<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(5)
REGISTRATION NO. 33-62911
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 18, 1998)
$445,000,000
6 1/2% DEBENTURES DUE NOVEMBER 15, 2028
----------------
The Debentures bear interest at the rate of 6 1/2% per year. Interest on
the Debentures is payable on May 15 and November 15 of each year, beginning
May 15, 1999. Motorola may redeem the Debentures at any time prior to
maturity, in whole or in part, at a redemption price equal to the greater of
(i) 100% of the principal amount of such Debentures and (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
thereon discounted to the redemption date at the Treasury Rate (as defined
herein) plus 15 basis points, plus, in each case, accrued interest thereon to
the date of redemption. See "Description of Debentures."
The Debentures are unsecured and rank equally with all of our other
unsecured senior indebtedness. The Debentures will be issued only in
registered form in denominations of $1,000 and integral multiples of $1,000.
----------------
<TABLE>
<CAPTION>
PER DEBENTURE TOTAL
------------- ------------
<S> <C> <C>
Public Offering Price(1)....................... 99.584% $443,148,800
Underwriting Discount.......................... .875% $ 3,893,750
Proceeds, before expenses, to Motorola......... 98.709% $439,255,050
</TABLE>
(1) Purchasers will also be required to pay accrued interest from
November 23, 1998, if settlement occurs after that date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
We expect that the Debentures will be ready for delivery in book-entry
form only through The Depository Trust Company, on or about November 23, 1998.
----------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
----------------
The date of this prospectus supplement is November 18, 1998.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Debentures.................................................. S-3
Recent Developments........................................................ S-7
Use of Proceeds............................................................ S-8
Capitalization............................................................. S-9
Underwriting............................................................... S-10
Legal Matters.............................................................. S-11
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 4
Risk Factors Relating to Currencies........................................ 6
Use of Proceeds............................................................ 6
Ratios of Earning to Fixed Charges......................................... 6
Description of Debt Securities............................................. 6
Description of Liquid Yield Option Notes................................... 19
Description of Capital Stock............................................... 31
Description of Securities Warrants......................................... 33
Plan of Distribution....................................................... 36
Legal Matters.............................................................. 36
Experts.................................................................... 36
</TABLE>
-----------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the Underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
Underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement and the accompanying
prospectus is accurate as of the date hereof only. Our business, financial
condition, results of operations and prospects may have changed since that
date.
S-2
<PAGE>
DESCRIPTION OF DEBENTURES
The following description of the particular terms of the Debentures
supplements and, to the extent inconsistent, replaces the description of the
general terms and provisions of the Debt Securities set forth in the
accompanying prospectus. Certain terms are defined in the prospectus.
GENERAL
The Debentures will be:
. unsecured general obligations of Motorola;
. limited to $445 million principal amount; and
. issued in book-entry form only.
The Debentures will mature on November 15, 2028.
The Debentures will bear interest from November 23, 1998 or from the most
recent Interest Payment Date to which interest has been paid or provided for,
at the rate of 6.50% per annum, payable semiannually on May 15 and November 15,
commencing on May 15, 1999, to the persons in whose names the Debentures are
registered at the close of business on the preceding May 1 and November 1,
respectively.
The Debentures will constitute Senior Securities as described in the
prospectus, will be issued under the Senior Indenture and will constitute a
separate series for purposes of the Senior Indenture.
Payment of the principal and interest on the Debentures will rank equally
with all other unsubordinated debt of Motorola. As of September 26, 1998,
Motorola had $5.364 billion of indebtedness (and approximately $700 million of
guarantees by Motorola) that would have ranked equally with the Debentures and
$367 million of indebtedness that would have ranked junior to the Debentures.
As described under "Capitalization," in connection with (i) the redemption of a
significant portion of Motorola's outstanding LYONs(TM) due 2013 at the option
of the holders thereof on September 28, 1998 and (ii) Motorola's sale on
October 20, 1998 of its 5.80% Notes due 2008, indebtedness of Motorola that
would have ranked equally with the Debentures increased to $5.630 billion and
indebtedness that would have ranked junior to the Debentures decreased to $104
million. The Senior Indenture does not limit the amount of Senior Securities
that may be issued and provides that Senior Securities may be issued from time
to time in one or more series.
The Senior Indenture does not limit the amount of additional indebtedness
Motorola or any of its subsidiaries may incur. The Debentures will be
obligations exclusively of Motorola. Since the operations of Motorola are
partially conducted through subsidiaries, primarily overseas, the cash flow and
the consequent ability to service debt, including the Debentures, of Motorola,
are partially dependent upon the earnings of its subsidiaries and the
distribution of those earnings to, or upon other payments of funds by those
subsidiaries to, Motorola. The subsidiaries are separate and distinct legal
entities and have no obligation, contingent or otherwise, to pay any amounts
due pursuant to the Debentures or to make funds available therefor, whether by
dividends, loans or other payments. In addition, the payment of dividends and
the making of loans and advances to Motorola by its subsidiaries may be subject
to statutory or contractual restrictions, are contingent upon the earnings of
those subsidiaries, and are subject to various business considerations.
Any right of Motorola to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Debentures to participate in those assets) will be effectively subordinated
to the claims of that subsidiary's creditors (including trade creditors),
except to the extent that Motorola is itself recognized as a creditor of such
subsidiary, in which case the
S-3
<PAGE>
claims of Motorola would be subordinate to any security interests in the assets
of such subsidiary and any indebtedness of such subsidiary senior to that held
by Motorola. As of September 26, 1998, Motorola's subsidiaries had outstanding
approximately $4 billion of liabilities.
REDEMPTION AT THE OPTION OF MOTOROLA
The Debentures are redeemable at the option of Motorola, in whole at any
time or in part from time to time (each a "Redemption Date"), at a redemption
price equal to the greater of (i) 100% of their principal amount and (ii) the
sum, as determined by the Independent Investment Banker, of the present value
of the principal amount and the remaining scheduled payments of interest on the
Debentures to be redeemed (exclusive of interest accrued to such Redemption
Date), discounted from the scheduled payment dates to the Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate plus 15 basis points plus, in each case, accrued but
unpaid interest thereon to the Redemption Date. Notwithstanding the foregoing,
installments of interest on Debentures that are due and payable on an interest
payment date falling on or prior to the relevant Redemption Date will be
payable to the holders of such Debentures registered as such at the close of
business on the relevant record date according to their terms and the
provisions of the Senior Indenture.
Notice of any redemption must be given at least 30 days but not more than
60 days before the Redemption Date to each holder of Debentures to be redeemed.
If money sufficient to pay the redemption price of and accrued interest on the
Debentures (or portion thereof) to be redeemed on the Redemption Date is
deposited on or before the Redemption Date and certain other conditions are
satisfied, then on and after such date, interest will cease to accrue on the
Debentures called for redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable
to the remaining term of the Debentures to be redeemed that would be utilized,
at the time of selection and in accordance with customary financial practice,
in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of the Debentures to be redeemed.
"Comparable Treasury Price" means, with respect to any Redemption Date, the
average of the Reference Treasury Dealer Quotations for such Redemption Date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or if the Trustee obtains fewer than four such Reference Treasury
Dealer Quotations, the average of all such Reference Treasury Dealer
Quotations.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with Motorola.
"Reference Treasury Dealer" means each of Merrill Lynch Government
Securities Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated
together with their affiliates and their respective successors and any other
primary U.S. government securities dealer in New York City (a "Primary Treasury
Dealer") selected by Motorola in addition to, or in substitution for, any of
such firms; provided, however, that if any of the foregoing shall cease to be a
Primary Treasury Dealer, Motorola will substitute another Primary Treasury
Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date for the Debentures, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m. New York City time, on the third business day preceding
such Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated on the third business day preceding such Redemption
Date using a price for the Comparable Treasury Issue (expressed as a percentage
of its principal amount) equal to the Comparable Treasury Price for such
Redemption Date.
S-4
<PAGE>
DEFEASANCE
The Debentures are subject to defeasance under the conditions described in
the accompanying prospectus and the Senior Indenture.
BOOK ENTRY SYSTEM
Upon issuance, the Debentures will be represented by one or more global
securities (the "Global Securities") which will be deposited with, or on behalf
of, the Depositary located in the Borough of Manhattan, The City of New York,
and will be registered in the name of the Depositary or a nominee of the
Depositary.
Upon the issuance of the Global Securities, the Depositary or its nominee
will credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debentures represented by the Global Securities to the
accounts designated by the underwriters. Ownership of beneficial interests in
the Global Securities will be limited to participants and to persons that may
hold interests through institutions that have accounts with the Depositary
participants. Ownership interests in the Global Securities will be shown on,
and the transfer of that ownership interest will be effected only through,
records maintained by the Depositary or its nominee (with respect to a
participant's interest) for the Global Securities and records maintained by
participants (with respect to interests of persons other than participants).
Payment of principal of and any premium and interest on the Debentures
represented by the Global Securities will be made to the Depositary or its
nominee, as the case may be, as the sole registered owner and the sole Holder
of the Debentures represented thereby for all purposes under the Senior
Indenture. Neither Motorola nor the Trustee, nor any agent of Motorola or the
Trustee, will have any responsibility or liability for any aspect of the
Depositary's records relating to or payments made on account of beneficial
ownership interests in the Global Securities representing any Debentures or for
maintaining, supervising or reviewing any of the Depositary's records relating
to those beneficial ownership interests.
Motorola has been advised by the Depositary that upon receipt of any
payment of principal of or any premium or interest on the Global Securities,
the Depositary will immediately credit, on its book-entry registration and
transfer system, the accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Securities as shown on the records of the Depositary. Payments
by participants to owners of beneficial interests in the Global Securities held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for customer
accounts registered in "street name," and will be the sole responsibility of
such participants.
The Global Securities may not be transferred except as a whole by the
Depositary to a nominee of the Depositary. The Global Securities representing
the Debentures are exchangeable only if the Depositary or its nominee notifies
Motorola that it is unwilling or unable to continue as Depositary for those
Global Securities; the Depositary ceases to be qualified as required by the
Senior Indenture; Motorola instructs the Trustee in accordance with the Senior
Indenture that those Book-Entry Debentures will be so registrable and
exchangeable; or there shall have occurred and be continuing an Event of
Default or an event which after notice or lapse of time would be an Event of
Default with respect to the Debentures. Any Global Securities that are
exchangeable pursuant to the preceding sentence shall be exchangeable for
certificated Debentures issuable in denominations of $1,000 and integral
multiples of $1,000 in excess thereof and registered in such names as the
Depositary holding those Global Securities shall direct. Subject to the
foregoing, the Global Securities are not exchangeable, except for Global
Securities of like denomination to be registered in the name of the Depositary
or its nominee. If the Debentures were subsequently issued in registered form,
they would thereafter be transferred or exchanged without any service charge at
the corporate trust office of the Trustee, which, at the date of this
prospectus supplement, is Corporate Trust Operations Division, P.O. Box 755,
311 West Monroe Street, 12th Floor, Chicago, Illinois 60690, or at any other
office or agency maintained by Motorola for such purpose.
S-5
<PAGE>
So long as the Depositary for the Global Securities, or its nominee, is the
registered holder and owner of the Global Securities, the Depositary or its
nominee, as the case may be, will be considered the sole owner or Holder of the
Debentures represented by the Global Securities for the purposes of receiving
payment on the Debentures, receiving notices and for all other purposes under
the Senior Indenture and the Debentures. Except as provided above, owners of
beneficial interests in the Global Securities will not be entitled to receive
physical delivery of Debentures in definitive form and will not be considered
the Holders thereof for any purpose under the Senior Indenture. Accordingly,
each person owning a beneficial interest in the Global Securities must rely on
the procedures of the Depositary 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 Senior Indenture. The Senior
Indenture provides that the Depositary may grant proxies 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 Senior Indenture. Motorola understands that under
existing industry practices, in the event that Motorola requests any action of
Holders or that an owner of a beneficial interest in Global Securities desires
to give or take any action which a Holder is entitled to give or take under the
Senior Indenture, the Depositary 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 through them.
The Depositary has advised Motorola as follows: The Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. The Depositary holds securities that its participants deposit
with the Depositary. The Depositary also facilitates the settlement among
participants of securities transactions, such as transfers and pledges in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). The
Depositary is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others, such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly. The rules applicable to the
Depositary and its participants are on file with the Securities and Exchange
Commission.
The Depositary has further advised Motorola that management of the
Depositary is aware that some computer applications, systems and the like for
processing data ("Systems") that are dependent upon calendar dates, including
dates before, on and after January 1, 2000, may encounter "Year 2000 problems."
The Depositary has informed its participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries and settlement of trades within the Depositary ("Depositary
Services"), continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, the Depositary's plan includes a testing phase, which is expected
to be completed within appropriate time frames.
However, the Depositary's ability to perform properly its service is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as the Depositary's Direct Participants and indirect
participants and third party vendors from whom the Depositary licenses software
and hardware, and third party vendors on whom the Depositary relies for
information or the provision of services, including telecommunication and
electrical utility service providers, among others. The Depositary has informed
the Industry that it is contacting (and will continue to contact) third party
vendors from whom the Depositary acquires services to: (i) impress upon them
the importance of such services being Year 2000 complaint; and (ii) determine
the extent of their efforts for Year 2000
S-6
<PAGE>
remediation (and, as appropriate, testing) of their services. In addition, the
Depositary is in the process of developing such contingency plans as it deems
appropriate.
According to the Depositary, the foregoing information with respect to the
Depositary has been provided to the Industry for informational purposes only
and is not intended to serve as a representation, warranty or contract
modification of any kind.
RECENT DEVELOPMENTS
As announced on June 4, 1998, to respond to the severity of current
business conditions, Motorola is aggressively restructuring itself to improve
its long-term profitability and efficiency. In the second quarter of 1998,
Motorola recorded a pre-tax charge of $1.98 billion associated with a
comprehensive series of manufacturing consolidations, cost reductions and
restructuring steps. These steps include:
. a reduction in employment by approximately 15,000 before July 1999
from the approximately 150,000 employees worldwide;
. the consolidation of manufacturing operations throughout Motorola,
with emphasis on the semiconductor products and messaging,
information and media segments;
. the exit of non-strategic, poorly performing businesses; and
. the writedown of assets that have become impaired as a result of
current business conditions or business portfolio decisions.
In July, Motorola announced that its communications-related businesses are
being realigned and renewed under a single, new organization called the
Motorola Communications Enterprise. The new structure links together all of
Motorola's communications-related businesses so that they can more efficiently
share resources and cooperate on key business and technology issues. At the
same time, it realigns individual business units to respond more quickly to the
needs of Motorola's three distinct customer segments: consumers;
telecommunications network operators; and commercial, government and industrial
users of telecommunications. Business segments to be combined in the Motorola
Communications Enterprise include cellular, space, land mobile, and messaging,
information and media, which together accounted for about two-thirds of
Motorola's $29.8 billion in sales in 1997.
In August, Motorola sold to a Taiwanese company its printed circuit board
business located in Singapore that supplied circuit boards mainly to Motorola's
cellular and paging operations. In September, Motorola announced the pending
sale to CTS Corporation of its components products business that supplies
ceramic and quartz components to cellular and paging customers including
Motorola. That sale is expected to close during the first quarter of 1999. Both
of these businesses were part of the Automotive, Component, Computer and Energy
Sector. There can be no assurances that the pending transaction will be
completed.
Motorola also is evaluating several strategic options with respect to its
semiconductor components business and its cellular infrastructure business. No
decision has been made and no assurances can be made that any action will be
taken with respect to these businesses.
At the end of the third quarter, Motorola had reduced its employee
headcount by approximately 7,800 since the beginning of the second quarter.
The Semiconductor Products Sector has announced the closing of four major
semiconductor facilities in North Carolina, California, Arizona and the
Philippines and has exited four different semiconductor business segments:
chemical sensors, opto-couplers, fast programmable gate arrays and gate arrays.
The Messaging, Information and Media Sector announced the closing of a major
paging facility in Puerto Rico. In addition to the transactions described
above, the Automotive, Component, Computer and Energy Sector has announced the
closing of its Costa Rica facility which manufactures quartz and ceramic-based
components.
S-7
<PAGE>
As previously reported, Iridium LLC, a company of which Motorola owns
approximately 19% and to which Motorola supplies satellite communications
equipment, may require additional financing, possibly before the end of 1998,
to continue to make contractual payments to Motorola. As of early 1997,
Motorola had guaranteed $750 million of Iridium LLC bank financing and had
conditionally offered to guarantee an additional $350 million. Currently, the
conditional offer to guarantee an additional $350 million remains in place.
However, Motorola's existing guarantee has been reduced to $275 million,
although that amount is likely to significantly increase before the end of the
year depending on Iridium LLC's financing needs and the outcome of current
negotiations involving Motorola and Iridium LLC, and Iridium LLC and its
lenders.
USE OF PROCEEDS
Motorola intends to use the net proceeds from the sale of the Debentures to
reduce short-term indebtedness and for other general corporate purposes. On
November 18, 1998, Motorola had outstanding approximately $3.889 billion of
commercial paper, with a weighted average maturity of approximately 89 days and
bearing a weighted average interest rate of approximately 5.30% per annum.
S-8
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of Motorola as of September 26, 1998, and as adjusted to give
effect to the sale of the Debentures (after deducting underwriting discounts
and estimated offering expenses) and the anticipated application of the net
proceeds from such sale to reduce short-term indebtedness, as well as
Motorola's sale on October 20, 1998 of its 5.80% Notes due 2008 and the
application of the net proceeds therefrom to reduce short-term debt and the
redemption of a significant portion of Motorola's outstanding LYONs due 2013 at
the option of the holders, as described below. From time to time, Motorola may
issue additional debt or equity securities. The following information should be
read in conjunction with Motorola's consolidated financial statements,
including the notes thereto, which are incorporated herein by reference. See
"Incorporation of Certain Documents by Reference" in the accompanying
prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 26, 1998
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS OF
DOLLARS)
<S> <C> <C>
Short-Term Debt
Commercial paper.................................... $ 3,317 $ 2,819(a)(b)
Notes payable and other short-term debt............. 273 273
Current portion of long-term debt................... 8 8
------- -------
Total short-term debt............................. $ 3,598 $ 3,100
======= =======
Long-Term Debt(c)
Senior notes and debentures......................... $ 1,719 $ 1,719
Other senior debt................................... 55 55
5.80% Notes due 2008................................ -- 325
Debentures offered hereby........................... -- 445
LYONs due 2009 and 2013............................. 367 104(a)
Less current portion of long-term debt.............. (8) (8)
------- -------
Total long-term debt.............................. 2,133 2,640
------- -------
Stockholders' Equity(d)
Common stock........................................ 1,801 1,801
Preferred stock (none issued)....................... -- --
Additional paid-in capital.......................... 1,922 1,922
Retained earnings................................... 8,167 8,167
------- -------
Total stockholders' equity........................ 11,890 11,890
------- -------
Total capitalization............................ $14,023 $14,530
======= =======
</TABLE>
- --------
(a) On September 28, 1998, Motorola redeemed $368.4 million principal amount at
maturity of its outstanding LYONs due 2013 at the option of the holders
thereof. Motorola made a total payment of $263.4 million to redeem these
LYONs. The proceeds used for this redemption were obtained entirely from
the issuance of commercial paper. As of November 18, 1998, approximately
$110 million principal amount at maturity of Motorola's LYONs due 2013
remains outstanding.
(b) On October 20, 1998, Motorola sold $325 million of its 5.80% Notes due
2008. The net proceeds to Motorola from the issuance and sale of such Notes
were $322 million. Motorola used the proceeds to reduce short-term
indebtedness and for other general corporate purposes.
(c) See Notes 3 and 4 of the Notes to Consolidated Financial Statements for
December 31, 1997, incorporated herein by reference, for additional
information on long-term debt.
(d) See the Consolidated Financial Statements for December 31, 1997,
incorporated herein by reference, and Notes 5 and 9 thereto for additional
information on stockholders' equity.
S-9
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among Motorola and Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Goldman, Sachs & Co. and Morgan Stanley & Co.
Incorporated (collectively, the "Underwriters"), Motorola has agreed to sell to
the Underwriters, and the Underwriters have severally agreed to purchase, the
respective principal amounts of the Debentures set forth opposite their names
below. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Debentures if any are
purchased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF DEBENTURES
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................. $222,500,000
Goldman, Sachs & Co....................................... 133,500,000
Morgan Stanley & Co. Incorporated......................... 89,000,000
------------
Total.................................................... $445,000,000
============
</TABLE>
The Underwriters have advised Motorola that they propose initially to offer
the Debentures to the public at the public offering price set forth on the
cover of this prospectus supplement, and to certain dealers at such price less
a concession not in excess of .5% of the principal amount of the Debentures.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of .25% of the principal amount of the Debentures to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Debentures are a new issue of securities with no established trading
market. Motorola has been advised by the Underwriters that they intend to make
a market in the Debentures, but are not obligated to do so and may discontinue
market making at any time without notice. Motorola can give no assurance as to
the liquidity of or the trading market for the Debentures.
In connection with the offering, the Underwriters are permitted to engage
in certain transactions that stabilize the price of the Debentures. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Debentures. If the Underwriters create a short
position in the Debentures in connection with the offering, i.e., if they sell
a greater aggregate principal amount of Debentures than is set forth on the
cover of this prospectus supplement, the Underwriters may reduce that short
position by purchasing Debentures in the open market. In general, purchases of
a security for the purpose of stabilization or to reduce a short position could
cause the price of the security to be higher than it might be in the absence of
such purchases.
Neither Motorola nor any Underwriter makes any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the Debentures. In addition, neither Motorola
nor any Underwriter makes any representation that the Underwriters will engage
in such transactions or that such transactions, once commenced, will not be
discontinued without notice.
Motorola has agreed to indemnify the several Underwriters against, or
contribute to payments that the Underwriters may be required to make in respect
of, certain liabilities, including liabilities under the Securities Act of
1933, as amended.
From time to time, the Underwriters and certain of their affiliates have
engaged, and may in the future engage, in transactions with, and perform
services for, Motorola and its affiliates in the ordinary course of business.
Motorola estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$250,000.
S-10
<PAGE>
LEGAL MATTERS
The validity of the Debentures will be passed upon for Motorola by Carol H.
Forsyte of Motorola's Law Department. As of November 1, 1998, Ms. Forsyte owned
approximately 160 shares of Common Stock and held options to purchase 3,800
shares of Common Stock, of which options to purchase 1,600 shares were
currently exercisable. Certain legal matters relating to the Debentures will be
passed upon for the Underwriters by Mayer, Brown & Platt, Chicago, Illinois.
S-11
<PAGE>
PROSPECTUS
DEBT SECURITIES AND DEBT WARRANTS
COMMON STOCK AND COMMON STOCK WARRANTS
UNITS
-----------------
Motorola, Inc. ("Motorola" or the "Company") may offer from time to time
under this Prospectus in one or more series its (i) debt securities (the "Debt
Securities"), which may be senior (the "Senior Securities") or subordinated
(the "Subordinated Securities"), (ii) warrants to purchase Debt Securities
(the "Debt Warrants"), (iii) shares of its common stock, $3 par value per
share (the "Common Stock") and (iv) warrants to purchase Common Stock ("Common
Stock Warrants," and together with the Debt Warrants, the "Securities
Warrants"), with an aggregate initial public offering price of up to
$1,000,000,000 or the equivalent thereof in one or more foreign currencies or
composite currencies, including European Currency Units ("ECU"), on terms to
be determined at the time of each offering hereunder. The Debt Securities,
Common Stock and Securities Warrants may be offered separately or as a part of
units consisting of one or more such securities ("Units," and together with
the Debt Securities, Common Stock and Securities Warrants, the "Offered
Securities"), in separate series, in amounts, at prices and on terms to be
determined at the time of sale and to be set forth in one or more supplements
to this Prospectus (a "Prospectus Supplement"). The Debt Securities may be
convertible into shares of Common Stock of the Company.
Certain terms of the Offered Securities in respect of which this
Prospectus is being delivered, such as, (i) in the case of Debt Securities,
the specific designation, ranking, priority, aggregate principal amount,
currency or currencies, denominations, maturity, which may be fixed or
extendible, premium or discount, if any, interest rate, which may be fixed or
variable, and time of payment of interest, terms for redemption at the option
of the Company or repayment at the option of the holder, terms for sinking
fund payments, terms for conversion or exchange and form (which may be bearer,
registered or global) and any other terms in connection with the offer and
sale of Debt Securities; (ii) in the case of Securities Warrants, the
duration, offering price, exercise price, exercise dates and detachability and
any other terms in connection with the offer and sale of the Securities
Warrants; (iii) in the case of Common Stock, the specific title, number of
shares or fractional interests therein, dividend, liquidation, voting and any
other rights in connection with the offer and sale of the Common Stock; and
(iv) in the case of any Offered Security, the net proceeds, initial public
offering price and any other terms, will be set forth in the applicable
Prospectus Supplement. Units may be issued in amounts, at prices, on terms and
containing such conditions, covenants and other provisions, and consisting of
such Offered Securities and other securities, as will be set forth in the
applicable Prospectus Supplement. The applicable Prospectus Supplement will
also contain information, where applicable, about certain United States
federal income tax considerations relating to the Offered Securities and any
listing on a securities exchange of the Offered Securities covered by such
Prospectus Supplement and about relationships between the Company and the
applicable trustee, in the case of the issuance of Debt Securities or Debt
Warrants.
The Offered Securities may be offered directly, through agents, to or
through underwriters or dealers, which may include affiliates of the Company,
or through any combination of the foregoing. See "Plan of Distribution." If
any agents, dealers or underwriters are involved in the sale of any of the
Offered Securities, their names, and any applicable fee, commission, purchase
price or discount arrangements with them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement.
SEE "RISK FACTORS RELATING TO CURRENCIES," ON PAGE 6 HEREOF, FOR A
DISCUSSION OF CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN DEBT
SECURITIES AND DEBT WARRANTS.
-----------------
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 OR ANY PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
The date of this Prospectus is November 18, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy and information statements and other information filed by
the Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices at 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained by
mail from the Public Reference Branch of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy
statements and other information concerning the Company may be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005 and the Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60605. The Company is subject to the electronic filing requirements of
the Commission. Accordingly, pursuant to the rules and regulations of the
Commission, certain documents, including annual and quarterly reports and proxy
statements, filed by the Company with the Commission have been and will be
filed electronically. The Commission maintains a Web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with the
Commission.
The Company has filed a registration statement (Registration No. 33-62911)
on Form S-3 (together with all exhibits and amendments thereto, the
"Registration Statement") relating to the Offered Securities with the
Commission under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the Commission's rules and regulations. For further information pertaining to
the Company and the Offered Securities offered hereby, reference is made to the
Registration Statement which may be inspected without charge at the office of
the Commission at 450 Fifth Street N.W., Washington, D.C. 20549, and copies
thereof may be obtained from the Commission at prescribed rates.
-----------------
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. $").
-----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-7221) are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 28, 1998, June 27, 1998 and September 26, 1998.
3. The Company's Current Reports on Form 8-K dated June 4, 1998 and
November 5, 1998.
4. The description of the Common Stock included in the Registration
Statement on Form 8-B dated July 2, 1973, including any amendments or
reports filed for the purpose of updating such description.
5. The description of the Company's Preferred Share Purchase Rights
outstanding on the date hereof included in the Registration Statement on
Form 8-A dated November 15, 1988, as amended by Forms 8 dated August 9,
1990 and December 2, 1992 and by Form 8-A/A dated February 28, 1994.
6. The description of the Company's Preferred Stock Purchase Rights to
be issued initially on November 20, 1998 included in the Registration
Statement on Form 8-A dated November 5, 1998.
2
<PAGE>
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Offered Securities shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference (other
than exhibits, unless such exhibits are specifically incorporated by reference
in such documents). Written requests for such copies should be directed to A.
Peter Lawson, Secretary, Motorola, Inc., 1303 East Algonquin Road, Schaumburg,
Illinois 60196, telephone: (847) 576-5000.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR A PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND THEREIN, 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 UNDERWRITER,
DEALER OR AGENT. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED
SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. NEITHER THIS
PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE OFFERED SECURITIES COVERED BY THIS
PROSPECTUS 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 AND THE APPLICABLE PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
3
<PAGE>
THE COMPANY
Motorola, Inc. is a corporation organized under the laws of the State of
Delaware as the successor to an Illinois corporation organized in 1928.
Motorola's principal executive offices are located at 1303 East Algonquin Road,
Schaumburg, Illinois 60196 and its telephone number at that address is (847)
576-5000. Motorola is one of the world's leading providers of wireless
communications, semiconductors and advanced electronic systems, components and
services. Major equipment businesses include cellular telephone, two-way radio,
paging and data communications, personal communications, automotive, defense
and space electronics and computers. Motorola semiconductors power
communication devices, computers and millions of other products. "Motorola" is
a registered trademark of Motorola, Inc. As used in this discussion of "The
Company," "Motorola" or the "Company" refers to Motorola, Inc. and its
subsidiaries, unless otherwise indicated by the context.
CELLULAR PRODUCTS
The Cellular Subscriber Sector ("CSS") primarily designs, manufactures,
distributes, markets and services subscriber radio-telephone equipment for
cellular and personal communications networks. In addition, CSS resells
cellular line service in the United States. CSS's products include mobile,
personal and wearable cellular telephones and related accessories.
The Cellular Infrastructure Group ("CIG") primarily designs, manufactures,
distributes, installs, markets and services wireless infrastructure equipment.
CIG's products include electronic exchanges (i.e., telephone switches), base
site controllers and radio base stations for Code Division Multiple Access
("CDMA"), Personal Communication Systems ("PCS"), Personal Digital Cellular
("PDC"), Global System for Mobile Communications ("GSM"), wireless local loop
("WILL(R)") and analog technologies.
The segment also is a joint venture partner in cellular operating systems
in a number of international jurisdictions and is an investor in IRIDIUM(R)
gateway companies.
SEMICONDUCTOR PRODUCTS
Semiconductors control and amplify electrical signals and are used in a
broad range of electronic products, including consumer electronic products,
computers, communications equipment, solid-state ignition systems and other
automotive electronic products, major home appliances, industrial controls,
robotics, aircraft, space vehicles, calculators and automatic controls.
The semiconductor products manufactured by Motorola's Semiconductor
Products Sector include integrated circuit devices (metal-oxide semiconductor,
gallium arsenide and bipolar) such as high-performance microprocessors,
microcontrollers and peripherals; digital signal processors; flash,
electrically erasable programmable read-only, and proprietary fast static
random access memories; custom and proprietary bipolar and MOS digital-analog
components; emitter-coupled logic; programmable logic devices; cell-based and
customizable standard products; rectifiers; zener and tuning diodes; power and
small signal transistors; and RF and microwave devices, thyristors and sensors.
LAND MOBILE PRODUCTS
The Land Mobile Products Sector ("LMPS") designs, manufactures and sells
analog and digital two-way voice and data products and systems for a variety of
worldwide applications. As a principal supplier of mobile and portable FM two-
way radio products and systems, LMPS provides equipment and systems to meet the
communication needs of individuals and many different types of business,
institutional and governmental organizations. LMPS products provide voice and
data communications between vehicles, persons and base stations. Also, LMPS
provides network services for two-way radio subscribers in international
markets through joint ventures.
4
<PAGE>
The principal customers for two-way radio products and systems include
public safety agencies, such as police, fire, highway maintenance departments
and forestry services; petroleum companies; gas, electric and water utilities;
telephone companies; diverse industrial companies; mining companies;
transportation companies such as railroads, airlines, taxicab operations and
trucking firms; institutions, such as schools and hospitals; and companies in
the construction, vending machine and service businesses. Also, there is an
emerging consumer two-way radio market using the products for personal and
family communication needs.
MESSAGING, INFORMATION AND MEDIA PRODUCTS
Motorola's Messaging, Information and Media Sector ("MIMS") manufactures,
distributes and sells paging subscriber, paging infrastructure and related
products, such as paging software and accessories. MIMS also provides network
services for paging and wireless data and gateway communication subscribers
through wholly-owned and operated businesses as well as domestic and
international joint ventures. It also manufactures and sells modems, analog and
digital transmission devices and other data communication devices. In addition,
MIMS manufactures equipment that enables voice, video and high-speed data
communications over cable networks. It offers handwriting and speech
recognition software for various applications and provides equipment and
systems to meet the communication needs of many different types of business,
institutional and governmental organizations. Also, there is a growing base of
paging customers using these products for personal and family communications
needs.
OTHER PRODUCTS
Automotive, Component, Computer and Energy Sector
The Automotive, Component, Computer and Energy Sector ("ACCES")
manufactures and sells products in four major categories: automotive and
industrial electronics; energy storage products and systems; ceramic and quartz
electronic components and electronic fluorescent ballasts; and multi-function
embedded board and computer system products. ACCES includes the Motorola
Computer Group, which develops, manufactures, sells and services multi-function
computer systems and board level products, together with operating systems and
system enablers based on the Motorola 68000, 88000, PowerPC(TM) series
microprocessors and Intel Pentium(TM) microprocessors. ACCES has also
established a Flat Panel Display Division to develop the next generation of
flat panel displays and is involved in several joint ventures. In addition,
ACCES now contains the Telematics Communications Group, which focuses resources
on creating products designed to provide security, information, convenience and
entertainment from a central service center to drivers and their passengers.
Space and Systems Technology Group
The Space and Systems Technology Group ("SSTG") is engaged in the design,
development and production of advanced electronic communication systems and
products for a host of international and domestic commercial and government
users. SSTG's government business operations primarily perform research,
development and production work under contracts with governmental agencies, but
also conduct independent research and development programs. The satellite
communications business, Satellite Communications Group ("SCG"), designs,
builds and markets space-based telecommunications systems. Currently, SCG is
fulfilling the terms of a contract with Iridium LLC, an entity of which
Motorola owns approximately 19%, to build and deploy a satellite communications
network, known as the IRIDIUM(R) system, as well as undertaking research and
development on other communications systems. The IRIDIUM system is being
designed to provide global digital service to handheld telephones and related
equipment.
5
<PAGE>
RISK FACTORS RELATING TO CURRENCIES
Debt Securities or Debt Warrants denominated or payable in foreign
currencies may entail significant risks. These risks include, without
limitation, the possibility of significant fluctuations in the foreign currency
markets, the imposition or modification of foreign exchange controls and
potential illiquidity in the secondary market. These risks will vary depending
upon the currency or currencies involved. These risks may be more fully
described in the applicable Prospectus Supplement. See "Description of Debt
Securities" and "Description of Securities Warrants."
USE OF PROCEEDS
Unless otherwise specified in an applicable Prospectus Supplement, the net
proceeds to be received by the Company from the sale of the Offered Securities
will be used for general corporate purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The following are the unaudited consolidated ratios of earnings to fixed
charges for the nine months ended September 26, 1998 and September 27, 1997 and
each of the years in the five-year period ended December 31, 1997:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
--------------------------- ------------------------
SEPTEMBER 26, SEPTEMBER 27,
1998 1997 1997 1996 1995 1994 1993
------------- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges........... -- (a) 6.6 6.4 6.1 11.6 9.8 6.8
</TABLE>
- --------
(a) Earnings were inadequate to cover fixed charges by $1.6 billion.
For purposes of computing the ratios of earnings to fixed charges, income
before income tax expense (excluding interest costs capitalized) plus fixed
charges has been divided by fixed charges. Fixed charges consist of interest
costs (including interest costs capitalized) and estimated interest included in
rentals (one-third of net rental expense).
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities (except for
the terms of Liquid Yield Option(TM) Notes ("LYONs"(TM)), which are described
separately) 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 apply to such Debt Securities will be
described in such Prospectus Supplement.
The Senior Securities (except for LYONs) are to be issued under an
indenture (the "Senior Indenture") dated May 1, 1995 between the Company and
Harris Trust and Savings Bank, as trustee, or the trustee named in the
applicable Prospectus Supplement as trustee (the "Senior Trustee") and the
Subordinated Securities (except for LYONs) are to be issued under an indenture
(the "Subordinated Indenture"; the Senior Indenture and the Subordinated
Indenture are collectively referred to herein as the "Indentures") between the
Company and the First National Bank of Chicago, as trustee, or the trustee
named in the applicable Prospectus Supplement as trustee (the "Subordinated
Trustee"). The forms of the Senior Indenture and the Subordinated Indenture are
exhibits to the Registration Statement. The
- --------
(TM)Trademark of Merrill Lynch & Co.
6
<PAGE>
following summary of certain provisions of the Indentures does not purport to
be complete and is qualified in its entirety by reference to the provisions of
the Indentures and the applicable Prospectus Supplement relating to such
Offered Securities. Numerical references in parentheses below are to sections
of the Indentures. Wherever particular sections or defined terms of the
Indentures are referred to, it is intended that such sections or defined terms
shall be incorporated herein by reference. Unless otherwise indicated,
capitalized terms used herein that are defined in the Indentures shall have the
meanings
ascribed to them in the Indentures. As used in this "Description of Debt
Securities," the "Company" refers to Motorola, Inc. and does not, unless the
context otherwise indicates, include its subsidiaries.
GENERAL
The Senior Securities will be unsubordinated obligations of the Company.
They will be unsecured and will rank equally and pari passu with each other,
unless otherwise indicated in the applicable Prospectus Supplement, which
Prospectus Supplement will set forth, as of the most recent practicable date,
the aggregate amount of outstanding indebtedness that would rank junior to the
Senior Securities. (Section 301 of the Senior Indenture) The Subordinated
Securities will be subordinated in right of payment to the prior payment in
full of the Senior Indebtedness of the Company. See "Description of Debt
Securities--Subordinated Indenture Provisions." The Subordinated Securities
will be unsecured and will rank equally and pari passu with each other, unless
otherwise indicated in the applicable Prospectus Supplement. (Section 301 of
the Subordinated Indenture) The Indentures do not limit the aggregate principal
amount of Debt Securities which may be issued thereunder and provide that Debt
Securities may be issued thereunder from time to time in one or more series.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for the following terms, when
applicable, of the Offered Securities: (1) the title of the Offered Securities;
(2) any limit on the aggregate principal amount of the Offered Securities; (3)
the date or dates, or the method by which such date or dates will be determined
or extended, on which the principal (and premium, if any) of the Offered
Securities will be payable; (4) the rate or rates per annum at which the
Offered Securities will bear interest, if any, or the method by which such rate
or rates will be determined and the date or dates from which such interest will
accrue; (5) the dates on which such interest, if any, will be payable and the
Regular Record Dates for any interest payable on any Registered Security on any
such Interest Payment Dates, any circumstances in which the Company may defer
interest payments or any manner of computing interest if other than a 360-day
year of twelve 30-day months; (6) the place or places where principal and
interest (and premium, if any) on the Offered Securities may be payable, where
any Registered Securities may be surrendered for transfer and where Offered
Securities may be exchanged and notices and demands may be served or published;
(7) the price at which, the periods within which or the date or dates on which,
and the terms and conditions upon which the Offered Securities may, pursuant to
any optional or mandatory redemption provisions, be redeemed at the option of
the Company; (8) the obligation, if any, of the Company to redeem, repay or
purchase Offered Securities pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods,
price or prices and terms and conditions upon which such repurchase, redemption
or purchase shall occur; (9) whether Offered Securities are to be Registered
Securities, Bearer Securities or both, are to be issuable with or without
coupons and the terms upon which Bearer Securities may be exchanged for
Registered Securities and, in the case of Bearer Securities, the date as of
which such Bearer Securities shall be dated (if not the date of original
issuance of the first security of like tenor and term); (10) whether Offered
Securities are to be issued in the form of a Global Security, the Depositary
and Global Exchange Agent, whether such Global form is temporary or permanent,
the circumstances under which any temporary Global Security will be exchanged
for definitive Global Securities and any applicable Exchange Date; (11) whether
any additional amounts will be payable to Holders of the Offered Securities;
(12) the denomination of any Registered Security (if other than $1,000 or any
integral multiple thereof) and of any Bearer Security (if other than $5,000 or
any integral multiple thereof); (13) if other than Dollars, the Currency or
Currencies of denomination, including any composite Currency or index; (14) the
application, if any, of the defeasance or covenant defeasance provisions of the
applicable Indenture to the Offered Securities; (15) if other than Dollars, the
7
<PAGE>
Currency, Currencies or Currency units in which payments shall be made on the
Offered Securities and the time and manner of determining any exchange rate
between the Currency or Currencies of denomination and that or those in which
they are to be paid; (16) the manner in which any payments on an Offered
Security may be determined with respect to an index; (17) the designation of
any initial Exchange Rate Agent; (18) the terms and conditions, if any, upon
which the Offered Securities are to be convertible into shares of Common Stock
of the Company; (19) the portion of the principal amount of the Offered
Securities, if other than the principal amount thereof, payable upon
acceleration of maturity thereof; (20) the Person to whom any interest on any
Registered Security shall be payable, if other than the Person in whose name
such Registered Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date, the manner in which, or
Person to whom, any interest on any Bearer Security will be payable, if other
than upon presentation and surrender of the coupons appertaining thereto as
they mature, and the extent to which any interest payable on an Interest
Payment Date on any temporary Security issued in Global form will be paid if
other than the manner in the applicable Indenture; (21) the terms of any pledge
of property made to secure the obligations of the Company under such Offered
Securities and the circumstances under which such pledge may be released, and
the limitations, if any, on recourse against the Company under such Offered
Securities; (22) if other than the Trustee, the identity of the Security
Registrar and/or Paying Agent; and (23) any other terms of the Offered
Securities. (Section 301 of each Indenture)
Additional provisions of the applicable Indenture, such as rate reset and
extension provisions, may be made applicable to the Offered Securities, as
described in the applicable Prospectus Supplement.
For purposes of this Prospectus, any reference to the payment of principal
(or premium, if any) or interest, if any, on any Debt Securities will be deemed
to include mention of the payment of any additional amounts required by the
terms of such Debt Securities.
Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Federal income tax and other
considerations pertaining to any such Original Issue Discount Securities will
be discussed in the applicable Prospectus Supplement.
The Debt Securities will be obligations exclusively of the Company. Since
the operations of the Company are partially conducted through subsidiaries,
primarily overseas, the cash flow and the consequent ability to service debt,
including the Debt Securities, of the Company, are partially dependent upon the
earnings of its subsidiaries and the distribution of those earnings to, or upon
loans or other payments of funds by those subsidiaries to, the Company. The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Debt Securities
or to make any funds available therefor, whether by dividends, loans or other
payments. In addition, the payment of dividends and the making of loans and
advances to the Company by its subsidiaries may be subject to statutory or
contractual restrictions, are contingent upon the earnings of those
subsidiaries and are subject to various business considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the Holders of
the Debt Securities to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would
still be subordinate to any security interests in the assets of such subsidiary
and any indebtedness of such subsidiary senior to that held by the Company.
The general provisions of the Indentures do not contain any provisions that
would limit the ability of the Company to incur indebtedness or that would
afford holders of Debt Securities protection in the event of a highly leveraged
or similar transaction involving the Company. However, the general provisions
of the Indentures do provide that neither the Company nor any Domestic
Subsidiary (as defined below) will subject certain of its property or assets to
any mortgage or other encumbrance unless
8
<PAGE>
the Securities issued thereunder are secured equally and ratably with or prior
to such other indebtedness thereby secured. See "Description of Debt
Securities--Restrictive Covenants" below.
Under the Indentures, the Company has the ability to issue Debt Securities
with terms different from those of Debt Securities previously issued thereunder
and, without the consent of the holders thereof, to issue additional amounts of
a series of Debt Securities (with different dates for payments, different rates
of interest and in different currencies or currency), in an aggregate principal
amount determined by the Company. (Section 301 of each Indenture)
DENOMINATIONS, FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable solely as Registered
Securities, solely as Bearer Securities or as both Registered Securities and
Bearer Securities. Unless otherwise provided in the applicable Prospectus
Supplement, Registered Securities denominated in U.S. dollars (other than
Global Securities, which may be of any denomination) are issuable in
denominations of $1,000 and any integral multiple thereof and Bearer Securities
denominated in U.S. dollars are issuable in denominations of $5,000 and any
integral multiples thereof. The Indentures also provide that Debt Securities of
a series may be issuable in global form. See "Description of Debt Securities--
Global Securities" below. Unless otherwise indicated in the applicable
Prospectus Supplement, Bearer Securities (except those in temporary or
permanent global form) will have interest coupons attached. (Section 201 of
each Indenture)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of authorized denominations and of a
like aggregate principal amount, tenor and terms. In addition, if Debt
Securities of any series are issuable as both Registered Securities and Bearer
Securities, at the option of the Holder, but subject to applicable laws, 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, tenor and terms. Bearer Securities
surrendered in exchange for Registered Securities of the same series between
the close of business on 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 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. Unless otherwise
specified in the applicable Prospectus Supplement, Bearer Securities will not
otherwise be issued in exchange for Registered Securities. (Section 305 of each
Indenture)
In connection with its original issuance, no Bearer Security shall be
mailed or otherwise delivered to any location in the United States (as defined
below under "Description of Debt Securities--Limitations on Issuance of Bearer
Securities") and, unless otherwise specified in the applicable Prospectus
Supplement, 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, in the form required by the applicable Indenture, to the
effect that (i) such Bearer Security is not being acquired by or on behalf of a
United States person (as defined below under "Description of Debt Securities--
Limitations on Issuance of Bearer Securities") or (ii) if a beneficial interest
in such Bearer Security is being acquired by or on behalf of a United States
person, that such United States person is a foreign branch of a United States
financial institution (as defined in Treasury Regulation Section 1.165-
12(c)(1)(v)) that is purchasing for its own account or for resale or such
person is acquiring the Bearer Security through the foreign branch of a United
States financial institution and the financial institution agrees, in either
case, to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations thereunder or (iii) such Bearer Security is being acquired by a
United States or foreign financial institution for resale during the restricted
period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7))
and has not been acquired for purposes of resale directly or indirectly to a
United States person or to a person within the United States
9
<PAGE>
or its possessions. (Section 303 of each Indenture) See "Description of Debt
Securities--Global Securities" and "Description of Debt Securities--Limitations
on Issuance of Bearer Securities" below.
Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented for registration of transfer (duly
endorsed or accompanied by a satisfactory written instrument of transfer), 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 such series of Debt
Securities, without service charge and upon payment of any taxes and other
governmental charges. (Section 305 of each Indenture) If the Prospectus
Supplement refers to any transfer agent (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 (or Security Registrar) 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 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 1002 of each Indenture)
The Company shall not be required (i) to issue, register the transfer of or
exchange Debt Securities of any particular series to be redeemed or exchanged
for a period of 15 days preceding the first publication of the relevant notice
of redemption or, if Registered Securities are outstanding and there is no
publication, the mailing of the relevant notice of redemption or exchange, (ii)
to register the transfer of or exchange any Registered Security so selected for
redemption in whole or in part, except the unredeemed portion of any Registered
Security being redeemed or exchanged in part or (iii) to exchange any Bearer
Security so selected for redemption except that such a Bearer Security may be
exchanged for a Registered Security of like tenor and terms of that series,
provided that such Registered Security shall be surrendered for redemption.
(Section 305 of each Indenture)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depository (the "Depository") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued in fully registered or
bearer form and may be issued in either temporary or permanent form. Unless and
until it is exchanged in whole or in part for the individual Debt Securities
represented thereby, a Global Security may not be transferred except as a whole
by the Depository for such Global Security to a nominee of such Depository or
by a nominee of such Depository to such Depository or another nominee of such
Depository or by the Depository or any nominee of such Depository to a
successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities will be described in the applicable Prospectus Supplement
relating to such series. The Company anticipates that the following provisions
will generally apply to depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests in a Global Security
will be limited to Participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the applicable Depository or its nominee (with respect to
interests of Participants) and records of Participants (with respect to
interests of persons who hold through
10
<PAGE>
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to own, pledge or transfer
beneficial interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as provided below, owners of beneficial interests
in a Global Security will not be entitled to have any of the individual Debt
Securities of the series represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
any such Debt Securities of such series in definitive form and will not be
considered the owners or holders thereof under the applicable Indenture.
Payments of principal of and any interest (and premium, if any) on
individual Debt Securities represented by a Global Security registered in the
name of a 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 Debt Securities. None of the Company, the Trustee, any Paying
Agent or the Security Registrar for such Debt Securities or any agent,
underwriter or dealer through which such Debt Securities are offered or sold
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global Security for such Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Depository for a series of Debt Securities or
its nominee, upon receipt of any payment of principal or interest (or premium,
if any) in respect of a permanent Global Security representing any of such Debt
Securities, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security for such Debt Securities as shown on the records
of such Depository or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name." Such payments will
be the responsibility of such Participants.
If a Depository for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depository and a successor depository is
not appointed by the Company within 90 days, the Company will issue individual
Debt Securities of such series to Participants in exchange for the Global
Security representing such series of Debt Securities. In addition, the Company
may, at any time and in its sole discretion, subject to any limitations
described in the applicable Prospectus Supplement relating to such Debt
Securities, determine not to have any Debt Securities of such series
represented by one or more Global Securities and, in such event, will issue
individual Debt Securities of such series to Participants in exchange for the
Global Security or Securities representing such series of Debt Securities.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, 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) other than to a Qualifying Branch of a United States
Financial Institution (as defined below) or a United States person acquiring
Bearer Securities through a Qualifying Branch of a United States Financial
Institution and any underwriters, agents and dealers participating in the
offering of Debt Securities must agree that they will not offer any Bearer
Securities for sale or resale in the United States or to United States persons
(other than a Qualifying Branch of a United States Financial Institution or a
United States person acquiring Bearer Securities through a Qualifying Branch of
a United States Financial Institution) nor deliver Bearer Securities within the
United States. In addition, any such underwriters, agents and dealers must
agree to send confirmations to each purchaser of a Bearer Security confirming
that such purchaser represents that it is not a United States
11
<PAGE>
person or is a Qualifying Branch of a United States Financial Institution and,
if such person is a dealer, that it will send similar confirmations to
purchasers from it. The term "Qualifying Branch of a United States Financial
Institution" means a branch located outside the United States of a United
States securities clearing organization, bank or other financial institution
listed under Treasury Regulation Section 1.165-12(c)(1)(v) that agrees to
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Code
and the regulations thereunder.
Bearer Securities and any coupons appertaining thereto will bear a legend
substantially to the following effect: "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
Internal Revenue Code." Under Sections 165(j) and 1287(a) of the Code, holders
that are United States persons, with certain exceptions, will not be entitled
to deduct any loss on Bearer Securities and must treat as ordinary income any
gain realized on the sale or other disposition (including the receipt of
principal) of Bearer Securities.
The term "United States person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision thereof,
and an estate or trust the income of which is subject to United States federal
income taxation regardless of its source, and the term "United States" means
the United States of America (including the states and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction (including the Commonwealth of Puerto Rico).
PAYMENT AND PAYING AGENTS
Unless otherwise provided in the applicable Prospectus Supplement, the
Place of Payment for a series issuable solely as Registered Securities will be
Chicago, Illinois, U.S.A., and the Company will initially designate the
corporate trust office of the Senior Trustee and the Subordinated Trustee,
respectively, for this purpose. Notwithstanding the foregoing, at the option of
the Company, interest, if any, may be paid on Registered Securities (i) by
check mailed to the address of the Person entitled thereto as such Person's
address appears in the Security Register or (ii) by wire transfer to an account
located in the United States maintained by the Person entitled thereto as
specified in the Security Register. (Sections 307, 1001 and 1002 of each
Indenture) Unless otherwise provided in the applicable Prospectus Supplement,
payment of any installment of interest on Registered Securities will be made to
the Person in whose name such Registered Security is registered at the close of
business on the Regular Record Date for such interest. (Section 307 of each
Indenture)
If Debt Securities of a series are issuable solely as Bearer Securities or
as both Registered Securities and Bearer Securities, unless otherwise provided
in the applicable Prospectus Supplement, the Company will be required to
maintain an office or agency (i) outside the United States at which, subject to
any applicable laws and regulations, the principal of (and premium, if any) and
interest, if any, on such series will be payable and (ii) in Chicago, Illinois
for payments with respect to any Registered Securities of such series (and for
payments with respect to Bearer Securities of such series in the limited
circumstances described below, but not otherwise); provided that, if required
in connection with any listing of such Debt Securities on The Stock Exchange of
the United Kingdom and the Republic of Ireland, the Luxembourg Stock Exchange
or any other stock exchange located outside the United States, the Company will
maintain an office or agency for such Debt Securities in London or Luxembourg
or any city located outside the United States required by such stock exchange.
(Section 1002 of each Indenture) The initial locations of such offices and
agencies will be specified in the applicable Prospectus Supplement. Unless
otherwise provided in the applicable Prospectus Supplement, principal of (and
premium, if any) and interest, if any, on Bearer Securities may be made, at the
Holder's option by (i) check in the Currency designated by the Bearer Security
presented or mailed to an address outside the United States or (ii) paid by
wire transfer to an account in such Currency maintained by the Person entitled
thereto with a bank located outside the United States. (Sections 307 and 1002
of each Indenture) Unless otherwise provided in the applicable Prospectus
Supplement, payment of installments of interest on any Bearer Securities on or
before Maturity will be made only against surrender of coupons for such
12
<PAGE>
interest installments as they severally mature. (Section 1001 of each
Indenture) Unless otherwise provided in the applicable Prospectus Supplement,
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, if any, on Bearer Securities payable in
U.S. dollars will be made at the office of the Company's Paying Agent in
Chicago, Illinois if (but only if) payment of the full amount thereof in U.S.
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions and
the Trustee has received an opinion of counsel that such payment within the
United States is legal. (Sections 307 and 1002 of each Indenture)
The Company may from time to time designate additional offices or agencies
for payment with respect to any Debt Securities, approve a change in the
location of any such office or agency and, except as provided above, rescind
the designation of any such office or agency.
Unless otherwise provided in the applicable Prospectus Supplement, all
payments of principal of (and premium, if any) and interest, if any, on any
Debt Security that is payable in a Currency other than U.S. dollars will be
made in U.S. dollars in the event that such Currency (i) ceases to be used both
by the government of the country that issued the currency and by a central bank
or other public institution of or within the international banking community
for the settlement of transactions, (ii) is the ECU and ceases to be used both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (iii) is any
currency unit (or composite currency) other than the ECU and ceases to be used
for the purposes for which it was established (each of the events described in
clauses (i) through (iii), a "Conversion Event"). (Section 312 of each
Indenture)
All moneys deposited with a paying agent or held for the payment of
principal of (or premium, if any) or interest, if any, on any Debt Security
that remains unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will, at request of the Company, be
repaid to the Company, or discharged from trust, and the Holder of such Debt
Security or any coupon appertaining thereto will thereafter look only to the
Company for payment thereof. (Section 1003 of each Indenture)
DEFEASANCE AND COVENANT DEFEASANCE
Each Indenture provides that, if such provision is made applicable to the
Debt Securities of any series pursuant to Section 301 of the applicable
Indenture, the Company may elect either (A) to defease and be discharged from
any and all obligations in respect of such Debt Securities (except for certain
obligations to register the transfer or exchange of such Debt Securities, to
replace temporary, destroyed, stolen, lost or mutilated Debt Securities, to
maintain paying agencies and to hold monies for payment in trust)
("defeasance") or (B) to omit to comply with certain restrictive covenants in
Section 801 (being the restrictions described under "Description of Debt
Securities--Consolidation, Merger, Conveyance, Transfer or Lease"), Section
1007 (relating to maintenance of the Company's existence), 1008 (Maintenance of
Properties), 1009 (Payment of Taxes and Other Claims), 1010 (Restrictions on
Secured Debt) and 1011 (Restrictions on Sales and Leasebacks), and the
occurrence of any event specified in Sections 501(3) and 501(4) (with respect
to any of Sections 1007 through 1011, inclusive, and Section 801) and 501(7)
(described, respectively, in clauses (c), (d) and (f) under "Description of
Debt Securities--Events of Default") shall not be deemed to be an Event of
Default under the applicable Indenture and the Debt Securities of any series
("covenant defeasance"), in either case upon the deposit with the applicable
Trustee (or other qualifying trustee), in trust, of money and/or U.S.
Government Obligations (as defined below) 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) and
each installment of interest, if any, on the Debt Securities of such series on
the Stated Maturities 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, the Company has delivered to the
applicable Trustee an Opinion of Counsel (who may be counsel for the Company)
to the effect that the
13
<PAGE>
Holders of the Debt Securities of such series will not recognize income, gain
or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred. Such opinion, in the case of
defeasance under clause (A) above, must refer to and be based upon a ruling of
Internal Revenue Service or a change in applicable Federal income tax law
occurring after the date of the applicable Indenture. The applicable Prospectus
Supplement may further describe the provisions, if any, permitting such
defeasance or covenant defeasance with respect to the Debt Securities of a
particular series. (Article Fifteen of each Indenture)
In the event the Company exercises its option to omit compliance with
certain covenants of the applicable Indenture with respect to the Debt
Securities of any series as described above and the Debt Securities of such
series are declared due and payable because of the occurrence of any Event of
Default other than the Event of Default described in clause (d) under
"Description of Debt Securities--Events of Default," the amount of money and
U.S. Government Obligations on deposit with the applicable Trustee will be
sufficient to pay amounts due on the Debt Securities of such series at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
Debt Securities of such series at the time of the acceleration resulting from
such Event of Default. However, the Company shall remain liable for such
payments. The term "U.S. Government Obligations" means direct noncallable
obligations of, or noncallable obligations guaranteed by, the United States or
an agency thereof for the payment of which guarantee or obligation the full
faith and credit of the United States is pledged.
RESTRICTIVE COVENANTS
Restrictions on Secured Debt
If the Company or any Domestic Subsidiary shall incur or guarantee any Debt
secured by a Mortgage on any Principal Property or on any shares of stock of or
Debt of any Domestic Subsidiary, the Company will secure the Debt Securities of
each series equally and ratably with (or prior to) such secured Debt, unless
after giving effect thereto, the aggregate amount of all such Debt so secured,
together with all Attributable Debt (as defined below) in respect of sale and
leaseback transactions involving Principal Properties (see "Description of Debt
Securities--Restrictions on Sales and Leasebacks" below), would not exceed 5%
of the Consolidated Net Tangible Assets of the Company and its consolidated
subsidiaries. This restriction will not apply to, and there will be excluded
from secured Debt in any computation under such restriction, Debt secured by
(a) Mortgages on property of, or on any shares of stock of or Debt of, any
corporation existing at the time such corporation becomes a Domestic Subsidiary
or at the time it is merged into or consolidated with the Company or a Domestic
Subsidiary, (b) Mortgages in favor of the Company or a Domestic Subsidiary, (c)
Mortgages in favor of governmental bodies to secure progress or advance
payments, (d) Mortgages on property, shares of stock or Debt existing at the
time of acquisition thereof (including acquisition through merger or
consolidation), (e) purchase money Mortgages and Mortgages to secure the
construction cost of property and (f) any extension, renewal or refunding of
any Mortgage referred to in the foregoing clauses (a) through (e), inclusive.
"Principal Property" will be defined to include any single parcel of real
estate, any manufacturing plant or warehouse owned or leased by the Company or
any Domestic Subsidiary which is located within the United States and the gross
book value (without deduction of any depreciation reserves) of which on the
date as of which the determination is being made exceeds 1% of Consolidated Net
Tangible Assets, other than any manufacturing plant or warehouse or a portion
thereof (a) which is a pollution control or other facility financed by
obligations issued by a state or local government unit or (b) 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. "Attributable Debt" means the total net amount of rent required to be
paid during the remaining term of any lease, discounted at the rate per annum
borne by the Senior Securities of each series, compounded annually. "Subsidiary
of the Company" means a corporation, a majority of the outstanding voting stock
of which is owned, directly or indirectly, by the Company and/or one or more
Subsidiaries of the Company. "Domestic Subsidiary" means a Subsidiary of the
Company except a Subsidiary of the Company which neither transacts any
substantial portion of its business nor regularly maintains any substantial
portion of its fixed assets within
14
<PAGE>
the United States, or which is engaged primarily in financing the operations of
the Company or its Subsidiaries, or both, outside the United States.
"Consolidated Net Tangible Assets" means the aggregate amount of assets (less
applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities (excluding any constituting Funded Debt
by reason of their being renewable or extendable) and (b) goodwill and other
intangibles. (Section 1010 of each Indenture)
Restrictions on Sales and Leasebacks
Neither the Company nor any Domestic Subsidiary may enter into any sale and
leaseback transaction involving any Principal Property, completion of
construction and commencement of full operation of which has occurred more than
180 days prior thereto, unless (a) the Company or such Domestic Subsidiary
could mortgage such property as provided for above under "Description of Debt
Securities--Restrictive Covenants--Restrictions on Secured Debt" in an amount
equal to the Attributable Debt with respect to the sale and leaseback
transaction without equally and ratably securing the Debt Securities of each
series or (b) the Company, within 120 days, applies to the retirement of its
Funded Debt an amount not less than the greater of (i) the net proceeds of the
sale of the Principal Property leased pursuant to such arrangement or (ii) the
fair market value of the Principal Property so leased (subject to credits for
certain voluntary retirements of Funded Debt). This restriction will not apply
to any sale and leaseback transaction (a) between the Company and a Domestic
Subsidiary or between Domestic Subsidiaries or (b) involving the taking back of
a lease for a period, including renewals, of three years or less. (Section 1011
of each Indenture)
EVENTS OF DEFAULT
The following are Events of Default under the Indentures with respect to
Securities of any series: (a) failure to pay principal of (or premium, if any)
on any Security of that series when due; (b) failure to pay any installment of
interest on any Security of that series when due, continued for 30 days; (c)
failure to deposit any sinking fund payment, when due, in respect of any
Security of that series; (d) failure to perform any other covenant of the
Company in the applicable Indenture (other than a covenant included in the
applicable Indenture solely for the benefit of any series of Securities other
than that series), continued for 60 days after written notice as provided in
the applicable Indenture; (e) certain events in bankruptcy, insolvency or
reorganization; and (f) any other Event of Default provided with respect to
Securities of that series. (Section 501 of each Indenture) If an Event of
Default with respect to the Outstanding Securities of any series shall occur
and be continuing either the Trustee or the Holders of at least 25% in
principal amount of the Outstanding Securities of that series may declare the
principal amount (or, if the Securities of that series are Original Issue
Discount Securities or Indexed Securities, such portion of the principal amount
as may be specified in the terms of that series) of all Securities of that
series to be due and payable immediately; provided that in the case of certain
events of bankruptcy, insolvency or reorganization, such principal amount (or
portion thereof) shall automatically become due and payable. However, at any
time after an acceleration with respect to Securities of any series has
occurred, but before a judgment or decree based on such acceleration has been
obtained, the Holders of a majority in principal amount of the Outstanding
Securities of that series may, under certain circumstances, rescind and annul
such acceleration. (Section 502 of each Indenture) For information as to waiver
of defaults, see "Description of Debt Securities--Modification and Waiver."
Reference is made to the Prospectus Supplement relating to each series of
Offered Securities which are Original Issue Discount Securities or Indexed
Securities for the particular provisions relating to acceleration of the
Maturity of a portion of the principal amount of such Original Issue Discount
Securities or Indexed Securities upon the occurrence of an Event of Default and
the continuation thereof.
The Indentures provide that, subject to the duty of the applicable Trustee
during default to act with the required standard of care, the applicable
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the applicable Trustee reasonable security
or indemnity. (Section 603 of each Indenture) Subject to such provisions for
indemnification of the Trustee and certain other limitations, the Holders of a
majority in principal amount of the Outstanding Securities of any series will
15
<PAGE>
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 Securities of that series.
(Section 512 of the Senior Indenture and Section 505 of the Subordinated
Indenture)
The Company will be required to furnish to the applicable Trustee annually
a statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance. (Section 1006 of
each Indenture)
MODIFICATION AND WAIVER
Modifications and amendments of each Indenture may be made by the Company
and the applicable Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Securities of each series affected thereby;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Security affected thereby, (a) change
the Stated Maturity date of the principal of, or any installment of principal
of or interest on, any Security, (b) reduce the principal amount of (or
premium, if any) or interest, if any, on, any Security, (c) reduce the amount
of principal of any Original Issue Discount Security payable upon acceleration
of the Maturity thereof, (d) change the place or currency of payment of
principal of (or premium, if any) or interest, if any, on, any Security, (e)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Security or (f) reduce the percentage in principal amount
of Outstanding Securities of any series, the consent of the Holders of which is
required for modification or amendment of the Indenture or for waiver of
compliance with certain provisions of the applicable Indenture or for waiver of
certain defaults. (Section 902 of each Indenture)
The Holders of a majority in principal amount of the Outstanding Securities
of any series may on behalf of the Holders of all Securities of that series
waive, insofar as that series is concerned, compliance by the Company with
certain restrictive provisions of the applicable Indenture. (Section 1012 of
each Indenture) The Holders of a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all
Securities of that series waive any past default under the applicable Indenture
with respect to Securities of that series, except a default in the payment of
the principal of (or premium, if any) or interest, if any, on any Security of
that series or in respect of any provision which under the applicable Indenture
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of that series affected. (Section 513 of the Senior
Indenture and Section 504 of the Subordinated Indenture)
In addition, under the Subordinated Indenture, no modification or amendment
thereof may, without the consent of the holders of each Outstanding
Subordinated Security affected thereby, modify any of the provisions of such
Indenture relating to the subordination of the Subordinated Securities in a
manner adverse to the holders thereof without the consent of all the holders
thereof and no such modification or amendment may adversely affect the rights
of the holders of Senior Indebtedness then outstanding under Article Sixteen of
such Indenture (described under the caption "Description of Debt Securities--
Subordinated Indenture Provisions") without the consent of the requisite
holders of Senior Indebtedness (as required pursuant to the terms of such
Senior Indebtedness). (Section 902 of the Subordinated Indenture)
In determining whether the holders of the requisite principal amount of
Outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver under either Indenture or whether a quorum
is present at a meeting of holders of Securities thereunder, (i) the principal
amount of an Original Issue Discount Security that will be deemed to be
outstanding will be the amount of the principal thereof that would be due and
payable as of the date of such determination upon acceleration of the Maturity
thereof, (ii) the principal amount of a Security denominated in a foreign
Currency or Currencies will be the U.S. dollar equivalent, determined on the
original issuance date for such Security, of the principal amount thereof (or,
in the case of an Original Issue Discount Security or Indexed Security, the
U.S. dollar equivalent on the original issuance date of such Security of the
amount
16
<PAGE>
determined as provided in (i) above or (iii) below), (iii) the principal amount
of an Indexed Security that may be counted in making such determination or
calculation and that will be deemed outstanding for such purpose will be equal
to the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such Indexed Security pursuant to
Section 301 of such Indenture and (iv) Securities owned by the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor will be disregarded. (Section 101 of each Indenture)
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series issued thereunder if Debt Securities of that series
are issuable in whole or in part as Bearer Securities. (Section 1401 of each
Indenture) A meeting may be called at any time by the Trustee for such Debt
Securities, or upon the request of 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 the applicable Indenture with
respect thereto. (Section 1402 of each Indenture) Except for any consent that
must be given by each holder of a Debt Security affected, 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 that must be given by each holder of a Debt
Security affected, any resolution with respect to any consent 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 issued under an Indenture may be
adopted at a meeting or an adjourned meeting at which a quorum is present only
by the affirmative vote of the Holders of 66 2/3% in principal amount of such
Outstanding Debt Securities of that series; and provided, further, that, except
for any consent that must be given by each holder of a Debt Security affected,
any resolution with respect to any demand, 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 issued under an Indenture may be adopted at a meeting or
adjourned meeting at which a quorum is present by the affirmative vote of the
Holders of such specified percentage in principal amount of the Outstanding
Debt Securities of that series. (Section 1404 of each Indenture)
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
with respect thereto will be binding on all Holders of Debt Securities of that
series and the related coupons issued under that Indenture. The quorum at any
meeting of Holders of a series of Debt Securities 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 such series;
provided, however, that if any action is to be taken at such meeting with
respect to a consent 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 issued under that Indenture will constitute a quorum.
(Section 1404 of each Indenture)
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company, without the consent of any Holders of Outstanding Securities,
may consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, the Company, provided that, (i) the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or which acquires or leases such assets of the Company is organized
and existing under the laws of any United States jurisdiction and assumes the
Company's obligations on the Debt Securities and under the applicable
Indenture, (ii) after giving effect to such transaction no Event of Default,
and no event which, after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continuing (provided that a
transaction will only be deemed to be in violation of this condition (ii) as to
any series of Debt Securities as to which such Event of Default or such event
shall have occurred and be continuing) and (iii) certain other conditions are
met. (Article Eight of each Indenture)
17
<PAGE>
HARRIS TRUST AND SAVINGS BANK, AS TRUSTEE
Harris Trust and Savings Bank is trustee under (i) an indenture with the
Company dated as of March 15, 1985 relating to the Company's 8.40% Debentures
due August 15, 2031, (ii) an indenture with the Company dated as of October 1,
1991 relating to the Company's 7.60% Notes due January 1, 2007 and the
Company's 6 1/2% Notes due March 1, 2008 and (iii) an indenture with the
Company dated as of May 1, 1995 relating to the Company's 5.80% Notes due
October 15, 2008, the Company's 7 1/2% Debentures due May 15, 2025, the
Company's 6 1/2% Debentures due September 1, 2025 and the Company's 5.22%
Debentures due October 1, 2097. Harris Trust and Savings Bank has also extended
credit facilities to the Company and a subsidiary of the Company and conducts
business with the Company and certain of its affiliates, including cash
management and stock transfer services. Harris Trust and Savings Bank also
serves as the Rights Agent under the Rights Agreement. See "Description of
Capital Stock--Preferred Stock Purchase Rights."
THE FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE
The First National Bank of Chicago serves as trustee under the indentures
with the Company for the 2009 LYONs and the 2013 LYONs and would serve as
extension trustee under the extension indenture relating to the extension notes
which could be issued in the future with respect to the 2009 LYONs. The First
National Bank of Chicago would also serve as trustee under the LYONs Indenture
except as otherwise set forth in the applicable Prospectus Supplement. See
"Description of Liquid Yield Option Notes." The Company also maintains certain
banking relationships with The First National Bank of Chicago.
SUBORDINATED INDENTURE PROVISIONS
The Subordinated Securities shall be subordinate and junior in right of
payment, to the extent set forth in the Subordinated Indenture, to the prior
payment in full of all existing and future Senior Debt (as defined below) of
the Company. (Section 1601 of the Subordinated Indenture)
Senior Debt is defined in the Subordinated Indenture as the principal of
(and premium, if any) and interest on (including interest accruing after the
filing of a petition initiating any proceeding pursuant to any bankruptcy law)
and other amounts due on or in connection with any Debt incurred, assumed or
guaranteed by the Company, whether outstanding on the date of the Subordinated
Indenture or thereafter incurred, assumed or guaranteed, and all renewals,
extensions and refundings of any such Debt. Excluded from the definition of
Senior Debt are the following: (a) any Debt which expressly provides (i) that
such Debt shall not be senior in right of payment to the Subordinated
Securities, or (ii) that such Debt shall be subordinated to any other Debt of
the Company, unless such Debt expressly provides that such Debt shall be senior
in right of payment to the Subordinated Securities; (b) Debt of the Company in
respect of the Subordinated Securities; (c) Debt of the Company in respect of
its outstanding Liquid Yield Option Notes due 2009 (the "2009 LYONs") and its
outstanding Liquid Yield Option Notes due 2013 ("2013 LYONs") (which 2009 LYONs
and 2013 LYONs will rank on a parity with the Subordinated Securities); and (d)
Debt of the Company in respect of the extension notes which may be issued in
the future, at specified dates, in respect of the 2009 LYONs in payment of the
purchase price thereof (which extension notes would rank on a parity with the
Subordinated Securities and any 2009 LYONs and 2013 LYONs remaining
outstanding). (Section 101 of the Subordinated Indenture)
There are no restrictions in the Subordinated Indenture on the creation of
additional Senior Debt (or any other indebtedness). (Section 101 of the
Subordinated Indenture) The Prospectus Supplement with respect to any
Subordinated Securities will set forth (a) as of the most recent practicable
date (i) the aggregate amount of consolidated indebtedness outstanding that
would constitute either Senior Debt or indebtedness of subsidiaries of the
Company and (ii) the aggregate amount of outstanding indebtedness that would
rank on a parity with the Subordinated Securities and (b) any then-existing
limitation on the issuance of additional Senior Debt.
18
<PAGE>
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of assets, (i)
the holders of all Senior Debt shall first be entitled to receive payment in
full of all amounts due or to become due thereon, or payment of such amounts
shall have been provided for, before the Holders of Subordinated Securities
shall be entitled to receive any payment or distribution with respect to such
securities, (ii) the Holders of Subordinated Securities will be required to pay
over their share of such distribution to the holders of Senior Debt until such
Senior Debt is paid in full and (iii) creditors of the Company who are not
Holders of Subordinated Securities or holders of Senior Debt may recover less,
ratably, than holders of Senior Debt and may recover more, ratably, than the
Holders of Subordinated Securities. (Section 16.02 of the Subordinated
Indenture)
Unless otherwise specified in the Prospectus Supplement, in the event that
the Subordinated Securities are declared due and payable prior to their Stated
Maturity by reason of the occurrence of an Event of Default, then the Company
would be obligated to promptly notify holders of Senior Debt of such
acceleration. Unless otherwise specified in the applicable Prospectus
Supplement, the Company may not pay the Subordinated Securities until 120 days
have passed after such acceleration occurs and may thereafter pay the
Subordinated Securities if the terms of the Subordinated Indenture otherwise
permit payment at that time. (Section 16.03 of the Subordinated Indenture)
Unless otherwise specified in the Prospectus Supplement, no payment of the
principal (and premium, if any) or interest, if any, with respect to any of the
Subordinated Securities may be made, except the Subordinated Securities may be
acquired for Common Stock or other Capital Stock or as otherwise set forth in
the Subordinated Indenture, if any default with respect to Senior Debt occurs
and is continuing that permits the acceleration of the maturity thereof and
such default is either the subject of judicial proceedings or the Company
receives notice of the default, unless (a) 120 days pass after notice of the
default is given and such default is not then the subject of judicial
proceedings or the default with respect to the Senior Debt is cured or waived
and (b) the terms of the Subordinated Indenture otherwise permit the payment or
acquisition of the Subordinated Securities at that time. (Section 16.04 of the
Subordinated Indenture)
DESCRIPTION OF LIQUID YIELD OPTION NOTES
The following description of the terms of the LYONs sets forth certain
general terms and provisions of the LYONs as to which any Prospectus Supplement
may relate. The particular terms of the LYONs and the extent, if any, to which
such general terms may apply to the LYONs so offered will be described in the
applicable Prospectus Supplement relating to such LYONs. Any Prospectus
Supplement relating to an offering of LYONs will also contain information
concerning certain United States federal income tax considerations relating
thereto.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") has
previously marketed (and anticipates continuing to market) securities of
issuers under the trademark LYONs. Any LYONs offered by the Company pursuant to
this Prospectus and the applicable Prospectus Supplement may contain certain
terms and provisions which are different from such other previously marketed
LYONs.
The LYONs are to be issued under an indenture (the "LYONs Indenture"),
between the Company and The First National Bank of Chicago, as trustee, or the
trustee named in the applicable Prospectus Supplement as trustee (the "LYONs
Trustee"). The form of the LYONs Indenture (including the Form of LYON, which
is a part thereof) is an exhibit to the Registration Statement. The following
19
<PAGE>
summaries of certain provisions of the LYONs and the LYONs Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the LYONs and the LYONs Indenture,
including the definitions therein of certain terms which are not otherwise
defined in this Prospectus and the applicable Prospectus Supplement relating to
such LYONs. Wherever particular provisions or defined terms of the LYONs
Indenture (or of the Form of LYON which is a part thereof) are referred to,
such provisions or defined terms are incorporated herein by reference.
References herein are to sections in the LYONs Indenture and paragraphs in the
Form of LYON. As used in this "Description of Liquid Yield Option Notes," the
"Company" refers to Motorola, Inc. and does not, unless the context otherwise
indicates, include its subsidiaries.
GENERAL
Unless otherwise specified in the Prospectus Supplement, the LYONs will be
unsecured obligations of the Company limited to the aggregate principal amount
at maturity set forth in the applicable Prospectus Supplement and will mature
on the date set forth in such Prospectus Supplement. The principal amount at
maturity of each LYON is $1,000 and will be payable at the office of the Paying
Agent, initially the LYONs Trustee, in the Borough of Manhattan, The City of
New York, or any other office of the Paying Agent maintained for such purpose.
(Sections 2.02, 2.03 and 4.05 and Form of LYON, paragraph 3)
The LYONs will be issued at a substantial discount from their principal
amount at maturity. There will be no periodic payments of interest. The
calculation of the accrual of Original Issue Discount (the difference between
the Issue Price and the principal amount at maturity of a LYON) in the period
during which a LYON remains outstanding will be on a semi-annual bond
equivalent basis using a 360-day year composed of twelve 30-day months; such
accrual will commence on the Issue Date of the LYONs. (Form of LYON, paragraph
1) Maturity, conversion, purchase by the Company at the option of a Holder, or
redemption of a LYON will cause Original Issue Discount and interest, if any,
to cease to accrue on such LYON, under the terms and subject to the conditions
of the LYONs Indenture. (Section 2.08) The Company may not reissue a LYON that
has matured or been converted, purchased by the Company at the option of a
Holder, redeemed or otherwise cancelled (except for registration of transfer,
exchange or replacement thereof). (Section 2.10)
The LYONs will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount at maturity or an integral multiple
thereof. (Section 2.02 and Form of LYON, paragraph 11) Unless otherwise
specified in the applicable Prospectus Supplement, the LYONs may be presented
for conversion at the office of the Conversion Agent and for exchange or
registration of transfer at the office of the Registrar, each such agent
initially being the LYONs Trustee. (Section 2.03) Unless otherwise specified in
the applicable Prospectus Supplement, the Company will not charge a service
charge for any registration of transfer or exchange of LYONs; however, the
Company may require payment by a Holder of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection therewith.
(Section 2.06)
SUBORDINATION OF LYONS
Unless otherwise specified in the applicable Prospectus Supplement, the
indebtedness evidenced by the LYONs will be subordinated in right of payment,
as set forth in the LYONs Indenture, to the prior payment in full of all
existing and future Senior Indebtedness of the Company. (Section 10.01 and Form
of LYON, paragraph 8) Senior Indebtedness is defined in the LYONs Indenture as
the principal of (and premium, if any) and interest on (including interest
accruing after the filing of a petition initiating any proceeding pursuant to
any Bankruptcy Law) and other amounts due on or in connection with any Debt
incurred, assumed or guaranteed by the Company, whether outstanding on the date
of the LYONs Indenture or thereafter incurred, assumed or guaranteed, and all
renewals, extensions and refundings of any such Debt. Excluded from the
definition of Senior Indebtedness are the following: (a) any Debt which
expressly provides (i) that such Debt shall not be senior in right of payment
to the LYONs, or (ii) that such Debt shall be subordinated to any other Debt of
the Company, unless such Debt expressly
20
<PAGE>
provides that such Debt shall be senior in right of payment to the LYONs; (b)
Debt of the Company in respect of the LYONs; (c) Debt of the Company in respect
of its outstanding 2009 LYONs and its outstanding 2013 LYONs (which 2009 LYONs
and 2013 LYONs will rank on a parity with the LYONs and any Subordinated
Securities); and (d) Debt of the Company in respect of the extension notes
which may be issued in the future, at specified dates, in respect of the 2009
LYONs, in payment of the purchase price thereof (which extension notes would
rank on a parity with the LYONs, any 2009 LYONs and 2013 LYONs remaining
outstanding and any Subordinated Securities). (Section 10.01)
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of assets, (i)
the holders of all Senior Indebtedness shall first be entitled to receive
payment in full of all amounts due or to become due thereon, or payment of such
amounts shall have been provided for, before the Holders of LYONs shall be
entitled to receive any payment or distribution with respect to the LYONs; (ii)
the Holders of LYONs will be required to pay over their share of such
distribution to the holders of Senior Indebtedness until such Senior
Indebtedness is paid in full; and (iii) creditors of the Company who are not
Holders of LYONs or holders of Senior Indebtedness may recover less, ratably,
than holders of Senior Indebtedness and may recover more, ratably, than the
Holders of LYONs. (Section 10.02)
Unless otherwise specified in the Prospectus Supplement, in the event that
the LYONs are declared due and payable prior to their Stated Maturity by reason
of the occurrence of an Event of Default, then the Company would be obligated
to promptly notify holders of Senior Indebtedness of such acceleration. Unless
otherwise specified in the applicable Prospectus Supplement, the Company may
not pay the LYONs until 120 days have passed after such acceleration occurs and
may thereafter pay the LYONs if the terms of the LYONs Indenture otherwise
permit payment at that time. (Section 10.03)
Unless otherwise specified in the Prospectus Supplement, no payment of the
principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, Change in Control Purchase Price or interest, if any, with
respect to any of the LYONs may be made, nor may the Company pay cash in
respect of the Purchase Price (or portion thereof) of any LYON (other than for
fractional shares of Common Stock) or otherwise acquire any LYONs except for
Common Stock or other Capital Stock or as otherwise set forth in the LYONs
Indenture, if any default with respect to Senior Indebtedness occurs and is
continuing that permits the acceleration of the maturity thereof and such
default is either the subject of judicial proceedings or the Company receives
notice of the default, unless (a) 120 days pass after notice of the default is
given and such default is not then the subject of judicial proceedings or the
default with respect to the Senior Indebtedness is cured or waived and (b) the
terms of the LYONs Indenture otherwise permit the payment or acquisition of the
LYONs at that time. (Section 10.04)
The LYONs will be obligations exclusively of the Company. Since the
operations of the Company are partially conducted through subsidiaries,
primarily overseas, the cash flow and the consequent ability to service debt,
including the LYONs, of the Company, are partially dependent upon the earnings
of its subsidiaries and the distribution of those earnings to, or upon loans or
other payments of funds by those subsidiaries to, the Company. The subsidiaries
are separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the LYONs or to make any funds
available therefor, whether by dividends, loans or other payments. In addition,
the payment of dividends and the making of loans and advances to the Company by
its subsidiaries may be subject to statutory or contractual restrictions, are
contingent upon the earnings of those subsidiaries and are subject to various
business considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the Holders of
the LYONs to participate in those assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except
to the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company.
21
<PAGE>
There are no restrictions in the LYONs Indenture on the creation of
additional Senior Indebtedness (or any other indebtedness). The Prospectus
Supplement with respect to any Subordinated Securities will set forth (a) as of
the most recent practicable date (i) the aggregate amount of consolidated
indebtedness outstanding that would constitute either Senior Indebtedness or
indebtedness of subsidiaries of the Company and (ii) the aggregate amount of
outstanding indebtedness that would rank on a parity with the Subordinated
Securities and (b) any then-existing limitation on the issuance of additional
Senior Indebtedness.
CONVERSION RIGHTS
Except as is otherwise specified in the applicable Prospectus Supplement, a
Holder of a LYON may convert it into Common Stock of the Company at the times
specified in the Prospectus Supplement; provided, however, that if a LYON is
called for redemption, the Holder may convert it only until the close of
business on the Redemption Date. A LYON in respect of which a Holder has
delivered a Purchase Notice or a Change in Control Purchase Notice exercising
the option of such Holder to require the Company to purchase such LYONs may be
converted only if such notice is withdrawn in accordance with the terms of the
LYONs Indenture. (Form of LYON, paragraph 9) A Holder may convert a portion of
such Holder's LYONs so long as such portion is $1,000 principal amount at
maturity or an integral multiple thereof. (Section 11.01)
The initial Conversion Rate is that number of shares of Common Stock per
LYON set forth as such in the applicable Prospectus Supplement, subject to
adjustment upon the occurrence of certain events. A Holder entitled to a
fractional share of Common Stock shall receive cash equal to the then current
market value of such fractional share. (Form of LYON, paragraph 9 and Section
11.03) Shares of Common Stock issued upon conversion of LYONs in accordance
with the terms of the LYONs Indenture, and prior to the Distribution Date (as
defined below) and the redemption or expiration of the Rights (as defined
below), shall also be entitled to receive Rights, under the terms and subject
to the conditions of the Rights Agreement (as defined below). See "Description
of Capital Stock--Preferred Stock Purchase Rights."
A Holder will not receive any cash payment representing accrued Original
Issue Discount. The Company's delivery to the Holder of the number of shares of
Common Stock into which the LYON is convertible (together with the cash
payment, if any, in lieu of fractional shares of Common Stock) will be deemed
to satisfy the Company's obligation to pay the principal amount of the LYON
including the accrued Original Issue Discount attributable to the period from
the Issue Date to the Conversion Date. Thus, the accrued Original Issue
Discount is deemed to be paid in full rather than cancelled, extinguished or
forfeited. The Conversion Rate will not be adjusted at any time during the term
of the LYONs for such accrued Original Issue Discount. (Section 11.02)
Except as is otherwise specified in the applicable Prospectus Supplement,
to convert a LYON into shares of Common Stock, a Holder must (i) complete and
manually sign the conversion notice on the back of the LYON (or complete and
manually sign a facsimile thereof) and deliver such notice to the Conversion
Agent or the office of the Paying Agent, (ii) surrender the LYON to the
Conversion Agent, (iii) if required, furnish appropriate endorsements and
transfer documents, and (iv) if required, pay all transfer or similar taxes.
Pursuant to the LYONs Indenture, the date on which all of the foregoing
requirements have been satisfied is the Conversion Date. (Section 11.02 and
Form of LYON, paragraph 9)
Except as otherwise specified in the applicable Prospectus Supplement, the
Conversion Rate will be adjusted for dividends or distributions on Common Stock
payable in Common Stock or other Capital Stock of the Company; certain
subdivisions, combinations or reclassifications of Common Stock; distributions
to all holders of Common Stock of certain rights to purchase Common Stock for a
period expiring within 60 days at less than the Quoted Price at the Time of
Determination; and distributions to such holders of assets or debt securities
of the Company or certain rights, warrants or options to purchase securities of
the Company (excluding cash dividends or other cash distributions from current
or retained
22
<PAGE>
earnings other than any Extraordinary Cash Dividend). However, except as
otherwise specified in the applicable Prospectus Supplement, no adjustment need
be made if Holders may participate in the transaction or in certain other
cases. Except as otherwise specified in the applicable Prospectus Supplement,
in cases where the fair market value (per share of Common Stock) of assets,
debt securities or certain rights, warrants or options to purchase securities
of the Company distributed to shareholders exceeds the Average Quoted Price of
the Common Stock, or such Average Quoted Price exceeds the fair market value
(per share of Common Stock) of such assets, debt securities or rights, warrants
or options so distributed by less than $1.00, rather than being entitled to an
adjustment in the Conversion Rate, the Holder of a LYON upon conversion thereof
will be entitled to receive, in addition to the shares of Common Stock into
which such LYON is convertible, the kind and amount of assets, debt securities
or rights, warrants or options comprising the distribution that such Holder
would have received if such Holder had converted such LYON immediately prior to
the record date for determining the shareholders entitled to receive the
distribution. Except as otherwise specified in the applicable Prospectus
Supplement, none of (i) the distribution to holders of Common Stock of separate
certificates representing Rights (as defined below), (ii) the occurrence of
certain events entitling holders of such Rights to receive, upon exercise
thereof, Common Stock of the Company or Capital Stock of another corporation or
(iii) the exercise of such Rights, as described under "Description of Capital
Stock--Preferred Stock Purchase Rights," will constitute a distribution
requiring an adjustment in the Conversion Rate. In addition, any future
dividend or distribution of rights to purchase Capital Stock which the Company
determines to be comparable in purpose and in effect to the dividend and
subsequent distribution of Rights will not constitute a distribution requiring
an adjustment in the Conversion Rate. The LYONs Indenture permits the Company
to increase the Conversion Rate from time to time. (Sections 11.06, 11.07,
11.08, 11.10, 11.12, 11.14, 11.17 and 11.19 and Form of LYON, paragraph 9)
Except as is otherwise provided in the applicable Prospectus Supplement, if
the Company is a party to a consolidation, merger or binding share exchange or
a transfer of all or substantially all of its assets, the right to convert a
LYON into Common Stock may be changed into a right to convert it into
securities, cash or other assets which the Holder would have received if the
Holder had converted such Holder's LYON immediately prior to such transaction.
(Section 11.14)
Except as is otherwise provided in the applicable Prospectus Supplement, in
the event of a taxable distribution to holders of Common Stock which results in
an adjustment of the Conversion Rate or in the event the Conversion Rate is
increased at the discretion of the Company, the Holders of the LYONs may, in
certain circumstances, be deemed to have received a distribution subject to
Federal income tax as a dividend.
REDEMPTION OF LYONS AT THE OPTION OF THE COMPANY
Except as is otherwise provided in the applicable Prospectus Supplement, no
sinking fund is provided for the LYONs. Except as is otherwise provided in the
applicable Prospectus Supplement, prior to the date set forth in the applicable
Prospectus Supplement, the LYONs will not be redeemable at the option of the
Company. Beginning on the date set forth in the applicable Prospectus
Supplement, the Company may redeem the LYONs for cash as a whole at any time,
or from time to time in part at Redemption Prices set forth in the applicable
Prospectus Supplement (equal to, except as otherwise provided in the applicable
Prospectus Supplement, Issue Price plus accrued Original Issue Discount to the
Redemption Date). (Section 3.03 and Form of LYON, paragraph 5) Except as is
otherwise provided in the Prospectus Supplement, not less than 15 days' nor
more than 60 days' notice of redemption shall be given by mail to Holders of
LYONs. (Section 3.03 and Form of LYON, paragraph 7)
Except as is otherwise provided in the applicable Prospectus Supplement, if
less than all of the outstanding LYONs are to be redeemed, the Trustee shall
select the LYONs to be redeemed in principal amounts at maturity of $1,000 or
integral multiples thereof by lot, pro rata or by another method the Trustee
considers fair and appropriate (so long as such method is not prohibited by the
rules of any stock exchange on which the LYONs are then listed). If a portion
of a Holder's LYON is selected for partial redemption and such Holder converts
a portion of such LYON prior to such redemption, such converted
23
<PAGE>
portion shall be deemed to be (solely for purposes of determining the aggregate
principal amount of LYONs redeemed by the Company) the portion selected for
redemption. (Section 3.02)
PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
Except as is otherwise provided in the applicable Prospectus Supplement, on
the date or dates set forth in the applicable Prospectus Supplement (each, a
"Purchase Date"), the Company will become obligated to purchase, at the option
of the Holder thereof, any outstanding LYON for which a written Purchase Notice
has been delivered by the Holder to the office of the Paying Agent (initially
the Trustee) at any time from the opening of business on the date that is 20
Business Days prior to such Purchase Date until the close of business on such
Purchase Date and for which such Purchase Notice has not been withdrawn,
subject to certain additional conditions.
Except as is otherwise provided in the applicable Prospectus Supplement,
the Purchase Notice shall state (i) the certificate numbers of the LYONs to be
delivered by the Holder thereof for purchase by the Company; (ii) the portion
of the principal amount at maturity of LYONs to be purchased, which portion
must be $1,000 or an integral multiple thereof; (iii) that such LYONs are to be
purchased by the Company pursuant to the applicable provisions of the LYONs;
and (iv) in the event the Company elects, pursuant to the applicable portion of
the Indenture, to pay the Purchase Price to be paid as of such Purchase Date in
Common Stock, in whole or in part, but such Purchase Price is ultimately to be
paid to such Holder entirely in cash because any of the conditions to payment
of the Purchase Price (or portion thereof) in Common Stock is not satisfied by
the Purchase Date, as described below, whether such Holder elects (x) to
withdraw such Purchase Notice as to some or all of the LYONs to which it
relates (stating the principal amount at maturity and certificate numbers of
the LYONs as to which such withdrawal shall relate), or (y) to receive cash in
respect of the entire Purchase Price for all LYONs subject to such Purchase
Notice. Except as is otherwise specified in the applicable Prospectus
Supplement, if the Holder fails to indicate in the Purchase Notice and in any
written notice of withdrawal relating to such Purchase Notice, such Holder's
choice with respect to the election described in clause (iv) above, such Holder
shall be deemed to have elected to receive cash in respect of the entire
Purchase Price for all LYONs subject to such Purchase Notice in such
circumstances. (Section 3.08)
Except as is otherwise specified in the applicable Prospectus Supplement,
any Purchase Notice may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Paying Agent prior to the close of business on the
Purchase Date. Except as is otherwise specified in the applicable Prospectus
Supplement, the notice of withdrawal shall state the principal amount at
maturity and the certificate numbers of the LYONs as to which the withdrawal
notice relates and the principal amount at maturity, if any, which remains
subject to the Purchase Notice. (Section 3.10)
Except as is otherwise specified in the applicable Prospectus Supplement,
the Purchase Price payable in respect of a LYON shall be equal to the Issue
Price plus accrued Original Issue Discount to the Purchase Date and the Company
may elect to pay the Purchase Price payable as of any Purchase Date in cash or
shares of Common Stock, or any combination thereof.
Except as is otherwise specified in the applicable Prospectus Supplement,
if the Company elects to pay the Purchase Price, in whole or in part, in shares
of Common Stock, the number of shares to be delivered in respect of the portion
of the Purchase Price to be paid in shares of Common Stock shall be equal to
such portion of the Purchase Price divided by the Market Price (as defined
below) of the Common Stock. Shares of Common Stock issued upon purchase of
LYONs in accordance with the provisions of the LYONs Indenture, and prior to
the Distribution Date (as defined below) and the redemption or expiration of
the Rights (as defined below), shall also be entitled to receive Rights, under
the terms and subject to the conditions of the Rights Agreement (as defined
below). See "Description of Capital Stock--Preferred Stock Purchase Rights."
Except as is otherwise specified in the applicable Prospectus Supplement,
however, no fractional shares of Common Stock will be delivered upon any
purchase by the Company of LYONs through the delivery of shares of Common Stock
in payment, in
24
<PAGE>
whole or in part, of the Purchase Price and, instead, the Company will pay cash
based on the Market Price for all fractional shares of Common Stock.
Except as is otherwise specified in the Prospectus Supplement, the Company
will give notice (the "Company Notice") not less than 20 Business Days prior to
the Purchase Date (the "Company Notice Date") to all Holders at their addresses
shown in the register of the Registrar (and to beneficial owners as required by
applicable law) stating, among other things, whether the Company will pay the
Purchase Price of the LYONs in cash or Common Stock, or any combination thereof
(specifying the percentage of each) and, if the Company elects to pay in Common
Stock, in whole or in part, the method of calculating the Market Price of the
Common Stock. (Section 3.08)
Except as is otherwise specified in the Prospectus Supplement, the "Market
Price" means the average of the Sale Prices (as defined below) of the Common
Stock for the five trading day period ending on (if the third Business Day
prior to the applicable Purchase Date is a trading day or, if not, then on the
last trading day prior to) the third Business Day prior to the applicable
Purchase Date, appropriately adjusted to take into account the occurrence
during the period commencing on the first of such trading days during such five
trading day period and ending on such Purchase Date of certain events that
would result in an adjustment of the Conversion Rate with respect to the Common
Stock. Except as is otherwise specified in the Prospectus Supplement, the "Sale
Price" of the Common Stock on any date means the closing per share sale price
(or if no closing sale price is reported, the average bid and ask prices or, if
more than one in either case, the average of the average bid and average ask
prices) on such date as reported in the composite transactions for the
principal U.S. securities exchange on which the Common Stock is traded or, if
the Common Stock is not listed on a U.S. national or regional stock exchange,
as reported by the National Association of Securities Dealers Automated
Quotation System. Because the Market Price of the Common Stock is determined
prior to the applicable Purchase Date, Holders of LYONs bear the market risk
with respect to the value of the Common Stock to be received from the date such
Market Price is determined to such Purchase Date. Except as is otherwise
specified in the Prospectus Supplement, the Company may elect to pay the
Purchase Price in Common Stock only if the information necessary to calculate
the Market Price is reported in a daily newspaper of national circulation.
(Section 3.08)
Except as is otherwise specified in the applicable Prospectus Supplement,
upon determination of the actual number of shares of Common Stock in accordance
with the foregoing provisions, the Company will publish such determination in a
daily newspaper of national circulation. (Section 3.08)
Except as is otherwise specified in the applicable Prospectus Supplement,
the Company's right to purchase LYONs with shares of Common Stock is subject to
the Company satisfying various conditions, including: (i) any required
registration of the Common Stock under the Securities Act or Exchange Act; and
(ii) compliance with other applicable federal and state securities laws, if
any. Except as is otherwise specified in any applicable Prospectus Supplement,
if such conditions are not satisfied by a Purchase Date, the Company will pay
the Purchase Price of the LYONs to be purchased on such Purchase Date entirely
in cash. (Section 3.08) The Company will comply with the provisions of Rule
13e-4 and any other tender offer rules under the Exchange Act which may then be
applicable and will file Schedule 13E-4 or any other Schedule required
thereunder in connection with any offer by the Company to purchase LYONs at the
option of Holders. (Section 3.13)
Except as is otherwise specified in the applicable Prospectus Supplement,
payment of the Purchase Price for a LYON for which a Purchase Notice has been
delivered and not withdrawn is conditioned upon delivery of such LYON (together
with necessary endorsements) to the Paying Agent at its office in the Borough
of Manhattan, The City of New York, or any other office of the Paying Agent
maintained for such purpose, at any time (whether prior to, on or after the
Purchase Date) after delivery of such Purchase Notice. Except as is otherwise
specified in the applicable Prospectus Supplement, payment of the Purchase
Price for such LYON will be made promptly following the later of the Purchase
Date or the time of delivery of such LYON. (Section 3.10) If the Paying Agent
holds, in accordance with the terms of the LYONs Indenture, money or securities
sufficient to pay the Purchase Price of such
25
<PAGE>
LYON on the Business Day following the Purchase Date, then, on and after such
date, Original Issue Discount on such LYON will cease to accrue, whether or not
such LYON is delivered to the Paying Agent, and all other rights of the Holder
shall terminate (other than the right to receive the Purchase Price upon
delivery of the LYON). (Section 2.08)
Except as is otherwise specified in the Prospectus Supplement, no LYONs may
be purchased at the option of the Holder for cash if there has occurred (prior
to, on or after the giving, by the Holders of such LYONs, of the required
Purchase Notice) and is continuing an Event of Default described under
"Description of Liquid Yield Option Notes--Events of Default; Notice and
Waiver" below (other than a default in the payment of the Purchase Price with
respect to such LYONs). (Sections 3.10 and 10.03)
CHANGE IN CONTROL PERMITS PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
Except as is otherwise specified in the applicable Prospectus Supplement,
in the event of any Change in Control (as defined below) of the Company
occurring on or prior to the date set forth in the applicable Prospectus
Supplement, each Holder of LYONs will have the right, at the Holder's option,
subject to the terms and conditions of the LYONs Indenture, to require the
Company to purchase all or any part (provided that the principal amount at
maturity must be $1,000 or an integral multiple thereof ) of the Holder's LYONs
on the date that is 35 Business Days after the occurrence of such Change in
Control (the "Change in Control Purchase Date") at a cash price equal to
(except as is otherwise specified in the applicable Prospectus Supplement) the
Issue Price plus accrued Original Issue Discount to the Change in Control
Purchase Date (the "Change in Control Purchase Price"). (Section 3.09 and Form
of LYON, paragraph 6) Holders will not have any right to require the Company to
purchase LYONs in the event of any Change in Control occurring after the date
set forth in the applicable Prospectus Supplement.
Except as is otherwise specified in the applicable Prospectus Supplement,
within 15 Business Days after the occurrence of a Change in Control, the
Company shall mail to the Trustee and each Holder of LYONs at its address shown
in the register of the Registrar (and to beneficial owners as required by
applicable law) a notice regarding the Change in Control, which notice shall
state, among other things: (i) the date of such Change in Control and the
events causing such Change in Control; (ii) the date by which the Change in
Control Purchase Notice (as defined below) must be given; (iii) the Change in
Control Purchase Price; (iv) the Change in Control Purchase Date; (v) the name
and address of the Paying Agent and the Conversion Agent; (vi) the Conversion
Rate and any adjustments thereto; (vii) that LYONs with respect to which a
Change in Control Purchase Notice is given by the Holder may be converted into
shares of Common Stock (or, in lieu thereof, cash, if the Company shall so
elect) only if the Change in Control Purchase Notice has been withdrawn in
accordance with the terms of the LYONs Indenture; (viii) that LYONs must be
surrendered to the Paying Agent to collect payment; (ix) that the Change in
Control Purchase Price for any LYON as to which a Change in Control Purchase
Notice has been given and not withdrawn will be paid promptly following the
later of the Change in Control Purchase Date and the time the LYON is
surrendered; (x) the procedures that Holders must follow to exercise these
rights; (xi) the procedures for withdrawing a Change in Control Purchase
Notice; and (xii) briefly, the conversion rights of Holders of LYONs. The
Company will cause a copy of such notice to be published in the Wall Street
Journal or another daily newspaper of national circulation. (Section 3.09)
Except as is otherwise specified in the applicable Prospectus Supplement,
to exercise the purchase right, the Holder must deliver a Change in Control
Purchase Notice to the Paying Agent (initially the Trustee), at its office in
the Borough of Manhattan, The City of New York, or any other office of the
Paying Agent maintained for such purpose, prior to the close of business on the
Change in Control Purchase Date. Except as is otherwise specified in the
applicable Prospectus Supplement, the Change in Control Purchase Notice shall
state (i) the certificate numbers of the LYONs to be delivered by the Holder
thereof for purchase by the Company; (ii) the portion of the principal amount
at maturity of LYONs to be purchased, which portion must be $1,000 or an
integral multiple thereof; and (iii) that such LYONs are to be purchased by the
Company pursuant to the applicable provisions of the LYONs. (Section 3.09)
26
<PAGE>
Except as is otherwise specified in the applicable Prospectus Supplement,
any Change in Control Purchase Notice may be withdrawn by the Holder by a
written notice of withdrawal delivered to the Paying Agent prior to the close
of business on the Change in Control Purchase Date. The notice of withdrawal
shall state the principal amount at maturity and the certificate numbers of the
LYONs as to which the withdrawal notice relates and the principal amount at
maturity, if any, which remains subject to a Change in Control Purchase Notice.
(Section 3.10)
Except as is otherwise specified in the applicable Prospectus Supplement,
payment of the Change in Control Purchase Price for a LYON for which a Change
in Control Purchase Notice has been delivered and not withdrawn is conditioned
upon delivery of such LYON (together with necessary endorsements) to the Paying
Agent at its office in the Borough of Manhattan, The City of New York, or any
other office of the Paying Agent maintained for such purpose, at any time
(whether prior to, on or after the Change in Control Purchase Date) after the
delivery of such Change in Control Purchase Notice. Except as is otherwise
specified in the applicable Prospectus Supplement, payment of the Change in
Control Purchase Price for such LYON will be made promptly following the later
of the Change in Control Purchase Date or the time of delivery of such LYON.
(Section 3.10) If the Paying Agent holds, in accordance with the terms of the
LYONs Indenture, money sufficient to pay the Change in Control Purchase Price
of such LYON on the Business Day following the Change in Control Purchase Date,
then, on and after the Change in Control Purchase Date, such LYON will cease to
be outstanding and Original Issue Discount on such LYON will cease to accrue
and be deemed paid, whether or not such LYON is delivered to the Paying Agent,
and all other rights of the Holder shall terminate (other than the right to
receive the Change in Control Purchase Price upon delivery of the LYON).
(Section 2.08)
Except as is otherwise specified in the applicable Prospectus Supplement, a
"Change in Control" of the Company is deemed to have occurred at such time as
(i) any person, including its Affiliates and Associates, other than the
Company, its Subsidiaries or their employee benefit plans, files a Schedule 13D
or 14D-1 under the Exchange Act (or any successor schedule, form or report)
disclosing that such person has become the Beneficial Owner of 50% or more of
the voting power of the Company's Common Stock or other Capital Stock of the
Company into which the Common Stock is reclassified or changed, with certain
exceptions, or (ii) there shall be consummated any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which the Common Stock (or such other Capital Stock) would be
converted into cash, securities or other property, other than a consolidation
or merger of the Company in which the holders of the Common Stock (or such
other Capital Stock) immediately prior to the consolidation or merger have,
directly or indirectly, the same proportionate ownership of common stock of the
continuing or surviving corporation immediately after the merger or
consolidation. (Section 3.09) Except as is otherwise specified in the
applicable Prospectus Supplement, the LYONs Indenture does not permit the Board
of Directors of the Company to waive the Company's obligation to purchase LYONs
at the option of the Holders in the event of a Change in Control of the
Company.
The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable and will
file Schedule 13E-4 or any other schedule required thereunder in connection
with any offer by the Company to purchase LYONs at the option of Holders upon a
Change in Control. (Section 3.13) The Change in Control purchase feature of the
LYONs may in certain circumstances make more difficult or discourage a takeover
of the Company and, thus, the removal of incumbent management. The Change in
Control purchase feature, however, unless otherwise specified in the applicable
Prospectus Supplement, is not the result of management's knowledge of any
specific effort to accumulate shares of Common Stock or to obtain control of
the Company by means of a merger, tender offer, solicitation or otherwise, or
part of a plan by management to adopt a series of anti-takeover provisions.
Instead, unless otherwise specified in the applicable Prospectus Supplement,
the Change in Control purchase feature is a standard provision contained in
other LYONs offerings that have been marketed by Merrill Lynch and the terms of
such feature result from negotiations between the Company and Merrill Lynch.
The 2009 LYONs and the 2013 LYONs have change in control provisions
substantially identical to the change in control provision described above, and
which, in the case of the 2009 LYONs, expired on September 8, 1994 and which,
in the case of the 2013 LYONs, expires on
27
<PAGE>
September 27, 1998. The Company's Preferred Share Purchase Rights also may have
an anti-takeover effect. See "Description of Capital Stock--Preferred Stock
Purchase Rights."
The Company could, in the future, enter into certain transactions,
including certain recapitalizations of the Company, that would not constitute a
Change in Control of the Company, but that would increase the amount of Senior
Indebtedness outstanding at such time. Except as is otherwise specified in the
applicable Prospectus Supplement, no LYONs may be purchased at the option of
Holders upon a Change in Control of the Company if there has occurred (prior
to, on or after the giving, by the Holders of such LYONs, of the required
Change of Control Purchase Notice) and is continuing an Event of Default
described under "Description of Liquid Yield Option Notes--Events of Default;
Notice and Waiver" below (other than a default in the payment of the Change in
Control Purchase Price with respect to such LYONs). (Sections 3.10 and 10.03)
Further, except as is otherwise specified in the applicable Prospectus
Supplement, the LYONs are subordinated to the prior payment of Senior
Indebtedness as described under "Description of Liquid Yield Option Notes--
Subordination of LYONs" above.
MERGERS AND SALES OF ASSETS BY THE COMPANY
Except as is otherwise specified in the applicable Prospectus Supplement,
the Company may not consolidate with or merge into any other person or convey,
transfer or lease its properties and assets substantially as an entirety to
another person, unless, among other items, (i) the resulting, surviving or
transferee person (if other than the Company) is organized and existing under
the laws of the United States, any state thereof or the District of Columbia
and such person assumes all obligations of the Company under the LYONs and the
LYONs Indenture, and (ii) the Company or such successor person shall not
immediately thereafter be in default under the LYONs Indenture. Upon the
assumption of the Company's obligations by such a person in such circumstances,
subject to certain exceptions, the Company shall be discharged from all
obligations under the LYONs and the LYONs Indenture. (Section 5.01) Except as
is otherwise specified in the applicable Prospectus Supplement, certain such
transactions which would constitute a Change in Control of the Company
occurring on or prior to the date set forth in the applicable Prospectus
Supplement, permit each Holder to require the Company to purchase the LYONs of
such Holder as described above. (Section 3.09)
EVENTS OF DEFAULT; NOTICE AND WAIVER
Except as otherwise specified in the applicable Prospectus Supplement, if
an Event of Default specified in the LYONs Indenture shall have happened and be
continuing, either the Trustee or the Holders of not less than 25% in aggregate
principal amount at maturity of the LYONs then outstanding may declare the
LYONs to be immediately due and payable. Except as is otherwise specified in
the applicable Prospectus Supplement, the amount so payable for each LYON shall
be the amount determined by discounting the $1,000 principal amount at maturity
payable at its maturity date back to the date of such declaration at the
interest rate per annum for such LYON (computed on a semi-annual bond
equivalent basis using a 360-day year composed of twelve 30-day months). In the
case of certain events of bankruptcy or insolvency, the amount determined
pursuant to the preceding sentence shall automatically become and be
immediately due and payable. See "Description of Liquid Yield Option Notes--
Subordination of LYONs" above. Except as is otherwise specified in any
applicable Prospectus Supplement, under certain circumstances, the Holders of a
majority in aggregate principal amount at maturity of the outstanding LYONs may
rescind any such acceleration with respect to the LYONs and its consequences.
(Section 6.02) Interest shall accrue and be payable on demand upon a default in
the payment of the Issue Price, accrued Original Issue Discount, any Redemption
Price, Purchase Price or Change in Control Purchase Price to the extent that
payment of such interest shall be legally enforceable. The accrual of such
interest on overdue amounts shall be in lieu of, and not in addition to, the
continued accrual of Original Issue Discount. (Form of LYON, paragraph 1)
Except as is otherwise specified in the Prospectus Supplement, under the
LYONs Indenture, Events of Default are defined as: (i) default in payment of
the principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, Purchase Price (continuing for three Business Days)
28
<PAGE>
or Change in Control Purchase Price (continuing for three Business Days) with
respect to any LYON when such becomes due and payable (whether or not payment
is prohibited by the provisions of the LYONs Indenture); (ii) failure by the
Company to comply with any of its other agreements in the LYONs or the LYONs
Indenture upon the receipt by the Company of notice of such default by the
Trustee or by Holders of not less than 25% in aggregate principal amount at
maturity of the LYONs then outstanding and the Company's failure to cure such
default within 60 days after receipt by the Company of such notice; or (iii)
certain events of bankruptcy or insolvency. (Section 6.01)
Except as is otherwise specified in the applicable Prospectus Supplement,
the Trustee shall give notice to Holders of the LYONs of any continuing default
known to the Trustee within 90 days after the occurrence thereof; provided,
that the Trustee may withhold such notice if it determines in good faith that
withholding the notice is in the interests of the Holders. (Section 7.05)
Except as is otherwise specified in the Prospectus Supplement, the Holders
of a majority in aggregate principal amount at maturity of the outstanding
LYONs may direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee, provided that such direction shall not be in conflict with any
law or the LYONs Indenture and subject to certain other limitations. (Section
6.05) Before proceeding to exercise any right or power under the LYONs
Indenture at the direction of such Holders, the Trustee shall be entitled to
receive from such Holders reasonable security or indemnity satisfactory to it
against the costs, expenses and liabilities which might be incurred by it in
complying with any such direction. Except as is otherwise specified in the
applicable Prospectus Supplement, no Holder of any LYON will have any right to
pursue any remedy with respect to the LYONs Indenture or the LYONs, unless (i)
such Holder shall have previously given the Trustee written notice of a
continuing Event of Default; (ii) the Holders of at least 25% in aggregate
principal amount at maturity of the outstanding LYONs shall have made a written
request to the Trustee to pursue such remedy; (iii) such Holder or Holders have
offered to the Trustee reasonable indemnity satisfactory to the Trustee; (iv)
the Holders of a majority in aggregate principal amount at maturity of the
outstanding LYONs have not given the Trustee a direction inconsistent with such
request within 60 days after receipt of such request; and (v) the Trustee shall
have failed to comply with the request within such 60-day period. (Section
6.06)
Except as is otherwise specified in the Prospectus Supplement, however, the
right of any Holder (x) to receive payment of the principal amount at maturity,
Issue Price, accrued Original Issue Discount, Redemption Price, Purchase Price,
Change in Control Purchase Price and any interest in respect of a default in
the payment of any such amounts on a LYON, on or after the due date expressed
in such LYON, (y) to institute suit for the enforcement of any such payments or
conversion or (z) to convert LYONs shall not be impaired or adversely affected
without such Holder's consent. (Section 6.07) The Holders of at least a
majority in aggregate principal amount at maturity of the outstanding LYONs may
waive an existing default and its consequences, other than (i) any default in
any payment on the LYONs, (ii) any default with respect to the conversion
rights of the LYONs or (iii) any default in respect of certain covenants or
provisions in the LYONs Indenture which may not be modified without the consent
of the Holder of each LYON as described in "Description of Liquid Yield Option
Notes--Modification" below. When a default is waived, it is deemed cured and
shall cease to exist, but no such waiver shall extend to any subsequent or
other default or impair any consequent right. (Section 6.04)
Except as is otherwise specified in the Prospectus Supplement, the Company
will be required to furnish to the Trustee annually a statement as to any
default by the Company in the performance and observance of its obligations
under the LYONs Indenture. (Section 4.03)
MODIFICATION
Except as is otherwise set forth in the Prospectus Supplement, without the
consent of any Holder of LYONs, the Company and the Trustee may amend the LYONs
Indenture to cure any ambiguity, defect or inconsistency, to provide for the
assumption by a successor corporation of the obligations of the Company under
the LYONs Indenture, to provide for uncertificated LYONs in addition to
certificated LYONs so long
29
<PAGE>
as such uncertificated LYONs are in registered form for purposes of the
Internal Revenue Code, to make any change that does not adversely affect the
rights of any Holder of LYONs, to comply with any requirement of the Commission
in connection with the qualification of the LYONs Indenture under the Trust
Indenture Act of 1939, as amended, to add to the covenants or obligations of
the Company under the LYONs Indenture or to surrender any right, power or
option under the LYONs Indenture conferred upon the Company. No amendment may
be made to the subordination provisions of the LYONs Indenture that adversely
affects the rights of any holder of Senior Indebtedness then outstanding,
unless the holders of such Senior Indebtedness (as required pursuant to the
terms of such Senior Indebtedness) consent to such change. (Section 9.02)
Except as is otherwise set forth in the Prospectus Supplement, modification
and amendment of the LYONs Indenture or the LYONs may be effected by the
Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount at maturity of the LYONs then
outstanding. However, without the consent of each Holder affected thereby, no
amendment may, among other things: (i) reduce the principal amount at maturity,
Issue Price, Purchase Price, Change in Control Purchase Price or Redemption
Price, or extend the stated maturity of any LYON or alter the manner or rate of
accrual of Original Issue Discount or interest, or make any LYON payable in
money or securities other than that stated in the LYON; (ii) make any change to
the principal amount at maturity of LYONs whose Holders must consent to an
amendment or any waiver under the LYONs Indenture or modify the LYONs Indenture
provisions relating to such amendments or waivers; (iii) make any change that
adversely affects the right to convert any LYON or the right to require the
Company to purchase a LYON; (iv) modify the provisions of the LYONs Indenture
relating to the subordination of the LYONs in a manner adverse to the Holders
of the LYONs; or (v) impair the right to institute suit for the enforcement of
any payment with respect to, or conversion of, the LYONs. (Section 9.02)
DISCHARGE OF THE LYONS INDENTURE
Except as otherwise set forth in the applicable Prospectus Supplement, the
Company may satisfy or discharge its obligations under the LYONs Indenture by
delivering to the LYONs Trustee for cancellation all outstanding LYONs or by
depositing with the LYONs Trustee or the Paying Agent, after the LYONs have
become due and payable, cash or Common Stock (as applicable under the LYONs
Indenture) sufficient to pay all of the outstanding LYONs and paying all other
sums payable under the LYONs Indenture by the Company. (Article Eight)
LIMITATIONS OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of the Company, the
claim of the Holder of a LYON is, under Title 11 of the United States Code,
limited to the Issue Price of the LYON plus that portion of the Original Issue
Discount that has accrued from the date of issue to the commencement of the
proceeding. In addition, the Holders of the LYONs will be subordinated in right
of payment to Senior Indebtedness and effectively subordinated to the
indebtedness and other obligations of the Company's subsidiaries. See
"Description of Liquid Yield Option Notes--Subordination of LYONs" above.
THE FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE
The First National Bank of Chicago serves as trustee under the indentures
with the Company for the 2009 LYONs and the 2013 LYONs and would serve as
extension trustee under the extension indenture relating to the extension notes
which could be issued in the future with respect to the 2009 LYONs. The First
National Bank of Chicago would also serve as trustee under the Subordinated
Indenture except as otherwise set forth in the applicable Prospectus
Supplement. The Company also maintains certain banking relationships with The
First National Bank of Chicago.
30
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following statements with respect to the Company's capital stock are
subject to the detailed provisions of the Company's restated certificate of
incorporation, as amended (the "Certificate of Incorporation"), and bylaws, as
amended (the "Bylaws"), and to the Rights Agreement (as defined below). These
statements do not purport to be complete and are qualified in their entirety by
reference to the terms of the Certificate of Incorporation, the Bylaws and the
Rights Agreement, which are incorporated by reference as exhibits to the
Registration Statement.
COMMON AND PREFERRED STOCK
The authorized capital stock of the Company consists of 1,400,000,000
shares of Common Stock, par value $3 per share, and 500,000 shares of Preferred
Stock, par value $100 per share, issuable in series ("Preferred Stock"). There
are no shares of Preferred Stock presently outstanding. The Board of Directors
of the Company is authorized to create and issue one or more series of
Preferred Stock and to determine the rights and preferences of each series, to
the extent permitted by the Certificate of Incorporation. The holders of shares
of the Company's Common Stock are entitled to one vote for each share held and
each share of the Company's Common Stock is entitled to participate equally in
dividends out of funds legally available therefor, as and when declared by the
Board of Directors, and in the distribution of assets in the event of
liquidation. The shares of the Company's Common Stock have no preemptive or
conversion rights, redemption provisions or sinking fund provisions. The
outstanding shares of the Company's Common Stock are duly and validly issued,
fully paid and nonassessable, and any shares of Common Stock issued as Offered
Securities and any shares of Common Stock issuable upon the (i) exercise of
Common Stock Warrants, (ii) conversion or exchange of Debt Securities which are
convertible into or exchangeable for Common Stock or (iii) in the case of
LYONs, unless the applicable Prospectus Supplement specifies otherwise, upon
the purchase of the LYONs at the option of the Holder thereof will be, duly and
validly issued, fully paid and nonassessable.
PREFERRED STOCK PURCHASE RIGHTS
On November 5, 1998, Motorola authorized a new rights agreement between the
Company and Harris Trust and Savings Bank, as Rights Agent (the "Rights
Agreement") to replace the existing rights agreement dated as of November 9,
1988, as amended (the "Expiring Rights Agreement"), and its associated
preferred stock purchase rights (the "Expiring Rights"), which are scheduled to
expire as of the close of business on November 20, 1998. A copy of the Expiring
Rights Agreement has been filed with the Commission as an exhibit to a
Registration Statement on Form 8-A, which, as amended, is incorporated herein
by reference. See "Incorporation of Certain Documents by Reference."
The following summary of certain provisions of the Rights Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all of the provisions of the Rights Agreement, including
particular provisions or defined terms of the Rights Agreement. A copy of the
Rights Agreement has been filed with the Commission as an exhibit to a
Registration Statement on Form 8-A filed on November 5, 1998, which is
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference."
Under the Rights Agreement, each outstanding share of Common Stock of the
Company is accompanied by a preferred stock purchase right (a "Right"). Each
Right entitles the registered holder to purchase from the Company one ten-
thousandth of a share of Junior Participating Preferred Stock, Series B, $100
par value per share, of the Company (the "Preferred Shares") at a price of $200
per one ten-thousandth of a Preferred Share (the "Preferred Share Purchase
Price"), subject to adjustment. The Rights attach to shares of Common Stock
outstanding as of the close of business on November 20, 1998 and to shares of
Common Stock which become outstanding thereafter prior to the earliest of the
Distribution Date (as defined below), the redemption of the Rights, the
exchange of the Rights and the expiration of the Rights (and, in certain cases,
following the Distribution Date).
31
<PAGE>
The Rights have certain anti-takeover 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, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors because of the ability of the Board of Directors to redeem
the Rights.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") acquired, or obtained the right to acquire, beneficial ownership of
10% or more of the outstanding shares of Common Stock (a "Triggering Event")
and (ii) 10 days following the commencement or announcement of a tender offer
or exchange offer for 10% or more of such outstanding shares of Common Stock
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Stock certificates
outstanding as of November 20, 1998, by such Common Stock certificate. The
Rights Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with the shares of Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after November 20, 1998, upon the transfer or
new issuance of shares of Common Stock (including, unless otherwise specified
in the applicable Prospectus Supplement, the shares of Common Stock issued (i)
as Offered Securities, (ii) upon exercise of any Common Stock Warrants, (iii)
upon conversion or exchange of Debt Securities which are convertible into or
exchangeable for Common Stock or (iv) upon purchase of LYONs at the option of
the Holder thereof) will contain a notation incorporating the Rights Agreement
by reference. Until the Distribution Date (or earlier redemption or expiration
of the Rights) the surrender for transfer of any certificate for shares of
Common Stock, outstanding as of November 20, 1998, with or without such
notation or a copy of a summary of Rights being attached thereto, will also
constitute the transfer of the Rights associated with the shares of Common
Stock represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Stock as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on November 20, 2008, unless earlier redeemed by the Company as
described below.
The Preferred Share Purchase Price payable, and the number of Preferred
Shares or other securities, cash or other 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 the
Common Stock of certain rights or warrants to subscribe for Common Stock or
convertible securities at less than the current market price of the Common
Stock, (iii) upon the distribution to holders of the Common Stock of evidences
of indebtedness or assets (excluding regular periodic cash dividends) and (iv)
in connection with any recapitalization of the Company.
In the event that a person becomes an Acquiring Person, each Right (other
than Rights that are or were beneficially owned by the Acquiring Person and
certain related persons and transferees, which will thereafter be void) shall
thereafter be exercisable not for Preferred Shares, but for a number of shares
of Common Stock (or, in certain cases, fractional Preferred Shares, other
Common Stock equivalents or cash) having a market value of two times the
exercise price of the Right. In the event that, at the time or after a person
becomes an Acquiring Person, the Company is involved in a merger or other
business combination in which (i) the Company is not the surviving corporation,
(ii) Common Stock is changed or exchanged or (iii) 50% or more of the Company's
consolidated assets or earning power are sold, then each Right (other than
Rights that are or were owned by the Acquiring Person and certain related
persons and transferees, which will thereafter be void) shall thereafter be
exercisable for a number of shares of common stock of the acquiring company
having a market value of two times the exercise price of the Right.
32
<PAGE>
In addition, at any time after a Triggering Event and before a person has
acquired beneficial ownership of 50% or more of the outstanding Common Stock,
the Company may elect to exchange all or part of the Rights (excluding void
Rights held by an Acquiring Person and certain related persons and transferees)
at an exchange ratio of one share of Common Stock, or one ten-thousandth of a
Preferred Share (or other Common Stock equivalent), per Right (subject to
adjustment).
At any time prior to a Triggering Event, the Board of Directors of the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (the "Rights Redemption Price"). Immediately upon the action of the Board
of Directors ordering redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Rights Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
At any time prior to a Triggering Event, the Company may amend or
supplement the Rights Agreement without the approval of the Rights Agent or any
holder of the Rights. Thereafter, no amendment may adversely effect the
interests of the Rights holders (other than an Acquiring Person).
The Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment equal to the greater of $250 per share and 10,000
times the dividend declared per share of Common Stock. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment equal to the greater of $1,000 per share and
10,000 times the payment made per share of Common Stock. Each Preferred Share
will have 10,000 votes per share, voting together with the Common Stock. In the
event of any merger, consolidation or other transaction in which Common Stock
is exchanged, each Preferred Share will be entitled to receive 10,000 times the
amount received per share of Common Stock.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one ten-thousandth interest in a Preferred
Share that may be purchased upon exercise of each Right should approximate the
value of one share of Common Stock.
No fractional shares of Common Stock or Preferred Shares will be required
to be issued upon the exercise of a Right (other than fractions of Preferred
Shares that are integral multiples of one ten-thousandth of a Preferred Share,
which may, at the election of the Company, be evidenced by depositary receipts)
and in lieu thereof, an adjustment in cash will be made based on the market
price of the Common Stock or Preferred Shares on the last trading day prior to
the date of exercise.
DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities or Common Stock. Securities Warrants may be issued independently or
together with Debt Securities offered by any Prospectus Supplement and may be
attached to or separate from such Debt Securities. Each series of Securities
Warrants will be issued under a separate warrant agreement (a "Securities
Warrant Agreement") to be entered into between the Company and a bank or trust
company, as Securities Warrant Agent, all as set forth in the applicable
Prospectus Supplement relating to the particular issue of Securities Warrants.
The Securities Warrant Agent will act solely as an agent of the Company in
connection with the Securities Warrant Agreement or any Certificates evidencing
the Securities Warrants ("Securities Warrant Certificates") and will not assume
any obligation or relationship of agency or trust for or with any holders of
Securities Warrant Certificates or beneficial owners of Securities Warrants.
Copies of the forms of Securities Warrant Agreements and the forms of
Securities Warrant Certificates representing the Securities Warrants are filed
as exhibits to the Registration Statement. The following summaries of certain
provisions of the forms of Securities Warrant Agreements and Securities Warrant
33
<PAGE>
Certificates do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Securities Warrant Agreements and the Securities Warrant Certificates.
GENERAL
If Securities Warrants are offered, the applicable Prospectus Supplement
will describe the terms of such Securities Warrants, including, in the case of
Securities Warrants for the purchase of Debt Securities (the "Underlying Debt
Securities"), the following where applicable: (i) the title and aggregate
number of such Debt Warrants; (ii) the title, rank, aggregate principal amount,
denominations, and terms of the Underlying Debt Securities purchasable upon
exercise of the Debt Warrants; (iii) the currencies in which such Debt Warrants
are being offered; (iv) the designation and terms of any series of Debt
Securities with which such Debt Warrants are being offered and the number of
such Debt Warrants being offered with each such Debt Security; (v) the date, if
any, on and after which such Debt Warrants and any related series of Debt
Securities will be transferable separately; (vi) the principal amount of the
series of Debt Securities purchasable upon exercise of each such Debt Warrant
and the price, or the manner of determining the price, at which and currencies
in which such principal amount of Debt Securities of such series may be
purchased upon such exercise; (vii) the time or times, or period or periods in
which, such Debt Warrants may be exercised and the date (the "Expiration Date")
on which such exercise right shall expire; (viii) whether the Securities
Warrant Certificates will be issued in registered or bearer form; (ix) United
States federal income tax consequences; (x) the terms of any right of the
Company to redeem or accelerate the exercisability of such Debt Warrants; (xi)
whether such Debt Warrants are to be issued with any Offered Securities; (xii)
the offering price of such Debt Warrants; and (xiii) any other terms of such
Debt Warrants.
In the case of Securities Warrants for the purchase of Common Stock, the
Prospectus Supplement will describe the terms of such Common Stock Warrants,
including the following where applicable: (i) title and aggregate number of
such Common Stock Warrants and whether such Common Stock Warrants will be sold
with other Offered Securities; (ii) the number of shares of Common Stock that
may be purchased on exercise of each Common Stock Warrant; (iii) the price or
manner of determining price; if other than cash, the property and manner in
which the exercise price may be paid and any minimum number of Common Stock
Warrants exercisable at one time; (iv) the terms of any right of the Company to
redeem such Common Stock Warrants; (v) the date, if any, on and after which
such Common Stock Warrants and any related series of Debt Securities will be
transferable separately; (vi) the time or times, or period or periods in which,
the Common Stock Warrants may be exercisable and the Expiration Date; (vii) the
terms of any right of the Company to accelerate the exercisability of the
Common Stock Warrants; (viii) United States federal income tax consequences;
and (ix) any other terms of such Common Stock Warrants. Securities Warrants for
the purchase of Common Stock will be offered and exercisable for U.S. dollars
only.
Securities Warrants may be exchanged for new Securities Warrants of
different denominations, may (if in registered form) be presented for
registration of transfer and may be exercised at the corporate trust office of
the Securities Warrant Agent or any other office indicated in the applicable
Prospectus Supplement. No service charge will be made for any permitted
transfer or exchange of Securities Warrant Certificates, but the Company may
require payment of any tax or other governmental charge payable in connection
therewith. Prior to the exercise of any Securities Warrant to purchase
Underlying Debt Securities, holders of such Securities Warrants will not have
any of the rights of Holders of the Debt Securities purchasable upon such
exercise, including the right to receive payments of principal of (or premium,
if any) or interest, if any, on the Debt Securities purchasable upon such
exercise or to enforce covenants in the applicable indenture. Prior to the
exercise of any Securities Warrants to purchase Common Stock, holders of such
Securities Warrants will not have any rights of holders of the Common Stock
purchasable upon such exercise, including the right to receive payments of
dividends, if any, on the Common Stock purchasable upon such exercise or to
exercise any applicable right to vote.
34
<PAGE>
EXERCISE OF SECURITIES WARRANTS
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Underlying Debt Securities or number of shares of Common
Stock, as the case may be, at such exercise price as shall in each case be set
forth in, or calculable from, the Prospectus Supplement relating to the offered
Securities Warrants. After the close of business on the Expiration Date (or
such later date to which such Expiration Date may be extended by the Company),
unexercised Securities Warrants will become void.
Securities Warrants may be exercised by delivering to the Securities
Warrant Agent payment as provided in the applicable Prospectus Supplement of
the amount required to purchase the Underlying Debt Securities or Common Stock,
as the case may be, purchasable upon such exercise together with certain
information set forth on the reverse side of the Securities Warrant. Securities
Warrants will be deemed to have been exercised upon receipt of payment of the
exercise price, subject to the receipt, within five business days, of the
Securities Warrant Certificate evidencing such Securities Warrants. Upon
receipt of such payment and such Securities Warrant Certificate properly
completed and duly executed at the corporate trust office of the Securities
Warrant Agent or any other office indicated in the applicable Prospectus
Supplement, the Company will, as soon as practicable, issue and deliver the
Underlying Debt Securities or Common Stock, as the case may be, purchasable
upon such exercise. If fewer than all of the Securities Warrants represented by
such Securities Warrant Certificate are exercised, a new Securities Warrant
Certificate will be issued for the remaining amount of Securities Warrants. The
holder of a Securities Warrant will be required to pay any tax or other
governmental charge that may be imposed in connection with any transfer
involved in the issuance of Underlying Debt Securities or Common Stock
purchased upon such exercise.
MODIFICATIONS
The Securities Warrant Agreements and the terms of the Securities Warrants
may be modified or amended by the Company and the Securities Warrant Agent,
without the consent of any holder, for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective or inconsistent provision
contained therein, or in any other manner that the Company deems necessary or
desirable and that will not materially adversely affect the interests of the
holders of the Securities Warrants.
The Company and the Securities Warrant Agent may also modify or amend the
Securities Warrant Agreement and the terms of the Securities Warrants with the
consent of the holders of not less than a majority in number of the then
outstanding unexercised Securities Warrants affected thereby; provided that no
such modification or amendment that accelerates the expiration date, increases
the exercise price, reduces the number of outstanding Securities Warrants the
consent of the holders of which is required for any such modification or
amendment, or otherwise materially adversely affects the rights of the holders
of the Securities Warrants, may be made without the consent of each holder
affected thereby.
COMMON STOCK WARRANT ADJUSTMENTS
The terms and conditions on which the exercise price of and/or the number
of shares of Common Stock covered by a Common Stock Warrant are subject to
adjustment will be set forth in the Common Stock Warrant Certificate and the
applicable Prospectus Supplement. Such terms will include provisions for
adjusting the exercise price and/or the number of shares of Common Stock
covered by such Common Stock Warrant; the events requiring such adjustment; the
events upon which the Company may, in lieu of making such adjustment, make
proper provisions so that the holder of such Common Stock Warrant, upon
exercise thereof, would be treated as if such holder had exercised such Common
Stock Warrant prior to the occurrence of such events; and provisions affecting
exercise in the event of certain events affecting the Common Stock.
35
<PAGE>
PLAN OF DISTRIBUTION
The Company may offer and sell the Offered Securities in any of four ways:
(i) through agents, (ii) to or through underwriters or dealers, which may
include affiliates of the Company, (iii) directly to one or more purchasers or
(iv) through any combination of the foregoing. The Prospectus Supplement with
respect to any of the Offered Securities will set forth the terms of the
offering of such Offered Securities, including the name or names of any
underwriters, dealers or agents, the purchase price of such Offered Securities,
the proceeds to the Company from such sale, any underwriting discounts or
agency fees and other items constituting underwriters' or agents' compensation,
the initial public offering price, any discounts or concessions allowed or
reallowed or paid to dealers, and any securities exchanges on which such
Offered Securities may be listed.
The distribution of the Offered Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
If underwriters or dealers are used in the sale, the Offered Securities
will be acquired by the underwriters or dealers for their own accounts and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price, which may be changed, or at
varying prices determined at the time of sale. The Offered Securities may be
offered to the public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more of such firms. Unless
otherwise set forth in the Prospectus Supplement, the obligations of the
underwriters to purchase such Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all of
such Offered Securities if any are purchased. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to
contributions with respect to payments which the underwriters, dealers or
agents may be required to make in respect thereof. Underwriters, dealers and
agents, and affiliates thereof, may be customers of, engage in transactions
with, or perform services for the Company and its affiliates in the ordinary
course of business.
All Offered Securities (except shares of Common Stock) will be new issues
of securities with no established trading market. Any underwriters to whom
Offered Securities are sold by the Company for public offering and sale may
make a market in such Offered 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 concerning the liquidity of the trading
market for any Offered Securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Carol H.
Forsyte of the Company's Law Department. As of November 1, 1998, Ms. Forsyte
owned approximately 160 shares of Common Stock and held options to purchase
3,800 shares of Common Stock, of which options to purchase 1,600 shares were
currently exercisable.
EXPERTS
The consolidated financial statements and schedules of the Company and its
consolidated subsidiaries as of December 31, 1997 and 1996 and for each of the
years in the three-year period ended December 31, 1997 have been incorporated
by reference in this Prospectus and in the Registration Statement in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in auditing and accounting.
36
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$445,000,000
6 1/2% DEBENTURES DUE NOVEMBER 15, 2028
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
NOVEMBER 18, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
