<PAGE>
Filed pursuant to Rule 424(b)(2)
Registration No. 333-35143
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 19, 1998
$800,000,000
[LOGO OF PHILIP MORRIS COMPANIES INC.]
PHILIP MORRIS COMPANIES INC.
PUTTABLE RESET SECURITIES PURS(SM) DUE MARCH 15, 2010
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Interest on the Puttable Reset Securities PURS(SM) due March 15, 2010 (the
"Bonds") of Philip Morris Companies Inc. (the "Company") is payable
semiannually on September 15 and March 15 of each year, commencing September
15, 1998. From and including March 16, 1998 to but excluding March 15, 2000,
interest on the Bonds will accrue at an annual rate equal to 6.15%. On March
15, 2000 (the "Reset Date"), the interest rate may be reset at a fixed rate
determined by the Calculation Agent on the basis of certain bids to be
requested from reference dealers, as described below. See "Description of
Bonds--Interest" and "--Reset of Interest Rate".
On the Reset Date, Goldman, Sachs & Co. will have the right to purchase all
of the outstanding Bonds (in whole and not in part) from the holders, at a
price equal to 100% of the principal amount of the Bonds purchased. If
Goldman, Sachs & Co. does not exercise its Call Option, then the Company will
repurchase from each holder on the Reset Date all of the holder's Bonds, at a
price equal to 100% of the principal amount of the Bonds repurchased, unless a
sufficient number of holders elect to retain them by notifying the Trustee in
the required manner. In all cases, the Company will remain obligated to pay
accrued and unpaid interest on the Bonds on the Reset Date. These purchase
rights and obligations are subject to the requirements and exceptions
described in this document. See "Description of Bonds--Call Option" and "--Put
Option".
The Bonds will be represented by one or more global Bonds registered in the
name of a nominee of The Depository Trust Company ("DTC" or the "Depository").
Beneficial interests in the global Bonds will be shown on, and transfers will
be effected only through, records maintained by DTC and its participants.
Except as described in this document, Bonds in definitive form will not be
issued. See "Description of Bonds--Global Securities" and "--United States
Book-Entry System" in the 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 TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ -------------
<S> <C> <C> <C>
Per Bond........................... 99.948% 0.250% 101.958%
Total.............................. $799,584,000 $2,000,000 $815,664,000
</TABLE>
- --------
(1) Plus accrued interest, if any, from March 16, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $400,000 payable by the Company.
The proceeds to the Company include an amount equal to 2.260% of the
principal amount of the Bonds, which will be paid by Goldman, Sachs & Co.
in consideration of the Call Option it will have with respect to the
Bonds.
-----------
The Bonds are offered severally by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. The Bonds are expected to be ready for delivery
in book-entry form only through the facilities of DTC in New York, New York on
or about March 16, 1998, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
-----------
The date of this Prospectus Supplement is March 11, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE BONDS, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH BONDS, AND
THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THIS OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
----------------
RECENT DEVELOPMENTS
Note 15 ("Note 15") to the Company's consolidated financial statements,
which is incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 (the "Form 10-K"), as updated
by Item 3 ("Item 3") of the Form 10-K, describes certain litigation pending
against the Company and its subsidiaries. The following summarizes certain
developments with respect to such litigation.
On March 7, 1998, in the Minnesota health care cost recovery action
described in Note 15 and Item 3, the trial court adopted the report of the
Special Master appointed to review defendants' assertions of privilege with
respect to documents requested for production. The Special Master's report had
found that more than 30,000 documents should be produced on the grounds that
they were either not privileged or, if privileged, were discoverable under the
crime-fraud exception to the privilege. Defendants have appealed the trial
court's decision.
On March 11, 1998, plaintiffs in a pending smoking and health action filed a
Motion for Transfer and Coordination or Consolidation before the Judicial
Panel on Multidistrict Litigation. The motion seeks to transfer and coordinate
or consolidate for pretrial proceedings more than 130 purportedly related
individual and class action smoking and health cases pending in 37 federal
judicial districts.
It is not possible to predict the outcome of the litigation pending against
the Company and its subsidiaries. Litigation is subject to many uncertainties,
and it is possible that some of these actions could be decided unfavorably. An
unfavorable outcome of a pending smoking and health case could encourage the
commencement of additional similar litigation. There have also been a number
of adverse legislative, regulatory, political and other developments
concerning cigarette smoking and the tobacco industry that have received
widespread media attention, including a decision by a federal district court
on a motion for summary judgment not to preclude the United States Food and
Drug Administration from asserting jurisdiction over cigarettes as "drugs" or
"medical devices", which decision is now under appeal. These developments, as
well as the widespread media attention given to the proposed Resolution and
the litigation settlements discussed in Note 15, may negatively affect the
perception of potential triers of fact with respect to the tobacco industry,
possibly to the detriment of certain pending litigation, and may prompt the
commencement of additional similar litigation.
Management is unable to make a meaningful estimate of the amount or range of
loss that could result from an unfavorable outcome of pending litigation. It
is possible that the Company's results of operations or cash flows in a
particular quarterly or annual period or its financial position could be
materially affected by an unfavorable outcome of certain pending litigation or
by the proposed Resolution discussed in Note 15 or by settlement, if any, of
certain pending cases. However, the proposed Resolution, if implemented,
should resolve the most significant tobacco litigation against the Company and
its subsidiaries. Furthermore, the Company and each of its subsidiaries named
as a defendant believe, and each has been so advised by counsel handling the
respective cases, that it has a number of valid defenses to all litigation
pending against it. Except as described in Note 15, all such cases are, and
will continue to be, vigorously defended.
----------------
PURS(SM) IS A SERVICE MARK OF GOLDMAN, SACHS & CO.
S-2
<PAGE>
DESCRIPTION OF BONDS
The Puttable Reset Securities PURS(SM) due March 15, 2010 (the "Bonds")
constitute a separate series of the Debt Securities described in the
accompanying Prospectus. Reference should be made to the Prospectus for a
detailed summary of certain additional provisions of the Bonds. The
description of the Bonds in this Prospectus Supplement supplements the
description of the Debt Securities contained in the Prospectus. If the
descriptions contained in these documents are inconsistent, this Prospectus
Supplement controls. Capitalized terms used but not defined herein have the
meanings given them in the Prospectus.
GENERAL
The Bonds will mature on March 15, 2010 (the "Final Maturity") but are
subject to earlier repurchase by the Company as described under "--Put Option"
below. The Bonds are not otherwise subject to redemption and are not entitled
to the benefit of any sinking fund. The aggregate principal amount of the
Bonds is limited to $800,000,000, but the Indenture does not limit the amount
of other Debt Securities that may be issued by the Company. The Bonds will be
unsecured, general obligations of the Company and will rank on a parity with
all other unsecured and unsubordinated indebtedness of the Company.
If any interest, principal or other payment to be made in respect of the
Bonds (including any payment pursuant to the Call Option or the Put Option
described below) would otherwise be due on a day that is not a Business Day
(as defined below), payment may be made on the next succeeding day that is a
Business Day, with the same effect as if payment were made on the due date.
"Business Day" means any day other than a Saturday, a Sunday, or a day on
which banking institutions in New York City are authorized or obligated by law
to close. "Market Day", as used below, means a Business Day other than a day
on which dealings in the U.S. Treasury bond market are generally not being
conducted.
The Company has agreed with Goldman, Sachs & Co., as holder of the Call
Option (as defined below), that, notwithstanding any provision to the contrary
set forth in the Indenture, the Company will not cause or permit the terms or
provisions of the Bonds (or the Indenture, as it relates to the Bonds) to be
modified in any way, and may not make open market or other purchases of the
Bonds prior to the Reset Date except pursuant to the Put Option, without the
prior written consent of Goldman, Sachs & Co.
The Bonds will be issued in fully registered form in denominations of, and
integral multiples of, $1,000. Transfers of the Bonds are registrable and
principal is payable at the corporate trust office of the Trustee, The Chase
Manhattan Bank, at 450 W. 33rd Street, New York, New York 10001. The Bonds
will initially be issued in global form. See "--Global Securities".
INTEREST
Interest will accrue on the principal amount of each Bond at the applicable
rate described below, from and including March 16, 1998 (the "Original Issue
Date") to but excluding the date on which the principal amount is paid in
full. Interest accrued on each Bond will be payable in arrears on September 15
and on March 15 each year, commencing on September 15, 1998, in each case to
the holder of record of the Bond on the August 30 or February 28 next
preceding the interest payment date (each an "Interest Payment Record Date").
The Interest Payment Record Date will differ from the date that applies for
purposes of determining holders of record in connection with the exercise of
the Call Option and Put Option described below.
From and including the Original Issue Date to but excluding March 15, 2000,
interest will accrue at an annual rate equal to 6.15%.
S-3
<PAGE>
On March 15, 2000 (the "Reset Date"), the interest rate on the Bonds will be
reset so as to equal a fixed rate determined as described under "--Reset of
Interest Rate" below. Notwithstanding the foregoing, the interest rate on a
particular Bond will not be reset on the Reset Date if the Company is
obligated to repurchase such Bond on such date, and a reset scheduled to occur
on the Reset Date may not occur because of a Market Disruption Event or a
Failed Remarketing. See "--Reset of Interest Rate" below.
CALL OPTION
Goldman, Sachs & Co. (or any successor firm) may purchase all of the
outstanding Bonds (in whole and not in part) from the holders on the Reset
Date (such right, the "Call Option") at a price equal to 100% of the principal
amount of Bonds purchased (the "Face Value") and subject to Goldman, Sachs &
Co. giving notice of its intention to purchase the outstanding Bonds as
described below (a "Call Notice"). In addition, the Company will remain
obligated to pay all accrued and unpaid interest on the Bonds. Interest that
becomes payable on the Reset Date will be payable to the holders of record on
the corresponding Interest Payment Record Date, as provided in the Bonds and
the Indenture.
To exercise the Call Option, Goldman, Sachs & Co. must give a Call Notice to
the holders of outstanding Bonds no later than the tenth Market Day prior to
the Reset Date, in the manner described under "--Certain Notices" below. In
the event a Call Notice is duly given, each holder will be obligated to sell
to Goldman, Sachs & Co., and Goldman, Sachs & Co. will be obligated to
purchase from each holder, at the Face Value on the Reset Date, the Bonds held
of record by the holder on the Reset Date. Such sale and purchase will be
effected through the facilities of DTC, with each holder being deemed to have
automatically tendered its Bonds for sale to Goldman, Sachs & Co. on the Reset
Date in accordance with applicable DTC procedures. Each holder's automatic
tender of Bonds will be subject to the holder's receipt of payment of the Face
Value of the Bonds from Goldman, Sachs & Co. on the Reset Date. Until
purchased or paid by the Company, the Bonds will remain outstanding
notwithstanding any exercise of the Call Option by Goldman, Sachs & Co. See
"--Settlement on Exercise of the Put and Call Options".
If the Call Option is exercised, all Bonds outstanding on the Reset Date
will be subject to purchase by Goldman, Sachs & Co. as described above. This
will be the case for every holder (and every beneficial owner) of Bonds
outstanding on the Reset Date, including those who acquire an interest in the
Bonds after the Call Notice is given or who are otherwise unaware that the
Call Notice has been given.
PUT OPTION
If Goldman, Sachs & Co. does not exercise the Call Option, each holder of
outstanding Bonds may require the Company to repurchase all of the holder's
Bonds (in whole and not in part) on the Reset Date (such right, its "Put
Option") at a price equal to 100% of the principal amount of the Bonds
repurchased (the "Put Price"), in the circumstances described in the next
paragraph. The accrued and unpaid interest on the repurchased Bonds that
becomes payable on the Reset Date will be payable by the Company to the
holders of record on the corresponding Interest Payment Record Date, as
provided in the Bonds and the Indenture. If for any reason payment of the Put
Price is not made when due, the accrued interest from the Reset Date to the
date payment is made would be payable by the Company as part of the Put Price.
On the Reset Date, each holder will be deemed to have exercised its Put
Option automatically for the full principal amount of the Bonds held of record
by such holder on the Reset Date unless either (x) Goldman, Sachs & Co. has
duly given a Call Notice or (y) if Goldman, Sachs & Co. does not exercise the
Call Option, (i) no later than 10:00 A.M. (New York City time) on the seventh
Market Day
S-4
<PAGE>
prior to the Reset Date, the holder gives notice to the Trustee that the
holder elects not to sell any of its Bonds to the Company on the Reset Date (a
"Hold Notice") and (ii) the notice is effective under the 10% Requirement
described in the next paragraph. A Hold Notice must be given in the manner
described under "--Certain Notices" below. Consequently, with respect to each
holder, if a Call Notice is not duly given by Goldman, Sachs & Co. and an
effective Hold Notice is not duly given by the holder, the Company will be
obligated to repurchase from the holder, and the holder will be obligated to
sell to the Company, at the Put Price on the Reset Date, the Bonds held of
record by the holder on the Reset Date. Such sale and purchase will be
effected through the facilities of DTC, with each holder who has not given an
effective Hold Notice being deemed to have automatically tendered its Bonds
for sale to the Company on the Reset Date in accordance with applicable DTC
procedures. If the Company is obligated to purchase any Bonds pursuant to the
Put Option, the Bonds subject to purchase will remain outstanding until the
Put Price (and accrued interest) in respect thereof has been paid. See
"--Settlement on Exercise of the Put and Call Options".
Notwithstanding the foregoing, no Hold Notice will be effective unless Hold
Notices are duly given by the holders of record of at least 10% of the Bonds
outstanding. The provision described in this paragraph is called the "10%
Requirement". If any holder gives a Hold Notice to the Trustee when the 10%
Requirement has not been satisfied, the Trustee will give written notice of
that fact (a "10% Requirement Notice") to the holder and the Company not later
than the close of business on the seventh Market Day before the Reset Date, in
the manner described under "--Certain Notices" below.
RESET OF INTEREST RATE
The interest rate on each Bond will be reset on the Reset Date, unless the
Company is obligated to repurchase the Bond on such date pursuant to the
holder's Put Option. Consequently, the interest rate on an outstanding Bond
will be reset on the Reset Date if either of the following occurs:
(x) Goldman, Sachs & Co. elects to purchase all of the outstanding Bonds on
the Reset Date pursuant to the Call Option or (y) Goldman, Sachs & Co. does
not elect to do so, the holder elects not to exercise its Put Option by giving
the Trustee a Hold Notice and the Hold Notice is effective under the 10%
Requirement. Notwithstanding the foregoing, reset of the interest rate is
subject to the occurrence of a Market Disruption Event or a Failed Remarketing
as described below.
The Company has initially appointed Goldman, Sachs & Co. as its agent for
the purpose of resetting the interest rate (such agent or any successor agent,
the "Calculation Agent"). If the interest rate is to be reset on the Reset
Date, the Calculation Agent will effect the reset as follows.
Between the tenth Market Day prior to the Reset Date and 11:00 A.M., New
York City time, on the Calculation Date (as defined below), the Calculation
Agent will select three financial institutions (one of which will be Goldman,
Sachs & Co. if it so requests) that deal in the Company's debt securities and
have agreed to participate as reference dealers in accordance with the terms
described below (the "Reference Dealers"). If Goldman, Sachs & Co. has
exercised the Call Option and so requests, each Reference Dealer must include
in its participation agreement a written commitment (satisfactory to Goldman,
Sachs & Co.) that, if it is selected as the Final Dealer (as defined below),
it will purchase from Goldman, Sachs & Co. on the Calculation Date for
settlement on the Reset Date and at the Final Offer Price (as defined below),
all the Bonds that Goldman, Sachs & Co. purchases pursuant to the Call Option
and tenders for resale to the Final Dealer on the Reset Date. For each
Reference Dealer, the Calculation Agent will request the name of and telephone
and facsimile numbers for one individual to represent such Reference Dealer.
On the sixth Market Day prior to the Reset Date (the "Calculation Date"),
the Calculation Agent will undertake the following actions to calculate a
fixed rate at which interest will accrue on the Bonds from and including the
Reset Date to but excluding the Final Maturity (such period, the "Reset
S-5
<PAGE>
Period"). In paragraphs (a) and (b) below, all references to specific hours
are references to prevailing New York City time, and each notice will be given
telephonically and will be confirmed as soon as possible by facsimile to each
of the Calculation Agent and the Company. The times set forth below are
guidelines for action, and the Calculation Agent will use reasonable efforts
to adhere to these times.
(a) At 12:00 P.M., the Calculation Agent will:
(i) determine (or obtain from Goldman, Sachs & Co., if Goldman, Sachs
& Co. has exercised the Call Option) the approximate ten-year U.S.
Treasury bond yield at or about such time, which will be expressed as a
percentage (the "Designated Treasury Yield") and will be based on the
then-current, ten-year U.S. Treasury bond (the "Designated Treasury
Bond");
(ii) calculate and provide to the Reference Dealers, on a preliminary
basis, a hypothetical price at which the Bonds might be offered for
sale to a Reference Dealer on the Reset Date (the "Offer Price"). The
Offer Price will be expressed as a percentage of the principal amount
of the Bonds and will equal 100% plus the Margin (as defined below), if
the Treasury Rate Difference (as defined below) is positive, or 100%
minus the Margin, if the Treasury Rate Difference is negative. The
"Margin" means the present value, expressed as a percentage of the
principal amount of the Bonds, of the absolute value of the Treasury
Rate Difference applied to twenty semi-annual periods (i.e., ten
years), discounted at the Designated Treasury Yield divided by two. The
"Treasury Rate Difference" means the percentage (which may be positive
or negative) equal to (x) 5.634% (the "Initial Treasury Yield") minus
(y) the Designated Treasury Yield; and
(iii) request each Reference Dealer to provide to the Calculation
Agent, when notified of the Final Offer Price as described in paragraph
(b) below, a firm bid, expressed as a percentage representing an
interest rate spread over the Designated Treasury Yield (the "Spread"),
at which such Reference Dealer would be willing to purchase on the
Calculation Date for settlement on the Reset Date, at the Final Offer
Price, all of the Bonds then outstanding. Each such firm bid is to be
given on an "all-in" basis and is to remain open for at least 30
minutes after it is given.
(b) At 12:30 P.M., the Calculation Agent will determine (or obtain from
Goldman, Sachs & Co., if Goldman, Sachs & Co. has exercised the Call
Option) the Designated Treasury Yield on a final basis, and calculate and
provide to the Reference Dealers the Offer Price on a final basis (the
"Final Offer Price") and request each Reference Dealer to submit its bid
immediately as described in clause (a)(iii) above. If the Calculation Agent
receives at least two bids, the following will occur:
(i) The Reference Dealer providing the bid presenting the lowest all-
in Spread (the "Final Spread") will be the "Final Dealer";
(ii) if Goldman, Sachs & Co. has exercised the Call Option, the Final
Dealer will be obligated to purchase from Goldman, Sachs & Co. at the
Final Offer Price, for settlement on the Reset Date, all the Bonds that
Goldman, Sachs & Co. purchases pursuant to the Call Option and tenders
for resale to the Final Dealer on the Reset Date (assuming that the
interest rate on the Bonds will be reset so as to equal the Adjusted
Rate (as defined below) during the Reset Period); as described below,
the Final Dealer will not be obligated to purchase any Bonds if
Goldman, Sachs & Co. has not exercised the Call Option;
(iii) the Calculation Agent will calculate and provide to the Company
the "Adjusted Rate", which will be the semi-annual, bond-equivalent,
fixed interest rate on the Bonds required to produce, during the Reset
Period, a semi-annual, bond-equivalent yield on the Bonds that equals
the sum of the Final Spread plus the final Designated Treasury Yield,
assuming that the Bonds are purchased on the Reset Date at the Final
Offer Price; and
S-6
<PAGE>
(iv) the interest rate on the Bonds will be adjusted so as to equal
the Adjusted Rate, effective from and including the Reset Date to but
excluding the Final Maturity. If Goldman, Sachs & Co. has not exercised
the Call Option and any holder gives an effective Hold Notice to the
Trustee, the Company will promptly give written notice of the Adjusted
Rate to such holder.
As indicated above, all determinations regarding the Designated Treasury Yield
and the Designated Treasury Bond as described in clause (a)(i) and the first
sentence of clause (b) above will be made by Goldman, Sachs & Co. if another
party is acting as the Calculation Agent, unless Goldman, Sachs & Co. has
elected not to exercise the Call Option.
If the Calculation Agent determines that, on the Calculation Date, (x) a
Market Disruption Event (as defined below) has occurred or is continuing or
(y) fewer than two Reference Dealers have provided firm bids in a timely
manner pursuant to participation agreements satisfactory to Goldman, Sachs &
Co. substantially as described above (a "Failed Remarketing"), the steps
contemplated above will be taken on the next Market Day on which the
Calculation Agent determines that no Market Disruption Event has occurred or
is continuing and at least two Reference Dealers have provided bids pursuant
to participation agreements satisfactory to Goldman, Sachs & Co. substantially
as contemplated above. If the Calculation Agent determines that a Market
Disruption Event and/or a Failed Remarketing has occurred or is continuing for
at least four consecutive Market Days starting on the Calculation Date, then
Goldman, Sachs & Co. will be deemed not to have exercised the Call Option, all
holders will be deemed to have exercised their Put Options and the Company
will repurchase all the Bonds from the holders on the Reset Date at the Put
Price. In these circumstances, the holders of the Bonds may not continue to
hold the Bonds by giving a Hold Notice. The Calculation Agent will notify the
Company of such determination promptly after the close of business on such
fourth Market Day. The Company will give notice to the holders that the Bonds
will be repurchased by the Company from the holders on the Reset Date at the
Put Price, no later than the second Market Day prior to the Reset Date in the
manner described under "--Certain Notices" below. If at any time Goldman,
Sachs & Co. is not acting as Calculation Agent, then the determinations and
notice to the Company described in this paragraph will be made and given by
Goldman, Sachs & Co. unless Goldman, Sachs & Co. did not exercise the Call
Option, in which case such determinations and notice will be made by such
party that is acting as Calculation Agent.
"Market Disruption Event" means any of the following: (i) a suspension or
material limitation in trading in securities generally on the New York Stock
Exchange or the establishment of minimum prices on such exchange; (ii) a
general moratorium on commercial banking activities declared by either federal
or New York State authorities; (iii) any material adverse change in the
existing financial, political or economic conditions in the United States of
America; (iv) an outbreak or escalation of hostilities involving the United
States of America or the declaration of a national emergency or war by the
United States of America; or (v) any material disruption of the U.S.
government securities market, U.S. corporate bond market and/or U.S. federal
wire system.
There is no assurance that the Calculation Agent will receive at least two
qualifying bids from Reference Dealers in connection with the Reset Date. All
determinations regarding Market Disruption Events and Failed Remarketings,
including whether or not any event has occurred or is continuing, will be made
by the Calculation Agent (or Goldman, Sachs & Co., as applicable) in its sole
discretion.
If Goldman, Sachs & Co. has not exercised the Call Option, the Final Dealer
will not be obligated to purchase Bonds from any holder, and no holder will be
obligated to sell Bonds to the Final Dealer. Consequently, in deciding whether
to give a Hold Notice, holders should not assume that any dealer will be
prepared to purchase their Bonds at the Final Offer Price or otherwise.
All determinations made by the Calculation Agent (or Goldman, Sachs & Co.)
regarding the matters described above will be final, conclusive and binding on
all concerned and will not give rise to any liability on the part of the
Calculation Agent (or Goldman, Sachs & Co.), the Trustee or the Company.
S-7
<PAGE>
SETTLEMENT ON EXERCISE OF THE PUT AND CALL OPTIONS
If the Call Option is exercised, then, on the Reset Date, all beneficial
interests in the Bonds will be transferred to a DTC account designated by
Goldman, Sachs & Co. The transfers will be made automatically, without any
action on the part of any beneficial owner, by book entry through DTC.
Goldman, Sachs & Co. will be obligated to make payment of the Face Value of
the Bonds to DTC, for credit to the accounts of the DTC participants through
which beneficial interests in the Bonds are held, by the close of business on
the Reset Date. Each transfer will be made against the corresponding payment,
and each payment will be made against the corresponding transfer, in
accordance with the applicable DTC procedures. If Goldman, Sachs & Co. fails
to pay the Face Value of the Bonds on the Reset Date, the Call Option will be
deemed not to have been exercised and the Put Option will be deemed to have
been exercised with respect to all of the outstanding Bonds. In these
circumstances, the holders of the Bonds may not continue to hold the Bonds by
giving an effective Hold Notice, and the Company will be obligated to pay, not
later than two Business Days following the Reset Date, the Put Price for the
Bonds (plus accrued interest from the Reset Date to the date payment is made),
with settlement occurring as described in the next paragraph. In any event,
the Company will remain obligated to make payment of accrued and unpaid
interest due on the Bonds, with interest payable on the Reset Date being
payable to the holders of record on the corresponding Interest Payment Record
Date, as provided in the Bonds and in the Indenture.
If the Put Option is exercised, then, on the Reset Date, all beneficial
interests in the Bonds to be purchased will be transferred to a DTC account
designated by the Company. The transfers will be made automatically, without
any action on the part of any beneficial owner, by book entry through DTC. The
Company will be obligated to make payment of the Put Price of the relevant
Bonds to DTC, for credit to the accounts of the DTC participants through which
beneficial interests in these Bonds are held, by the close of business on the
Reset Date. Each transfer will be made against the corresponding payment, and
each payment will be made against the corresponding transfer, in accordance
with applicable DTC procedures. If the Company fails to pay the Put Price of
the relevant Bonds on the Reset Date, accrued interest at the then applicable
rate from the Reset Date to the date the payment is made will be payable as
part of the Put Price. With respect to all the Bonds, whether or not purchased
pursuant to the Put Option, the Company will remain obligated to make payment
of accrued and unpaid interest due on the Bonds, with interest payable on the
Reset Date being payable to the holders of record on the corresponding
Interest Payment Record Date, as provided in the Bonds and in the Indenture.
The transactions described above will be executed on the Reset Date through
DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC participants will be debited and credited and the Bonds
delivered by book entry as necessary to effect the purchases and sales
thereof. The transactions will settle in immediately available funds through
DTC's Same-Day Funds Settlement System.
The settlement procedures described above, including those for payment and
delivery of Bonds purchased by Goldman, Sachs & Co. or the Company on the
Reset Date, may be modified, notwithstanding any contrary terms of the
Indenture, to the extent required by DTC or, if the book-entry system is no
longer available for the Bonds at the relevant time, to the extent required to
facilitate these transactions in Bonds in certificated form. In addition,
Goldman, Sachs & Co. and the Company may, notwithstanding any contrary terms
of the Indenture, modify the settlement procedures referred to above in order
to facilitate the settlement process.
Under the terms of the Bonds, the Company has agreed that, notwithstanding
any provision to the contrary set forth in the Indenture, (i) it will use its
best efforts to maintain the Bonds in book-entry form with DTC or any
successor thereto and to appoint a successor depository to the extent
necessary to maintain the Bonds in book-entry form and (ii) it will waive any
discretionary right it otherwise may have under the Indenture to cause the
Bonds to be issued in certificated form.
S-8
<PAGE>
For further information with respect to payments, transfers and settlement
through DTC, see "--Global Securities" below.
GLOBAL SECURITIES
Upon original issuance, the Bonds will be represented by one or more global
securities (the "Global Securities") having an aggregate principal amount
equal to that of the Bonds represented thereby. Each Global Security will be
deposited with, or on behalf of, The Depository Trust Company, as depository,
and registered in the name of Cede & Co., a nominee of the Depository. The
Global Securities will bear legends regarding the restrictions on exchanges
and registration of transfer thereof referred to below and any other matters
as may be provided for by the Indenture. See "Description of Debt Securities--
Global Securities" and "--United States Book-Entry System" in the Prospectus.
None of the Company, the Trustee, the Calculation Agent (or Goldman, Sachs &
Co.) or any of their respective agents will have any responsibility or
liability for any aspect of the Depository's or any participant's records
relating to, or for payments or notices on account of, beneficial interests in
a Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
CERTAIN NOTICES
With respect to any Bonds represented by a Global Security, Call Notices,
10% Requirement Notices and any other notices to be given to the holders of
the Bonds will be deemed to have been duly given to the holders when given to
DTC, or its nominee, in accordance with DTC's policies and procedures. The
Company believes that DTC's practice is to inform its participants of any such
notice it receives, in accordance with its policies and procedures. Persons
who hold beneficial interests in the Bonds through DTC or its direct or
indirect participants may wish to consult with them about the manner in which
notices and other communications relating to the Bonds may be given and
received through the facilities of DTC. Neither the Company, the Calculation
Agent (nor Goldman, Sachs & Co.) nor the Trustee will have any responsibility
with respect to those policies and procedures or for any notices or other
communications among DTC, its direct and indirect participants and the
beneficial owners of the Bonds in global form.
With respect to any Bonds not represented by a Global Security, Call
Notices, 10% Requirement Notices and any other notices to be given to the
holders of the Bonds will be deemed to have been duly given to the holders
upon the mailing of such notices to the holders at their respective addresses
as they appear on the Bond register maintained by the Company or its agent as
of the close of business preceding the day notice is given.
Neither the failure to give any notice nor any defect in any notice given to
a particular holder will affect the sufficiency of any notice given to another
holder.
Hold Notices may be given by a holder to the Trustee only by facsimile
transmission or by mail and MUST ACTUALLY BE RECEIVED by the Trustee at the
following address no later than 10:00 A.M., New York City time, on the seventh
Market Day prior to the Reset Date:
The Chase Manhattan Bank, as Trustee
55 Water Street, 2nd Floor
North Building
New York, New York 10041
Attention: Tender Operations Area
Facsimile No.: 212-638-7380/81
Hold Notices may be given with respect to a Bond only by the registered
holder of the Bond. Therefore, in the case of any beneficial interest in a
Bond represented by a Global Security, a Hold Notice must be given by DTC or
its agent, and any owner of a beneficial interest that wants a Hold Notice to
be given with respect to the interest will need to make arrangements with DTC
and/or the applicable direct or indirect participants for the notice to be
given in a timely manner.
S-9
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Sutherland, Asbill & Brennan LLP, the following summary
describes certain United States federal income tax considerations relevant to
the ownership of the Bonds as of the date hereof. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and final, temporary
and proposed Treasury Regulations, rulings and judicial decisions thereunder
as of such date, all of which are subject to change, possibly with retroactive
effect. This summary deals only with Bonds held as capital assets within the
meaning of Section 1221 of the Code by United States Holders (as defined
below) who purchase Bonds on their original issuance. It does not purport to
deal with all aspects of United States federal income taxation that may be
relevant to such holders, nor does it address tax consequences that may be
relevant to certain types of holders, such as life insurance companies,
financial institutions, dealers in securities or currencies, persons holding
Bonds as part of a straddle, hedging or conversion transaction, holders who
elect to amortize bond premium and holders whose "functional currency" as
defined in Section 985 of the Code is not the U.S. dollar. As used herein, a
"United States Holder" means a beneficial owner of a Bond that is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any
political subdivision thereof, an estate the income of which is subject to
United States federal income taxation regardless of its source, or a trust
subject to the supervision of a court within the United States and the control
of a United States person as described in Section 7701(a)(30) of the Code.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF BONDS SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER
STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
An opinion of tax counsel is not binding on the Internal Revenue Service
(the "Service") or the courts. Prospective investors should note that no
rulings have been or are expected to be sought from the Service with respect
to any of the federal income tax considerations discussed below, and no
assurance can be given that the Service will not take contrary positions.
TREATMENT OF BONDS
Although there is no authority on point, and the matter is not free from
doubt, the Bonds should be treated as fixed rate debt instruments that mature
on the Reset Date. Under this treatment, a United States Holder should include
as ordinary income the interest paid or accrued on the Bonds in accordance
with its regular method of accounting for tax purposes. Upon the sale,
exchange or redemption of a Bond, a United States Holder should recognize
capital gain or loss equal to the difference between the amount realized on
the sale, exchange or redemption and its tax basis in the Bond. A United
States Holder's tax basis in a Bond will generally equal its purchase price
for such Bond. The ability to use capital losses to offset ordinary income in
determining taxable income is generally limited.
Alternatively, it is possible that the Service or a court could treat the
Bonds as maturing on the Final Maturity rather than on the Reset Date, the
holders as writing the Call Option and the issue price of the Bonds as
including the value of the Call Option. In this case, because the interest
rate on the Bonds could reset on the Reset Date, the Bonds could be considered
"contingent payment debt instruments". Under Treasury Regulations dealing with
contingent payment debt instruments (the "Contingent Debt Regulations"), each
United States Holder would be required, regardless of its regular method of
accounting for tax purposes, to include in income original issue discount for
each interest accrual period in an amount equal to the product of (i) the
adjusted issue price of the Bonds at the beginning of each such period and
(ii) a projected yield to maturity on the Bonds. The adjusted issue price
would generally be equal to the issue price of the Bonds plus any accrued but
unpaid original issue discount. The projected yield to maturity would be based
on the "comparable yield", i.e., the yield
S-10
<PAGE>
at which the Company would issue a fixed rate debt instrument maturing on the
Final Maturity, with terms and conditions otherwise similar to those of the
Bonds. Under these rules, the original issue discount includible in income for
an interest accrual period could be greater than the actual cash payment
received. In addition, the Contingent Debt Regulations would require that a
projected payment schedule be determined, and that adjustments to income
accruals be made to account for differences between actual and projected
payments. These regulations would also require that any gain realized upon the
disposition of a Bond would be treated as ordinary income, and any loss
realized would be an ordinary loss to the extent of the previously accrued
original issue discount, and any excess loss would be a capital loss. As noted
above, the ability to use capital losses is generally limited.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and proceeds on the sale of Bonds made to
United States Holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will also apply to such payments
if the United States Holder fails to provide a taxpayer identification number
or certification of foreign or other exempt status or fails to report in full
dividend and interest income. On October 14, 1997, the Service issued final
Treasury Regulations that unify and impose certain new requirements for
establishing an exemption from backup withholding. These regulations generally
apply to payments on debt instruments made after December 31, 1998, even if
the debt instruments were issued on or before that date. United States Holders
should consult their tax advisors as to the potential impact of these
regulations on their particular situations.
DUE TO THE COMPLEXITY OF THE RULES DESCRIBED ABOVE AND THE UNCERTAINTY AS TO
THEIR APPLICATION TO THE BONDS, IT IS PARTICULARLY IMPORTANT THAT PERSONS
CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF BONDS CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES AS
WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER STATE, LOCAL OR
FOREIGN TAXING JURISDICTION.
S-11
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the terms agreement and
related underwriting agreement (collectively, the "Underwriting Agreement"),
the Company has agreed to sell to each of the Underwriters named below, and
each of such Underwriters, for whom Goldman, Sachs & Co. is acting as
representative (the "Representative"), has severally agreed to purchase, the
principal amount of the Bonds set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF BONDS
----------- ---------
<S> <C>
Goldman, Sachs & Co............................................... $720,000,000
Chase Securities Inc.............................................. 20,000,000
Citibank Securities, Inc.......................................... 20,000,000
Credit Suisse First Boston Corporation............................ 20,000,000
Deutsche Morgan Grenfell Inc...................................... 20,000,000
------------
Total......................................................... $800,000,000
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Bonds, if any are
taken. In the event of default by an Underwriter, the Underwriting Agreement
provides that, in certain circumstances, purchase commitments of the
nondefaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Underwriters propose to offer the Bonds in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of 0.150% of the principal amount of the Bonds. The
Underwriters may allow, and such dealers may reallow, a concession not to
exceed 0.125% of the principal amount of the Bonds to certain brokers and
dealers. After the Bonds are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
Representative.
The Bonds are a new issue of securities with no established trading market.
The Company has been advised by the Representative that the Representative
intends to make a market in the Bonds but is not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Bonds.
In connection with the offering, the Underwriters may purchase and sell the
Bonds in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Bonds; and syndicate short positions involve the
sale by the Underwriters of a greater number of Bonds than they are required
to purchase from the Company in the offering. The Underwriters also may impose
a penalty bid, whereby selling concessions allowed to syndicate members or
other broker-dealers in respect of the securities sold in the offering for
their account may be reclaimed by the syndicate if such Bonds are repurchased
by the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Bonds, which
may be higher than the price that might otherwise prevail in the open market;
and these activities, if commenced, may be discontinued at any time. These
transactions may be effected in the over-the-counter market or otherwise.
Each Underwriter, on behalf of itself and each of its affiliates that
participates in the initial distribution of the Bonds, has represented and
agreed that:
(a)(i) it and each such affiliate has not offered or sold and, prior to
the expiration of the period ending six months from the date of the issue
of the Bonds, will not offer or sell any Bonds to
S-12
<PAGE>
persons in the United Kingdom except to those persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995, (ii) it and each such
affiliate has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the Bonds in, from or otherwise involving the United Kingdom,
and (iii) it and each such affiliate has only issued or passed on, and will
only issue or pass on in the United Kingdom, any document received by it or
such affiliate in connection with the issue of the Bonds to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a
person to whom such documents may otherwise lawfully be issued or passed
on; and
(b) it and each such affiliate has not offered, sold or delivered and it
and each such affiliate will not offer, sell or deliver, directly or
indirectly, any of the Bonds or distribute the Prospectus Supplement,
Subject to Completion, Dated March 6, 1998, or the Prospectus Supplement or
the Prospectus as amended or supplemented (as each such term is defined in
the Underwriting Agreement) or any other offering material relating to the
Bonds, in or from any other foreign jurisdiction except under circumstances
that will, to the best of its or each such affiliate's knowledge and
belief, result in compliance with the applicable laws and regulations
thereof and which will not impose any obligations on the Company except as
contained in the Underwriting Agreement.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
in respect of such liabilities.
Certain of the Underwriters have provided from time to time, and expect to
provide in the future, financial advisory and investment banking services to
the Company and its affiliates, for which such Underwriters have received and
will receive customary fees and commissions. Certain of the Underwriters are
also affiliated with commercial banking institutions that have agreed in the
ordinary course of business to loan money to, and have customary banking
relationships with, the Company and its affiliates. In addition, John S. Reed,
a director of the Company, is Chairman of the Board of Directors of Citicorp,
the parent corporation of Citicorp Securities, Inc., one of the Underwriters
and Chase Securities Inc., one of the Underwriters, is an affiliate of the
Trustee.
S-13
<PAGE>
PROSPECTUS
[LOGO]
PHILIP MORRIS COMPANIES INC.
Debt Securities
and
Warrants to Purchase Debt Securities
---------------
Philip Morris Companies Inc. (the "Company") intends to offer from time to
time up to $5,087,550,000 aggregate principal amount of its debt securities
(the "Debt Securities") or warrants to purchase the Debt Securities (the "Debt
Warrants"). The Debt Securities and Debt Warrants will be offered in one or
more separate series or issues in amounts, at prices, in currencies or
currency units and on terms to be determined at the time of offering. The Debt
Warrants may be offered with the Debt Securities or separately. See "Plan of
Distribution".
The Debt Securities and the Debt Warrants will be unsecured and will rank
pari passu with all other unsecured and unsubordinated indebtedness of the
Company.
Debt Securities of a series may be issuable in registered form without
coupons ("Registered Securities"), in bearer form with or without coupons
attached ("Bearer Securities") or in the form of one or more global securities
(each a "Global Security"). Bearer Securities will not be offered or sold to
persons who are within the United States or to United States persons. See
"Limitations on Issuance of Bearer Securities".
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, authorized denominations, maturity,
rate (or manner of calculation thereof) and time of payment of interest, if
any, and any redemption or repayment terms, the currency, currencies or
currency unit or units in which the Debt Securities shall be payable (and
similar information with respect to the Debt Securities purchasable upon
exercise of each Debt Warrant) and the terms of the Debt Warrants, including
the exercise price, detachability, expiration date and other terms, in respect
of which this Prospectus is being delivered are set forth in the accompanying
Prospectus Supplement (the "Prospectus Supplement"). This Prospectus may not
be used to offer or sell Debt Securities or Debt Warrants unless accompanied
by a Prospectus Supplement.
The Company may sell the Debt Securities and Debt Warrants to or through
underwriters or dealers and also may sell Debt Securities and Debt Warrants
directly to other purchasers or through agents. See "Plan of Distribution".
The Prospectus Supplement sets forth the initial public offering price, the
net proceeds to the Company, the names of, and principal amount of Debt
Securities and Debt Warrants to be purchased by or through underwriters,
dealers or agents, if any, the compensation of such underwriters, dealers or
agents and other special terms in connection with the offering and sale of the
applicable series of Debt Securities or Debt Warrants, as the case may be.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 19, 1998
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT, UNDERWRITER OR DEALER. THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY OF THE DEBT SECURITIES OR DEBT WARRANTS
IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and definitive proxy or information
statements filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional offices of the
Commission: 7 World Trade Center, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can 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 (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants,
such as the Company, that file electronically with the Commission. The
Company's Common Stock is listed on the New York Stock Exchange and such
reports, proxy statements and other information concerning the Company can
also be inspected and acquired at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission, Washington, D.C., a registration
statement on Form S-3 (Registration No. 333-16955) under the Securities Act of
1933, as amended (the "1933 Act"), with respect to the Debt Securities and
Debt Warrants offered hereby (together with all amendments and exhibits, the
"Registration Statement"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information pertaining to the Debt Securities, Debt Warrants and
the Company, reference is made to the Registration Statement, the exhibits
thereto and the documents incorporated by reference herein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference and made a part
hereof: (i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996; (ii) the Company's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1997, June 30, 1997 and September 30, 1997; (iii) the
Company's Current Reports on Form 8-K dated January 30, 1997, June 20, 1997,
June 25, 1997, July 2, 1997, August 25, 1997, January 16, 1998 and January 28,
1998; and (iv) the Company's Current Report on Form 8-K/A dated February 17,
1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities and Debt Warrants shall
be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is incorporated or deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
2
<PAGE>
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request, a copy of any or
all of the foregoing documents incorporated by reference herein (not including
exhibits to such documents unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Philip
Morris Companies Inc., 120 Park Avenue, New York, New York 10017, Attention:
Secretary (telephone (212) 880-5000).
THE COMPANY
GENERAL
The Company is a holding company whose principal wholly-owned subsidiaries,
Philip Morris Incorporated, Philip Morris International Inc., Kraft Foods,
Inc., and Miller Brewing Company, are engaged in the manufacture and sale of
various consumer products. A wholly-owned subsidiary of the Company, Philip
Morris Capital Corporation ("PMCC"), engages in various financing and
investment activities. As used herein, unless the context indicates otherwise,
the term "Company" means Philip Morris Companies Inc. and its subsidiaries.
The Company is the largest consumer packaged goods company in the world.*
Philip Morris Incorporated ("PM Inc."), which conducts business under the
trade name "Philip Morris U.S.A.", and its subsidiaries and affiliates are
engaged in the manufacture and sale of cigarettes. PM Inc. is the largest
cigarette company in the United States. Philip Morris International Inc.
("Philip Morris International") is a holding company whose subsidiaries and
affiliates and their licensees are engaged primarily in the manufacture and
sale of tobacco products (mainly cigarettes) internationally. A subsidiary of
Philip Morris International is the leading United States exporter of
cigarettes. Marlboro, the principal cigarette brand of these companies, has
been the world's largest-selling cigarette brand since 1972. Certain
subsidiaries and affiliates of Philip Morris International manufacture and
sell a wide variety of food products in Latin America.
Kraft Foods, Inc. ("Kraft"), is the largest processor and marketer of retail
packaged foods in the United States. A wide variety of cheese, processed meat
products, coffee and grocery products are manufactured and marketed in the
United States and Canada by Kraft. Subsidiaries and affiliates of Kraft Foods
International, Inc., a subsidiary of Kraft, manufacture and market coffee,
confectionery, cheese, grocery and processed meat products in Europe and the
Asia/Pacific region.
Miller Brewing Company ("Miller") is the second largest brewing company in
the United States.
OTHER
The Company is a legal entity separate and distinct from PM Inc., Philip
Morris International, Kraft, Miller, PMCC and its other subsidiaries.
Accordingly, the right of the Company, and thus the right of the Company's
creditors and stockholders, to participate in any distribution of the assets
or earnings of any subsidiary is subject to the prior claims of creditors of
such subsidiary, except to the extent that claims of the Company itself as a
creditor may be recognized. As a holding company, the Company's principal
source of funds is dividends from its subsidiaries. The Company's principal
wholly-owned subsidiaries currently are not limited by long-term debt or other
agreements in their ability to pay cash dividends or to make other
distributions with respect to their common stock.
USE OF PROCEEDS
Except as may be set forth in the Prospectus Supplement, the Company intends
to use the proceeds from the sale of the Debt Securities and Debt Warrants and
the proceeds, if any, from the exercise of Debt Warrants for general corporate
purposes and to refinance existing short-term and long-term borrowings. At
December 31, 1997, outstanding short-term and long-term borrowings of the
Company carried a weighted average interest rate of 8.93% and 7.40%,
respectively.
- --------
* References to the Company's competitive ranking in its various businesses
are based on sales data or, in the case of cigarettes and beer, shipments.
3
<PAGE>
The Company expects to issue additional long-term and short-term debt from
time to time. The nature and amount of the Company's long-term and short-term
debt and the proportionate amount of each can be expected to vary from time to
time as a result of business requirements, market conditions and other
factors.
SELECTED FINANCIAL INFORMATION
HISTORICAL FINANCIAL STATEMENT DATA
The following consolidated summary information with respect to the Company
is based upon, and should be read in conjunction with, the consolidated
financial statements of the Company, including the notes thereto, included or
incorporated by reference in the documents described under "Incorporation of
Certain Documents by Reference".
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
Earnings Data
Operating revenues........................................... $72,055 $69,204
Interest and other debt expense, net (consumer products)..... 1,052 1,086
Earnings before income taxes ................................ 10,611 10,683
Net earnings................................................. 6,310 6,303
Balance Sheet Data
Working capital (consumer products).......................... $ 2,369 $ 323
Total assets
Consumer products.......................................... 50,061 48,954
Financial services and real estate......................... 5,886 5,917
Short-term debt
Consumer products (including current portion of long-term
debt)..................................................... 1,673 2,106
Financial services and real estate......................... -- 173
Long-term debt
Consumer products.......................................... 11,585 11,827
Financial services and real estate......................... 845 1,134
Stockholders' equity......................................... 14,920 14,218
Cash Flow Data
Net cash provided by operating activities
Consumer products.......................................... $ 8,018 $ 7,249
Financial services and real estate......................... 322 385
Capital expenditures (consumer products)..................... 1,874 1,782
Dividends paid............................................... 3,885 3,462
Repurchase of outstanding stock.............................. 805 2,770
</TABLE>
During 1997, the Company recorded pretax charges of $1,457 million related
to tobacco litigation settlements in Mississippi, Florida and Texas.
During 1997, the Company acquired a controlling interest in a Portuguese
tobacco company at a cost of $217 million and increased its ownership interest
in a Mexican cigarette business from 28.8% to 50.0% at a cost of $403 million.
The effects of these and other smaller acquisitions were not material to the
Company's financial position or results of operations in any of the periods
presented.
During 1997, the Company sold several domestic and international food
businesses, including its Brazilian ice cream businesses and its North
American maple-flavored syrup businesses, for total proceeds of $1.5 billion
and net pretax gains of $958 million. In addition, the Company sold its equity
interest in a Canadian beer operation and sold a minority interest in a beer
import operation for proceeds of $306 million and a pretax gain of $12
million. The Company also sold its real estate operations for total proceeds
of $424 million and a pretax gain of $103 million. The operating results of
the businesses divested in 1997 were not material to the Company's
consolidated operating results in any of the periods presented.
4
<PAGE>
During 1997, the Company recorded to earnings before income taxes a charge
of $342 million related primarily to the downsizing or closure of
manufacturing and other facilities, as well as the discontinuance of certain
low-margin product lines of its international food operations. The Company
also recorded to earnings before income taxes a charge of $288 million for
incremental postemployment benefits, primarily related to severance. These
charges reduced 1997 earnings before income taxes by $630 million.
During 1996, the Company acquired a controlling interest in a Polish tobacco
company, at a cost of $285 million and nearly all of the remaining voting
shares of a Brazilian confectionery company, at a cost of $314 million. The
effects of these and other smaller acquisitions were not material to the
Company's financial position or results of operations in any of the periods
presented.
During 1996, the Company sold several domestic and international food
businesses for total proceeds of $612 million and net pretax gains of $320
million. The operating results of the businesses divested in 1996 were not
material to the Company's consolidated operating results in any of the periods
presented.
During 1996, the Company recorded to earnings before income taxes a charge
of $320 million related primarily to the downsizing and closure of certain
food manufacturing facilities and related incremental postemployment costs,
primarily severance.
The Company's credit facilities include a revolving bank credit agreement
which enables the Company to refinance short-term debt on a long-term basis.
Accordingly, short-term debt intended to be refinanced was reclassified as
long-term debt.
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratios of earnings to fixed charges.................... 8.3 8.5 7.2 6.3 4.6
</TABLE>
Earnings available for fixed charges represent earnings before income taxes
and cumulative effect of accounting change(s) and fixed charges (excluding
interest capitalized, net of amortization), reduced by undistributed earnings
of less than 50% owned affiliates. Fixed charges represent interest incurred
plus that portion of rental expense deemed to be the equivalent of interest.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture, dated as of
December 2, 1996 (the "Indenture") between the Company and The Chase Manhattan
Bank, as Trustee (the "Trustee"). A copy of the Indenture is filed as an
exhibit to the Registration Statement. The following description summarizes
certain provisions of the Indenture and is subject to the detailed provisions
of the Indenture. Whenever any particular section of the Indenture or any term
defined therein is referred to, such section or definition is incorporated
herein by reference, and the statement in connection with which such reference
is made is qualified in its entirety by such reference. Capitalized terms
appearing in this Prospectus that are not defined herein have the meanings set
forth in the Indenture.
GENERAL
The Indenture does not limit the amount of Debt Securities which can be
issued thereunder and provides that additional Debt Securities may be issued
thereunder up to the aggregate principal amount which may be authorized from
time to time by the Company's Board of Directors. Reference is made to the
Prospectus Supplement for the following terms of the particular series of Debt
Securities being offered thereby: (i) the designation, aggregate principal
amount and authorized denominations of the series; (ii) the percentage of
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<PAGE>
principal amount at which the series will be issued; (iii) the date or dates
on which the series will mature (or manner of determining the same); (iv) the
rate or rates per annum, if any, at which the series will bear interest (or
the manner of calculation thereof) and the date or dates from which such
interest will accrue; (v) the times at which any interest will be payable (or
manner of determining the same) and the Regular Record Dates for such Interest
Payment Dates for Debt Securities which are Registered Securities; (vi) the
place or places where the principal of (and premium, if any) and interest, if
any, on the series will be payable and each office or agency, as described
below under "Denominations, Registration and Transfer", where the Debt
Securities may be presented for transfer or exchange; (vii) the currency,
currencies or currency unit or units for which such Debt Securities may be
purchased and the currency, currencies or currency unit or units in which the
principal of (and premium, if any) and interest, if any, on such Debt
Securities may be payable; (viii) the period or periods within which, and the
terms and conditions upon which, an election may be made by the Company or a
holder, as the case may be, for payment of the principal of (and premium, if
any) and interest, if any, on the series in the currency, currencies or
currency unit or units other than that in which the series is stated to be
payable; (ix) whether the Debt Securities are to be issuable as Registered
Securities or Bearer Securities or both, and if Bearer Securities are issued,
the circumstances and places for the exchange of Bearer Securities for
Registered Securities; (x) whether such Debt Securities are to be issued in
the form of one or more temporary or permanent Global Securities and, if so,
the identity of the Depositary for such Global Security or Securities; (xi) if
a temporary Global Security is to be issued with respect to such series,
whether any interest thereon payable on an interest payment date prior to the
issuance of a permanent Global Security or definitive Bearer Securities will
be credited to the account of the persons entitled thereto on such interest
payment date; (xii) if a temporary Global Security is to be issued with
respect to such series, the terms upon which interests in such temporary
Global Security may be exchanged for interests in a permanent Global Security
or for definitive Debt Securities of the series and the terms upon which
interests in a permanent Global Security, if any, may be exchanged for
definitive Debt Securities of the series; (xiii) any mandatory or optional
sinking fund or analogous provision; (xiv) the date, if any, after which, and
the price or prices in the currency, currencies or currency unit or units in
which, such Debt Securities are payable pursuant to any optional or mandatory
redemption provisions; (xv) any provisions for payment of additional amounts
for taxes and any provision for redemption, in the event the Company must
comply with reporting requirements in respect of a Debt Security or must pay
such additional amounts in respect of any Debt Security; (xvi) the terms and
conditions, if any, upon which the Debt Securities of such series may be
repayable prior to maturity at the option (which option may be conditional) of
the holder thereof (in which case the Company will comply with the
requirements of Section 14(e) and Rule 14e-1 under the 1934 Act in connection
therewith, if then applicable) and the price or prices in the currency,
currencies or currency unit or units in which such Debt Securities are
payable; (xvii) any index used to determine the amount of payments of
principal of (and premium, if any) and interest, if any, on such Debt
Securities; (xviii) the terms and conditions, if any, pursuant to which Debt
Securities may be converted or exchanged for other debt securities of the
Company; (xix) additional information with respect to book-entry procedures,
if any; and (xx) any other terms of the Debt Securities not inconsistent with
the Indenture. (Section 301).
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or foreign currency unit or units or if the
principal of (and premium, if any) or interest, if any, on any series of Debt
Securities is payable in a foreign currency or currencies or foreign currency
unit or units, the restrictions, elections, tax consequences, specific terms
and other information with respect to such issue of Debt Securities and such
foreign currency or currencies or foreign currency unit or units will be set
forth in the applicable Prospectus Supplement relating thereto.
Some of the Debt Securities may be issued as Discounted Securities (bearing
no interest or interest at a rate which at the time of issuance is below
market rates) to be sold at a substantial discount below their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any Discounted Securities will be described in
the Prospectus Supplement relating thereto.
DENOMINATIONS, REGISTRATION AND TRANSFER
The Debt Securities of a series will be issuable as Registered Securities,
Bearer Securities or both. Debt Securities of a series may be issuable in the
form of one or more Global Securities, as described below under
6
<PAGE>
"Global Securities". Unless otherwise provided in an applicable Prospectus
Supplement with respect to a series of Debt Securities, Registered Securities
denominated in U.S. dollars will be issued only in denominations of $1,000 or
any integral multiple thereof and Bearer Securities denominated in U.S.
dollars will be issued only in denominations of $5,000 with coupons attached.
A Global Security will be issued in a denomination equal to the aggregate
principal amount of Outstanding Debt Securities of the series represented by
such Global Security. The Prospectus Supplement relating to a series of Debt
Securities denominated in a foreign or composite currency will specify the
denominations thereof. (Sections 201, 301, 302 and 305).
In connection with its sale, during the "restricted period" as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury regulations
(generally, the first 40 days after the closing date and, with respect to
unsold allotments, until sold), no Bearer Security shall be mailed or
otherwise delivered to any location in the United States (as defined below
under "Limitations on Issuance of Bearer Securities") and any such Bearer
Security may be delivered only if the person entitled to receive such Bearer
Security furnishes written certification, in the form required by the
Indenture, to the effect that such Bearer Security is not being acquired by or
on behalf of a United States person (as defined under "Limitations on Issuance
of Bearer Securities"), or, if a beneficial interest in such Bearer Security
is being acquired by or on behalf of a United States person, that such United
States person is a person described in Section 1.163-5(c)(2)(i)(D)(6) of the
United States Treasury regulations or is a financial institution who has
purchased such Bearer Security for resale during the restricted period and who
certifies that it has not acquired such Bearer Security for purposes of resale
to a United States person or to a person within the United States. (Sections
303 and 304). See "Global Securities" and "Limitations on Issuance of Bearer
Securities".
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. In addition, if Debt
Securities of any series are issuable as both Registered Securities and Bearer
Securities, at the option of the holder upon request confirmed in writing, and
subject to the terms of the Indenture, Bearer Securities (with all unmatured
coupons, except as provided below, and all matured coupons in default) of such
series will be exchangeable for Registered Securities of the same series of
any authorized denominations and of a like aggregate principal amount and
tenor. Unless otherwise indicated in an applicable Prospectus Supplement, any
Bearer Security surrendered in exchange for a Registered Security between a
Regular Record Date or a Special Record Date and the relevant date for payment
of interest shall be surrendered without the coupon relating to such date for
payment of interest and interest will not be payable in respect of the
Registered Security issued in exchange for such Bearer Security, but will be
payable only to the holder of such coupon when due in accordance with the
terms of the Indenture. (Section 305). Except as provided in an applicable
Prospectus Supplement, Bearer Securities will not be issued in exchange for
Registered Securities.
Debt Securities may be presented for exchange as provided above, and
Registered Securities (other than a Global Security) may be presented for
registration of transfer (with the form of transfer duly executed), at the
office of the Security Registrar or at the office of any transfer agent
designated by the Company for such purpose with respect to any series of Debt
Securities and referred to in an applicable Prospectus Supplement, without
service charge and upon payment of any taxes and other governmental charges as
described in the Indenture. Such transfer or exchange will be effected upon
the Security Registrar or such transfer agent, as the case may be, being
satisfied with the documents of title and identity of the person making the
request. The Company has initially appointed the Trustee as Security Registrar
under the Indenture. (Section 305). If a Prospectus Supplement refers to any
transfer agents (in addition to the Security Registrar) initially designated
by the Company with respect to any series of Debt Securities, the Company may
at any time rescind the designation of any such transfer agent or approve a
change in the location through which any such transfer agent acts, except
that, if Debt Securities of a series are issuable only as Registered
Securities, the Company will be required to maintain a transfer agent in each
Place of Payment for such series and, if Debt Securities of a series are
issuable as Bearer Securities, the Company will be required to maintain (in
addition to the Security Registrar) a transfer agent in a Place of Payment for
such series located outside the United States. The Company may at any time
designate additional transfer agents with respect to any series of Debt
Securities. (Section 1002).
7
<PAGE>
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of Debt Securities of that series
selected to be redeemed and ending at the close of business on (A) if Debt
Securities of the series are issuable only as Registered Securities, the day
of mailing of the relevant notice of redemption, and (B) if Debt Securities of
the series are issuable as Bearer Securities, the day of the first publication
of the relevant notice of redemption or, if Debt Securities of that series are
also issuable as Registered Securities and there is no publication, the
mailing of the relevant notice of redemption; (ii) register the transfer of or
exchange any Registered Security, or portion thereof, called for redemption,
except the unredeemed portion of any Registered Security being redeemed in
part; or (iii) exchange any Bearer Security called for redemption, except to
exchange such Bearer Security for a Registered Security of that series and
like tenor which is immediately surrendered for redemption. (Section 305).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and interest, if any, on Registered
Securities (other than a Global Security) will be made at the office of such
Paying Agent or Paying Agents as the Company may designate from time to time,
except that at the option of the Company payment of any interest may be made
(i) by check mailed or delivered to the address of the Person entitled thereto
as such address shall appear in the Security Register or (ii) by wire transfer
to an account maintained by the Person entitled thereto as specified in the
Security Register. (Sections 305, 307 and 1002). Unless otherwise indicated in
an applicable Prospectus Supplement, payment of any instalment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest payment. (Section 307).
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and interest, if any, on Bearer
Securities will be payable, subject to any applicable laws and regulations, at
the offices of such Paying Agents outside the United States as the Company may
designate from time to time, except that at the option of the Company, payment
of any interest may be made by check or by transfer to an account maintained
by the payee outside the United States. (Sections 307 and 1002). Unless
otherwise indicated in an applicable Prospectus Supplement, payment of
interest on Bearer Securities on any Interest Payment Date will be made only
against surrender of the coupon relating to such Interest Payment Date.
(Section 1001). No payment of interest on a Bearer Security will be made
unless on the earlier of the date of the first such payment by the Company or
the date of delivery by the Company of the Bearer Security, a written
certificate, in the form required by the Indenture, is provided to the Company
stating that on such date the Bearer Security is not owned by or on behalf of
a United States person (as defined under "Limitations on Issuance of Bearer
Securities") or, if a beneficial interest in such Bearer Security is owned by
or on behalf of a United States person, that such United States person is a
person described in Section 1.163-5(c)(2)(i)(D)(6) of the United States
Treasury regulations or is a financial institution who has purchased such
Bearer Security for resale during the restricted period and who certifies that
it has not acquired such Bearer Security for purposes of resale to a United
States person or to a person within the United States. No payment with respect
to any Bearer Security will be made at any office or agency of the Company in
the United States or by check mailed to any address in the United States or by
transfer to an account maintained in the United States. Payments will not be
made in respect of Bearer Securities or coupons appertaining thereto pursuant
to presentation to the Company or its designated Paying Agents within the
United States or any other demand for payment to the Company or its designated
Paying Agents within the United States. Notwithstanding the foregoing, payment
of principal of (and premium, if any) and interest, if any, on Bearer
Securities denominated and payable in U.S. dollars will be made at the office
of the Company's Paying Agent in the United States if, and only if, payment of
the full amount thereof in U.S. dollars at all offices or agencies outside the
United States is illegal or effectively precluded by exchange controls or
other similar restrictions and the Company has delivered to the Trustee an
opinion of counsel to that effect. (Section 1002).
Unless otherwise indicated in an applicable Prospectus Supplement, the
principal office of the Trustee in The City of New York will be designated as
the Company's sole Paying Agent for payments with respect to
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<PAGE>
Debt Securities which are issuable solely as Registered Securities. Any Paying
Agents outside the United States and any other Paying Agents in the United
States initially designated by the Company for the Debt Securities will be
named in the related Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agents or approve a change in the office through which any Paying Agent acts,
except that, if Debt Securities of a series are issuable only as Registered
Securities, the Company will be required to maintain a Paying Agent in each
Place of Payment for such series, and if the Debt Securities of a series may
be issuable as Bearer Securities, the Company will be required to maintain (i)
a Paying Agent in a Place of Payment for that series in the United States for
payments with respect to any Registered Securities of the series (and for
payments with respect to Bearer Securities of the series in the circumstances
described above, but not otherwise), (ii) a Paying Agent in a Place of Payment
located outside the United States where Debt Securities of such series and any
coupons appertaining thereto may be presented and surrendered for payment;
provided that if the Debt Securities of such series are listed on the
Luxembourg Stock Exchange or any other stock exchange located outside the
United States and such stock exchange shall so require, the Company will
maintain a Paying Agent in Luxembourg or any other required city located
outside the United States, as the case may be, for the Debt Securities of such
series, and (iii) a Paying Agent in a Place of Payment located outside the
United States where (subject to applicable laws) Registered Securities of such
series may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company may be served. (Section 1002).
All moneys paid by the Company to a Paying Agent for the payment of
principal of (and premium, if any) and interest, if any, on any Debt Security
which remains unclaimed at the end of two years after such principal, premium
or interest shall have become due and payable will be repaid to the Company
and the holder of such Debt Security or any coupon will thereafter look only
to the Company for payment thereof. (Section 1003).
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on
behalf of, a Depositary which shall be The Depository Trust Company, as set
forth below under "Description of Debt Securities--United States Book-Entry
System", unless otherwise provided in the Prospectus Supplement relating to
such series. Global Securities may be issued in either registered or bearer
form and in either temporary or permanent form. Unless and until it is
exchanged for Debt Securities in definitive form, a temporary Global Security
in registered form may not be transferred except as a whole by the Depositary
for such Global Security to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor of such Depositary or a
nominee of such successor. (Section 305).
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be as set forth below under "Description of Debt
Securities--United States Book-Entry System" unless otherwise provided in the
Prospectus Supplement relating to such series. The Company anticipates that
the following provisions will apply to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit the accounts of persons held with it with
the respective principal amounts of the Debt Securities represented by such
Global Security. Such accounts shall be designated by the underwriters or
agents with respect to such Debt Securities or by the Company if such Debt
Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to persons that have
accounts with the Depositary for such Global Security or its nominee
("participants") or persons that may hold interests through participants.
Ownership of beneficial interests in such Global Security will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Depositary or its nominee (with respect to interests of
participants) for such Global Security and on the records of participants
(with respect to interests of persons other than participants). The laws of
some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
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<PAGE>
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture governing such Debt Securities. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have Debt
Securities of the series represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
Debt Securities of such series in definitive form and will not be considered
the owners or holders thereof under the Indenture governing such Debt
Securities.
Principal, premium, if any, and interest payments on Debt Securities
registered in the name of a Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
Global Security representing such Debt Securities. Neither the Company, the
Trustee for such Debt Securities, any Paying Agent nor the Security Registrar
for such Debt Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the Global Security for such Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities" below, the Company expects that the Depositary for a series
of Debt Securities or its nominee, upon receipt of any payment of principal,
premium or interest, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the Global Security for such Debt Securities as shown
on the records of such Depositary or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name",
and will be the responsibility of such participants. Receipt by owners of
beneficial interests in a temporary Global Security of payments in respect of
such temporary Global Security will be subject to restrictions discussed under
"Limitations on Issuance of Bearer Securities" below.
If a Depositary for a series of Debt Securities is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed
by the Company within 90 days, the Company will issue Debt Securities of such
series in definitive form in exchange for the Global Security representing
such series of Debt Securities. In addition, the Company may at any time and
in its sole discretion determine not to have the Registered Securities of a
series represented by a Global Security and, in such event, will issue
Registered Securities of such series in definitive form in exchange for the
Global Security representing such series of Registered Securities. Further, if
the Company so specifies with respect to the Debt Securities of a series, an
owner of a beneficial interest in a Global Security representing Debt
Securities of such series may, on terms acceptable to the Company and the
Depositary for such Global Security, receive Debt Securities of such series in
definitive form. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of
Debt Securities of the series represented by such Global Security equal in
principal amount to such beneficial interest and to have such Debt Securities
registered in its name (if the Debt Securities of such series are issuable as
Registered Securities). Debt Securities of such series so issued in definitive
form will be issued (a) as Registered Securities in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof
if the Debt Securities of such series are issuable as Registered Securities,
(b) as Bearer Securities in the denomination, unless otherwise specified by
the Company, of $5,000 if the Debt Securities of such series are issuable as
Bearer Securities or (c) as either Registered or Bearer Securities, if the
Debt Securities of such series are issuable in either form. (Section 305).
See, however, "Limitations on Issuance of Bearer Securities" below for a
description of certain restrictions on the issuance of a Bearer Security in
definitive form in exchange for an interest in a Global Security.
UNITED STATES BOOK-ENTRY SYSTEM
Unless otherwise described in the Prospectus Supplement relating to each
series, the Debt Securities of each series offered, sold or delivered in the
United States will be issued in the form of one or more fully registered
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global notes (collectively, the "Global Note") which will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York (the
"Depository") and registered in the name of the Depository's nominee.
The Depository has advised as follows: it is a limited-purpose trust company
which was created to hold securities for its participating organizations (the
"Participants") and to facilitate the clearance and settlement of securities
transactions between Participants in such securities through electronic book-
entry changes in accounts of its Participants. Participants include securities
brokers and dealers (including the underwriters for such Debt Securities),
banks and trust companies, clearing corporations and certain other
organizations. Access to the Depository's system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants"). Persons who are not Participants may
beneficially own securities held by the Depository only through Participants
or indirect participants.
Principal (and premium, if any) and interest payments on the Debt Securities
of each series registered in the name of the Depository's nominee will be made
by the Trustee to the Depository's nominee as the registered owner of the
Global Note. Under the terms of the Indenture, the Company and the Trustee
will treat the persons in whose names the Debt Securities of each series are
registered as the owners of such Debt Securities for the purpose of receiving
payment of principal (and premium, if any) and interest on the Debt Securities
and for all other purposes whatsoever. Therefore, neither the Company, the
Trustee nor any Paying Agent has any direct responsibility or liability for
the payment of principal (and premium, if any) or interest on the Debt
Securities to owners of beneficial interests in a Global Note. The Depository
has advised the Company and the Trustee that its present practice is, upon
receipt of any payment of principal (and premium, if any) or interest, to
immediately credit the accounts of the Participants with such payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interests in such Global Note as shown on the records of the
Depository.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities may not be offered, sold or delivered during the restricted period
(as defined under "Denominations, Registration and Transfer") in the United
States or to United States persons (each as defined below) except to the
extent permitted under Section 1.163-5(c)(2)(i)(D) of the United States
Treasury regulations (the "D Rules"), and any underwriters, agents and dealers
participating in the offering of such Debt Securities must agree that they
will not offer any Bearer Securities for sale or resale in the United States
or to United States persons, except to the extent permitted under the D Rules,
nor deliver Bearer Securities within the United States.
Bearer Securities and any coupons appertaining thereto will bear a legend
substantially to the following effect: "Any United States person who holds
this obligation will be subject to limitations under the United States income
tax laws, including the limitations provided in Sections 165(j) and 1287(a) of
the Internal Revenue Code". Under Sections 165(j) and 1287(a) of the United
States Internal Revenue Code of 1986, as amended, and the regulations
thereunder (the "Code"), holders that are United States persons, with certain
exceptions, will not be entitled to deduct any loss on Bearer Securities and
must treat as ordinary income any gain realized on the sale or other
disposition (including the receipt of principal) of Bearer Securities.
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision
thereof, an estate the income of which is subject to United States federal
income taxation regardless of its source, or a trust subject to the
supervision of a court within the United States and the control of a United
States fiduciary as described in Section 7701(a)(30) of the Code, and "United
States" means the United States of America (including the States and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (including the Commonwealth of Puerto Rico). The
term "United States Alien" means any corporation, partnership, individual or
fiduciary that is, as to the United States, a foreign corporation, a
nonresident alien individual, a nonresident fiduciary of a foreign estate or
trust, or a foreign partnership one or
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more of the members of which is, as to the United States, a foreign
corporation, a nonresident alien individual or a nonresident fiduciary of a
foreign estate or trust.
CERTAIN COVENANTS OF THE COMPANY
Except as otherwise described in this paragraph, the Company will not and
will not permit any Subsidiary to create, assume, incur or suffer to be
created, assumed or incurred any mortgage, lien, charge or encumbrance of any
kind (herein referred to as "liens") (i) upon any shares of stock issued by
any Subsidiary or (ii) upon any manufacturing plant or facility owned and
operated by the Company or any Subsidiary, which is determined to be a
materially important manufacturing plant or facility by the Company's Board of
Directors in its discretion, without, in each case, making effective provision
whereby all the Debt Securities shall be directly secured equally and ratably
with the indebtedness or other obligations secured by such lien. This covenant
does not apply to: (i) liens for taxes, assessments or governmental charges or
levies not yet delinquent or being diligently contested by appropriate
proceedings, in good faith, if any reserve or provision required by generally
accepted accounting principles shall have been made; (ii) liens incurred in
the ordinary course of business in connection with workmen's compensation,
unemployment insurance and other types of social security or to secure
statutory, excise tax and similar obligations (other then for payment of
borrowed money) and judgment liens unless the judgment shall not have been
discharged or execution stayed pending appeal within 60 days or not discharged
within 60 days after any such stay; (iii) in the case of any materially
important manufacturing facility and if incurred in the ordinary course of
business (a) liens of landlords, mechanics and materialmen for monies not yet
due or being diligently contested in good faith by appropriate proceeding, if
any reserve or provision required by generally accepted accounting principles
shall have been made, (b) leases or subleases granted to others and
(c) easements and other similar encumbrances not interfering with the ordinary
conduct of the business of the Company; (iv) in the case of liens upon any
materially important manufacturing facility, liens incurred in connection with
the issuance by a state or a political subdivision thereof of any securities
the interest on which is exempt from federal income taxes by virtue of Section
103 of the Code, or any other laws and regulations in effect at the time of
such issuance; (v) liens securing indebtedness owed by a Subsidiary to the
Company or another Subsidiary; (vi) liens on property or shares of stock
existing when acquired (including through merger and consolidation) or
securing the payment of all or part of the purchase price, construction or
improvement thereof incurred prior to, at the time of, or within 120 days
after the later of the acquisition, completion of construction or commencement
of full operation of such property or within 120 days after the acquisition of
such shares for the purpose of financing all or a portion of such purchase
thereof or construction thereon; or (vii) any extension, renewal or
replacement (or successive extensions, renewals or replacements), in whole or
in part of liens referred to in this sentence. Notwithstanding the foregoing,
the Company may create or assume liens in addition to those otherwise
permitted by the preceding sentence of this paragraph, provided that such
additional liens secure an aggregate amount of indebtedness, which together
with the aggregate "value" of sale and leaseback transactions referred to
below (other than such transactions in which debt has been retired in
accordance with the following paragraph), does not exceed 10% of Consolidated
Net Tangible Assets. (Section 1007).
Sales and leasebacks by the Company or any Subsidiary of any materially
important manufacturing facility are prohibited unless an amount equal to the
greater of the proceeds of sale or the fair value of the property is applied
to the retirement of long-term non-subordinated indebtedness for money
borrowed (including the Debt Securities) of the Company, except that such
sales and leasebacks are permitted to the extent that the "value" thereof plus
the other secured debt referred to in the last sentence of the previous
paragraph does not exceed the amount stated therein. (Section 1008).
Consolidated Net Tangible Assets means the excess over current liabilities
of all assets properly appearing on a consolidated balance sheet of the
Company and its Subsidiaries after deducting goodwill, trademarks, patents,
other like intangibles, and the minority interests of others in Subsidiaries.
A Subsidiary is defined to mean any corporation of which at least a majority
of all outstanding stock having ordinary voting power in the election of
directors of such corporation is at the time, directly or indirectly, owned by
the Company or by one or more Subsidiaries or by the Company and one or more
Subsidiaries. (Section 101).
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There are no other restrictive covenants in the Indenture. The Indenture
does not require the Company to maintain any financial ratios, minimum levels
of net worth or liquidity or restrict the payment of dividends, the making of
other distributions on the Company's capital stock or the redemption or
purchase of its capital stock. Moreover, the Indenture does not contain any
provision requiring the Company to repurchase or redeem any Debt Securities or
Debt Warrants or modify the terms thereof or afford the holders thereof any
other protection in the event of a change of control of the Company, any
highly leveraged transaction or any other event involving the Company that may
materially adversely affect the creditworthiness of the Company or the value
of the Debt Securities or Debt Warrants.
TAX REDEMPTION; SPECIAL TAX REDEMPTION
If and to the extent specified in an applicable Prospectus Supplement, the
Debt Securities of a series will be subject to redemption at any time, as a
whole but not in part, at a redemption price equal to the principal amount
thereof together with accrued and unpaid interest to the date fixed for
redemption, upon publication of a notice as described below, if (x) the
Company determines that (a) as a result of any change in or amendment to the
laws (or any regulations or rulings promulgated thereunder) of the United
States or of any political subdivision or taxing authority thereof or therein
affecting taxation, or any change in official position regarding application
or interpretation of such laws, regulations or rulings (including a holding by
a court of competent jurisdiction), which change or amendment is announced or
becomes effective on or after a date specified in the applicable Prospectus
Supplement, the Company has or will become obligated to pay additional amounts
with respect to any Debt Security of such series as described below under
"Payment of Additional Amounts" or (b) on or after a date specified in the
applicable Prospectus Supplement, any action has been taken by any taxing
authority of, or any decision has been rendered in a court of competent
jurisdiction in, the United States or any political subdivision or taxing
authority thereof or therein, including any of those actions specified in (a)
above, whether or not such action was taken or decision was rendered with
respect to the Company, or any change, amendment, application or
interpretation shall be officially proposed, which, in any such case, in the
written opinion to the Company of independent legal counsel of recognized
standing, will result in a material probability that the Company will become
obligated to pay additional amounts with respect to any Debt Security of such
series, and (y) in any such case the Company in its business judgment
determines that such obligation cannot be avoided by the use of reasonable
measures available to the Company.
If the Company shall determine that any payment made outside the United
States by the Company or any Paying Agent of principal or interest due in
respect of any Bearer Security (an "Affected Security") or any coupon
appertaining thereto would, under any present or future laws or regulations of
the United States, be subject to any certification, information or other
reporting requirement of any kind, the effect of which requirement is the
disclosure to the Company, any Paying Agent or any governmental authority of
the nationality, residence or identity (as distinguished from, for example,
status as a United States Alien) of a beneficial owner of such Affected
Security of such series or coupon who is a United States Alien (other than
such a requirement which (a) would not be applicable to a payment made (i)
directly to the beneficial owner or (ii) to a custodian, nominee or other
agent of the beneficial owner, (b) can be satisfied by such custodian, nominee
or other agent certifying to the effect that such beneficial owner is a United
States Alien, provided that, in each case referred to in items (a)(ii) and
(b), payment by such custodian, nominee or other agent to such beneficial
owner is not otherwise subject to any such requirement (other than a
requirement which is imposed on a custodian, nominee or other agent described
in (d) of this sentence), (c) would not be applicable to a payment made by at
least one other Paying Agent of the Company or (d) is applicable to a payment
to a custodian, nominee or other agent of the beneficial owner who is a United
States person, a controlled foreign corporation for United States tax
purposes, a foreign person 50% or more of whose gross income for the three-
year period ending with the close of its taxable year preceding the year of
payment is effectively connected with a United States trade or business, or is
otherwise related to the United States), the Company at its election shall
either (x) redeem the Affected Securities of such series, as a whole, at a
redemption price equal to the principal amount thereof, together with accrued
and unpaid interest to the date fixed for redemption, or (y) if the conditions
of the next succeeding paragraph are satisfied, pay the additional amounts
specified in such paragraph. The Company shall make such
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determination and election as soon as practicable and give prompt notice
thereof (the "Determination Notice") in the manner described under "Notices"
below, stating the effective date of such certification, information or
reporting requirements, whether the Company has elected to redeem the Affected
Securities of such series, or to pay the additional amounts specified in the
next succeeding paragraph, and (if applicable) the last date by which the
redemption of the Affected Securities of such series must take place, as
provided in the next succeeding sentence. If the Company elects to redeem the
Affected Securities of such series, such redemption shall take place on such
date, not later than one year after the publication of the Determination
Notice, as the Company shall elect by notice to the Trustee given not less
than 45 nor more than 75 days before the date fixed for redemption. Notice of
such redemption of the Affected Securities of such series will be given to the
holders thereof not less than 30 nor more than 60 days prior to the date fixed
for redemption. Notwithstanding the foregoing, the Company shall not so redeem
the Affected Securities of such series if the Company shall subsequently
determine, not less than 30 days prior to the date fixed for redemption, that
subsequent payments would not be subject to any such requirement, in which
case the Company shall give prompt notice of such determination in the manner
described under "Notices" below and any earlier redemption notice shall be
revoked and of no further effect. The right of the holders of Affected
Securities called for redemption to exchange such Affected Securities for
Registered Securities (which Registered Securities will remain Outstanding
following such redemption) will terminate on the 16th day prior to the date
fixed for redemption, and no further exchanges of Affected Securities for
Registered Securities shall be permitted unless the Company shall have made
the subsequent determination and given the notice referred to in the preceding
sentence.
If and so long as the certification, information or other reporting
requirements referred to in the preceding paragraph would be fully satisfied
by payment of a withholding tax, backup withholding tax or similar charge, the
Company may elect to pay such additional amounts as may be necessary so that
every net payment made outside the United States following the effective date
of such requirements by the Company or any Paying Agent of principal (or
premium, if any) or interest, if any, due in respect of any Affected Security
of such series or any coupon to a holder who certifies that the beneficial
owner is a United States Alien (but without any requirement that the
nationality, residence or identity of such beneficial owner be disclosed to
the Company, any Paying Agent or any governmental authority), after deduction
or withholding for or on account of such withholding tax, backup withholding
tax or similar charge (other than a withholding tax, backup withholding tax or
similar charge which (a) is the result of a certification, information or
other reporting requirement described in the second parenthetical clause of
the first sentence of the preceding paragraph or (b) is imposed as a result of
presentation of such Affected Security or coupon for payment more than 10 days
after the date on which such payment becomes due and payable or on which
payment thereof is duly provided for, whichever occurs later), will not be
less than the amount provided for in such Affected Security or coupon to be
then due and payable. In the event the Company elects to pay such additional
amounts, the Company will have the right, at its sole option, at any time, to
redeem the Affected Securities of such series as a whole, but not in part, at
a redemption price equal to the principal amount thereof, together with
accrued and unpaid interest to the date fixed for redemption. If the Company
has made the determination described in the preceding paragraph with respect
to certification, information or other reporting requirements applicable only
to interest and subsequently makes a determination in the manner and of the
nature referred to in such preceding paragraph with respect to such
requirements applicable to principal, the Company will redeem the Affected
Securities of such series in the manner and on the terms described in the
preceding paragraph unless the Company elects to have the provisions of this
paragraph apply rather than the provisions of the immediately preceding
paragraph. If in such circumstances the Affected Securities of such series are
to be redeemed, the Company shall have no obligation to pay additional amounts
pursuant to this paragraph with respect to principal (or premium, if any) or
interest, if any, accrued and unpaid after the date of the notice of such
determination indicating such redemption, but will be obligated to pay such
additional amounts with respect to interest accrued and unpaid to the date of
such determination. If the Company elects to pay additional amounts pursuant
to this paragraph and the condition specified in the first sentence of this
paragraph should no longer be satisfied, then the Company shall promptly
redeem such Affected Securities in whole but not in part. (Section 1107).
In the event that the Company elects or is required to redeem the Debt
Securities of such series pursuant to the provisions set forth in the
preceding three paragraphs, the Company shall deliver to the Trustee a
certificate,
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signed by an authorized officer, stating that the Company is entitled to
redeem the Debt Securities of such series pursuant to their terms.
Notice of intention to redeem the Debt Securities of such series and all
other notices in accordance with the provisions of the preceding paragraphs
will be given in accordance with "Notices" below. In the case of a redemption,
notice will be given once not more than 60 nor less than 30 days prior to the
date fixed for redemption and will specify the date fixed for redemption.
PAYMENT OF ADDITIONAL AMOUNTS
If and to the extent specified in an applicable Prospectus Supplement, the
Company will, subject to the exceptions and limitations set forth below, pay
to the holder of any Debt Security or coupon who is a United States Alien such
additional amounts as may be necessary in order that every net payment on such
Debt Security or coupon, after withholding by the Company or any of its Paying
Agents for or on account of any present or future tax, assessment or other
governmental charge imposed upon or as a result of such payment by the United
States (or any political subdivision or taxing authority thereof or therein)
will not be less than the amount provided for in such Debt Security or in such
coupon to be then due and payable. However, the Company will not be required
to make any payment of additional amounts for or on account of:
(1) any tax, assessment or other governmental charge that would not have
been so imposed but for (i) the existence of any present or former
connection between such holder (or between a fiduciary, settlor or
beneficiary of, or a person holding a power over, such holder, if such
holder is an estate or trust, or a member or shareholder of such holder, if
such holder is a partnership or corporation) and the United States,
including, without limitation, such holder (or such fiduciary, settlor,
beneficiary, person holding a power, member or shareholder) being or having
been a citizen, resident or treated as a resident thereof or being or
having been engaged in a trade or business or present therein or having or
having had a permanent establishment therein, or (ii) such holder's present
or former status as a personal holding company, foreign personal holding
company, controlled foreign corporation or passive foreign investment
company with respect to the United States or as a corporation that
accumulates earnings to avoid United States federal income tax;
(2) any tax, assessment or other governmental charge which would not have
been so imposed but for the presentation by the holder of such Debt
Security or coupon for payment on a date more than 10 days after the date
on which such payment became due and payable or the date on which payment
thereof is duly provided for, whichever occurs later;
(3) any estate, inheritance, gift, sales, transfer, personal property tax
or any similar tax, assessment or other governmental charge;
(4) any tax, assessment or other governmental charge that is payable
otherwise than by withholding from a payment on a Debt Security or coupon;
(5) any tax, assessment or other governmental charge imposed on a holder
of a Debt Security or coupon that actually or constructively owns 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote within the meaning of Section 871(h)(3) of the
Code or that is a controlled foreign corporation related to the Company
through stock ownership;
(6) any tax, assessment or other governmental charge imposed as a result
of the failure to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connection with the United States of the holder or
beneficial owner of a Debt Security or coupon, if such compliance is
required by statute, or by regulation of the United States, as a
precondition to relief or exemption from such tax, assessment or other
governmental charge;
(7) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment on a Debt Security or coupon
if such payment can be made without such withholding by at least one other
Paying Agent;
(8) any tax, assessment or other governmental charge imposed with respect
to payments on any Registered Security by reason of the failure of the
holder to fulfill the statement requirement of Section 871(h) or Section
881(c) of the Code; or
(9) any combination of items (1), (2), (3), (4), (5), (6), (7) and (8);
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nor will additional amounts be paid with respect to any payment on a Debt
Security or coupon to a holder who is a fiduciary or partnership or other than
the sole beneficial owner of such payment to the extent such payment would be
required by the laws of the United States (or any political subdivision
thereof) to be included in the income for federal income tax purposes of a
beneficiary or settlor with respect to such fiduciary or a member of such
partnership or a beneficial owner who would not have been entitled to payment
of the additional amounts had such beneficiary, settlor, member or beneficial
owner been the holder of such Debt Security or coupon. (Section 1011).
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may consolidate or merge with or into any other corporation, and
the Company may convey or transfer its properties and assets substantially as
an entirety to another corporation, provided, among other things, that (a) the
corporation formed by or resulting from any such consolidation or merger or
the transferee of such assets shall be a corporation organized and existing
under the laws of the United States, any State thereof or the District of
Columbia and shall expressly assume by supplemental indenture payment of the
principal of (and premium, if any) and interest, if any, on the Debt
Securities and the performance and observance of the Indenture, (b) after
giving effect to the transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have occurred and be continuing, and (c) certain other conditions are met.
(Section 801).
Upon any consolidation or merger, or any conveyance or transfer of the
properties and assets of the Company substantially as an entirety in
accordance with the preceding paragraph, the successor corporation formed by
such consolidation or into which the Company is merged or to which such
conveyance or transfer is made shall be substituted for the Company with the
same effect as if such successor corporation had been named as the Company.
Thereafter the Company shall be relieved of all obligations and covenants
under the Indenture and the Company may thereupon or any time thereafter be
dissolved, wound up, or liquidated. (Section 802).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default"
with respect to a series of Debt Securities: (i) default in the payment of any
instalment of interest on any Debt Securities in such series and any related
coupons for 30 days after becoming due; (ii) default in the payment of the
principal of (or premium, if any, on) any Debt Securities in such series when
due; (iii) default in the performance of any other covenant for 90 days after
notice; and (iv) certain events of bankruptcy, insolvency or reorganization.
(Section 501). If an Event of Default shall occur and be continuing with
respect to a series of Debt Securities, either the Trustee or the holders of
at least 25% in principal amount of the outstanding Debt Securities of such
series may declare the entire principal amount, or, in the case of Discounted
Securities, such lesser amount as may be provided for in such Discounted
Securities, of all the Debt Securities of such series to be immediately due
and payable. (Section 502). A default under any other indebtedness of the
Company will not constitute a default under the Indenture and a default under
one series of Debt Securities or Debt Warrants will not constitute a default
under any other series of Debt Securities or Debt Warrants.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default with respect to a particular series of Debt
Securities, give the holders of the Debt Securities of such series notice of
such default known to it (the term default to mean the events specified above
without grace periods); provided that, except in the case of a default in the
payment of principal of (or premium, if any) or interest, if any, on any of
the Debt Securities of such series, the Trustee shall be protected in
withholding such notice if it in good faith determines the withholding of such
notice is in the interest of the holders of the Debt Securities of such
series. (Section 602).
The Company is required to furnish the Trustee annually a statement by
certain officers of the Company to the effect that to the best of their
knowledge the Company is not in default in the fulfillment of any of its
obligations under the Indenture or, if there has been a default in the
fulfillment of any such obligation, specifying each such default. (Section
1005).
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The holders of a majority in principal amount of a particular series of
Outstanding Debt Securities have the right, subject to certain limitations, to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee with respect to such series or exercising any trust
or power conferred on the Trustee, and to waive certain defaults. (Sections
512 and 513). The Indenture provides that in case an Event of Default shall
occur and be continuing, the Trustee shall exercise such of its rights and
powers under the Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs. (Section 601). Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the holders of the Debt
Securities unless they shall have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request. (Section 603).
A judgment for money damages by courts in the United States, including a
money judgment based on an obligation expressed in a foreign currency, will
ordinarily be rendered only in U.S. dollars. New York statutory law provides
that a court shall render a judgment or decree in the foreign currency of the
underlying obligation and that the judgment or decree shall be converted into
U.S. dollars at the exchange rate prevailing on the date of entry of the
judgment or decree.
If, for the purpose of obtaining a judgment in any court with respect to any
obligation of the Company under any Debt Security or any related coupon, it
becomes necessary to convert into any other currency or currency unit any
amount in the currency or currency unit due under such Debt Security or
coupon, the conversion will be made by the Currency Determination Agent at the
Market Exchange Rate in effect on the date of entry of the judgment (the
"Judgment Date"). If pursuant to any such judgment, conversion is made on a
date (the "Substitute Date") other than the Judgment Date and a change has
occurred between the Market Exchange Rate in effect on the Judgment Date and
the Market Exchange Rate in effect on the Substitute Date, the Indenture
requires the Company to pay such additional amounts (if any) as may be
necessary to ensure that the amount paid is equal to the amount in such other
currency or currency unit which, when converted at the Market Exchange Rate in
effect on the Judgment Date, is the amount then due under such Debt Security
or coupon. The Company will not, however, be required to pay more in the
currency or currency unit due under such Debt Security or coupon at the Market
Exchange Rate in effect when payment is made than the amount of currency or
currency unit stated to be due under such Debt Security or coupon, and the
Company will be entitled to withhold (or be reimbursed for, as the case may
be) any excess of the amount actually realized upon any such conversion over
the amount due and payable on the date of payment. (Section 516).
SATISFACTION AND DISCHARGE
Except as may otherwise be set forth in the Prospectus Supplement relating
to a series of Debt Securities, the Indenture provides that the Company shall
be discharged from its obligations under the Debt Securities of such series
(with certain exceptions) at any time prior to the Stated Maturity or
redemption thereof when (a) the Company has irrevocably deposited with the
Trustee, in trust, (i) sufficient funds in the currency, currencies or
currency unit or units in which the Debt Securities of such series are payable
to pay the principal of (and premium, if any) and interest, if any, to Stated
Maturity (or redemption) on, the Debt Securities of such series, or (ii) such
amount of direct obligations of, or obligations the principal of (and premium,
if any) and interest, if any, on which are fully guaranteed by, the government
which issued the currency, and are payable in the currency, in which the Debt
Securities of such series are payable, and which are not subject to
prepayment, redemption or call, as will, together with the predetermined and
certain income to accrue thereon without consideration of any reinvestment
thereof, be sufficient to pay when due the principal of (and premium, if any)
and interest, if any, to Stated Maturity (or redemption) on, the Debt
Securities of such series or (iii) such amount equal to the amount referred to
in clause (i) or (ii) in any combination of currency or currency units or
government obligations, (b) the Company has paid all other sums payable with
respect to the Debt Securities of such series and (c) certain other conditions
are met. Upon such discharge, the holders of the Debt Securities of such
series shall no longer be entitled to the benefits of the Indenture, except
for certain rights, including
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registration of transfer and exchange of the Debt Securities of such series
and replacement of mutilated, destroyed, lost or stolen Debt Securities, and
shall look only to such deposited funds or obligations. (Sections 401 and
403).
Such discharge may be treated as a taxable exchange of the related Debt
Securities for an issue of obligations of the trust or a direct interest in
the cash and securities held in the trust. In that case, holders of such Debt
Securities would recognize gain or loss as if the trust obligations or the
cash or securities deposited, as the case may be, had actually been received
by them in exchange for their Debt Securities. Such holders thereafter might
be required to include in income a different amount than would be includable
in the absence of discharge. Prospective investors are urged to consult their
own tax advisors as to the specific consequences of discharge.
DEFEASANCE OF CERTAIN OBLIGATIONS
If the terms of the Debt Securities of any series so provide, the Company
may omit to comply with the restrictive covenants in Section 801 ("Company May
Consolidate, Etc., Only on Certain Terms"), Section 1007 ("Limitations on
Liens") and Section 1008 ("Sale and Leaseback Transactions") and any such
omission with respect to such Sections shall not be an Event of Default with
respect to the Debt Securities of such series, if (a) the Company deposits or
causes to be deposited with the Trustee for the Debt Securities of such series
in trust an amount of (i) cash in the currency or currency unit in which the
Debt Securities of such series are payable (except as otherwise specified with
respect to the Securities of such series), (ii) government obligations of the
type referred to under "Satisfaction and Discharge" or (iii) a combination of
such cash and government obligations which amount, in the case of (ii) or
(iii), together with the predetermined and certain income to accrue on any
such government obligations when due (without the consideration of any
reinvestment thereof), is sufficient to pay and discharge when due the entire
indebtedness on all such Outstanding Securities of such series and any related
coupons for unpaid principal (and premium, if any) and interest, if any, to
the Stated Maturity or any Redemption Date, as the case may be and (b) certain
other conditions are met. The obligations of the Company under the Indenture
with respect to the Debt Securities of such series, other than with respect to
the covenants referred to above shall remain in full force and effect.
(Section 1010).
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of more than 50% in principal
amount of the Outstanding Debt Securities of each series issued under the
Indenture affected by such modification or amendment; provided, however, that
no such modification or amendment may, without the consent of the holder of
each Outstanding Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or any instalment of principal of or interest,
if any, on any Debt Security, (b) reduce the principal amount of (or premium,
if any) or interest, if any, on any Debt Security, (c) change any obligation
of the Company to pay additional amounts as set forth under "Payment of
Additional Amounts", (d) reduce the amount of principal of a Discounted
Security payable upon acceleration of the Maturity thereof, (e) change the
Place of Payment, (f) change the currency or currency unit of payment of
principal of (or premium, if any) or interest, if any, on any Debt Security,
(g) impair the right to institute suit for the enforcement of any payment on
or with respect to any Debt Security on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or (h)
reduce the percentage in principal amount of Outstanding Debt Securities of
any series, the consent of the holders of which is required for modification
or amendment of the applicable Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults.
(Section 902).
The holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the
Indenture. (Section 1009). The holders of not less than a majority in
principal amount of the Outstanding Debt Securities of any series may on
behalf of the holders of all Debt Securities of that series and any coupons
appertaining thereto waive any past default under the Indenture with respect
to that series, except a default in the payment of the principal of (or
premium, if any)
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and interest, if any, on any Debt Security of that series or in respect of a
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each Outstanding Debt Security of that series
affected. (Section 513).
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series if Debt Securities of that series are issuable as
Bearer Securities. A meeting may be called at any time by the Trustee, and
also, upon request, by the Company or the holders of at least 10% in principal
amount of the Outstanding Debt Securities of such series, in any such case
upon notice given in accordance with "Notices" below. (Section 1302). Any
resolution passed or decision taken at any meeting of holders of Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all holders of Debt Securities of that series and the related
coupons. The quorum at any meeting called to adopt a resolution, and at any
reconvened meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of a series. (Section
1304).
NOTICES
Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Debt Securities, notices to holders of Bearer
Securities will be given by publication in a daily newspaper in the English
language of general circulation in The City of New York and in London, and so
long as such Bearer Securities are listed on the Luxembourg Stock Exchange and
the rules of the Luxembourg Stock Exchange shall so require, in a daily
newspaper of general circulation in Luxembourg or, if not practical, elsewhere
in Western Europe. Such publication is expected to be made in The Wall Street
Journal, the Financial Times and the Luxemburger Wort. Notices to holders of
Registered Securities will be given by mail to the addresses of such holders
as they appear in the Security Register. (Sections 101 and 106).
TITLE
Title to any temporary Global Security, any permanent Global Security, any
Bearer Securities and any coupons appertaining thereto will pass by delivery.
The Company, the Trustee and any agent of the Company or the Trustee may treat
the bearer of any Bearer Security and the bearer of any coupon and the
registered owner of any Registered Security as the absolute owner thereof
(whether or not such Debt Security or coupon shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308).
GOVERNING LAW
The Indenture and the Debt Securities are governed by and construed in
accordance with the laws of the State of New York.
CONCERNING THE TRUSTEE
The Company and its subsidiaries have customary banking relationships with
The Chase Manhattan Bank, which is the Trustee under the Indenture. As of
March 31, 1988, the Company had issued pursuant to an Indenture dated as of
December 1, 1985 between the Company and The Chase Manhattan Bank its 8 3/8%
Sinking Fund Debentures Due 2017 which are still outstanding as of the date
hereof. Subsequent to March 31, 1988, the Company has issued pursuant to an
Amended and Restated Indenture, dated as of April 1, 1988, amending, restating
and supplementing an Indenture dated as of December 1, 1985 between the
Company and The Chase Manhattan Bank, the following securities which are still
outstanding as of the date hereof: its 9% Notes Due 1998 and its 9 1/4% Notes
Due 2000. Subsequent to August 1, 1990, the Company has issued pursuant to an
Indenture, dated as of August 1, 1990, as supplemented and amended by a First
Supplemental Indenture dated as of February 1, 1991 and a Second Supplemental
Indenture dated as of January 21, 1992 between the Company and The Chase
Manhattan Bank, the following securities which are still outstanding as of the
date hereof: its 9% Notes Due 2001, its 8 5/8% Notes Due 1999, its 8 3/4%
Notes Due 2001, its 8 1/4% Notes Due 2003, its 7 1/2% Notes
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Due 2002, its 7 3/8% Notes Due 1999, its 7 3/4% Notes Due 1999, its 7 5/8%
Notes Due 2002, its 7 1/8% Notes Due 2002, its 7 1/8% Notes Due 2004, its 7
1/8% Notes Due 1999, its 7 1/4% Notes Due 2003, its 6 3/8% Notes Due 2006, its
6.95% Notes Due 2006, its 7.65% Notes Due July 1, 2008, its 7 1/4% Notes Due
2001 and its Medium-Term Notes, Series C, with interest rates ranging from
6.60% to 8.90% and maturities ranging from 1998 to 2000. Subsequent to
December 2, 1996, the Company has issued pursuant to an Indenture dated as of
December 2, 1996 between the Company and The Chase Manhattan Bank, the
following securities which are still outstanding as of the date hereof: its
6.80% Notes due December 1, 2003, its 7 3/4% Debentures Due 2027, its 7.20%
Notes Due 2007, its 7 1/2% Notes due April 1, 2004 and its 7% Notes Due 2005.
DESCRIPTION OF DEBT WARRANTS
The Company may issue Debt Warrants in registered certificated form for the
purchase of Debt Securities. Debt Warrants may be issued together with or
separately from any Debt Securities offered by any Prospectus Supplement and,
if issued together with any Debt Securities, may be attached to or separate
from such Debt Securities. Debt Warrants are to be issued under Debt Warrant
Agreements to be entered into between the Company and a bank or trust company,
as Debt Warrant Agent, all as set forth in the Prospectus Supplement relating
to the particular issue of Debt Warrants. Copies of the forms of Debt Warrant
Agreements and Debt Warrant Certificates are filed as exhibits to the
Registration Statement. The following summaries of certain provisions of the
forms of Debt Warrant Agreements and Debt Warrant Certificates do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Debt Warrant Agreements and the Debt
Warrant Certificates. Section references herein are references to particular
provisions of the Debt Warrant Agreements. Capitalized terms used in this
Description of Debt Warrants but not defined herein have the meanings ascribed
to such terms in the Debt Warrant Agreements.
GENERAL
The Prospectus Supplement will describe the terms of the Debt Warrants
offered thereby, the Debt Warrant Agreement relating to such Debt Warrants and
the Debt Warrant Certificates representing such Debt Warrants, including the
following: (i) the offering price; (ii) the designation, aggregate principal
amount and terms of the Debt Securities purchasable upon exercise of the Debt
Warrants; (iii) if applicable, the designation and terms of the Debt
Securities with which the Debt Warrants are issued and the number of Debt
Warrants issued with each such Debt Security; (iv) if applicable, the date on
and after which the Debt Warrants and the related Debt Securities will be
separately transferable; (v) the principal amount of Debt Securities
purchasable upon exercise of one Debt Warrant and the price at which such
principal amount of Debt Securities may be purchased upon such exercise; (vi)
the date on which the right to exercise the Debt Warrants shall commence and
the date (the "Debt Warrant Expiration Date") on which such right shall
expire; (vii) federal income tax consequences; (viii) the identity of the Debt
Warrant Agent; and (ix) any other terms of the Debt Warrants.
Debt Warrant Certificates may be exchanged for new Debt Warrant Certificates
of different denominations, may be presented for registration of transfer, and
may be exercised at the corporate trust office of the Debt Warrant Agent or
any other office indicated in the applicable Prospectus Supplement. (Section
4.01).
EXERCISE OF DEBT WARRANTS
Each Debt Warrant will entitle its holder to purchase such principal amount
of Debt Securities at such exercise price as shall in each case be set forth
in, or calculable from, the Prospectus Supplement relating to the Debt
Warrants. (Section 1.01). Debt Warrants may be exercised at any time up to
5:00 p.m., New York City time, on the Debt Warrant Expiration Date set forth
in the Prospectus Supplement relating to such Debt Warrants. After such time
on the Debt Warrant Expiration Date (or such later date to which such Debt
Warrant Expiration Date may be extended by the Company), unexercised Debt
Warrants will be void. (Section 2.02).
Debt Warrants may be exercised by delivery to the Debt Warrant Agent of
payment as provided in the Prospectus Supplement of the amount required to
purchase the Debt Securities purchasable upon such exercise together with
certain information set forth on the reverse side of the Debt Warrant
Certificate. Debt Warrants will be deemed to have been exercised upon receipt
of the exercise price, subject to the receipt within five
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business days of the Debt Warrant Certificate evidencing such Debt Warrants.
Upon receipt of such payment and the Debt Warrant Certificate properly
completed and duly executed at the corporate trust office of the Debt Warrant
Agent or any other office indicated in the Prospectus Supplement, the Company
will, as soon as practicable, issue and deliver the Debt Securities
purchasable upon such exercise. If fewer than all of the Debt Warrants
represented by such Debt Warrant Certificate are exercised, a new Debt Warrant
Certificate will be issued for the remaining amount of Debt Warrants. (Section
2.03).
MODIFICATIONS
The Debt Warrant Agreement and the terms of the Debt Warrants may be amended
by the Company and the Debt Warrant Agent, without the consent of the holders,
for the purpose of curing any ambiguity, or curing, correcting or
supplementing any defective provision contained therein, or in any other
manner which the Company and the Debt Warrant Agent may deem necessary or
desirable and which will not adversely affect the interests of the holders.
(Section 6.01).
ENFORCEABILITY OF RIGHTS BY HOLDERS; GOVERNING LAW
The Debt Warrant Agent will act solely as an agent of the Company in
connection with the Debt Warrant Certificates and will not assume any
obligation or relationship of agency or trust for or with any holders of Debt
Warrant Certificates. (Section 5.02). Holders may, without the consent of the
Debt Warrant Agent or the Trustee for the applicable series of Debt
Securities, enforce by appropriate legal action, on their own behalf, their
right to exercise their Debt Warrants in the manner provided in their Debt
Warrant Certificates and the Debt Warrant Agreement. (Section 3.03). Prior to
the exercise of their Debt Warrants, holders of Debt Warrants will not have
any of the rights of holders of the Debt Securities purchasable upon such
exercise, including the right to receive payments of principal of (and
premium, if any) or interest, if any, on the Debt Securities purchasable upon
such exercise or to enforce covenants in the Indenture. (Section 3.01). Except
as may otherwise be provided in the Prospectus Supplement relating thereto,
each issue of Debt Warrants and the applicable Debt Warrant Agreement will be
governed by and construed in accordance with the laws of the State of New
York. (Section 6.04).
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities and the Debt Warrants (i) through
underwriters or dealers, (ii) directly to one or more institutional purchasers
or (iii) through agents. The Prospectus Supplement with respect to the Debt
Securities or the Debt Warrants being offered thereby sets forth the terms of
the offering thereof, including the name or names of any underwriters, their
purchase price and the proceeds to the Company from such sale, any
underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price, any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchanges on which
they may be listed. Only underwriters so named in the Prospectus Supplement
are deemed to be underwriters in connection with the Debt Securities or the
Debt Warrants offered thereby.
If underwriters are used in the sale, the Debt Securities or the Debt
Warrants will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The obligations of the underwriters to purchase such Debt
Securities or the Debt Warrants will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all the Debt
Securities or the Debt Warrants offered by the Prospectus Supplement relating
to such series if any are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Debt Securities or Debt Warrants may also be sold directly by the Company or
through agents designated by the Company from time to time. Any agent involved
in the offering and sale thereof in respect of which this Prospectus is
delivered is named and any commissions payable by the Company to such agent
are set
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forth in the Prospectus Supplement relating to such series. Unless otherwise
indicated in such Prospectus Supplement, any such agent is acting on a best
efforts basis for the period of its appointment.
If so indicated in a Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain institutional
investors to purchase Debt Securities or Debt Warrants, as the case may be, to
which such Prospectus Supplement relates providing for payment and delivery on
a future date specified in such Prospectus Supplement. There may be
limitations on the minimum amount which may be purchased by any such
institutional investor or on the portion of the aggregate amount of the
particular Debt Securities or Debt Warrants which may be sold pursuant to such
arrangements. Institutional investors to which such offers may be made, when
authorized, include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and such
other institutions as may be approved by the Company. The obligations of any
such purchasers pursuant to such delayed delivery and payment arrangements
will not be subject to any conditions except that (i) such purchase shall not
at the time of delivery be prohibited under the laws of any jurisdiction in
the United States to which such institution is subject, and (ii) if the
particular Debt Securities or Debt Warrants are being sold to underwriters,
the Company shall have sold to such underwriters the total amount of such Debt
Securities or Debt Warrants less the amount thereof covered by such
arrangements. Underwriters will not have any responsibility in respect of the
validity of such arrangements or the performance of the Company or such
institutional investors thereunder.
Debt Securities may also be offered and sold, if so indicated in a
Prospectus Supplement, in connection with a remarketing upon their purchase,
in accordance with a redemption or repayment pursuant to their terms, or
otherwise, by one or more firms ("remarketing firms"), acting as principals
for their own accounts or as agents for the Company. Any remarketing firm will
be identified and the terms of its agreement, if any, with the Company and its
compensation will be described in the applicable Prospectus Supplement
relating to such series. Remarketing firms may be deemed to be underwriters,
as that term is defined in the 1933 Act, in connection with the Debt
Securities remarketed thereby.
Agents, underwriters and remarketing firms may be entitled under agreements
entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the 1933 Act, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
Each underwriter, dealer, agent and remarketing firm participating in the
distribution of any Debt Securities that are issuable as Bearer Securities
will agree that it will not offer, sell or deliver, directly or indirectly,
Bearer Securities in the United States or to United States persons (other than
qualifying financial institutions) in connection with the original issuance of
such Debt Securities.
VALIDITY OF DEBT SECURITIES AND DEBT WARRANTS
The validity of the Debt Securities and Debt Warrants will be passed upon
for the Company by Hunton & Williams, 200 Park Avenue, New York, New York and
for any underwriter or agent by Simpson Thacher & Bartlett (a partnership
which includes professional corporations), 425 Lexington Avenue, New York, New
York. Simpson Thacher & Bartlett acts as counsel in certain matters for
certain subsidiaries of the Company.
EXPERTS
The Company's consolidated financial statements as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997
included in its Current Report on Form 8-K, dated January 28, 1998,
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given upon the authority of that firm as experts in accounting and auditing.
The Company's consolidated financial statements and related financial
statement schedule incorporated by reference or included in its Annual Report
on Form 10-K for the year ended December 31, 1996, incorporated by reference
in this Prospectus, have been incorporated herein in reliance on the reports
of Coopers & Lybrand L.L.P., independent accountants, given upon the authority
of that firm as experts in accounting and auditing.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES DESCRIBED IN THE PROSPECTUS SUPPLEMENT OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Recent Developments........................................................ S-2
Description of Bonds....................................................... S-3
Certain Federal Income Tax Considerations.................................. S-10
Underwriting............................................................... S-12
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Selected Financial Information............................................. 4
Description of Debt Securities............................................. 5
Description of Debt Warrants............................................... 20
Plan of Distribution....................................................... 21
Validity of Debt Securities and Debt Warrants.............................. 22
Experts.................................................................... 22
</TABLE>
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$800,000,000
PHILIP MORRIS
COMPANIES INC.
PUTTABLE RESET SECURITIES
PURS(SM) DUE MARCH 15, 2010
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[LOGO]
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GOLDMAN, SACHS & CO.
REPRESENTATIVES OF THE UNDERWRITERS
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