereto. In addition,
certain special United States federal income tax or other considerations
applicable to any Debt Securities which are denominated in a currency or
currency unit other than United States dollars may be described in the
applicable Prospectus Supplement relating thereto.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Unless otherwise indicated in an applicable
Prospectus Supplement, Bearer Securities will have interest coupons attached.
(Section 2.1) The Indentures also will provide that Debt Securities of a series
may be issuable in temporary or permanent global form and may be issued as
Book-Entry Securities that will be deposited with, or on behalf of, The
Depository Trust Company (the "Depository") or another depository named by the
Company and identified in a Prospectus Supplement with respect to such series.
(Sections 2.1 and 2.4) See "Global and Book-Entry Debt Securities."
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<PAGE>
In connection with its original issuance, no Bearer Security (including a
Debt Security exchangeable for a Bearer Security or a Debt Security in global
form that is either a Bearer Security or exchangeable for Bearer Securities)
shall be mailed or otherwise delivered to any location in the United States (as
defined under "Limitations on Issuance of Bearer Securities") and a Bearer
Security may be delivered in connection with its original issuance only if the
Person entitled to receive such Bearer Security furnishes written certification
of the beneficial ownership of the Bearer Security as required by Treasury
Regulation Section 1.163-5(c)(2)(i)(D)(3). In the case of a Bearer Security in
permanent global form, such certification must be given in connection with
notation of a beneficial owner's interest therein in connection with the
original issuance of such Debt Security. (Section 3.3) See "Global and
Book-Entry Securities" and "Limitations on Issuance of Bearer Securities."
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. In addition, if Debt
Securities of any series are issuable as both Registered Securities and Bearer
Securities, at the option of the Holder upon request confirmed in writing, and
subject to the terms of the applicable Indenture, Bearer Securities (with all
unmatured coupons, except as provided below, and all matured coupons in default)
of such series will be exchangeable into Registered Securities of the same
series of any authorized denominations and of a like aggregate principal amount
and tenor. Bearer Securities surrendered in exchange for Registered Securities
between a Regular Record Date or a Special Record Date and the relevant date for
payment of interest shall be surrendered without the coupon relating to such
date for payment of interest and interest accrued as of such date will not be
payable in respect of the Registered Security issued in exchange for such Bearer
Security, but will be payable only to the Holder of such coupon when due in
accordance with the terms of the applicable Indenture. Bearer Securities will
not be issued in exchange for Registered Securities. (Section 3.5) Each Bearer
Security, and any coupon attached thereto, other than a temporary global Bearer
Security will bear the following legend: "Any United States person who holds
this obligation will be subject to limitations under the United States income
tax laws, including the limitations provided in Sections 165(j) and 1287(a) of
the United States Internal Revenue Code." A Book-Entry Security may not be
registered for transfer or exchange (other than as a whole by the Depository to
a nominee or by such nominee to such Depository) unless the Depository or such
nominee notifies the Company that it is unwilling or unable to continue as
Depository or the Depository ceases to be qualified as required by the
applicable Indenture or the Company instructs the Trustee in accordance with the
applicable Indenture that such Book-Entry Securities shall be so registerable
and exchangeable or there shall have occurred and be continuing an Event of
Default with respect to the Debt Securities evidenced by such Book-Entry
Securities or there shall exist such other circumstances, if any, as may be
specified in the applicable Prospectus Supplement. (Section 3.5)
Debt Securities may be presented for exchange as provided above, and
Registered 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 transfer agent designated by the Company for
such purpose with respect to any series of Debt Securities and referred to in an
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the applicable Indenture.
Such transfer or exchange will be effected upon the Security Registrar or such
transfer agent, as the case may be, being satisfied with the documents of title
and identity of the person making the request. The Company has appointed the
Trustee as Security Registrar. (Section 3.5) If a Prospectus Supplement refers
to any transfer agents (in addition to the Security Registrar) initially
designated by the Company with respect to any series of Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that, if Debt Securities of a series are issuable solely as Registered
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 Bearer Securities, the Company will be required to maintain (in
addition to the Security Registrar) a transfer
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<PAGE>
agent in a Place of Payment for such series located outside the United States.
The Company may at any time designate additional transfer agents with respect to
any series of Debt Securities. (Section 10.2)
In the event of any redemption in part, the Company shall 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 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 Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer 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 Securities and there is
no publication, the mailing of the relevant notice of redemption; (ii) register
the transfer of or exchange any Registered Security, or portion thereof, called
for redemption, except the unredeemed portion of any Registered Security being
redeemed in part; or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 3.5)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest on Bearer Securities will be
payable, subject to any applicable laws and regulations, at the offices of such
Paying Agents outside the United States as the Company may designate from time
to time, at the option of the Holder, by check or by transfer to an account
maintained by the payee with a bank located outside the United States. Unless
otherwise indicated in an applicable Prospectus Supplement, payment of interest
on Bearer Securities on any Interest Payment Date will be made only against
surrender to the Paying Agent of such coupon relating to such Interest Payment
Date. (Section 10.1) No payment with respect to any Bearer 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 an account maintained with
a bank located in the United States. Notwithstanding the foregoing, payments of
principal of, and premium, if any, and interest on Bearer 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 Untied States is illegal or effectively precluded by exchange
controls or other similar restrictions. (Section 10.2)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest on Registered Securities will be
made at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, except that at the option of the Company payment of
any interest may be made by check mailed to the address of the person entitled
thereto as such address shall appear in the Security Register. Unless otherwise
indicated in an applicable Prospectus Supplement, payment of any instalment of
interest on Registered Securities will be made to the Person in whose name such
Registered Security is registered at the close of business on the Regular Record
Date for such interest. (Section 3.7)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee in The City of New York will be designated
as a Paying Agent for the Company for payments with respect to Debt Securities
which are issuable solely as Registered Securities and the Company will maintain
a Paying Agent outside of the United States for payments with respect to Debt
Securities (subject to the limitations described above in the case of Bearer
Securities) which are issuable solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Any Paying Agents outside the United States
and any other Paying Agent in the United States initially designated by the
Company for the Debt Securities will be named in an 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 Securities, the Company will be required to
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<PAGE>
maintain a Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series are issuable as Bearer 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 Securities of the series
(and for payments with respect to Bearer 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 The
Stock Exchange of the United Kingdom and the Republic of Ireland or the
Luxembourg Stock Exchange or any other stock exchange located outside the United
States and such stock exchange shall so require, the Company will maintain a
Paying Agent in London or Luxembourg or any other required city located outside
the United States, as the case may be, for the Debt Securities of such series.
(Section 10.2)
Payments of principal of, premium, if any, and interest on Book-Entry
Securities registered in the name of any Depository or its nominee will be made
to the Depository or its nominee, as the case may be, as the registered owner of
the global security representing such Book-Entry Securities. The Company expects
that the Depository, upon receipt of any payment of principal, premium or
interest, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests as shown on the
records of such Depository or its nominee. Neither the Company, the Trustee, any
Paying Agent nor the Securities Registrar for such Debt Securities will have any
responsibility or liability for any aspects of the records relating to, or
payments made on account of, such beneficial ownership interests in the
Book-Entry Securities or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
All moneys paid by the Company to a Paying Agent for the payment of
principal of, premium, if any, or interest on any Debt Securities which remain
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 and the Holder
of such Debt Security or any coupon will thereafter look only to the Company for
payment thereof. (Section 10.3)
GLOBAL AND BOOK-ENTRY DEBT SECURITIES
If so specified in an applicable Prospectus Supplement, the portion of the
Debt Securities of a series which are issuable as Bearer Securities will
initially be represented by one or more temporary or permanent global Debt
Securities, without interest coupons, to be deposited with a common depositary
in London for the Euro-clear System ("Euro-clear") and CEDEL S.A. ("CEDEL") for
credit to the designated accounts. Unless otherwise indicated by an applicable
Prospectus Supplement, on or after 40 days following its issuance, each such
temporary global Debt Security will be exchangeable for definitive Bearer
Securities, definitive Registered Securities or all or a portion of a permanent
global Debt Security, or any combination thereof, as specified in an applicable
Prospectus Supplement, only upon written certification in the form and to the
effect described under "Form, Exchange, Registration and Transfer." No Bearer
Security (including a Debt Security in permanent global form) delivered in
exchange for a portion of a temporary or permanent global Debt Security shall be
mailed or otherwise delivered to any location in the United States in connection
with such exchange. (Sections 3.4 and 3.5)
A Person having a beneficial interest in a permanent global Debt Security
will, except with respect to payment of principal of, premium, if any, and
interest on such permanent global Debt Security, be treated as a Holder of such
principal amount of Outstanding Debt Securities represented by such permanent
global Debt Security as shall be specified in a written statement of the Holder
of such permanent global Debt Security or, in the case of a permanent global
Debt Security in bearer form, of the operator of Euro-clear or CEDEL which is
provided to the Trustee by such Person. (Section 2.3)
If Debt Securities to be sold in the United States are designated by the
Company in a Prospectus Supplement as Book-Entry Securities, a global security
representing the Book-Entry Securities will be
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deposited in the name of Cede & Co., as nominee for the Depository representing
the Debt Securities to be sold in the United States. Upon such deposit of the
Book-Entry Securities, the Depository shall credit an account maintained or
designated by an institution to be named by the Company or any purchaser of the
Debt Securities represented by the Book-Entry Securities with an aggregate
amount of Debt Securities equal to the total number of Debt Securities that have
been so purchased. The specific terms of any depository arrangement with respect
to any portion of a series of Debt Securities to be represented by one or more
global securities will be described in the applicable Prospectus Supplement.
Beneficial interests in such Debt Securities will only be evidenced by, and
transfers thereof will only be effected through, records maintained by the
Depository and the institutions that are Depository participants.
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant that it will not, nor will it permit any
Subsidiary (as hereinafter defined), to issue, assume or guarantee any debt for
money borrowed ("Debt") if such Debt is secured by a mortgage, pledge, security
interest or lien (a "mortgage" or "mortgages") upon any Forestlands or Principal
Manufacturing Facility (as hereinafter defined), now owned or hereafter
acquired, without in any such case effectively providing that the Senior Debt
Securities shall be secured equally and ratably with (or prior to) such Debt,
except that the foregoing restrictions shall not apply to (a) mortgages on any
property acquired, constructed or improved by the Company or any Subsidiary
after April 1, 1994 which are created within 180 days after such acquisition (or
in the case of property constructed or improved, after the completion and
commencement of commercial operation of such property, whichever is later) to
secure or provide for the payment of the purchase price or cost thereof, or
existing mortgages on property acquired, provided such mortgages shall not apply
to any property theretofore owned by the Company or any Subsidiary other than
theretofore unimproved real property, (b) mortgages on any property acquired
from a corporation which is merged with or into the Company or a Subsidiary or
mortgages outstanding at the time any corporation becomes a Subsidiary, (c)
mortgages in favor of the Company or any Subsidiary, or (d) any extension,
renewal or replacement (or successive extensions, renewals or replacements), in
whole or in part, of any mortgage referred to in the foregoing clauses (a), (b)
or (c); and except that the following types of transactions, among others, shall
not be deemed to create Debt secured by a mortgage: (x) the sale, mortgage or
other transfer of timber in connection with an arrangement under which the
Company or a Subsidiary is obligated to cut such timber or a portion thereof in
order to provide the transferee with a specified amount of money however
determined and (y) mortgages in favor of governmental bodies of the United
States to secure advance, progress or other payments pursuant to any contract or
statute or to secure indebtedness incurred to finance the purchase price or cost
of constructing or improving the property subject to such mortgages. (Section
10.7 of Senior Indenture)
Notwithstanding the foregoing, the Company and any Subsidiary may, without
securing the Senior Debt Securities, issue, assume or guarantee secured Debt
(which would otherwise be subject to the foregoing restrictions) in an aggregate
amount which, together with all other such Debt and the Attributable Debt (as
hereinafter defined) in respect of Sale and Lease-Back Transactions (as
hereinafter defined) of the Company and its Subsidiaries existing at such time
(other than Sale or Lease-Back Transactions the proceeds of which have been
applied to the retirement of Funded Debt (as hereinafter defined)), does not at
the time exceed 10% of the net tangible assets of the Company and its
consolidated Subsidiaries as of the latest fiscal year. (Section 10.7 of Senior
Indenture) "Net tangible assets" is defined as the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities and (b) all goodwill, tradenames,
trademarks, patents, unamortized debt discount and expense (to the extent
included in said aggregate amount of assets) and other like intangibles, all as
set forth on the most recent consolidated balance sheet of the Company and its
consolidated Subsidiaries and computed in accordance with generally accepted
accounting principles.
The Company will not, nor will it permit any Subsidiary to, enter into any
arrangement with any person providing for the leasing to the Company or a
Subsidiary of any Forestlands or any Principal
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Manufacturing Facility (except for temporary leases for a term of not more than
three years), which property has been owned and, in the case of any such
Principal Manufacturing Facility, has been placed in commercial operation more
than 180 days by the Company or such Subsidiary and has been or is said to be
sold or transferred by the Company or such Subsidiary to such person (herein
referred to as a "Sale and Lease-Back Transaction"), unless either (a) the
Company or such Subsidiary would be entitled to incur Debt secured by a mortgage
on the property to be leased in an amount equal to the Attributable Debt with
respect to such Sale and Lease-Back Transaction without equally and ratably
securing the Senior Debt Securities or (b) the Company shall, and in any such
case the Company will covenant that it will, apply an amount equal to the fair
value (as determined by its Board of Directors) of the property so leased to the
retirement, within 180 days of the effective date of any such Sale and
Lease-Back Transaction, of Debt Securities or of Funded Debt of the Company
which ranks on a parity with the Senior Debt Securities. (Section 10.8 of Senior
Indenture)
The term "Forestlands" shall mean at any time property in the United States
which contains standing timber which is, or upon completion of a growth cycle
then in process is expected to become, of a commercial quantity and of
merchantable quality, excluding from the term "Forestlands," however, any land
which at the time is held by, or has been or is after the date of this
Prospectus transferred to, a Subsidiary primarily for development and/or sale,
and not primarily for the production of any lumber or other timber products.
(Section 1.1 of Senior Indenture)
The term "Principal Manufacturing Facility" shall mean any paperboard, paper
or pulp mill or any paper converting plant of the Company or any Subsidiary
which is located within the United States other than any such mill or plant or
portion thereof (i) which is financed by obligations issued by a State, a
Territory, or a possession of the United States, or any political subdivision of
any of the foregoing, or the District of Columbia, the interest on which is
excludable from gross income of the holders thereof pursuant to the provisions
of Section 103(a) of the Internal Revenue Code (or any successor to such
provision) as in effect at the time of issuance of such obligations, or (ii)
which, in the opinion of the Board of Directors of the Company, is not of
material importance to the total business conducted by the Company and its
Subsidiaries as an entirety. (Section 1.1 of Senior Indenture)
The term "Subsidiary" shall mean any corporation of which at least a
majority of the outstanding stock having by the terms thereof ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by the Company, or by any one or more Subsidiaries, or by the Company
and one or more Subsidiaries. (Section 1.1 of Senior Indenture)
The term "Attributable Debt" shall mean, at the time of determination, the
present value (discounted at the interest rate, compounded semiannually, equal
to the weighted average Yield to Maturity of the Senior Debt Securities then
Outstanding, such average being weighted by the principal amount of the Senior
Debt Securities of each series or, in the case of Original Issue Discount
Securities, such amount to be determined as provided in the definition of
"Outstanding" in the Senior Indenture) of the obligation of a lessee for net
rental payments during the remaining term of any lease (including any period for
which such lease has been extended) entered into in connection with a sale and
leaseback transaction. (Section 1.1 of Senior Indenture)
The term "Funded Debt" shall mean Debt which by its terms matures at, or is
extendible or renewable at the option of the obligor to, a date more than twelve
months after the date of the creation of such Debt. (Section 1.1 of Senior
Indenture)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Indebtedness. Upon any
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payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the Holders of Senior Indebtedness will
first be entitled to receive payment in full of principal of, and premium, if
any, and interest, if any, on such Senior Indebtedness before the Holders of the
Subordinated Debt Securities will be entitled to receive or retain any payment
in respect of the principal of, and premium, if any, or interest, if any, on the
Subordinated Debt Securities. (Section 16.2 of Subordinated Indenture)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company may recover less, ratably, than Holders of Senior
Indebtedness and may recover more, ratably, than the Holders of the Subordinated
Debt Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the Holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of all
amounts due thereon before the Holders of the Subordinated Debt Securities will
be entitled to receive any payment upon the principal of (or premium, if any) or
interest, if any, on the Subordinated Debt Securities. (Section 16.3 of
Subordinated Indenture)
No payments on account of principal, or premium, if any, or interest, if
any, in respect of the Subordinated Debt Securities may be made if there shall
have occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default. (Section 16.4 of
Subordinated Indenture) For purposes of the subordination provisions, the
payment, issuance and delivery of cash, property or securities (other than stock
and certain subordinated securities of the Company) upon conversion of a
Subordinated Debt Security will be deemed to constitute payment on account of
the principal of such Subordinated Debt Security.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness, which may include indebtedness that is senior to
the Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities constitute Senior Indebtedness under the
Subordinated Indenture.
"Senior Indebtedness" is defined to include all amounts due on and
obligations in connection with any of the following, whether outstanding at the
date of execution of the Subordinated Indenture or thereafter incurred or
created: (a) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Company for money borrowed, or evidenced by bonds, debentures,
notes or similar instruments; (b) reimbursement obligations and other
liabilities (contingent or otherwise) of the Company with respect to letters of
credit, bankers' acceptances issued for the account of the Company or with
respect to interest rate protection agreements or currency exchange or purchase
agreements; (c) obligations and liabilities (contingent or otherwise) in respect
of leases by the Company as lessee which, in conformity with generally accepted
accounting principles, are accounted for as capitalized lease obligations on the
balance sheet of the Company; (d) all direct or indirect guarantees or similar
agreements in respect of, and obligations or liabilities (contingent or
otherwise) to purchase or otherwise acquire or otherwise to assure a creditor
against loss of the Company in respect of, indebtedness, obligations or
liabilities of another Person described in clauses (a) through (c); (e) any
indebtedness described in clauses (a) through (d) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
the Company, regardless of whether the indebtedness secured thereby shall have
been assumed by the Company; and (f) any and all deferrals, renewals, extensions
and refundings of, or amendments, modifications or supplements to, any
indebtedness, obligation or liability of the kind described in clauses (a)
through (e); unless in any case in the instrument creating or evidencing such
indebtedness, obligation, liability, guaranty, assumption, deferral, renewal,
extension or refunding, it is provided that such indebtedness, obligation,
liability,
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guaranty, assumption, deferral, renewal, extension or refunding involved is not
senior in right of payment to the Subordinated Debt Securities or that such
indebtedness is PARI PASSU with or junior to the Subordinated Debt Securities.
(Section 1.1 of Subordinated Indenture)
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
CONVERSION RIGHTS
The terms on which Debt Securities of any series are convertible into or
exchangeable for Common Stock or other securities of the Company will be set
forth in the Prospectus Supplement relating thereto. Such terms will include
provisions as to whether conversion or exchange is mandatory, at the option of
the Holder or at the option of the Company, and may include provisions pursuant
to which the number of shares of Common Stock or other securities of the Company
to be received by the Holders of Debt Securities would be subject to adjustment.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the applicable Indenture with respect to Debt Securities of any series: (a)
failure to pay any interest on any Debt Security of that series when due,
continued for 30 days (in the case of the Subordinated Indenture, whether or not
such payment is prohibited by the subordination provisions); (b) failure to pay
principal of or premium, if any, on any Debt Security of that series when due
(in the case of the Subordinated Indenture, whether or not such payment is
prohibited by the subordination provisions); (c) failure to deposit any sinking
fund payment, when due, in respect of any Debt Security of that series (in the
case of the Subordinated Indenture, whether or not such deposit is prohibited by
the subordination provisions); (d) failure to perform any other covenant of the
Company in the applicable Indenture or such Debt Security (other than a covenant
included in the applicable Indenture solely for the benefit of a series of Debt
Securities other than that series), continued for 60 days after written notice
has been given as provided in the applicable Indenture; (e) certain events in
bankruptcy, insolvency or reorganization involving the Company; and (f) any
other Event of Default provided with respect to the Debt Securities of that
series. (Section 5.1)
If an Event of Default with respect to the Debt Securities of any series at
the time Outstanding occurs and is continuing, either the Trustee or the Holders
of at least 25% in aggregate principal amount of the Outstanding Debt Securities
of that series by notice as provided in the applicable Indenture may declare the
principal amount of the Debt Securities of that series (or, in the case of any
Debt Security that is an Original Issue Discount Security or the principal
amount of which is not then determinable, such portion of the principal amount
of such Debt Security, or such other amount in lieu of such principal amount, as
may be specified in the terms of such Debt Security) to be due and payable
immediately. At any time after a declaration of acceleration with respect to
Debt Securities of any series has been made, but before a judgment or decree for
payment of money has been obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration. (Section
5.2)
The Indentures will provide that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the applicable
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Sections 6.1, 6.3)
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Debt Securities
of any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Debt Securities
of that series. (Section 5.12)
The Company will be required to furnish to the applicable Trustee annually a
statement as to the performance of certain of its obligations under the
applicable Indenture and as to any default in such performance. (Section 10.9)
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DEFEASANCE
If so specified with respect to any particular series of Debt Securities,
the Company may discharge its indebtedness and its obligations or certain of its
obligations under the applicable Indenture with respect to such series by
depositing funds or obligations issued or guaranteed by the United States of
America with the applicable Trustee.
DEFEASANCE AND DISCHARGE
The Indentures will provide that, if so specified with respect to the Debt
Securities of any series, the Company will be discharged from any and all
obligations in respect of the Debt Securities of such series (including, in the
case of Subordinated Debt Securities, the subordination provisions described
under "Subordination of Subordinated Debt Securities" herein and except for
certain obligations relating to temporary Debt Securities and exchange of Debt
Securities, registration of transfer or exchange of Debt Securities of such
series, replacement of stolen, lost or mutilated Debt Securities of such series,
maintenance of paying agencies, to hold monies for payment in trust and payment
of additional amounts, if any, required in consequence of United States
withholding taxes imposed on payments to non-United States persons) upon the
deposit with the applicable Trustee, in trust, of money and/or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any), each instalment of
interest on, and any sinking fund payments on, the Debt Securities of such
series on the Stated Maturity of such payments in accordance with the terms of
the applicable Indenture and the Debt Securities of such series. Such a trust
may only be established if, among other things, (a) the Company has delivered to
the applicable Trustee an Opinion of Counsel to the effect that (i) the Company
has received from, or there has been published by, the Internal Revenue Service
a ruling, or (ii) since the date of the applicable Indenture there has been a
change in applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the Holders of
Debt Securities of such series will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge, and will be subject to federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred; (b) the Debt Securities of
such series, if then listed on any domestic or foreign securities exchange, will
not be delisted as a result of such deposit, defeasance and discharge; and (c)
in the case of the Subordinated Debt Securities, (x) no default in the payment
of principal of, or premium, if any, or any interest on any Senior Indebtedness
beyond any applicable grace period shall have occurred and be continuing, or (y)
no other default with respect to any Senior Indebtedness shall have occurred and
be continuing and shall have resulted in the acceleration of such Senior
Indebtedness. (Section 4.3) In the event of any such defeasance and discharge of
Debt Securities of such series, Holders of Debt Securities of such series would
be able to look only to such trust fund for payment of principal of and any
premium and any interest on their Debt Securities until Maturity.
DEFEASANCE OF CERTAIN OBLIGATIONS
The Senior Indenture will provide that, if so specified with respect to the
Senior Debt Securities of any series, the Company may omit to comply with the
restrictive covenants described under "Certain Covenants of the Company" above
and any other covenants applicable to such Senior Debt Securities which are
subject to covenant defeasance and any such omission shall not be an Event of
Default with respect to the Debt Securities of such series, upon the deposit
with the Trustee, in trust, of money and/ or U.S. Government Obligations which
through the payment of interest and principal in respect thereof in accordance
with their terms will provide money in an amount sufficient to pay the principal
of (and premium, if any), each instalment of interest on and any sinking fund
payments on the Senior Debt Securities of such series on the Stated Maturity of
such payments in accordance with the terms of the Senior Indenture and the
Senior Debt Securities of such series. The obligations of the Company under the
Senior Indenture and the Senior Debt Securities of such series other than with
respect to such covenant shall remain in full force and effect. Such a trust may
be established only if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel to the effect that (i) the
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Holders of the Senior Debt Securities of such series will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit and
defeasance of certain obligations and will be subject to federal income tax on
the same amounts and in the same manner and at the same times as would have been
the case if such deposit and defeasance has not occurred and (ii) the Senior
Debt Securities of such series, if then listed on any domestic or foreign
securities exchange, will not be delisted as a result of such deposit and
defeasance. (Section 10.11 of Senior Indenture)
In the event the Company exercises its option to omit compliance with the
covenants described under "Certain Covenants of the Company" above with respect
to the Senior Debt Securities of any series as described above and the Senior
Debt Securities of such series are declared due and payable because of the
occurrence of any Event of Default, then the amount of money and U.S. Government
Obligations on deposit with the Trustee will be sufficient to pay amounts due on
the Senior Debt Securities of such series at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Senior Debt Securities of
such series at the time of the acceleration resulting from such Default. The
Company shall in any event remain liable for such payments as provided in the
Senior Indenture.
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of the Indentures may be made by the Company
and the Trustee under the applicable Indenture only with the consent of the
Holders of not less than 66 2/3% aggregate principal amount of the Outstanding
Debt Securities issued under the applicable Indenture and affected by such
modification or amendment unless a greater percentage of such aggregate
principal amount is specified in the applicable Prospectus Supplement; provided,
however, that no such modification or amendment may, without the consent of each
Holder of such Outstanding Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or any instalment of principal of or interest on,
any such Debt Security, (b) reduce the principal amount of, or any premium or
interest on, any such Debt Security, (c) change any obligation of the Company to
pay additional amounts, (d) reduce the amount of principal of an Original Issue
Discount Security or any other Debt Security payable upon acceleration of the
maturity thereof, (e) change the coin or currency in which any Debt Security or
any premium or interest thereon is payable, (f) impair the right to institute
suit for the enforcement of any payment on or with respect to any such Debt
Security, (g) adversely change the right to convert or exchange, including
decreasing the conversion rate or increasing the conversion price of, such Debt
Security (if applicable), (h) in the case of the Subordinated Indenture, modify
the subordination provisions in a manner adverse to the Holders of the
Subordinated Debt Securities, (i) reduce the percentage in principal amount of
Outstanding Debt Securities of any series, the consent of whose Holders is
required for modification or amendment of the applicable Indenture or for waiver
of compliance with certain provisions of the applicable Indenture or for waiver
of certain defaults, (j) reduce the requirements contained in the applicable
Indenture for quorum or voting, (k) change any obligations of the Company to
maintain an office or agency in the places and for the purposes required by the
Indentures, or (l) modify any of the above provisions. (Section 9.2)
The Holders of at least 66 2/3% in aggregate principal amount of the
Outstanding Debt Securities of each series may, on behalf of the Holders of all
the Debt Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the applicable
Indenture and, if applicable, such Debt Securities, unless a greater percentage
of such aggregate principal amount is specified in the applicable Prospectus
Supplement. (Section 10.10) The Holders of not less than a majority in aggregate
principal amount of the Outstanding Debt Securities of each series may, on
behalf of all Holders of Debt Securities of that series and any coupons
pertaining thereto, waive any past default under the applicable Indenture,
except a default (a) in the payment of principal of, or premium, if any, or any
interest on any Debt Security of such series, and (b) in respect of a covenant
or provision of the applicable Indenture and, if applicable, such Debt
Securities which cannot be modified or amended without the consent of the Holder
of each Outstanding Debt Security of such series affected. (Section 5.13)
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The applicable Indenture will provide that in determining whether the
Holders of the requisite principal amount of the Outstanding Debt Securities
have given any request, demand, authorization, direction, notice, consent or
waiver thereunder or are present at a meeting of Holders of Debt Securities for
quorum purposes, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
acceleration of the Maturity thereof, and (ii) the principal amount of a Debt
Security denominated in a foreign currency or currency units shall be the U.S.
dollar equivalent, determined on the date of original issuance of such Debt
Security, of the principal amount of such Debt Security or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent, determined on the
date of original issuance of such Debt Security, of the amount determined as
provided in (i) above. (Section 1.1)
The applicable Indenture will contain provisions for convening meetings of
the Holders of Debt Securities of a series if Debt Securities of that series are
issuable as Bearer Securities. (Section 13.1) A meeting may be called at any
time by the Trustee, 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
13.2) Except for any consent which must be given by the Holder of each
Outstanding Debt Security affected thereby, as described above, any resolution
presented at a meeting or adjourned meeting 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,
except for any consent which must be given by the Holder of each Outstanding
Debt Security affected thereby, as described above, any resolution with respect
to any consent or waiver which may be given by the Holders of not less than
66 2/3% in principal amount of the Outstanding Debt Securities of a series may
be adopted at a meeting or an adjourned meeting at which a quorum is present
only by the affirmative vote of 66 2/3% in principal amount of the Outstanding
Debt Securities of that series; and provided, further, that, except for any
consent which must be given by the Holder of each Outstanding Debt Security
affected thereby, as described above, 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 less than a majority, in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the Holders of such specified percentage in the 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 the applicable Indenture will be binding on all Holders of Debt
Securities of that series and the related coupons. The quorum at any meeting
called to adopt a resolution, and at any reconvened meeting, will be persons
holding or representing a majority in principal amount of the Outstanding Debt
Securities of a series; provided, however, that if any action is to be taken at
such meeting with respect to a consent or waiver which may be given by the
Holders of not less than 66 2/3% in principal amount of the Outstanding Debt
Securities of a series, the persons holding or representing 66 2/3% in principal
amount of the Outstanding Debt Securities of such series will constitute a
quorum. (Section 13.4)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Debt Securities under the applicable Indenture, may consolidate or merge with or
into, sell, lease, transfer or otherwise dispose of its assets substantially as
an entirety to, any Person which is a corporation, partnership or trust
organized and validly existing under the laws of any domestic jurisdiction, or
may permit any such Person to consolidate or merge with or into the Company or
sell, lease, transfer or otherwise dispose of its assets substantially as an
entirety to the Company, provided that any successor Person assumes the
Company's obligations on the Debt Securities and under the applicable Indenture,
that after giving effect to the transaction no Event of Default, and no event
which, after notice or lapse of time, would become an Event of Default, shall
have occurred and be continuing, and that certain other conditions are met.
(Section 8.1)
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REDEMPTION AT THE OPTION OF HOLDERS UPON CHANGE IN CONTROL
In the event of any Change in Control (as hereinafter defined) of the
Company, prior to maturity of the Debt Securities, that has not been approved by
the Continuing Directors (as hereinafter defined) of the Company, Debt
Securities may be submitted for redemption, on and after the Exchange Date in
the case of Debt Securities of any series issuable as Bearer Securities or at
any time in the case of all other Debt Securities, at the option of the Holders,
unless, prior to the expiration of ten days following such Change in Control,
the Company, if permitted to do so by the terms of the Debt Securities of a
series, shall have called all of the Debt Securities of such series for
redemption. Bearer Securities may be so redeemed only in whole and Registered
Securities in whole or in part in increments of $1,000. Any Debt Securities to
be so submitted must be submitted during a period (the "Exercise Period")
commencing on the date of the Company's notice described below to Holders of
such Change in Control and expiring on the 20th business day after such notice
is given.
Debt Securities submitted for redemption will be redeemed on a Redemption
Date that will be the 15th day after expiration of the Exercise Period, at a
redemption price of 100% of the principal amount of the Debt Security, plus
accrued interest to the Redemption Date. Exercise of this redemption option by
the Holder of a Debt Security will be irrevocable.
On or before the tenth day after a Change in Control, the Company is
obligated, unless the Continuing Directors have approved such Change in Control
prior to such date, to give notice to Holders as set forth under "Notices"
below, and written notice to the Trustee, regarding the Change in Control, the
date of expiration of the Exercise Period, the applicable Redemption Date, the
redemption price and the procedure which the Holder must follow to exercise this
option. To exercise this option, the Holder must deliver on or before the
expiration of the Exercise Period to one of the Paying Agents referred to below
written notice of the Holder's exercise of such option, together with the Debt
Securities with respect to which the option is being exercised, duly endorsed
(in the case of Registered Securities) for transfer. Each Bearer Security
delivered for redemption must be delivered with all coupons maturing after the
Redemption Date. If the Redemption Date falls between any Regular Record Date
and the next succeeding Payment Date, Registered Securities must be accompanied
by payment of an amount equal to the interest thereon which the registered
Holder is to receive on such Interest Payment Date.
As used herein, a "Change in Control" of the Company shall be deemed to have
occurred at such time or times as (a) the Company determines that any person or
related group of persons is the beneficial owner, directly or indirectly, of 20%
or more of the outstanding Common Stock or (b) individuals who constitute the
Continuing Directors cease for any reason to constitute at least a majority of
the Company's directors. "Continuing Director" means any director who is a
director on the date hereof and any director who is nominated or elected by a
majority of Continuing Directors who are then directors.
The Company could, in the future, enter into certain transactions, including
certain recapitalizations or leveraged transactions of the Company, that would
not constitute a Change in Control or would constitute a Change of Control but
would not trigger the Change of Control purchase feature of the Debt Securities
if approved by the Continuing Directors and would increase the amount of the
Company's indebtedness outstanding at such time. However, the Senior Indenture
contains covenants of the Company limiting its ability to mortgage or sell
Principal Manufacturing Facilities or Forestlands. If a Change in Control were
to occur, there can be no assurance that the Company would have sufficient funds
to pay the Change in Control purchase price for all Debt Securities tendered by
the Holders thereof. In addition, the Company's ability to purchase Debt
Securities with cash may be limited by the terms of its then-existing borrowing
agreements. A default by the Company on its obligation to pay the Change in
Control purchase price or a breach of its covenant would result in an Event of
Default and could result in acceleration of the maturity of other indebtedness
of the Company at the time outstanding pursuant to cross-default provisions. The
Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act
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which may then be applicable and will file a Schedule 13E-4 or any other
schedule required thereunder and will otherwise comply with all federal or state
securities laws, as required, in connection with any of the Debt Securities
providing for redemption at the option of Holders.
NOTICES
Except as otherwise provided in the applicable Indenture, notices to Holders
of Bearer Securities will be given by publication at least twice in a daily
newspaper in The City of New York and in such other city or cities as may be
specified in such Debt Securities. Notices to Holders of Registered Securities
will be given by mail to the address of such Holders as they appear in the
Security Register. (Sections 1.1, 1.6)
TITLE
Title to any temporary global Debt Security, any Bearer Securities
(including Bearer Securities in permanent global form) 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 Security
and the bearer of any coupon and the registered owner of any Registered Security
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 3.8)
REPLACEMENT OF DEBT SECURITIES AND COUPONS
Any mutilated Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
Holder upon surrender of such Debt Security to the Trustee. Debt Securities or
coupons that became destroyed, stolen or lost will be replaced by the Company at
the expense of the Holder upon delivery of the Trustee of the Debt Security and
coupons or evidence of the destruction, loss or theft thereof satisfactory to
the Company and the Trustee; in the case of any coupon which becomes destroyed,
stolen or lost, such coupon will be replaced 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 Trustee 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 3.6)
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 without regard
to principles of conflicts of laws. (Section 1.13)
REGARDING THE TRUSTEE
The Indentures contain limitations on the right of the Trustee, as a
creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security or
otherwise. In addition, the Trustee may be deemed to have a conflicting interest
and may be required to resign as Trustee if at the time of a default under one
of the Indentures it is a creditor of the Company. The Chase Manhattan Bank,
N.A. also acts as trustee under various indentures and the Company and certain
subsidiaries from time to time maintain deposit accounts and conduct their
banking transactions with The Chase Manhattan Bank, N.A. in the ordinary course
of their business.
MEDIUM-TERM NOTES
The Company may offer from time to time up to $400,000,000 aggregate
principal amount of its medium-term notes (the "Medium-Term Notes"). The
particular terms and provisions of the Medium-Term Notes will be described in
the Prospectus Supplement relating to such Medium-Term Notes. The Medium-Term
Notes will be issued as a series of Senior Debt Securities under an Indenture,
dated as of May 22, 1992, as supplemented by the First Supplemental Indenture,
dated as of June 26, 1992 (the "Medium-Term Note Indenture"), between the
Company and The Bank of New York, as trustee. The terms and provisions of the
Medium-Term Note Indenture are substantially
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similar to those to be contained in the Senior Note Indenture. The Medium-Term
Note Indenture is incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 400,000,000
shares of common stock, $1.00 par value per share (the "Common Stock"), (ii)
400,000 shares of cumulative $4 preferred stock, without par value (the "$4
Preferred Stock"), and (iii) 8,750,000 shares of serial preferred stock, $1.00
par value per share (the "Preferred Stock").
At February 28, 1994, there were outstanding (a) 124,465,467 shares of
Common Stock (as well as the same number of Common Share Purchase Rights to
purchase Common Stock pursuant to the Rights Agreement), (b) employee stock
options to purchase an aggregate of approximately 4,650,000 shares of Common
Stock, (c) 16,017 shares of $4 Preferred Stock and (d) no shares of any series
of Preferred Stock. In addition, approximately 2,900,000 shares of Common Stock
were reserved for issuance upon conversion of the Company's convertible
subordinated debentures.
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of certain general terms of the
Company's Preferred Stock to which any Prospectus Supplement may relate. Certain
terms of any series of Preferred Stock offered by any Prospectus Supplement will
be described in the Prospectus Supplement relating thereto. If so indicated in
the Prospectus Supplement, the terms of any series may differ from the terms set
forth below. The description of certain provisions of the Company's Preferred
Stock does not purport to be complete and is subject to and qualified in its
entirety by reference to the provisions of the Company's Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation"), and the Certificate
of Designation (the "Certificate of Designation") relating to each particular
series of Preferred Stock which will be filed or incorporated by reference, as
the case may be, as an exhibit to the Registration Statement of which this
Prospectus is a part at or prior to the time of the issuance of such Preferred
Stock.
GENERAL
Under the Company's Restated Certificate of Incorporation, the Board of
Directors of the Company is authorized, without further stockholder action, to
provide for the issuance of up to 8,750,000 shares of Preferred Stock. The
Preferred Stock may be issued in one or more series, with such designations of
titles; dividend rates; any redemption provisions; special or relative rights in
the event of liquidation, dissolution, distribution or winding up of the
Company; any sinking fund provisions; any conversion provisions; any voting
rights thereof; and any other preferences, privileges, powers, rights,
qualifications, limitations and restrictions, as shall be set forth as and when
established by the Board of Directors of the Company. The shares of any series
of Preferred Stock will be, when issued, fully paid and non-assessable and
holders thereof will have no preemptive rights in connection therewith.
So long as any shares of $4 Preferred Stock are outstanding, the
preferences, privileges and voting powers, if any, of the shares of Preferred
Stock of any series, and the restrictions or qualifications thereof, shall be
subject to the preferences, privileges and voting powers, if any, of the shares
of $4 Preferred Stock and the restrictions and qualifications thereof.
RANK
Any series of Preferred Stock will, with respect to rights on liquidation,
winding up and dissolution, rank (i) senior to all classes of Common Stock and
to all equity securities issued by the Company, the terms of which specifically
provide that such equity securities will rank junior to such series of Preferred
Stock (the "Junior Liquidation Securities"); (ii) on a parity with all equity
securities issued by the Company, the terms of which specifically provide that
such equity securities will rank on a
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parity with such series of Preferred Stock ("Parity Liquidation Securities");
and (iii) junior to all equity securities issued by the Company, the terms of
which specifically provide that such equity securities will rank senior to such
series of Preferred Stock, including the $4 Preferred Stock (the "Senior
Liquidation Securities"). In addition, any series of Preferred Stock will, with
respect to dividend rights, rank (i) senior to all equity securities issued by
the Company, the terms of which specifically provide that such equity securities
will rank junior to such series of Preferred Stock and, to the extent provided
in the applicable Certificate of Designation, to Common Stock, (ii) on a parity
with all equity securities issued by the Company, the terms of which
specifically provide that such equity securities will rank on a parity with such
series of Preferred Stock and, to the extent provided in the applicable
Certificate of Designation, to Common Stock ("Parity Dividend Securities") and
(iii) junior to all equity securities issued by the Company, the terms of which
specifically provide that such equity securities will rank senior to such series
of Preferred Stock, including the $4 Preferred Stock. As used in any Certificate
of Designation for these purposes, the term "equity securities" will not include
debt securities convertible into or exchangeable for equity securities.
DIVIDENDS
Holders of each series of Preferred Stock will be entitled to receive, when,
as and if declared by the Board of Directors of the Company out of funds legally
available therefor, cash dividends at such rates and on such dates as are set
forth in the Prospectus Supplement relating to such series of Preferred Stock.
Dividends will be payable to holders of record of Preferred Stock as they appear
on the books of the Company (or, if applicable, the records of the Depositary
referred to below under "Description of Depositary Shares") on such record dates
as shall be fixed by the Board of Directors. Dividends on any series of
Preferred Stock may be cumulative or non-cumulative.
No full dividends may be declared or paid on funds set apart for the payment
of dividends on any series of Preferred Stock unless dividends shall have been
paid or set apart for such payment on the Parity Dividend Securities. If full
dividends are not so paid, such series of Preferred Stock shall share dividends
pro rata with the Parity Dividend Securities.
CONVERSION AND EXCHANGE
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
another series of Preferred Stock or Common Stock or exchangeable for another
series of Preferred Stock, Common Stock or Debt Securities of the Company. The
Common Stock of the Company is described below under "Description of Common
Stock."
REDEMPTION
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Company or the holder thereof and may be subject to
mandatory redemption pursuant to a sinking fund or otherwise upon terms and at
the redemption prices set forth in the Prospectus Supplement relating to such
series.
In the event of partial redemptions of Preferred Stock, whether by mandatory
or optional redemption, the shares to be redeemed will be determined by lot or
pro rata, as may be determined by the Board of Directors of the Company, or by
any other method determined to be equitable by the Board of Directors.
On and after a redemption date, unless the Company defaults in the payment
of the redemption price, dividends will cease to accrue on shares of Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, holders of each series of Preferred Stock that ranks senior to the
Junior Liquidation Securities will be entitled to receive out of assets of the
Company available for distribution to shareholders, before any
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distribution is made on any Junior Liquidation Securities, including Common
Stock, distributions upon liquidation in the amount set forth in the Prospectus
Supplement relating to such series of Preferred Stock, plus an amount equal to
any accrued and unpaid dividends. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable with
respect to the Preferred Stock of any series and any other Parity Liquidation
Securities are not paid in full, the holders of the Preferred Stock of such
series and the Parity Liquidation Securities will share ratably in any such
distribution of assets of the Company in proportion to the full liquidation
preferences to which each is entitled. After payment of the full amount of the
liquidation preference to which they are entitled, the holders of such series of
Preferred Stock will not be entitled to any further participation in any
distribution of assets of the Company.
VOTING RIGHTS
Except as indicated below or in the Prospectus Supplement relating to a
particular series of Preferred Stock or except as expressly required by
applicable law, the holders of shares of Preferred Stock will have no voting
rights.
PREFERRED STOCK OUTSTANDING
As of February 28, 1994, the Company had issued and outstanding 16,017
shares without par value of $4 Preferred Stock, which is senior to the Common
Stock and the Preferred Stock as to the payment of dividends and distributions
of assets on liquidation, dissolution or winding up of the Company. The $4
Preferred Stock bears a dividend of $4.00 per share per annum from the surplus
or net profits of the Company, but only when and as declared by the Board of
Directors. Dividends on the $4 Preferred Stock are cumulative. Such dividends
are payable quarterly in each year on such dates as from time to time may be
fixed by the Board of Directors. Accumulation of dividends do not bear interest.
If dividends in full on all outstanding shares of the $4 Preferred Stock for
all past quarterly dividend periods and for the then current quarterly period
have not been paid or declared and set apart for payment, no dividends (other
than dividends payable in stock ranking junior to the $4 Preferred Stock) will
be declared or paid or set apart for payment on, nor will any distribution be
made to, any class of stock ranking junior to the $4 Preferred Stock.
Holders of the $4 Preferred Stock have no general voting rights but have the
right to vote in certain specified circumstances.
If at the time of any annual meeting of shareholders, dividends have not
been paid on the shares of the $4 Preferred Stock in an aggregate amount equal
to four full quarterly dividends (whether consecutive or not), then at such
annual meeting, the holders of the $4 Preferred Stock will have the sole right,
to the exclusion of all other classes of stock, to vote for and elect one-third
(or the nearest whole number thereto) of the total number of directors to be
elected at the meeting and thereafter at all meetings for the election of
directors until all arrearages of dividends accumulated on the $4 Preferred
Stock for all preceding dividend periods shall have been paid or declared and
set apart for payment. Whenever all arrearages of dividends have been paid or
declared and set apart for payment, all powers of the holders of the $4
Preferred Stock to vote for directors will terminate, and the tenure of all
Directors elected by them will automatically end.
So long as any shares of the $4 Preferred Stock are outstanding, the
Company, without first obtaining a majority vote of the holders of the
outstanding shares of the $4 Preferred Stock, may not (i) increase the
authorized number of $4 Preferred Stock, (ii) authorize, create or issue stock
of any class ranking, as to the payment of dividends or distributions upon
dissolution, liquidation or winding up, on a parity with the $4 Preferred Stock,
or (iii) sell, lease or otherwise dispose of all or substantially all of the
assets of the Company, otherwise than by merger or consolidation.
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In addition, so long as any shares of $4 Preferred Stock are outstanding,
the Company may not, without first obtaining the vote of holders of at least
two-thirds of the outstanding shares of $4 Preferred Stock, authorize, create or
issue stock of any class ranking, as to the payment of dividends or distribution
upon dissolution, liquidation or winding up, senior to the $4 Preferred Stock.
The Company's Restated Certificate of Incorporation provides that for so
long as any shares of Preferred Stock are outstanding, the Company will not
issue any shares of the $4 Preferred Stock without first obtaining the
affirmative vote of the holders of at least a majority of the outstanding shares
of Preferred Stock.
Upon the dissolution, liquidation or winding up of the Company, the holders
of the $4 Preferred Stock will be entitled to receive out of the net assets of
the Company (whether represented by capital or surplus), (i) if such
dissolution, liquidation or winding up is voluntary, cash in an amount per share
of $105, and (ii) if such dissolution, liquidation or winding up is involuntary,
cash in the amount of $100 per share. In addition, such holders will be entitled
to receive, in each case, an amount equal to all dividends accrued and unpaid on
such share up to and including the date fixed for distribution, whether or not
earned or declared and, in either case, before any distribution of the assets to
be distributed is made to the holders of stock ranking junior to the $4
Preferred Stock.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below of certain provisions of the Deposit
Agreement (as defined below) and of the Depositary Shares and Depositary
Receipts (as defined below) does not purport to be complete and is subject to
and qualified in its entirety by reference to the forms of Deposit Agreement and
Deposit Receipt relating to the Preferred Stock, included as exhibits to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Company may, at its option, elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In the event such
option is exercised, the Company will issue receipts for Depositary Shares, each
of which will represent a fraction (to be set forth in the Prospectus Supplement
relating to a particular series of Preferred Stock) of a share of a particular
series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Company and a bank or trust company selected by the Company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000 (the "Depositary"). Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share will be entitled, in proportion to
the applicable fraction of a share of Preferred Stock represented by such
Depositary Share, to all the rights and preferences of the Preferred Stock
represented thereby (including dividend, voting, redemption, conversion and
liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary
Receipts will be distributed to those persons purchasing the fractional shares
of Preferred Stock in accordance with the terms of the offering.
Pending the preparation of definitive Depositary Receipts, the Depositary
may, upon the written order of the Company or any holder of deposited Preferred
Stock, execute and deliver temporary Depositary Receipts which are substantially
identical to, and entitle the holders thereof to all the rights pertaining to,
the definitive Depositary Receipts. Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
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DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the deposited Preferred Stock to the record
holders of Depositary Shares relating to such Preferred Stock in proportion to
the numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto. If the Depositary determines that it is not feasible to make
such distribution, it may, with the approval of the Company, sell such property
and distribute the net proceeds from such sale to such holders.
REDEMPTION OF STOCK
If a series of Preferred Stock represented by Depositary Shares is to be
redeemed, the Depositary Shares will be redeemed from the proceeds received by
the Depositary resulting from the redemption, in whole or in part, of such
series of Preferred Stock held by the Depositary. The Depositary Shares will be
redeemed by the Depositary at a price per Depositary Share equal to the
applicable fraction of the redemption price per share payable in respect of the
shares of Preferred Stock so redeemed. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same date the number of Depositary Shares representing shares of Preferred Stock
so redeemed. If fewer than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by the Depositary by lot or
pro rata or by any other equitable method as may be determined by the
Depositary.
WITHDRAWAL OF STOCK
Any holder of Depositary Shares may, upon surrender of the Depositary
Receipts at the corporate trust office of the Depositary (unless the related
Depositary Shares have previously been called for redemption), receive the
number of whole shares of the related series of Preferred Stock and any money or
other property represented by such Depositary Receipts. Holders of Depositary
Shares making such withdrawals will be entitled to receive whole shares of
Preferred Stock on the basis set forth in the related Prospectus Supplement for
such series of Preferred Stock, but holders of such whole shares of Preferred
Stock will not thereafter be entitled to deposit such Preferred Stock under the
Deposit Agreement or to receive Depositary Receipts therefor. If the Depositary
Shares surrendered by the holder in connection with such withdrawal exceed the
number of Depositary Shares that represent 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.
VOTING DEPOSITED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of any series of
deposited Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such series of Preferred Stock. Each record holder
of such Depositary Shares on the record date (which will be the same date as the
record date for the relevant series of Preferred Stock) will be entitled to
instruct the Depositary as to the exercise of the voting rights pertaining to
the amount of the Preferred Stock represented by such holder's Depositary
Shares. The Depositary will endeavor, insofar as practicable, to vote the amount
of such series of Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable actions that may be deemed necessary by the Depositary in order to
enable the Depositary to do so. The Depositary will abstain from voting shares
of the Preferred Stock to the extent it does not receive specific instructions
from the holder of Depositary Shares representing such Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which materially
and adversely alters the rights of the holders
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of the Depositary Shares representing Preferred Stock of any series will not be
effective unless such amendment has been approved by the holders of at least the
amount of the Depositary Shares then outstanding representing the minimum amount
of Preferred Stock of such series necessary to approve any amendment that would
materially and adversely affect the rights of the holders of the Preferred Stock
of such series. Every holder of an outstanding Depositary Receipt at the time
any such amendment becomes effective, or any transferee of such holder, shall be
deemed, by continuing to hold such Depositary Receipt, or by reason of the
acquisition thereof, to consent and agree to such amendment and to be bound by
the Deposit Agreement as amended thereby. The Deposit Agreement automatically
terminates if (i) all outstanding Depositary Shares have been redeemed; or (ii)
each share of Preferred Stock has been converted into other preferred stock or
Common Stock or has been exchanged for debt securities; or (iii) there has been
a final distribution in respect of the Preferred Stock in connection with any
liquidation, dissolution or winding up of the Company and such distribution has
been distributed to 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 all charges of the Depositary in connection with the initial deposit of
the relevant series of Preferred Stock and any redemption of such Preferred
Stock. Holders of Depositary Receipts will pay other transfer and other taxes
and governmental charges and such other charges or expenses as are expressly
provided in the Deposit Agreement to be for their accounts.
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 of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
MISCELLANEOUS
The Depositary will forward 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 deposited Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstances 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, Depositary
Receipts or shares of Preferred Stock unless satisfactory indemnity is
furnished. They may rely upon written advice of counsel or accountants, or upon
information provided by holders of Depositary Receipts or other persons believed
to be competent and on documents believed to be genuine.
DESCRIPTION OF COMMON STOCK
GENERAL
Subject to the rights of the Holders of any shares of the Company's
Preferred Stock or $4 Preferred Stock which may at the time be outstanding,
holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor.
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Holders of Common Stock are entitled to receive, upon any liquidation of
the Company, all remaining assets available for distribution to
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shareholders after satisfaction of the Company's liabilities and the
preferential rights of any preferred stock that may then be issued and
outstanding. The outstanding shares of Common Stock are, and the shares offered
hereby will be, fully paid and nonassessable. The holders of Common Stock have
no preemptive, conversion or redemption rights. The Common Stock is listed on
the New York Stock Exchange. The registrar and transfer agent for the Common
Stock is Chemical Bank.
CERTAIN PROVISIONS
The Company's Restated Certificate of Incorporation contains provisions
which: (1) divide the Board of Directors into three classes of as nearly equal
size as possible, with Directors in each class being elected for terms of three
years; (2) require the affirmative vote of 80% of the outstanding shares of
voting stock to remove any Director except for cause; (3) require the
affirmative vote of (a) 80% of the outstanding shares of voting stock and (b) a
majority of the voting stock not owned by an Interested Stockholder (an owner of
10% or more of voting power) to approve any Business Combination (as such term
is defined in the Company's Restated Certificate of Incorporation) with an
Interested Stockholder unless (x) the Business Combination shall have been
approved by the Board of Directors at a time when Disinterested Directors (those
directors unaffiliated with an Interested Stockholder who were either on the
Board of Directors prior to the time the Interested Stockholder became an
Interested Stockholder or succeeded a Disinterested Director and were
recommended for a nomination or election by a majority of the Disinterested
Directors) constitute a majority of the entire Board of Directors or (y) in the
case of a Business Combination involving the payment of consideration to holders
of capital stock, certain conditions concerning the adequacy of the
consideration are met; (4) require the affirmative vote of 80% of the
outstanding shares of voting stock to amend or repeal those provisions of the
Company's Restated Certificate of Incorporation described in clauses (1) and (2)
above; and (5) require the affirmative vote of (x) 80% of the outstanding shares
of voting stock and (y) a majority of the voting stock not owned by an
Interested Stockholder, to approve any proposal made by such Interested
Stockholder to amend or repeal those provisions of the Company's Restated
Certificate of Incorporation described in clause (3) above, unless such proposal
is recommended by the Board of Directors at a time when Disinterested Directors
constitute a majority of the entire Board of Directors.
The overall effect of these provisions may be to deter or discourage hostile
takeover attempts by making it more difficult for a person who has gained a
substantial equity interest in the Company effectively to exercise control.
COMMON SHARE PURCHASE RIGHTS
In April 1987, the Company's Board of Directors authorized the distribution
of one Common Share Purchase Right (a "Right") for each outstanding share of
Common Stock. Pursuant to the terms of the Rights Agreement (as hereinafter
defined), each share of Common Stock issued subsequent to the effective date of
such Agreement and prior to the Distribution Date (as hereinafter defined), has
been and will be accompanied by one Right. Each Right entitles the registered
holder to purchase from the Company one share of Common Stock at an exercise
price of $155, subject to adjustment as provided below (the "Purchase Price").
As distributed, the Rights trade together with the Common Stock. They may be
exercised or traded separately only after the earlier to occur of: (i) the tenth
business day after the commencement of, or first public disclosure of an
intention to commence, a tender or exchange offer by a person or group other
than the Company if, upon consummation of the offer, such person or group has
acquired beneficial ownership of 20% or more of the outstanding Common Stock, or
(ii) the tenth day after the first public announcement that an Acquiring Person
(as such term is defined in the Rights Agreement) has acquired the beneficial
ownership of 20% or more of the shares of Common Stock outstanding (the earlier
of such dates being called the "Distribution Date").
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The Rights will expire on April 29, 1997 (the "Final Expiration Date"),
unless earlier redeemed by the Company as provided below. Until a Right is
exercised, the holder thereof will have no additional rights as a shareholder of
the Company, including, without limitation, the right to vote or to receive
dividends on shares of Common Stock subject to the Rights.
In the event that, following the Distribution Date, the Company (i) engages
in a merger or other business combination transaction with a Principal Party (as
such term is defined in the Rights Agreement) in which the shares of Common
Stock are changed into, or exchanged for, stock or other securities of any other
person or cash or other property, or (ii) sells or transfers 50% or more of its
assets or earnings power to a Principal Party, each holder of a Right (except as
provided below) shall thereafter have the right to receive, upon exercise
thereof at the Purchase Price, Common Stock of such Principal Party having a
value of twice such Purchase Price. In the event that (i) an Acquiring Person
shall acquire beneficial ownership of 20% or more of the shares of Common Stock
outstanding, other than pursuant to an offer for all outstanding shares of
Common Stock which the Continuing Directors (as such term is defined in the
Rights Agreement), determine to be in the best interests of the Company and its
shareholders, (ii) the Company merges with an Acquiring Person and the Company
is the surviving corporation and all shares of Common Stock remain outstanding
and unchanged or (iii) an Acquiring Person engages in one or more "self-dealing"
transactions with the Company, each holder of a Right will be entitled to
purchase, at the Purchase Price, (A) shares of Common Stock of the Company
having a value of twice the Purchase Price or (B) in certain circumstances as
determined by the Continuing Directors, any combination of cash, property,
shares of Common Stock or other securities equal to twice the Purchase Price
(any of the events described in this paragraph being called "Triggering
Events"). Any rights that are or were at any time on or after the earlier of the
Distribution Date or the Stock Acquisition Date (as such term is defined in the
Rights Agreement), beneficially owned by an Acquiring Person will become null
and void upon the occurrence of a Triggering Event and any holder of any such
Right will be unable to exercise such Right after the occurrence of a Triggering
Event.
At any time prior to the earlier of (i) the tenth day following the Stock
Acquisition Date or (ii) the Final Expiration Date, the Board of Directors of
the Company may redeem the Rights in whole, but not in part, at a price of $.05
per Right.
The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Stock, (ii) upon the grant to holders of Common Stock of certain rights or
warrants to subscribe for shares of Common Stock or convertible securities at
less than the current market price of the Common Stock or (iii) upon the
distribution to holders of Common Stock of evidences of indebtedness,
securities, cash or assets (excluding regular periodic dividends) or of
subscription rights or warrants (other than those referred to above). With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in the Purchase
Price.
The Rights have certain antitakeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors of the Company. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors of the Company since the Rights may be redeemed at a
price of $.05 per Right prior to the time that a person or group has acquired
beneficial ownership of 20% or more of the outstanding Common Stock.
The Rights Agreement (the "Rights Agreement") dated as of April 14, 1987, as
amended December 14, 1989, between the Company and Chemical Bank (successor to
Manufacturers Hanover Trust Company), as Rights Agent, specifies the terms of
the Rights. The foregoing description of the Rights
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is qualified in its entirety by reference to such Rights Agreement, which is an
exhibit to the Company's registration statement on Form 8-A, dated April 17,
1987, as amended, incorporated by reference herein.
DESCRIPTION OF WARRANTS
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), Preferred Stock, including Preferred Stock
represented by Depositary Shares ("Preferred Stock Warrants"), Common Stock
("Common Stock Warrants"), or any combination thereof. Warrants may be issued
independently or together with any Securities and may be attached to or separate
from such Securities. The Warrants are to be issued under warrant agreements
(each a "Warrant Agreement") to be entered into between the Company and a bank
or trust company, as warrant agent (the "Warrant Agent"), all as shall be set
forth in the Prospectus Supplement relating to Warrants being offered pursuant
thereto.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the certificates representing such Debt Warrants, including the following:
(1) the title of such Debt Warrants; (2) the aggregate number of such Debt
Warrants; (3) the price or prices at which such Debt Warrants will be issued;
(4) the currency or currencies, including composite currencies or currency
units, in which the price of such Debt Warrants may be payable; (5) the
designation, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of such Debt Warrants, and the procedures and
conditions relating to the exercise of such Debt Warrants; (6) the designation
and terms of any related Debt Securities with which such Debt Warrants are
issued, and the number of such Debt Warrants issued with each such Debt
Security; (7) the currency or currencies, including composite currencies or
currency units, in which the principal of or any premium or interest on the Debt
Securities purchasable upon exercise of such Debt Warrants will be payable; (8)
the date, if any, on and after which such Debt Warrants and the related Debt
Securities will be separately transferable; (9) the principal amount of Debt
Securities purchasable upon exercise of each Debt Warrant, and the price at
which and the currency or currencies, including composite currencies or currency
units, in which such principal amount of Debt Securities may be purchased upon
such exercise; (10) the date on which the right to exercise such Debt Warrants
will commence, and the date on which such right will expire; (11) the maximum or
minimum number of such Debt Warrants which may be exercised at any time; (12) a
discussion of any material federal income tax considerations; and (13) any other
terms of such Debt Warrants and terms, procedures and limitations relating to
the exercise of such Debt Warrants.
Certificates representing Debt Warrants will be exchangeable for new
certificates representing Debt Warrants of different denominations, and Debt
Warrants may be exercised at the corporate trust office of the Warrant Agent or
any other office indicated in the Prospectus Supplement. Prior to the exercise
of their Debt Warrants, holders of Debt Warrants will not have any of the rights
as holders of the Debt Securities purchasable upon such exercise and will not be
entitled to payment of principal of or any premium or interest on the Debt
Securities purchasable upon such exercise.
PREFERRED STOCK WARRANTS
The applicable Prospectus Supplement will describe the terms of Preferred
Stock Warrants offered thereby, the Warrant Agreement relating to such Preferred
Stock Warrants and the certificates representing such Preferred Stock Warrants,
including the following: (1) the title of such Preferred Stock Warrants; (2) the
aggregate number of such Preferred Stock Warrants; (3) the price or prices at
which such Preferred Stock Warrants will be issued; (4) the currency or
currencies, including composite currencies or currency units, in which the price
of such Preferred Stock Warrants may be payable; (5) the designation, number of
shares and terms (including, among others, dividend, liquidation, redemption and
voting rights) of the Preferred Stock (including Preferred Stock represented by
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Depositary Shares) purchasable upon exercise of such Preferred Stock Warrants,
and the procedures and conditions relating to the exercise of such Preferred
Stock Warrants; (6) the designation and terms of any related Securities of the
Company with which such Warrants are issued, and the number of such Preferred
Stock Warrants issued with each such Security; (7) the date, if any, on and
after which such Preferred Stock Warrants and the related Securities will be
separately transferable; (8) the maximum or minimum number of Preferred Stock
Warrants which may be exercised at any time; (9) if applicable, a discussion of
any material federal income tax considerations; and (10) any other terms of such
Preferred Stock Warrants, including terms, procedures and limitations relating
to the exchange and exercise of such Preferred Stock Warrants.
Certificates representing Preferred Stock Warrants will be exchangeable for
new certificates representing Preferred Stock Warrants of different
denominations, and Preferred Stock Warrants may be exercised at the corporate
trust office of the Warrant Agent or any office indicated in the Prospectus
Supplement. Prior to the exercise of their Preferred Stock Warrants, holders of
such Preferred Stock Warrants will not have any of the rights as holders of the
Preferred Stock purchaseable upon such exercise and will not be entitled to any
dividend payments, liquidation premiums or voting rights of the Preferred Stock
(including Preferred Stock represented by Depositary Shares) purchasable upon
such exercise.
COMMON STOCK WARRANTS
The applicable Prospectus Supplement will describe the terms of any Common
Stock Warrants, the Warrant Agreement relating to such Common Stock Warrants and
the certificates representing such Common Stock Warrants in respect of which
this Prospectus is being delivered which may include: (1) the title of such
Common Stock Warrants; (2) the aggregate number of such Common Stock Warrants;
(3) the price or prices at which such Common Stock Warrants will be issued; (4)
the currency or currencies, including composite currencies or currency units, in
which the price of such Common Stock Warrants may be payable; (5) if applicable,
the designation and terms of any related Security with which such Common Stock
Warrants are issued, and the number of such Common Stock Warrants issued with
each such related Security; (6) if applicable, the date on and after which such
Common Stock Warrants and the related Security will be separately transferable;
(7) the date on which the right to exercise such Common Stock Warrants will
commerce, and the date on which such right will expire, (8) the maximum or
minimum number of such Common Stock Warrants which may be exercised at any time;
(9) if applicable, a discussion of any material federal income tax
considerations; and (10) any other terms of such Common Stock Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Common Stock Warrants.
Certificates representing Common Stock Warrants will be exchangeable for new
certificates representing Common Stock Warrants of different denominations, and
Common Stock Warrants may be exercised at the corporate trust office of the
Warrant Agent or any other office indicated in the Prospectus Supplement. Prior
to the exercise of their Common Stock Warrants, holders of Common Stock Warrants
will not have any of the rights as holders of Common Stock purchasable upon such
exercise and will not be entitled to dividend payments, if any, or voting rights
of the Common Stock purchasable upon such exercise.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase for cash such principal
amount of Debt Securities or number of shares of Preferred Stock or Common Stock
at such exercise price as shall in each case be set forth in, or be determinable
as set forth in, the Prospectus Supplement relating to the Warrants offered
thereby. Warrants may be exercised at any time up to the close of business on
the expiration date set forth in the Prospectus Supplement relating to the
Warrants offered thereby. After the close of business on the expiration date,
unexercised Warrants will become void.
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Warrants may be exercised as set forth in the Prospectus Supplement relating
to the Warrants offered thereby. Upon receipt of payment and the certificate
representing the Warrant properly completed and duly executed at the corporate
trust office of the Warrant Agent or any other office indicated in the
Prospectus Supplement, the Company will, as soon as practicable, forward the
Securities purchasable upon such exercise. If less than all of the Warrants
represented by such certificate are exercised, a new certificate will be issued
for the remaining Warrants.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities (including Debt Securities that are exchangeable for Bearer
Securities and Debt Securities in permanent global form that are either Bearer
Securities or exchangeable for Bearer Securities) may not be offered, sold,
resold or delivered in connection with their original issuance in the United
States or to United States persons (each as defined below) except as otherwise
permitted by Treasury Regulation Section 1.163-5(c)(2)(i)(D) including offers
and sales to offices located outside the United States of United States
financial institutions (as defined in Treasury Regulation Section
1.165-12(c)(1)(v)) which agree in writing to comply with the requirements of
Section 165(j)(3)(A),(B) or (C) of the Code, as defined below, and the
regulations thereunder, and any underwriters, agents and dealers participating
in the offering of Debt Securities must agree in writing that they will not
offer, sell or resell any Bearer Securities to persons within the United States
or to United States persons (except as described above) nor deliver Bearer
Securities within the United States. In addition, any such underwriters, agents
and dealers must represent in writing that they have in effect, in connection
with the offer and sale of the Debt Securities, procedures reasonably designed
to ensure that their employees or agents who are directly engaged in selling the
Debt Securities are aware that Bearer Securities cannot be offered or sold to a
person who is within the United States or is a United States person except as
otherwise permitted by Treasury Regulation Section 1.163-5(c)(2)(i)(D).
Furthermore, the owner of the obligation (or the financial institution or
clearing organization through which the owner holds the obligation) must certify
to the Company that the owner is not a United States Person. Bearer Securities
and any coupons attached hereto will bear the following legend: "Any United
States person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the United States Internal Revenue Code."
Purchasers of Bearer Securities may be affected by certain limitations under
United States tax laws. The applicable Prospectus Supplement or Prospectus
Supplements will describe such limitations for any Bearer Securities relating
thereto.
As used herein, "United States person" means (i) an individual who is, for
United States federal income tax purposes, a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision thereof,
or (iii) 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 and its possessions.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters or dealers and
also may sell Securities directly to other purchasers or through agents. Any
such underwriter or agent involved in the offer and sale of the Securities will
be named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the Securities
upon the terms and conditions as
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shall be set forth in any Prospectus Supplement. In connection with the sale of
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions from purchasers of
Securities for whom they may act as agent. Underwriters may sell Securities to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
(which may be changed from time to time) from the purchasers for whom they may
act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in an applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements with the Company, to indemnification
against and contribution toward certain civil liabilities, including liabilities
under the Securities Act, and to reimbursement by the Company for certain
expenses.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Debt Securities or Preferred Stock from the Company at
the public offering price set forth in such Prospectus Supplement pursuant to
Delayed Delivery Contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount specified in the applicable Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if the Securities are being sold to underwriters, the Company shall have sold to
such underwriters the amount specified in the applicable Prospectus Supplement.
Agents and underwriters will have no responsibility in respect of the delivery
or performance of Contracts. A commission as indicated in the applicable
Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Securities pursuant to Contracts accepted by the Company.
Each underwriter, dealer and agent participating in the distribution of any
Debt Securities which are issuable in bearer form will agree that it will not
offer, sell or deliver, directly or indirectly, Debt Securities in bearer form
in the United States or to United States persons except as otherwise permitted
by Treasury Regulation Section 1.163-5(c)(2)(i)(D). See "Limitations on Issuance
of Bearer Securities."
The Securities may not be offered or sold directly or indirectly in Great
Britain other than to persons whose ordinary business it is to buy or sell
shares or debentures (except in circumstances which do not constitute an offer
to the public within the meaning of the Companies Act of 1985), and this
Prospectus and any Prospectus Supplement or any other offering material relating
to the Securities may not be distributed in or from Great Britain other than to
persons whose business involves the acquisition and disposal, or the holding, of
securities whether as principal or as agent.
Each series of Securities will be a new issue with no established trading
market, other than the Common Stock which is listed on the New York Stock
Exchange. Any Common Stock sold pursuant to a Prospectus Supplement will be
listed on the New York Stock Exchange, subject to official notice of issuance.
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.
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Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for, the Company in the
ordinary course of business.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company by James
W. Guedry, Esq., Associate General Counsel and Secretary of the Company, and
certain matters will be passed upon for any underwriters or agents, by Skadden,
Arps, Slate, Meagher & Flom. Mr. Guedry does not own a material or significant
amount of the outstanding shares of the Company's Common Stock. He participates
in the Company's Stock Option Plan and in its Salaried Savings Plan, having an
interest in a fund under that plan which invests in the Company's Common Stock.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Andersen &
Co., independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
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NO DEALER, AGENT, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT IN CONNECTION WITH
THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY AGENT. THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND ANY PRICING
SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS,
PROSPECTUS SUPPLEMENT AND SUCH PRICING SUPPLEMENT OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS, PROSPECTUS
SUPPLEMENT AND ANY PRICING SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR
RESPECTIVE DATES.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes............................ S-2
Special Provisions Relating to Foreign Currency
Notes.......................................... S-11
Foreign Currency Risks.......................... S-14
United States Taxation.......................... S-14
Plan of Distribution of Notes................... S-17
Validity of the Notes........................... S-18
Glossary........................................ S-19
PROSPECTUS
Available Information........................... 2
Incorporation of Certain Documents by
Reference...................................... 2
The Company..................................... 3
Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and
Preferred Stock Dividends...................... 4
Use of Proceeds................................. 4
Description of Debt Securities.................. 5
Description of Capital Sotck.................... 19
Description of Preferred Stock.................. 19
Description of Depositary Shares................ 22
Description of Common Stock..................... 24
Description of Warrants......................... 27
Limitations on Issuance of Bearer Securities.... 29
Plan of Distribution............................ 29
Validity of Debt Securities..................... 31
Experts......................................... 31
</TABLE>
[LOGO]
$400,000,000
Medium-Term Notes,
Series E
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P R O S P E C T U S S U P P L E M E N T
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CS First Boston
Kidder, Peabody P Co.
Incorporated
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