<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration Number 333-52695
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 29, 1998)
$200,000,000
Arrow Electronics, Inc.
6 7/8% SENIOR DEBENTURES DUE 2018
------------------------
Interest payable June 1 and December 1
------------------------
THE 2018 SENIOR DEBENTURES (THE "OFFERED SECURITIES") WILL BE REDEEMABLE, IN
WHOLE OR FROM TIME TO TIME IN PART, AT THE OPTION OF THE COMPANY AT ANY TIME AT
A REDEMPTION PRICE EQUAL TO THE GREATER OF (I) 100 PERCENT OF PRINCIPAL AMOUNT
OF THE OFFERED SECURITIES TO BE REDEEMED AND (II) THE SUM OF THE PRESENT VALUES
OF THE REMAINING SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST THEREON (EXCLUSIVE
OF INTEREST ACCRUED TO THE DATE OF REDEMPTION) DISCOUNTED TO THE DATE OF
REDEMPTION ON A SEMIANNUAL BASIS (ASSUMING A 360-DAY YEAR CONSISTING OF TWELVE
30-DAY MONTHS) AT THE TREASURY RATE (AS DEFINED HEREIN) PLUS 25 BASIS POINTS,
PLUS, IN EITHER CASE, ACCRUED AND UNPAID INTEREST ON THE PRINCIPAL AMOUNT BEING
REDEEMED TO THE DATE OF REDEMPTION. THE OFFERED SECURITIES WILL BE REPRESENTED
BY ONE REGISTERED GLOBAL SECURITY REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITARY") OR ITS NOMINEE. BENEFICIAL INTERESTS IN THE
REGISTERED GLOBAL SECURITY WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE
EFFECTED THROUGH, RECORDS MAINTAINED BY THE DEPOSITARY OR ITS PARTICIPANTS.
EXCEPT AS DESCRIBED HEREIN, OFFERED SECURITIES IN DEFINITIVE FORM WILL NOT BE
ISSUED. SEE "DESCRIPTION OF OFFERED SECURITIES" HEREIN AND "DESCRIPTION OF DEBT
SECURITIES -- REGISTERED GLOBAL SECURITIES" IN THE ACCOMPANYING PROSPECTUS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE 98.782% AND ACCRUED INTEREST, IF ANY
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
--------- -------------- -------------
<S> <C> <C> <C>
Per Senior Debenture............. 98.782% .875% 97.907%
Total............................ $197,564,000 $1,750,000 $195,814,000
</TABLE>
- ------------
(1) Plus accrued interest from June 3, 1998, if any.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933.
(3) Before deducting expenses payable by the Company estimated at $200,000.
------------------------
The Offered Securities are offered by the Underwriters, subject to prior
sale, when, as and if issued by the Company and accepted by the Underwriters and
subject to approval of certain legal matters by Davis Polk & Wardwell, counsel
for the Underwriters. It is expected that delivery of the Offered Securities
will be made on or about June 3, 1998 through the book-entry facilities of the
Depositary, against payment therefor in immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
GOLDMAN, SACHS & CO.
May 29, 1998
<PAGE> 2
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY (THE
"OFFERING") TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE OFFERED SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER
ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company................................................. S-1
Use of Proceeds............................................. S-1
Capitalization.............................................. S-2
Selected Historical Financial Data.......................... S-3
Management's Discussion and Analysis........................ S-4
Description of Offered Securities........................... S-8
Underwriters................................................ S-10
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Information by Reference........... 2
The Company................................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Use of Proceeds............................................. 3
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 17
Legal Opinions.............................................. 18
Experts..................................................... 18
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
SECURITIES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING, AND MAY BID FOR, AND PURCHASE, OFFERED SECURITIES IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS".
<PAGE> 3
THE COMPANY
The Company is the world's largest distributor of electronic components and
computer products to industrial and commercial customers. As the global
electronics distribution industry's leader in state-of-the-art operating
systems, employee productivity, value-added programs and total quality
assurance, the Company is the distributor of choice for over 600 suppliers.
The Company's global distribution network spans the world's three dominant
electronics markets -- North America, Europe and the Asia/Pacific region. The
Company is the largest electronics distributor in each of these vital
industrialized regions, serving a diversified worldwide base of original
equipment manufacturers, including manufacturers of computer and office
products, industrial equipment (including machine tools, factory automation, and
robotic equipment), telecommunications products, aircraft and aerospace
equipment, and scientific and medical devices, and commercial customers, which
are mainly value-added resellers of computer systems. The Company maintains over
200 sales facilities and 26 distribution centers in 32 countries.
The Company's principal executive offices are located at 25 Hub Drive,
Melville, New York 11747, telephone (516) 391-1300.
USE OF PROCEEDS
The net proceeds from the sale by the Company of the Offered Securities are
estimated to be approximately $195.6 million, which will be used to reduce U.S.
borrowings of approximately $473.5 million outstanding under the Company's
global multi-currency credit facility with any remaining balance used to fund
future working capital needs.
S-1
<PAGE> 4
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 and as adjusted to give effect to the issuance of the Offered
Securities and the application of the net proceeds of the Offering.
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
($ IN THOUSANDS)
<S> <C> <C>
Short-term borrowings, including current maturities of
long-term debt............................................ $ 139,919 $ 139,919
---------- ----------
Long-term debt:
Global multi-currency credit facility..................... 473,472 277,858
6 7/8% senior debentures due 2018...................... -- 195,814
7% senior notes due 2007............................... 197,788 197,788
7 1/2% senior debentures due 2027...................... 195,966 195,966
8.29% senior notes due 2000............................ 50,000 50,000
Other obligations with various interest rates and due
dates..................................................... 1,585 1,585
---------- ----------
Total long-term debt.............................. 918,811 919,011
---------- ----------
Total debt........................................ 1,058,730 1,058,930
---------- ----------
Shareholders' equity:
Common stock, par value $1:
Authorized -- 120,000,000 shares
Issued -- 102,949,640 shares........................... 102,950 102,950
Capital in excess of par value.............................. 505,113 505,113
Retained earnings........................................... 1,010,943 1,010,943
Foreign currency translation adjustment..................... (46,666) (46,666)
---------- ----------
1,572,340 1,572,340
Less:
Treasury shares (5,725,315), at cost...................... 155,511 155,511
Unamortized employee stock awards......................... 20,750 20,750
---------- ----------
Total shareholders' equity........................ 1,396,079 1,396,079
---------- ----------
Total capitalization.............................. $2,454,809 $2,455,009
========== ==========
</TABLE>
S-2
<PAGE> 5
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth certain selected historical financial data
for the Company. Such financial data should be read in conjunction with the
consolidated financial statements and related notes for the Company incorporated
by reference in this Prospectus Supplement and the accompanying Prospectus. The
accompanying financial data for the three month periods ended March 31, 1998 and
1997 are unaudited; however such data reflect all adjustments, consisting only
of normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the consolidated financial position and results of
operations at and for the periods presented. The results of operations for the
interim periods are not necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997(A) 1996 1995 1994(B)(C) 1993(B)(D)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Sales................ $2,025,760 $1,855,333 $7,763,945 $6,534,577 $5,919,420 $4,649,234 $3,560,856
Operating income..... 91,958 104,097 374,721 400,627 423,209 255,974 226,089
Interest expense..... 18,677 13,945 67,117 37,959 46,361 36,168 26,573
Net income........... 41,945 50,294 163,656 202,709 202,544 111,889 106,559
Diluted earnings per
share(e)........... $0.43 $0.50 $1.64 $1.98 $2.03 $1.16 $1.12
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994(B)(C) 1993(B)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Accounts receivable
and inventories.... $2,571,187 $2,241,535 $2,475,407 $1,947,719 $1,979,160 $1,422,457 $1,094,175
Total assets......... 3,580,078 3,201,280 3,537,873 2,710,351 2,701,016 2,038,774 1,569,152
Total long-term debt
and subordinated
debentures......... 918,811 766,376 823,099 344,562 451,706 349,398 314,859
Shareholders'
equity............. 1,396,079 1,346,575 1,360,758 1,358,482 1,195,881 837,885 701,799
</TABLE>
- ---------------
(a) Net income includes special charges totaling $59.5 million associated with
the realignment of Arrow's North American components operations and the
acquisition and integration of the volume electronic component distribution
businesses of Premier Farnell plc. Excluding these charges, operating
income, net income, and net income per share on a diluted basis were $434.2
million, $204.1 million, and $2.05, respectively.
(b) In 1994, Arrow acquired Gates/FA Distributing, Inc. ("Gates") and Anthem
Electronics, Inc. ("Anthem") in transactions accounted for as poolings of
interests. Accordingly, all financial information for the year prior thereto
have been restated to include the operations of Gates and Anthem. Also, 1994
includes special charges of $45.3 million associated with the acquisition
and integration of Gates and Anthem. Excluding these charges, operating
income, net income, and net income per share on a diluted basis were $301.3
million, $140.7 million, and $1.44, respectively.
(c) Includes results of Silverstar which was accounted for under the equity
method prior to January 1994.
(d) Net income is after a restructuring charge of $7.8 million associated with
the disposition of a business unit by Anthem. Excluding this charge,
operating income, net income, and net income per share on a diluted basis
were $233.9 million, $111.1 million, and $1.17, respectively.
(e) All per share amounts have been restated to reflect the two-for-one stock
split effective October 15, 1997.
S-3
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
For an understanding of the significant factors that influenced the
Company's performance during the periods discussed below, the following
discussion should be read in conjunction with the consolidated financial
statements and other information appearing elsewhere in this Prospectus
Supplement, the accompanying Prospectus or incorporated by reference herein.
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Sales
Consolidated sales for the first quarter of 1998 increased approximately 9
percent compared with the year-earlier period. This sales growth was due to
increased activity levels in Europe and the Asia/Pacific region and acquisitions
offset, in part, by a stronger U.S. dollar and lower sales in the Company's
North American components operations.
Operating income
The Company recorded operating income of $92 million in the first quarter
of 1998, compared with $104.1 million in the first quarter of 1997. The decrease
in operating income reflects the impact of lower sales and gross profit margins
in North America offset, in part, by stronger performance by the Company's
operations in Europe and the Asia/Pacific region. Gross profit margins decreased
principally as a result of competitive pricing pressures in the North American
components operations and a greater sales mix of lower margin commercial
computer products.
Interest expense
Interest expense of $18.7 million in the first quarter of 1998 increased
from $13.9 million during the comparable quarter of 1997, reflecting increases
in borrowings associated with acquisitions, the purchases of the Company's
common stock, and investments in working capital.
Income taxes
During the first quarter of 1998, the Company recorded a provision for
taxes at an effective tax rate of 41.2 percent, compared with 41.1 percent in
the year-earlier period.
Net income
The Company recorded net income of $41.9 million in the first quarter of
1998 compared with $50.3 million in the first quarter of 1997. The decrease in
net income from the year-earlier period is due principally to lower operating
income and higher interest expense offset, in part, by a decrease in minority
interest.
Liquidity and capital resources
The Company maintains a high level of current assets, primarily accounts
receivable and inventories. Consolidated current assets as a percentage of total
assets were approximately 75 percent for the first quarter of 1998 and 1997.
During the first three months of 1998, the net amount of cash used by the
Company's operating activities was $121.4 million, the principal element of
which was the increase in inventory. The net amount of cash used for investing
activities was $40.7 million, including $32.2 million for acquisitions. The net
amount of cash provided by the Company's financing activities was $105.5
million.
The net amount of cash used by the Company's operating activities during
the first three months of 1997 was $51.7 million. The principal element of which
was the increase in accounts receivable resulting from the increase in net sales
over the fourth quarter of 1996. The net amount of cash used for investing
activities was $327 million, including approximately $300 million for the
S-4
<PAGE> 7
acquisition of the volume electronic component distribution businesses of
Premier Farnell plc. The net amount of cash provided by financing activities was
$380.8 million, reflecting principally the $393.3 million of proceeds from the
issuance of the Company's 7% senior notes due 2007 and 7.5% senior debentures
due 2027 offset, in part, by purchases of the Company's common stock and
distributions to minority partners.
THREE YEARS ENDED DECEMBER 31, 1997
Sales
In 1997, consolidated sales increased to $7.8 billion, an increase of 19
percent over 1996 sales of $6.5 billion. This sales growth was due to increased
activity levels throughout the world and acquisitions, principally the volume
electronic component distribution businesses of Premier Farnell plc offset, in
part, by the impact of a stronger U.S. dollar.
Consolidated sales of $6.5 billion in 1996 were 10 percent higher than 1995
sales of $5.9 billion. This sales growth was principally due to increased sales
of commercial computer products and microprocessors. The sales of semiconductor
products were characterized by an oversupply of product, competitive pricing
pressures, and reductions in memory prices.
In 1995, consolidated sales increased to $5.9 billion, a 27 percent
increase over 1994 sales of $4.6 billion. This sales growth reflected strong
activity levels in each of the Company's businesses as well as the impact of key
strategic acquisitions and alliances forged around the world during 1994.
Operating Income
In 1997, the Company's consolidated operating income decreased to $374.7
million, compared with operating income of $400.6 million in 1996, principally
as a result of special charges of $37.9 million associated with the realignment
of the North American components operations and $21.6 million associated with
the acquisition and integration of the volume electronic component distribution
businesses of Premier Farnell plc. The improvement in operating income,
excluding the special charges, reflects the impact of increased sales,
acquisitions, and continuing economies of scale offset, in part, by lower gross
profit margins caused by competitive pricing pressures and a greater sales mix
of commercial computer products. Operating expenses, excluding the special
charges, as a percent of sales declined to 9.7 percent in 1997, the lowest in
the Company's history.
The Company's consolidated operating income decreased to $400.6 million in
1996, compared with operating income of $423.2 million in 1995. The reduction in
operating income reflected a further decline in gross margins due to
proportionately higher sales of lower margin commercial computer products and
microprocessors throughout the world and competitive pricing pressures in Europe
and the Asia/Pacific region offset, in part, by the impact of increased sales
and the benefits of continuing economies of scale. Operating expenses as a
percent of sales declined to 9.8 percent in 1996.
In 1995, the Company's consolidated operating income increased to $423.2
million, compared with operating income of $256 million in 1994. Included in the
1994 results were special charges of $45.3 million associated with the
acquisition and integration of Gates and Anthem into Arrow. The improvement in
operating income outpaced the growth in sales as the Company benefited from cost
savings following the integration of Gates and Anthem. These cost savings
principally reflected reductions in personnel performing duplicative functions
and the elimination of duplicative administrative facilities, computer and
telecommunications equipment, and selling and stocking locations. Operating
expenses as a percentage of sales declined to 10.3 percent in 1995.
S-5
<PAGE> 8
Interest Expense
In 1997, interest expense increased to $67.1 million from $38 million in
1996, reflecting increases in borrowings associated with acquisitions, the
repurchase of the Company's common stock, and investments in working capital.
Interest expense of $38 million in 1996 decreased by $8.4 million from the
1995 level. The decrease reflected the conversion of the Company's 5 3/4%
convertible subordinated debentures in October 1995, lower borrowings resulting
from improved working capital usage, and lower borrowing costs offset, in part,
by borrowings to fund purchases of common stock.
In 1995, interest expense increased to $46.4 million from $36.2 million in
1994, reflecting increases in working capital required to support higher sales,
interest related to borrowings associated with acquisitions, and capital
expenditures.
Income Taxes
In 1997, the Company recorded a provision for taxes at an effective tax
rate of 41 percent, excluding the special charges, compared with 39.9 percent in
1996. The increased rate for 1997 is due to increased earnings in countries with
higher marginal tax rates and the non-deductibility of goodwill amortization.
The Company recorded a provision for taxes at an effective tax rate of 39.9
percent in 1996, compared with 40.4 percent in 1995. The lower effective rate
was the result of decreased earnings in countries with higher tax rates.
In 1995, the Company recorded a provision for taxes at an effective tax
rate of 40.4 percent compared with 40.6 percent, excluding the special charges
associated with the Gates and Anthem acquisitions, in 1994.
Net Income
In 1997, the Company's net income advanced to $204.1 million from $202.7
million in 1996, before the special charges of $59.5 million ($40.4 million
after taxes). The increase in net income is attributable to higher operating
income offset, in part, by an increase in interest expense.
Net income in 1996 was $202.7 million, an increase from $202.5 million in
1995. The increase in net income was attributable to decreases in interest
expense, income taxes, and minority interest offset, in part, by lower operating
income.
In 1995, the Company's net income advanced to $202.5 million from $140.7
million in 1994, before the special charges of $45.3 million ($28.8 million
after taxes) associated with Gates and Anthem. The significant improvement in
net income was principally the result of the increase in operating income
offset, in part, by higher interest expense.
Liquidity and Capital Resources
Working capital increased by $160 million, or 13 percent, in 1997 compared
with 1996, primarily as a result of increased sales and acquisitions. This
percentage increase was less than the percentage increase of sales as a result
of improvements in working capital usage.
The net amount of cash used for the Company's operating activities in 1997
was $14.2 million, principally reflecting earnings offset by increased working
capital requirements supporting higher sales. The net amount of cash used for
investing activities was $410.8 million, including $381.5 million for
acquisitions and investments. The net amount of cash provided by financing
activities was $422.1 million, principally reflecting the $392.8 million of
proceeds from the issuance of the Company's senior notes and senior debentures
and increases in the Company's credit facilities offset, in part, by the
purchase of the Company's common stock.
S-6
<PAGE> 9
In January 1997, the Company issued $200 million of 10-year senior notes
bearing interest at 7% and $200 million of 30-year senior debentures bearing
interest at 7 1/2%. The net proceeds of $392.8 million were used primarily to
fund acquisitions and working capital and for other general corporate purposes.
In 1996, working capital increased by five percent, or $56 million,
compared with 1995. This percentage increase was less than the percentage
increase of sales as a result of improvements in working capital usage.
The net amount of cash provided by operations in 1996 was $308.6 million,
the principal element of which was the cash flow resulting from net earnings and
improved working capital usage. The net amount of cash used by the Company for
investing purposes was $57.1 million, including $38.9 million for various
acquisitions. Cash flows used for financing activities were $202.6 million,
principally reflecting the reduction in the Company's borrowings, purchases of
common stock, and distributions to partners.
Working capital increased by $349 million, or 40 percent, in 1995 compared
with 1994, primarily as a result of increased sales and, to a lesser extent,
acquisitions in Europe and the Asia/Pacific region.
The net amount of cash used for the Company's operating activities in 1995
was $114.1 million, as the growth in accounts receivable and inventories
outpaced the increase in net income. The net amount of cash used for investing
activities was $132.7 million, including $90.7 million for various investments
and acquisitions. The net amount of cash provided by financing activities was
$228.1 million, principally reflecting the Company's borrowings to finance
investments and acquisitions, distributions to partners, and the repayment of
certain debt.
In October 1995, the Company redeemed its 5 3/4% convertible subordinated
debentures due 2002, which resulted in the issuance of 7,544,508 shares of
common stock and eliminated approximately $125 million in long-term debt and
$7.2 million in annual interest charges.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and the documents incorporated herein by
reference include forward-looking statements that are subject to certain risks
and uncertainties which could cause actual results or facts to differ materially
from such statements for a variety of reasons, including, but not limited to:
industry conditions; changes in product supply, pricing, and customer demand;
competition; other vagaries in the computer and electronic components markets;
and changes in relationships with key suppliers. Prospective purchasers of the
Offered Securities are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on which they are
made. The Company undertakes no obligation to update publicly or revise any
forward-looking statements.
S-7
<PAGE> 10
DESCRIPTION OF OFFERED SECURITIES
The following description of the particular terms of the Offered Securities
offered hereby supplements and, to the extent inconsistent therewith, replaces
the description of the general terms and provisions of the Offered Securities
set forth in the accompanying Prospectus under the caption "Description of Debt
Securities", to which description reference is hereby made. The following
summary is qualified in its entirety by reference to the Indenture referred to
in the accompanying Prospectus.
GENERAL
The Offered Securities constitute a series of debt securities under the
Indenture, limited to $200 million aggregate principal amount. The Offered
Securities will mature on June 1, 2018.
The Offered Securities will bear interest from June 3, 1998 at the rate
shown in their title, payable semi-annually (to holders of record at the close
of business on the May 15 or November 15 immediately preceding the interest
payment date) on June 1 and December 1 of each year beginning December 1, 1998.
Upon issuance, each series of the Offered Securities will be represented by one
Registered Global Security that will be deposited with, or on behalf of, the
Depositary and will be registered in the name of the Depositary or its nominee.
For so long as the Offered Securities are registered in the name of the
Depositary, or its nominee, the principal and interest due on the Offered
Securities will be payable by the Company or its agent to the Depositary for
payment to its participants for subsequent disbursement to the beneficial
owners. See "Description of Debt Securities -- Registered Global Securities" in
the accompanying Prospectus.
The Offered Securities will be unsubordinated and unsecured obligations of
the Company ranking pari passu with all existing and future unsubordinated and
unsecured obligations of the Company. Claims of Holders of the Offered
Securities will be effectively subordinated to the claims of holders of the debt
of the Company's subsidiaries with respect to the assets of such subsidiaries.
As of March 31, 1998, the Company's subsidiaries had $384.5 million of debt. In
addition, claims of Holders of the Offered Securities will be effectively
subordinated to the claims of holders of secured debt of the Company and its
subsidiaries with respect to the collateral securing such claims and claims of
the Company as the holder of general unsecured intercompany debt will be
similarly effectively subordinated to claims of holders of secured debt of its
subsidiaries.
REDEMPTION
The Offered Securities will be redeemable, in whole or from time to time in
part, at the option of the Company on any date (a "Redemption Date"), at a
redemption price equal to the greater of (i) 100 percent of the principal amount
of the Offered Securities to be redeemed and (ii) the sum of the present values
of the remaining scheduled payments of principal and interest thereon (exclusive
of interest accrued to such Redemption Date) discounted to such Redemption Date
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate plus 25 basis points, plus, in either case, accrued
and unpaid interest on the principal amount being redeemed to such Redemption
Date; provided that installments of interest on the Offered Securities which are
due and payable on an interest payment date falling on or prior to the relevant
Redemption Date shall be payable to the holders of such Offered Securities,
registered as such at the close of business on the relevant record date
according to their terms and the provisions of the Indenture.
"Treasury Rate" means, with respect to any Redemption Date for the Offered
Securities, (i) the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity correspond-
S-8
<PAGE> 11
ing to the Comparable Treasury Issue (if no maturity is within three months
before or after the Maturity Date, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue shall, be determined and
the Treasury Rate shall be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month) or (ii) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annul equivalent yield to maturity to the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date. The Treasury Rate shall be calculated on the third
Business Day preceding the Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the Offered Securities to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Offered Securities.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated or,
if such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee after consultation with the Company.
"Comparable Treasury Price" means with respect to any Redemption Date for
the Offered Securities (i) the average of five Reference Treasury Dealer
Quotations for such Redemption Date, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than
five such Reference Treasury Dealer Quotations, the average of all such
quotations.
"Reference Treasury Dealer Quotations" means with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.
Notice of any redemption by the Company will be mailed at least 30 days but
not more than 60 days before any Redemption Date to each holder of the Offered
Securities to be redeemed. If less than all the Offered Securities are to be
redeemed at the option of the Company, the Trustee shall select, in such manner
as it shall deem fair and appropriate, the Offered Securities to be redeemed in
whole or in part.
S-9
<PAGE> 12
UNDERWRITERS
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, the Underwriters named below (the
"Underwriters") have severally agreed to purchase from the Company, and the
Company has agreed to sell to them, severally, the respective principal amounts
of the Offered Securities set forth opposite the names of such Underwriters
below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF OFFERED SECURITIES
---- ---------------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $ 50,000,000
Chase Securities Inc........................................ 50,000,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 50,000,000
Goldman, Sachs & Co......................................... 50,000,000
------------
Total............................................. $200,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Offered Securities are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
Offered Securities if any are taken.
The Underwriters initially propose to offer part of the Offered Securities
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
in excess of .50% of the principal amount of the Offered Securities. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of .25% of the principal amount of the Offered Securities to certain other
dealers. After the initial public offering of the Offered Securities, the public
offering price and other selling terms may from time to time be varied by the
Underwriters.
The Company does not intend to apply for listing of the Offered Securities
on a national securities exchange, but has been advised by the Underwriters that
they presently intend to make a market in the Offered Securities, as permitted
by applicable laws and regulations. The Underwriters are not obligated, however,
to make a market in the Offered Securities and any such market making may be
discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Offered Securities.
From time to time, Morgan Stanley & Co. Incorporated has provided, and
continues to provide, investment banking services to the Company. An affiliate
of Chase Securities Inc. is a lender to, and engages in general financing and
banking transactions with, the Company and its affiliates and will receive its
proportionate share of the repayment of the U.S. borrowings outstanding under
the Company's global multi-currency credit facility. See "Capitalization".
In order to facilitate the offering of the Offered Securities, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Offered Securities. Specifically, the Underwriters may
overallot in connection with the offering, creating a short position in the
Offered Securities for their own account. In addition, to cover overallotments
or to stabilize the price of the Offered Securities, the Underwriters may bid
for, and purchase, shares of the Offered Securities in the open market. Finally,
the underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the Offered Securities in the offering,
if the syndicate repurchases previously distributed Offered Securities in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the Offered Securities above independent market levels. The Underwriters are
not required to engage in these activities, and may end any of these activities
at any time.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
S-10
<PAGE> 13
PROSPECTUS
$300,000,000
ARROW ELECTRONICS, INC.
DEBT SECURITIES
------------------------
Arrow Electronics, Inc. (the "Company") intends to issue from time to time
up to $300,000,000 (or the equivalent in foreign currency or composite currency)
aggregate principal amount of its debt securities (the "Debt Securities"), or if
any Debt Securities are issued at an original issue discount, such greater
amount as shall result in net proceeds to the Company of $300,000,000, which
will be offered to the public on terms determined by market conditions at the
time of sale. The Debt Securities may be issued in one or more series with the
same or various maturities at par, at a premium or with an original issue
discount. When particular Debt Securities are offered, a prospectus supplement
(a "Prospectus Supplement"), together with this Prospectus, will be delivered
setting forth the terms of such Debt Securities, including, where applicable,
the specific designation, aggregate principal amount, denominations, maturity,
rate of interest (or manner of calculation thereof) and time of payment thereof,
any redemption provisions, the initial public offering price and any other
specific terms in connection with the offering and sale of such Debt Securities.
The Debt Securities will be unsecured and unsubordinated obligations of the
Company ranking pari passu with all existing and future unsecured and
unsubordinated obligations of the Company. The Debt Securities will be
represented by global certificates (each, a "Registered Global Security")
registered in the name of a nominee of The Depository Trust Company, New York,
New York (the "Depositary"). Beneficial interests in the Debt Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depositary (with respect to participants' interests) and its
participants. Except as described in this Prospectus, Debt Securities in
certificated form will not be issued in exchange for Registered Global
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.
------------------------
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement. The Company may sell Debt
Securities through underwriters, dealers or agents, or directly to one or more
purchasers. The applicable Prospectus Supplement will set forth the names of
underwriters, dealers or agents, if any, any applicable commissions or discounts
and the net proceeds to the Company from any such sale. See "Plan of
Distribution" for possible indemnification arrangements for underwriters,
dealers, agents and purchasers.
------------------------
The date of this Prospectus is May 29, 1998.
<PAGE> 14
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
DEBT SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBT SECURITIES
OFFERED HEREBY. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH
THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE SECURITIES OFFERED HEREBY IN
THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION".
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (together with all amendments thereto,
the "Registration Statement") on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Debt Securities offered
hereby. This Prospectus, filed as a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules a and regulations
of the Commission. In addition, certain documents filed by the Company with the
Commission have been incorporated herein by reference. See "Incorporation of
Certain Information by Reference". For further information regarding the Company
and the Debt Securities offered hereby, reference is made to the Registration
Statement, including the exhibits and schedules thereto and the documents
incorporated herein by 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, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission, at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549; and at the regional offices of the Commission at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and at 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such materials can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding reporting
companies under the Exchange Act, including the Company, at http://www.sec.gov.
The Common Stock of the Company is listed on the New York Stock Exchange.
Reports, proxy statements and other information concerning the Company can also
be inspected and copied at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, its Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
and its Current Report on Form 8-K dated March 18, 1998 are hereby incorporated
by reference.
In addition, all documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the Debt Securities shall be deemed
to be incorporated by reference in this Prospectus and be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus shall
be
2
<PAGE> 15
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus, or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference, modifies or replaces such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified, to constitute a part
of this Prospectus.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon written or oral request of any
such person, a copy of any or all of the documents incorporated by reference
herein, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. Written or oral requests for such copies should be directed to
Arrow Electronics, Inc., 25 Hub Drive, Melville, New York 11747, or by telephone
at (516) 391-1300.
THE COMPANY
The Company is the world's largest distributor of electronic components and
computer products to industrial and commercial customers. As the global
electronics distribution industry's leader in state-of-the-art operating
systems, employee productivity, value-added programs and total quality
assurance, the Company is the distributor of choice for over 600 suppliers.
The Company's global distribution network spans the world's three dominant
electronics markets -- North America, Europe and the Asia/Pacific region. The
Company is the largest electronics distributor in each of these vital
industrialized regions, serving a diversified worldwide base of original
equipment manufacturers, including manufacturers of computer and office
products, industrial equipment (including machine tools, factory automation, and
robotic equipment), telecommunications products, aircraft and aerospace
equipment, and scientific and medical devices, and commercial customers, which
are mainly value-added resellers of computer systems. The Company maintains over
200 sales facilities and 26 distribution centers in 32 countries.
The Company's principal executive offices are located at 25 Hub Drive,
Melville, New York 11747, telephone (516) 391-1300.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------------------
MARCH 31, 1998 1997 1996 1995 1994 1993
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 4.4 5.0(a) 8.6 7.7 6.0(b) 7.0
</TABLE>
- ---------------
(a) Excluding special charges of $59.5 million associated with the realignment
of the North American components operations and the acquisition and
integration of the volume electronic component distribution businesses of
Premier Farnell plc, the ratio of earnings to fixed charges was 5.7.
(b) Excluding special charges of $45.3 million associated with the acquisition
and integration of Gates/FA Distributing, Inc. and Anthem Electronics, Inc.,
the ratio of earnings to fixed charges was 7.1.
USE OF PROCEEDS
Except as may be set forth in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities for
general corporate purposes.
3
<PAGE> 16
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture")
between the Company and Bank of Montreal Trust Company, as trustee (the
"Trustee"). The following description of certain provisions of the Indenture and
the Debt Securities summarizes the material terms thereof but does not purport
to be complete, and such summaries are subject to the detailed provisions of the
Indenture to which reference is hereby made, including the definition of certain
terms used herein and those terms made a part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and for
other information regarding the Debt Securities. The Indenture has been
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus is a part. Numerical references in parentheses below are to
sections in the Indenture. Wherever particular sections or defined terms of the
Indenture are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference. Capitalized terms that are used and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
GENERAL
The Indenture provides for the issuance from time to time of debentures,
notes (including the Debt Securities) or other evidences of indebtedness by the
Company (the "Securities") in an unlimited amount pursuant to an indenture
supplemental to the Indenture or a Board Resolution, or in an Officer's
Certificate pursuant to such supplemental indenture or Board Resolution.
(Section 2.3) Additional Securities may be issued under the Indenture from time
to time.
The Debt Securities may be issued in one or more series with the same or
various maturities, at par, at a premium or with an original issue discount.
Reference is made to the applicable Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for the following terms of
the Debt Securities: (i) the designation of the Securities of the series, which
shall distinguish the Securities of the series from the Securities of all other
series; (ii) any limit upon the aggregate principal amount of the Securities of
the series that may be authenticated and delivered under the Indenture and any
limitation on the ability of the Company to increase such aggregate principal
amount after the initial issuance of the Securities of that series; (iii) the
date or dates on which the Principal of the Securities of the series is payable
(which date or dates may be fixed or extendible); (iv) the rate or rates (which
may be fixed or variable) per annum at which the Securities of the series shall
bear interest, if any, the date or dates from which such interest shall accrue,
on which such interest shall be payable and (in the case of Registered
Securities (which is defined as any Security registered on the Security
Register)) on which a record shall be taken for the determination of Holders to
whom interest is payable and/or the method by which such rate or rates or date
or dates shall be determined; (v) if other than as provided in the Indenture,
the place or places where the Principal of and any interest on Securities of the
series shall be payable, any Registered Securities of the series may be
surrendered for exchange, notices, demands to or upon the Company in respect of
the Securities of the series and the Indenture may be served and notice to
Holders may be published; (vi) the right, if any, of the Company to redeem
Securities of the series, in whole or in part, at its option and the period or
periods within which, the price or prices at which and any terms and conditions
upon which Securities of the series may be so redeemed pursuant to any sinking
fund or otherwise; (vii) the obligation, if any, of the Company to redeem,
purchase or repay Securities of the series pursuant to any mandatory redemption,
sinking fund or analogous provisions or at the option of a Holder thereof and
the price or prices at which and the period or periods within which and any of
the terms and conditions upon which Securities of the series shall be redeemed,
purchased or repaid, in whole or in part, pursuant to such obligation; (viii) if
other than denominations of $1,000 and any integral multiple thereof, the
denominations in which Securities of the series shall be issuable; (ix) if other
than the principal amount thereof, the portion of the principal amount of
Securities of the series which shall be payable upon acceleration of the
maturity thereof; (x) if other than the coin or currency in which the Securities
of the series are
4
<PAGE> 17
denominated, the coin or currency in which payment of the Principal of or
interest on the Securities of the series shall be payable or if the amount of
payments of Principal of and/or interest on the Securities of the series may be
determined with reference to an index based on a coin or currency other than
that in which the Securities of the series are denominated, the manner in which
such amounts shall be determined; (xi) if other than the currency of the United
States of America, the currency or currencies, including composite currencies,
in which payment of the Principal of and interest on the Securities of the
series shall be payable, and the manner in which any such currencies shall be
valued against other currencies in which any other Securities shall be payable;
(xii) whether the Securities of the series or any portion thereof will be
issuable as Registered Securities (and if so, whether such Securities will be
issuable as Registered Global Securities) or Unregistered Securities (which is
defined as any Security other than a Registered Security) (with or without
coupons), or any combination of the foregoing, any restrictions applicable to
the offer, sale or delivery of Unregistered Securities or the payment of
interest thereon and, if other than as provided in the Indenture, the terms upon
which Unregistered Securities of any series may be exchanged for Registered
Securities of such series and vice versa; (xiii) whether and under what
circumstances the Company will pay additional amounts on the Securities of the
series held by a person who is not a U.S. person in respect of any tax,
assessment or governmental charge withheld or deducted and, if so, whether the
Company will have the option to redeem such Securities rather than pay such
additional amounts; (xiv) if the Securities of the series are to be issuable in
definitive form (whether upon original issue or upon exchange of a temporary
Security of such series) only upon receipt of certain certificates or other
documents or satisfaction of other conditions, the form and terms of such
certificates, documents or conditions; (xv) any trustees, depositaries,
authenticating or paying agents, transfer agents or the registrar or any other
agents with respect to the Securities of the series; (xvi) provisions, if any,
for the defeasance of the Securities of the series (including provisions
permitting defeasance of less than all Securities of the series), which
provisions may be in addition to, in substitution for, or in modification of (or
any combination of the foregoing) the provisions of the Indenture; (xvii) if the
Securities of the series are issuable in whole or in part as one or more
Registered Global Securities, the identity of the depositary for such Registered
Global Security or Securities (which depositary shall, at the time of its
designation as depositary and at all times while it serves as depositary, be a
clearing agency registered under the Exchange Act and any other applicable
statute or regulation) if other than the Depositary; (xviii) any other events of
default or covenants with respect to the Securities of the series in addition to
the events of default or covenants set forth in the Indenture; and (xix) any
other terms of the Securities of the series (which terms shall not be
inconsistent with the provisions of the Indenture).
The Indenture does not contain any restriction on the payment of dividends
or, except as set forth under "-- Certain Covenants", any financial covenants.
The Indenture does not contain provisions which would afford the Holders of the
Debt Securities protection in the event of a transfer of assets to a subsidiary
and incurrence of unsecured debt by such subsidiary, or in the event of a
decline in the Company's credit quality resulting from highly leveraged or other
similar transactions involving the Company.
The Debt Securities will be unsubordinated and unsecured obligations of the
Company ranking pari passu with all existing and future unsubordinated and
unsecured obligations of the Company. Claims of Holders of Debt Securities will
be effectively subordinated to the claims of holders of debt of the Company's
subsidiaries with respect to the assets of such subsidiaries. In addition,
claims of Holders of Debt Securities will be effectively subordinated to the
claims of holders of secured debt of the Company and its subsidiaries with
respect to the collateral securing such claims. Claims of the Company as the
holder of general unsecured intercompany debt will be similarly effectively
subordinated to claims of holders of secured debt of its subsidiaries.
5
<PAGE> 18
REGISTERED GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, the
Depositary will act as securities depository for the Securities, including the
Debt Securities. The Securities will be issued only as Registered Global
Securities registered in the name of Cede & Co. (the Depositary's partnership
nominee). One or more Registered Global Securities will be issued for the
Securities representing the aggregate principal amount of such series of
Securities and will be deposited with the Depositary.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants (the "Direct
Participants") deposit with the Depositary. The Depositary also facilitates the
settlement among Direct Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Direct Participants' accounts, thereby eliminating the
need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. The Depositary is owned by a
number of its Direct Participants and by The New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depositary's system is also available to others such
as securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either directly
or indirectly (the "Indirect Participants", and together with the Direct
Participants, the "Participants"). The rules applicable to the Depositary and
its Participants are on file with the Commission.
Purchases of Securities within the Depositary's system must be made by or
through Direct Participants, which will receive a credit for the Securities on
the Depositary's records. The ownership interest of each actual purchaser of
each Security (a "Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' respective records. Beneficial Owners will not receive
written confirmation from the Depositary of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interest in the Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interest in Securities except in the event that use of the
book-entry system for the Securities is discontinued.
To facilitate subsequent transfers, all Securities deposited by Direct
Participants with the Depositary are registered in the name of the Depositary's
partnership nominee, Cede & Co. The deposit of the Securities with the
Depositary and their registration in the name of Cede & Co. effect no change in
beneficial ownership. The Depositary has no knowledge of the actual Beneficial
Owners of the Securities; the Depositary's records reflect only the identity of
the Direct Participants to whose accounts such Securities are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Securities of an issue are being redeemed, the Depositary's practice is to
determine by lot the amount of the interest of each Direct Participant in such
series to be redeemed.
6
<PAGE> 19
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Securities. Under its usual procedures, the Depositary mails an omnibus
proxy (an "Omnibus Proxy") to the Participants as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights
to those Direct Participants to whose accounts the Securities are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Securities will be
made to the Depositary. The Depositary's practice is to credit Direct
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on the Depositary's records unless the Depositary has
reason to believe that it will not receive payment on such payment date.
Payments by participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities for the
accounts of customers in bearer form or registered in "street-name", and will be
the responsibility of such participant and not of the Depositary, the
underwriters, or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of Principal,
redemption premium, if any, and interest to the Depositary is the responsibility
of the Company or the respective trustees. Disbursement of such payments to
Direct Participants is the responsibility of the Depositary, and disbursement of
such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants. Registered Global Securities will settle in immediately
available funds in the secondary trading market. No assurance can be given as to
the effect, if any, of settlement in immediately available funds on trading
activity in the Securities.
The Depositary may discontinue providing its services as securities
depository with respect to the Securities at any time by giving reasonable
notice to the Company. Under such circumstances and in the event that a
successor securities depository is not obtained, Securities certificates are
required to be printed and delivered. In addition, the Company may decide to
discontinue use of the system of book-entry transfers through the Depositary (or
a successor securities depository). In that event, Securities certificates will
be printed and delivered.
The Company will not have any responsibility or obligation to Participants
or the persons for whom they act as nominees with respect to the accuracy of the
records of the Depositary, its nominee or any Direct or Indirect Participant
with respect to any ownership interest in the Securities, or with respect to
payments to or providing of notice for the Direct Participants, the Indirect
Participants or the Beneficial Owners.
So long as Cede & Co. is the registered owner of the Securities, as nominee
of the Depositary, references herein to Holders of the Securities shall mean
Cede & Co. or the Depositary and shall not mean the Beneficial Owners of the
Securities.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from the Depositary. Neither
the Company, the Trustee nor the underwriters, dealers or agents take
responsibility for the accuracy or completeness thereof.
CERTAIN COVENANTS
The following covenants apply to all series of Securities, including the
Debt Securities:
Restrictions on Liens. The Indenture provides that the Company will not,
and will not permit any Restricted Subsidiary (as defined herein) to, create or
incur any Lien (as defined herein) on any shares of stock, indebtedness or other
obligations of a Restricted Subsidiary (as defined herein) or any Principal
Property (as defined herein) of the Company or a Restricted Subsidiary, whether
such shares of stock, indebtedness or other obligations of a Restricted
Subsidiary or Principal Property are owned at the date of the Indenture or
thereafter acquired, unless the Company secures or causes such Restricted
Subsidiary to secure the outstanding Securities equally and ratably with (or, at
the Company's option, prior to) all indebtedness secured by such Lien, so long
as such indebtedness shall be so secured. This covenant shall not apply in the
case of:
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(i) the creation of any Lien on any shares of stock, indebtedness or other
obligations of a Subsidiary or any Principal Property Acquired after the date of
the Indenture (including acquisitions by way of merger or consolidation) by the
Company or a Restricted Subsidiary contemporaneously with such acquisition, or
within 180 days thereafter, to secure or provide for the payment or financing of
any part of the purchase price thereof, or the assumption of any Lien upon any
shares of stock, indebtedness or other obligations of a Subsidiary or any
Principal Property acquired after the date of the Indenture existing at the time
of such acquisition, or the acquisition of any shares of stock, indebtedness or
other obligations of a Subsidiary or any Principal Property subject to any Lien
without the assumption thereof, provided that every such Lien referred to in
this clause (i) shall attach only to the shares of stock, indebtedness or other
obligations of a Subsidiary or any Principal Property so acquired and fixed
improvements thereon; (ii) any Lien on any shares of stock, indebtedness or
other obligations of a Subsidiary or any Principal Property existing at the date
of the Indenture; (iii) any Lien on any shares of stock, indebtedness or other
obligations of a Subsidiary or any Principal Property in favor of the Company or
any Restricted Subsidiary; (iv) any Lien on any Principal Property being
constructed or improved securing loans to finance such construction or
improvements; (v) any Lien on shares of stock, indebtedness or other obligations
of a Subsidiary or any Principal Property incurred in connection with the
issuance of tax-exempt governmental obligations (including, without limitation,
industrial revenue bonds and similar financings); (vi) any mechanics',
materialmen's, carriers' or other similar Liens arising in the ordinary course
of business with respect to obligations that are not yet due or that are being
contested in good faith; (vii) any Lien on any shares of stock, indebtedness or
other obligations of a Subsidiary or any Principal Property for taxes,
assessments or governmental charges or levies not yet delinquent, or already
delinquent but the validity of which is being contested in good faith; (viii)
any Lien on any shares of stock, indebtedness or other obligations of a
Subsidiary or any Principal Property arising in connection with legal
proceedings being contested in good faith, including any judgment Lien so long
as execution thereon is stayed; (ix) any landlord's Lien on fixtures located on
premises leased by the Company or a Restricted Subsidiary in the ordinary course
of business, and tenants' rights under leases, easements and similar Liens not
materially impairing the use or value of the property involved; (x) any Lien
arising by reason of deposits necessary to qualify the Company or any Restricted
Subsidiary to conduct business, maintain self-insurance, or obtain the benefit
of, or comply with, any law; (xi) Liens on current assets of the Company to
secure loans to the Company that mature within twelve months from the creation
thereof and that are made in the ordinary course of business; and (xii) any
renewal of or substitution for any Lien permitted by any of the preceding
clauses (i) through (xi), provided, in the case of a Lien permitted under clause
(i), (ii) or (iv), the indebtedness secured is not increased nor the Lien
extended to any additional assets. (Section 4.3(a)) Notwithstanding the
foregoing, the Company or any Restricted Subsidiary may create or assume Liens
in addition to those permitted by the preceding sentence of this paragraph, and
renew, extend or replace such Liens, provided that at the time of such creation,
assumption, renewal, extension or replacement, and after giving effect thereto,
Exempted Debt (as defined herein) does not exceed 15 percent of Consolidated Net
Tangible Assets (as defined herein). (Section 4.3(b))
Restrictions on Sale and Lease-Back Transactions. The Indenture provides
that the Company will not, and will not permit any Restricted Subsidiary to,
sell or transfer, directly or indirectly, except to the Company or a Restricted
Subsidiary, any Principal Property as an entirety, or any substantial portion
thereof, with the intention of taking back a lease of such property, except a
lease for a period of three years or less at the end of which it is intended
that the use of such property by the lessee will be discontinued; provided that,
notwithstanding the foregoing, the Company or any Restricted Subsidiary may sell
any such Principal Property and lease it back for a longer period (i) if the
Company or such Restricted Subsidiary would be entitled, pursuant to the
provisions of Section 4.3(a) described above under "-- Restrictions on Liens",
to create a Lien on the property to be leased securing Funded Debt (as defined
herein) in an amount equal to the Attributable Debt (as defined herein) with
respect to such sale and lease-back transaction without equally and ratably
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<PAGE> 21
securing the outstanding Securities or (ii) if (A) the Company promptly informs
the Trustee of such transaction, and (B) the Company causes an amount equal to
the fair value (as determined by Board Resolution of the Company) of such
property to be applied (1) to the purchase of other property that will
constitute Principal Property having a fair value at least equal to the fair
value of the property sold, or (2) to the retirement within 120 days after
receipt of such proceeds, of Funded Debt incurred or assumed by the Company or a
Restricted Subsidiary (including the Securities); provided further that, in lieu
of applying all of or any part of such net proceeds to such retirement, the
Company may, within 75 days after such sale, deliver or cause to be delivered to
the applicable trustee for cancellation either debentures or notes evidencing
Funded Debt of the Company (which may include the Securities) or of a Restricted
Subsidiary previously authenticated and delivered by the applicable trustee, and
not theretofore tendered for sinking fund purposes or called for a sinking fund
or otherwise applied as a credit against an obligation to redeem or retire such
notes or debentures, and an Officer's Certificate (which shall be delivered to
the Trustee) stating that the Company elects to deliver or cause to be delivered
such debentures or notes in lieu of retiring Funded Debt as hereinabove
provided. If the Company shall so deliver debentures or notes to the applicable
trustee and the Company shall duly deliver such Officer's Certificate, the
amount of cash that the Company shall be required to apply to the retirement of
Funded Debt under this provision of the Indenture shall be reduced by an amount
equal to the aggregate of the then applicable optional redemption prices (not
including any optional sinking fund redemption prices) of such debentures or
notes, or, if there are no such redemption prices, the principal amount of such
debentures or notes; provided, that in the case of debentures or notes that
provide for an amount less than the principal amount thereof to be due and
payable upon a declaration of the maturity thereof, such amount of cash shall be
reduced by the amount of principal of such debentures or notes that would be due
and payable as of the date of such application upon a declaration of
acceleration of the maturity thereof pursuant to the terms of the indenture
pursuant to which such debentures or notes were issued. (Section 4.4(a))
Notwithstanding the foregoing, the Company or any Restricted Subsidiary may
enter into sale and lease-back transactions in addition to those permitted by
this paragraph without any obligation to retire any outstanding Securities or
other Funded Debt, provided that at the time of entering into such sale and
lease-back transactions and after giving effect thereto, Exempted Debt does not
exceed 15 percent of Consolidated Net Tangible Assets. (Section 4.4(b))
CERTAIN DEFINITIONS
The term "Attributable Debt" as defined in the Indenture means when used in
connection with a sale and leaseback transaction referred to above under
"-- Certain Covenants -- Restrictions on Sale and Lease-Back Transactions", on
any date as of which the amount thereof is to be determined, the product of (i)
the net proceeds from such sale and lease-back transaction multiplied by (ii) a
fraction, the numerator of which is the number of full years of the term of the
lease relating to the property involved in such sale and lease-back transaction
(without regard to any options to renew or extend such term) remaining on the
date of the making of such computation and the denominator of which is the
number of full years of the term of such lease measured from the first day of
such term.
The term "Consolidated Net Tangible Assets" as defined in the Indenture
means total assets after deducting therefrom all current liabilities and
intangible assets as set forth in the most recent balance sheet of the Company
and its consolidated Subsidiaries and computed in accordance with GAAP.
The term "Exempted Debt" as defined in the Indenture means the sum, without
duplication, of the following items outstanding as of the date Exempted Debt is
being determined: (i) indebtedness of the Company and its Restricted
Subsidiaries incurred after the date of the Indenture and secured by liens
created or assumed or permitted to exist pursuant to Section 4.3(b) of the
Indenture described above under "-- Certain Covenants -- Restrictions on Liens"
and (ii) Attributable Debt
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<PAGE> 22
of the Company and its Restricted Subsidiaries in respect of all sale and
lease-back transactions with regard to any Principal Property entered into
pursuant to Section 4.4(b) of the Indenture described above under "-- Certain
Covenants -- Restrictions on Sale and Lease-Back Transactions".
The term "Funded Debt" as defined in the Indenture means all indebtedness
for money borrowed, including purchase money indebtedness, having a maturity of
more than one year from the date of its creation or having a maturity of less
than one year but by its terms being renewable or extendible, at the option of
the obligor in respect thereof, beyond one year from the date of its creation.
The terms "Holder" or "Securityholder" as defined in the Indenture mean the
registered holder of any Security with respect to Registered Securities and the
bearer of any Unregistered Security or any coupon appertaining thereto, as the
case may be.
The term "Lien" as defined in the Indenture means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind, or any other type of preferential arrangement that has the practical
effect of creating a security interest, in respect of such asset. For the
purposes of the Indenture, the Company or any Subsidiary shall be deemed to own
subject to a Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
The term "Original Issue Discount Security" as defined in the Indenture
means any Security that provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the maturity
thereof pursuant to Section 6.2 of the Indenture.
The term "Principal Property" as defined in the Indenture means any
manufacturing or processing plant or warehouse owned at the date hereof or
hereafter acquired by the Company or any Restricted Subsidiary of the Company
which is located within the United States and the gross book value of which
(including related land and improvements thereon and all machinery and equipment
included therein without deduction of any depreciation reserves) on the date as
of which the determination is being made exceeds 2 percent of Consolidated Net
Tangible Assets, other than (i) any such manufacturing or processing plant or
warehouse or any portion thereof (together with the land on which it is erected
and fixtures comprising a part thereof) which is financed by industrial
development bonds which are tax exempt pursuant to Section 103 of the Internal
Revenue Code (or which receive similar tax treatment under any subsequent
amendments thereto or any successor laws thereof or under any other similar
statute of the United States), (ii) any property which in the opinion of the
Company's Board of Directors is not of material importance to the total business
conducted by the Company as an entirety, or (iii) any portion of a particular
property which is similarly found not to be of material importance to the use or
operation of such property.
The term "Restricted Subsidiary" as defined in the Indenture means a
Subsidiary of the Company (i) substantially all the property of which is
located, or substantially all the business of which is carried on, within the
United States, and (ii) which owns Principal Property; provided, however, that
any Subsidiary may be declared a Restricted Subsidiary by Board Resolution,
effective as of the date such Board Resolution is adopted; provided further,
that any such declaration may be rescinded by further Board Resolution,
effective as of the date such further Board Resolution is adopted.
The term "Subsidiary" as defined in the Indenture means with respect to any
Person, any corporation, association or other business entity of which more than
50% of the outstanding Voting Stock is owned, directly or indirectly, by such
Person and one or more other Subsidiaries of such Person.
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<PAGE> 23
RESTRICTIONS ON MERGERS AND SALES OF ASSETS
Under the Indenture, the Company shall not consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (in one transaction or a series of
related transactions) to, any Person (other than a consolidation with or merger
with or into a Subsidiary or a sale, conveyance, transfer, lease or other
disposition to a Subsidiary) or permit any Person to merge with or into the
Company unless: (i) either (A) the Company shall be the continuing Person or (B)
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or that acquired or leased such property and assets
of the Company shall be a corporation organized and validly existing under the
laws of the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of the Company on all of the Securities and
under the Indenture and the Company shall have delivered to the Trustee an
Opinion of Counsel stating that such consolidation, merger or transfer and such
supplemental indenture complies with the Indenture and that all conditions
precedent provided for in the Indenture relating to such transaction have been
complied with and that such supplemental indenture constitutes the legal, valid
and binding obligation of the Company or such successor enforceable against such
entity in accordance with its terms, subject to customary exceptions; and (ii)
an Officers' Certificate to the effect that immediately after giving effect to
such transaction, no Default shall have occurred and be continuing and an
Opinion of Counsel as to the matters set forth in clause (i) shall have been
delivered to the Trustee. (Section 5.1)
EVENTS OF DEFAULT; TRUSTEE'S RIGHTS
Events of Default defined in the Indenture with respect to the Securities
of any series are: (i) the Company defaults in the payment of the Principal of
any Security of such series when the same becomes due and payable at maturity,
upon acceleration, redemption or mandatory repurchase, including as a sinking
fund installment, or otherwise; (ii) the Company defaults in the payment of
interest on any Security of such series when the same becomes due and payable,
and such default continues for a period of 30 days; (iii) the Company defaults
in the performance of or breaches any other covenant or agreement of the Company
in the Indenture with respect to any Security of such series or in the
Securities of such series and such default or breach continues for a period of
30 consecutive days after written notice to the Company by the Trustee or to the
Company and the Trustee by the Holders of 25 percent or more in aggregate
principal amount of the Securities of all series affected thereby; (iv) an
involuntary case or other proceeding shall be commenced against the Company or
any Restricted Subsidiary with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
60 days; or an order for relief shall be entered against the Company or any
Restricted Subsidiary under the federal bankruptcy laws as now or hereafter in
effect; (v) the Company or any Restricted Subsidiary (A) commences a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Restricted Subsidiary or
for all or substantially all of the property and assets of the Company or any
Restricted Subsidiary or (C) effects any general assignment for the benefit of
creditors; or (vi) any other Event of Default established with respect to any
series of Securities issued pursuant to the Indenture occurs. (Section 6.1)
The Indenture provides that if an Event of Default described in clauses (i)
or (ii) of the immediately preceding paragraph with respect to the Securities of
any series then outstanding occurs and is continuing, then, and in each and
every such case, except for any series of Securities the Principal of which
shall have already become due and payable, either the Trustee or the Holders
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<PAGE> 24
of not less than 25 percent in aggregate principal amount of the Securities of
any such affected series then outstanding under the Indenture (each such series
treated as a separate class) by notice in writing to the Company (and to the
Trustee if given by Securityholders), may declare the entire Principal (or, if
the Securities of any such series are Original Issue Discount Securities, such
portion of the Principal amount as may be specified in the terms of such series
established pursuant to the Indenture) of all Securities of such affected
series, and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately due
and payable. If an Event of Default described in clauses (iii) or (vi) of the
immediately preceding paragraph with respect to the Securities of one or more
but not all series then outstanding, or with respect to the Securities of all
series then outstanding, occurs and is continuing, then, and in each and every
such case, except for any series of Securities the Principal of which shall have
already become due and payable, either the Trustee or the Holders of not less
than 25 percent in aggregate principal amount (or, if the Securities of any such
series are Original Issue Discount Securities, the amount thereof accelerable as
described in this paragraph) of the Securities of all such affected series then
outstanding under the Indenture (treated as a single class) by notice in writing
to the Company (and to the Trustee if given by Securityholders), may declare the
entire Principal (or, if the Securities of any such series are Original Issue
Discount Securities, such portion of the Principal amount as may be specified in
the terms of such series established pursuant to the Indenture) of all
Securities of all such affected series, and the interest accrued thereon, if
any, to be due and payable immediately, and upon any such declaration the same
shall become immediately due and payable. If an Event of Default described in
clause (iv) or (v) of the immediately preceding paragraph occurs and is
continuing, then the principal amount (or, if any Securities are Original Issue
Discount Securities, such portion of the Principal as may be specified in the
terms of such series established pursuant to the Indenture) of all the
Securities then outstanding and interest accrued thereon, if any, shall be and
become immediately due and payable, without any notice or other action by any
Holder or the Trustee to the full extent permitted by applicable law. Upon
certain conditions such declarations may be rescinded and annulled and past
defaults may be waived by the Holders of a majority in Principal of the then
outstanding Securities of all such series that have been accelerated (voting as
a single class). (Section 6.2)
The Indenture contains a provision under which, subject to the duty of the
Trustee during a default to act with the required standard of care, (i) the
Trustee may rely and shall be protected in acting or refraining from acting upon
any resolution, certificate, Officers' Certificate, Opinion of Counsel (or
both), statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence or indebtedness or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper person or persons and the Trustee need not investigate
any fact or matter stated in the document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as it
may see fit; (ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and/or an Opinion of Counsel, which shall
conform to the requirements of the Indenture and the Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion; subject to the terms of the Indenture, whenever in the
administration of the trusts of the Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting any action under the Indenture, such matter (unless other
evidence in respect thereof be specifically prescribed in the Indenture) may, in
the absence of negligence or bad faith on the part of the Trustee, be deemed to
be conclusively proved and established by an Officers' Certificate delivered to
the Trustee, and such certificate, in the absence of negligence or bad faith on
the part of the Trustee, shall be full warrant to the Trustee for any action
taken, suffered or omitted by it under the provisions of the Indenture upon the
faith thereof; (iii) the Trustee may act through its attorneys and agents not
regularly in its employ and shall not be responsible for the misconduct or
negligence of any agent or attorney appointed with due care by it under the
Indenture; (iv) any request, direction, order or demand of the Company mentioned
in the Indenture shall be sufficiently evidenced by an Officers' Certificate
(unless other evidence in respect thereof be specifically
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<PAGE> 25
prescribed in the Indenture); and any Board Resolution may be evidenced to the
Trustee by a copy thereof certified by the Secretary or an Assistant Secretary
of the Company; (v) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by the Indenture at the request, order or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction; (vi) the Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its rights or
powers or for any action it takes or omits to take in accordance with the
direction of the Holders in accordance with the Indenture relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under the
Indenture; (vii) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it under
the Indenture in good faith and in reliance thereon; and (viii) prior to the
occurrence of an Event of Default under the Indenture and after the curing or
waiving of all Events of Default, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
Officers' Certificate, Opinion of Counsel, Board Resolution, statement,
instrument, opinion, report, notice, request, consent, order, approval,
appraisal, bond, debenture, note, coupon, security, or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine, during normal business hours and upon prior written notice,
books, records and premises of the Company, personally or by agent or attorney.
(Section 7.2)
Subject to various provisions in the Indenture, the Holders of at least a
majority in principal amount (or, if the Securities are Original Issue Discount
Securities, such portion of the Principal as is then accelerable under the
Indenture) of the outstanding Securities of all series affected (voting as a
single class) by notice to the Trustee, may waive, on behalf of the Holders of
all the Securities of such series, an existing Default or Event of Default with
respect to the Securities of such series and its consequences, except a Default
in the payment of Principal of or interest on any Security as specified in
clauses (i) or (ii) of the first paragraph of this section or in respect of a
covenant or provision of the Indenture which cannot be modified or amended
without the consent of the Holder of each outstanding Security affected. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
with respect to the Securities of such series arising therefrom shall be deemed
to have been cured, for every purpose of the Indenture; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereto. (Section 6.4)
Subject to such provisions in the Indenture for the indemnification of the
Trustee and certain other limitations, the Holders of at least a majority in
aggregate principal amount (or, if any Securities are Original Issue Discount
Securities, such portion of the Principal as is then accelerable under the
Indenture) of the outstanding Securities of all series affected (voting as a
single class), may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Securities of such series by
the Indenture; provided that the Trustee may refuse to follow any direction that
conflicts with law or the Indenture, that may involve the Trustee in personal
liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders not joining in the giving of such
direction; and provided further that the Trustee may take any other action it
deems proper that is not inconsistent with any directions received from Holders
of Securities pursuant to the Indenture. (Section 6.5)
The Indenture provides that no Holder of any Securities of any series may
institute any proceeding, judicial or otherwise, with respect to the Indenture
or the Securities of such series, or for the appointment of a receiver or
trustee, or for any other remedy under the Indenture, unless: (i) such Holder
has previously given to the Trustee written notice of a continuing Event of
Default
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<PAGE> 26
with respect to the Securities of such series; (ii) the Holders of at least 25
percent in aggregate principal amount of outstanding Securities of all such
series affected shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee under
the Indenture; (iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to the Trustee against any costs, liabilities
or expenses to be incurred in compliance with such request; (iv) the Trustee for
60 days after its receipt of such notice, request and offer of indemnity has
failed to institute any such proceeding; and (v) during such 60-day period, the
Holders of a majority in aggregate principal amount of the outstanding
Securities of all such affected series have not given the Trustee a direction
that is inconsistent with such written request. A Holder may not use the
Indenture to prejudice the rights of another Holder or to obtain a preference or
priority over such other Holder. (Section 6.6)
The Indenture contains a covenant that the Company will file with the
Trustee, within 15 days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports that the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act. (Section 4.6)
DISCHARGE, LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides with respect to each series of Securities that,
except as otherwise provided in this paragraph, the Company may terminate its
obligations under the Securities of a series and the Indenture with respect to
Securities of such series if: (i) all Securities of such series previously
authenticated and delivered, with certain exceptions, have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by it under
the Indenture; or (ii) (A) the Securities of such series mature within one year
or all of them are to be called for redemption within one year under
arrangements satisfactory to the Trustee for giving the notice of redemption,
(B) the Company irrevocably deposits in trust with the Trustee, as trust funds
solely for the benefit of the Holders of such Securities, for that purpose,
money or U.S. Government Obligations or a combination thereof sufficient (unless
such funds consist solely of money, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee), without consideration of any reinvestment, to
pay Principal of and interest on the Securities of such series to maturity or
redemption, as the case may be, and to pay all other sums payable by it under
the Indenture, and (C) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all conditions
precedent provided for in the Indenture relating to the satisfaction and
discharge of the Indenture with respect to the Securities of such series have
been complied with. With respect to the foregoing clause (i), only the Company's
obligations to compensate and indemnify the Trustee shall survive. With respect
to the foregoing clause (ii), only the Company's obligations to execute and
deliver Securities of such series for authentication, to set the terms of the
Securities of such series, to maintain an office or agency in respect of the
Securities of such series, to have moneys held for payment in trust, to register
the transfer or exchange of Securities of such series, to deliver Securities of
such series for replacement or to be canceled, to compensate and indemnify the
Trustee and to appoint a successor trustee, and its right to recover excess
money held by the Trustee shall survive until such Securities are no longer
outstanding. Thereafter, only the Company's obligations to compensate and
indemnify the Trustee and its right to recover excess money held by the Trustee
shall survive. (Section 8.1)
The Indenture provides that, except as otherwise provided in this
paragraph, the Company (i) will be deemed to have paid and will be discharged
from any and all obligations in respect of the Securities of any series, and the
provisions of the Indenture will no longer be in effect with respect to the
Securities of such series (a "legal defeasance") and (ii) may omit to comply
with any term, provision or condition of the Indenture described above under
"-- Certain Covenants" (or any other specific covenant relating to such series
provided for in a Board Resolution or supplemental indenture, or Officer's
Certificate pursuant to such Board Resolution or such supplemental inden-
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<PAGE> 27
ture, that may by its terms be defeased pursuant to the Indenture), and such
omission shall be deemed not to be an Event of Default under clauses (iii) or
(vi) of the first paragraph of "-- Events of Default" with respect to the
outstanding Securities of a series (a "covenant defeasance"); provided that the
following conditions shall have been satisfied: (i) the Company has irrevocably
deposited in trust with the Trustee as trust funds solely for the benefit of the
Holders of the Securities of such series, for payment of the Principal of and
interest on the Securities of such series, money or U.S. Government Obligations
or a combination thereof sufficient (unless such funds consist solely of money,
in the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee) without
consideration of any reinvestment and after payment of all federal, state and
local taxes or other charges and assessments in respect thereof payable by the
Trustee, to pay and discharge the Principal of and accrued interest on the
outstanding Securities of such series to maturity or earlier redemption
(irrevocably provided for under arrangements satisfactory to the Trustee), as
the case may be; (ii) such deposit will not result in a breach or violation of,
or constitute a default under, the Indenture or any other material agreement or
instrument to which the Company is a party or by which it is bound; (iii) no
Default with respect to such Securities of such series shall have occurred and
be continuing on the date of such deposit; (iv) the Company shall have delivered
to the Trustee an Opinion of Counsel that the Holders of the Securities of such
series have a valid security interest in the trust funds subject to no prior
liens under the Uniform Commercial Code; and (v) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, in each case
stating that all conditions precedent provided for in the Indenture relating to
the defeasance contemplated have been complied with. In the case of a legal
defeasance, the Company shall have delivered to the Trustee an Opinion of
Counsel (based on a change in law) or a ruling directed to the Trustee from the
United States Internal Revenue Service that the Holders of the Securities of
such series will not recognize income, gain or loss for federal income tax
purposes as a result of the Company's exercise of its option under this
provision of the Indenture and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred, or an instrument, in form
reasonably satisfactory to the Trustee, wherein the Company, notwithstanding a
legal defeasance of its indebtedness in respect of Securities of any series, or
any portion of the principal amount thereof, shall assume the obligation (which
shall be absolute and unconditional) to irrevocably deposit with the Trustee
such additional sums of money, if any, or additional U.S. Government
Obligations, if any, or any combination thereof, at such time or times, as shall
be necessary, together with the money and/or U.S. Government Obligations
theretofore so deposited, to pay when due the Principal of and premium, if any,
and interest due and to become due on such Securities or portions thereof;
provided, however, that such instrument may state that the obligation of the
Company to make additional deposits as aforesaid shall be subject to the
delivery to the Company by the Trustee of a notice asserting the deficiency
accompanied by an opinion of an independent public accountant of nationally
recognized standing, selected by the Trustee, showing the calculation thereof.
Subsequent to a legal defeasance, the Company's obligations to execute and
deliver Securities of such series for authentication, to set the terms of the
Securities of such series, to maintain an office or agency in respect of the
Securities of such series, to have moneys held for payment in trust, to register
the transfer or exchange of Securities of such series, to deliver Securities of
such series for replacement or to be canceled, to compensate and indemnify the
Trustee and to appoint a successor trustee, and its right to recover excess
money held by the Trustee shall survive until such Securities are no longer
outstanding. After such Securities are no longer outstanding, in the case of a
legal defeasance, only the Company's obligations to compensate and indemnify the
Trustee and its right to recover excess money held by the Trustee shall survive.
(Sections 8.2 and 8.3)
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee may amend or
supplement the Indenture or the Securities of any series without notice to or
the consent of any Holder: (i) to cure
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any ambiguity, defect or inconsistency in the Indenture; provided that such
amendments or supplements shall not materially and adversely affect the
interests of the Holders; (ii) to comply with Article 5 (which relates to the
covenant discussed under "-- Restrictions on Mergers and Sales of Assets") of
the Indenture: (iii) to comply with any requirements of the Commission in
connection with the qualification of the Indenture under the Trust Indenture
Act; (iv) to evidence and provide for the acceptance of appointment under the
Indenture with respect to the Securities of any or all series by a successor
Trustee; (v) to establish the form or forms or terms of Securities of any series
or of the coupons appertaining to such Securities as permitted under the
Indenture; (vi) to provide for uncertificated or unregistered Securities and to
make all appropriate changes for such purpose; (vii) to change or eliminate any
provisions of the Indenture with respect to all or any series of the Securities
not then outstanding (and, if such change is applicable to fewer than all such
series of the Securities, specifying the series to which such change is
applicable), and to specify the rights and remedies of the Trustee and the
Holders of such Securities in connection therewith; and (viii) to make any
change that does not materially and adversely affect the rights of any Holder.
(Section 9.1)
The Indenture also contains provisions whereby the Company and the Trustee,
subject to certain conditions, without prior notice to any Holders, may amend
the Indenture and the outstanding Securities of any series with the written
consent of the Holders of a majority in aggregate principal amount of the
Securities then outstanding of all series affected by such supplemental
indenture (all such series voting as one class), and the Holders of a majority
in aggregate principal amount of the outstanding Securities of all series
affected thereby (all such series voting as one class) by written notice to the
Trustee may waive future compliance by the Company with any provision of the
Indenture or the Securities of such series. Notwithstanding the foregoing
provisions, without the consent of each Holder affected thereby, an amendment or
waiver, including a waiver pursuant to Section 6.4 of the Indenture, may not:
(i) extend the stated maturity of the Principal of, or any sinking fund
obligation or any installment of interest on, such Holder's Security, or reduce
the principal amount thereof or the rate of interest thereon (including any
amount in respect of original issue discount), or any premium payable with
respect thereto, or adversely affect the rights of such Holder under any
mandatory redemption or repurchase provision or any right of redemption or
repurchase at the option of such Holder, or reduce the amount of the Principal
of an Original Issue Discount Security that would be due and payable upon the
acceleration of the maturity thereof or the amount thereof provable in
bankruptcy, or change any place of payment where, or the currency in which, any
Security or any premium or the interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the due
date therefor; (ii) reduce the percentage in principal amount of outstanding
Securities of the relevant series the consent of whose Holders is required for
any such supplemental indenture or for any waiver of compliance with certain
provisions of the Indenture or certain Defaults and their consequences provided
for in the Indenture; (iii) waive a Default in the payment of Principal of or
interest on any Security of such Holder; or (iv) modify any of the provisions of
the Indenture governing supplemental indentures with the consent of
Securityholders, except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Security affected thereby. A
supplemental indenture which changes or eliminates any covenant or other
provision of the Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of Holders of Securities of such series with respect to such covenant or
provision, shall be deemed not to affect the rights under the Indenture of the
Holders of Securities of any other series or of the coupons appertaining to such
Securities. It shall not be necessary for the consent of any Holder under this
section of the Indenture to approve the particular form of any proposed
Amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof. After an amendment, supplement or waiver under
this section of the Indenture becomes effective, the Company or, at the request
of the Company, the Trustee shall give to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. The Company or, at the
request of the Company, the Trustee
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will mail supplemental indentures to Holders upon request. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
(Section 9.2)
INFORMATION CONCERNING THE TRUSTEE
An affiliate of the Bank of Montreal Trust Company participates as a lender
under certain credit agreements of the Company.
PLAN OF DISTRIBUTION
GENERAL
The Company may sell the Debt Securities being offered hereby: (i) directly
to purchasers; (ii) through agents; (iii) through dealers; (iv) through
underwriters; or (v) through a combination of any such methods of sale.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions either: (i) at a fixed price or prices which may be
changed; (ii) at market prices prevailing at the time of sale; (iii) at prices
related to such prevailing market prices; or (iv) at negotiated prices.
Offers to purchase the Debt Securities may be solicited directly by the
Company. Offers to purchase Debt Securities may also be solicited by agents
designated by the Company from time to time. Any such agent, who may be deemed
to be an "underwriter" as that term is defined in the Securities Act, involved
in the offer or sale of the Debt Securities in respect of which this Prospectus
is delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the applicable Prospectus Supplement.
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, the Company will sell such Debt Securities
to the dealer, as principal. The dealer, who may be deemed to be an
"underwriter" as that term is defined in the Securities Act, may then resell
such Debt Securities to the public at varying prices to be determined by such
dealer at the time of resale.
If an underwriter or underwriters are utilized in the sales of the Debt
Securities, the Company will execute an underwriting agreement with such
underwriters at the time of such sale and the name of the underwriters will be
set forth in the applicable Prospectus Supplement, which will be used by the
underwriters to make resales of the Debt Securities in respect of which this
Prospectus is delivered to the public. In connection with the sale of Debt
Securities, such 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 Debt Securities for whom they may act as
agents. Underwriters may also sell Debt 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 from the purchasers for
whom they may act as agents. Any underwriting compensation paid by the Company
to underwriters in connection with the offering and sale of Debt Securities, and
any discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the applicable Prospectus
Supplement.
Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with the Company, to indemnification by the
Company against certain civil liabilities, including liabilities under the
Securities Act. Underwriters and agents may engage in transactions with, or
perform services for, the Company in the ordinary course of business.
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DELAYED DELIVERY ARRANGEMENTS
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters, dealers or other persons to solicit offers by certain
institutions to purchase Debt Securities pursuant to contracts providing for
payment and delivery on a future date or dates. Institutions with which such
contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others. The obligations of any purchaser under any such contract will not be
subject to any conditions except that (i) the purchase of the Debt Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject and (ii) if the Debt Securities
are also being sold to underwriters, the Company shall have sold to such
underwriters the Debt Securities not sold for delayed delivery. The
underwriters, dealers and such other persons will not have any responsibility in
respect to the validity or performance of such contracts. The applicable
Prospectus Supplement relating to such contracts will set forth the price to be
paid for Debt Securities pursuant to such contracts, the commissions payable for
solicitation of such contracts and the date or dates in the future for delivery
of Debt Securities pursuant to such contracts.
LEGAL OPINIONS
Certain legal matters with respect to the Debt Securities offered hereby
will be passed upon for the Company by Milbank, Tweed, Hadley & McCloy, counsel
for the Company, and for any underwriters or agents by Davis Polk & Wardwell.
EXPERTS
The consolidated financial statements of the Company at December 31, 1997
and 1996, and for each of the three years in the period ended December 31, 1997,
appearing in its Annual Report on Form 10-K for the fiscal year ended December
31, 1997, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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