<PAGE>
FILE PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 333-70651
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 10, 1999
U.S. $220,000,000
Ashland Inc.
50 E. RiverCenter Boulevard
Covington, Kentucky 41012
(606) 815-3333
Medium-Term Notes, Series H
Due Nine Months or more from Date of Issue
----------------
Ashland Inc. may offer from time to time up to $220,000,000 of its Medium-
Term Notes, Series H. Each note will mature on a date nine months or more from
its date of original issuance. Unless we specify otherwise in the applicable
pricing supplement to this prospectus supplement, we will pay interest on
fixed rate notes on each February 15 and August 15 and at maturity. We will
pay interest on floating rate notes on the dates specified in the applicable
pricing supplement. Notes may contain optional redemption provisions or may
obligate us to repay at the option of the holder. Generally, there will not be
a sinking fund. We will establish and the pricing supplement will describe the
specific terms of each note.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Price to Agents' Proceeds
Public Commissions to Company
---------------- -------------------- --------------------------
<S> <C> <C> <C>
Per Note...... 100% .125%--.750% 99.875%--99.250%
Total(1)...... U.S.$220,000,000 $275,000--$1,650,000 $219,725,000--$218,350,000
</TABLE>
- --------
(1) Or the equivalent in other currencies or currency units.
----------------
We are offering the notes on a continuing basis through Credit Suisse First
Boston Corporation, Salomon Smith Barney Inc., and Chase Securities Inc.,
which are acting as agents. Each agent has agreed to use reasonable efforts to
solicit offers to purchase the notes. We may also sell notes at or above par
to any agent, acting as principal, for a commission as set forth in the table
above. The notes will not be listed on any securities exchange. You cannot be
assured that the notes offered by this prospectus supplement will be sold or
that there will be a secondary market for the notes.
Credit Suisse First Boston
Salomon Smith Barney
Chase Securities Inc.
Prospectus Supplement dated March 12, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Prospectus Supplement
About this Prospectus Supplement; Pricing Supplements...................... S-3
Description of the Notes................................................... S-4
Special Provisions Relating to Foreign Currency Notes...................... S-11
Certain United States Federal Income Tax Consequences...................... S-13
Plan of Distribution....................................................... S-18
Legal Opinions............................................................. S-20
Glossary................................................................... S-21
Prospectus
Summary.................................................................... 1
Ashland Inc................................................................ 5
Use of Proceeds............................................................ 5
Description of Debt Securities............................................. 5
Description of Preferred Stock............................................. 18
Description of Depositary Shares........................................... 21
Description of Common Stock................................................ 22
Description of Securities Warrants......................................... 23
Plan of Distribution....................................................... 24
Legal Matters.............................................................. 25
Experts.................................................................... 25
</TABLE>
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You should rely only on the information incorporated by reference or provided
in this prospectus supplement, the attached prospectus and the attached pricing
supplement. We have authorized no one to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information in this
prospectus supplement, the attached prospectus or the attached pricing
supplement is accurate as of any date other than the date on the front of the
applicable document.
S-2
<PAGE>
ABOUT THIS PROSPECTUS SUPPLEMENT; PRICING SUPPLEMENTS
We may use this prospectus supplement, together with the attached prospectus
and an attached pricing supplement, to offer our senior Medium-Term Notes,
Series H, at various times. The total initial public offering price of notes
that may be offered by use of this prospectus supplement is $220,000,000 (or
the equivalent in foreign or composite currencies).
This prospectus supplement sets forth certain terms of the notes that we may
offer. It supplements the description of the debt securities and senior
securities contained in the attached prospectus. If information in this
prospectus supplement is inconsistent with the prospectus, this prospectus
supplement will apply and will supersede that information in the prospectus.
Each time we issue notes we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes being offered and the terms of the offering. The
pricing supplement may also add, update or change information in this
prospectus supplement or the attached prospectus. Any information in the
pricing supplement, including any changes in the method of calculating interest
on any note, that is inconsistent with this prospectus supplement will apply
and will supersede that information in this prospectus supplement.
It is important for you to read and consider all information contained in
this prospectus supplement and the attached prospectus and pricing supplement
in making your investment decision. You should also read and consider the
information in the documents we have referred you to in "Where You Can Find
More Information About Ashland" on page 3 of the attached prospectus.
S-3
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DESCRIPTION OF THE NOTES
General
The following summary of certain terms of the notes is not complete. You
should refer to the senior indenture with Citibank, N.A., as trustee, under
which the notes will be issued, a copy of which is incorporated as an exhibit
to the registration statement. The definitions of certain capitalized terms
used in this prospectus supplement are provided in the glossary beginning on
page S-21. A number of terms used but not defined in this prospectus supplement
(including the glossary) have the same meanings as in the indenture.
The notes will be "senior securities" as described in the attached
prospectus. The notes will constitute one series of senior securities issued
under the indenture. They will have the same rank as all of our other senior
securities. See "Description of Debt Securities" in the attached prospectus.
We will offer the notes on a continuing basis. Each note will mature 9 months
or more from its date of issue, as agreed between us and the initial purchaser.
We will not redeem any note prior to the redemption date fixed at the time of
sale and set forth in the attached pricing supplement. If the pricing
supplement does not indicate a redemption date for a note, we will not redeem
the note before its stated maturity. Unless the attached pricing supplement
indicates otherwise, on or after any indicated redemption date, we may, at our
option, redeem the related note wholly or partially in increments of $1,000. If
we choose to redeem the note, we will do so at a redemption price equal to the
entire principal amount to be redeemed, together with interest payable to the
date of redemption. We must give notice of this redemption not more than 60 nor
less than 30 days prior to the redemption date. The notes will not have a
sinking fund unless the attached pricing supplement specifies otherwise.
We may provide that any note will be repayable at the holder's option, at the
times and on the terms and conditions set forth in the note and described in
the attached pricing supplement.
The notes may bear interest at (a) a fixed rate or (b) a floating rate.
Interest on floating rate notes will be determined, and adjusted periodically,
using an interest rate basis or quotation, adjusted by any spread or spread
multiplier. See "Interest and Interest Rates" below.
Unless the attached pricing supplement specifies otherwise, the notes will be
denominated in U.S. dollars and payments of principal of and interest on the
notes will be made in U.S. dollars. If denominated in U.S. dollars, the notes
will be issued in denominations of $1,000 and multiples of $1,000 greater than
$1,000. The attached pricing supplement will set forth the authorized
denominations of notes not denominated in U.S. dollars and additional
information. This information would include any exchange rate information,
relevant for these notes and notes for which principal, premium, if any, and
interest may be payable at the holder's or our option in a denomination
different from that of the note. See "Special Provisions Relating to Foreign
Currency Notes" below.
Each note will be issued in fully registered form without coupons. Each note
will be issued either in definitive form as a certificate or in global form and
deposited with or on behalf of DTC, as depositary, in book-entry form as
described in the attached prospectus under the caption "Description of Debt
Securities--Global Securities". Unless the attached pricing supplement
specifies otherwise, each note will be issued in book-entry form. Beneficial
interests in a book-entry note will be shown on records maintained by DTC or
its participants. Transfers of the beneficial interests can only be effected
through those records. Holders may not exchange book-entry notes for
certificated notes and book-entry notes will not generally be issuable in
definitive form. The attached prospectus describes the exceptions to this. We
will make payments of principal, any premium and interest on book-entry notes
to DTC or its nominee. DTC and its participants will make payments to
beneficial owners of interests in book-entry notes. A further description of
the depositary's procedures regarding global securities representing book-entry
notes is set forth in the attached prospectus
S-4
<PAGE>
under "Description of Debt Securities--Global Securities". DTC has confirmed to
the agents, the trustee and us that it intends to follow those procedures.
You may present certificated notes for registration of transfer or exchange
at the corporate trust office of Citibank, N.A. in the Borough of Manhattan,
New York City. Unless the attached pricing supplement indicates otherwise, we
will make payments of principal, premium, if any, and interest on certificated
notes in immediately available funds at the paying agent's office in the
Borough of Manhattan, New York City, or another office or agency we may choose.
However, we will make payments in these funds only if the certificated notes
are presented to the paying agent in time for the paying agent to make the
payments through normal procedures. At our option, we may pay interest on the
certificated notes by check to the person in whose name a certificated note is
registered at the close of business on the applicable regular record date
before each interest payment date. This option does not apply for interest
payable at maturity. However, certain holders will be entitled to receive the
payments by wire transfer of immediately available funds to an account
maintained by that holder with a bank located in the U.S. These holders include
any holders of $10,000,000 or more in aggregate principal amount of notes
denominated and payable in U.S. dollars with the same interest payment date. To
take this option, these holders must provide appropriate payment instructions
in writing to the trustee on or before the relevant regular record date.
We have initially designated Citibank, N.A., acting through its principal
corporate trust office in the Borough of Manhattan, New York City, as paying
agent for the certificated notes.
Except as described in the attached prospectus under the heading "Certain
Rights to Require Purchase of Securities by Ashland Upon Unapproved Change in
Control and Decline in Debt Rating", the indenture does not contain any
covenants or provisions designed to protect the holders of the notes if we
enter into a transaction that adversely affects our debt-to-equity ratio.
For a description of the rights attaching to different series of debt
securities under the indenture, see "Description of Debt Securities" in the
prospectus.
Interest and Interest Rates
The applicable pricing supplement will designate whether a particular note is
a fixed rate note or a floating rate note. In the case of a floating rate note,
the attached pricing supplement will also specify whether the note will bear
interest based on the commercial paper rate, the prime rate, LIBOR, the
Treasury rate, the Federal funds rate, the CD rate or on another interest rate
quotation set forth in the attached pricing supplement. In addition, a floating
rate note may bear interest at the lowest, highest or average of two or more
interest rate quotations.
We will select an interest rate or interest rate quotations for each issue of
notes based on market conditions at the time of issuance. In doing so, we will
take into account, among other things, expectations concerning the level of
interest rates that will prevail during the period the notes will be
outstanding, the relative attractiveness of the interest rate or interest rate
quotation to prospective investors and our financial needs. Unless the attached
pricing supplement provides otherwise, Citibank, N.A. will be the calculation
agent with respect to the floating rate notes.
We may change the interest rates, or interest rate quotations at various
times. No such change will affect any note already issued or for which we have
accepted an offer to purchase.
The rate of interest on floating rate notes will reset daily, weekly,
monthly, quarterly, semi-annually or annually. The interest reset dates will be
specified in the attached pricing supplement and on the face of each note. In
addition, the pricing supplement will specify any spread, spread multiplier,
maximum interest rate or minimum interest rate that applies for a floating rate
note. The pricing supplement relating to an offering of notes may also specify,
where applicable, the calculation dates, index maturity, initial interest rate,
interest
S-5
<PAGE>
determination dates, interest payment dates, interest reset dates and regular
record dates with respect to each note. See "Glossary" on page S-21 for
definitions of the above terms. The interest rate on the notes will in no event
be higher than the maximum rate permitted by applicable law. Under New York law
in effect on the date of this prospectus supplement, the maximum annual
interest rate on a simple interest basis is 25%. The limit may not apply to
notes in which $2,500,000 or more has been invested.
Each interest bearing note will accrue interest from and including the date
of issue or the most recent interest payment date for which interest has been
paid or provided. The notes will bear interest until the principal is paid or
made available for payment. We will make any interest payments in the amount of
interest accrued in the manner described up to but excluding the applicable
interest payment date.
We will pay any interest at each interest payment date and at maturity. See
"Description of Debt Securities--Payment and Paying Agents" in the prospectus.
We will pay interest to the person in whose name a note is registered at the
close of business on the regular record date preceding the interest payment
date. However, we will pay interest at maturity to the person to whom principal
is payable. For book-entry notes, this person will be the depositary for both
kinds of payments. Interest on a note will be payable on the first interest
payment date following its date of issue. However, if the date of a note's
issue is on or after the regular record date for that interest payment date,
interest will be payable beginning on the second interest payment date
following the note's issue.
Fixed Rate Notes
The applicable pricing supplement relating to a fixed rate note will
designate a fixed annual interest rate payable on the fixed rate note. Unless
the attached pricing supplement indicates otherwise, the interest payment dates
for the fixed rate notes will be February 15 and August 15 of each year and at
maturity. The regular record dates for the fixed rate notes will be the
February 1 and August 1 preceding the February 15 and August 15 interest
payment dates. Unless the attached pricing supplement indicates otherwise,
interest on fixed rate notes will be computed on the basis of a 360-day year of
twelve 30-day months.
Floating Rate Notes
Upon the request of a registered holder of a floating rate note, the
calculation agent will provide the interest rate then in effect. The
calculation agent will also provide any new interest rate that will become
effective as a result of a determination the calculation agent has made on the
most recent interest determination date with respect to that floating rate
note.
The calculation agent will calculate accrued interest on a floating rate note
by multiplying the principal amount of the note by an accrued interest factor.
The calculation agent will compute the accrued interest factor by adding the
interest factors calculated for each day in the accrual period. Unless the
attached pricing supplement specifies otherwise, the calculation agent will
compute the interest factor for each day by dividing the interest rate for that
day by (a) the actual number of days in the year, in the case of treasury rate
notes or (b) 360, in the case of all other floating rate notes.
The interest rate on a floating rate note in effect on any day will be (a) if
the day is an interest reset date, the interest rate with respect to the
interest determination date for that interest reset date, or (b) if the day is
not an interest reset date, the interest rate with respect to the interest
determination date for the preceding interest reset date. However, the interest
rate on a floating rate note from its issue date up to but not including the
first interest reset date for the note will be the initial interest rate set
forth in the attached pricing supplement. The interest rate is subject to
adjustment by any spread or a spread multiplier and to any maximum interest
rate or minimum interest rate limitation. However, the interest rate for the
ten calendar days prior to the date of maturity will be the one in effect on
the tenth calendar day before maturity.
S-6
<PAGE>
All percentages resulting from any calculation of floating rate notes will be
rounded to the nearest one-hundred thousandth of a percentage point, with five
one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) being rounded to 9.87655% (or .0987655), and 9.876544% (or
.09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts
used in or resulting from this calculation will be rounded to the nearest cent
(with one-half cent being rounded upwards).
Commercial Paper Rate Notes. Commercial paper rate notes will bear interest
at the interest rates (calculated with reference to the commercial paper rate
and any spread or spread multiplier) specified on the face of the commercial
paper rate note and in the attached pricing supplement.
Unless the attached pricing supplement indicates otherwise, the "commercial
paper rate" for any commercial paper interest determination date is the money
market yield of the rate on that date for commercial paper having the index
maturity specified in the pricing supplement as published in H.15(519) prior to
3:00 P.M., New York City time, on the calculation date relating to that
commercial paper interest determination date under the heading "Commercial
Paper--Nonfinancial".
The following procedures will be followed if the commercial paper rate cannot
be determined as described above:
. If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the calculation date, the commercial paper rate will be the
money market yield of the rate on that commercial paper rate interest
determination date for commercial paper having the index maturity
designated in the pricing supplement, as published in H.15 Daily Update
under the heading "Commercial Paper--Nonfinancial".
. If that rate is not published in H.15 Daily Update by 3:00 P.M., New
York City time, on the calculation date, then the calculation agent will
determine the commercial paper rate to be the money market yield of the
average of certain offered rates of three leading dealers of commercial
paper in New York City as of 11:00 A.M., New York City time, on that
commercial paper rate interest determination date. These offered rates will
be for commercial paper having the index maturity specified in the pricing
supplement for a non-financial issuer whose bond rating is "Aa", or the
equivalent, from a nationally recognized rating agency. The calculation
agent will select the three dealers referred to above, which may include
the agents or their affiliates.
. If fewer than three dealers selected by the calculation agent are
quoting as mentioned above, the commercial paper rate will be the
commercial paper rate in effect on that commercial paper rate interest
determination date.
Prime Rate Notes. A prime rate note will bear interest at the interest rate
(calculated with reference to the prime rate and any spread or spread
multiplier) specified on the face of the prime rate note and in the attached
pricing supplement.
Unless the attached pricing supplement indicates otherwise, the "prime rate"
for any prime rate interest determination date is the prime rate on that date,
as published in H.15(519) by 3:00 P.M., New York City time, on the calculation
date relating to that prime rate interest determination date under the heading
"Bank Prime Loan".
The following procedures will be followed if the prime rate cannot be
determined as described above:
. If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the calculation date, then the prime rate will be the rate on
that prime rate interest determination date as published in H.15 Daily
Update opposite the caption "Bank Prime Loan".
. If that rate is not published in H.15 Daily Update by 3:00 P.M., New
York City time, on the calculation date, then the calculation agent will
determine the prime rate to be the average of certain interest rates
publicly announced by each bank that appears on the Reuters Screen USPRIME1
Page. For each bank, those announced rates will be that bank's prime rate
or base lending rate in effect for that prime rate interest determination
date at 11:00 A.M. New York City time.
S-7
<PAGE>
. If fewer than four of those rates appear on the Reuters Screen USPRIME1
Page for that prime rate interest determination date, then the prime rate
will be the average of the announced prime rates quoted (on the basis of
the actual number of days in the year divided by 360) by at least three
major money center banks in New York City as of the close of business on
that prime rate interest determination date. The calculation agent will
select the banks referred to above, which may include the agents or their
affiliates.
. If fewer than two quotations are provided as mentioned in the previous
item, the prime rate will be determined on the basis of the rates furnished
in New York City by the appropriate number of substitute banks or trust
companies organized and doing business under the laws of the United States,
or any state. These substitute banks must have total equity capital of at
least $500 million and subject to supervision or examination by Federal or
state authority. The calculation agent will select the banks or trust
companies referred to above.
. If the banks or trust companies described in the previous item are not
quoting as mentioned above, the prime rate will be the prime rate in effect
on that prime rate interest determination date.
LIBOR Notes. A LIBOR note will bear interest at the interest rate (calculated
with reference to LIBOR and any spread or spread multiplier) specified on the
face of the LIBOR note and in the attached pricing supplement.
Unless the attached pricing supplement indicates otherwise, the calculation
agent will determine LIBOR as follows:
On each LIBOR rate interest determination date:
. If "LIBOR Reuters" is specified in the attached pricing supplement,
LIBOR will be the average of certain offered rates for deposits in the
index currency having the index maturity specified in the pricing
supplement beginning on the applicable interest reset date. Those rates
will be the ones which appear on the designated LIBOR page as of 11:00
A.M., London time, on that LIBOR rate interest determination date, if at
least two of those offered rates appear on the designated LIBOR page. If
the designated LIBOR page provides only for a single rate, that single rate
will be used regardless of the foregoing provisions requiring more than one
rate.
. If "LIBOR Telerate" is specified in the attached pricing supplement,
LIBOR will be a certain rate for deposits in the index currency having the
index maturity specified in the pricing supplement beginning on that
interest reset date. That rate will be the one which appears on the
designated LIBOR page as of 11:00 A.M., London time, on that LIBOR rate
interest determination date.
. If neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
attached pricing supplement as the method for calculating LIBOR, LIBOR will
be calculated as if "LIBOR Telerate" had been specified.
On any LIBOR rate interest determination date on which fewer than two of
those offered rates appear or no rate appears, as applicable, on the designated
LIBOR page, the calculation agent will determine LIBOR as follows:
. LIBOR will be determined on the basis of the offered rates at which
deposits in the index currency having the index maturity specified in the
applicable pricing supplement beginning on the applicable interest reset
date and in a principal amount that is representative for a single
transaction in that index currency in that market at that time by four
major banks in the London interbank market (which may include the agents or
their affiliates) at approximately 11:00 A.M., London time, on that LIBOR
rate interest determination date to prime banks in the London interbank
market. The calculation agent will select the four banks and request the
principal London office of each of those banks to provide a quotation of
its rate. If at least two quotations are provided, LIBOR on that LIBOR rate
interest determination date will be the average of those quotations.
. If fewer than two of those quotations are provided as mentioned above,
LIBOR on that LIBOR rate interest determination date will be the average of
the rates quoted at approximately 11:00 A.M., in the
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applicable principal financial center, on that LIBOR rate interest
determination date by three major banks in that principal financial center
(which may include the agents or their affiliates) for loans in the index
currency to leading European banks, having the index maturity specified in
the applicable pricing supplement and in a principal amount representative
for a single transaction in that index currency in that market at that
time. The calculation agent will select the three banks referred to above.
. If the banks selected by the calculation agent are not quoting as
mentioned above, LIBOR will be LIBOR in effect on the LIBOR rate interest
determination date.
Treasury Rate Notes. A Treasury rate note will bear interest at the interest
rate (calculated with reference to the Treasury rate and any spread or spread
multiplier) specified on the face of the Treasury rate note and in the attached
pricing supplement.
Unless the attached pricing supplement indicates otherwise, "Treasury rate"
for any Treasury rate interest determination date means a certain rate from the
most recent auction of direct obligations of the United States ("Treasury
bills") having the index maturity specified in the pricing supplement. That
rate will be the one that appears on the display designated as page 56 or the
display designated as page 57 on the Dow Jones Telerate Service under the
heading "AVGE INVEST YIELD".
The following procedures will be followed if the Treasury rate cannot be
determined as described above:
. If the above rate is not displayed on the relevant page by 3:00 P.M.,
New York City time, on the calculation date, the Treasury rate will be the
auction average rate for that auction as otherwise announced by the United
States Department of the Treasury. The auction average rate will be
expressed as a bond equivalent on the basis of a year of 365 or 366 days,
as applicable, and applied on a daily basis.
. If the results of the auction of Treasury bills having the index
maturity specified in the pricing supplement are not published or reported
as provided above by 3:00 P.M., New York City time, on the calculation
date, or if no auction is held in a particular week, then the Treasury rate
will be the rate as published in H.15(519) under the heading "U.S.
Government Securities/Treasury Bills/Secondary Market".
. If the rate described in the previous item is not published by 3:00
P.M., New York City time, on the calculation date, then the calculation
agent will determine the Treasury rate to be a yield to maturity of the
average of certain secondary market bid rates, as of approximately 3:30
P.M., New York City time, on that Treasury rate interest determination
date. The bid rates will be those of three leading primary U.S. government
securities dealers in New York City for the issue of Treasury bills with a
remaining maturity closest to the index maturity specified in the pricing
supplement. The rates will be expressed as a bond equivalent on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis.
The calculation agent will select the three dealers referred to above,
which may include the agents or their affiliates.
. If fewer than three dealers selected by the calculation agent are
quoting as mentioned above, the Treasury rate will be the Treasury rate in
effect on that Treasury rate interest determination date.
Federal Funds Rate Notes. A Federal funds rate note will bear interest at the
interest rate calculated with reference to the Federal funds rate and any
spread or spread multiplier, as specified on the face of the Federal funds rate
note and in the attached pricing supplement.
Unless the attached pricing supplement indicates otherwise, the "Federal
funds rate" for any Federal funds rate interest determination date is the rate
on that day for Federal funds as published in H.15(519) prior to 3:00 P.M., New
York City time, on the calculation date relating to that Federal funds rate
interest determination date under the heading "Federal Funds (Effective)".
The following procedures will be followed if the Federal funds rate cannot be
determined as described above:
. If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the calculation date, the Federal funds rate will be the rate
on that Federal funds rate interest determination
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date for U.S. dollar Federal funds, as published in H.15 Daily Update under
the heading "Federal Funds (Effective)".
. If that rate is not published in H.15 Daily Update by 3:00 P.M., New
York City time, on the calculation date, then the calculation agent will
determine the Federal funds rate to be the average of certain rates for the
last transaction in overnight Federal funds as of 9:00 A.M., New York City
time, on that Federal funds rate interest determination date. The rates
will be ones arranged by three leading brokers of Federal funds
transactions in New York City. The calculation agent will select the three
brokers referred to above.
. If fewer than three brokers selected by the calculation agent are
quoting as mentioned above, the Federal funds rate will be the Federal
funds rate in effect on that Federal funds rate interest determination
date.
CD Rate Notes. A CD rate note will bear interest at the interest rate
(calculated with reference to the CD rate and any spread or spread multiplier)
specified in the CD rate note and in the attached pricing supplement.
Unless the attached pricing supplement indicates otherwise, the "CD rate" for
any CD rate interest determination date is the rate on that date for negotiable
certificates of deposit having the index maturity specified in the pricing
supplement, as published in H.15(519) prior to 3:00 P.M., New York City time,
on the calculation date relating to that CD rate interest determination date
under the heading "CDs (Secondary Market)".
The following procedures will be followed if the CD rate cannot be determined
as described above:
. If the above rate is not published by 3:00 P.M., New York City time, on
the calculation date, the CD rate will be the rate on that CD rate interest
determination date for negotiable certificates of deposit of the index
maturity specified in the pricing supplement as published in H.15 Daily
Update under the caption "CDs (Secondary Market)".
. If that rate is not published in H.15 Daily Update by 3:00 P.M., New
York City time, on the calculation date, then the calculation agent will
determine the CD rate to be the average of certain secondary market offered
rates as of 10:00 A.M., New York City time, on that CD rate interest
determination date. The offered rates will be ones quoted by three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in New
York City. The dealers will provide quoted rates for negotiable
certificates of deposit in a denomination of $5,000,000 of major U.S. money
market banks of the highest credit standing (in the market for negotiable
certificates of deposit) with a remaining maturity closest to the index
maturity designated in the applicable pricing supplement. The calculation
agent will select the three dealers referred to above.
. If fewer than three dealers are quoting as mentioned above, the CD rate
will be the CD rate in effect on that CD rate interest determination date.
Indexed Notes
We may issue notes as indexed notes, as indicated in the attached pricing
supplement. Holders of indexed notes may receive a principal amount at maturity
that is greater than or less than the face amount of the notes depending upon
the fluctuation of the relative value, rate or price of the specified index.
The attached pricing supplement will describe specific information relating to
the method for determining the principal amount payable at maturity, a
historical comparison of the relative value, rate or price of the specified
index and the face amount of the indexed note and certain additional tax
considerations.
Other Provisions; Addenda
Any provisions relating to any note may be modified as specified under "Other
Provisions" on the face of that note or in an addendum relating to that note.
These provisions might include the determination of an interest rate basis, the
calculation of the interest rate applicable to a floating rate note, and the
specification of one or more interest rate bases, the interest payment dates,
the maturity or any other variable term relating to that note.
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SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
General
Unless the attached pricing supplement indicates otherwise, the notes will be
denominated in U.S. dollars and we will make payments of principal of and
interest on the notes in U.S. dollars. If we designate any of the notes to be
denominated in a currency or currency unit other than U.S. dollars the
following provisions will apply. These provisions are in addition to and, where
inconsistent, replace the description of general terms and provisions of notes
set forth in the attached prospectus and elsewhere in this prospectus
supplement. We refer below to any currency or currency unit designated in this
manner as the "specified currency."
Notes not denominated in U.S. dollars are issuable in registered form only,
without coupons. The pricing supplement will specify the denominations for
particular foreign currency notes.
Unless the attached pricing supplement provides otherwise, you are required
to pay the purchase price of foreign currency notes in immediately available
funds.
Notes denominated in specified currencies other than euros will not be sold
in, or to residents of, the country of the specified currency in which
particular notes are denominated unless the pricing supplement specifies
otherwise.
Currencies
Unless the attached pricing supplement specifies otherwise, you are required
to pay for foreign currency notes in the specified currency. At the present
time there are limited facilities in the United States for the conversion of
U.S. dollars into the specified currencies and vice versa, and banks do not
generally offer non-U.S. dollar checking or savings accounts in the United
States. However, you may ask the agent who presented your offer to purchase
foreign currency notes to us to use its reasonable best efforts to arrange for
the exchange of U.S. dollars into the relevant specified currency to enable you
to pay for the notes. You must make this request on or before the third
business day preceding the delivery date for the note or by a later date if
allowed by the agent. Each exchange will be made on the terms and conditions
established by the agent in accordance with its regular foreign exchange
practices and you will pay for all related costs.
The attached pricing supplement will contain specific information about the
foreign currency or currency units in which a particular foreign currency note
is denominated, including historical exchange rates and a description of the
currency and any exchange controls.
Payment of Principal and Interest
We will pay the principal of and interest on foreign currency notes in U.S.
dollars. However, unless the attached pricing supplement specifies otherwise,
the holder of a foreign currency note may elect to receive the payments in the
specified currency as described below. The exchange rate agent will determine
the rate of conversion for all payments of principal of and interest on foreign
currency notes to U.S. dollars. "Exchange rate agent" means the agent appointed
by us to make those determinations. Unless the pricing supplement specifies
otherwise, the exchange rate agent will be Citibank, N.A.
Unless the attached pricing supplement specifies otherwise, any U.S. dollar
amount to be received by a holder of a foreign currency note will be based on
the following:
. The highest bid quotation in New York City received by the exchange
rate agent at approximately 11:00 A.M., New York City time, on the second
business day preceding the applicable payment date from three recognized
foreign exchange dealers (one of which may be the exchange rate agent or an
agent) for the purchase by the quoting dealer of the specified currency for
U.S. dollars for settlement on that payment date in the aggregate amount of
the specified currency payable to all holders of foreign currency notes
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scheduled to receive U.S. dollar payments and at which the applicable
dealer commits to execute a contract. The exchange rate agent will select
and we will approve that selection of the three dealers referred to above.
. If fewer than three of these bid quotations are available, payments
will be made in the specified currency.
The holder of the foreign currency note will bear all of these currency
exchange costs through payment deductions.
Unless the attached pricing supplement specifies otherwise, a holder of
foreign currency notes may elect to receive payment of the principal of and
interest on the notes in the specified currency by transmitting a request for
the payment to the corporate trust department of Citibank, N.A. in the Borough
of Manhattan, New York City, on or before the regular record date or at least
sixteen days before maturity, as the case may be. The request must be in
writing (mailed or hand delivered) or by cable, telex or other form of
facsimile transmission. If a holder elects to receive all principal and
interest payments in the specified currency that holder need not file a
separate election for each payment. The election will remain in effect until
revoked by written notice to Citibank, N.A. in the Borough of Manhattan, New
York City. Written notice of any revocation of this kind must be received by
Citibank, N.A. in the Borough of Manhattan, New York City on or before the
regular record date or at least sixteen days before maturity, as the case may
be. Holders of foreign currency notes held in the name of a broker or nominee
should contact that broker or nominee to determine whether and how an election
to receive payments in the specified currency may be made.
We will pay interest on and principal of foreign currency notes paid in U.S.
dollars in the manner specified in the attached prospectus and elsewhere in
this prospectus supplement. Interest on foreign currency notes paid in the
specified currency will be paid by a check drawn on an account maintained at a
bank outside the U.S., unless other arrangements have been made. The principal
and interest due at maturity of foreign currency notes paid in the specified
currency will be paid in immediately available funds by wire transfer to an
account maintained with a bank outside the U.S. designated at least sixteen
days before maturity by the holders. However, those foreign currency notes must
be presented to the trustee or the paying agents designated in the attached
pricing supplement to allow time for payment. Any payment of principal or
interest required to be made on an interest payment date or at maturity of a
foreign currency Note that is not a business day may be made instead on the
following business day. In this case, no interest will accrue for the period
from and after the interest payment date or maturity.
Payment Currency
At various times, a specified currency may not available for the payment of
principal or interest with respect to a foreign currency note due to the
imposition of exchange controls or other circumstances beyond our control. If
this is the case, we will be entitled to satisfy our obligations to holders of
foreign currency notes by making the payment in U.S. dollars on the basis of
the market exchange rate on the date of payment, or if the market exchange rate
is not available at that time, on the basis of the most recently available
market exchange rate.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States Federal income tax
consequences resulting from the beneficial ownership of notes by certain
persons. This summary does not purport to consider all the possible United
States Federal tax consequences of the purchase, ownership or disposition of
the notes and is not intended to reflect the individual tax position of any
beneficial owner. It deals only with notes and currencies or composite
currencies other than U.S. dollars held as capital assets. Moreover, except as
expressly indicated, it addresses initial purchasers of a note at its issue
price, that is the first price to the public at which a substantial amount of
the notes in an issue is sold, and does not address beneficial owners that may
be subject to special tax rules, such as banks, insurance companies, dealers in
securities or currencies, purchasers that hold notes (or foreign currency) as a
hedge against currency risks or as part of a straddle with other investments or
as part of a "synthetic security" or other integrated investment (including a
"conversion transaction") comprised of a note and one or more other
investments, or purchasers that have a "functional currency" other than the
U.S. dollar. Except to the extent discussed below under "Non-United States
Holders", this summary is not applicable to non-United States persons not
subject to United States Federal income tax on their worldwide income. This
summary is based upon the United States Federal tax laws and regulations as now
in effect and as currently interpreted and does not take into account possible
changes in the tax laws or the interpretations, any of which may be applied
retroactively. It does not discuss the tax laws of any state, local or foreign
governments. It does not discuss the tax treatment of notes denominated in
certain hyperinflationary currencies or dual currency notes. Persons
considering the purchase of notes should consult their own tax advisors
concerning the United States Federal income tax consequences to them in light
of their particular situations as well as any consequences to them under the
laws of any other taxing jurisdiction.
UNITED STATES HOLDERS
Payments of Interest
In general, interest on a note, whether payable in U.S. dollars or a foreign
currency, will be taxable to a beneficial owner who or which is (i) a citizen
or resident of the United States, (ii) a corporation created or organized under
the laws of the United States or any State (including the District of Columbia)
or (iii) a person otherwise subject to United States Federal income taxation on
its worldwide income (a "United States holder") as ordinary income at the time
it is received or accrued, depending on the holder's method of accounting for
tax purposes. If a partnership holds notes, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships holding notes should consult their tax
advisors. If an interest payment is denominated in or determined by reference
to a foreign currency, then special rules, described below under "Foreign
Currency Notes", apply.
Notes Purchased at a Premium
Under the Internal Revenue Code of 1986, as amended, a United States holder
that purchases a note for an amount in excess of its stated redemption price at
maturity may elect to treat such excess as "amortizable bond premium", in which
case the amount of interest required to be included in the United States
holder's income each year with respect to interest on the note will be reduced
by the amount of amortizable bond premium allocable (based on the note's yield
to maturity) to that year. Under recently promulgated regulations, if the
amortizable bond premium allocable to a year exceeds the amount of interest
allocable to that year, the excess would be allowed as a deduction for that
year but only to the extent of the United States holder's prior interest
inclusions on the note. Any excess is generally carried forward and allocable
to the next year. A holder who elects to amortize bond premium must reduce his
tax basis in the note as described below under "Purchase Sale and Retirement of
the Notes". Any election to amortize bond premium is applicable to all bonds
(other than bonds the interest on which is excludible from gross income) held
by the United States holder at the beginning of the first taxable year to which
the election applies or thereafter acquired by the United States holder, and
may not be revoked without the consent of the Internal Revenue Service. The new
regulations provide a restrictive automatic consent for a United States holder
to change its method of accounting for
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eligible bond premium in certain circumstances, if the change is made for the
first taxable year for which the United States holder must account for the note
under the new regulations.
Notes Purchased at a Market Discount
A note, other than a note that matures one year or less from the date of
issuance ("short-term note"), will be treated as issued at a market discount (a
"market discount note") if the amount for which a United States holder
purchased the note is less than the note's issue price, unless such difference
is less than a specified de minimis amount.
In general, any partial payment of principal or any gain recognized on the
maturity or disposition of a market discount note will be treated as ordinary
income to the extent that such gain does not exceed the accrued market discount
on such note. Alternatively, a United States holder of a market discount note
may elect to include market discount in income currently over the life of the
market discount note. That election applies to all debt instruments with market
discount acquired by the electing United States holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service.
Market discount accrues on a straight-line basis unless the United States
holder elects to accrue such discount on a constant yield to maturity basis.
That election is applicable only to the market discount note with respect to
which it is made and is irrevocable. A United States holder of a market
discount note that does not elect to include market discount in income
currently generally will be required to defer deductions for interest on
borrowings allocable to the note in an amount not exceeding the accrued market
discount on such note until the maturity or disposition of the note.
Purchase, Sale, Exchange and Retirement of the Notes
A United States holder's tax basis in a note generally will equal its U.S.
dollar cost (which, in the case of a note purchased with a foreign currency,
will be the U.S. dollar value of the purchase price on the date of purchase),
increased by any market discount included in the United States holder's income
with respect to the note, and reduced by the amount of any amortizable bond
premium applied to reduce interest on the note. A United States holder
generally will recognize gain or loss on the sale, exchange or retirement of a
note equal to the difference between the amount realized on the sale or
retirement and the United States holder's tax basis in the note. The amount
realized on a sale, exchange or retirement for an amount in foreign currency
will be the U.S. dollar value of the amount on the date of sale, exchange or
retirement. Except to the extent described above under "Market Discount" or
below under "Foreign Currency Notes--Exchange Gain or Loss", and except to the
extent attributable to accrued but unpaid interest, gain or loss recognized on
the sale, exchange or retirement of a note will be capital gain or loss and
will be long-term capital gain or loss if the note was held for more than one
year.
Foreign Currency Notes
Interest Payments. If an interest payment is denominated in or determined by
reference to a foreign currency, the amount of income recognized by a cash
basis United States holder will be the U.S. dollar value of the interest
payment, based on the exchange rate in effect on the date of receipt,
regardless of whether the payment is in fact converted into U.S. dollars. A
cash basis United States holder who receives a foreign currency payment will be
required to include the amount of the payment in income upon receipt. Accrual
basis United States holders may determine the amount of income recognized with
respect to a foreign currency interest payment in accordance with either of two
methods. Under the first method, the amount of income recognized will be based
on the average exchange rate in effect during the interest accrual period (or,
with respect to an accrual period that spans two taxable years, the partial
period within the taxable year). Upon receipt of an interest payment (including
a payment attributable to accrued but unpaid interest upon the sale or
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retirement of a note) determined by reference to a foreign currency, an accrual
basis United States holder will recognize ordinary income or loss measured by
the difference between that average exchange rate and the exchange rate in
effect on the date of receipt, regardless of whether the payment is in fact
converted into U.S. dollars. Under the second method, an accrual basis United
States holder may elect to translate interest income into U.S. dollars at the
spot exchange rate in effect on the last day of the accrual period or, in the
case of an accrual period that spans two taxable years, at the exchange rate in
effect on the last day of the partial period within the taxable year.
Additionally, if a payment of interest is actually received within five
business days of the last day of the accrual period or taxable year, an accrual
basis United States holder applying the second method may instead translate the
accrued interest into U.S. dollars at the spot exchange rate in effect on the
day of actual receipt (in which case no exchange gain or loss will result). Any
election to apply the second method will apply to all debt instruments held by
the United States holder at the beginning of the first taxable year to which
the election applies or thereafter acquired by the United States holder and may
not be revoked without the consent of the IRS.
Exchange of Amounts in Other than U.S. Dollars. Foreign currency received as
interest on a note or on the sale or retirement of a note will have a tax basis
equal to its U.S. dollar value at the time the interest is received or at the
time of the sale or retirement, as the case may be. Foreign currency that is
purchased will generally have a tax basis equal to the U.S. dollar value of the
foreign currency on the date of purchase. Any gain or loss recognized on a sale
or other disposition of a foreign currency (including its use to purchase notes
or upon exchange for U.S. dollars) will be ordinary income or loss.
Amortizable Bond Premium. In the case of a note that is denominated in a
foreign currency, bond premium will be computed in units of foreign currency,
and amortizable bond premium will reduce interest income in units of the
foreign currency. At the time amortized bond premium offsets interest income, a
United States holder may realize ordinary income or loss, measured by the
difference between exchange rates at that time and at the time of the
acquisition of the notes.
Market Discount. Market discount is determined in units of the foreign
currency. Accrued market discount that is required to be taken into account on
the maturity or upon disposition of a note is translated into U.S. dollars at
the exchange rate on the maturity or the disposition date, as the case may be
(and no part is treated as exchange gain or loss). Accrued market discount
currently includible in income by an electing United States holder is
translated into U.S. dollars at the average exchange rate for the accrual
period (or the partial accrual period during which the United States holder
held the note), and exchange gain or loss is determined on maturity or
disposition of the note (as the case may be) in the manner described above
under "Foreign Currency Notes--Interest Payments" with respect to the
computation of exchange gain or loss on the receipt of accrued interest by an
accrual method holder.
Exchange Gain or Loss. Gain or loss recognized by a United States holder on
the sale, exchange or retirement of a note that is attributable to changes in
exchange rates will be treated as ordinary income or loss which will not be
treated as interest income or expense. However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
Indexed Notes
The applicable pricing supplement will contain a discussion of any special
United States Federal income tax rules with respect to currency indexed notes
or other indexed notes.
NON-UNITED STATES HOLDERS
Subject to the discussion of backup withholding below, payments of principal,
any premium and interest by us or any agent of ours (acting in its capacity as
agent) to any holder of a note that is not a United States holder (a "non-
United States holder") will not be subject to United States Federal withholding
tax, provided,
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in the case of interest, that (i) the non-United States holder does not
actually or constructively own 10% or more of the total combined voting power
of all classes of our stock entitled to vote, (ii) the non-United States holder
is not a controlled foreign corporation for United States tax purposes that is
related to us (directly or indirectly) through stock ownership and (iii) either
(A) the non-United States holder certifies to us or our agent under penalties
of perjury that it is not a United States person and provides its name and
address or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business and holds the note certifies to us or our agent under
penalties of perjury that such statement has been received from the non-United
States holder by it or by another financial institution and furnishes the payor
with a copy.
A non-United States holder that does not qualify for exemption from
withholding under the preceding paragraph generally will be subject to United
States Federal withholding tax at the rate of 30% (or lower applicable treaty
rate) of payments of interest on the notes.
If a non-United States holder is engaged in a trade or business in the United
States and interest on the note is effectively connected with the conduct of
such trade or business, the non-United States holder, although exempt from the
withholding tax discussed in the preceding paragraph (provided that such holder
timely furnishes the required certification to claim such exemption), may be
subject to United States Federal income tax on such interest in the same manner
as if it were a United States holder. In addition, if the non-United States
holder is a foreign corporation, it may be subject to a branch profits tax
equal to 30% (or lower applicable treaty rate) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments. For
purposes of the branch profits tax, interest on a note will be included in the
earnings and profits of the holder if the interest is effectively connected
with the conduct by the holder of a trade or business in the United States. In
lieu of the certificate described in the preceding paragraph, such a holder
must provide the payor with a properly executed IRS Form 4224 (or successor
form) to claim an exemption from United States Federal withholding tax.
Any capital gain, market discount or exchange gain realized on the sale,
exchange, retirement or other disposition of a note by a non-United States
holder will not be subject to United States Federal income or withholding taxes
if (a) the gain is not effectively connected with a United States trade or
business of the non-United States holder and (b) in the case of an individual,
the non-United States holder is not present in the United States for 183 days
or more in the taxable year of the sale, exchange, retirement or other
disposition, and certain other conditions are met.
Notes held by an individual who is neither a citizen nor a resident of the
United States for United States Federal tax purposes at the time of the
individual's death will not be subject to United States Federal estate tax,
provided that the income from the notes was not or would not have been
effectively connected with a United States trade or business of the individual
and that the individual qualified for the exemption from United States Federal
withholding tax (without regard to the certification requirements) described
above.
Recently finalized Treasury regulations, generally effective for payments
made after December 31, 1999, provide alternative procedures to be followed by
a non-United States holder in establishing eligibility for a withholding tax
reduction or exemption.
Purchasers of notes that are non-United States holders should consult their
own tax advisors with respect to the possible applicability of United States
withholding and other taxes upon income realized in respect of the notes.
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INFORMATION REPORTING AND BACK-UP WITHHOLDING
For each calendar year in which the notes are outstanding, we are required to
provide the Internal Revenue Service with certain information, including the
holder's name, address and taxpayer identification number (either the holder's
Social Security number or its employer identification number, as the case may
be), the aggregate amount of principal and interest paid to that holder during
the calendar year and the amount of tax withheld, if any. This obligation,
however, does not apply with respect to certain United States holders,
including corporations, tax-exempt organizations, qualified pension and profit
sharing trusts and individual retirement accounts.
In the event that a United States holder subject to the reporting
requirements described above fails to supply its correct taxpayer
identification number in the manner required by applicable law or underreports
its tax liability, we, our agents or paying agents or a broker may be required
to "backup" withhold a tax equal to 31% of each payment of interest, principal
and any premium on the notes. This backup withholding is not an additional tax
and may be credited against the United States holder's Federal income tax
liability, provided that the required information is furnished to the Internal
Revenue Service.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments made by us or any of our agents (in its
capacity as such) to a non-United States holder of
a note if the holder has provided the required certification that it is not a
United States person as set forth in clause (iii) in the first paragraph under
"non-United States holders" above, or has otherwise established an exemption
(provided that neither we nor our agent has actual knowledge that the holder is
a United States person or that the conditions of an exemption are not in fact
satisfied).
Payments of the proceeds from the sale of a note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding. However, information reporting (but not backup withholding) may
apply to those payments if the broker is one of the following:
. a United States person,
. a controlled foreign corporation for United States tax purposes,
. a foreign person 50 percent or more of whose gross income from all
sources for the three-year period ending with the close of its taxable
year preceding the payment was effectively connected with a United
States trade or business or
. for payments made after December 31, 1999, a foreign partnership with
certain connections to the United States.
Payment of the proceeds from a sale of a note to or through the United States
office of a broker is subject to information reporting and backup withholding
unless the holder or beneficial owner certifies as to its taxpayer
identification number or otherwise establishes an exemption from information
reporting and backup withholding.
Recently finalized Treasury regulations unify current certification
procedures and forms relating to information reporting and backup withholding
for payments made after December 31, 1999.
The Federal income tax discussion set forth above is included for general
information only and may not be applicable depending upon a holder's particular
situation. Holders should consult their tax advisors with respect to the tax
consequences to them of the ownership and disposition of the notes, including
the tax consequences under state, local, foreign and other tax laws and the
possible effects of changes in Federal or other tax laws.
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PLAN OF DISTRIBUTION
Under the terms of a distribution agreement, a form of which is attached as
an exhibit to the registration statement, we will offer the notes on a
continuing basis through Credit Suisse First Boston Corporation, Salomon Smith
Barney Inc., and Chase Securities Inc. as our agents, each of which has agreed
to use reasonable efforts to solicit purchases of the notes. Unless the
applicable pricing supplement indicates otherwise, we will pay a commission to
the agents. We will have the sole right to accept offers to purchase notes and
may reject any offer, in whole or in part. Each agent will have the right, in
its discretion reasonably exercised, without notice to us, to reject any offer
to purchase notes received by it, in whole or in part.
We also may sell notes at or above par to any agent, acting as principal, for
a commission equivalent to that set forth on the cover page of this prospectus
supplement. The notes may be resold at market prices prevailing at the time of
resale, at prices related to those prevailing market prices, at a fixed
offering price or at negotiated prices, as determined by that agent. We also
may sell notes at or above par to any agent or to a group of underwriters for
whom an agent acts as representative. We may do this for a commission to be
agreed at the time of sale, for resale to one or more investors or purchasers
at a fixed offering price or at varying prices prevailing at the time of
resale, at prices related to those prevailing market prices at the time of the
resale or at negotiated prices. Notes purchased by an agent or by a group of
underwriters may be resold to certain securities dealers for resale to
investors or to certain other dealers. Dealers may receive compensation in the
form of commissions from the agents and/or from the purchasers for whom they
may act as agents. Unless the applicable pricing supplement specifies
otherwise, any compensation allowed by any agent to any of these dealers shall
not be in excess of the commission received by that agent from us. After the
initial public offering of notes to be resold to investors and other purchasers
on a fixed public offering price basis, the public offering price and
commission may be changed.
We have reserved the right to sell notes directly on our own behalf. We also
may accept but not solicit offers to purchase notes through additional agents
on substantially the same terms and conditions (including commission rates) as
would apply to purchases of notes under the distribution agreement. In
addition, we have reserved the right to appoint additional agents for the
purpose of soliciting offers to purchase notes. Those additional agents will be
named in the applicable pricing supplement. No commission will be payable on
any notes sold directly by us.
We will pay each agent a commission of from .125% to .750% of the principal
amount of each note, depending on its stated maturity, sold through that agent.
The following table summarizes the compensation to be paid to the agents by
us.
<TABLE>
<CAPTION>
Total
--------------------------------
Per Note Minimum Maximum
------------ -------- ----------
<S> <C> <C> <C>
Commissions paid by Ashland................ .125% -.750% $275,000 $1,650,000
</TABLE>
We estimate that we will incur expenses of $70,000 in connection with this
program.
The agents and any dealers to whom the agents may sell notes may be deemed to
be "underwriters" within the meaning of the Securities Act of 1933. We have
agreed to indemnify the agents against certain liabilities, including civil
liabilities under the Securities Act of 1933, or contribute to payments which
the agents may be required to make in this regard. We have agreed to reimburse
the agents for certain expenses.
Unless the applicable pricing supplement indicates otherwise, you must pay
for notes, other than foreign currency notes in funds immediately available in
New York City. For payment of the purchase price of foreign currency notes, see
"Description of the Notes--Foreign Currency Notes" above.
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The notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the notes.
The agents may engage in over-allotment, stabilizing transactions and
syndicate covering transactions and may impose penalty bids in accordance with
Regulation M under the Exchange Act. Over-allotment involves syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the notes in the open market after
the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the agents to reclaim a selling concession from
a syndicate member when the notes originally sold by that syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the notes to be higher than it would
otherwise be in the absence of the transactions. These transactions, if
commenced, may be discontinued at any time.
In the ordinary course of their respective businesses, the agents and their
affiliates have engaged, and may in the future engage, in commercial banking
and/or investment banking transactions with us and our affiliates. Citibank,
N.A., the trustee under the indenture, is an affiliate of Salomon Smith Barney
Inc.
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LEGAL OPINIONS
Opinions regarding the validity of the notes being offered will be issued for
us by Cravath, Swaine & Moore, New York, New York (who will rely as to matters
of Kentucky law upon the opinion of David L. Hausrath, Esq., our Vice President
and General Counsel), and for the agents by Davis Polk & Wardwell, New York,
New York. In these opinions, certain assumptions will be made regarding future
action required to be taken by us and the trustee in connection with the
issuance and sale of any particular notes, the specific terms of those notes
and other matters which may affect the validity of notes but which cannot be
ascertained on the date of the relevant opinions. David L. Hausrath owns
beneficially 16,344 shares of our common stock (includes common stock units
held in our deferred compensation plan).
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GLOSSARY
Set forth below are definitions of some of the terms used in this prospectus
supplement and not defined in the attached prospectus.
"business day" means any day, other than a Saturday or Sunday, that meets
each of the following applicable requirements. The day is:
(a) not a day on which banking institutions are authorized or required by
law or regulation to be closed in New York City;
(b) with respect to foreign currency notes (other than foreign currency
notes denominated in euro only), not a day on which banking institutions
are authorized or required by law or regulation to be closed in the
principal financial center in the country of the specified currency;
(c) with respect to foreign currency notes denominated in euro, any date
on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer (TARGET) System is open; and
(d) with respect to LIBOR notes, a London banking day.
"calculation agent" means the agent appointed by us to calculate interest
rates for floating rate notes. Unless the pricing supplement specifies
otherwise, the calculation agent will be Citibank, N.A.
"calculation date" means, with respect to any interest determination date,
the date on which the calculation agent is to calculate an interest rate for a
floating rate note. Unless the pricing supplement specifies otherwise, the
calculation date relating to an interest determination date for a floating rate
note will be the first to occur of (a) the tenth calendar day after that
interest determination date, or, if that day is not a business day, the next
succeeding business day or (b) the business day preceding the applicable
interest payment date or maturity of that note, as the case may be. However,
LIBOR will be calculated on the LIBOR rate interest determination date.
"designated LIBOR page" means (a) if "LIBOR Reuters" is specified in the
applicable pricing supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in that pricing
supplement (or any other page as may replace that page on that service) for the
purpose of displaying the London interbank rates of major banks for the
applicable index currency, or (b) if "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR, the display
on the Dow Jones Telerate Service (or any successor service) on the page
specified in that pricing supplement (or any other page as may replace that
page on that service) for the purpose of displaying the London interbank rates
of major banks for the applicable index currency.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication, published by the Board
of Governors of the Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world wide web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
"index currency" means the currency or composite currency specified in the
applicable pricing supplement as to which LIBOR will be calculated. If no
currency or composite currency of this kind is specified in the applicable
pricing supplement, the index currency will be U.S. dollars.
"index maturity" means, for a floating rate note, the period to maturity of
the instrument or obligation on which the interest rate quotation is based, as
set forth in the pricing supplement.
"initial interest rate" means the rate at which a floating rate note will
bear interest from and including its issue date to but excluding the first
interest reset date, as indicated in the applicable pricing supplement.
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<PAGE>
"interest determination date" means the date as of which the interest rate
for a floating rate note is to be calculated, to be effective as of the
following interest reset date and calculated on the related calculation date.
However, LIBOR will be calculated on the LIBOR rate interest determination
date. The interest determination date relating to an interest reset date for a
commercial paper rate note, for a prime rate note, for a Federal funds rate
note and for a CD rate note will be the second business day preceding that
interest reset date. The interest determination date relating to an interest
reset date for a LIBOR note will be the second London banking day preceding
that interest reset date. The interest determination date relating to an
interest reset date for a Treasury rate note will be the day of the week during
which that interest reset date falls on which Treasury bills of the index
maturity designated in the pricing supplement would normally be auctioned.
Treasury bills are usually sold at auction on the Monday of each week, unless
that day is a legal holiday, in which case the auction is usually held on the
following Tuesday or may be held on the preceding Friday. If, as the result of
a legal holiday, an auction is so held on the preceding Friday, that Friday
will be the Treasury interest rate determination date pertaining to the
interest reset date occurring in the following week.
"interest payment date" means the date on which payment of interest on a note
(other than payment at maturity) is to be made. Unless the applicable pricing
supplement indicates otherwise, the interest payment dates for the fixed rate
notes will be February 15 and August 15 of each year and at maturity. Unless
the applicable pricing supplement indicates otherwise and except as provided
below, the interest payment dates for any floating rate note will be:
(a) in the case of floating rate notes that reset weekly, on the third
Wednesday of March, June, September and December of each year;
(b) in the case of floating rate notes that reset daily or monthly, on
the third Wednesday of each month or on the third Wednesday of March, June,
September and December of each year (as indicated in the pricing
supplement);
(c) in the case of floating rate notes that reset quarterly, on the third
Wednesday of March, June, September and December of each year, in the case
of floating rate notes that reset semi-annually, on the third Wednesday of
the two months of each year specified in the pricing supplement;
(d) in the case of floating rate notes that reset annually, on the third
Wednesday of the month specified in the pricing supplement; and
(e) in each case, at maturity.
If an interest payment date for any fixed rate note falls on a day that is not
a business day for that note, the interest payment for that note will be made
on the following business day for that note, and no interest on that payment
will accrue from and after that interest payment date. If an interest payment
date (other than an interest payment date at maturity) for any floating rate
note would otherwise be a day that is not a business day for that note, that
interest payment date will be postponed to the next business day for that note,
and interest will continue to accrue (except that, for a LIBOR note, if that
business day is in the following calendar month, that interest payment date
will be the preceding business day for that LIBOR note).
"interest reset date" means the date on which a floating rate note will begin
to bear interest at the interest rate determined as of any interest
determination date. Unless the pricing supplement specifies otherwise, the
interest reset dates will be:
(a) in the case of floating rate notes that reset daily, each business
day;
(b) in the case of floating rate notes (other than Treasury rate notes)
that reset weekly, the Wednesday of each week;
(c) in the case of Treasury rate notes that reset weekly, the Tuesday of
each week (except as provided below);
(d) in the case of floating rate notes that reset monthly, the third
Wednesday of each month;
S-22
<PAGE>
(e) in the case of floating rate notes that reset quarterly, the third
Wednesday of March, June, September and December of each year;
(f) in the case of floating rate notes that reset semi-annually, the
third Wednesday of each of two months of each year specified in the pricing
supplement; and
(g) in the case of floating rate notes that reset annually, the third
Wednesday of one month of each year specified in the pricing supplement.
If any interest reset date for any floating rate note would otherwise be a day
that is not a business day for that floating rate note, that interest reset
date will be postponed to the next business day for that floating rate note
(except that, for a LIBOR note, if that business day is in the following
calendar month, that interest reset date will be the preceding business day for
that LIBOR note). If a Treasury bill auction (as described in the definition of
"interest determination date") falls on any day that would otherwise be an
interest reset date for a Treasury rate note, then that interest reset date
will instead be the first business day following that auction date.
"London banking day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"market exchange rate" for any specified currency means the noon buying rate
in New York City for cable transfers for that specified currency as certified
for customs purposes by (or if not certified, as otherwise determined by) the
Federal Reserve Bank of New York.
"maturity" means the date on which the principal of a note becomes due,
whether at stated maturity, upon redemption or otherwise. If the maturity of
any note falls on a day that is not a business day, the payment of principal,
premium, if any, and interest for that note will be made on the following
business day, and no interest on that payment will accrue from and after that
maturity.
"maximum interest rate" means, for any floating rate note, a maximum
numerical interest rate limitation, or ceiling, on the rate at which interest
may accrue on that during any interest period.
"minimum interest rate" means, for any floating rate note, a minimum
numerical interest rate limitation, or floor, on the rate at which interest may
accrue on that during any interest period.
"money market yield" means a yield (expressed as a percentage rounded to the
next higher one hundred thousandth of a percentage point) calculated in
accordance with the following formula:
_D x 36__ 0
money market yield =x 100
360 - (D x
M)
where "D" refers to the annual rate for the commercial paper, quoted on a bank
discount basis and expressed as a decimal, and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
"paying agent" means the agent appointed by us to make payments of principal,
premium, if any, and interest on the notes. Unless the pricing supplement
specifies otherwise, the paying agent will be Citibank, N.A.
"principal financial center" means the capital city of the country issuing
the index currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire and Swiss
francs, the principal financial center will be New York City, Sydney,
Frankfurt, Amsterdam, Milan and Zurich, respectively.
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<PAGE>
"regular record date" means the date on which a note must be held in order
for the holder to receive an interest payment on the next interest payment
date. Unless the pricing supplement specifies otherwise, the regular record
date for any interest payment date with respect to any floating rate note will
be the fifteenth day (whether or not a business day) prior to that interest
payment date. The regular record dates for the fixed rate notes will be the
February 1 and August 1 next preceding the February 15 and August 15 interest
payment dates.
"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor Money
Rates Service (or any successor service) on the "USPRIME1" page (or any other
page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major U.S. banks.
"spread" means the number of basis points, if any, to be added to the
commercial paper rate, the prime rate, LIBOR, the Treasury rate, the Federal
funds rate, the CD rate or any other interest rate index in effect at various
times for a note, which amount will be set forth in the pricing supplement.
"spread multiplier" means the percentage by which the commercial paper rate,
the prime rate, LIBOR, the Treasury rate, the Federal funds rate, the CD rate
or any other interest rate index in effect at various times for a note is to be
multiplied, which percentage will be set forth in the pricing supplement.
S-24
<PAGE>
PROSPECTUS
Ashland Inc.
$600,000,000
Debt Securities
Preferred Stock
Depositary Shares
Common Stock
Warrants
----------------
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated March 10, 1999
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all the information that is important to you. To understand the terms
of our securities, you should carefully read this document with the attached
prospectus supplement that together give the specific terms of the securities
we are offering. You should also read the documents we have referred you to in
"Where You Can Find More Information About Ashland" on page 3 for information
on our company and our financial statements.
Ashland Inc.
Our businesses are grouped into five industry segments: Ashland Chemical,
APAC, Valvoline, Refining and Marketing, and Arch Coal.
Ashland Chemical distributes industrial chemicals, solvents, thermoplastics
and resins, and fiberglass materials, and manufactures and sells a wide variety
of specialty chemicals and certain petrochemicals. APAC performs contract
construction work, including highway paving and repair, excavation and grading,
and bridge construction, and produces asphaltic and ready-mix concrete, crushed
stone and other aggregate, concrete block and certain specialized construction
materials in the southern and midwestern United States.
Valvoline is a marketer of branded, packaged motor oil and automotive
chemicals, automotive appearance products, antifreeze, filters, rust
preventives and coolants. In addition, Valvoline is engaged in the "fast oil
change" business through outlets operating under the Valvoline Instant Oil
Change(R) name.
Effective January 1, 1998, we and USX-Marathon completed a transaction to
form Marathon Ashland Petroleum LLC ("MAP"), which combined major portions of
the supply, refining, marketing and transportation operations of the two
companies. Marathon has a 62% interest in MAP, and we hold a 38% interest. MAP
operates seven refineries with a total crude oil refining capacity of 935,000
barrels per day. Refined products are distributed through a network of
independent and company-owned outlets in the Midwest, the upper Great Plains
and the southeastern United States. We account for our investment in MAP using
the equity method.
Our coal operations are conducted by Arch Coal, Inc., which is 55% owned by
us and is publicly traded. Arch Coal produces, transports, processes and
markets bituminous coal produced in Central Appalachia and the western and
midwestern United States. We account for our investment in Arch Coal using the
equity method.
The Securities We May Offer
This prospectus is part of a registration statement (No. 333-70651) that we
filed with the SEC utilizing a "shelf" registration process. Under this shelf
process, we may offer from time to time up to $600,000,000 of any of the
following securities, either separately or in units: debt securities, preferred
stock, depositary shares, common stock and warrants. This prospectus provides
you with a general description of the securities we may offer. Each time we
offer securities, we will provide you with a prospectus supplement that will
describe the specific amounts, prices and terms of the securities being
offered. The prospectus supplement may also add, update or change information
contained in this prospectus.
Debt Securities
We may offer unsecured general obligations of our company, which may be
senior or subordinated. Unless the applicable prospectus supplement states
otherwise, senior securities will be issued under an indenture dated as of
August 15, 1989, as amended and restated as of August 15, 1990, between us and
Citibank, N.A., as trustee. The senior securities and the subordinated
securities are together referred to in this prospectus as the "debt
securities". The senior securities will have the same rank as all of our other
unsecured, unsubordinated debt.
<PAGE>
The subordinated securities will be entitled to payment only after payment on
our superior indebtedness (as described below).
The subordinated securities will be issued under an indenture between us and
a commercial bank to be selected, as trustee. We have summarized certain
general features of the debt securities from the indentures. We encourage you
to read the indentures (which are exhibits to the registration statement) and
our recent periodic and current reports that we file with the SEC. Directions
on how you can get copies of these reports are provided on page 3.
General Indenture Provisions that Apply to Senior and Subordinated Securities
. Neither indenture limits the amount of debt that we may issue or provides
holders any protection should there be a highly leveraged transaction,
recapitalization or restructuring involving our company.
. The indentures provide that holders of two-thirds of the total principal
amount of outstanding debt securities of any series may vote to change
certain of our obligations or certain of your rights concerning the debt
securities of that series. However, to change the amount or timing of
principal, interest or other payments under the debt securities every
holder in the series must consent.
. If an event of default (as described below) occurs with respect to any
series of debt securities, the trustee or holder of 25% of the
outstanding principal amount of that series may declare the principal
amount of the series immediately payable. However, holders of a majority
of the principal amount may rescind this action except where a payment
default or a breach of certain covenants has occurred.
. If we satisfy certain conditions in either indenture, we may discharge
that indenture at any time by depositing with the trustee sufficient
funds or government obligations to pay when due the debt securities
outstanding under that indenture.
Events of Default. The indentures provide that the following are events of
default:
. Interest not paid for 30 days after due date.
. Principal or premium not paid when due.
. Sinking fund payment not paid for 30 days after due date.
. Covenant breach continuing for 60 days after notice.
. Occurrence of certain bankruptcy or insolvency events.
. Occurrence of any other event of default specified in the prospectus
supplement.
General Indenture Provisions that Apply Only to Senior Securities
. The indenture relating to the senior securities limits our ability and
the ability of any subsidiary of ours to assume or guarantee indebtedness
secured by mortgages, liens or other encumbrances upon our or our
subsidiary's property unless the senior securities will be equally and
ratably secured with that indebtedness.
. The indenture relating to the senior securities limits our ability and
the ability of any subsidiary of ours to sell or transfer property to a
lender or investor, which then, either directly or indirectly, leases the
property back to us or the subsidiary for a time period over three years.
. The indenture relating to the senior securities states that we may not
merge or consolidate with another company or sell all or substantially
all of our assets to another company unless certain conditions are met.
If these events occur, the other company will be required to assume our
responsibilities relating to the debt securities, and we will be released
from all liabilities and obligations.
General Indenture Provisions that Apply Only to Subordinated Securities
The subordinated securities will be subordinated to all "superior
indebtedness", which includes all indebtedness for money borrowed by us, except
indebtedness that is stated to be not superior to, or to have the same rank as,
the subordinated securities.
2
<PAGE>
Preferred Stock and Depositary Shares
We may issue our preferred stock, without par value, in one or more series.
We will determine the dividend, voting, conversion and other rights of the
series being offered and the terms and conditions relating to its offering and
sale at the time of the offer and sale. We may also issue fractional shares of
preferred stock that will be represented by depositary shares and depositary
receipts.
Common Stock
We may issue our common stock, par value $1.00 per share. Holders of common
stock are entitled to receive dividends when declared by the board of directors
of Ashland (subject to rights of preferred stockholders). Each holder of common
stock is entitled to one vote per share. The holders of common stock have
cumulative voting rights but no preemptive, redemption or conversion rights.
Warrants
We may issue warrants for the purchase of debt securities, preferred stock or
common stock. We may issue warrants independently or together with other
securities.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for Ashland:
<TABLE>
<CAPTION>
Three months
Fiscal Year Ended ended
September 30, December 31,
------------------------ ---------------------
1994 1995 1996 1997 1998 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges..................... 2.40 1.06 1.92 2.39 2.28 3.46 3.13
Ratio of earnings to combined
fixed charges and preferred
stock dividends............. 2.06 * 1.70 2.23 2.28 3.46 3.13
</TABLE>
- --------
* Combined fixed charges and preferred stock dividends exceeded earnings (as
defined) by $4 million.
The above ratios are computed on a total enterprise basis including our
consolidated subsidiaries, plus our share of significant affiliates accounted
for on the equity method that are 50% or greater owned or whose indebtedness
has been directly or indirectly guaranteed by us. Earnings consist of income
from continuing operations before income taxes, adjusted to exclude fixed
charges (excluding capitalized interest) and undistributed earnings of equity
method affiliates excluded from the total enterprise. Fixed charges consist of
interest incurred on indebtedness, the portion of operating lease rentals
deemed representative of the interest factor and the amortization of debt
expense.
Where You Can Find More Information About Ashland
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus, and
later information filed with the SEC will update and supersede this
information. We incorporate by reference the documents listed
3
<PAGE>
below and any future filings made with the SEC under Section 13(a), 13(c), 14,
or 14(d) of the Securities Exchange Act of 1934 until our offering is
completed:
(a) Annual Report on Form 10-K for the year ended September 30, 1998;
(b) Quarterly Report on Form 10-Q for the quarter ended December 31,
1998;
(c) The description of our common stock, par value $1.00 per share, set
forth in the registration statement on Form 10, as amended in its entirety
by the Form 8 filed with the SEC on May 1, 1983;
(d) The description of our rights to purchase Series A Participating
Cumulative Preferred Stock, set forth in the registration statement on Form
8-A dated May 16, 1996; and
(e) The description of our cumulative preferred stock, without par value,
set forth in the registration statement on Form 8-A, as amended by
Amendment No. 1 to the registration statement, filed with the SEC on April
30, 1993.
You may request a copy of these filings, at no cost, by writing to or
telephoning us at the following address (or by visiting our website at
http://www.ashland.com):
Office of the Secretary
Ashland Inc.
50 E. RiverCenter Boulevard
P.O. Box 391
Covington, KY 41012-0391
606-815-3333
You should rely only on the information incorporated by reference or provided
in this prospectus or the prospectus supplement. We have authorized no one to
provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus or the prospectus supplement is
accurate as of any date other than the date on the front of the document.
4
<PAGE>
ASHLAND INC.
Our businesses are grouped into five industry segments: Ashland Chemical,
APAC, Valvoline, Refining and Marketing, and Arch Coal.
Ashland Chemical distributes industrial chemicals, solvents, thermoplastics
and resins, and fiberglass materials, and manufactures and sells a wide variety
of specialty chemicals and certain petrochemicals. APAC performs contract
construction work, including highway paving and repair, excavation and grading,
and bridge construction, and produces asphaltic and ready-mix concrete, crushed
stone and other aggregate, concrete block and certain specialized construction
materials in the southern and midwestern United States.
Valvoline is a marketer of branded, packaged motor oil and automotive
chemicals, automotive appearance products, antifreeze, filters, rust
preventives and coolants. In addition, Valvoline is engaged in the "fast oil
change" business through outlets operating under the Valvoline Instant Oil
Change(R) name.
Effective January 1, 1998, we and USX-Marathon completed a transaction to
form Marathon Ashland Petroleum LLC ("MAP"), which combined major portions of
the supply, refining, marketing and transportation operations of the two
companies. Marathon has a 62% interest in MAP, and we hold a 38% interest. MAP
operates seven refineries with a total crude oil refining capacity of 935,000
barrels per day. Refined products are distributed through a network of
independent and company-owned outlets in the Midwest, the upper Great Plains
and the southeastern United States. We account for our investment in MAP using
the equity method of accounting.
Our coal operations are conducted by Arch Coal, Inc., which is 55% owned by
us and is publicly traded. Arch Coal produces, transports, processes and
markets bituminous coal in Central Appalachia and the western and midwestern
United States. We account for our investment in Arch Coal using the equity
method of accounting.
We are a Kentucky corporation, organized on October 22, 1936, with our
principal executive offices located at 50 E. RiverCenter Boulevard, Covington,
Kentucky 41012 (Mailing Address: 50 E. RiverCenter Boulevard, P.O. Box 391,
Covington, Kentucky 41012-0391) (Telephone: (606) 815-3333).
USE OF PROCEEDS
We will use the net proceeds we receive from the sale of the securities
offered by this prospectus and the accompanying prospectus supplement for
general corporate purposes, unless we specify otherwise in the applicable
prospectus supplement. General corporate purposes may include additions to
working capital, capital expenditures, stock redemption, repayment of debt or
the financing of possible acquisitions.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth the general terms and provisions that
could apply to the debt securities. Each prospectus supplement will state the
particular terms that actually will apply to the debt securities included in
the supplement.
The debt securities will be either our senior debt securities or our
subordinated debt securities. Under an indenture between us and Citibank, N.A.,
as trustee, we have issued to date an aggregate of $1.45 billion of senior
securities. Subordinated securities will be issued under an indenture between
us and a commercial bank to be selected, as trustee. The senior indenture and
the subordinated indenture are together called the "indentures".
5
<PAGE>
The following summary of certain provisions of the indentures is not
complete. You should refer to the applicable provisions of the following
documents for more detailed information:
. the senior indenture, which is incorporated by reference to Exhibit 4(a)
to Registration Statement No. 33-39359, filed with the SEC on March 11,
1991, and
. the subordinated indenture, which is incorporated by reference to Exhibit
4.3 to Registration Statement No. 33-57011, filed with the SEC on
December 22, 1994.
Some of the capitalized terms used in the following discussion are defined in
the indentures, and their definitions are incorporated by reference into this
prospectus.
General
Neither indenture limits the aggregate principal amount of debt securities
that we may issue under that indenture. The debt securities may be issued in
one or more series as we may authorize at various times. All debt securities
will be unsecured. The senior securities will have the same rank as all of our
other unsecured and unsubordinated debt. The subordinated securities will be
subordinated to superior indebtedness as described in the "Subordinated
Securities" section below. The senior securities and subordinated securities
may be combined into one series or offered separately. The prospectus
supplement relating to the particular series of debt securities being offered
will specify the amounts, prices and terms of those debt securities. These
terms may include:
. the title and the limit on the aggregate principal amount of the debt
securities;
. the date or dates on which the debt securities will mature;
. any annual rate or rates (which may be fixed or variable), or the method
of determining any rate or rates, at which the debt securities will bear
interest;
. the date or dates from which interest shall accrue and the date or dates
on which interest will be payable;
. the currency or currencies or units of two or more currencies in which
the debt securities are denominated and principal and interest may be
payable, and for which the debt securities may be purchased, which may be
in United States dollars, a foreign currency or currencies or units of
two or more foreign currencies;
. whether such debt securities are to be senior securities or subordinated
securities;
. any redemption or sinking fund terms;
. any event of default or covenant with respect to the debt securities of a
particular series, if not set forth in this prospectus;
. whether the debt securities will be issued as registered securities or as
bearer securities;
. whether the debt securities are to be issued in whole or in part in the
form of one or more global securities and the depositary for the global
security or securities; and
. any other terms of the series, which will not conflict with the terms of
applicable indenture.
Principal, any premium and any interest will be payable and the debt
securities will be transferable at the corporate trust office of the
appropriate trustee, unless we specify otherwise in the accompanying prospectus
supplement. At our option, however, payment of interest may be made by check
mailed to the registered holders of the debt securities at their registered
addresses.
We will issue the debt securities in fully registered form without coupons
unless the applicable prospectus supplement provides for an issuance to be in
bearer form with or without coupons. Unless we specify otherwise in the
applicable prospectus supplement, we will issue debt securities denominated in
U.S. dollars in denominations of $1,000 or multiples of $1,000 for registered
securities and in denominations of
6
<PAGE>
$5,000 or multiples of $5,000 for bearer securities. No service charge will be
made for any transfer or exchange of debt securities, but we may require
payment beforehand of any related taxes or other governmental charges. Debt
securities may also be issued pursuant to the indentures in transactions exempt
from the registration requirements of the Securities Act of 1933. Those debt
securities will not be considered in determining the aggregate amount of
securities issued under the registration statement.
We will describe special Federal income tax and other considerations relating
to debt securities denominated in foreign currencies or units of two or more
foreign currencies in the applicable prospectus supplement.
Unless we specify otherwise in the applicable prospectus supplement, the
covenants contained in the indentures and the debt securities will not provide
special protection to holders of debt securities if we enter into a highly
leveraged transaction, recapitalization or restructuring.
Exchange, Registration and Transfer
Registered securities of any series that are not global securities will be
exchangeable for other registered securities of the same series and of like
aggregate principal amount and tenor in different authorized denominations. In
addition, if debt securities of any series are issuable as both registered
securities and bearer securities, the holder may choose, upon written request,
and subject to the terms of the applicable indenture, to exchange bearer
securities and the appropriate related coupons of that series into registered
securities of the same series of any authorized denominations and of like
aggregate principal amount and tenor. Bearer securities with attached coupons
surrendered in exchange for registered securities between a regular record date
or a special record date and the relevant date for interest payment shall be
surrendered without the coupon relating to the interest payment date. Interest
will not be payable with respect to the registered security issued in exchange
for that bearer security. That interest will be payable only to the holder of
the coupon when due in accordance with the terms of the applicable indenture.
Bearer securities will not be issued in exchange for registered securities.
You may present debt securities for exchange as provided above. In addition,
you may present registered securities for registration of transfer, together
with a duly executed form of transfer, at the office of the security registrar
or at the office of any transfer agent designated by us for that purpose with
respect to any series of debt securities and referred to in the applicable
prospectus supplement. This may be done without service charge and upon payment
of any taxes and other governmental charges as described in the applicable
indenture. The security registrar or the transfer agent will effect the
transfer or exchange upon being satisfied with the documents of title and
identity of the person making the request. We have appointed the applicable
trustee as security registrar for the applicable indenture. If a prospectus
supplement refers to any transfer agents (in addition to the security
registrar) initially designated by us with respect to any series of debt
securities, we may at any time rescind the designation of any such transfer
agent or approve a change in the location through which such transfer agent
acts. However, if debt securities of a series are issuable solely as registered
securities, we 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, we will be required to maintain (in addition to the security
registrar) a transfer agent in a place of payment for such series located in
Europe. We may at any time designate additional transfer agents with respect to
any series of debt securities.
In the event of any redemption in part, we will not be required to:
. issue, register the transfer of or exchange debt securities of any series
during a period beginning at the opening of business 15 days before any
selection of debt securities of that series to be redeemed and ending at
the close of business on:
. if debt securities of the series are issuable only as registered
securities, the day of mailing of the relevant notice of redemption;
. if debt securities of the series are issuable only as bearer securities,
the day of the first publication of the relevant notice of redemption; or
. if debt securities of the series are issuable as registered securities
and bearer securities and there is no publication of the relevant notice
of redemption, the day of mailing of the relevant notice of redemption,
or the date of such publication, if applicable;
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. 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
. 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.
For a discussion of restriction on the exchange, registration and transfer of
global securities, see "Global Securities" below.
Payment and Paying Agents
Unless we specify otherwise in the applicable prospectus supplement, payment
of principal, any premium and interest on bearer securities will be payable, in
accordance with any applicable laws and regulations, at the offices of those
paying agents outside the U.S. that we may designate at various times. We will
make interest payments on bearer securities and the attached coupons on any
interest payment date only against surrender of the coupon relating to that
interest payment date. No payment with respect to any bearer security will be
made at any of our offices or agencies in the U.S. by check mailed to any U.S.
address or by transfer to an account maintained with a bank located in the U.S.
However, if (but only if) payment in U.S. dollars of the full amount of
principal, any premium and interest on bearer securities denominated and
payable in U.S. dollars at all offices or agencies outside the U.S. is illegal
or effectively precluded by exchange controls or other similar restrictions,
then those payments will be made at the office of our paying agent in the
Borough of Manhattan, The City of New York.
Unless we specify otherwise in the applicable prospectus supplement, payment
of principal, any premium and any interest on registered securities will be
made at the office of the paying agent or paying agents that we designate at
various times. However, at our option, we may make interest payments by check
mailed to the address, as it appears in the security register, of the person
entitled to the payments. Unless we specify otherwise in the applicable
prospectus supplement, we will make payment of any installment of interest on
registered securities to the person in whose name that registered security is
registered at the close of business on the regular record date for such
interest.
Unless we specify otherwise in the applicable prospectus supplement, the
Corporate Trust Office of the trustee in the Borough of Manhattan, The City of
New York, will be designated:
. as our sole paying agent for payments with respect to debt securities
that are issuable solely as registered securities; and
. as our paying agent in the Borough of Manhattan, The City of New York,
for payments with respect to debt securities (subject to the limitation
described above in the case of bearer securities) that are issuable
solely as bearer securities or as both registered securities and bearer
securities. We will name any paying agents outside the U.S. and any other
paying agents in the U.S. initially designated by us for the debt
securities in the applicable prospectus supplement. We may at any time
designate additional paying agents or rescind the designation of any
paying agent or approve a change in the office through which any paying
agent acts. However, if debt securities of a series are issuable solely
as registered securities, we will be required to maintain a paying agent
in each place of payment for that series. If debt securities of a series
are issuable as bearer securities, we will be required to maintain
. a paying agent in the Borough of Manhattan, The City of New York, (a)
for payments with respect to any registered securities of the series
and (b) for payments with respect to bearer securities of the series
in the circumstance described above, but not otherwise; and
. a paying agent in a place of payment located outside the U.S. where
debt securities of that series and any attached coupons may be
presented and surrendered for payment. However, if the debt
securities of that series are listed on the London Stock Exchange,
the Luxembourg Stock Exchange or any other stock exchange located
outside the U.S. and if the stock exchange requires it, we will
maintain a paying agent in London or Luxembourg or any other required
city located outside the U.S. for those debt securities.
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All moneys we pay to a paying agent for the payment of principal, any premium
or interest on any debt security or coupon that remains unclaimed at the end of
two years after becoming due and payable will be repaid to us. After that time,
the holder of the debt security or coupon will look only to us for payments out
of those repaid amounts.
Global Securities
The debt securities of a series may be issued in whole or in part in the form
of one or more global certificates that we will deposit with a depositary
identified in the applicable prospectus supplement. Global securities may be
issued in either registered or bearer form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for the individual
debt securities it represents, a global security may not be transferred except
as a whole:
. by the applicable depositary to a nominee of the depositary,
. by any nominee to the depositary itself or another nominee, or
. by the depositary or any nominee to a successor depositary or any nominee
of the successor.
We will describe the specific terms of the depositary arrangement with
respect to a series of debt securities in the applicable prospectus supplement.
We anticipate that the following provisions will generally apply to depositary
arrangements.
When we issue a global security in registered form, the depositary for the
global security or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the individual debt
securities represented by that global security to the accounts of persons that
have accounts with the depositary ("participants"). Those accounts will be
designated by the dealers, underwriters or agents with respect to the
underlying debt securities or by us if those debt securities are offered and
sold directly by us. Ownership of beneficial interests in a global security
will be limited to participants or persons that may hold interests through
participants. For interests of participants, ownership of beneficial interests
in the global security will be shown on records maintained by the applicable
depositary or its nominee. For interests of persons other than participants,
that ownership information will be shown on the records of participants.
Transfer of that ownership will be effected only through those records. The
laws of some states require that certain purchasers of securities take physical
delivery of securities in definitive form. These limits and laws may impair our
ability to transfer beneficial interests in a global security.
As long as the depositary for a global security, or its nominee, is the
registered owner of that global security, the depositary or nominee will be
considered the sole owner or holder of the debt securities represented by the
global security for all purposes under the applicable indenture. Except as
provided below, owners of beneficial interests in a global security:
. will not be entitled to have any of the underlying debt securities
registered in their names,
. will not receive or be entitled to receive physical delivery of any of
the underlying debt securities in definitive form and
. will not be considered the owners or holders under the indenture relating
to those debt securities.
Payments of principal of, any premium and any interest on individual debt
securities represented by a global security registered in the name of a
depositary or its nominee will be made to the depositary or its nominee as the
registered owner of the global security representing such debt securities.
Neither we, the trustee for the debt securities, any paying agent nor the
registrar for the debt securities will be responsible for any aspect of the
records relating to or payments made by the depositary or any participants on
account of beneficial interests of the global security.
We expect that the depositary or its nominee, upon receipt of any payment of
principal, any premium or interest relating to a permanent global security
representing any series of debt securities, immediately will credit
participants' accounts with the payments. Those payments will be credited in
amounts proportional to the
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respective beneficial interests of the participants in the principal amount of
the global security as shown on the records of the depositary or its nominee.
We also expect that payments by participants to owners of beneficial interests
in the global security held through those participants will be governed by
standing instructions and customary practices. This is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name". Those payments will be the sole responsibility of those
participants.
If the depositary for a series of debt securities is at any time unwilling,
unable or ineligible to continue as depositary and we do not appoint a
successor depositary within 90 days, we will issue individual debt securities
of that series in exchange for the global security or securities representing
that series. In addition, we may at any time in our sole discretion determine
not to have any debt securities of a series represented by one or more global
securities. In that event, we will issue individual debt securities of that
series in exchange for the global security or securities. Further, if we
specify, an owner of a beneficial interest in a global security may, on terms
acceptable to us, the trustee and the applicable depositary, receive individual
debt securities of that series in exchange for those beneficial interests. The
foregoing is subject to any limitations described in the applicable prospectus
supplement. In any such instance, the owner of the beneficial interest will be
entitled to physical delivery of individual debt securities equal in principal
amount to the beneficial interest and to have the debt securities registered in
its name. Those individual debt securities will be issued in denominations,
unless we specify otherwise, of $1,000 or integral multiples of $1,000.
If we specify in an applicable prospectus supplement, all or any portion of
the debt securities of a series that are issuable as bearer securities
initially will be represented by one or more temporary global securities, with
or without interest coupons. These temporary global securities will be
deposited with a common depositary in London for Morgan Guaranty Trust Company
of New York, Brussels Office, as operator of the Euroclear System and Cedel
Bank, societe anonyme, for credit to the respective accounts of the beneficial
owners of those debt securities or to other accounts as they may direct. On and
after the exchange date determined as provided in the temporary global security
and described in the applicable prospectus supplement, each temporary global
security will be exchangeable for definitive debt securities in bearer form,
registered form, or definitive global form or any combination of these. No
bearer security including one in definitive global bearer form delivered in
exchange for a portion of a temporary global security will be mailed or
otherwise delivered to any location in the U.S. in connection with this
exchange.
Unless we specify otherwise in the applicable prospectus supplement, we or
our agent must receive a certificate signed by Euroclear or Cedel prior to the
delivery of a definitive bearer security. We must also receive this signed
certificate prior to the actual payment of interest on the applicable portion
of the temporary global security payable before delivery of a definitive debt
security. The certificate must be based on statements provided to Euroclear or
Cedel by its member organizations. The certificate must be dated on the earlier
of the date of the first actual payment of interest on the debt security or the
date of delivery of the debt security in definitive form, and must state that
on that date the debt security is owned by:
. a person that is not a U.S. person and is not a financial institution
holding the obligation for purposes of resale during the restricted
period;
. a U.S. person that is either (a) the foreign branch of a U.S. financial
institution purchasing for its own account or for resale during the
restricted period or (b) a U.S. person who acquired its interest through
the foreign branch of a U.S. financial institution and who holds the
obligation through such financial institution on the date of
certification. In either case (a) or (b), the U.S. financial institution
must provide a certificate stating that it agrees to comply with the
requirements and regulations of Section 165(j)(3)(A), (B) or (C) of the
Internal Revenue Code of 1986, as amended unless it has provided a valid
blanket certificate stating the same; or
. a financial institution holding for purposes of resale during the
restricted period. That financial institution must certify in addition
that it has not acquired the obligation for purposes of resale directly
or indirectly to a U.S. person or to a person within the United States or
its possessions.
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As used in this paragraph, the term "restricted period" means (a) the period
from the closing date until 40 days after or (b) any time if the obligation is
held as part of an unsold allotment or subscription.
Each of Euroclear and Cedel will in these circumstances credit the interest
received by it to the accounts of the beneficial owners of the temporary global
security or to other accounts as they may direct.
The beneficial owner of a debt security underlying a definitive global
security in bearer form may exchange its interest in that definitive global
security for a definitive bearer security or securities, or a definitive
registered security or securities of any authorized denomination. The
beneficial owner must give at least 30 days' written notice of the exchange
through either Euroclear or Cedel. No individual definitive bearer security
will be delivered in or to the U.S.
Senior Securities--Certain Restrictive Covenants
Limitations on Liens. Unless we specify otherwise in the applicable
prospectus supplement, neither we nor any domestic subsidiary of ours will
issue, assume or guarantee any debt secured by a mortgage, lien, pledge or
other encumbrance upon real or personal property of ours or of our domestic
subsidiary that is located in the continental U.S. without providing that the
senior securities will be secured equally and ratably or prior to the debt.
However, this provision shall not apply to the following:
. Mortgages existing on the date of the senior indenture;
. Mortgages affecting property of a corporation existing at the time it
becomes a domestic subsidiary of ours or at the time it is merged into or
consolidated with us or a domestic subsidiary of ours;
. Mortgages on property (a) existing at the time of the property's
acquisition, (b) to secure payment of all or part of the property's
purchase price, (c) to secure debt incurred prior to, at the time of or
within 24 months after the property's acquisition for the purpose of
financing all or part of the property's purchase price or (d) assumed or
incurred in connection with the property's acquisition;
. Mortgages on property to secure all or part of the cost of repairing,
altering, constructing, improving, exploring, drilling or developing the
property, or to secure debt incurred to provide funds for any such
purpose;
. Mortgages on (a) pipelines, gathering systems, pumping or compressor
stations, pipeline storage facilities or other related facilities, (b)
tank cars, tank trucks, tank vessels, barges, tow boats or other vessels
or boats, drilling barges, drilling platforms, or other movable railway,
automotive, aeronautic or marine facilities, (c) office buildings,
laboratory and research facilities, retail service stations, retail or
wholesale sales facilities, terminals, bulk plants, warehouses or storage
or distribution facilities, (d) manufacturing facilities other than units
for the refining of crude oil, (e) the equipment of any of the foregoing
or (f) any "margin stock" or "margin security" within the meaning of
Regulation U or Regulation G of the Board of Governors of the Federal
Reserve System as amended from time to time;
. Mortgages on current assets or other personal property (other than shares
of stock or indebtedness of subsidiaries) to secure loans maturing not
more than one year from the date of their creation or to secure any
renewal of those loans for not more than a year at a time;
. Mortgages which secure indebtedness owed by a domestic subsidiary of ours
to us or another domestic subsidiary of ours;
. Mortgages on property of any domestic subsidiary of ours principally
engaged in a financing or leasing business;
. Mortgages upon the oil, gas or other minerals produced or to be produced
or on the related proceeds from properties (other than those which were
acquired and which became productive on or before August 15, 1977) if,
each of those mortgages has been or will be given to secure indebtedness
incurred to pay or to reimburse the cost of drilling or equipping such
property; and
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. any extension, renewal or replacement of any mortgage referred to in the
preceding items or of any debt secured by those mortgages if the original
principal amount of debt secured does not exceed the principal amount of
debt secured at the time of the extension, renewal or replacement. In
addition, the extension, renewal or replacement mortgage will be limited
to substantially the same property (plus improvements) which secured the
mortgage.
Notwithstanding anything mentioned above, we and any one or more of our
domestic subsidiaries may issue, assume or guarantee debt secured by mortgages
that would otherwise be subject to the foregoing restrictions in an aggregate
principal amount which, together with the aggregate outstanding principal
amount of all other debt of ours and our domestic subsidiaries that would
otherwise be subject to the foregoing restrictions, does not at any one time
exceed 5% of the stockholders' equity in us and our consolidated subsidiary
companies as shown on our audited consolidated balance sheet contained in our
latest annual report to stockholders.
The following types of transactions, among others, shall not be deemed to
create debt secured by mortgages: (1) the sale or other transfer of oil, gas or
other minerals in place for a period of time until, or in an amount such that,
the transferee will realize from the sale or transfer a specified amount
(however determined) of money or such minerals, or the sale or other transfer
of any other interest in property of the character commonly referred to as an
oil payment or a production payment, and (2) mortgages required by any contract
or statute in order to permit us or a subsidiary of ours to perform any
contract or subcontract made with or at the request of the U.S., any state or
any department, agency or instrumentality of either.
"Debt" is defined to include any notes, bonds, debentures or other similar
evidences of indebtedness for money borrowed.
Limitations on Sale and Lease-Back. Unless we specify otherwise in the
applicable prospectus supplement, neither we nor any domestic subsidiary of
ours will enter into any arrangement with any bank or other lender or investor
to lease to us or a domestic subsidiary of ours for a period of more than three
years any real property located in the continental U.S. To be applicable, we or
a domestic subsidiary of ours must sell or plan to sell or transfer this
property to the lender or investor or to any person or organization to which
funds have been or are to be advanced by the lender or investor on the security
of the leased property. This paragraph does not apply where either: (a) we or
our domestic subsidiary would be entitled to create debt secured by a mortgage
on the property to be leased, without equally and ratably securing the senior
securities, or (b) we, within four months after the effective date of the sale
and lease-back transaction, apply to the retirement of debt of ours maturing by
its terms more than one year after its original creation, an amount equal to
the greater of
. the net proceeds of the sale of the real property leased pursuant to the
arrangement, or
. the fair value of the real property leased at the time of entering into
the arrangement as determined by the board of directors of Ashland.
This amount to be applied to the retirement of debt maturing more than one
year after its creation will be reduced by an amount equal to the sum of (a)
the principal amount of debt securities delivered, within four months after the
effective date of the arrangement, to the trustee for retirement and
cancellation and (b) the principal amount of other debt maturing within one
year after its creation voluntarily retired by us within the four-month period.
The latter amount does not include retirements of senior securities and other
debt maturing within one year after its creation related to mandatory sinking
fund or prepayment provisions or by payment at maturity.
Limitation on Consolidations and Mergers. We may not consolidate or merge
with any other person or convey or transfer all or substantially all of our
properties and assets to another person or permit another corporation to merge
into us, unless:
. the successor is a person organized under the laws of the United States
or any state;
. the successor person, if not us, assumes our obligations on the senior
securities and under the senior indenture; and
. certain other conditions are met.
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Subordinated Securities
Under the subordinated indenture, payment of the principal, interest and any
premium on the subordinated securities will generally be subordinated in right
of payment to the prior payment in full of all of our superior indebtedness.
"Superior indebtedness" is defined as the principal of, any premium and
accrued and unpaid interest on the following items, whether outstanding on or
created, incurred or assumed after the date of execution of the subordinated
indenture:
. our indebtedness for money borrowed (other than the subordinated
securities);
. guarantees by us of indebtedness for money borrowed of any other person;
. indebtedness evidenced by notes, debentures, bonds or other instruments
of indebtedness for the payment of which we are responsible or liable, by
guarantees or otherwise;
. our obligations under any agreement relating to any interest rate or
currency swap, interest rate cap, interest rate collar, interest rate
future, currency exchange or forward currency transaction or any similar
interest rate or currency hedging transaction, whether outstanding on the
date of the subordinated indenture or created, incurred or assumed
afterward; and
. our obligations under any agreement to lease, or any lease of, any real
or personal property which, in accordance with generally accepted
accounting principles, is classified on our balance sheet as a liability.
Superior indebtedness shall also be deemed to include modifications,
renewals, extensions and refundings of any of the types of indebtedness,
liability, obligations or guarantee listed above, unless the relevant
instrument provides that such indebtedness, liability, obligation or guarantee,
or such modification, renewal, extension or refunding, is not superior in right
of payment to the subordinated securities. Superior indebtedness shall not,
however, be deemed to include (a) any of our obligations to any subsidiary of
ours and (b) any of our indebtedness, guarantee or obligations of the type set
forth above which is subordinate or junior in ranking in any respect to any of
our other indebtedness, guarantees or obligations.
No payment by us on account of principal of, any premium or interest on the
subordinated securities, including any sinking fund payments may be made if:
. any default or event of default with respect to any superior indebtedness
occurs and is continuing and
. unless the default or event of default is our failure to pay principal or
interest on any instrument constituting superior indebtedness, written
notice of this default or event of default is given to the trustee by us
or to us and the trustee by the holders or their representatives of at
least 10% in principal amount of any superior indebtedness.
We may resume payments on the subordinated securities (unless otherwise
prohibited by the related indenture) if (a) the default is cured or waived, or
(b) 120 days pass after the notice is given, if the default is not the subject
of judicial proceedings, unless the default is our failure to pay principal or
interest on any superior indebtedness.
In the event that any subordinated security is declared due and payable
before its specified date, or upon any payment or distribution of assets by us
to creditors upon our dissolution, winding up, liquidation or reorganization,
all principal of, any premium and interest due or to become due on all superior
indebtedness must be paid in full before the holders of subordinated securities
are entitled to receive or take any payment. However, this does not apply to
payments received by the holders of subordinated securities consisting of
shares of stock or subordinated indebtedness provided by a plan of
reorganization or adjustment which does not alter the rights of holders of
superior indebtedness without any holder's consent. Subject to the payment in
full of all superior indebtedness, the holders of the subordinated securities
are to be subrogated to the rights of the holders of superior indebtedness to
receive payments or distribution of our assets applicable to superior
indebtedness until the subordinated securities are paid in full.
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By reason of this subordination, in the event of insolvency, our creditors
who are holders of superior indebtedness, as well as certain of our general
creditors, may recover more, ratably, than the holders of the subordinated
securities.
The subordinated indenture will not limit the amount of superior indebtedness
or debt securities which may be issued by us or any of our subsidiaries.
Modification of the Indentures
Under each indenture our rights and obligations and the rights of the holders
may be modified with the consent of the holders of at least two-thirds in
principal amount of the then outstanding debt securities of each series
affected by the modification. None of the following modifications, however, is
effective against any holder without the consent of the holders of all of the
affected outstanding debt securities:
. changing the maturity, installment or interest rate of any of the debt
securities;
. reducing the principal amount, any premium or the rate of interest of any
of the debt securities;
. changing the currency, currencies or currency unit or units in which any
principal, premium or interest of any of the debt securities is payable;
. changing any of our obligations to maintain an office or agency in the
places and for the purposes required by the indentures;
. impairing any right to take legal action for an overdue payment;
. reducing the percentage required for modifications or waivers of
compliance with the indentures; or
. with certain exceptions, modifying the provisions for the waiver of
certain covenants and defaults and any of the foregoing provisions.
Any actions we or the trustee may take toward adding to our covenants, adding
events of default or establishing the structure or terms of the debt securities
as permitted by the indentures will not require the approval of any holder of
debt securities. In addition, we or the trustee may cure ambiguities or
inconsistencies in the indentures or make other provisions without the approval
of any holder as long as no holder's interests are materially and adversely
affected.
Waiver of Certain Covenants
The indentures provide that we will not be required to comply with certain
restrictive covenants (including those described above under "Senior
Securities--Certain Restrictive Covenants") if the holders of at least two-
thirds in principal amount of each series of outstanding debt securities
affected waive compliance with the restrictive covenants.
Events of Default, Notice and Waiver
"Event of default" when used in an indenture, will mean any of the following
in relation to a series of debt securities:
. failure to pay interest on any debt security for 30 days after the
interest becomes due;
. failure to pay the principal or any premium on any debt security when
due;
. failure to deposit any sinking fund payment for 30 days after such
payment becomes due;
. failure to perform or breach of any other covenant or warranty in the
indenture that continues for 60 days after our being given notice from
the trustee or the holders of at least 25% in principal amount of the
outstanding debt securities of the series;
. certain events of bankruptcy, insolvency or reorganization of ours; or
. any other event of default provided for debt securities of that series.
If any event of default relating to outstanding debt securities of any series
occurs and is continuing, either the trustee or the holders of at least than
25% in principal amount of the outstanding debt securities of that series may
declare the principal of all of the outstanding debt securities of such series
to be due and immediately payable.
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The indentures provide that the holders of at least a majority in principal
amount of the outstanding debt securities of any series may direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee, or of exercising any trust or power conferred on the trustee, with
respect to the debt securities of that series. The trustee may act in any way
that is consistent with those directions and may decline to act if any of the
directions is contrary to law or to the indentures or would involve the trustee
in personal liability.
The indentures provide that the holders of at least a majority in principal
amount of the outstanding debt securities of any series may on behalf of the
holders of all of the outstanding debt securities of the series waive any past
default (and its consequences) under the indentures relating to the series,
except a default (a) in the payment of the principal of or any premium or
interest on any of the debt securities of the series or (b) with respect to a
covenant or provision of such indentures which, under the terms of such
indentures, cannot be modified or amended without the consent of the holders of
all of the outstanding debt securities of the series affected.
The indentures contain provisions entitling the trustee, subject to the duty
of the trustee during an event of default to act with the required standard of
care, to be indemnified by the holders of the debt securities of the relevant
series before proceeding to exercise any right or power under the indentures at
the request of those holders.
The indentures require the trustee to, within 90 days after the occurrence of
a default known to it with respect to any series of outstanding debt
securities, give the holders of that series notice of the default if uncured
and unwaived. However, the trustee may withhold this notice if it in good faith
determines that the withholding of this notice is in the interest of those
holders. However, the trustee may not withhold this notice in the case of a
default in payment of principal, premium, interest or sinking fund installment
with respect to any debt securities of the series. The above notice shall not
be given until at least 30 days after the occurrence of a default in the
performance of or a breach of a covenant or warranty in the applicable
indenture other than a covenant to make payment. The term "default" for the
purpose of this provision means any event that is, or after notice or lapse of
time, or both, would become, an event of default with respect to the debt
securities of that series.
Each indenture requires us to file annually with the trustee a certificate,
executed by one of our officers, indicating whether the officer has knowledge
of any default under the indenture.
Meetings
The indentures contain provisions for convening meetings of the holders of
debt securities of a series if debt securities of that series are issuable as
bearer securities. A meeting may be called at any time by the trustee. If the
trustee fails to call a meeting within 21 days after receipt of a request from
us or the holders of at least 10% in principal amount of the outstanding debt
securities of a series, we or the holders may call a meeting upon notice given
in accordance with the provisions described in "Notices" below. Persons
entitled to vote a majority in principal amount of the outstanding debt
securities of a series shall constitute a quorum at a meeting of the holders of
debt securities of the series. However, if any action is to be taken at the
meeting with respect to a consent or waiver which is required to be given by
the holders of at least two-thirds in principal amount of the outstanding debt
securities of a series, the persons entitled to vote two-thirds in principal
amount of the outstanding debt securities of the series will constitute a
quorum. In the absence of a quorum, a meeting called by us or the trustee shall
be adjourned for a period of at least 10 days, and in the absence of a quorum
at the adjourned meeting, the meeting shall be further adjourned for a period
of at least 10 days. Any resolution with respect to any action which may be
made, given or taken by the holders of a specified percentage in principal
amount of outstanding debt securities of a series may be adopted at a properly
reconvened meeting or adjourned meeting at which a quorum is present by the
affirmative vote of the holders of the specified
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percentage in principal amount of the outstanding debt securities of that
series. Any resolution passed or decision taken at any meeting of holders of
debt securities of any series duly held in accordance with the indentures will
be binding on all holders of debt securities of that series and the related
coupons. With respect to any consent, waiver or other action which the
indentures expressly provide may be given by the holders of the specified
percentage of outstanding debt securities of any series affected (acting as one
class), only the principal amount of outstanding debt securities of any series
represented at a meeting or adjourned meeting duly reconvened at which a quorum
is present as described above and voting in favor of the action will be counted
for purposes of calculating the aggregate principal amount of outstanding debt
securities of all series affected favoring the action.
Notices
Except as otherwise provided in the applicable prospectus supplement, notices
to holders of bearer securities will be given by publication at least once in a
daily newspaper in New York City and London and in any other cities specified
in the bearer securities. For holders of bearer securities, notices will also
be mailed to those persons whose names and addresses were previously filed with
the trustee within the last two years under the indentures, within the time
prescribed for the giving of that information. Notices to holders of registered
securities will be sent by mail to the addresses of those holders as they
appear in the security register.
Title
Title to any bearer securities (including bearer securities in temporary or
definitive global bearer form) and any related coupons will pass by delivery.
We, the appropriate trustee and any agent of us or the trustee may treat the
bearer of any bearer security and the bearer of any coupon and registered owner
of any registered security as the absolute owner (whether or not such security
or coupon is overdue and notwithstanding any notice to the contrary) for the
purpose of making payment and for all other purposes.
Replacement of Securities and Coupons
We will replace any mutilated debt security and any debt security with a
mutilated coupon at the expense of the holder upon surrender of the mutilated
debt security or debt security with a mutilated coupon to the appropriate
trustee. We will replace debt securities or coupons that are destroyed, stolen
or lost at the expense of the holder upon delivery to the appropriate trustee
of evidence of the destruction, loss or theft of the debt securities or coupons
satisfactory to us and to the trustee. In the case of any coupon which is
destroyed, stolen or lost, that coupon will be replaced upon surrender to the
appropriate trustee of the debt security with all related coupons not
destroyed, stolen or lost by issuance of a new debt security in exchange for
the debt security to which that coupon relates. In the case of a destroyed,
lost or stolen debt security or coupon, an indemnity satisfactory to the
appropriate trustee and us may be required at the expense of the holder of the
debt security or coupon before a replacement debt security will be issued.
Defeasance
The indentures contain a provision that, if made applicable to any series of
debt securities, permits us to elect (a) to defease and be discharged from all
of our obligations (subject to limited exceptions) with respect to any series
of debt securities then outstanding, which we refer to below as "legal
defeasance", or (b) to be released from our obligations under certain
restrictive covenants (including those described above under "Senior
Securities--Certain Restrictive Covenants"), which we refer to below as
"covenant defeasance". To make either of the above elections, we must
. deposit in trust with the trustee (a) in the case of debt securities and
coupons denominated in U.S. dollars, U.S. government obligations and (b)
in the case of debt securities and coupons denominated in a foreign
currency, foreign government securities, which through the payment of
principal and interest in accordance with their terms will provide
sufficient money, U.S. government obligations and/or foreign government
obligations as necessary, without reinvestment, to repay in full those
debt securities; and
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. deliver to the trustee an opinion of counsel that holders of the debt
securities will not recognize income, gain or loss for Federal income tax
purposes as a result of the deposit and related defeasance and will be
subject to Federal income tax in the same amount, in the same manner and
at the same times as would have been the case if such deposit and related
defeasance had not occurred (in the case of legal defeasance only, such
opinion of counsel to be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law.)
Certain Rights to Require Purchase of Securities by Ashland Upon Unapproved
Change in Control and Decline in Debt Rating
In the event that (a) there occurs any change in control (as defined below)
of Ashland and (b) the prevailing rating of any series of the debt securities
issued under the indentures on a date within 90 days following public notice of
the change in control is less than the rating on a specified earlier date by
the equivalent of at least one full rating category the following will apply.
Each holder of debt securities of that series will have the right, at the
holder's option, to require us to purchase all or any part of the holder's debt
securities on the repurchase date that is 100 days after the later of (1)
public notice of the change in control and (2) the rating decline, at 100% of
the principal amount on the repurchase date, plus accrued and unpaid interest
to the repurchase date. However, if the rating decline applies to less than all
series of the debt securities, the repurchase rights described above will apply
only to those series with respect to which there has been a rating decline.
On or before the twenty-eighth day after the later of public notice of the
change in control and the decrease in the rating of the debt securities, we are
obligated to mail or cause to be mailed to all holders of record of the debt
securities a notice regarding the change in control, the decrease in the rating
of the debt securities and the repurchase right. The notice shall state the
date by which the repurchase right must be exercised, the applicable price for
the debt securities and the procedure which the holder must follow to exercise
this right. We shall cause a copy of such notice to be published in a newspaper
of general circulation in the Borough of Manhattan, The City of New York. To
exercise this right, the holder of a debt security must deliver on or before
the tenth day before the repurchase date written notice to us (or an agent
designated by us for that purpose) of the holder's exercise of the right,
together with the debt security with respect to which the right is being
exercised, duly endorsed for transfer. We will comply with Rules 13e-4 and 14e-
1 under the Securities Exchange Act of 1934 and any other applicable securities
laws in connection with any repurchase of debt securities.
As used in this prospectus, a "change in control" will be deemed to have
occurred when
. a "person" or "group" within the meaning of Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934 becomes the "beneficial owner", as
defined in Rule 13d-3 under the Act, of more than 50% of our outstanding
voting stock, other than through a transaction consummated with the prior
approval of the board of directors of Ashland, or
. during any period of two consecutive years, individuals who at the
beginning of that period and certain directors elected subsequently who
constitute the board of directors of Ashland cease for any reason to
constitute a majority of the directors then in office. Additional
directors who will be counted toward the majority include any director
whose election by the board of directors of Ashland or whose nomination
for election by our shareholders was approved by a vote of at least two-
thirds of the directors then still in office who either were directors at
the beginning of the two-year period or whose election or nomination for
election was previously approved.
In considering whether to approve a transaction which might otherwise
constitute a change in control, the board of directors of Ashland will be
required to consider the interests of our stockholders, employees and other
creditors which may not necessarily be consistent with the interests of holders
of debt securities. In considering whether to pursue a transaction which might
otherwise constitute a change in control, a potential acquiror will be required
to consider that, to the extent the repurchase right becomes exercisable and is
exercised by holders of debt securities of any series, sufficient funds must be
made available to make payment to these holders. We cannot presently predict
the source of those funds, but expect that the source would be determined in
the context of the overall consideration of this type of transaction.
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Governing Law
The indentures, the debt securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York.
The Trustee
Citibank, N.A. is trustee under the senior indenture and one other indenture
under which unsecured debt obligations of ours are outstanding. The trustee has
other customary banking relationships with us and our affiliates.
DESCRIPTION OF PREFERRED STOCK
General. Our Second Restated Articles of Incorporation, as amended, authorize
the board of directors of Ashland, without further shareholder action, to
provide for the issuance of up to 30,000,000 shares of preferred stock, in one
or more series, and to fix the designations, terms, and relative rights and
preferences, including the dividend rate, voting rights, conversion rights,
redemption and sinking fund provisions and liquidation values of each of these
series. We may amend from time to time our restated articles to increase the
number of authorized shares of preferred stock. Any amendment like this would
require the approval of the holders of two-thirds of the outstanding shares of
all series of preferred stock voting together as a single class without regard
to series. As of the date of this prospectus, we have no preferred stock
outstanding. We have 500,000 shares designated as Series A Participating
Cumulative Preferred Stock reserved for issuance upon exercise of rights under
the rights agreement described below under "Preferred Stock Purchase Rights".
The particular terms of any series of preferred stock being offered by us
under this shelf registration will be described in the prospectus supplement
relating to that series of preferred stock. Those terms may include:
. the title and liquidation preference per share of the preferred stock and
the number of shares offered;
. the purchase price of the preferred stock;
. the dividend rate (or method of calculation), the dates on which
dividends will be paid and the date from which dividends will begin to
accumulate;
. any redemption or sinking fund provisions of the preferred stock;
. any conversion provisions of the preferred stock;
. the voting rights, if any, of the preferred stock; and
. any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions of the
preferred stock.
If the terms of any series of preferred stock being offered differ from the
terms set forth in this prospectus, those terms will also be disclosed in the
prospectus supplement relating to that series of preferred stock. The summary
in this prospectus is not complete. You should refer to the articles of
amendment to the restated articles establishing a particular series of
preferred stock which will be filed with the Secretary of State of the
Commonwealth of Kentucky and the SEC in connection with the offering of the
preferred stock.
The preferred stock will, when issued, be fully paid and nonassessable.
Dividend Rights. The preferred stock will be preferred over the common stock
as to payment of dividends. Before any dividends or distributions (other than
dividends or distributions payable in common stock) on the common stock shall
be declared and set apart for payment or paid, the holders of shares of each
series of preferred stock will be entitled to receive dividends when, as and if
declared by the board of directors of Ashland. We will pay those dividends
either in cash, shares of common stock or preferred stock or otherwise, at the
rate and on the date or dates set forth in the prospectus supplement. With
respect to each
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series of preferred stock, the dividends on each share of the series will be
cumulative from the date of issue of the share unless some other date is set
forth in the prospectus supplement relating to the series. Accruals of
dividends will not bear interest.
Rights Upon Liquidation. The preferred stock will be preferred over the
common stock as to assets so that the holders of each series of preferred stock
will be entitled to be paid, upon our voluntary or involuntary liquidation,
dissolution or winding up and before any distribution is made to the holders of
common stock, the amount set forth in the applicable prospectus supplement.
However, in this case the holders of preferred stock will not be entitled to
any other or further payment. If upon any liquidation, dissolution or winding
up our net assets are insufficient to permit the payment in full of the
respective amounts to which the holders of all outstanding preferred stock are
entitled, our entire remaining net assets will be distributed among the holders
of each series of preferred stock in amounts proportional to the full amounts
to which the holders of each series are entitled.
Redemption. All shares of any series of preferred stock will be redeemable to
the extent set forth in the prospectus supplement relating to the series. All
shares of any series of preferred stock will be convertible into shares of
common stock or into shares of any other series of preferred stock to the
extent set forth in the applicable prospectus supplement.
Voting Rights. Except as indicated in the prospectus supplement, the holders
of preferred stock shall be entitled to one vote for each share of preferred
stock held by them on all matters properly presented to shareholders. The
holders of common stock and the holders of all series of preferred stock will
vote together as one class.
Preferred Stock Purchase Rights. On May 16, 1996, we entered into a rights
agreement with Harris Trust and Savings Bank, as rights agent, which is a
shareholder rights plan providing for a dividend of one preferred stock
purchase right for each outstanding share of our common stock. We issued the
dividend to shareholders of record on the date of the adoption of the rights
agreement, and holders of shares of common stock issued since that date are
issued rights with their shares. The rights trade automatically with shares of
common stock and become exercisable only under certain circumstances as
described below. The rights are designed to protect the interests of Ashland
and our shareholders against coercive takeover tactics. The purpose of the
rights is to encourage potential acquirors to negotiate with the board of
directors of Ashland prior to attempting a takeover and to provide the board
with leverage in negotiating on behalf of all shareholders the terms of any
proposed takeover. The rights may have certain anti-takeover effects. The
rights should not, however, interfere with any merger or other business
combination approved by the board of directors of Ashland.
Until a right is exercised, the holder of a right will have no rights as an
Ashland shareholder, including, without limitation, the right to vote or to
receive dividends. Upon becoming exercisable, each right will entitle its
holder to purchase from us one one-thousandth of a share of Series A
Participating Cumulative Preferred Stock, without par value, at a purchase
price of $140 per right, subject to adjustment. In general, the rights will not
be exercisable until the earlier of (a) any time that we learn that a person or
group or an affiliate or associate of the person or group has acquired, or has
obtained the right to acquire, beneficial ownership of 15% or more of our
outstanding common stock, unless provisions preventing accidental triggering of
the rights apply and (b) the close of business on the date, if any, designated
by the board of directors of Ashland following the commencement of, or first
public disclosure of an intent to commence, a tender or exchange offer for 15%
or more of our outstanding common stock. Below we refer to the earlier of those
dates as the "distribution date" and the person or group acquiring at least 15%
of our common stock as an "acquiring person". You should assume that any of the
following provisions that refers to an acquiring person applies to any
associate or affiliate of the acquiring person as well.
In the event that, following the distribution date, we are acquired in a
merger or other business combination by a publicly traded acquiring person, or
50% or more of our assets or assets representing 50% or more of our revenues or
cash flow are sold, leased, exchanged or transferred in another manner to a
publicly
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traded acquiring person, each right will entitle its holder to purchase, for
the purchase price, that number of common shares of the corporation which at
the time of the transaction would have a market value of twice the purchase
price. In the event we are acquired in a merger or other business combination
by a non-publicly traded acquiring person, or 50% or more of our assets or
assets representing 50% or more of our revenues or cash flow are sold, leased,
exchanged or otherwise transferred to a non-publicly traded acquiring person,
each right will entitle its holder to purchase, for the purchase price, at the
holder's option:
. that number of shares of the surviving corporation (including us, if we
are the surviving corporation) in the transaction with the entity which
at the time of the transaction would have a book value of twice the
purchase price,
. that number of shares of the entity which at the time of the transaction
would have a book value of twice the purchase price or
. if the entity has an affiliate which has publicly traded common shares,
that number of common shares of the affiliate which at the time of the
transaction would have a market value of twice the purchase price.
Any rights that are at any time beneficially owned by an acquiring person
will be null and void and nontransferable, and any holder of such right,
including any purported transferee or subsequent holder, will be unable to
exercise or transfer the right.
The rights will expire at the close of business on May 16, 2006, unless
redeemed before that time. At any time prior to the earlier of (a) the time a
person or group becomes an acquiring person and (b) the expiration date, the
board of directors of Ashland may redeem the rights in whole, but not in part,
at a price of $.01 per right. This amount is subject to adjustment as provided
in the rights agreement.
The preceding summary is not complete and is not intended to give full effect
to provisions of statutory or common law. You should refer to the applicable
provisions of the rights agreement and the form of right certificate, which are
incorporated by reference to Exhibits 4(a) and 4(c), respectively, to our Form
8-A, filed with the SEC on May 16, 1996, into Exhibit 4.5 to the registration
statement.
Certain Provisions of Ashland's Restated Articles. In the event of a proposed
merger or tender offer, proxy contest or other attempt to gain control of us
and not approved by the board of directors of Ashland, it would be possible for
the board of directors of Ashland to authorize the issuance of one or more
series of preferred stock with voting rights or other rights and preferences
which would impede the success of the proposed merger, tender offer, proxy
contest or other attempt to gain control of us. This authority may be limited
by applicable law, the restated articles and the applicable rules of the stock
exchanges upon which the common stock is listed. The consent of the holders of
common stock would not be required for any issuance of preferred stock like
this.
The restated articles incorporate in substance certain provisions of the
Kentucky Business Corporation Act to require certain approvals as a condition
to mergers and certain other business combinations involving us and the 10%
shareholder unless (a) the transaction is approved by a majority of our
continuing directors or (b) certain minimum price and procedural requirements
are met. Those approvals include the approval of the holders of at least 80% of
our voting stock, plus two-thirds of the voting stock other than voting stock
owned by a 10% shareholder. In addition, the Kentucky Business Corporation Act
includes a standstill provision which precludes a business combination from
occurring with a 10% shareholder, notwithstanding any vote of shareholders or
price paid, for a period of five years after the date that 10% shareholder
becomes a 10% shareholder, unless a majority of our independent directors
approves the combination before that date.
The restated articles also provide that
. the board of directors of Ashland is classified into three classes,
. a director may be removed from office without cause only by the
affirmative vote of the holders of at least 80% of the voting power of
our then outstanding voting stock,
. the board of directors of Ashland may adopt by-laws concerning the
conduct of, and matters considered at, meetings of shareholders,
including special meetings,
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. the by-laws and certain provisions of the restated articles may be
amended only by the affirmative vote of the holders of at least 80% of
the voting power of our then outstanding voting stock and
. the by-laws may be adopted or amended by the board of directors of
Ashland. However, the by-laws adopted in this fashion may be amended or
repealed by affirmative vote of the holders of at least 80% of the voting
power of our then outstanding voting stock.
DESCRIPTION OF DEPOSITARY SHARES
General. We may, at our option, elect to offer fractional shares of preferred
stock, rather than full shares of preferred stock. If we exercise this option,
we will issue to the public receipts for depositary shares, and each of these
depositary shares will represent a fraction (to be set forth in the applicable
prospectus supplement) of a share of a particular series of preferred stock.
The shares of any series of preferred stock underlying the depositary shares
will be deposited under a deposit agreement between us and a bank or trust
company selected by us. The depositary will have its principal office in the
United States and a combined capital and surplus of at least $50,000,000.
Subject to the terms of the deposit agreement, each owner of a depositary share
will be entitled, in proportion to the applicable fraction of a share of
preferred stock underlying that depositary share, to all the rights and
preferences of the preferred stock underlying that depositary share. Those
rights include dividend, voting, redemption and liquidation rights.
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional shares of preferred stock underlying
the depositary shares, in accordance with the terms of the offering. Copies of
the forms of deposit agreement and depositary receipt will be filed as exhibits
to the registration statement. The following summary of the deposit agreement,
the depositary shares and the depositary receipts is not complete. You should
refer to the forms of the deposit agreement and depositary receipts that will
be filed with the SEC in connection with the offering of the specific
depositary shares.
Pending the preparation of definitive engraved depositary receipts, the
depositary may, upon our written order, issue temporary depositary receipts
substantially identical to the definitive depositary receipts but not in
definitive form. These temporary depositary receipts entitle their holders to
all the rights of definitive depositary receipts which are to be prepared
without unreasonable delay. Temporary depositary receipts will then be
exchangeable for definitive depositary receipts at our expense.
Dividends and Other Distributions. The depositary will distribute all cash
dividends or other cash distributions received with respect to the preferred
stock to the record holders of depositary shares relating to the preferred
stock in proportion to the number of depositary shares owned by those holders.
If there is a distribution other than in cash, the depositary will distribute
property received by it to the record holders of depositary shares that are
entitled to receive the distribution, unless the depositary determines that it
is not feasible to make the distribution. If this occurs, the depositary may,
with our approval, sell the property and distribute the net proceeds from the
sale to the applicable holders.
Redemption of Depositary Shares. If a series of preferred stock represented
by depositary shares is subject to redemption, the depositary shares will be
redeemed from the proceeds received by the depositary resulting from the
redemption, in whole or in part, of that series of preferred stock held by the
depositary. The redemption price per depositary share will be equal to the
applicable fraction of the redemption price per share payable with respect to
that series of the preferred stock. Whenever we redeem shares of preferred
stock that are held by the depositary, the depositary will redeem, as of the
same redemption date, the number of depositary shares representing the shares
of preferred stock so redeemed. If fewer than all the depositary shares are to
be redeemed, the depositary shares to be redeemed will be selected by lot or
pro rata as may be determined by the depositary.
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Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of the preferred stock are entitled to vote, the depositary will
mail the information contained in the notice to the record holders of the
depositary shares underlying the preferred stock. Each record holder of the
depositary shares on the record date (which will be the same date as the record
date for the preferred stock) will be entitled to instruct the depositary as to
the exercise of the voting rights pertaining to the amount of the preferred
stock represented by such holder's depositary shares. The depositary will then
try, as far as practicable, to vote the number of shares of preferred stock
underlying those depositary shares in accordance with such instructions, and we
will agree to take all actions which may be deemed necessary by the depositary
to enable the depositary to do so. The depositary will not vote the shares of
preferred stock to the extent it does not receive specific instructions from
the holders of depositary shares underlying the preferred stock.
Amendment and Termination of the Depositary Agreement. The form of depositary
receipt evidencing the depositary shares and any provision of the deposit
agreement may at any time be amended by agreement between us and the
depositary. However, any amendment which materially and adversely alters the
rights of the holders of depositary shares will not be effective unless the
amendment has been approved by the holders of at least a majority of the
depositary shares then outstanding. The deposit agreement may be terminated by
us or by the depositary only if (a) all outstanding depositary shares have been
redeemed or (b) there has been a final distribution of the underlying preferred
stock in connection with our liquidation, dissolution or winding up and the
preferred stock has been distributed to the holders of depositary receipts.
Charges of Depositary. We will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. We will also pay charges of the depositary in connection with the
initial deposit of the preferred stock and any redemption of the preferred
stock. Holders of depositary receipts will pay other transfer and other taxes
and governmental charges and those other charges, including a fee for the
withdrawal of shares of preferred stock upon surrender of depositary receipts,
as are expressly provided in the deposit agreement to be for their accounts.
Miscellaneous. The depositary will forward to holders of depositary receipts
all reports and communications from us that we deliver to the depositary and
that we are required to furnish to the holders of the preferred stock.
Neither we nor the depositary will be liable if either of us is prevented or
delayed by law or any circumstance beyond our control in performing our
respective obligations under the deposit agreement. Our obligations and those
of the depositary will be limited to performance in good faith of our
respective duties under the deposit agreement. Neither we nor they will be
obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or preferred stock unless satisfactory indemnity is
furnished. We and the depositary may rely upon written advice of counsel or
accountants, or upon information provided by persons presenting preferred stock
for deposit, holders of depositary receipts or other persons believed to be
competent and on documents believed to be genuine.
Resignation and Removal of Depositary. The depositary may resign at any time
by delivering notice to us of its election to resign. We may remove the
depositary at any time. Any resignation or removal will take effect upon the
appointment of a successor depositary and its acceptance of the appointment.
The successor depositary must be appointed within 60 days after delivery of the
notice of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000.
DESCRIPTION OF COMMON STOCK
As of the date of this prospectus, we are authorized to issue up to
300,000,000 shares of common stock. As of December 31, 1998, we had 74,645,734
shares of common stock issued and had reserved 12,029,530 additional shares of
common stock for issuance under our various stock and compensation incentive
plans.
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The following summary is not complete and is not intended to give full effect
to provisions of statutory or common law. You should refer to the applicable
provisions of the following documents:
. the restated articles, which are incorporated by reference to Exhibit 3
to our Form 10-Q for the quarter ended December 31, 1997, and
. the by-laws, as amended, which are incorporated by reference to Exhibit 3
to our Form 10-Q for the quarter ended December 31, 1998.
Dividends. The holders of common stock are entitled to receive dividends
when, as and if declared by the board of directors of Ashland, out of funds
legally available for their payment subject to the rights of holders of the
preferred stock subject to the rights of holders of preferred stock.
Voting Rights. The holders of common stock are entitled to one vote per share
on all matters submitted to a vote of shareholders. The holders of common stock
also possess cumulative voting rights. Under cumulative voting, a shareholder
may multiply the number of shares owned by the number of directors to be
elected and either cast this total number of votes for any one nominee or
distribute the total number of votes, in any proportion, among as many nominees
as the shareholder desires.
Rights Upon Liquidation. In the event of our voluntary or involuntary
liquidation, dissolution or winding up, the holders of common stock will be
entitled to share equally in any of our assets available for distribution after
the payment in full of all debts and distributions and after the holders of all
series of outstanding preferred stock have received their liquidation
preferences in full.
Miscellaneous. The outstanding shares of common stock are fully paid and
nonassessable. The holders of common stock are not entitled to preemptive or
redemption rights. Shares of common stock are not convertible into shares of
any other class of capital stock. Harris Trust and Savings Bank, Chicago,
Illinois, is the transfer agent and registrar for the common stock.
DESCRIPTION OF SECURITIES WARRANTS
We may issue securities warrants for the purchase of debt securities,
preferred stock or common stock. Securities warrants may be issued
independently or together with debt securities, preferred stock or common stock
and may be attached to or separate from any offered securities. Each series of
securities warrants will be issued under a separate warrant agreement to be
entered into between us and a bank or trust company, as warrant agent. The
securities warrant agent will act solely as our agent in connection with the
securities warrants and will not assume any obligation or relationship of
agency or trust for or with any registered holders of securities warrants or
beneficial owners of securities warrants. This summary of some provisions of
the securities warrants is not complete. You should refer to the securities
warrant agreement, including the forms of securities warrant certificate
representing the securities warrants, relating to the specific securities
warrants being offered for the complete terms of the securities warrant
agreement and the securities warrants. That securities warrant agreement,
together with the terms of securities warrant certificate and securities
warrants, will be filed with the SEC in connection with the offering of the
specific securities warrants.
The particular terms of any issue of securities warrants will be described in
the prospectus supplement relating to the issue. Those terms may include:
. the designation, aggregate principal amount, currencies, denominations
and terms of the series of debt securities purchasable upon exercise of
securities warrants to purchase debt securities and the price at which
the debt securities may be purchased upon exercise;
. the designation, number of shares, stated value and terms (including,
without limitation, liquidation, dividend, conversion and voting rights)
of the series of preferred stock purchasable upon exercise of securities
warrants to purchase shares of preferred stock and the price at which
such number of shares of preferred stock of such series may be purchased
upon such exercise;
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. the number of shares of common stock purchasable upon the exercise of
securities warrants to purchase shares of common stock and the price at
which such number of shares of common stock may be purchased upon such
exercise;
. the date on which the right to exercise the securities warrants will
commence and the date on which the right will expire;
. United States Federal income tax consequences applicable to the
securities warrants; and
. any other terms of the securities warrants.
Securities warrants for the purchase of preferred stock and common stock will
be offered and exercisable for U.S. dollars only. Securities warrants will be
issued in registered form only. The exercise price for securities warrants will
be subject to adjustment in accordance with the applicable prospectus
supplement.
Each securities warrant will entitle its holder to purchase the principal
amount of debt securities or the number of shares of preferred stock or common
stock at the exercise price set forth in, or calculable as set forth in, the
applicable prospectus supplement. The exercise price may be adjusted upon the
occurrence of certain events as set forth in the prospectus supplement. After
the close of business on the expiration date, unexercised securities warrants
will become void. We will specify the place or places where, and the manner in
which, securities warrants may be exercised in the applicable prospectus
supplement.
Prior to the exercise of any securities warrants to purchase debt securities,
preferred stock or common stock, holders of the securities warrants will not
have any of the rights of holders of the debt securities, preferred stock or
common stock purchasable upon exercise, including:
. in the case of securities warrants for the purchase of debt securities,
the right to receive payments of principal of, any premium or interest on
the debt securities purchasable upon exercise or to enforce covenants in
the applicable indenture; or
. in the case of securities warrants for the purchase of preferred stock or
common stock, the right to vote or to receive any payments of dividends
on the preferred stock or common stock purchasable upon exercise.
PLAN OF DISTRIBUTION
We may sell the debt securities, preferred stock, depositary shares, common
stock or securities warrants (together referred to as the "offered securities")
(a) through underwriters or dealers; (b) directly to one or a limited number of
institutional purchasers; or (c) through agents. This prospectus or the
applicable prospectus supplement will set forth the terms of the offering of
any offered securities, including the name or names of any underwriters,
dealers or agents, the price of the offered securities and the net proceeds to
us from such sale, any underwriting commissions or other items constituting
underwriters' compensation.
If underwriters are used in the sale, the offered securities 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
offered securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by one or more
investment banking firms or others, as designated. Unless otherwise set forth
in the applicable prospectus supplement, the obligations of the underwriters or
agents to purchase the offered securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the offered
securities if any are purchased. Any initial public offering price and any
underwriting commissions or other items constituting underwriters' compensation
may be changed from time to time.
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If a dealer is utilized in the sale of any offered securities, we will sell
those offered securities to the dealer, as principal. The dealer may then
resell the offered securities to the public at varying prices to be determined
by the dealer at the time of resale.
We may sell offered securities directly to one or more institutional
purchasers, or through agents at a fixed price or prices, which may be changed,
or at varying prices determined at time of sale. Unless otherwise indicated in
the prospectus supplement, any agent will be acting on a best efforts basis for
the period of its appointment.
If an applicable prospectus supplement indicates, we will authorize agents,
underwriters or dealers to solicit offers by certain specified institutions to
purchase offered securities from us at the public offering price set forth in
the prospectus supplement under delayed delivery contracts providing for
payment and delivery on a specified date in the future. These contracts will be
subject only to those conditions set forth in the prospectus supplement, and
the prospectus supplement will set forth the commission payable for
solicitation of the contracts.
Under agreements entered into with us, agents and underwriters who
participate in the distribution of the offered securities may be entitled to
indemnification by us against certain civil liabilities, including liabilities
under the Securities Act of 1933, or to contribution with respect to payments
which the agents or underwriters may be required to make. Agents and
underwriters may be customers of, engage in transactions with or perform
services for us in the ordinary course of business.
LEGAL MATTERS
The validity of the issuance of the offered securities will be passed upon
for us by Cravath, Swaine & Moore, New York, New York, who will rely as to
matters of Kentucky law upon the opinion of Thomas L. Feazell, Esq., who is a
Senior Vice President of Ashland. Cravath, Swaine & Moore has in the past
represented and continues to represent us in other matters on a regular basis.
Samuel C. Butler is a director of ours and a partner in the law firm of
Cravath, Swaine & Moore and owns beneficially 65,325 shares of our common stock
(includes common stock units held in our deferred compensation plan). Thomas L.
Feazell owns beneficially 143,304 shares of our common stock (includes common
stock units held in our deferred compensation plan).
EXPERTS
The consolidated financial statements and schedule of Ashland Inc.
incorporated by reference or included in Ashland Inc.'s Annual Report (Form 10-
K) for the year ended September 30, 1998, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements and schedule have been incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
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