<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-20373
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED JANUARY 23, 1998
PROSPECTUS SUPPLEMENT (TO THE PROSPECTUS DATED FEBRUARY 18, 1997)
$200,000,000
UNISYS CORPORATION
% SENIOR NOTES DUE 2008
Interest on the % Senior Notes due 2008 (the "Notes") of Unisys
Corporation ("Unisys" or the "Company") is payable semiannually on April 1 and
October 1 of each year, commencing April 1, 1998. The Notes will be redeemable
at the option of the Company, in whole or in part, at any time on and after
April 1, 2003 at the redemption prices set forth herein, together with accrued
and unpaid interest, if any, to the date of redemption. In addition, upon the
occurrence of a Change in Control (as defined), each holder of the Notes may
require the Company to repurchase all or a portion of such holder's Notes at a
cash purchase price of 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of repurchase.
The Notes will be senior unsecured obligations of the Company and will rank
pari passu in right of payment with all senior indebtedness of the Company and
senior in right of payment to all subordinated indebtedness of the Company.
------------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE S-4 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS
OF THE NOTES OFFERED HEREBY.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.............................. % % %
- -----------------------------------------------------------------------------------------------
Total................................. $ $ $
===============================================================================================
</TABLE>
(1) Plus accrued interest, if any, from , 1998.
(2) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
------------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Notes will be made against payment therefor, on or about
, 1998 at the offices of Bear, Stearns & Co. Inc., 245
Park Avenue, New York, New York 10167.
------------------------------
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
, 1998
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
STABILIZING TRANSACTIONS AND THE PURCHASE OF NOTES TO COVER SYNDICATE SHORT
POSITIONS, SYNDICATE SHORT-COVERING TRANSACTIONS AND PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and the financial statements and
the notes thereto appearing elsewhere herein or incorporated by reference in the
accompanying Prospectus. See "Risk Factors" for a discussion of certain factors
that should be considered by prospective purchasers of the Notes.
THE OFFERING
Notes Offered..................$200,000,000 aggregate principal amount of %
Senior Notes due 2008.
Maturity Date..................April 1, 2008.
Interest Payment Dates.........April 1 and October 1, commencing April 1, 1998.
Optional Redemption............The Notes will be redeemable at the option of the
Company, in whole or in part, on and after
April 1, 2003, at the redemption prices set
forth herein, together with accrued and unpaid
interest, if any, to the date of redemption.
Mandatory Sinking Fund.........None.
Ranking........................The Notes will be senior unsecured obligations of
the Company, ranking pari passu with all
existing and future senior indebtedness of the
Company and senior to subordinated
indebtedness.
Change in Control..............Upon the occurrence of a Change in Control (as
defined), holders of the Notes will have the
right, at the holder's option, to require the
Company to repurchase all or any part of their
Notes at a purchase price equal to 101% of the
principal amount of such Notes, plus accrued
and unpaid interest thereon to the date of
repurchase. No assurance can be given that the
Company would have sufficient funds to
repurchase any or all Notes then required to be
repurchased. See "Description of
Notes -- Change in Control."
Certain Covenants..............The Indenture (as defined) imposes certain
restrictions on, among other things, the
ability of the Company and certain of its
subsidiaries to (i) incur indebtedness, (ii)
make restricted payments, (iii) engage in
transactions with affiliates, (iv) create liens
and (v) engage in certain sale and leaseback
transactions. These covenants include
significant conditions and exceptions and
should be read in their entirety. See
"Description of Notes -- Certain Covenants."
Use of Proceeds................The net proceeds from the sale of the Notes will
be used to call, at 101.77% of the principal
amount thereof, $200 million principal amount
of the Company's 10 5/8% senior notes due 1999.
S-3
<PAGE> 3
THE COMPANY
The Company is a major supplier of information services, systems and
solutions on a worldwide basis. Through its three business units, the
Information Services Group, the Computer Systems Group and Global Customer
Services, the Company provides systems and solutions designed to enhance the
productivity, competitiveness and responsiveness of its clients.
The Company was incorporated in February 1984 under the laws of Delaware
and is the successor by merger to Burroughs Corporation, a Michigan corporation
incorporated in 1905. In November 1986, Sperry Corporation, a Delaware
corporation incorporated in 1955, was merged with and into the Company, and the
Company's name was changed to Unisys Corporation.
The principal executive offices of the Company are located at Township Line
and Union Meeting Roads, Blue Bell, Pennsylvania 19424. The Company's telephone
number is (215) 986-4011.
RISK FACTORS
This Prospectus contains or incorporates by reference certain
forward-looking statements, as defined in the Private Securities Litigation
Reform Act of 1995. All forward-looking statements rely on assumptions and are
subject to risks, uncertainties and other factors that could cause the Company's
actual results to differ materially from expectations. These include, but are
not limited to, the risk factors set forth below. Prospective investors should
consider carefully, in addition to the other information contained and
incorporated by reference herein, the following factors before deciding to
purchase the Notes.
COMPETITIVE MARKETPLACE
The Company operates in an industry characterized by aggressive
competition, rapid technological change, evolving technology standards and short
product life cycles. The Company's competitors include computer hardware
manufacturers, software providers and information services companies, many of
which have greater financial and other resources than the Company and are
substantially less leveraged. The Company competes primarily on the basis of
product performance, service, technological innovation and price. Future
operating results will depend on the Company's ability to design, develop,
introduce, deliver or obtain new and innovative products and services on a
timely and cost-effective basis; on its ability to mitigate the effects of
competitive pressures and volatility in the information technology and services
market on revenues, pricing and margins; and on its ability to effectively
manage the shift of its business mix away from traditional high margin product
and services offerings.
HIGH LEVERAGE AND CASH REQUIREMENTS
At December 31, 1997 and 1996, the Company had approximately $1.7 billion
and $2.3 billion principal amount of debt, respectively. Total interest expense
for 1997 and 1996 was $233.2 million and $249.7 million, respectively. The
Company's debt-to-capital ratio was 58% at December 31, 1997 and 59% at December
31, 1996.
The Company has outstanding $1.4 billion of Series A convertible preferred
stock. Dividends paid on the Series A preferred stock in 1997 amounted to $106.3
million.
The total cash requirements associated with the restructuring actions
discussed below are expected to be approximately $180 million in 1998 and a
total of $58 million in 1999 and beyond. Several factors, including foreign
currency fluctuations and negotiations with third parties, could cause actual
cash requirements to differ from expectations.
During 1997, net cash used for continuing operations was $207.1 million.
For the year 1996, net cash used for continuing operations was $64.6 million. In
1996, proceeds from the issuance of debt exceeded principal payments of debt by
$373.3 million. During 1995, net cash used for continuing operations was $412.4
million. In 1995, discontinued operations provided cash of $658.3 million,
primarily from the sale of the Company's defense systems business.
In June 1997, the Company entered into a two-year $200 million revolving
credit facility replacing the prior one-year facility. The facility includes
certain financial tests that must be met as conditions to a
S-4
<PAGE> 4
borrowing and provides that no amounts may be outstanding under the facility for
a minimum of 20 consecutive days in each quarter. The facility may not be used
to refinance other debt. The amount the Company may borrow at any given time is
dependent upon the amount of certain of its accounts receivable and inventory.
The Company may require continued access to financing sources to meet its
cash requirements for debt service, restructurings and operating activities.
There can be no assurance that such access will always be available to the
Company or that the Company would be permitted to incur additional indebtedness
under its then existing set of restrictive covenants.
NET LOSSES AND RESTRUCTURINGS
The Company operates in an industry characterized by ongoing dramatic
changes, including, in the case of the Company, a shift from higher margin to
lower margin products and services. In order to improve its operating results,
the Company has moved aggressively to realign its operations to reflect the
rapidly changing market for information processing products and services. In the
fourth quarter of 1997, the Company took a one-time charge of $1.1 billion
against net income. The charge included $127.0 million principally related to
the Company's decision to discontinue the manufacturing and assembly of personal
computers and low-end servers and to dispose of a small, non-strategic
technology product, the writeoff of $883.6 million in goodwill principally
related to the 1986 merger of Burroughs Corporation and Sperry Corporation and
$42.0 million related to the conversion, in December 1997, of $271.2 million of
the Company's 8 1/4% convertible subordinated notes due 2006. After this charge,
the Company reported a net loss of $853.6 million for 1997. In 1995, the Company
reported a net loss of $624.6 million, which included a fourth quarter pretax
restructuring charge of $717.6 million, primarily relating to the internal
realignment of the Company into three operating units and covering work force
reductions, product and program discontinuances and consolidation of office
facilities and manufacturing capacity. For the year ended December 31, 1996, the
Company reported net income of $49.7 million. In the fourth quarter of 1996, the
Company reversed certain reserves established under the 1995 restructuring plan,
due to lower-than-anticipated costs for work force reductions. This reversal was
offset by charges of $84 million relating to the refocusing and discontinuance
of certain products and programs. The Company recorded special pretax charges of
$186.2 million in 1994, $1.2 billion in 1991, $181.0 million in 1990 and $231.0
million in 1989. Principally due to these special charges, the Company had net
losses of $1.4 billion in 1991, $436.7 million in 1990 and $639.3 million in
1989. No assurance can be given that the Company will not experience losses in
the future.
SYSTEMS INTEGRATION CONTRACTS
Certain of the Company's systems integration contracts are fixed-price
contracts under which the Company assumes the risk for the delivery of the
contracted services at an agreed-upon fixed price. The Company has at times
experienced problems in performing certain of its fixed-price contracts on a
profitable basis and has provided periodically for adjustments to the cost to
complete such contracts. In the fourth quarter of 1995, the Company recorded a
pretax charge for contract losses of $129.0 million, primarily relating to a few
large multi-year, fixed-price systems integration contracts. In the first
quarter of 1997, the Company recorded charges of approximately $25 million for
additional estimated contract costs identified during the quarter. There can be
no assurance that the Company will not experience such contract performance
problems in the future, which problems could affect the Company's results of
operations.
IMPORTANCE OF INTERNATIONAL OPERATIONS
Revenue from international operations accounted for approximately 60% of
the Company's total revenue in each of the last three years. There is no
material concentration of revenues in any particular country. Due to its foreign
operations, the Company is exposed to the effects of foreign exchange rate
fluctuations on the U.S. dollar.
The Company uses foreign exchange forward contracts and options, generally
having maturities of less than nine months, to reduce such exposure. Such
contracts and options are entered into for the sole purpose of hedging certain
transactional exposures. The Company does not hold or issue financial
instruments for speculative trading purposes. In addition to fluctuations in
foreign currency exchange rates, the Company's
S-5
<PAGE> 5
international business could be affected by many factors beyond its control,
such as instability of foreign economies, U.S. and foreign government laws and
policies affecting trade and investment, and governmental changes. Although the
Company has not experienced any significant problems in foreign countries
arising from such factors, there can be no assurance that such problems will not
arise in the future.
REPURCHASE OF THE NOTES UPON A CHANGE IN CONTROL
Upon a Change in Control (as defined), the Company must offer to purchase
the Notes then outstanding at a purchase price equal to 101% of the principal
amount thereof, plus accrued interest to the date of purchase. See "Description
of Notes -- Change in Control."
The Change in Control purchase feature of the Notes may in certain
circumstances discourage or make more difficult a sale or takeover of the
Company. The occurrence of a Change in Control would enable the holders of
certain other outstanding debt securities of the Company to exercise repurchase
rights of the type described herein and would, in most cases, permit members of
the bank group to terminate their lending commitments under the Company's
revolving credit facility. There can be no assurance that the Company will have
sufficient funds available at the time of any Change in Control to effect the
repurchase of the Notes. See "Description of Notes."
RECENT DEVELOPMENTS
On January 15, 1998, the Company reported net income before one-time
charges of $199.0 million for the year ended December 31, 1997, compared with
net income before one-time charges of $61.8 million in 1996. Before one-time
items, the Company earned $0.46 per share on a diluted basis after payment of
preferred dividends in 1997, compared to a loss of $0.34 per share in 1996.
Operating income before one-time items was $613.8 million in 1997, compared to
$327.4 million in 1996. Net income for the fourth quarter of 1997 before
one-time items was $86.9 million, or $0.25 per share on a diluted basis after
preferred dividends, compared to net income before one-time items of $55.7
million, or $0.14 per share on a diluted basis after preferred dividends, in the
fourth quarter of 1996. Operating income before one-time items was $217.5
million in the fourth quarter of 1997 and $146.9 million in the fourth quarter
of 1996.
In the fourth quarter of 1997, the Company took a one-time charge of $1.1
billion against net income. After this charge, the Company reported a fourth
quarter 1997 net loss of $965.7 million, compared to net income of $43.6 million
after a one-time item in the fourth quarter of 1996. Including one-time items,
the net loss for the year ended December 31, 1997 was $853.6 million, or $5.30
per share after preferred dividends. Net income in 1996 was $49.7 million, or a
loss of $0.41 per share after preferred dividends.
The one-time charge against 1997 fourth quarter net income included the
writeoff of $883.6 million in goodwill principally related to the 1986 merger of
Burroughs Corporation and Sperry Corporation, $127.0 million principally related
to the Company's decision to discontinue the manufacturing and assembly of
personal computers and low-end servers and to dispose of a small, non-strategic
technology product and $42.0 million related to the conversion, in December
1997, of $271.2 million of the Company's 8 1/4% convertible subordinated notes
due 2006. The writeoff of goodwill reflects the rapid changes that continue to
occur in the marketplace away from proprietary technology and maintenance as
well as the Company's decision to change the method used for measuring the
remaining value of this goodwill.
Revenue for the year ended December 31, 1997 was $6.64 billion, compared to
$6.37 billion in 1996. Revenue for the fourth quarter of 1997 was $1.90 billion,
compared to $1.81 billion in the fourth quarter of 1996. During the year ended
December 31, 1997, the Company generated $383.5 million in cash flow from
operating activities, an increase of $473.2 million from 1996. During the fourth
quarter of 1997, the Company generated $393.7 million in cash flow from
operations, up from $263.0 million in the fourth quarter of 1996.
During the fourth quarter of 1997, approximately $616 million principal
amount of the Company's 8 1/4% convertible subordinated notes due 2000 and 2006
were converted into common stock. On February 5, 1998, the Company will redeem,
at par, all $197.5 million of its 9 1/2% senior notes due July 15, 1998. These
actions will reduce by more than $58 million the Company's cash and interest
expense in 1998.
S-6
<PAGE> 6
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby, after deducting
the underwriting discount and expenses of the offering, are estimated to be
approximately $195.8 million. Such proceeds will be used to call, at 101.77% of
the principal amount thereof, $200 million principal amount of the Company's
10 5/8% senior notes due 1999.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997, and as adjusted to give effect to (i) the redemption of the
9 1/2% senior notes referred to in "Recent Developments" above and (ii) the sale
of the Notes offered hereby and the assumed redemption of $200 million of the
Company's 10 5/8% senior notes. See "Use of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------
ACTUAL AS ADJUSTED
--------- -----------
(MILLIONS)
<S> <C> <C>
Cash and Cash Equivalents(1)(2)(3)................................... $ 803.0 $ 597.8
======= =======
Short-Term Debt:
Notes Payable and current maturities of Long-Term Debt(2).......... $ 253.7 $ 56.2
======= =======
Long-Term Debt:
% Senior Notes due 2008....................................... $ -- $ 200.0
10 5/8% Senior Notes due 1999(3)................................... 330.1 130.1
Other Senior Debt.................................................. 1,080.4 1,080.4
8 1/4% Convertible Subordinated Notes due 2006(4).................. 27.8 27.8
------- -------
Total Long-Term Debt....................................... 1,438.3 1,438.3
------- -------
Stockholders' Equity:
Preferred Stock, $1.00 par value per share, 40 million shares
authorized; 28.4 million shares issued.......................... 1,420.1 1,420.1
Common Stock, $.01 par value per share, 360 million shares
authorized; 250.2 million shares issued......................... 2.5 2.5
Accumulated Deficit(5)............................................. (1,736.8) (1,739.9)
Other Capital...................................................... 1,520.1 1,520.1
------- -------
Total Stockholders' Equity................................. 1,205.9 1,202.8
Total Capitalization....................................... $ 2,644.2 $ 2,641.1
======= =======
</TABLE>
- ---------------
(1) The number in the "As Adjusted" column gives effect to the approximately
$195.8 million of net proceeds expected to be received by the Company from
the sale of the Notes, after payment of certain fees and expenses in
connection with the offering of the Notes.
(2) The number in the "As Adjusted" column gives effect to the redemption at
par, on February 5, 1998, of $197.5 million of the Company's 9 1/2% senior
notes due July 15, 1998.
(3) The number in the "As Adjusted" column gives effect to the assumed
redemption, at 101.77% of the principal amount thereof, of $200.0 million
principal amount of the Company's 10 5/8% senior notes due 1999.
(4) Convertible into an aggregate of 4.0 million shares of the Company's Common
Stock at a conversion price of $6.875 per share.
(5) The number in the "As Adjusted" column gives effect to the estimated charge
of $3.1 million principally associated with the early redemption of the
10 5/8% senior notes.
S-7
<PAGE> 7
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- ----------------------------------------
1997 1996 1995 1994 1993
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
* 1.28 * 1.11 2.21
</TABLE>
The ratio of earnings to fixed charges has been computed by dividing income
(loss) from continuing operations before income taxes, extraordinary items and
changes in accounting principles minus undistributed earnings of associated
companies plus fixed charges by fixed charges. Fixed charges consist of interest
on all indebtedness, amortization of debt issuance expenses and the portion of
rental expense representative of interest.
- ---------------
* Earnings for the years ended December 31, 1997 and 1995 were inadequate to
cover fixed charges by $752.9 million and $776.1 million, respectively.
DESCRIPTION OF NOTES
GENERAL
The following description of the Notes offered hereby (referred to in the
accompanying Prospectus as "Debt Securities") supplements, and to the extent
inconsistent therewith supersedes, insofar as such description relates to the
Notes, the description of the general terms and provisions of the Debt
Securities set forth in the accompanying Prospectus, to which description
reference is hereby made.
The Notes will be issued under an Indenture dated as of August 6, 1992
between the Company and Bank One, NA, as trustee (the "Trustee"), as
supplemented by a Fourth Supplemental Indenture (the "Supplemental Indenture")
thereto (such Indenture and Supplemental Indenture, collectively, the
"Indenture"). The following is a summary of the material provisions of the
Indenture. The summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Indenture,
including the definitions of certain terms therein. Wherever particular defined
terms of the Indenture not otherwise defined herein are referred to, such
defined terms shall be incorporated herein by reference. The Indenture is an
exhibit to the Registration Statement.
The Company does not currently intend to list the Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active public market for the Notes
will develop. The absence of an active public trading market could have an
adverse effect on the liquidity and value of the Notes.
PRINCIPAL, MATURITY AND INTEREST
The aggregate principal amount of the Notes is limited to $200 million.
Each Note will mature on April 1, 2008 and will bear interest at the rate per
annum shown on the cover page hereof. Interest on the Notes will accrue from the
date of original issuance or from the most recent interest payment date to which
interest has been paid or provided for, payable semiannually (to holders of
record at the close of business on the March 15 or September 15 immediately
preceding the interest payment date) on April 1 and October 1 of each year,
commencing April 1, 1998.
Interest on the Notes will be paid by check mailed to the persons in whose
names the Notes are registered at the close of business on the applicable record
date or, at the option of the Company, by wire transfer to accounts maintained
by such person with a bank located in the United States. The principal of the
Notes will be paid upon surrender of the Notes at the corporate trust office of
the Trustee. While the Notes are represented by Global Notes, the Company will
make payments of interest by wire transfer to the Depositary or its nominee, as
the case may be, which will distribute payments to beneficial holders in
accordance with its customary procedures. See "-- Book-Entry, Delivery and
Form."
The Company has no sinking fund obligation with respect to the Notes. The
provisions of the Indenture described in the accompanying Prospectus under
"Description of the Debt Securities -- Defeasance" shall apply to the Notes.
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<PAGE> 8
RANKING
The Notes will be senior unsecured obligations of the Company, ranking pari
passu with all existing and future senior indebtedness of the Company and senior
to subordinated indebtedness.
OPTIONAL REDEMPTION
The Notes may not be redeemed prior to April 1, 2003 on and after which
date the Notes may be redeemed at the option of the Company as a whole, or from
time to time in part, in multiples of $1,000, on any date prior to maturity,
upon mailing a notice of such redemption not less than 30 nor more than 60 days
prior to the date fixed for redemption to the holders of Notes to be redeemed,
at the following redemption prices (expressed in percentages of the principal
amount) together in each case with accrued interest to the date fixed for
redemption:
If redeemed during the twelve-month period beginning April 1:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
--------------------- ----------
<S> <C>
2003
2004
2005
2006 and thereafter 100.00%
</TABLE>
;provided that if the date fixed for redemption is April 1 or October 1, then
the interest payable on such date shall be paid to the holder of record on the
preceding March 15 or September 15.
If fewer than all of the Notes are to be redeemed, the Trustee shall
select, in such manner as it shall deem appropriate and fair, which Notes shall
be redeemed in whole or in part, and shall promptly notify the Company in
writing of the Notes selected for redemption. On or prior to the redemption date
specified in the notice of redemption, the Company will deposit with the Trustee
money sufficient to pay the redemption price, together with all accrued
interest, of all Notes or portions thereof to be redeemed.
FALL-AWAY EVENT
In the event that the Notes achieve Investment Grade Status and no Event of
Default or Default shall have occurred and be continuing (the occurrence of the
foregoing events, being collectively referred to as the "Fall-away Event"), the
"Limitation on Company and Subsidiary Indebtedness," "Limitation on Restricted
Payments" and "Limitation on Transactions with Related Persons" covenants
described under "-- Certain Covenants" will no longer be applicable to the
Company and its Subsidiaries. See "-- Certain Covenants."
CHANGE IN CONTROL
Upon any Change in Control (as defined below) with respect to the Company,
each holder of Notes shall have the right (the "Repurchase Right"), at the
holder's option, to require the Company to repurchase all of such holder's
Notes, or a portion thereof which is $1,000 or any integral multiple thereof, on
the date (the "Repurchase Date") that is 45 days after the date of the Company
Notice (as defined below) at a price (the "Put Price") equal to 101% of the
principal amount of the Notes, plus accrued interest, if any, to the Repurchase
Date.
Within 30 days after the occurrence of a Change in Control, the Company is
obligated to mail to all holders of record of the Notes a notice (the "Company
Notice") of the occurrence of such Change in Control and the Repurchase Right
arising as a result thereof. The Company shall deliver a copy of the Company
Notice to the Trustee and shall cause a copy of such notice to be published in
The Wall Street Journal or another newspaper of national circulation. To
exercise the Repurchase Right, a holder of Notes must deliver on or before the
30th day after the date of the Company Notice irrevocable written notice to the
Company (or an agent designated by the Company for such purpose) and the Trustee
of the holder's exercise of such right together with the Notes with respect to
which the right is being exercised, duly endorsed for transfer.
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<PAGE> 9
"Change in Control" means an event or series of events as a result of which
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of shares entitling the holder thereof to cast
more than 50% of the votes for the election of directors of the Company; (ii)
the Company consolidates with or merges into any other corporation, or conveys,
transfers or leases all or substantially all of its assets to any person, or any
other corporation merges into the Company, and, in the case of any such
transaction, the outstanding Common Stock of the Company is changed or exchanged
as a result; or (iii) at any time Continuing Directors do not constitute a
majority of the Board of Directors. "Continuing Director" means at any date a
member of the Company's Board of Directors (i) who was a member of such board 24
months prior to such date or (ii) who was nominated or elected by at least
two-thirds of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Company's Board of Directors was
recommended or endorsed by at least two-thirds of the directors who were
Continuing Directors at the time of such election (under this definition, if the
present Board of Directors of the Company were to approve a new director or
directors and then resign, no Change in Control would occur even though the
present Board of Directors would thereafter cease to be in office). No
quantitative or other established meaning has been given to the phrase "all or
substantially all" (which appears in the definition of Change in Control) by
courts which have interpreted this phrase in various contexts. In interpreting
this phrase, courts make a subjective determination as to the portion of assets
conveyed, considering such factors as the value of assets conveyed and the
proportion of an entity's income derived from the assets conveyed. To the extent
the meaning of such phrase is uncertain, uncertainty will exist as to whether or
not a Change in Control may have occurred (and, accordingly, whether or not the
holders of Notes will have the right to require the Company to repurchase their
Notes).
Certain transactions sponsored by the Company's management or an affiliate
of the Company could constitute a Change in Control that would give rise to the
Repurchase Right. The Indenture does not provide the Company's Board of
Directors with the right to limit or waive the Repurchase Right in the event of
any such transaction. The right to require the Company to repurchase the Notes
could delay or deter a Change in Control of the Company, whether or not such
Change in Control were supported by the Board of Directors of the Company.
The occurrence of a Change in Control would enable the holders of certain
other outstanding debt securities of the Company to exercise Repurchase Rights
of the type described above and would, in most cases, permit members of the bank
group to terminate their lending commitments under the Company's revolving
credit facility. If a Change in Control occurs, there can be no assurance that
the Company would have sufficient funds to repurchase any or all Notes then
required to be repurchased under the Indenture.
If an offer is made to repurchase Notes as a result of a Change in Control,
the Company will comply with all tender offer rules, including but not limited
to Section 13(e) and 14(e) under the Exchange Act and Rules 13e-1 and 14e-1
thereunder, to the extent applicable to such offer.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Consolidated Subsidiary or (ii) assumed in connection
with the acquisition of assets of such Person.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Redeemable Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment or mandatory redemption of
such Indebtedness or Redeemable Stock, as the case may be, multiplied by the
amount of such principal payment or mandatory redemption by (ii) the sum of all
such principal payments or mandatory redemption amounts, as the case may be.
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"Bank Credit Agreement" means the Credit Agreement, dated as of June 19,
1997, among the Company, certain banks, and Bankers Trust Company, as agent.
"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which is not subject to redemption by the Company.
"Consolidated Interest Coverage Ratio" means for any period the ratio of
(i) the sum of Consolidated Net Income, Consolidated Interest Expense and
Consolidated Tax Expense, plus, without duplication, all depreciation and all
amortization, in each case, for such period, of the Company and its Consolidated
Subsidiaries on a consolidated basis, all as determined in accordance with
generally accepted accounting principles, to (ii) Consolidated Interest Expense
for such period; provided, that in making such computation, the Consolidated
Interest Expense attributable to interest on any indebtedness computed on a pro
forma basis and bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable rate for the
entire period.
"Consolidated Interest Expense" means for any period the sum of (i) the
aggregate of the interest expense on Indebtedness of the Company and its
Consolidated Subsidiaries for such period, determined on a consolidated basis in
accordance with generally accepted accounting principles, plus (ii) without
duplication, that portion of capital lease obligations of the Company and its
Consolidated Subsidiaries representative of the interest factor for such period,
determined on a consolidated basis in accordance with generally accepted
accounting principles, plus (iii) without duplication, dividends in respect of
preferred or preference stock of a Consolidated Subsidiary of the Company held
by Persons other than the Company or a Consolidated Subsidiary of the Company.
For purposes of clause (iii) of the preceding sentence, dividends shall be
deemed to be an amount equal to the actual dividends paid divided by 1.00 minus
the applicable actual combined federal, state, local and foreign income tax rate
of the Company (expressed as a decimal), on a consolidated basis, for the fiscal
year immediately preceding the date of the transaction giving rise to the need
to calculate Consolidated Interest Expense.
"Consolidated Net Income" means for any period the net income or loss of
the Company and its Consolidated Subsidiaries for such period on a consolidated
basis as determined in accordance with generally accepted accounting principles
adjusted by excluding the after-tax effect of (i) net gains or losses in respect
of dispositions of assets other than in the ordinary course of business, (ii)
any gains or losses from currency exchange transactions not in the ordinary
course of business consistent with past practice, (iii) any gains or losses
attributable to write-ups or write-downs of assets or liabilities other than in
the ordinary course of business, (iv) any special or extraordinary charges
attributable to restructuring transactions other than in the ordinary course of
business, (v) any income or loss of persons acquired in a "pooling of interest"
transaction prior to the date of combination and (vi) the cumulative effect of a
change in accounting principle from the date of the Supplemental Indenture;
provided that, if the consolidated financial statements of the Company and its
Consolidated Subsidiaries for such period give effect to Statement 106 of the
Financial Accounting Standards Board ("FASB 106"), Consolidated Net Income for
such period shall be (a) increased by any expenses (net of any income tax
benefits attributable to such expenses) for post-retirement benefits other than
pensions ("Post-Retirement Benefits") to the extent that such expenses are
deducted from net income in accordance with FASB 106 and (b) shall be decreased
by the aggregate amount of cash payments for Post-Retirement Benefits during
such period (net of any income tax benefits attributable to such cash payments
on a pro forma basis calculated in the same manner as the income tax benefits
referred to in clause (a)).
"Consolidated Shareholders' Equity" means the total shareholders' equity of
the Company and its consolidated subsidiaries which, under generally accepted
accounting principles, would appear on a consolidated balance sheet of the
Company and its subsidiaries, excluding the separate component of shareholders'
equity attributable to foreign currency translation adjustments pursuant to
"Statement of Financial Accounting Standards No. 52 -- Foreign Currency
Translation" or any successor provision or principle of generally accepted
accounting principles.
"Consolidated Subsidiary" means, with respect to any Person, any
corporation or other entity of which a majority of the capital stock or other
ownership interests having ordinary voting power to elect a majority of
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the Board of Directors or other persons performing similar functions are at the
time directly or indirectly owned by such Person.
"Consolidated Tax Expense" means for any period the aggregate of the
federal, state, local and foreign income tax expenses of the Company and its
Consolidated Subsidiaries for such period determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Convertible Debt" means Indebtedness of the Company that, by its terms, is
convertible in its entirety into Common Stock.
"Finance Subsidiary" means a corporation of the type described in clause
(ii) of the definition of "Subsidiary."
"Foreign Subsidiary" means a corporation of the type described in clause
(i) of the definition of "Subsidiary."
"generally accepted accounting principles" means generally accepted
accounting principles in the United States as in effect (unless otherwise
stated) as of the date of the Supplemental Indenture, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession.
"guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by standby letter of credit
or otherwise) or (ii) entered into for the purpose of assuring in any other
manner the holder of such Indebtedness of the payment thereof or to protect such
holder against loss in respect thereof (in whole or in part); provided that the
term guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "guarantee" used as a verb has a
corresponding meaning.
"Indebtedness" means (i) any liability of any Person (a) for borrowed
money, or (b) evidenced by a bond, note, debenture or similar instrument
(including purchase money obligations but excluding Trade Payables), or (c) for
the payment of money relating to a lease that is required to be classified as a
capitalized lease obligation in accordance with generally accepted accounting
principles, or (d) for preferred or preference stock of a Consolidated
Subsidiary of the Company held by Persons other than the Company or any
Consolidated Subsidiary of the Company; (ii) any liability of others described
in the preceding clause (i) that the Person has guaranteed, that is recourse to
such Person or that is otherwise its legal liability; and (iii) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (i) and (ii) above.
"Intercompany Obligations" means any Indebtedness or any other obligation
of the Company or any Consolidated Subsidiary of the Company which, in the case
of the Company, is owing to any Consolidated Subsidiary of the Company and
which, in the case of any Consolidated Subsidiary of the Company, is owing to
the Company or any other Consolidated Subsidiary of the Company.
"Investment Grade" means (i) BBB- or above in the case of S&P (or its
equivalent under any successor Rating Categories of S&P), (ii) Baa3 or above, in
the case of Moody's (or its equivalent under any successor Rating Categories of
Moody's), or (iii) the equivalent in respect of the Rating Categories of any
Rating Agencies substituted for S&P or Moody's.
"Investment Grade Status" means the first day on which the Notes are rated
Investment Grade by either S&P or Moody's.
"Moody's" means Moody's Investors Service, Inc. and its successors.
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"Permitted Indebtedness" means (i) Indebtedness of the Company or any
Consolidated Subsidiary of the Company outstanding on the date of the
Supplemental Indenture; (ii) Indebtedness of the Company and its Consolidated
Subsidiaries at any time outstanding not in excess of $750 million in the
aggregate; (iii) Indebtedness of the Company and its Consolidated Subsidiaries
at any time outstanding not in excess of $1 billion in the aggregate under the
Bank Credit Agreement (and any refinancings or replacements thereof or additions
thereto) and Indebtedness of Foreign Subsidiaries at any time outstanding not in
excess of $250 million in the aggregate under bank loan facilities; (iv)
Indebtedness of Finance Subsidiaries so long as such Indebtedness is
non-recourse to, not guaranteed by and is not otherwise the legal liability of
the Company or any other Consolidated Subsidiary; (v) Intercompany Obligations;
and (vi) any renewals, extensions, substitutions, refundings, refinancings or
replacements of any Indebtedness described in clause (i) above ("Refinancing
Indebtedness"); provided that (a) the aggregate principal amount of the
Refinancing Indebtedness shall not exceed the sum of (1) the aggregate principal
amount and accrued interest of the Indebtedness to be refinanced (or if such
Indebtedness was issued at an original issue discount, the original issue
discount price plus amortization of the original issue discount at the time of
the incurrence of the Refinancing Indebtedness) and (2) the reasonable fees and
expenses directly incurred in connection with such Refinancing Indebtedness, (b)
such Refinancing Indebtedness is subordinated in right of payment to the Notes
at least to the extent that the Indebtedness to be refinanced is subordinated to
the Notes, (c) Refinancing Indebtedness incurred by any Consolidated Subsidiary
shall not be used to refinance Indebtedness of the Company, (d) all proceeds of
such Refinancing Indebtedness are applied to the payment, redemption,
repurchase, defeasance, acquisition or retirement of the Indebtedness to be
refinanced within 12 months before or after such event and (e) such Refinancing
Indebtedness determined as of the date of incurrence does not mature prior to
the final scheduled maturity date of the Notes and the Average Life of such
Refinancing Indebtedness is equal to or greater than the remaining Average Life
of the Notes; provided that this clause (e) shall apply only if the final
scheduled maturity date of the Indebtedness being refinanced is later than the
final scheduled maturity date of the Notes. Notwithstanding clauses (ii) and
(iii) above, up to $250 million of the amounts set forth in such clauses may be
subtracted from such amounts and applied to increase any other amount set forth
in either of such clauses.
"Principal Manufacturing Property" means any manufacturing property located
within the United States of America (other than its territories or possessions)
owned by the Company or any Subsidiary, except for any manufacturing property
that, in the opinion of the Board of Directors, is not of material importance to
the business conducted by the Company and its Subsidiaries, taken as a whole.
"Rating Agencies" means (i) S&P, (ii) Moody's or (iii) any successor to S&P
or Moody's or both, as the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories (any of which may include a "+" or "-"): AAA, AA, A, BBB, BB, B, CCC,
CC, C and D (or equivalent successor categories); (ii) with respect to Moody's,
any of the following categories (any of which may include a "1", "2" or "3"):
Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories)
and (iii) the equivalent of any such categories of S&P or Moody's used by
another Rating Agency, if applicable.
"Redeemable Stock" means any class or series of preferred or preference
stock of the Company with a stated maturity which is prior to the Stated
Maturity of the Notes or that by its terms or otherwise is required to be
redeemed or retired, in whole or in part, prior to the Stated Maturity of the
Notes or is redeemable at the option of the holder thereof at any time prior to
the Stated Maturity of the Notes.
"Related Person" means (i) any Affiliate of the Company, (ii) any Person
who directly or indirectly holds 10% or more of any class of capital stock of
the Company, (iii) with respect to any such natural Person, any other Person
having a relationship with such Person by blood, marriage or adoption not more
remote than first cousin and (iv) any officer or director of the Company;
provided, however, "Related Person" shall not include the Unisys Employees
Savings Thrift Trust, or any successor thereof.
"S&P" means Standard & Poor's Rating Services and its successors.
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"Subsidiary" means any corporation of which at least a majority of the
outstanding voting stock is owned by the Company or by other Subsidiaries, but
will not include any such corporation (an "Affiliated Corporation") which (i)
does not transact any substantial portion of its business or regularly maintain
any substantial portion of its operating assets in the United States; (ii) is
principally engaged in financing sales or leases of merchandise, equipment or
services by the Company, a Subsidiary or another Affiliated Corporation; (iii)
is principally engaged in holding or dealing in real estate or (iv) is
principally engaged in the holding of stock in, and/or the financing of
operations of, Affiliated Corporations.
"Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed in the ordinary
course of business in connection with the obtaining of materials or services.
"Wholly Owned Consolidated Subsidiary" means, with respect to any Person, a
Consolidated Subsidiary the voting stock (excluding directors' qualifying
shares) of which is more than 90% owned, directly or indirectly, by such Person.
"Wholly Owned Subsidiary" means a Subsidiary of which all of the
outstanding voting stock (other than directors' qualifying shares) is at the
time, directly or indirectly, owned by the Company and/or by one or more Wholly
Owned Subsidiaries.
CERTAIN COVENANTS
Set forth below is a summary of certain covenants contained in the
Indenture. The following summary does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the provisions of the
Indenture. The Indenture will provide that all of the following restrictive
covenants will be applicable to the Company unless and until the Fall-away Event
occurs. In such event, the Company will be released from its obligations to
comply with certain of the restrictive covenants described below as well as
certain other obligations. The covenants that will be released upon the
Fall-away Event are "Limitation on Company and Subsidiary Indebtedness,"
"Limitation on Restricted Payments" and "Limitation on Transactions with Related
Persons."
Limitation on Company and Subsidiary Indebtedness
The Company will not, and will not permit any Consolidated Subsidiary of
the Company to, create, incur, assume, guarantee the payment of, or otherwise
become liable for, any Indebtedness (including Acquired Indebtedness) other than
Permitted Indebtedness, unless, at the time of such event and after giving
effect thereto on a pro forma basis, the Company's Consolidated Interest
Coverage Ratio for the last four full fiscal quarters immediately preceding such
event, taken as one period, is not less than 2.0 to 1.
Limitation on Restricted Payments
The Company will not, and will not permit any Consolidated Subsidiary of
the Company to, directly or indirectly, (i) declare or pay any dividend on, or
make any distribution in respect of or purchase, redeem or retire for value any
capital stock of the Company, other than (a) through the issuance solely of the
Company's own capital stock (other than Redeemable Stock) or options, warrants
or other rights thereto or (b) in the case of any such capital stock that is
Redeemable Stock ("Existing Redeemable Stock"), through the issuance solely of
the Company's own capital stock (including new shares of Redeemable Stock,
provided such new shares of Redeemable Stock have an Average Life equal to or
greater than the lesser of (1) the remaining Average Life of the Existing
Redeemable Stock or (2) the remaining Average Life of the Notes), or (ii) make
any principal payment on, or redeem, repurchase, defease or otherwise acquire or
retire for value, prior to scheduled maturity, mandatory sinking fund date or
mandatory repayment date (including any repayment date arising from the right of
a holder of any Indebtedness to require such Indebtedness to be paid by the
Company prior to its stated maturity but excluding any repayment date arising as
a result of any Indebtedness being declared due and payable prior to the date on
which it would otherwise become due and payable due to any default in the
performance of any term or provision of such Indebtedness), any Indebtedness of
the Company which is subordinate in right of payment to the Notes (other than
with, and to
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the extent of, the proceeds from the incurrence of Refinancing Indebtedness that
constitutes Permitted Indebtedness) (such payments or any other actions
described in (i) and (ii), collectively, "Restricted Payments").
The Company or any Consolidated Subsidiary of the Company may make a
Restricted Payment which would otherwise be prohibited by the preceding
paragraph, provided, that (i) at the time of and after giving effect to the
proposed Restricted Payment no Event of Default (and no event that, after notice
or lapse of time, or both, would become an Event of Default) shall have occurred
and be continuing; (ii) at the time of and after giving effect to the proposed
Restricted Payment (the value of any such payment, if other than cash, as
determined by the Board of Directors, whose determination will be conclusive and
evidenced by a Board Resolution), the aggregate amount of all Restricted
Payments declared or made after June 30, 1992 will not exceed the sum of (a) 50%
of the aggregate cumulative Consolidated Net Income of the Company accrued on a
cumulative basis during the period beginning after June 30, 1992 and ending on
the last day of the Company's last fiscal quarter ending prior to the date of
such proposed Restricted Payment (or, if such aggregate cumulative Consolidated
Net Income shall be a loss, minus 100% of such loss) plus (b) the aggregate
proceeds received by the Company as capital contributions to the Company after
June 30, 1992, or from the issuance and sale (other than to a Consolidated
Subsidiary of the Company) after June 30, 1992 of capital stock of the Company
(excluding Redeemable Stock but including stock issued upon conversions of
Convertible Debt, stock issued to the Company's pension plans and stock issued
upon the exercise of options or warrants), plus (c) $500 million; and (iii)
immediately after giving effect to such proposed Restricted Payment, the Company
could incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the "Limitation on Company and Subsidiary
Indebtedness" covenant described above; provided, however, the provisions of
clause (iii) above shall not be applicable to any declaration or payment in cash
of current dividends or dividends in arrears in respect of any series of
preferred stock of the Company.
The foregoing provisions will not prevent the payment of any dividend
within 60 days after the date of its declaration, if, at the date of
declaration, such payment would be permitted by such provisions. Notwithstanding
the foregoing, "Restricted Payment" shall not include (i) the payment, during
the period beginning October 1, 1992 and ended June 30, 1994, of an aggregate of
$185 million of dividends in arrears in respect of the Company's preferred stock
or (ii) the redemption of Convertible Debt pursuant to the terms of the
indenture or other instrument under which such debt is issued, provided that (a)
the last reported sale price for the Company's Common Stock for each of the five
consecutive trading days immediately preceding the date of the notice of
redemption therefor (the "notice date") shall have exceeded 115% of the
conversion price for such Convertible Debt and (b) the Company's Consolidated
Interest Coverage Ratio for the last four fiscal quarters immediately preceding
such notice date, taken as one period, is not less than 2.0 to 1.
Limitation on Transactions with Related Persons
The Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with a
Related Person unless such transaction or series of transactions is on terms
that are no less favorable to the Company or such Consolidated Subsidiary, as
the case may be, than would be available in a comparable transaction with an
unrelated third party; provided, however, that the foregoing restrictions will
not apply to (i) transactions between or among any of the Company and its Wholly
Owned Consolidated Subsidiaries, (ii) transactions between or among any of the
Company and its Consolidated Subsidiaries that are not Wholly Owned Consolidated
Subsidiaries, provided such transactions are entered into in the ordinary course
of business on terms and conditions consistent with prior practice, and (iii)
any transaction with an officer or director of the Company or any Consolidated
Subsidiary entered into in the ordinary course of business (including, without
limitation, compensation or employee benefit and perquisite arrangements).
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Limitation upon Mortgages and Liens
Neither the Company nor a Subsidiary will create or assume, except in favor
of the Company or a Wholly Owned Subsidiary, any mortgage, pledge, lien or
encumbrance upon any Principal Manufacturing Property or any stock or
indebtedness of any Subsidiary without equally and ratably securing the Notes
and any other indebtedness of the Company entitled thereto. This limitation will
not apply to certain permitted encumbrances as described in the Indenture,
including (i) purchase money mortgages entered into within specified time
limits; (ii) liens existing on acquired property; (iii) certain tax,
materialmen's, mechanics' and judgment liens, certain liens arising by operation
of law and certain other similar liens; (iv) liens in connection with certain
government contracts; (v) certain mortgages, pledges, liens or encumbrances in
favor of any state or local government or governmental agency in connection with
certain tax-exempt financings; (vi) pledges of customers' accounts or paper;
(vii) certain mortgages, pledges, liens or encumbrances securing the payment of
any V Loan Debt (as defined in the Indenture) and (viii) mortgages, pledges,
liens and encumbrances not otherwise permitted if the sum of the indebtedness
thereby secured plus the aggregate sales price of property involved in certain
sale and leaseback transactions does not exceed the greater of $250,000,000 or
5% of Consolidated Shareholders' Equity.
Limitation Upon Sale and Leaseback Transactions
The Company and any Subsidiary will be prohibited from selling any
Principal Manufacturing Property owned on the date of the Indenture with the
intention of taking back a lease thereof, other than a temporary lease (a lease
of not more than 36 months) with the intent that the use of the property by the
Company or such Subsidiary will be discontinued before the expiration of such
period, unless (i) the sum of the sale price of property involved in sale and
leaseback transactions not otherwise permitted plus all indebtedness secured by
certain mortgages, pledges, liens and encumbrances does not exceed the greater
of $250,000,000 or 5% of Consolidated Shareholders' Equity or (ii) the greater
of the net proceeds of such sale or the fair market value of such Principal
Manufacturing Property (which may be conclusively determined by the Board of
Directors of the Company) are applied within 120 days to the optional retirement
of outstanding Notes or to the optional retirement of other Funded Debt (as
defined) of the Company ranking on a parity with the Notes.
CONSOLIDATION, MERGER, SALE OR LEASE OF ASSETS
The Company, without the consent of the holders of any of the outstanding
Notes, may consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to any corporation organized under the laws of any
domestic jurisdiction, provided that (i) the successor corporation assumes the
Company's obligations on the Notes and under the Indenture, (ii) after giving
effect to the transaction no Event of Default (and no event which, after notice
or lapse of time would become an Event of Default) shall have occurred and be
continuing, (iii) after giving effect to the transaction the Company or such
successor corporation could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the "Limitation on Company and Subsidiary
Indebtedness" covenant described above, and (iv) certain other conditions are
met.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Notes: (i) failure to pay principal of or any premium on any Note when due; (ii)
failure to pay any interest on any Note when due, continued for 30 days; (iii)
default in the performance or breach of any of the terms contained under
"Consolidation, Merger, Sale or Lease of Assets;" (iv) failure to pay the Put
Price on a Repurchase Date for any Note with respect to which the Repurchase
Right has been exercised; (v) failure to perform any other covenant of the
Company in the Indenture, continued for 60 days after written notice; (vi)
default (a) in the payment of any scheduled principal of or interest on any
Indebtedness of the Company or any Consolidated Subsidiary (other than the
Notes) aggregating more than $25 million in principal amount when due after
giving effect to any applicable grace period or (b) in the performance of any
other term or provision of any Indebtedness of the Company or any Consolidated
Subsidiary in excess of $25 million principal amount that results in such
Indebtedness becoming or being declared due and payable prior to the date on
which it would
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otherwise become due and payable, and such acceleration shall not have been
rescinded or annulled, or such Indebtedness shall not have been discharged,
within a period of 15 days after written notice; (vii) the entry against the
Company or any Consolidated Subsidiary of one or more judgments, decrees or
orders by a court having jurisdiction in the premises from which no appeal may
be or is taken for the payment of money, either individually or in the
aggregate, in excess of $25 million and the continuance of such judgment, decree
or order unsatisfied and in effect for any period of 45 consecutive days without
a stay of execution after written notice; and (viii) certain events in
bankruptcy, insolvency or reorganization.
If any Event of Default occurs and is continuing, either the Trustee or the
holders of at least 25% in aggregate principal amount of the outstanding Notes
may declare the principal amount of all the Notes to be due and payable
immediately. At any time after a declaration of acceleration with respect to the
Notes has been made, but before a judgment or decree based on acceleration has
been obtained, the holders of a majority in aggregate principal amount of
outstanding Notes may, under certain circumstances, rescind and annul such
acceleration.
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Trustee, the holders of a majority in aggregate principal
amount of the outstanding Notes will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, with respect to the
Notes.
The Company is required to furnish the Trustee annually with 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.
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be issued in the form of one or more Global Notes (the
"Global Note") deposited with, or on behalf of, The Depository Trust Company
(the "Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depositary only through the Depositary's Participants or the Depositary's
Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants with portions of the principal amount of the Global
Note and (ii) ownership of the Notes evidenced by the Global Note will be shown
on, and the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of the Depositary's
Participants), the Depositary's Participants and the Depositary's Indirect
Participants. The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer Notes evidenced by the Global Note will be limited to such
extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to
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the Trustee thereunder. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records of the Depositary or
for maintaining, supervising or reviewing any records of the Depositary relating
to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Certificated Securities. A person having a beneficial interest in the
Global Note may exchange such beneficial interest for Notes in the form of
registered definitive certificates (the "Certificated Securities") only under
the limited circumstances described in the accompanying Prospectus. Upon any
such issuance, the Trustee is required to register such Certificated Securities
in the name of, and cause the same to be delivered to, such person or persons
(or the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days, or if at any time the Depositary ceases to be a "clearing agency"
registered under the Exchange Act, or (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the form
of Certificated Securities under the Indenture, then, upon surrender by the
Global Note Holder of its Global Note, Notes in such form will be issued to each
person that the Global Note Holder and the Depositary identify as being the
beneficial owner of the related Notes. Neither the Company nor the Trustee will
be liable for any delay by the Global Note Holder or the Depositary in
identifying the beneficial owners of Notes, and the Company and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from the
Global Note Holder or the Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
will trade in the Same-Day Funds Settlement System maintained by the Depositary
until maturity, and secondary market trading activity in the Notes will
therefore be required by the Depositary to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Notes.
DESCRIPTION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain material United States federal
income tax consequences relevant to the purchase, ownership and disposition of
Notes, all as of the date hereof. Unless otherwise indicated, this summary deals
only with United States Holders (as defined below) who purchase Notes upon their
original issuance and who hold such Notes as capital assets. The following
discussion does not purport to deal with all aspects of United States federal
income taxation that may be relevant to such holders, nor does it address United
States federal income tax consequences which may be relevant to certain types of
holders, such as dealers in securities or currencies, financial institutions,
life insurance companies, persons holding Notes as a part of a hedging, short
sale or conversion transaction or a straddle or United States Holders whose
"functional currency" is not the U.S. dollar. Furthermore, the discussion below
is based upon the provisions of
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<PAGE> 18
the Internal Revenue Code of 1986, as amended (the "Code"), and regulations,
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified so as to result in United
States federal income tax consequences different from those discussed below.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES
ARISING UNDER THE LAWS OF ANY OTHER STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
As used herein, a "United States Holder" of a Note means a holder that is
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source, or
(iv) a trust which is subject to the primary supervision of a court within the
United States and the control of one or more United States persons as described
in section 7701(a)(30) of the Code. A "Non-United States Holder" is any holder
that is not a United States Holder.
PAYMENTS OF INTEREST
Except as set forth below, interest on a Note generally will be taxable to
a United States Holder as ordinary income at the time it is received or accrued
in accordance with the United States Holder's method of accounting for tax
purposes.
MARKET DISCOUNT
If a United States Holder purchases a Note for an amount that is less than
its principal amount, the difference will be treated as "market discount" for
United States federal income tax purposes, unless such difference is less than a
specified de minimis amount. Under the market discount rules, a United States
Holder will be required to treat any principal payment on, or any gain on the
sale, exchange, retirement or other disposition of, a Note as ordinary income to
the extent of the market discount which has not previously been included in
income and is treated as having accrued on such Note at the time of such payment
or disposition. In addition, the United States Holder may be required to defer,
until the maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder of a Note may elect to include market discount in income currently as it
accrues (on either a ratable or constant interest method), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable year
to which the election applies and may not be revoked without the consent of the
Internal Revenue Service ("IRS").
AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a Note for an amount in excess of the
Note's principal amount will be considered to have purchased the Note at a
"premium". A United States Holder generally may elect to amortize the premium
over the remaining term of the Note on a constant yield method. The amount
amortized in any year will be treated as a reduction of the United States
Holder's interest income from the Note. Bond premium on a Note held by a United
States Holder that does not make such an election will decrease the gain or
increase the loss otherwise recognized on disposition of the Note. The election
to amortize premium on a constant yield method once made applies to all debt
obligations held or subsequently acquired by the electing United States Holder
on or after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
Final Treasury regulations issued on December 30, 1997 provide that, at a
holder's election, premium may be amortized to offset interest income only as a
United States Holder takes the qualified stated interest into account under the
United States Holder's regular accounting method. In the case of instruments
that
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<PAGE> 19
provide for alternative payment schedules, bond premium is calculated by
assuming that (i) the holder will exercise or not exercise options in a manner
that maximizes the holder's yield and (ii) the issuer will exercise or not
exercise options in a manner that minimizes the holder's yield except with
respect to call options for which the issuer is assumed to exercise such call
options in a manner that maximizes the holder's yield. The final regulations are
effective for debt instruments acquired on or after March 2, 1998. However, if a
United States Holder elects to amortize bond premium for the taxable year
containing March 2, 1998, or any subsequent taxable year, the final regulations
would apply to all the United States Holder's debt instruments held on or after
the first day of that taxable year. Once made, the election cannot be revoked
without the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A United States Holder's tax basis in a Note will, in general, be the
United States Holder's cost therefor, increased by market discount previously
included in income by the United States Holder and reduced by any amortized
premium. Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize gain or loss equal to the difference between the amount realized
upon the sale, exchange or retirement (less any accrued stated interest, which
will be taxable as such) and the adjusted tax basis of the Note. Such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if
at the time of sale, exchange or retirement the Note has been held for more than
one year. Under recently enacted legislation, capital gains of individuals
derived in respect of capital assets held for more than one year are eligible
for reduced rates of taxation which may vary depending upon the holding period
of such capital assets. Prospective investors should consult their own tax
advisors with respect to the tax consequences of the new legislation. The
deductibility of capital losses is subject to limitations.
NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Company or any paying agent of
principal or interest on a Note owned by a Non-United States Holder,
provided that (i) the beneficial owner does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Company entitled to vote within the meaning of section 871(h)(3) of
the Code and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to the Company through stock
ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on a Note is described in section 881(c)(3)(A) of the Code and
(iv) the beneficial owner satisfies the statement requirement (described
generally below) set forth in section 871(h) or section 881(c) of the Code
and the regulations thereunder;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange or retirement of a Note; and
(c) a Note beneficially owned by an individual who at the time of
death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote within the meaning of section 871(h)(3) of the Code and provided
that the interest payments with respect to such Note would not have been,
if received at the time of such individual's death, effectively connected
with the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner is
not a United States person. Currently, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an IRS Form W-8 (or successor form)) or (2) a financial institution
holding the Note on behalf of
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<PAGE> 20
the beneficial owner certifies, under penalties of perjury, that such statement
has been received by it and furnishes a paying agent with a copy thereof. Under
recently finalized Treasury regulations (the "Final Regulations"), the statement
requirement referred to in (a)(iv) above may also be satisfied with other
documentary evidence for interest paid after December 31, 1998 with respect to
an offshore account or through certain foreign intermediaries.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of interest and
premium made to Non-United States Holders will be subject to a 30% withholding
tax unless the beneficial owner of the Note provides the Company or its paying
agent, as the case may be, with a properly executed (1) IRS Form 1001 (or
successor form) claiming an exemption from withholding under the benefit of a
tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid
on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States. Under the Final Regulations, Non-United States Holders will
generally be required to provide IRS Form W-8 in lieu of IRS Form 1001 and IRS
Form 4224, although alternative documentation may be applicable in certain
situations.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest or premium on the Note is effectively connected with
the conduct of such trade or business, the Non-United States Holder, although
exempt from the withholding tax discussed above, will be subject to United
States federal income tax on such interest on a net income basis in the same
manner as if it were a United States Holder. In addition, if such holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, such interest and premium on a Note will be
included in such foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange or retirement of a Note
generally will not be subject to United States federal income tax unless (i)
such gain or income is effectively connected with a trade or business in the
United States of the Non-United States Holder, or (ii) in the case of a
Non-United States Holder who is an individual, such individual is present in the
United States for 183 days or more in the taxable year of such sale, exchange or
retirement, and certain other conditions are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal and interest paid on Notes and to the proceeds of sale of
a Note made to United States Holders other than certain exempt recipients (such
as corporations). A 31% backup withholding tax will apply to such payments if
the United States Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to Non-United States
Holders if a statement described in (a) (iv) under "Non-United States Holders"
has been received and the payor does not have actual knowledge that the
beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payments of principal and interest on a Note are paid or collected by a foreign
office of a custodian, nominee or other foreign agent on behalf of the
beneficial owner of such Note, or if a foreign office of a foreign broker (as
defined in applicable Treasury regulations) pays the proceeds of the sale of a
Note to the owner thereof. If, however, such nominee, custodian, agent or broker
is, for United States federal income tax purposes, a United States person, a
controlled foreign corporation or a foreign person that derives 50% or more of
its gross income for certain periods from the conduct of a trade or business in
the United States, or, after December 31, 1998, if such nominee, custodian,
agent or broker is a foreign partnership, in which one or more United States
persons, in the aggregate, own more than 50% of the income or capital interests
in the partnership or if the partnership is engaged in a trade or business in
the United States, such payments will not be subject to backup withholding but
will be subject to information reporting, unless (1) such custodian, nominee,
agent or broker has
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documentary evidence in its records that the beneficial owner is not a United
States person and certain other conditions are met or (2) the beneficial owner
otherwise establishes an exemption.
Payments of principal and interest on a Note paid to the beneficial owner
of a Note by a United States office of a custodian, nominee or agent, or the
payment by the United States office of a broker of the proceeds of sale of a
Note, will be subject to both backup withholding and information reporting
unless the beneficial owner provides the statement referred to in (a) (iv) above
and the payor does not have actual knowledge that the beneficial owner is a
United States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
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<PAGE> 22
UNDERWRITING
Bear, Stearns & Co. Inc., BT Alex. Brown Incorporated, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc (the
"Underwriters") have severally agreed, subject to the terms and conditions set
forth in the Underwriting Agreement Basic Provisions dated July, 1996 and the
related Terms Agreement dated January , 1998 (collectively, the "Underwriting
Agreement") among the Company and the Underwriters, to purchase from the Company
the principal amount of Notes set forth below opposite their respective names.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- ------------------------------------------------------------------------------- ------------
<S> <C>
Bear, Stearns & Co. Inc. ...................................................... $100,000,000
BT Alex. Brown Incorporated....................................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.............................
Salomon Brothers Inc...........................................................
------------
Total..................................................................... $200,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to purchasers
at the initial public offering price set forth on the cover of this Prospectus
Supplement and in part to certain securities dealers at such price less a
concession of % of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not to exceed % of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes, but are not obligated to do so and may discontinue such
market making at any time without notice. No assurance can be given, however, as
to whether a trading market in the Notes will develop or as to liquidity of any
trading market for the Notes.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters to bid for and purchase the Notes. As
an exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Notes. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the Notes.
If the Underwriters create a short position in the Notes in connection with
the offering, i.e., if they sell more than the aggregate principal amount of
Notes that is set forth on the cover page of this Prospectus Supplement, the
Underwriters may reduce that short position by purchasing Notes in the open
market.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase Notes in the
open market to reduce the Underwriters' short position or to stabilize the price
of the Notes, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those Notes as part of the
offering.
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. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor the Underwriters 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 Notes. In addition, neither the
Company nor the Underwriters makes any representation that the Underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
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<PAGE> 23
The Underwriters have performed investment banking and other financial
advisory services in the ordinary course of their respective businesses for the
Company in the past, for which they have received customary compensation, and
may continue to do so in the future. Bankers Trust Company, an affiliate of BT
Alex. Brown Incorporated, is an agent under and a participant in the Company's
revolving credit facility and is also the trustee under an indenture governing
other indebtedness of the Company.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed with the Commission pursuant to the
Exchange Act and are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (as amended on Form 10-K/A dated June 20, 1997).
2. The Company's Current Reports on Form 8-K dated October 7, 1997 and
January 15, 1998.
3. The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1997, June 30, 1997 and September 30, 1997.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
Supplement shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such documents. Any statements contained
in a document incorporated by reference herein shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except as
so modified or superseded.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on written or oral request, copies of any or all
documents incorporated by reference herein (other than the exhibits thereto
unless such exhibits are incorporated specifically by reference therein).
Requests should be directed to Unisys Corporation, Township Line and Union
Meeting Roads, Blue Bell, Pennsylvania 19424, Attention: Financial
Communications; Telephone (215) 986-5777.
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<PAGE> 24
PROSPECTUS
$500,000,000
UNISYS CORPORATION
SECURITIES
------------------------
Unisys Corporation (the "Company") may offer from time to time, together or
separately, (1) its unsecured debt securities (the "Debt Securities"), which may
be either senior debt securities ("Senior Debt Securities") or subordinated debt
securities ("Subordinated Debt Securities"); (2) shares of its Common Stock, par
value $.01 per share ("Common Stock"); (3) shares of its Preferred Stock, par
value $1 per share ("Preferred Stock") and (4) warrants or similar rights
("Warrants") to purchase Debt Securities, Common Stock or Preferred Stock (the
Debt Securities, the Common Stock, the Preferred Stock and the Warrants are
collectively referred to as the "Securities"), in amounts, at prices and on
terms to be determined at the time of offering. The Securities offered pursuant
to this Prospectus may be issued in one or more series or issuances and will be
limited to $500,000,000 aggregate offering price (or its equivalent, if Debt
Securities are issued with principal amounts denominated in one or more foreign
currencies or foreign currency units). Certain specific terms of the particular
Securities in respect of which this Prospectus is being delivered (the "Offered
Securities") will be set forth in a Prospectus Supplement (the "Prospectus
Supplement"), including, where applicable (1) in the case of Debt Securities,
the specific designation (including whether senior or subordinated and whether
convertible), aggregate principal amount, currency or currency unit for which
the Debt Securities may be purchased or in which the principal and any premium
or interest is payable, maturity, premium, if any, rate and times of payment of
any interest, any terms for optional or mandatory redemption, the terms for any
conversion into Common Stock, the initial public offering price and other
special terms; (2) in the case of Preferred Stock, the specific title and stated
value, any dividend, liquidation, redemption, voting and other rights, any terms
for conversion into Common Stock, the initial public offering price and other
special terms and (3) in the case of Warrants, the number and terms thereof, the
designation and the number of securities issuable upon exercise, the purchase
price and, where applicable, the duration and detachability thereof.
------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Securities will be sold either through underwriters, dealers or agents,
or directly by the Company. The accompanying Prospectus Supplement will set
forth the names of any underwriters or agents involved in the sale of the
Securities in respect of which this Prospectus is being delivered, the proposed
amounts, if any, to be purchased by underwriters and the compensation, if any,
of such underwriters or agents.
The aggregate proceeds to the Company from all Securities will be the
purchase price of Securities sold less the aggregate of agents' commissions and
underwriters' discounts and other expenses of issuance and distribution. See
"Plan of Distribution."
February 18, 1997
<PAGE> 25
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities being
offered hereby (the "Registration Statement"). As permitted by the rules and
regulations of the Commission, this Prospectus, which constitutes a part of the
Registration Statement, does not contain certain information, exhibits and
undertakings contained in the Registration Statement. Such additional
information can be inspected at and obtained from the Commission in the manner
set forth below. For further information, reference is made to the Registration
Statement and to the exhibits thereto. Statements contained herein concerning
any documents are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement. Each such statement is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file periodic reports, proxy statements and other
information with the Commission relating to its business, financial statements
and other matters. Such reports, proxy statements and other information, as well
as the Registration Statement, may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of
the Commission located in the Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New York, New York
10048. Copies of such material can also be obtained from the Commission at
prescribed rates by addressing written requests for such copies to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Such reports, proxy statements and other information are also available
for inspection at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York, 10005. The Commission maintains a Web site, which
contains reports, proxy and information statements and other information
regarding registrants that, like the Company, file electronically with the
Commission, at the following address: http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed with the Commission pursuant to the
Exchange Act and are incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (as amended on Forms 10-K/A dated May 31, 1996 and June
24, 1996).
2. The Company's Current Reports on Form 8-K dated February 22, 1996,
March 4, 1996, March 29, 1996 and October 1, 1996.
3. The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996, June 30, 1996 and September 30, 1996.
4. The description of the Company's Common Stock contained in the
registration statement of Burroughs Corporation ("Burroughs"), the
predecessor to the Company, on Form 8-B dated May 22, 1984 (as amended on
Form 8 dated May 7, 1991), filed pursuant to Section 12 of the Exchange
Act, including any amendment or report filed for the purpose of updating
such description.
5. The description of the Company's Preferred Share Purchase Rights
contained in the Registration Statement of Burroughs on Form 8-A dated
March 11, 1986 (as amended on Forms 8 dated, respectively, April 16, 1986,
July 8, 1987 and May 7, 1991 and on Form 8-A/A dated February 26, 1996),
filed pursuant to Section 12 of the Exchange Act, including any amendment
or report filed for the purpose of updating such description.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such documents. Any statements contained in a document incorporated by
reference herein shall be deemed to be
2
<PAGE> 26
modified or superseded for purposes hereof to the extent that a statement
contained herein, in the accompanying Prospectus Supplement or in any other
subsequently filed document which also is incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on written or oral request, copies of any or all
documents incorporated by reference herein (other than the exhibits thereto
unless such exhibits are incorporated specifically by reference therein).
Requests should be directed to Unisys Corporation, Township Line and Union
Meeting Roads, Blue Bell, Pennsylvania 19424, Attention: Corporate Secretary;
Telephone (215) 986-5934.
THE COMPANY
The Company is an information management company that provides information
services, technology, software and customer support on a worldwide basis. The
Company operates in the information management business segment.
The Company was incorporated in February 1984 under the laws of Delaware
and is the successor by merger to Burroughs Corporation, a Michigan corporation
incorporated in 1905. In November 1986, Sperry Corporation, a Delaware
corporation incorporated in 1955, was merged with and into the Company, and the
Company's name was changed to Unisys Corporation.
The principal executive offices of the Company are located at Township Line
and Union Meeting Roads, Blue Bell, Pennsylvania 19424. The Company's telephone
number is (215) 986-4011.
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained herein, the following factors before deciding to purchase
the Securities offered hereby.
RESTRUCTURINGS AND NET LOSSES
The Company operates in an industry that has undergone dramatic changes,
including, in the case of the Company, a shift from higher margin to lower
margin products and services. In order to improve its operating results, the
Company has moved aggressively to realign its operations to reflect the rapidly
changing market for information processing products and services. In 1995, the
Company reported a net loss of $624.6 million, which included a fourth quarter
pretax restructuring charge of $717.6 million, primarily relating to the
internal realignment of the Company into three operating units and covering work
force reductions, product and program discontinuances and consolidation of
office facilities and manufacturing capacity. For the year ended December 31,
1996, the Company reported net income of $49.7 million, or a loss of 41 cents
per share after payment of preferred dividends. In the fourth quarter of 1996,
the Company reversed certain reserves established under the 1995 restructuring
plan, due to lower-than-anticipated costs for work force reductions. This
reversal was offset by charges of $84 million relating to the refocusing and
discontinuance of certain products and programs. The Company recorded special
pretax charges of $186.2 million in 1994, $1.2 billion in 1991, $181.0 million
in 1990 and $231.0 million in 1989. Principally due to these special charges,
the Company had net losses of $1.4 billion in 1991, $436.7 million in 1990 and
$639.3 million in 1989. No assurance can be given that the Company will not
experience losses in the future.
HIGH LEVERAGE AND CASH REQUIREMENTS
At December 31, 1996, the Company had approximately $2.3 billion principal
amount of debt, an increase of approximately $400 million from December 31,
1995. Total interest expense for 1996 and 1995 was $249.7 million and $202.1
million, respectively. Long-term debt of $5.8 million, $213.0 million and $345.0
million is scheduled to mature in 1997, 1998 and 1999, respectively.
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<PAGE> 27
The Company has outstanding $1.6 billion of Series A, B and C convertible
preferred stock. Dividends paid on preferred stock in 1996 amounted to $120.8
million ($106.5 million -- Series A; $14.3 million -- Series B and C). The
Company will redeem all $150 million of its outstanding Series B and C preferred
stock for cash during the first half of 1997.
Cash requirements for the restructuring actions discussed above are
expected to be approximately $200 million in 1997. The Company estimates that
the restructuring actions have generated annualized savings of approximately
$475 million as of the end of 1996 and expects these annualized savings to be
approximately $600 million by the end of 1997. The degree to which cash savings
from the restructuring actions offset cash requirements depends upon the timing
of implementation of the restructuring actions. Cash requirements for the
restructuring actions and the annualized savings expected from such actions are
forward-looking statements (as such term is used in the Private Securities
Litigation Reform Act of 1995), and several factors, particularly the timing of
implementation of the restructuring, could cause actual cash requirements and
savings to be different.
During 1996, net cash used for continuing operations was approximately $65
million. During this period, proceeds from the issuance of debt exceeded
principal payments of debt by $373.3 million. During 1995, net cash used for
continuing operations was $412.4 million (including principal payments of debt
of $68.2 million). In 1995, discontinued operations provided cash of $658.3
million, primarily from the sale of the Company's defense systems business.
The Company may require continued access to financing sources to meet its
cash requirements for debt maturities, restructuring and operating activities.
There can be no assurance that such access will always be available to the
Company or that the Company would be permitted to incur additional indebtedness
under its then existing set of restrictive covenants.
In June 1996, the Company entered into a one-year $200 million revolving
credit facility replacing the prior facility which expired in May 1996.
Conditions precedent to a borrowing under the facility include minimum cash
balances and compliance with net worth and interest coverage covenants. In
addition, if any borrowings are outstanding, the Company is required to maintain
full compensating balances with the bank group unless waived by a supermajority
of the banks. The Company does not currently anticipate that it will borrow
under this facility.
COMPETITION
The Company's business is affected by rapid change in technology in the
information systems and services field and aggressive competition from many
domestic and foreign companies, including computer hardware manufacturers,
software providers and information services companies. The Company competes
primarily on the basis of product performance, service, technological innovation
and price. Many of the Company's competitors have greater financial, marketing
or other resources than the Company. The Company's results depend upon its
ability to compete successfully in the United States and abroad.
SYSTEMS INTEGRATION CONTRACTS
Certain of the Company's systems integration contracts are fixed-price
contracts under which the Company assumes the risk for the delivery of the
contracted services at an agreed-upon fixed price. The Company has at times
experienced problems in performing certain of its fixed-price contracts on a
profitable basis and has provided periodically for adjustments to the cost to
complete such contracts. In the fourth quarter of 1995, the Company recorded a
significant pretax charge for contract losses of $129.0 million, primarily
relating to a few large multi-year, fixed-price systems integration contracts.
There can be no assurance that the Company will not experience such contract
performance problems in the future, which problems could affect the Company's
results of operations.
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<PAGE> 28
IMPORTANCE OF INTERNATIONAL OPERATIONS
Revenue from international operations accounted for approximately 60% of
the Company's total revenue in each of the last three years. There is no
material concentration of revenues in any particular country. Due to its foreign
operations, the Company is exposed to the effects of foreign exchange rate
fluctuations on the U.S. dollar. The Company uses foreign exchange forward
contracts and options, generally having maturities of less than nine months, to
reduce such exposure. Such contracts and options are entered into for the sole
purpose of hedging certain transactional exposures. The Company does not hold or
issue financial instruments for speculative trading purposes. In addition to
fluctuations in foreign currency exchange rates, the Company's international
business could be affected by many factors beyond its control, such as
instability of foreign economies, U.S. and foreign government laws and policies
affecting trade and investment, and governmental changes. Although the Company
has not experienced any significant problems in foreign countries arising from
such factors, there can be no assurance that such problems will not arise in the
future.
NO DIVIDENDS ON COMMON STOCK; DIVIDEND LIMITATIONS
The Company has not declared or paid any cash dividends on its Common Stock
since 1990 and does not anticipate declaring or paying dividends on the Common
Stock in the foreseeable future. Certain of the Company's debt instruments and
credit facilities contain financial covenants which could limit the payment of
dividends on the Company's capital stock.
USE OF PROCEEDS
Except as may otherwise be set forth in the applicable Prospectus
Supplement, net proceeds from the sale of the Offered Securities will be used
for general corporate purposes and to reduce or refinance indebtedness.
RATIOS OF EARNINGS
The following tables set forth the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock dividends
for the Company for each of the years in the five-year period ended December 31,
1995 and for the nine months ended September 30, 1996.
The ratio of earnings to fixed charges has been computed by dividing
earnings by fixed charges. The ratio of earnings to combined fixed charges and
preferred stock dividends has been computed by dividing earnings by the sum of
fixed charges and preferred dividend requirements. Earnings consist of income
(loss) from continuing operations before income taxes, extraordinary items and
changes in accounting principles minus undistributed earnings of associated
companies plus fixed charges. Fixed charges consist of interest on all
indebtedness, amortization of debt issuance expenses and the portion of rental
expense representative of interest.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
- ------------ ----------------------------------------
1996 1995 1994 1993 1992 1991
- ------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
* * 1.11 2.21 1.72 *
</TABLE>
- ---------------
* Earnings for the nine months ended September 30, 1996 and for the years ended
December 31, 1995 and 1991 were inadequate to cover fixed charges by $4.8
million, $776.1 million and $1,432.1 million, respectively.
5
<PAGE> 29
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
- ------------ ----------------------------------------
1996 1995 1994 1993 1992 1991
- ------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
* * * 1.39 1.17 *
</TABLE>
- ---------------
* Earnings for the nine months ended September 30, 1996 and for the years ended
December 31, 1995, 1994 and 1991 were inadequate to cover combined fixed
charges and preferred stock dividends by $144.2 million, $961.2 million,
$153.6 million and $1,630.8 million, respectively.
DESCRIPTION OF THE DEBT SECURITIES
The following sets forth certain general terms and provisions of the
Indentures under which the Debt Securities are to be issued. The particular
terms of a series of Debt Securities will be set forth in the Prospectus
Supplement or Prospectus Supplements relating to such Debt Securities.
The Senior Debt Securities are to be issued under an Indenture dated as of
August 6, 1992 (the "Senior Indenture") between the Company and Bank One,
Columbus NA, as Trustee (the "Senior Trustee") or under a substantially
identical indenture with a different trustee. The Subordinated Debt Securities
are to be issued under an Indenture dated as of March 1, 1996 (the "Subordinated
Indenture") between the Company and The Bank of New York, as Trustee (the
"Subordinated Trustee") or under a substantially identical indenture with a
different trustee. The Senior Indenture and the Subordinated Indenture are
sometimes referred to individually as an "Indenture" and collectively as the
"Indentures". The Senior Trustee and the Subordinated Trustee are sometimes
referred to individually as a "Trustee" and collectively as the "Trustees". The
Senior Indenture and the Subordinated Indenture are filed as exhibits to the
Registration Statement. The following are brief summaries of certain provisions
of the Indentures and are subject to the detailed provisions of the Indentures,
to which reference is hereby made for a complete statement of such provisions.
Capitalized terms used herein and not otherwise defined shall have the meanings
specified in the Indentures. If the Debt Securities are issued under an
indenture other than the Senior Indenture or the Subordinated Indenture, the
Prospectus Supplement will identify the trustee and will describe any material
differences between that indenture and the Indenture.
GENERAL
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 from time to time in series.
The Senior Debt Securities will be unsecured obligations of the Company and
will rank on a parity with all other unsecured and unsubordinated indebtedness
of the Company. The Subordinated Debt Securities will be unsecured obligations
of the Company and will be subordinated in right of payment to all Senior
Indebtedness (as defined below in "Subordination of Debt Securities").
The applicable Prospectus Supplement will describe the following terms of
the Debt Securities offered thereby: (1) the title of such Debt Securities; (2)
whether such Debt Securities are Senior Debt Securities or Subordinated Debt
Securities; (3) any limit on the aggregate principal amount of such Debt
Securities; (4) the date or dates on which such Debt Securities may be issued
and are or will be payable; (5) the rate or rates per annum (which may be fixed
or variable) at which such Debt Securities will bear interest, if any, or the
method by which such rate or rates shall be determined, and the date or dates
from which such interest, if any, will accrue; (6) the date or dates on which
interest, if any, on such Debt Securities will be payable and the regular record
date or dates therefor; (7) the place or places where the principal of, and
premium, if any, and any interest on such Debt Securities will be payable; (8)
the period or periods within which, the price or prices at which, the currency
or currencies (including currency units) in which, and the terms and conditions
upon which such Debt Securities may be redeemed at the option of the Company;
(9) the obligation, if any, of the Company to redeem, to repay or purchase such
Debt Securities pursuant to any sinking fund or analogous
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<PAGE> 30
provisions, upon the happening of a specified event or at the option of a holder
thereof, and the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities will be redeemed,
repaid or purchased pursuant to any such obligations; (10) whether such Debt
Securities are to be issued in registered form without coupons, in bearer form
with or without coupons, including temporary and definitive global form, or a
combination thereof and the circumstances, if any, upon which such Debt
Securities may be exchanged for Debt Securities issued in a different form; (11)
whether such Debt Securities are to be issued in whole or in part in the form of
one or more Global Notes (as defined under "Denominations, Registration and
Transfer") and, if so, the identity of the depositary, if any, for such Global
Note or Notes; (12) whether and under what circumstances the Company will pay
additional amounts to any holder of Debt Securities who is not a U.S. Person (as
defined under "Limitations on Issuance of Bearer Securities") in respect of any
tax, assessment or other governmental charge required to be withheld or deducted
and, if so, whether the Company will have the option to redeem rather than pay
any additional amounts; (13) if other than dollars, the foreign currency or
currencies (including currency units) in which the principal of, and premium, if
any, and any interest on such Debt Securities shall or may be paid and, if
applicable, whether at the election of the Company and/or the holder, and the
conditions and manner of determining the exchange rate or rates; (14) any index
used to determine the amount of payment of principal of, and premium, if any,
and any interest on such Debt Securities; (15) whether such Debt Securities are
convertible into shares of Common Stock and the terms and conditions upon which
any conversion will be effected, including the conversion price, the conversion
period and other conversion provisions; (16) any addition to, or modification or
deletion of, any Events of Default or covenants provided for with respect to
such Debt Securities and (17) any other detailed terms and provisions of such
Debt Securities which are not inconsistent with the Indentures.
Debt Securities may be issued at or above par or with an original issue
discount. Federal income tax consequences and other special considerations
applicable to any Debt Securities issued with original issue discount or above
par will be described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in one
or more foreign currencies or currency units, or if the principal of or any
premium or interest on any series of Debt Securities is payable in one or more
foreign currencies or currency units, the restrictions, elections, Federal
income tax considerations, specific terms and other information with respect to
such series and such foreign currency or currency units will be described in the
applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Debt Securities may be issued in fully registered form, without coupons
("Registered Securities"), in bearer form with or without coupons ("Bearer
Securities") or in the form of one or more global securities (each a "Global
Note"). Registered Securities which are book-entry securities ("Book-Entry
Notes") will be issued as registered Global Notes. Bearer Securities may be
issued in the form of temporary or definitive Global Notes. Unless otherwise
provided in an applicable Prospectus Supplement with respect to a series of Debt
Securities, the Debt Securities will be issued as Registered Securities in
denominations of $1,000 or any integral multiple thereof. One or more Global
Notes will be issued in denominations or aggregate denominations equal to the
aggregate principal amount of outstanding Debt Securities of the series to be
represented by such Global Note or Notes.
Registered Securities of any series (other than a Book-Entry Note) may be
exchanged for other Registered Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations.
Whenever any such Registered Securities are surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Registered Securities which the holder making the exchange is entitled to
receive. In addition, if so provided in an applicable Prospectus Supplement,
Bearer Securities of any series which is registrable as to principal and
interest may, at the option of the holder and subject to the terms of the
applicable Indenture, be exchangeable into Registered Securities of the same
series of any authorized denominations and of a like aggregate principal amount
and tenor. Any Bearer Security surrendered for exchange shall be surrendered
with all unmatured coupons and all matured coupons in default, except that any
Bearer Security surrendered in exchange for a Registered Security between
7
<PAGE> 31
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 due on such date will not be payable in
respect of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the holder of such coupon when due in accordance
with the terms of the applicable Indenture. Except as provided in an applicable
Prospectus Supplement, Bearer Securities will not be issued in exchange for
Registered Securities.
Debt Securities may be presented for exchange as provided above, and
Registered Securities (other than Book-Entry Notes) may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed), at the office of the Security Registrar designated by the Company for
such purpose with respect to any series of Debt Securities and referred to in an
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the applicable Indenture.
Such transfer or exchange will be effected upon the Security Registrar being
satisfied with the documents of title and identity of the person making the
request. The Company has appointed the Trustee under each Indenture as Security
Registrar for the applicable Debt Securities.
For a discussion of restrictions on the exchange, registration and transfer
of Global Notes, see "Global Notes".
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, and premium, if any, and any interest on Bearer Securities will
be payable, subject to any applicable laws and regulations, at the offices of
such Paying Agents outside the United States as the Company may designate from
time to time, and payment of interest on Bearer Securities on any interest
payment date will be made only against surrender of the coupon relating to such
interest payment date. Presentation of coupons for payment or other demands for
payment of Bearer Securities must be made outside the United States, and 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 in the United States. No
payment of interest on a Bearer Security will be made unless, on the earlier of
the date of the first such payment by the Company or the date of delivery by the
Company of the Bearer Security in definitive form, a written certificate, in the
form required by the applicable Indenture, is provided to the Company stating
that on such date the Bearer Security is not owned by or on behalf of a U.S.
Person or, if a beneficial interest in such Bearer Security is owned by or on
behalf of a U.S. Person, that such U.S. Person is (1) a foreign branch of a
United States financial institution; (2) acquired and holds the Bearer Security
through the foreign branch of a United States financial institution (and, in
either case (1) or (2), such financial institution agrees to comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations thereunder) or (3) is a
financial institution purchasing for resale during the "restricted period" (as
defined under "Global Notes-Temporary and Definitive Global Notes") only to
non-U.S. Persons outside the United States. Notwithstanding the foregoing,
payment of principal of, and premium, if any, and any interest on Bearer
Securities will be made at the office of the Company's Paying Agent in the
United States if (but only if) (1) payment of the full amount thereof at all
offices or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions and (2) such
payment is then permitted by applicable laws.
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, and premium, if any, and any interest on Registered Securities
will be made at the office of such Paying Agent or Paying Agents as the Company
may designate from time to time, except that at the option of the Company
payment of any interest may be made (1) by check mailed to the address of the
person entitled thereto as such address shall appear in the Security Register or
(2) by wire transfer to an account maintained by the person entitled thereto.
Unless otherwise indicated in an 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.
8
<PAGE> 32
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee under the applicable Indenture will act as the Company's sole Paying
Agent through its principal office with respect to Debt Securities which are
issuable solely as Registered Securities. Any Paying Agents outside the United
States and other Paying Agents in the United States initially designated by the
Company for the offered Debt Securities will be named in an applicable
Prospectus Supplement. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent or approve a change in the
office through which any Paying Agent acts, except that, if Debt Securities of a
series are issuable only as Registered Securities, the Company will be required
to maintain a Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series may be issuable as Bearer Securities, the Company will be
required to maintain (1) a Paying Agent in the United States, for payments with
respect to any Registered Securities of the series (and for payments with
respect to Bearer Securities of the series in the circumstances described above,
but not otherwise) and (2) a Paying Agent in a Place of Payment located outside
the United States where Debt Securities of such series and any coupons
appertaining thereto may be presented and surrendered for payment; provided that
if the Debt Securities of such series are listed on The International Stock
Exchange of the United Kingdom and the Republic of Ireland Limited or the
Luxembourg Stock Exchange or any other stock exchange located outside the United
States and such stock exchange shall so require, the Company will maintain a
Paying Agent in London or Luxembourg or any other required city located outside
the United States, as the case may be, for the Debt Securities of such series.
All moneys paid by the Company to the Trustee or a Paying Agent for the
payment of principal of, and premium, if any, and any interest on any Debt
Security that remain unclaimed at the end of two years after such principal,
premium or interest shall have become due and payable will be repaid to the
Company, and the holder of such Debt Security or any coupon will thereafter look
only to the Company for payment thereof.
GLOBAL NOTES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Notes that will be deposited with, or on behalf of, a
depositary located in the United States (a "U.S. Depositary") or a common
depositary located outside the United States (a "Common Depositary") identified
in the Prospectus Supplement relating to such series. Global Notes may be issued
in either registered or bearer form and in either temporary or definitive form.
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depositary arrangements.
Book-Entry Notes
Unless otherwise specified in an applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Note to be deposited with or
on behalf of a U.S. Depositary will be represented by a Global Note registered
in the name of such depositary or its nominee. Upon the issuance of a Global
Note in registered form, the U.S. Depositary for such Global Note will credit,
on its book-entry registration and transfer system, the respective principal
amounts of the Debt Securities represented by such Global Note to the accounts
of institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited shall be designated by the
underwriters or agents of such Debt Securities, or by the Company if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in such Global Notes will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests by
participants in such Global Notes will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the U.S.
Depositary or its nominee for such Global Note. Ownership of beneficial
interests in Global Notes by persons that hold through participants will be
shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global Note.
9
<PAGE> 33
So long as the U.S. Depositary for a Global Note in registered form, or its
nominee, is the registered owner of such Global Note, such depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Debt Securities represented by such Global Note for all purposes under the
Indenture governing such Debt Securities. Except as set forth below, owners of
beneficial interests in such Global Notes will not be entitled to have Debt
Securities of the series represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of Debt
Securities of such series in definitive form and will not be considered the
owners or holders thereof under the applicable Indenture.
Payment of principal of, and premium, if any, and any interest on Debt
Securities registered in the name of or held by a U.S. Depositary or its nominee
will be made to the U.S. Depositary or its nominee, as the case may be, as the
registered owner or the holder of the Global Note representing such Debt
Securities. None of the Company, any Trustee, any Paying Agent or the Security
Registrar for such Debt Securities will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Note for such Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that the U.S. Depositary for Debt Securities of a
series or its nominee, upon receipt of any payment of principal, premium or
interest in respect of a permanent Global Note, will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of such depositary or nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Note held through such participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers in bearer form or registered in "street name", and will be
the responsibility of such participants.
Unless and until it is exchanged in whole for Debt Securities in definitive
form, a Global Note may not be transferred except as a whole by the U.S.
Depositary for such Global Note to a nominee of such depositary or by a nominee
of such depositary to such depositary or another nominee of such depositary or
by such depositary or any such nominee to a successor of such depositary or a
nominee of such successor. If a U.S. Depositary for Debt Securities in
registered form is at any time unwilling or unable to continue as depositary and
a successor depositary is not appointed by the Company within ninety days, the
Company will issue Debt Securities in definitive registered form in exchange for
the Global Note or Notes representing such Debt Securities. In addition, the
Company may at any time and in its sole discretion determine not to have any
Debt Securities in registered form represented by one or more Global Notes and,
in such event, will issue Debt Securities in definitive registered form in
exchange for the Global Note or Notes representing such Debt Securities.
Further, if the Company so specifies with respect to the Debt Securities of a
series, an owner of a beneficial interest in a Global Note representing Debt
Securities of such series may, on terms acceptable to the Company and the U.S.
Depositary for such Global Note, receive Debt Securities of such series in
definitive form. In any such instance, an owner of a beneficial interest in a
Global Note will be entitled to physical delivery in definitive form of Debt
Securities of the series represented by such Global Note equal in principal
amount to such beneficial interest and to have such Debt Securities registered
in its name.
Temporary and Definitive Global Notes
If so specified in an applicable Prospectus Supplement, all Bearer
Securities of a series will initially be issued in the form of one or more
temporary Global Notes, to be deposited with a Common Depositary in London for
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euro-clear System ("Euro-clear Operator") and CEDEL, S.A. ("CEDEL") for credit
to the designated accounts. On and after the exchange date determined as
provided in any such temporary Global Note and described in the applicable
Prospectus Supplement, each such temporary Global Note will be exchangeable for
definitive Debt Securities in bearer form, registered form, definitive global
bearer form or any combination thereof, as specified in the Prospectus
Supplement, upon written certification (as described under "Payment and Paying
Agents") of non-United States beneficial ownership. No Bearer Security delivered
in exchange for a portion of a temporary Global Note shall be mailed or
otherwise delivered to any location in the United States.
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Unless otherwise specified in an applicable Prospectus Supplement, interest
in respect of any portion of a temporary Global Note payable in respect of an
interest payment date occurring prior to the issuance of definitive Debt
Securities will be paid to each of the Euroclear Operator and CEDEL with respect
to the portion of the temporary Global Note held for its account upon delivery
by the Euro-clear Operator and CEDEL to the Trustee of a certificate or
certificates of non-United States beneficial ownership in the form required by
the applicable Indenture.
If any Debt Securities of a series are issuable in definitive global bearer
form, the Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such definitive Global Notes may
exchange such interests for Debt Securities of such series and of like tenor and
principal amount in any authorized form and denomination. No Bearer Security
delivered in exchange for a portion of a definitive Global Note shall be mailed
or otherwise delivered to any location in the United States in connection with
such exchange.
In connection with the sale of a Bearer Security during the "restricted
period" as defined in Section 1.163-5(c)(2)(i)(D)(7) of the United States
Treasury regulations (generally, the first 40 days after the closing date and,
with respect to unsold allotments, until sold), no Bearer Security (including a
definitive Bearer Security in global form) shall be mailed or otherwise
delivered to any location in the United States, and a Bearer Security sold
during the restricted period (other than a temporary Bearer Security in global
form) may be delivered only if the person entitled to receive such Bearer
Security (including a definitive Bearer Security in global form) furnishes
written certification, in the form required by the applicable Indenture, to the
effect that such Bearer Security is not being acquired by a U.S. Person, or, if
a beneficial interest in such Bearer Security is being acquired by a U.S.
Person, that such U.S. Person (1) is a foreign branch of a United States
financial institution; (2) acquired and holds the Bearer Security through the
foreign branch of a United States financial institution (and, in either case (1)
or (2), such financial institution agrees to comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Code and the regulations thereunder) or
(3) is a financial institution purchasing for resale during the restricted
period only to non-U.S. Persons outside the United States. See "Limitations on
Issuance of Bearer Securities".
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
Generally, in compliance with United States Federal tax laws and
regulations, Bearer Securities may not be offered or sold during the restricted
period or delivered in connection with their sale during the restricted period
in the United States or to U.S. Persons (each as defined below) other than to
foreign branches of United States financial institutions which agree in writing
to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Code
or purchase for resale during the restricted period only to non-U.S. Persons
outside the United States (or as otherwise permitted under United States
Treasury regulations), and any underwriters, agents and dealers participating in
the offering of Debt Securities must agree that they will not offer or sell any
Bearer Securities in the United States or to U.S. Persons (other than as
described above) nor deliver Bearer Securities within the United States.
Bearer Securities and their interest coupons will bear a legend
substantially to the following effect: "Any U.S. 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". The Sections referred to in the legend provide that,
with certain exceptions, a U.S. Person holding a Bearer Security or coupon will
not be permitted to deduct any loss, and will not be eligible for capital gain
treatment with respect to any gain, realized on a sale, exchange or redemption
of such Bearer Security or coupon.
As used in this Prospectus, "U.S. Person" means a citizen or resident of
the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States, or an estate or trust the
income of which is subject to United States Federal income taxation regardless
of its source, and the term "United States" means the United States of America
(including the States and the District of Columbia) and its possessions,
including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
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CERTAIN COVENANTS APPLICABLE TO SENIOR DEBT SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement with
respect to Senior Debt Securities of a series, Senior Debt Securities will have
the benefit of the following covenants contained in the Senior Indenture. Unless
otherwise indicated in the applicable Prospectus Supplement with respect to
Subordinated Debt Securities of a series, the Subordinated Debt Securities will
not have the benefit of such covenants.
Limitation Upon Mortgages and Liens
Neither the Company nor a Subsidiary will create or assume, except in favor
of the Company or a Wholly-Owned Subsidiary, any mortgage, pledge, lien or
encumbrance upon any Principal Manufacturing Property or any stock or
indebtedness of any Subsidiary without equally and ratably securing the
outstanding Senior Debt Securities. For the purpose of providing such equal and
ratable security, the principal amount of outstanding Senior Debt Securities
issued with original issue discount shall be such portion of the principal
amount as may be specified in the terms of that series. This limitation will not
apply to certain permitted encumbrances as described in the Senior Indenture,
including (1) purchase money mortgages entered into within specified time
limits; (2) liens existing on acquired property; (3) certain tax, materialmen's,
mechanics' and judgment liens, certain liens arising by operation of law and
certain other similar liens; (4) liens in connection with certain government
contracts; (5) certain mortgages, pledges, liens or encumbrances in favor of any
state or local government or governmental agency in connection with certain
tax-exempt financings; (6) pledges of customers' accounts or paper; (7) certain
mortgages, pledges, liens or encumbrances securing the payment of any V Loan
Debt (as defined in the Senior Indenture) and (8) mortgages, pledges, liens and
encumbrances not otherwise permitted if the sum of the indebtedness thereby
secured plus the aggregate sales price of property involved in certain sale and
leaseback transactions does not exceed the greater of $250,000,000 or 5% of
Consolidated Shareholders' Equity.
Limitation Upon Sale and Leaseback Transactions
The Company and any Subsidiary will be prohibited from selling any
Principal Manufacturing Property owned on the date of the Senior Indenture with
the intention of taking back a lease thereof, other than a temporary lease (a
lease of not more than 36 months) with the intent that the use of the property
by the Company or such Subsidiary will be discontinued before the expiration of
such period, unless (1) the sum of the sale price of property involved in sale
and leaseback transactions not otherwise permitted plus all indebtedness secured
by certain mortgages, pledges, liens and encumbrances does not exceed the
greater of $250,000,000 or 5% of Consolidated Shareholders' Equity or (2) the
greater of the net proceeds of such sale or the fair market value of such
Principal Manufacturing Property (which may be conclusively determined by the
Board of Directors of the Company) are applied within 120 days to the optional
retirement of outstanding Senior Debt Securities or to the optional retirement
of other Funded Debt (as defined) of the Company ranking on a parity with
outstanding Senior Debt Securities.
Certain Definitions
Certain terms defined in the Senior Indenture and applicable to the
foregoing covenants are summarized below:
"Consolidated Shareholders' Equity" means the total shareholders' equity of
the Company and its consolidated subsidiaries which, under generally accepted
accounting principles, would appear on a consolidated balance sheet of the
Company and its subsidiaries, excluding the separate component of shareholders'
equity attributable to foreign currency translation adjustments pursuant to
"Statement of Financial Accounting Standards No. 52 -- Foreign Currency
Translation" or any successor provision or principle of generally accepted
accounting principles.
"Principal Manufacturing Property" means any manufacturing property located
within the United States of America (other than its territories or possessions)
owned by the Company or any Subsidiary, except for any
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manufacturing property that, in the opinion of the Board of Directors, is not of
material importance to the business conducted by the Company and its
Subsidiaries, taken as a whole.
"Subsidiary" means any corporation of which at least a majority of the
outstanding voting stock is owned by the Company or by other Subsidiaries, but
will not include any such corporation (an "Affiliated Corporation") which (1)
does not transact any substantial portion of its business or regularly maintain
any substantial portion of its operating assets in the United States; (2) is
principally engaged in financing sales or leases of merchandise, equipment or
services by the Company, a Subsidiary or another Affiliated Corporation; (3) is
principally engaged in holding or dealing in real estate or (4) is principally
engaged in the holding of stock in, and/or the financing of operations of,
Affiliated Corporations.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the
outstanding voting stock (other than directors' qualifying shares) is at the
time, directly or indirectly, owned by the Company and/or by one or more
Wholly-Owned Subsidiaries.
CONSOLIDATION, MERGER, SALE OR LEASE OF ASSETS
Each Indenture provides that the Company, without the consent of the
holders of any of the outstanding Debt Securities, may consolidate with or merge
into, or transfer or lease its assets substantially as an entirety to, any
corporation organized under the laws of any domestic jurisdiction, provided that
(1) the successor corporation assumes the Company's obligations under such
Indenture and the Debt Securities issued thereunder; (2) after giving effect to
the transaction, no Event of Default and no event which, after notice or lapse
of time, would become an Event of Default shall have occurred and be continuing
and (3) certain other conditions are met.
EVENTS OF DEFAULT
The following are Events of Default under the Indentures with respect to
Debt Securities of any series: (1) failure to pay principal of or any premium on
any Debt Security of that series when due; (2) failure to pay any interest on
any Debt Security of that series when due, continued for 30 days; (3) failure to
deposit any sinking fund payment in respect of any Debt Security of that series
when due; (4) failure to perform any other covenant of the Company in the
applicable Indenture (other than a covenant included in such Indenture solely
for the benefit of a series of Debt Securities other than that series),
continued for 60 days (90 days in the case of the Subordinated Indenture) after
written notice as provided in the Indenture; (5) certain events of bankruptcy,
insolvency or reorganization and (6) any other Event of Default provided with
respect to Debt Securities of that series. Such other Events of Default, if any,
will be described in the Prospectus Supplement relating to such Debt Securities.
If any Event of Default with respect to Debt Securities of any series at
the time outstanding occurs and is continuing, either the Trustee or the holders
of at least 25% in aggregate principal amount of the outstanding Debt Securities
of that series may declare the principal amount (or, if the Debt Securities of
that series are issued with original issue discount, such portion of the
principal amount as may be specified in the terms of that series) of all the
Debt Securities of that series to be due and payable immediately. At any time
after a declaration of acceleration with respect to Debt Securities of any
series has been made, but before a judgment or decree based on acceleration has
been obtained, the holders of a majority in aggregate principal amount of
outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration.
The Indentures provide that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Trustee, the holders of a majority in aggregate principal
amount of the outstanding Debt Securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Debt Securities of that series.
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The Company is required to furnish the Trustees annually with a statement
as to the performance by the Company of certain of its obligations under the
Indentures and as to any default in such performance.
MODIFICATION AND WAIVER
Each Indenture provides that the Company and the Trustee may, without the
consent of any holders of Debt Securities, enter into supplemental indentures
for the purposes, among other things, of adding to the Company's covenants,
adding any additional Events of Default, establishing the form or terms of Debt
Securities or curing ambiguities or inconsistencies in such Indentures or making
other provisions; provided such action shall not adversely affect the interests
of the holders of any series of outstanding Debt Securities in any material
respect.
Modifications of and amendments to the Indentures may be made by the
Company and the Trustee with the consent of the holders of a majority (66 2/3%
in the case of the Senior Indenture) in aggregate principal amount of the
outstanding Debt Securities of each series affected by such modification or
amendment; provided, however, that no such modification or amendment may without
the consent of the holder of each outstanding Debt Security affected thereby (1)
change the stated maturity of the principal of, or any installment of principal
or interest on, any Debt Security; (2) reduce the principal amount of, or any
premium or interest on, any Debt Security; (3) reduce the amount of principal of
Debt Securities issued with original issue discount payable upon acceleration of
the maturity thereof; (4) change the currency of payment of principal of, or any
premium or interest on, any Debt Security; (5) impair the right to institute
suit for the enforcement of any payment on or with respect to any Debt Security;
(6) reduce the percentage in principal amount of outstanding Debt Securities of
any series, the consent of whose holders is required for modification or
amendment of the Indenture or for waiver of compliance with certain provisions
of, or of certain defaults under, such Indenture or (7) limit certain
obligations of the Company to maintain an office or agency in the places and for
the purposes required by such Indenture.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive any past default under the applicable Indenture with
respect to Debt Securities of that series, except a default in the payment of
the principal of or any premium or interest on any of the Debt Securities of
such series or in respect of a covenant or provision of such Indenture that
cannot, under the terms of such Indenture, be modified or amended without the
consent of the holders of each outstanding Debt Security affected thereby.
DEFEASANCE
Each Indenture provides that, if such provision is made applicable to the
Debt Securities of any series, the Company, at its option, will be discharged
from its obligations in respect of the outstanding Debt Securities of a series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, convert Debt Securities of such series, replace
stolen, lost or mutilated Debt Securities of such series, maintain paying
agencies and hold moneys for payment in trust) or, in the case of Senior Debt
Securities, will not be subject to certain covenants applicable to the Debt
Securities of such series, in each case if the Company deposits with the
Trustee, in trust, money or U.S. Government Obligations which through the
payment of interest thereon and principal thereof in accordance with their terms
will provide money in an amount sufficient to pay all the principal of, and
premium, if any, and any interest on the Debt Securities of such series on the
dates such payments are due in accordance with the terms of such Debt
Securities. To exercise any such option, the Company is required, among other
things, to deliver to the Trustee an opinion of counsel to the effect that the
deposit and related defeasance would not cause the holders of the Debt
Securities of such series to recognize income, gain or loss for United States
income tax purposes.
CONVERSION RIGHTS
The terms on which and the prices at which Subordinated Debt Securities of
a series may be convertible into Common Stock will be set forth in the
Prospectus Supplement relating thereto. Such terms will include provisions as to
whether conversion is mandatory, at the option of the holder or at the option of
the Company.
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SUBORDINATION PROVISIONS
Except as described in the applicable Prospectus Supplement, the
indebtedness evidenced by the Subordinated Debt Securities will be subordinate
in right of payment to all Senior Indebtedness (as hereinafter defined).
No payment shall be made by the Company on account of principal of, and
premium, if any, or interest on the Subordinated Debt Securities or on account
of the purchase, redemption or other acquisition of the Subordinated Debt
Securities if there shall have occurred and be continuing any default in the
payment of principal, premium, if any, or interest on any Senior Indebtedness
continuing beyond the period of grace, if any, specified in the instrument
evidencing such Senior Indebtedness.
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization, the payment of the principal of, and
premium, if any, and interest on the Subordinated Debt Securities is to be
subordinated to the extent provided in the Subordinated Indenture in right of
payment to the prior payment in full of all Senior Indebtedness. By reason of
this provision, in the event of the Company's dissolution or insolvency, holders
of Senior Indebtedness may receive more, ratably, and holders of Subordinated
Debt Securities may receive less, ratably, than the other creditors of the
Company.
The foregoing subordination provisions will not prevent the occurrence of
any Event of Default under the Subordinated Indenture.
The term "Senior Indebtedness" will be defined to mean the principal of,
premium, if any, and any interest on, and any other payment due pursuant to the
terms of an instrument (including, without limitation, fees, expenses,
collection expenses (including attorneys' fees), interest yield amounts,
post-petition interest and taxes) creating, securing or evidencing any of the
following, whether outstanding on the date of the Subordinated Indenture or
thereafter incurred or created:
(1) All indebtedness of the Company for money borrowed or constituting
reimbursement obligations with respect to letters of credit (including
indebtedness secured by a mortgage, conditional sales contract or other
lien which is (A) given to secure all or a part of the purchase price of
property subject thereto, whether given to the vendor of such property or
to another, or (B) existing on property at the time of acquisition
thereof);
(2) All indebtedness of the Company evidenced by notes, debentures,
bonds or other securities;
(3) All indebtedness of others of the kinds described in either of the
preceding clauses (1) or (2) assumed by or guaranteed in any manner by the
Company or in effect guaranteed by the Company through an agreement to
purchase, contingent or otherwise; and
(4) All renewals, deferrals, increases, extensions or refundings of
and modifications to indebtedness of the kinds described in any of the
preceding clauses (1), (2) or (3);
except (A) the Subordinated Debt Securities, (B) certain outstanding
subordinated indebtedness of the Company, which indebtedness at December 31,
1996 was approximately $644 million and (C) any indebtedness, renewal, extension
or refunding that, under the provisions of the instrument creating, evidencing,
or assuming or guaranteeing it, is not superior in right of payment to the
Subordinated Debt Securities or is subordinate by its terms in right of payment
to the Subordinated Debt Securities.
As of December 31, 1996, the Company had Senior Indebtedness (excluding
accrued interest and premium, if any) of approximately $1.6 billion. The amount
of Senior Indebtedness may change in the future. The Subordinated Indenture
contains no limitations on the incurrence of Senior Indebtedness.
NOTICES
Except as otherwise provided in the Indentures, notices to holders of
Bearer Securities will be given by publication at least twice in a daily
newspaper in The City of New York and, if Debt Securities of such series are
then listed on The International Stock Exchange of the United Kingdom and the
Republic of Ireland Limited or the Luxembourg Stock Exchange or any other stock
exchange located outside the United States
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and such stock exchange shall so require, in a daily newspaper in London or
Luxembourg or any other required city located outside the United States, as the
case may be, or, if not practicable, elsewhere in Europe. Notices to holders of
Registered Securities will be given by mail to the addresses of such holders as
they appear in the Security Register.
GOVERNING LAW
The Indentures, the Debt Securities and the coupons, if any, will be
governed by, and construed in accordance with, the laws of the State of New
York.
CONCERNING THE TRUSTEES
Each Trustee has normal banking relationships with the Company and also
serves as trustee under other indentures with the Company pursuant to which
unsecured debt securities are currently outstanding.
DESCRIPTION OF CAPITAL STOCK
The following descriptions do not purport to be complete and are subject
to, and qualified in their entirety by reference to, the more complete
descriptions thereof set forth in (1) the Company's Certificate of
Incorporation; (2) the Company's By-Laws and (3) the Rights Agreement (as
defined below), all of which are exhibits to the Registration Statement.
The Company's authorized capital stock consists of 360,000,000 shares of
Common Stock, par value $.01 per share, and 40,000,000 shares of Preferred
Stock, par value $1 per share.
As of December 31, 1996, there were 174.8 million shares of Common Stock
outstanding, and the Company had reserved 158.2 million additional shares of
Common Stock for issuance pursuant to various employee benefit plans and upon
the conversion of outstanding shares of Preferred Stock and other outstanding
securities.
The Board of Directors has authorized the issuance of 30,000,000 shares of
Series A Cumulative Convertible Preferred Stock (the "Series A Preferred
Stock"), 10 shares of Series B Cumulative Convertible Preferred Stock (the
"Series B Preferred Stock") and 20 shares of Series C Cumulative Preferred Stock
(the "Series C Preferred Stock") and 1,500,000 shares of Junior Participating
Preferred Stock (the "Junior Preferred Stock"). As of December 31, 1996, there
were 28.4 million shares of Series A Preferred Stock, 10 shares of Series B
Preferred Stock, 20 shares of Series C Preferred Stock and no shares of Junior
Preferred Stock outstanding.
The Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock rank on a parity with each other, and prior to the Common Stock
and the Junior Preferred Stock, as to payment of dividends and as to
distribution of assets upon liquidation, dissolution or winding up of the
Company. Unless otherwise set forth in the applicable Prospectus Supplement,
each series of Preferred Stock offered hereby will rank on a parity with each
other such series and with the Series A, Series B and Series C Preferred Stock.
COMMON STOCK
General
Subject to the rights of the holders of shares of Preferred Stock, holders
of shares of Common Stock (1) are entitled to receive dividends when and as
declared by the Board of Directors of the Company from funds legally available
for that purpose; (2) have the exclusive right, except as otherwise may be
required by law, to vote for the election of directors and for all other
purposes and (3) are entitled, upon any liquidation, dissolution or winding up
of the Company, to a pro rata distribution of the assets and funds of the
Company available for distribution to stockholders. Each share of Common Stock
is entitled to one vote on all matters on which stockholders generally are
entitled to vote. Holders of shares of Common Stock do not have preemptive
rights to subscribe for additional shares of Common Stock or securities
convertible into shares of Common Stock. The Common Stock is traded on the New
York Stock Exchange and prices are reported by
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the New York Stock Exchange Composite Tape under the symbol UIS. Harris Trust
Company of New York is the transfer agent for the Common Stock.
Dividend Limitations
The Company has not declared or paid any cash dividends on the Common Stock
since 1990 and does not anticipate declaring or paying dividends on the Common
Stock in the foreseeable future. In addition, the Company's most restrictive
outstanding debt instruments generally limit aggregate dividends paid on the
Company's capital stock since June 30, 1992 (other than $185 million paid in
respect of dividends in arrears) to an amount no greater than 50% of cumulative
consolidated net income since July 1, 1992, plus capital contributions and
proceeds of equity issuances, plus $150 million.
Preferred Share Purchase Rights and Junior Participating Preferred Stock
The Company has distributed to its stockholders one Preferred Share
Purchase Right (the "Rights") with respect to each outstanding share of Common
Stock pursuant to a Rights Agreement (the "Rights Agreement") dated as of March
7, 1986 between the Company and Harris Trust Company of New York, as Rights
Agent. Each Right entitles the holder thereof, until the earlier of March 17,
2001 or the redemption of the Rights, to buy one three-hundredth of a share of
the Junior Preferred Stock at an exercise price of $75. The Rights are
represented by the certificates for shares of Common Stock and will not be
exercisable, or transferable apart from the shares of Common Stock, until the
earlier of the tenth day after the announcement that a person or group has
acquired beneficial ownership of 20% or more of the shares of Common Stock (a
"20% holder") or the tenth day after a person commences, or announces an
intention to commence, an offer, the consummation of which would result in a
person beneficially owning 30% or more of the shares of Common Stock as of such
date (the earlier of such dates being called the "Distribution Date"). The
Rights could then begin trading separately from the shares of Common Stock.
In the event that the Company is acquired in a merger or other business
combination transaction, each Right will entitle its holder to purchase, at the
exercise price of the Right, that number of shares of common stock of the
surviving company which, at the time of such transaction, would have a market
value of two times the exercise price of the Right. Alternatively, if a 20%
holder were to acquire the Company by means of a reverse merger in which the
Company and its stock survive, or were to engage in certain "self-dealing"
transactions, each Right not owned by the 20% holder would become exercisable
for the number of shares of Common Stock which, at that time, would have a
market value of two times the exercise price of the Right.
The Rights are redeemable at $.01 2/3 per Right at any time prior to the
time that a person or group has acquired beneficial ownership of 20% of the
shares of Common Stock. The Rights will expire on March 17, 2001 (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed by the Company in accordance with their terms. At no
time will the Rights have any voting rights.
The foregoing summary of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is an
exhibit to the Registration Statement.
The shares of Junior Preferred Stock purchasable upon exercise of the
Rights will be nonredeemable. Each share of Junior Preferred Stock will have a
minimum preferential quarterly dividend of $15 per share, but will be entitled
to a dividend of 300 times the aggregate dividend declared per share of Common
Stock. In the event of liquidation, the holders of the shares of Junior
Preferred Stock will receive a preferred liquidation payment of $100 per share,
but will be entitled to receive an aggregate liquidation payment per share equal
to 300 times the payment made per share of Common Stock. Each share of the
Junior Preferred Stock will have 300 votes, voting together with the shares of
Common Stock. In the event of any merger, consolidation or other transaction in
which shares of Common Stock are exchanged, each share of the Junior Preferred
Stock will be entitled to receive 300 times the amount received per share of
Common Stock. The Junior Preferred Stock has customary antidilution provisions
to protect the dividend, liquidation and voting rights described above.
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The purchase price payable, and the number of shares of Junior Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (1) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
shares of Junior Preferred Stock; (2) as a result of the grant to holders of the
shares of Junior Preferred Stock of certain rights or warrants to subscribe for
shares of Junior Preferred Stock or of securities convertible into shares of
Junior Preferred Stock (at a price, or with a conversion price, respectively,
less than the then current market price for the shares of Junior Preferred
Stock) or (3) as a result of the distribution to holders of the shares of Junior
Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends at a rate not in excess of 125% of the rate of the last
cash dividend theretofore paid or dividends payable in shares of Junior
Preferred Stock) or of subscription rights or warrants (other than those
referred to above). With certain exceptions, no adjustment in the purchase price
will be required until cumulative adjustments require an adjustment of at least
1% in such purchase price. The percentage of a share of Junior Preferred Stock
for which a Right is exercisable and the number of Rights outstanding are also
subject to adjustment in the event of dividends on the shares of Common Stock
payable in shares of Common Stock or subdivisions, combinations or
consolidations of the shares of Common Stock, occurring, in any case, before the
Rights become exercisable or transferable apart from the shares of Common Stock.
One Right is presently associated with each issued and outstanding share of
Common Stock. The Company will issue one Right with each share of Common Stock
issued prior to the Final Expiration Date unless, prior to such issuance, the
Rights are redeemed or become exercisable and transferable apart from the shares
of Common Stock.
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 that the Board of Directors determines are not in the best interests of
the Company's stockholders, 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
since the Rights may be redeemed by the Company at $.01 2/3 per Right prior to
the time that a person or group has acquired beneficial ownership of 20% or more
of the shares of Common Stock.
Anti-Takeover Provisions
The Company is a Delaware corporation and subject to Section 203 of the
Delaware General Corporation Law. Generally, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless (1)
prior to such date, either the business combination or such transaction is
approved by the board of directors of the corporation; (2) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock or (3) on or after such date the business combination is approved
by the board and by the affirmative vote of at least 66 2/3% of the outstanding
voting stock that is not owned by the interested stockholder. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. An "interested stockholder" is
a person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of the corporation's outstanding voting stock.
The Company's Certificate of Incorporation and By-Laws contain certain
anti-takeover provisions that are intended to enhance the likelihood of
continuity and stability in the composition of the Board of Directors and that
may have the effect of delaying, deferring or preventing a future takeover or
change in control of the Company unless such takeover or change in control is
approved by the Board of Directors. Such provisions may also render the removal
of the current Board of Directors more difficult.
The Company's Certificate of Incorporation and By-Laws provide that the
Board of Directors shall consist of not less than 10 nor more than 20 directors
(subject to any rights of the holders of shares of Preferred Stock to elect
additional directors), with the exact number to be fixed by the Board of
Directors pursuant to a resolution adopted by a majority of the entire Board.
The Board of Directors is divided into three
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<PAGE> 42
classes of directors, which classes are as nearly equal in number as possible.
One class of directors is elected each year for a term of three years. Directors
may be removed from office only for cause and only by the affirmative vote of
the holders of at least 80% of the voting power of all capital stock of the
Company entitled to vote generally in the election of directors (the "Voting
Stock"), voting as a single class. Subject to any rights of the holders of
shares of Preferred Stock, vacancies in the Board of Directors and newly created
directorships are filled for the unexpired term only by the vote of a majority
of the remaining directors in office. Pursuant to the Certificate of
Incorporation, advance notice of stockholder nominations for the election of
directors must be given in the manner provided in the Company's By-Laws. The
By-Laws provide that written notice of the intent of a stockholder to make a
nomination at a meeting of stockholders must be delivered to the Secretary of
the Company not less than 90 days prior to the date of the meeting, in the case
of an annual meeting, and not more than seven days following the date of notice
of the meeting, in the case of a special meeting. The notice must contain
certain background information about the nominee and the number of shares of the
Company's capital stock beneficially owned by the nominee. The affirmative vote
of the holders of 80% or more of the voting power of the then outstanding shares
of Voting Stock, voting as a single class, is required to amend, alter or repeal
the provisions of the Certificate of Incorporation and the By-Laws discussed
above.
The Company's Certificate of Incorporation also provides that certain
mergers, consolidations, sales or other transfers of assets of, issuances or
reclassifications of securities of, or adoptions of plans of liquidation by the
Company (individually, a "Business Combination") must be approved by an
affirmative vote of the holders of 80% or more of the voting power of the then
outstanding shares of Voting Stock, voting as a single class, when such action
involves a person (an "Interested Stockholder") who beneficially owns more than
20% of the voting power of the then outstanding shares of Voting Stock, unless
certain minimum price, form of consideration and procedural requirements (the
"Fair Price Provisions") are satisfied or unless a majority of the directors not
affiliated with the Interested Stockholder approve the Business Combination. The
affirmative vote of the holders of 80% or more of the voting power of the then
outstanding shares of Voting Stock, voting as a single class, is required to
amend, alter or repeal such provisions of the Certificate of Incorporation.
Under the Certificate of Incorporation and By-Laws, except as otherwise
required by law and subject to the rights of the holders of shares of Preferred
Stock, stockholders may not call a special meeting of stockholders. Only the
Board of Directors, pursuant to a resolution adopted by a majority of the entire
Board, may call a special meeting of stockholders. The General Corporation Law
of the State of Delaware provides that, unless specifically prohibited by the
certificate of incorporation, any action required or permitted to be taken by
stockholders of a corporation may be taken without a meeting, without prior
notice, and without a stockholder vote if a written consent or consents setting
forth the action to be taken is signed by the holders of outstanding shares of
capital stock having the requisite number of votes that would be necessary to
authorize or take such action at a meeting of stockholders. The Company's
Certificate of Incorporation requires that stockholder action be taken at a
meeting of stockholders and prohibits stockholder action by written consent. The
affirmative vote of the holders of 80% or more of the voting power of the then
outstanding shares of Voting Stock, voting as a single class, is required to
amend, alter or repeal the provisions of the Certificate of Incorporation and
By-Laws discussed above.
The purpose of certain provisions of the Certificate of Incorporation and
By-Laws discussed above relating to (1) a classified Board of Directors; (2) the
removal of directors and the filling of vacancies; (3) the prohibition of
stockholder action by written consent and (4) supermajority voting requirements
for the repeal of provisions (1) through (3) is to help assure the continuity
and stability of the business strategies and policies of the Company and to
discourage certain types of transactions that involve an actual or threatened
change of control of the Company. They are designed to make it more difficult
and time-consuming to change majority control of the Board of Directors and thus
to reduce the vulnerability of the Company to an unsolicited takeover proposal
that does not contemplate the acquisition of at least 80% of the voting power of
all of the Voting Stock or to an unsolicited proposal for the restructuring or
sale of all or part of the Company.
Such charter and by-law provisions may make more difficult or discourage a
proxy contest, or the assumption of control, by a holder of a substantial block
of shares of Common Stock, or the removal of the incumbent Board of Directors,
and could thus increase the likelihood that incumbent directors will retain
their
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<PAGE> 43
positions. In addition, since the Fair Price Provisions discussed above provide
that certain business combinations involving the Company and a certain type of
stockholder which do not meet specified criteria or are not approved by
supermajority vote cannot be consummated without the approval of a majority of
those directors who are not affiliated with such stockholder, such provisions
could give incumbent management the power to prevent certain takeovers. The Fair
Price Provisions may also discourage attempts to effect a "two-step" acquisition
in which a third party purchases a controlling interest in cash and acquires the
balance of the voting stock of the Company for less desirable consideration.
Under the classified board and related provisions, the third party would not
immediately obtain the ability to control the Board of Directors through its
first-step acquisition and, under the Fair Price Provisions, having made the
first-step acquisition, the third party could not acquire the balance of the
Voting Stock for a lower price without a supermajority vote or the approval of a
majority of such unaffiliated directors.
These provisions of the Certificate of Incorporation and By-Laws help
ensure that the Board of Directors, if confronted with an unsolicited proposal
from a third party which has acquired a block of shares of Common Stock, will
have sufficient time to review the proposal and appropriate alternatives for the
Company's stockholders.
Such charter and by-law provisions are intended to encourage persons
seeking to acquire control of the Company to initiate such an acquisition
through arm's-length negotiations with the Board of Directors, who would then be
in a position to negotiate a transaction which would treat all stockholders in
substantially the same manner. Such provisions may have the effect of
discouraging a third party from making an unsolicited tender offer or otherwise
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its stockholders. In addition, since the
provisions are designed to discourage accumulations of large blocks of shares of
Common Stock by purchasers whose objective is to have such shares repurchased by
the Company at a premium, such provisions could tend to reduce the temporary
fluctuations in the market price of Common Stock caused by such accumulations.
Accordingly, stockholders of the Company could be deprived of certain
opportunities to sell their shares at a temporarily higher market price.
The Rights could also have the effect of delaying, deferring or preventing
a takeover or change in control of the Company. See "Common Stock -- Preferred
Share Purchase Rights and Junior Participating Preferred Stock".
PREFERRED STOCK
The following description sets forth certain general terms and provisions
of the Preferred Stock to which any Prospectus Supplement may relate. Certain
other terms of a particular series of Preferred Stock will be described in the
Prospectus Supplement relating to that series. If so indicated in the Prospectus
Supplement, the terms of any such series may differ from the terms set forth
below. The description of certain provisions of the Preferred Stock set forth
below and in any Prospectus Supplement does not purport to be complete and is
subject to and qualified in its entirety by reference to the Company's
Certificate of Incorporation and the Certificate of Designation relating to each
such series of Preferred Stock, which will be filed with the Commission in
connection with the offering of such series of Preferred Stock.
Under the Company's Certificate of Incorporation, the Board of Directors
may, by resolution, establish series of Preferred Stock having such voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, as the Board of Directors may determine.
The Preferred Stock offered hereby will have the dividend, liquidation,
redemption and voting rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Stock offered thereby for specific terms, including: (1) the
designation and stated value per share of such Preferred Stock and the number of
shares offered; (2) the amount of liquidation preference per share; (3) the
price at which such Preferred Stock will be issued; (4) the dividend rate (or
method of calculation), the dates on which dividends will be payable, whether
such dividends will be cumulative or noncumulative and, if
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<PAGE> 44
cumulative, the dates from which dividends will commence to cumulate; (5) any
redemption or sinking fund provisions; (6) any conversion rights and (7) any
additional voting, dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions.
The Preferred Stock offered hereby will be issued in one or more series.
The holders of Preferred Stock will have no pre-emptive rights. Preferred Stock
will be fully paid and nonassessable upon issuance against full payment of the
purchase price therefor. Unless otherwise specified in the Prospectus Supplement
relating to a particular series of Preferred Stock, each series of Preferred
Stock will, with respect to dividend rights and rights on liquidation,
dissolution and winding up of the Company, rank prior to the Common Stock and
the Junior Preferred Stock (the "Junior Stock") and on a parity with the Series
A, Series B and Series C Preferred Stock and each other series of Preferred
Stock offered hereby (the "Parity Stock").
Dividend Rights
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the Prospectus Supplement relating to such series of Preferred
Stock. Such rate may be fixed or variable or both. Each such dividend will be
payable to the holders of record as they appear on the stock books of the
Company on such record dates as will be fixed by the Board of Directors of the
Company. Dividends on any series of the Preferred Stock may be cumulative or
noncumulative, as provided in the Prospectus Supplement relating thereto. If the
Board of Directors of the Company fails to declare a dividend payable on a
dividend payment date on any series of Preferred Stock for which dividends are
noncumulative, then the right to receive a dividend in respect of the dividend
period ending on such dividend payment date will be lost, and the Company will
have no obligation to pay the dividend accrued for that period, whether or not
dividends are declared for any future period. Dividends on shares of each series
of Preferred Stock for which dividends are cumulative will accrue from the date
set forth in the applicable Prospectus Supplement.
The Preferred Stock of each series will include customary provisions (1)
restricting the payment of dividends or the making of other distributions on, or
the redemption, purchase or other acquisition of, Junior Stock unless full
dividends, including, in the case of cumulative Preferred Stock, accruals, if
any, in respect of prior dividend periods, on the shares of such series of
Preferred Stock have been paid and (2) providing for the pro rata payment of
dividends on such series and other Parity Stock when dividends have not been
paid in full upon such series and other Parity Stock.
See "Certain Provisions of Outstanding Preferred Stock" for a description
of provisions of the Company's Series A, Series B and Series C Preferred Stock
that could limit the Company's ability to pay dividends on the Preferred Stock
offered hereby.
Rights Upon Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of assets of the Company available for distribution to
stockholders, before any distribution of assets is made to holders of Junior
Stock, liquidating distributions in the amount set forth in the Prospectus
Supplement relating to such series of Preferred Stock plus an amount equal to
accrued and unpaid dividends. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Preferred Stock of any series and any Parity Stock are not paid in full, the
holders of the Preferred Stock of such series and of such Parity Stock will
share ratably in any such distribution of assets of the Company in proportion to
the full respective preferential amounts (which may include accumulated
dividends) to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of such series
of Preferred Stock will have no right or claim to any of the remaining assets of
the Company. Neither the sale of all or a portion of the Company's assets nor
the merger or consolidation of the Company into or with any other corporation
shall be deemed to be a dissolution, liquidation or winding up, voluntarily or
involuntarily, of the Company.
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<PAGE> 45
Redemption
The terms, if any, on which shares of a series of Preferred Stock may be
subject to optional or mandatory redemption will be set forth in the Prospectus
Supplement relating to such series.
Conversion
The terms, if any, on which shares of any series of Preferred Stock are
convertible into Common Stock will be set forth in the Prospectus Supplement
relating thereto.
Voting Rights
The holders of Preferred Stock of a series offered hereby will not be
entitled to vote except as indicated below or in the Prospectus Supplement
relating to such series of Preferred Stock or as required by applicable law.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Stock, when and if any such series is entitled to vote, each
share in such series will be entitled to one vote.
Unless otherwise specified in the related Prospectus Supplement, holders of
shares of a series of Preferred Stock will have the following voting rights. If,
on the date used to determine stockholders of record for any meeting of
stockholders of the Company at which directors are to be elected, dividends
payable on any series of Preferred Stock offered hereby and any other series of
Parity Stock are in arrears in an amount equal to at least six quarterly
dividends, the number of directors of the Company will be increased by two and
the holders of all such series of Preferred Stock, voting as a class without
regard to series, will be entitled to elect such two additional directors at
such meeting. The affirmative vote or consent of the holders of at least a
majority of the outstanding shares of a series of Preferred Stock and any other
series of Parity Stock also being affected, voting as a single class without
regard to series, will be required for any amendment of the Company's
Certificate of Incorporation if the amendment would have a materially adverse
effect on the powers, preferences or special rights of such series. The
affirmative vote or consent of the holders of at least two-thirds of the
outstanding shares of a series of Preferred Stock and any other series of Parity
Stock, voting as a single class without regard to series, will be required to
authorize, create or issue, or increase the authorized amount of, any class or
series of capital stock ranking prior to such series of Preferred Stock as to
dividends or upon liquidation.
CERTAIN PROVISIONS OF OUTSTANDING PREFERRED STOCK
As of December 31, 1996, there were 28.4 million shares of Series A
Preferred Stock, 10 shares of Series B Preferred Stock and 20 shares of Series C
Preferred Stock outstanding. The Series A Preferred Stock accrues quarterly
cumulative dividends at the annual rate of $3.75 per share and is entitled to
receive $50 per share, plus accrued and unpaid dividends, upon liquidation. Each
of the Series B Preferred Stock and the Series C Preferred Stock has a stated
value of $5 million per share, accrues quarterly cumulative dividends based on
such stated value at the rate of 9 1/2% per annum, accrues dividends on the
amount of any unpaid dividends and is entitled to receive the stated value, plus
accrued and unpaid dividends, upon liquidation.
Each of the Series A, Series B and Series C Preferred Stock prohibits the
payment of cash dividends or other distributions on, and the purchase,
redemption or other acquisition of, any shares of Junior Stock until all accrued
and unpaid dividends on such series of Preferred Stock have been paid. When
dividends are not paid in full on such series of Preferred Stock, all dividends
paid upon shares of such series and Parity Stock must be paid pro rata so that
the amount of dividends paid per share on such series and the Parity Stock bear
to each other the same ratio that accrued dividends per share on such series and
the Parity Stock bear to each other.
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<PAGE> 46
DESCRIPTION OF THE WARRANTS
The Company may issue Warrants for the purchase of Debt Securities,
Preferred Stock or Common Stock. Warrants may be issued independently or
together with Debt Securities, Preferred Stock or Common Stock offered by any
Prospectus Supplement and may be attached to or separate from any such
Securities. Each series of Warrants will be issued under a separate warrant
agreement (a "Warrant Agreement") to be entered into between the Company and a
bank or trust company, as warrant agent (the "Warrant Agent"). The Warrant Agent
will act solely as an agent of the Company in connection with the Warrants and
will not assume any obligation or relationship of agency or trust for or with
any holders or beneficial owners of Warrants. The following summary of certain
provisions of the Warrants does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the Warrant
Agreement that will be filed with the Commission in connection with the offering
of such Warrants.
DEBT WARRANTS
The Prospectus Supplement relating to a particular issue of Warrants for
the purchase of Debt Securities ("Debt Warrants") will describe the terms of
such Debt Warrants, including the following: (1) the title of such Debt
Warrants; (2) the offering price for such Debt Warrants, if any; (3) the
aggregate number of such Debt Warrants; (4) the designation and terms of the
Debt Securities purchasable upon exercise of such Debt Warrants; (5) if
applicable, the designation and terms of the Debt Securities with which such
Debt Warrants are issued and the number of such Debt Warrants issued with each
such Debt Security; (6) if applicable, the date from and after which such Debt
Warrants and any Debt Securities issued therewith will be separately
transferable; (7) the principal amount of Debt Securities purchasable upon
exercise of a Debt Warrant and the price at which such principal amount of Debt
Securities may be purchased upon exercise (which price may be payable in cash,
securities, or other property); (8) the date on which the right to exercise such
Debt Warrants shall commence and the date on which such right shall expire; (9)
if applicable, the minimum or maximum amount of such Debt Warrants that may be
exercised at any one time; (10) whether the Debt Warrants represented by the
Debt Warrant certificates or Debt Securities that may be issued upon exercise of
the Debt Warrants will be issued in registered or bearer form; (11) information
with respect to book-entry procedures, if any; (12) the currency or currency
units in which the offering price, if any, and the exercise price are payable;
(13) if applicable, a discussion of material United States federal income tax
considerations; (14) the antidilution provisions of such Debt Warrants, if any;
(15) the redemption or call provisions, if any, applicable to such Debt
Warrants; and (16) any additional terms of the Debt Warrants, including terms,
procedures, and limitations relating to the exchange and exercise of such Debt
Warrants.
STOCK WARRANTS
The Prospectus Supplement relating to any particular issue of Warrants for
the purchase of Common Stock or Preferred Stock will describe the terms of such
Warrants, including the following: (1) the title of such Warrants; (2) the
offering price for such Warrants, if any; (3) the aggregate number of such
Warrants; (4) the designation and terms of any Preferred Stock purchasable upon
exercise of such Warrants; (5) if applicable, the designation and terms of the
Securities with which such Warrants are issued and the number of such Warrants
issued with each such Security; (6) if applicable, the date from and after which
such Warrants and any Securities issued therewith will be separately
transferable; (7) the number of shares of Common Stock or Preferred Stock
purchasable upon exercise of a Warrant and the price at which such shares may be
purchased upon exercise (which price may be payable in cash, securities, or
other property); (8) the date on which the right to exercise such Warrants shall
commence and the date on which such right shall expire; (9) if applicable, the
minimum or maximum amount of such Warrants that may be exercised at any one
time; (10) the currency or currency units in which the offering price, if any,
and the exercise price are payable; (11) if applicable, a discussion of material
United States federal income tax considerations; (12) the antidilution
provisions of such Warrants, if any; (13) the redemption or call provisions, if
any, applicable to such Warrants; and (14) any additional terms of the Warrants,
including terms, procedures, and limitations relating to the exchange and
exercise of such Warrants.
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<PAGE> 47
PLAN OF DISTRIBUTION
The Offered Securities may be sold to underwriters for public offering
pursuant to terms of offering fixed at the time of sale. In addition, the
Offered Securities may be sold by the Company to other purchasers directly or
through agents. Any such underwriter or agent involved in the offer and sale of
the Offered Securities will be named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may offer and sell the Offered Securities in
exchange for one or more of its outstanding issues of debt securities. The
Company also may, from time to time, authorize underwriters acting as the
Company's agents to offer and sell the Offered Securities upon the terms and
conditions as shall be set forth in an applicable Prospectus Supplement. In
connection with the sale of Offered Securities, underwriters may be deemed to
have received compensation from the Company in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
Offered Securities for whom they may act as agents. Underwriters may sell
Offered Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions (which may be changed from time to time) from
the purchasers for whom they may act as agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act, and to
reimbursement by the Company for certain expenses.
If so indicated in an applicable Prospectus Supplement, the Company may
authorize agents, underwriters or dealers acting as the Company's agents to
solicit offers from certain institutional investors to purchase Offered
Securities from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on a future date or dates specified therein.
There may be limitations on the minimum amount which may be purchased by any
such institutional investor or on the portion of the aggregate amount of the
particular Offered Securities which may be sold pursuant to such arrangements.
Institutional investors to which such offers may be made, when offered, include
commercial and savings banks, insurance companies, pension funds, investment
banks, educational and charitable institutions and such other institutions as
may be approved by the Company. Each Contract will be subject to the approval of
the Company. Contracts will not be subject to any conditions except (1) purchase
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which the purchaser is subject and (2) if
the Offered Securities are being sold to underwriters, the Company shall have
sold to underwriters the total amount of the Offered Securities less the amount
covered by Contracts. Agents or underwriters will have no responsibility in
respect of the delivery or performance of Contracts.
Each underwriter, dealer and agent participating in the distribution of any
Offered Securities which are Bearer Securities will agree that it will not
offer, sell or deliver, directly or indirectly, Bearer Securities in the United
States or to U.S. Persons (other than qualifying financial institutions), in
connection with the original issuance of the Offered Securities. See
"Limitations on Issuance of Bearer Securities".
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<PAGE> 48
LEGAL MATTERS
Unless otherwise indicated in an accompanying Prospectus Supplement,
certain legal matters in connection with the Offered Securities will be passed
upon for the Company by Harold S. Barron, Esq., Senior Vice President, General
Counsel and Secretary of the Company, and for any agents or underwriters by
Simpson Thacher & Bartlett (a partnership which includes professional
corporations). As of the date of this Prospectus, Mr. Barron owns 68,295 shares
(including 66,695 restricted shares) of Common Stock and holds options to
purchase 228,000 shares of Common Stock.
EXPERTS
The consolidated financial statements of the Company at December 31, 1995
and 1994, and for each of the three years in the period ended December 31, 1995
incorporated by reference or appearing in the Company's Annual Report (Form
10-K) for the year ended December 31, 1995, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated
therein and incorporated herein by reference. Such consolidated financial
statements are, and audited financial statements to be included in subsequently
filed documents will be, incorporated herein in reliance upon the reports of
Ernst & Young LLP (to the extent covered by consents filed with the Commission)
given upon the authority of such firm as experts in accounting and auditing.
25
<PAGE> 49
======================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY UNISYS OR ANY UNDERWRITER, DEALER OR AGENT. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH THEY RELATE OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary...... S-3
The Company........................ S-4
Risk Factors....................... S-4
Recent Developments................ S-6
Use of Proceeds.................... S-7
Capitalization..................... S-7
Ratio of Earnings to Fixed
Charges.......................... S-8
Description of Notes............... S-8
Description of Certain Federal
Income Tax Consequences.......... S-18
Underwriting....................... S-23
Information Incorporated by
Reference........................ S-24
PROSPECTUS
Available Information.............. 2
Information Incorporated by
Reference........................ 2
The Company........................ 3
Risk Factors....................... 3
Use of Proceeds.................... 5
Ratios of Earnings................. 5
Description of Debt Securities..... 6
Description of Capital Stock....... 16
Plan of Distribution............... 24
Legal Matters...................... 25
Experts............................ 25
</TABLE>
======================================================
======================================================
UNISYS
$200,000,000
UNISYS CORPORATION
% SENIOR NOTES DUE 2008
-----------------------------------------
PROSPECTUS SUPPLEMENT
AND PROSPECTUS
-----------------------------------------
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
, 1998
======================================================
