<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM F-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
SMITHKLINE BEECHAM HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 51-0374608
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
1403 FOULK ROAD, SUITE 102, P.O. BOX 7108, WILMINGTON, DELAWARE 19803-2775,
(302) 479-5801
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SMITHKLINE BEECHAM plc
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
ENGLAND 98-0101920
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
NEW HORIZONS COURT, BRENTFORD, MIDDLESEX TW8 9EP, ENGLAND 44-181-975-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DONALD F. PARMAN, ESQ.
SECRETARY
SMITHKLINE BEECHAM HOLDINGS CORPORATION
C/O SMITHKLINE BEECHAM CORPORATION
ONE FRANKLIN PLAZA
PHILADELPHIA, PENNSYLVANIA 19101
(215) 751-7633
(NAME, ADDRESS, INCLUDING ZIP CODE
AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JAMES F. MUNSELL, ESQ. NORMAN D. SLONAKER, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON BROWN & WOOD
ONE LIBERTY PLAZA ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10048
(212) 225-2000 (212) 839-5300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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- ------------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM OFFERING PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
- ------------------------------------------------------------------------------------------------------------------
Flexible Auction Rate Preferred Stock....... 12,920 shares $100,000 $1,292,000,000 $445,518
- ------------------------------------------------------------------------------------------------------------------
Limited Guarantee by SmithKline Beecham plc
of dividends declared and unpaid by
SmithKline Beecham Holdings Corporation on
the Flexible Auction Rate Preferred
Stock..................................... N/A (1) N/A N/A
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</TABLE>
(1) No separate consideration will be received for the Guarantee.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, DATED JUNE 28, 1996
SMITHKLINE BEECHAM HOLDINGS CORPORATION
Flexible Auction Rate Preferred Stock
Liquidation Preference $100,000 Per Share
With a limited guarantee of declared and unpaid dividends by
SMITHKLINE BEECHAM PLC
------------------------
SmithKline Beecham Holdings Corporation, a Delaware corporation (the
"Company"), from time to time may issue in one or more series ("Series") up to
12,920 shares of its flexible auction rate preferred stock (the "Shares"). Each
Share will have a liquidation preference of $100,000. All of the shares of
common stock, no par value, of the Company ("Common Stock") are owned indirectly
by SmithKline Beecham plc, an English public limited company ("SmithKline
Beecham"). SmithKline Beecham will issue a limited guarantee of the payment of
dividends declared by the Company and unpaid (the "Guarantee"), and will agree
to provide additional capital to the Company, in each case, under circumstances,
and subject to limitations, described herein. See "Description of SmithKline
Beecham Support".
The designation, the number of Shares, certain dividend and any special
redemption or repurchase provisions for the Initial Dividend Period and other
applicable terms for each Series not described herein will be described in the
Prospectus Supplement relating to such Series. Dividends on the Shares of each
Series will accumulate from the date such Shares are originally issued by the
Company (the "Date of Original Issue") until the Initial Period-End Dividend
Payment Date specified in the Prospectus Supplement for such Series (the
"Initial Dividend Period") at the cash dividend rate (the "Applicable Rate")
described in the Prospectus Supplement for such Series. The Applicable Rate for
each Subsequent Dividend Period for each Series will be determined pursuant to
periodic auctions conducted in accordance with the procedures described in
Appendix B hereto (each, an "Auction"). After the Initial Dividend Period,
except as otherwise provided herein, each Subsequent Dividend Period for each
Series will be a Regular Dividend Period; provided, however, that prior to any
Auction for a Subsequent Dividend Period, the Company may designate, subject to
certain limitations and notice requirements described herein, such Subsequent
Dividend Period as a Special Dividend Period. See "Description of Securities --
Dividends".
The Applicable Rate for each Series for each Subsequent Dividend Period
therefor will be reset on the basis of Bids, Hold Orders and Sell Orders placed
by Existing Holders and Potential Holders of Shares of such Series in an Auction
conducted on the Business Day next preceding the commencement of such Dividend
Period. The Applicable Rate that results from an Auction for any Dividend Period
will not be greater than the Maximum Applicable Rate. See "Description of
Securities -- The Auction -- Orders by Existing Holders and Potential Holders".
If the Company fails to pay within the applicable grace period for any
Series the full amount of any accumulated and unpaid dividends on Shares of such
Series on any Period-End Dividend Payment Date or the redemption or repurchase
price of Shares of such Series called for redemption or subject to repurchase,
the Applicable Rate will not be based on the results of an Auction but instead
will be equal to the Non-Payment Period Rate and each Subsequent Dividend Period
for such Series will be a Regular Dividend Period until such failure to pay is
cured. See "Description of Securities -- Determination of Dividend Rate".
Each prospective purchaser should review carefully the detailed information
regarding the Auction Procedures which appears in this Prospectus, including the
Appendices, and should note that (i) an Order constitutes an irrevocable
commitment to hold, purchase or sell Shares based upon the results of the
related Auction, (ii) the Auctions will be conducted through telephone
communications, (iii) settlement for purchases and sales will be on the Business
Day following the Auction and (iv) ownership of Shares will be maintained in
book-entry form by or through the Securities Depository. Under certain
circumstances, holders of Shares may be unable to sell their Shares in an
Auction and thus may lack liquidity of investment. Shares may be transferred
through a Broker-Dealer pursuant to a Bid or a Sell Order placed in an Auction
or in the secondary market, if any.
Except during the Initial Dividend Period (unless otherwise specified in the
applicable Prospectus Supplement) and any Non-Call Period therefor, the Shares
of each Series will be redeemable, in whole or in part, on the second Business
Day prior to any Dividend Payment Date, at the option of the Company, at
$100,000 per Share upon the payment of accumulated and unpaid dividends thereon.
During a Regular Dividend Period and, if designated by the Company, a Special
Dividend Period, Shares of each Series will be subject to mandatory redemption
upon the occurrence of a Change of Control, in whole, at a redemption price of
$100,000 per Share plus accumulated and unpaid dividends thereon. If designated
by the Company, during a Special Dividend Period, holders of Shares of the
applicable Series will have the right to require the Company to repurchase such
Shares upon the occurrence of a Change of Control, at a repurchase price equal
to the sum of $100,000 per Share plus accumulated and unpaid dividends thereon.
Holders of Shares of each Series will have certain general and class voting
rights, including the right, voting together with holders of Common Stock and
other holders of capital stock of the Company similarly entitled, to vote
cumulatively on the election of directors of the Company and on other matters
submitted generally to holders of Common Stock and to elect additional directors
in the event of nonpayment of dividends or a Credit Rating Event. Also, except
under certain circumstances, the Company may not merge or consolidate with
another entity or liquidate or dispose of all or substantially all of its assets
unless it obtains the approval of holders of at least two-thirds of the Shares
of each Series with a Dividend Period that has more than 99 days remaining.
The Shares will not be listed on any stock exchange or quoted on the
National Association of Securities Dealers Automated Quotation system.
If any agent of the Company, or any underwriter, is involved in the sale of
the Shares offered hereby, the name of such agent or underwriter and any
applicable commissions or discounts will be set forth in, or may be calculated
from, the Prospectus Supplement, and the net proceeds to the Company from such
sale will be the purchase price of such Shares less such commissions or
discounts and other attributable issuance and distribution expenses. The
aggregate net proceeds to the Company from the sale of all the Shares will be
the public offering or purchase price of the Shares sold less the aggregate of
such commissions and discounts and other expenses of issuance and distribution.
See "Plan of Distribution" for a description of possible indemnification
arrangements for agents or underwriters.
This Prospectus may not be used to consummate sales of Shares unless
accompanied by a Prospectus Supplement.
SEE "RISK FACTORS" ON PAGE 18 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE SHARES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JULY , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILLED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 3
AVAILABLE INFORMATION
SmithKline Beecham is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith is required to file reports, including annual reports on
Form 20-F, and other information with the Securities and Exchange Commission
(the "Commission"). Copies of SmithKline Beecham's Annual Report on Form 20-F
for the year ended December 31, 1995 (the "1995 Form 20-F"), and of other
reports and information filed by SmithKline Beecham with the Commission, may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the Commission's regional offices located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
at 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
materials may also be obtained by mail from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, such material may be inspected and copied at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company and SmithKline Beecham have filed with the Commission a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities covered by this Prospectus
(the "Registration Statement"). This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to SmithKline Beecham, the Company and such securities, reference is
hereby made to such Registration Statement, including the exhibits filed
therewith. The Registration Statement, the exhibits thereto, and reports and
other information to be filed pursuant to the Exchange Act can be obtained by
mail from or inspected and copied at the public reference facilities maintained
by the Commission as provided in the prior paragraph.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by SmithKline Beecham with the Commission are
incorporated by reference in this Prospectus:
(1) The 1995 Form 20-F; and
(2) Reports on Form 6-K dated April 18, 1996 (filing the SmithKline Beecham
earnings release for the three months ended March 31, 1996) and dated April 15,
1996 (regarding completion of share structure simplification).
All documents subsequently filed by the Company or SmithKline Beecham
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the Offering in
respect of which this Prospectus is being delivered shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute part of this
Prospectus.
The Company or SmithKline Beecham will provide without charge to each
person to whom a copy of this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference (not including exhibits to such information, unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Written or oral requests for such copies should
be directed to the Secretary of the Company, care of SmithKline Beecham
Corporation (FP2225), One Franklin Plaza, Philadelphia, Pennsylvania 19101
(Telephone: 215-751-7633), or to the Secretary of SmithKline Beecham, at One New
Horizons Court, Brentford, Middlesex TW8 9EP, England (Telephone:
44-181-975-2000).
2
<PAGE> 4
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS
SmithKline Beecham is a public limited company incorporated in England and
Wales. A number of the directors and executive officers of SmithKline Beecham
are non-residents of the United States, and all or a substantial portion of the
assets of such persons are located outside the United States. As a result, it
may not be possible for investors to effect service of process within the United
States upon such persons or to enforce against them in U.S. courts judgments
obtained in U.S. courts predicated upon the civil liability provisions of the
federal securities laws of the United States. SmithKline Beecham has been
advised by its English solicitors, Linklaters & Paines, that there is doubt as
to the enforceability in England, in original actions or in actions for
enforcement of judgments of U.S. courts, of civil liabilities to the extent
predicated upon the federal securities laws of the United States. See "Risk
Factors -- Enforceability of U.S. Securities Laws". SmithKline Beecham has
expressly submitted to the jurisdiction of New York state and federal courts
sitting in the City of New York for the purpose of any suit, action or
proceeding arising out of the Guarantee. Service of process on SmithKline
Beecham may be made by mailing a copy thereof to SmithKline Beecham at its
address set forth above or to Donald F. Parman, authorized representative of
SmithKline Beecham in the United States, care of SmithKline Beecham Corporation
(FP2225), One Franklin Plaza, Philadelphia, Pennsylvania 19101.
EXCHANGE RATE INFORMATION
SmithKline Beecham publishes its consolidated financial statements in
pounds sterling ("L"). Each pound sterling is comprised of 100 pence ("p"). The
following table sets forth, for each period indicated, the high and low exchange
rates for pounds sterling expressed in United States dollars, based upon the
inverse of the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New
York (the "Noon Buying Rate"), the average of such exchange rates on the last
day of each full month during such period, and such exchange rate at the end of
such period:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
---------------------------------------- ENDED MARCH 31,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---------------
<S> <C> <C> <C> <C> <C> <C>
High............................ 1.99 2.01 1.59 1.64 1.64 1.55
Low............................. 1.60 1.50 1.42 1.46 1.53 1.50
Average......................... 1.78 1.75 1.50 1.54 1.58 1.52
Rate at period end.............. 1.87 1.51 1.48 1.57 1.55 1.53
</TABLE>
On June 25, 1996, the inverse of the Noon Buying Rate was L1 = U.S.$1.54.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following information is qualified in its entirety by, and is subject
to, the detailed information and financial statements, including the notes
thereto, appearing elsewhere or incorporated by reference in this Prospectus.
All financial and other information at dates and for periods prior to the
formation of the Company was prepared as if the Company (together with the
subsidiaries and investments that it will have at the time of the initial
issuance of Shares) had existed and operated as a separate business at such
dates and during such periods. Except where the context requires otherwise,
references to the Company include the Company and its consolidated subsidiaries.
Terms not defined in this Prospectus Summary are defined elsewhere in this
Prospectus. For a reference to the definitions of certain capitalized terms used
herein, see the Glossary that appears at the end of this Prospectus.
THE COMPANY AND SMITHKLINE BEECHAM
The Company was incorporated in May 1996 for the principal purpose of
acquiring, owning and managing certain non-U.S. assets of SmithKline Beecham,
primarily in the pharmaceuticals business. SmithKline Beecham owns indirectly
100 percent of the Common Stock of the Company. The Company had combined sales
of $1,698 million and $389 million and combined net income of $110 million and
$19 million for 1995 and the first quarter of 1996, respectively. The Company is
a holding company and conducts its operations through approximately 60
subsidiaries. The Company's holdings also include fixed rate cumulative
preferred stock of SmithKline Beecham Biologicals S.A., an indirect Belgian
pharmaceuticals subsidiary of SmithKline Beecham ("SB Biologicals"), having an
aggregate redemption price of $650 million (the "SB Biologicals Preferred
Stock"). See "Business -- SB Biologicals". The Company's primary activities
consist of the manufacture and sale of pharmaceuticals (prescription medicines)
and the manufacture and sale of certain consumer healthcare products, such as
over-the-counter ("OTC") medicines, oral care products and nutritional drinks,
as part of the worldwide business of SmithKline Beecham and its subsidiaries
(collectively, "SmithKline Beecham Group"). The Company also engages in
intercompany lending to other companies within SmithKline Beecham Group.
The principal activities of SmithKline Beecham Group are the discovery,
development, manufacture and marketing of pharmaceuticals and vaccines, the
provision of disease management and pharmaceutical benefit management services,
OTC medicines and health-related consumer products, and the provision of
clinical laboratory testing services.
The Company's principal executive offices are located at 1403 Foulk Road,
Suite 102, P.O. Box 7108, Wilmington, Delaware 19803-2775, telephone (302)
479-5801. SmithKline Beecham's principal executive offices are located at New
Horizons Court, Brentford, Middlesex TW8 9EP, England, telephone 44-181-
975-2000.
RELATIONSHIP WITH SMITHKLINE BEECHAM GROUP
SmithKline Beecham conducts its pharmaceutical and consumer healthcare
businesses on a worldwide basis directly and through approximately 330
subsidiaries, including the Company and its subsidiaries. The operations of the
Company and its subsidiaries are fully integrated with those of SmithKline
Beecham Group as a whole through a series of intercompany arrangements including
purchases and sales of active ingredients and finished products, product and
intellectual property licenses, intercompany loans and management and shared
services agreements (see "Arrangements with SmithKline Beecham Group"). For
example, the Company's manufacturing operations produce certain pharmaceutical
and consumer healthcare products for sale by SmithKline Beecham Group marketing
units worldwide. Other operations produce certain raw materials or semi-finished
ingredients which are sold to other SmithKline Beecham Group entities for use in
the manufacture of other products, which may in turn be sold back to the
Company's subsidiaries in finished form for marketing and sale to end users.
SmithKline Beecham Group also supplies a substantial portion of the raw
materials used by the Company in manufacturing finished products. In addition,
the Company and other members of SmithKline Beecham Group generally share the
results of their research and development efforts through mutual licensing
agreements or arrangements.
4
<PAGE> 6
While there may be no direct correlation between the financial results of
the Company and those of SmithKline Beecham in any particular period, the
overall performance of the Company is interdependent with the performance of
other units of SmithKline Beecham Group. Moreover, the Company is dependent upon
other members of SmithKline Beecham Group with respect to new product
development, the addition of any resulting new products to the Company's product
line and the expansion of the Company's marketing and distribution activities.
The Company believes that the agreements and arrangements between the
Company and its subsidiaries, on the one hand, and other members of SmithKline
Beecham Group, on the other hand, are on arm's length terms. However, SmithKline
Beecham's determination to seek to establish, modify or terminate any such
agreement or arrangement is made on a case-by-case basis, generally with a view
to the objectives of SmithKline Beecham Group as a whole. There can be no
assurance that the Company or its subsidiaries will be requested to produce or
market any particular product or to engage in any particular business of
SmithKline Beecham Group, or that any existing business relationship between the
Company and its subsidiaries, on the one hand, and other members of SmithKline
Beecham Group, on the other hand, will not be so modified or terminated.
SmithKline Beecham will have the ability to modify or terminate business
relationships affecting the Company without seeking the approval of the holders
of Shares. See "Arrangements with SmithKline Beecham Group".
The Company intends to pay dividends on the Shares out of earnings derived
from dividends from its subsidiaries, dividends on the SB Biologicals Preferred
Stock and interest income on intercompany loans. Although the ability of the
Company's subsidiaries and SB Biologicals to pay dividends to the Company is
dependent upon the subsidiaries' and SB Biologicals' profitability, regulatory
requirements and other factors, the Company expects its subsidiaries and SB
Biologicals to continue to have sufficient earnings and cash flow to enable them
to declare and pay dividends in amounts sufficient (together with the Company's
interest income) to permit the Company to meet its dividend obligations with
respect to the Shares, after adequate provision has been made for the Company's
operating expenses, taxes, working capital, capital expenditures and other
corporate requirements.
SMITHKLINE BEECHAM SUPPORT
SmithKline Beecham plc will unconditionally and irrevocably guarantee the
due and punctual payment by the Company of dividends on the Shares to the extent
that such dividends have been declared by the Company's Board of Directors out
of funds legally available therefor and remain unpaid, and will enter into a
support agreement with the Company which will require it to make additional
capital contributions to the Company (the "Support Agreement") in the
circumstances described under "Description of SmithKline Beecham Support -- The
Support Agreement". The rights of holders of Shares of any Series under the
Guarantee will be limited and subordinated to the rights of other creditors of
SmithKline Beecham. Similarly, the rights of the Company under the Support
Agreement will be subordinated to the rights of other creditors of SmithKline
Beecham. SmithKline Beecham will in no event be required to make any payment
pursuant to the Guarantee or to make, or cause to be made, a Capital Increase
(as defined in the Guarantee and the Support Agreement) under the Support
Agreement at any time in an amount that would exceed the Adjusted Distributable
Reserves (as defined in the Guarantee and the Support Agreement) of SmithKline
Beecham plc at such time. At December 31, 1995, the Adjusted Distributable
Reserves of SmithKline Beecham were L576 million ($893 million). In addition,
SmithKline Beecham's obligations under the Support Agreement will be limited
initially to an aggregate amount of $3 billion, which shall be increased to a
limited extent if the aggregate liquidation preference of the Shares issued by
the Company exceeds $1.15 billion, and will be reduced to the extent of any
payments made under the SB Biologicals Support Agreement. The Support Agreement
is not a guarantee by SmithKline Beecham of any obligation, liability or
indebtedness of the Company, including the Shares of any Series. SmithKline
Beecham will not, by virtue of the Support Agreement, have any obligation or
liability to any holder of Shares of any Series and, accordingly, the Support
Agreement is not enforceable directly by any such holder.
SmithKline Beecham will also guarantee the payment to the Company by SB
Biologicals of dividends declared by SB Biologicals on the shares of SB
Biologicals Preferred Stock held by the Company out of funds
5
<PAGE> 7
legally available therefor, as described under "Business -- SB Biologicals" (the
"SB Biologicals Guarantee"), and will enter into a support agreement with SB
Biologicals under which SmithKline Beecham will agree to make additional capital
contributions to SB Biologicals in certain circumstances in order to enable SB
Biologicals to declare and pay dividends on the SB Biologicals Preferred Stock
(the "SB Biologicals Support Agreement"). SmithKline Beecham's obligations under
the SB Biologicals Support Agreement will be limited to an aggregate amount of
$1 billion. The SB Biologicals Support Agreement is not a guarantee of any
obligation, liability or indebtedness of SB Biologicals, including the SB
Biologicals Preferred Stock. Accordingly, SmithKline Beecham will not, by virtue
of the SB Biologicals Support Agreement, have any obligation to the Company or
any holder of the Shares of any Series, and the SB Biologicals Support Agreement
is not enforceable directly by the Company or any such holder. See
"Business -- SB Biologicals" and "Description of SmithKline Beecham Support".
SmithKline Beecham has committed not to dispose of any shares of Common
Stock of the Company so long as any Shares are outstanding. In addition,
SmithKline Beecham's policy will be that the Company will have sufficient
earnings and profits to pay dividends on the Shares, and sufficient assets to
perform its obligations in respect of the Shares. This policy does not
constitute a guarantee or other legal obligation, and SmithKline Beecham's sole
legal obligations with respect to the payment of dividends or performance of
other obligations in respect of the Shares are those arising under the
Guarantee.
FLEXIBLE AUCTION RATE PREFERRED STOCK
The Company may issue Shares in one or more Series. The designation, the
number of Shares, certain dividend and special redemption or repurchase
provisions for the Initial Dividend Period and other applicable terms for each
Series not described herein will be described in the Prospectus Supplement for
such Series.
The Shares will be shares of Preferred Stock that entitle their holders to
receive cash dividends at a rate per annum that may vary from Dividend Period to
Dividend Period. In general, as described below, each Dividend Period after the
Initial Dividend Period (each, a "Subsequent Dividend Period", and each of an
Initial Dividend Period and a Subsequent Dividend Period being a "Dividend
Period") will be 49 days in length (or such greater number of days (not
exceeding 98 days) as is at least equal to the Minimum Holding Period) unless
the Company has designated such Subsequent Dividend Period as a Special Dividend
Period of longer than 49 days. The Applicable Rate for a particular Dividend
Period generally will be determined by an Auction conducted on the Business Day
next preceding the start of such Dividend Period.
Through Broker-Dealers, Existing Holders and Potential Holders of Shares of
each Series may participate in Auctions for such Series, although, except in the
case of a Special Dividend Period, Existing Holders desiring to continue to hold
all of their Shares regardless of the Applicable Rate resulting from Auctions
need not participate. For an explanation of Auctions and the method of
determining the Applicable Rate, see "Description of Securities -- The Auction".
Except as described herein, investors in Shares will not receive
certificates representing ownership of their Shares. Ownership of Shares will be
maintained in book-entry form by the Securities Depository (DTC or a successor
securities depository) or its nominee for the account of the investor's Agent
Member. The investor's Agent Member, in turn, will maintain records of such
investor's beneficial ownership of their Shares. Accordingly, references herein
to an investor's investment in or purchase, sale or ownership of Shares are to
purchases, sales or ownership of those Shares by beneficial owners.
Dividends and Dividend Periods
The Initial Dividend Period for each Series of Shares will commence on the
Date of Original Issue and end on the day prior to the Initial Period-End
Dividend Payment Date, in each case as specified in the Prospectus Supplement
for such Series. Each Subsequent Dividend Period for each Series of Shares will
be a Regular Dividend Period unless, prior to any Auction, the Company shall
designate, subject to certain limitations and notice provisions, such Subsequent
Dividend Period as a Special Dividend Period. There shall be 49 days in a
Regular Dividend Period and at least 49 days in any Special Dividend Period, or,
in each case, such greater number of days (not exceeding 98 days) as shall at
least equal the Minimum Holding Period.
6
<PAGE> 8
The Mandatory Redemption Upon Change of Control Provision, but not the DRD
Gross-Up Provision, will apply to Shares of any Series as to which the then
applicable Dividend Period is a Regular Dividend Period. A Special Dividend
Period may, at the election of the Company, be subject to any or all of a
Non-Call Period, the Mandatory Redemption Upon Change of Control Provision, the
Repurchase Upon Change of Control Provision and the DRD Gross-Up Provision. See
"Description of Securities".
Dividends on Shares of each Series will be cumulative from the Date of
Original Issue for such Series and will be payable when, as and if declared by
the Board of Directors of the Company or a duly authorized committee thereof,
out of funds legally available therefor. Dividends on each Series of Shares will
be paid through the Securities Depository in accordance with its normal
procedures in same-day funds to Agent Members, who are in turn expected to
distribute such dividends to the person for whom they are acting as agent in
accordance with the instructions of such person. See "Description of
Securities -- Dividends".
Subject to declaration as described above, dividends will be payable on
Shares of each Series on the day following the last day of each Dividend Period
with respect thereto, regardless of its length (the "Period-End Dividend Payment
Date"), and, in addition, in the case of Dividend Periods of more than 99 days,
on the following additional dates: (a) if such Dividend Period is from 100 to
190 days, on the 91st day; (b) if such Dividend Period is from 191 to 281 days,
on the 91st and 182nd days; (c) if such Dividend Period is from 282 days to 364
days, on the 91st, 182nd and 273rd days; and (d) if such Dividend Period is one
year or longer, on January 15, April 15, July 15 and October 15 of each year,
provided that in all such cases, if such date is not a Business Day, the
Dividend Payment Date will be the Business Day next succeeding such date.
Although any particular Dividend Payment Date may not occur on the originally
scheduled day or date because of the exception discussed above, the next
succeeding Dividend Payment Date, subject to such exception, will occur on the
day or date on which it was originally scheduled to occur.
The cash dividend rate for the Initial Dividend Period for each Series of
Shares will be the Initial Dividend Rate specified in the Prospectus Supplement
for such Series. For each Subsequent Dividend Period, the cash dividend rate on
each Series of Shares will be the Applicable Rate that the Auction Agent advises
the Company has resulted from an Auction relating to such Series of Shares. See
"Description of Securities -- Dividends".
A Special Dividend Period will not be effective for any Series of Shares
unless Sufficient Clearing Bids exist at the Auction in respect of such Special
Dividend Period. If Sufficient Clearing Bids do not exist at such Auction, the
Subsequent Dividend Period for such Series will be a Regular Dividend Period. In
the event that the Company fails to pay all dividends in respect of any Shares
of any Series which have accumulated during any Dividend Period applicable to
such Series by no later than the third Business Day following the last day of
such Dividend Period or the Company fails to pay all redemption or repurchase
payments for Shares of such Series due on the third Business Day following the
redemption or repurchase date, then, except in certain cases with respect to a
Special Dividend Period, the next Dividend Period shall be a Regular Dividend
Period regardless of any Special Dividend Period designation by the Company. See
"Description of Securities -- Dividends".
If all Existing Holders submit (or are deemed to have submitted) Hold
Orders in an Auction, the Applicable Rate for the next succeeding Dividend
Period will equal 59% of the Reference Rate.
Maximum Applicable Rate; Non-Payment Period
Except during a Non-Payment Period, the Applicable Rate for any Dividend
Period for Shares of any Series will not be more than the Maximum Applicable
Rate applicable to such Series. The Maximum Applicable Rate for the Shares will
depend on the credit rating assigned to such Shares and the length of the
Dividend Period. The "Maximum Applicable Rate" for any Dividend Period will be
the rate obtained by multiplying the Reference Rate on the Auction Date therefor
by a percentage determined as set forth below based on the lower of the credit
ratings assigned to such Series by Moody's and S&P (or, if Moody's or S&P or
both shall not make such rating available, the equivalent of either or both of
such ratings by a Substitute Rating Agency or two Substitute Rating Agencies, as
the case may be, or, in the event that only one such
7
<PAGE> 9
rating shall be available, such rating) at the close of business on the Business
Day immediately preceding such Auction Date:
<TABLE>
<CAPTION>
CREDIT RATING
- -------------------------------------- APPLICABLE PERCENTAGE
MOODY'S S&P OF REFERENCE RATE
- --------------------- ------------- ---------------------
<S> <C> <C>
"aa3" or above AA- or above 110%
"a3" to "a1" A- to A+ 125%
"baa3" to "baa1" BBB- to BBB+ 150%
below "baa3" below BBB- 200%
</TABLE>
The Reference Rate, with respect to a Dividend Period of 49 days to 183
days, is the "AA" Composite Commercial Paper Rate; with respect to a Dividend
Period of 184 days to 364 days, is the U.S. Treasury Bill Rate; with respect to
a Dividend Period of one year to ten years, is the U.S. Treasury Note Rate; and,
with respect to a Dividend Period in excess of ten years, is the U.S. Treasury
Bond Rate.
There is no minimum Applicable Rate in respect of any Dividend Period.
Notwithstanding the foregoing, during any Non-Payment Period for Shares of
any Series, Auctions for such Shares will be suspended, all Dividend Periods for
such Series commencing during such Non-Payment Period will be Regular Dividend
Periods and the Applicable Rate for the Shares of such Series during each such
Dividend Period will be 200% of the Reference Rate. A failure to pay dividends
or the redemption or repurchase price of Shares may be cured by making the
required payment within three Business Days after the due date therefor,
together with additional dividends in respect of the period in which the
dividends or the redemption price remain unpaid. See "Description of
Securities -- Dividends".
Changes in the Dividends Received Percentage
If any amendment to the Internal Revenue Code of 1986 (the "Code") is
enacted and becomes effective after the date of this Prospectus that changes the
percentage of dividends received by corporate taxpayers which may be deducted
for federal income tax purposes pursuant to section 243(a)(1) of the Code (or
any successor provision) (the "Dividends Received Percentage"), then the
Applicable Rate with respect to the Shares of any Series for the Dividend Period
in which the effective date of such change occurs will, if this provision
applies to such Dividend Period, be adjusted on and after such effective date
for the remainder of such Dividend Period by multiplying the Applicable Rate
(determined before any adjustment described in this paragraph) by a factor,
which will be the number determined in accordance with the following formula
(the "DRD Formula"), and rounding the result to the nearest basis point:
1-[.35(1-.70)]
-------------------
1-[.35(1-DRP)]
For purposes of this formula, "DRP" means the Dividends Received
Percentage, expressed as a fraction, applicable to the dividend in question. No
amendment to the Code other than a change in the percentage of the dividends
received deduction set forth in section 243(a)(1) (or any successor provision)
will give rise to an adjustment described in this paragraph. Notwithstanding the
foregoing provisions, if, with respect to any such amendment, the Company
receives either an opinion of independent tax counsel or a private letter ruling
or similar form of guidance from the IRS to the effect that such amendment to
the Code generally would not affect corporate holders of such Shares, then such
amendment will not result in the adjustment provided for above. Notwithstanding
the foregoing, in no event will (i) the Applicable Rate for any Dividend Period
(if and as adjusted from time to time as set forth above) be more than the
Maximum Applicable Rate as of the Date of Original Issue or the preceding
Auction Date, as the case may be, or (ii) DRP be less than 0.50. If the
Applicable Rate of each Series is adjusted as described above, the Company will
send notice of such adjustment to each holder of Shares, the Auction Agent and
the Paying Agent on or prior to the next Dividend Payment Date of such Series.
Unless the context requires otherwise, all references to dividends in this
Prospectus and the applicable Prospectus Supplement mean dividends adjusted as
described above.
8
<PAGE> 10
The foregoing provision (the "DRD Gross-Up Provision") shall not apply to
any Regular Dividend Period and will only apply to any Special Dividend Period
for Shares of any Series if designated by the Company and specified in the
Prospectus Supplement or the applicable Special Dividend Period Notice, as the
case may be, for such Series.
Redemption or Repurchase of Shares
Optional Redemption. At the option of the Company, the Shares of any
Series may be redeemed after the Initial Dividend Period therefor, other than
during a Non-Call Period therefor, as a whole or from time to time in part, out
of funds legally available therefor, on the second Business Day immediately
preceding any Dividend Payment Date for such Series, upon at least 15 but not
more than 45 days' notice pursuant to a Notice of Redemption, at a redemption
price per Share equal to $100,000, upon payment of accumulated and unpaid
dividends. The Company shall be required to declare and pay on the redemption
date a dividend in an amount equal to the accumulated and unpaid dividends on
such Shares to the date that the Company pays the full amount payable upon
redemption of such Shares. Pursuant to such right of optional redemption, the
Company may elect to redeem all or less than all of the Shares of a Series
without redeeming Shares of any other Series. Notwithstanding the foregoing, if
any dividends on Shares of any Series are in arrears, no Shares of any Series
shall be redeemed unless all outstanding Shares are simultaneously redeemed, and
the Company shall not purchase or otherwise acquire any Shares of any Series;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Shares pursuant to an otherwise lawful purchase or exchange offer
made on the same terms to holders of all outstanding shares of such Series.
Mandatory Redemption Upon Change of Control. The following provision (the
"Mandatory Redemption Upon Change of Control Provision") shall apply to each
Regular Dividend Period, but will only apply to the Initial Dividend Period or
any Special Dividend Period for Shares of any Series if elected by the Company
and specified in the Prospectus Supplement or the applicable Special Dividend
Period Notice, as the case may be, for such Series. If SmithKline Beecham shall
at any time cease to beneficially own, directly or indirectly, shares of capital
stock of the Company representing more than 50% of the voting power in respect
of all outstanding shares of capital stock of the Company (such event being
herein called a "Change of Control"), the Company shall redeem all outstanding
Shares of each Series as to which this provision at the time applies, to the
extent of funds legally available therefor, within 30 days of such event upon at
least 10 but not more than 20 days' notice pursuant to a Notice of Redemption,
at a redemption price per Share equal to the sum of $100,000, plus an amount
equal to the accumulated and unpaid dividends on such Shares to the date that
the Company pays the full amount payable upon redemption of such Shares.
Holder's Right to Require Repurchase of Shares Upon Change of Control. The
following provision (the "Repurchase Upon Change of Control Provision") shall
not apply to any Regular Dividend Period and shall apply to the Initial Dividend
Period or any Special Dividend Period for Shares of any Series only if
designated by the Company and specified in the Prospectus Supplement or the
applicable Special Dividend Period Notice, as the case may be, for such Series.
Upon the occurrence of a Change of Control, the Company shall be obligated to
purchase from all holders of Shares of each Series as to which this provision at
the time applies, at the option of such holders, Shares of such Series tendered
to the Company by such holders at a purchase price per Share equal to the sum of
$100,000 and the amount of accumulated and unpaid dividends thereon (whether or
not earned or declared) to the repurchase date. If Shares of any Series are to
be purchased pursuant to this provision, within 20 days following a Change of
Control, the Company shall cause to be mailed, by first-class mail, postage
prepaid, within the applicable notice period specified above, a written notice
of offer to purchase (a "Notice of Offer to Purchase") to each holder of record
of Shares of such Series (initially the nominee of the Securities Depository)
and the Auction Agent. The Company will comply with any tender offer rules under
the Exchange Act which may then be applicable in connection with any offer
required to be made by the Company in accordance with the Repurchase Upon Change
of Control Provision.
SmithKline Beecham has committed not to dispose of any shares of Common
Stock of the Company so long as any Shares are outstanding. See "Description of
SmithKline Beecham Support -- Other SmithKline Beecham Policies and
Commitments".
9
<PAGE> 11
Auction Procedures
Separate Auctions will be conducted on the Auction Dates for each Series of
Shares. Accordingly, as stated in the following description of the Auction
Procedures, unless the context otherwise requires, "Shares" means Shares of the
Series subject to the related Auction, and "Existing Holders" and "Potential
Holders" means Existing Holders and Potential Holders thereof, respectively.
Unless otherwise permitted by the Company, Existing Holders and Potential
Holders of Shares may only participate in Auctions through their Broker-Dealers.
Broker-Dealers will submit the Orders of their respective customers to the
Auction Agent (with a separate Order being submitted for each customer),
designating themselves as Existing Holders in respect of Shares subject to
Orders submitted or deemed submitted to them by beneficial owners and as
Potential Holders in respect of Shares subject to Orders submitted to them by
potential beneficial owners.
On or prior to the Submission Deadline on each Auction Date for the Shares
(the Business Day next preceding the first day of each Subsequent Dividend
Period), each Existing Holder may submit Orders through a Broker-Dealer to the
Auction Agent as follows:
- Hold Order -- indicating its desire to hold Shares without regard to the
Applicable Rate for the next Dividend Period for such Shares.
- Bid -- indicating its desire to hold Shares if the Applicable Rate for
the next Dividend Period for such Shares is not less than the rate
specified in such Bid.
- Sell Order -- indicating its desire to sell Shares without regard to the
Applicable Rate for the next Dividend Period for such Shares.
An Existing Holder may submit different types of Orders in any Auction with
respect to Shares then held by such Existing Holder, provided that the total
number of Shares covered by such Orders does not exceed the number of Shares
held by such Existing Holder. If, however, an Existing Holder offers to purchase
additional Shares in such Auction, such Existing Holder, for purposes of such
offer to purchase additional Shares, will be treated as a Potential Holder as
described below. Bids by Existing Holders with rates higher than the Maximum
Dividend Rate will be treated as Sell Orders. A Hold Order (in the case of an
Auction relating to a Regular Dividend Period) or a Sell Order (in the case of
an Auction relating to a Special Dividend Period) shall be deemed to have been
submitted on behalf of an Existing Holder if an Order with respect to Shares
then held by such Existing Holder is not submitted on behalf of such Existing
Holder for any reason, including the failure of a Broker-Dealer to submit such
Existing Holder's Order to the Auction Agent.
Potential Holders of Shares may submit Bids in which they offer to purchase
Shares if the Applicable Rate for the next Dividend Period for such Shares is
not less than the rate specified in such Bid. A Bid by a Potential Holder
specifying a rate higher than the Maximum Dividend Rate will not be considered.
Neither the Company nor the Auction Agent will be responsible for a
Broker-Dealer's failure to comply with any of the foregoing.
A Broker-Dealer also may hold Shares for its own account. A Broker-Dealer
thus may submit Orders to the Auction Agent as an Existing Holder or a Potential
Holder and therefore participate in an Auction on behalf of both itself and its
customers. An Order placed with the Auction Agent by a Broker-Dealer as an
Existing Holder or a Potential Holder as or on behalf of a customer will be
treated in the same manner as an Order placed with a Broker-Dealer by such
customer. Similarly, any failure by a Broker-Dealer to submit to the Auction
Agent an Order in respect of any Shares held by its customer will be treated in
the same manner as such customer's failure to submit to its Broker-Dealer an
Order in respect of Shares held by it, as described above. Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of its customers, all discussions herein
relating to the consequences of an Auction for Existing Holders and Potential
Holders also apply to the underlying beneficial ownership interests.
If Sufficient Clearing Bids exist in an Auction (that is, in general, the
number of Shares subject to Bids by Potential Holders is at least equal to the
number of Shares subject to Sell Orders by Existing Holders), the Applicable
Rate will be the lowest rate specified in the Submitted Bids which, taking into
account such rate and all lower rates bid by Existing Holders and Potential
Holders, would result in all Shares subject to Sell
10
<PAGE> 12
Orders by Existing Holders being purchased in the Auction. If all of the
Outstanding Shares are subject to Submitted Hold Orders, the Applicable Rate for
the next succeeding Dividend Period for such Shares shall be 59% of the
Reference Rate. If Sufficient Clearing Bids do not exist in an Auction (other
than because all of the Outstanding Shares are the subject of Submitted Hold
Orders), the Dividend Period for such Shares next following the Auction will be
a Regular Dividend Period (regardless of whether it was designated a Special
Dividend Period by the Company), the Applicable Rate for such Dividend Period
will be the Maximum Dividend Rate and, in such event, Existing Holders that have
submitted Sell Orders will not be able to sell in the Auction all, and may not
be able to sell any, Shares subject to such Sell Orders. Thus, under certain
circumstances, Existing Holders may not have liquidity of investment.
The Auction Procedures include a pro rata allocation of Shares for purchase
and sale, which may result in an Existing Holder selling or holding, or a
Potential Holder purchasing, a number of Shares that is fewer than the number of
Shares specified in its Order.
A Sell Order by an Existing Holder will constitute an irrevocable offer to
sell the number of Shares subject thereto, and a Bid placed by an Existing
Holder will also constitute an irrevocable offer to sell the number of Shares
subject thereto if the rate specified in the Bid is higher than the Applicable
Rate determined in the Auction, in each case at a price per Share of $100,000. A
Bid placed by a Potential Holder will constitute an irrevocable offer to
purchase the Shares subject thereto at a price per Share of $100,000 if the rate
specified in such Bid is less than or equal to the Applicable Rate determined in
the Auction. Settlement of purchases and sales will be made on the next Business
Day (also a Dividend Payment Date) after the Auction Date through the Securities
Depository. Purchasers will make payment through their Agent Members in same-day
funds to the Securities Depository against delivery by book-entry to their Agent
Members. The Securities Depository will make payment to the sellers' Agent
Members in accordance with the Securities Depository's normal procedures, which
now provide for payment in same-day funds. See "Description of Securities -- The
Auction".
Structural Requirements
Under the Certificate of Designations, unless the Company has received
written confirmation from Moody's and S&P (and, as appropriate, any Substitute
Rating Agency or Substitute Rating Agencies) that such action will not impair
the then current ratings then assigned to the Shares of each Series by each of
them, the Company will not (i) issue any Parity Preferred or Senior Preferred if
the aggregate liquidation preference of all outstanding Shares, Parity Preferred
and Senior Preferred would thereupon exceed 75% of the maximum amount of
SmithKline Beecham's obligations under the Support Agreement (the "Preferred
Stock Limitation Provision"), (ii) incur any indebtedness if the aggregate
amount of the Company's indebtedness would thereupon exceed one-third of the
Company's shareholders' equity (after deducting therefrom the aggregate
liquidation preference, including accumulated and unpaid but not declared
dividends, of all outstanding Shares, Parity Preferred and Senior Preferred)
(the "Debt Limitation Provision"), and (iii) make any loans to members of
SmithKline Beecham Group other than the Company and its subsidiaries unless such
loans are guaranteed as to payment of principal and interest by SmithKline
Beecham (the "Loan Guarantee Provision").
Liquidation Preference
The liquidation preference of each Share will be $100,000, plus an amount
equal to accumulated but unpaid dividends (whether or not earned or declared).
Ratings
The Company expects that the Shares will be issued with a rating of "aa3"
from Moody's Investors Service, Inc. ("Moody's") and "A" from Standard & Poor's
Ratings Group ("S&P").
11
<PAGE> 13
Voting Rights
The Securities Depository, while it or its nominee is the registered owner
of the Shares, will not independently exercise any voting rights with respect
thereto. Rather, the Securities Depository, in accordance with its normal
procedures, will extend such voting rights to its Agent Members whose accounts
are credited with such Shares. Each Agent Member will in turn extend such voting
rights to the holders for whom it is Agent Member in accordance with its normal
procedures.
General. Each Share will carry 0.08507 of a vote in connection with the
election of directors and other matters submitted generally to the holders of
Common Stock, voting cumulatively and together as a single class with shares of
Common Stock and other capital stock of the Company entitled to vote generally
in the election of directors and other matters submitted to stockholders
generally. Based on the number of shares of Common Stock outstanding as of the
date of this Prospectus and assuming that all Shares offered hereby were issued
and outstanding, the Shares would represent, in the aggregate, approximately 27%
of the combined voting power of the Shares and the Common Stock. All of the
issued and outstanding shares of Common Stock, representing approximately 73% of
such combined voting power, are held indirectly by SmithKline Beecham. As a
result, SmithKline Beecham will be able to direct the outcome of matters
submitted to stockholders of the Company.
Right to Vote in Connection with a Merger, Liquidation, Etc. Without the
affirmative vote of the holders of at least two-thirds of the Shares of each
Series with any outstanding Dividend Period having more than 99 remaining
Dividend Period Days voting in person or by proxy at one or more special
meetings for the purpose, or the unanimous written consent of the holders of
Shares of each such Series, the Company shall not (i) consolidate with or merge
with or into, or convey, transfer or lease substantially all of its assets to,
any person unless: (A) the resulting, surviving or transferee Person (if not the
Company) shall be a corporation organized and existing under the laws of the
United States, any State thereof or the District of Columbia which shall, by a
valid and legally binding instrument, expressly assume all the obligations of
the Company with respect to, and afford the holders of all Outstanding Shares
all the legal rights as holders of, the Shares, including the rights established
by the Certificate of Designations and the Certificate of Incorporation; (B)
there shall not have occurred any downgrading, nor shall any notice have been
given of any intended or potential downgrading, in the rating accorded the
Shares by any "nationally recognized statistical rating organization", as such
term is defined for purposes of Rule 436(g)(2) under the Securities Act in
connection with such transaction; and (C) there shall have been delivered to the
holders of the Outstanding Shares an opinion of nationally recognized, qualified
legal counsel to the effect that (1) the holders of such Shares will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such transaction, and will be subject to United States federal
income tax on the same amounts and at the same times as would be the case if the
transaction had not occurred and (2) such transaction complies with the terms of
the foregoing clause (i)(A), or (ii) voluntarily liquidate, dissolve or wind up.
On such matters, holders of Shares will vote on the basis of one vote per
$100,000 in liquidation preference.
Rights to Elect Two Additional Directors. During any period (referred to
herein as a "Default Period") when dividend payments on any Shares of any Series
or Parity Preferred for such number of dividend periods or portions thereof (or
the equivalent thereof in the case of Parity Preferred), which in the aggregate
contain at least 180 days, shall not have been paid or declared and a sum
sufficient for the payment thereof set aside for payment, then in any such case
the number of directors of the Company will automatically be increased by two
additional directors and the holders of record of the Shares of all Series and
Parity Preferred upon which like voting rights have been conferred and are then
exercisable will possess full voting powers (to the exclusion of the holders of
all other series and classes of capital stock of the Company), voting as a
single class to elect such two directors (the "Default Directors").
During any period in which a Credit Rating Event shall exist (a "Downgrade
Period"), the authorized number of members of the Board of Directors of the
Company shall automatically be increased by two and the holders of record of the
Shares of all Series and Parity Preferred upon which like voting rights have
been conferred and are then exercisable (the Shares of all Series and all such
other shares being referred to as the "Downgrade Voting Parity Shares") will be
entitled to fill the vacancies so created on the Board of Directors
12
<PAGE> 14
of the Company by electing two additional directors for the Company. Each
director so elected (each a "Downgrade Director") shall be entitled to such
number of votes on all matters before the Board of Directors of the Company as
shall result in the Downgrade Directors together having a majority of the total
voting power of all directors on the Board of Directors of the Company;
provided, however, that each Downgrade Director shall be entitled to only one
vote with respect to matters concerning the redemption of Shares of any Series
or the liquidation, dissolution or winding up of the Company.
If a Downgrade Period shall commence and be continuing at any time during a
Default Period, or if a Default Period shall commence and be continuing during a
Downgrade Period, then the powers conferred upon the Default Directors elected
pursuant to the provisions set forth above shall be suspended or if Default
Directors shall not have been so elected, then the right of holders of the
Shares of all Series and Parity Preferred to elect the Default Directors as
described above shall be suspended, in either case, at such time and during such
period as the Downgrade Directors shall have assumed and remain in office,
provided that upon the expiration of such Downgrade Period, such powers of the
Default Directors or voting rights of holders of the Shares of all Series and
Parity Preferred, as the case may be, shall be automatically and immediately
reinstated.
Right to Vote in Certain Events. Without the affirmative vote of the
holders of at least two-thirds of the outstanding Shares of all Series voting in
person or by proxy at a special meeting for the purpose, or the unanimous
written consent of the holders of the outstanding Shares of all Series acting
without such a meeting (subject to the provisions of any applicable law), the
Company may not amend, alter or repeal any provisions of the Certificate of
Designations or the Certificate of Incorporation so as to affect adversely the
preferences, special rights or powers of the Shares of any Series. Any increase
in the authorized number of any series of capital stock ranking on a parity with
the Shares with respect to the payment of dividends or the distribution of
assets, or creation, authorization or issuance of any securities convertible
into, or warrants, options or similar rights to purchase, acquire or receive,
shares of such capital stock or reclassification of any authorized capital stock
of the Company into any share ranking on a parity with Shares with respect to
the payment of dividends or the distribution of assets in accordance with the
Preferred Stock Limitation Provision shall be deemed not to affect adversely the
preferences, special rights or powers of the Shares.
In addition, without the affirmative vote of the holders of at least
two-thirds of the outstanding Shares of all Series and Parity Preferred upon
which like voting rights have been conferred and are then exercisable, voting
together as a single class, in person or by proxy at a special meeting for the
purpose, or the unanimous written consent of the holders of the outstanding
Shares of all Series and such Parity Preferred acting without such a meeting
(subject to the provisions of any applicable law), the Company may not create,
authorize or issue shares of any class or series of capital stock ranking senior
to the Shares and such Parity Preferred with respect to the payment of dividends
or the distribution of assets, or create, authorize or issue any securities
convertible into, or warrants, options or similar rights to purchase, acquire or
receive, shares of capital stock ranking senior to the Shares and such Parity
Preferred with respect to the payment of dividends or the distribution of assets
or reclassify any authorized capital stock of the Company into any shares
ranking senior to the Shares and such Parity Preferred with respect to the
payment of dividends or the distribution of assets.
No Right to Vote in Certain Events. With respect to any right of holders
of Shares to vote on any matter, whether such right is created by the
Certificate of Designations thereof, by applicable law or otherwise, no holder
of any Share will be entitled to vote and no Share will be deemed to be
outstanding for the purpose of voting or determining the number of Shares
required to constitute a quorum, if prior to or concurrently with a
determination of Shares entitled to vote or of Shares deemed outstanding for
quorum purposes, as the case may be, such Share is held beneficially or of
record by the Company or any affiliate of the Company or if the Company or any
affiliate has, directly or indirectly, the power to vote or dispose of such
Share. In addition, Shares with respect to which a Notice of Redemption has been
issued and the redemption price has been deposited with the Auction Agent will
be deemed not to be outstanding for the purpose of voting or determining the
number of Shares required to constitute a quorum.
13
<PAGE> 15
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Company will receive an opinion of Cleary, Gottlieb, Steen & Hamilton,
special U.S. counsel to the Company, that (i) the Shares will be treated as
stock of the Company for federal income tax purposes; (ii) distributions with
respect to the Shares (other than liquidating distributions and certain
redemptions) will constitute dividends to the extent made out of current or
accumulated earnings and profits of the Company, as determined under federal
income tax principles; and (iii) a corporate holder that generally is entitled
to the dividends received deduction will be allowed that deduction with respect
to dividends received on the Shares. Opinions of counsel are not binding on the
Internal Revenue Service (the "IRS") and the IRS could assert contrary
positions, although in the opinion of counsel the IRS would be unlikely to
prevail if it asserted those positions in a proceeding in which the issues were
properly presented. See "Certain Federal Income Tax Considerations".
14
<PAGE> 16
SUMMARY COMBINED FINANCIAL DATA OF THE COMPANY
The summary combined financial data of the Company set forth below as of
December 31, 1994 and 1995 and for the three years ended December 31, 1995 have
been derived from, and should be read in conjunction with, the audited and
unaudited combined financial statements of the predecessor companies to the
Company, including the notes thereto, contained elsewhere in this Prospectus
(the "Combined Financial Statements"). The summary combined financial statement
data set forth below as of December 31, 1993 and as of March 31, 1995 and 1996
and for the three month periods then ended are unaudited. The summary combined
financial data should also be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations included elsewhere
in this Prospectus. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of
information with respect to interim periods have been included. Results of
operations with respect to interim periods may not be indicative of the results
for the full fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
---------------------------- -------------
1993 1994 1995 1995 1996
------ ------ ------ ---- ----
(UNAUDITED)
(IN MILLIONS EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales........................................ $1,281 $1,490 $1,698 $418 $389
Operating costs and expenses:
Cost of sales.................................. 629 783 867 219 199
Marketing, administrative and general.......... 412 449 531 122 117
Research and development....................... 16 18 22 5 6
Restructuring.................................. -- -- 60 60 --
Operating income................................. 224 240 218 12 67
Non-operating income (expense):
Interest expense............................... (19) (13) (3) (1) (1)
Interest income................................ 33 20 33 7 6
Minority interests............................. (42) (45) (45) (6) (9)
Equity in net income of affiliates............. 20 9 21 9 4
Other, net..................................... (5) 19 (5) (1) (36)
Income before income taxes....................... 211 230 219 20 31
Provision for income taxes..................... 61 81 109 10 12
Net income..................................... $ 150 $ 149 $ 110 $ 10 $ 19
====== ====== ====== ==== ====
Ratio of Earnings to Fixed Charges............. 11.5x 17.4x 55.5x 21.0x 32.0x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------- AT MARCH 31,
1993 1994 1995 1996
------ ------ ------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
(IN MILLIONS)
BALANCE SHEET DATA
Total assets........................................ $1,582 $1,853 $2,615 $2,168
Total liabilities................................... 688 731 1,182 723
Total intercompany loans receivable (payable),
net............................................... 139 265 676 731
Total shareholders' equity.......................... 894 1,122 1,433 1,445
</TABLE>
15
<PAGE> 17
SUMMARY CONSOLIDATED FINANCIAL DATA OF SMITHKLINE BEECHAM
The summary financial data set forth below as of December 31, 1994 and 1995
and for the three years ended December 31, 1995 have been derived from, and
should be read in conjunction with, the audited consolidated financial
statements of the SmithKline Beecham Group included in the 1995 Form 20-F (the
"Consolidated Financial Statements"). Financial data as of December 31, 1993
have been derived from SmithKline Beecham's audited consolidated financial
statements contained in SmithKline Beecham's Annual Reports to Shareholders. The
financial information for the interim periods as of March 31, 1995 and 1996 and
for the three months then ended is unaudited. Results of operations with respect
to interim periods may not be indicative of the results for the full fiscal
year.
SmithKline Beecham prepares its Consolidated Financial Statements in
accordance with accounting principles generally accepted in the U.K. ("U.K.
GAAP") which differ in certain significant respects from accounting principles
generally accepted in the United States ("U.S. GAAP"). There is a fundamental
difference between U.K. GAAP and U.S. GAAP in the accounting for the combination
(the "Combination") of SmithKline Beckman Corporation, a Pennsylvania
corporation (now SmithKline Beecham Corporation, "SB Corp"), and Beecham Group
p.l.c., a public limited company incorporated under the laws of England in 1989
to form SmithKline Beecham. Under U.K. GAAP, the Combination has been accounted
for using merger accounting principles, whereas under U.S. GAAP, the transaction
has been accounted for using the purchase accounting method. In addition, the
requirements for making provision for restructuring costs are more prescriptive
under U.S. GAAP than under U.K. GAAP. A reconciliation to U.S. GAAP of certain
amounts at December 31, 1995 and 1994 and for the three years ended December 31,
1995 is set forth in Note 32 of the Notes to the Consolidated Financial
Statements of SmithKline Beecham included in the 1995 Form 20-F.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------------------ ---------------
1993 1994 1995 1996
------ ------ 1995 1995 ------ ------
------ -------
(L) ($)
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA
Amounts in accordance with U.K. GAAP
Net sales
Continuing operations....................... L5,631 L6,071 L7,011 $11,077 L1,712 L1,874
Discontinued operations(1).................. 533 421 -- -- -- --
------ ------ ------ ------- ------ ------
Total sales................................. 6,164 6,492 7,011 11,077 L1,712 L1,874
Operating exceptional items................. -- (580) (250) (395) -- --
Research and development expenditure........ (575) (638) (653) (1,032) (135) (162)
Trading income of continuing
operations(2)............................. 1,078 657 1,216 1,921 384 414
Trading income of discontinued
operations(1)............................. 102 84 -- -- --
Non-operating exceptional items............. 51 -- 512 809 512 --
Income before taxes and minority
interests................................. 1,220 691 1,623 2,564 873 387
Taxes on income............................. (378) (571)(3) (591) (934) (348) (112)
Auction Rate Preference Stock (SB Corp MMP)
dividends................................. (15) (18) (24) (38) (6) (6)
Net income.................................. 813 72 970 1,533 510 260
Per Share/Equity Unit
Income excluding exceptional items.......... 29.1p 32.3p 34.4p 0.54 9.1p 9.6p
Net income.................................. 30.4p 2.7p 36.1p 0.57 18.9p 9.6p
Per Equity Unit ADR
Income excluding exceptional items.......... 145.5p 161.5p 172.0p 2.72 45.5p 48.0p
Net income.................................. 152.0p 13.5p 180.5p 2.85 94.5p 48.0p
Ratio of Earnings to Fixed Charges.......... 6.01x 3.85x 5.16x 5.16x 7.84x 5.24x
------ ------ ------ ------- ------ ------
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
---------------------------------
1993 1994 1995 1995
---- ---- ---- ----
(L) ($)
<S> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE
DATA AND RATIOS)
APPROXIMATE AMOUNTS IN ACCORDANCE WITH U.S. GAAP
Income from continuing operations............................ L473 L546 L357 $564
Net income................................................... 518 600 446 705
Per Share/Equity Unit
Income from continuing operations............................ 17.7p 20.3p 13.3p 0.21
Net income................................................... 19.4p 22.4p 16.6p 0.26
Per Equity Unit ADR
Income from continuing operations............................ 88.5p 101.5p 66.5p 1.05
Net income................................................... 97.0p 112.0p 83.0p 1.31
Ratio of Earnings to Fixed Charges........................... 4.98x 4.97x 3.23x 3.23x
</TABLE>
- ---------------
(1) The businesses disposed of in 1993 were the hair care and the bath and body
care businesses. The business disposed of in 1994, with completion in
January 1995, was the animal health business. Prior year amounts have been
restated on a comparable basis.
(2) The trading income of continuing operations is after charging exceptional
items of L250 million in 1995 and L580 million in 1994. For information on
exceptional items, see Note 1 to the Consolidated Financial Statements.
(3) Taxes on income includes L216 million representing a charge on the
reorganization of Sterling Winthrop Inc. ("Sterling") in connection with
the sale by SmithKline Beecham of Sterling's North American business and a
credit associated with the deferred tax asset arising on the creation of
the restructuring provision.
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------- AT MARCH 31,
1993 1994 1995 1995 1996
------ ------ ------ ------- -------------
(L) ($) (UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
AMOUNTS IN ACCORDANCE WITH U.K. GAAP
Current assets............................ L3,476 L3,479 L3,403 $ 5,275 L 3,536
Intangible assets......................... 50 2,304 2,246 3,481 2,272
Total assets(2)........................... 5,569 8,071 8,153 12,637 8,397
Long-term debt............................ 852 1,086 1,718 2,663 1,737
Total debt................................ 1,225 2,978 2,320 3,596 2,560
Total liabilities......................... 3,726 6,940 6,414 9,942 6,596
Shareholders' funds -- equity
interests(2)............................ 1,302 618 1,223 1,895 1,278
Auction Rate Preference Stock (SB Corp
MMP).................................... 541 513 516 800 523
----- ----- ----- ----- -----
APPROXIMATE AMOUNTS IN ACCORDANCE WITH
U.S. GAAP
Shareholders' funds -- equity
interests(1)............................ 4,596 4,769 4,901 7,597 N/A
</TABLE>
- ---------------
(1) Increase in shareholders' equity under U.S. GAAP principally arises from
goodwill and purchase accounting adjustments. See Note 32 to the
Consolidated Financial Statements included in the 1995 Form 20-F.
(2) The total assets and shareholders' funds have been restated for
capitalization of interest. See Statement of Accounting Policies, included
in the Consolidated Financial Statements included in the 1995 Form 20-F.
17
<PAGE> 19
RISK FACTORS
Prospective purchasers of the Shares should carefully consider all the
information contained in this Prospectus, including the risk factors set forth
below.
LIMITED NATURE OF GUARANTEES AND SUPPORT AGREEMENTS
SmithKline Beecham plc will unconditionally and irrevocably guarantee the
due and punctual payment of declared and unpaid dividends on the Shares to the
extent that such dividends have been declared by the Company's Board of
Directors out of funds legally available therefor and will enter into a Support
Agreement with the Company which will require it to make additional capital
contributions to the Company in the circumstances and subject to the limitations
described under "Description of SmithKline Beecham Support -- The Support
Agreement". The rights of holders of Shares of any Series under the Guarantee
will be subordinated to the rights of other creditors of SmithKline Beecham.
Similarly, the rights of the Company under the Support Agreement will be
subordinated to the rights of other creditors of SmithKline Beecham. SmithKline
Beecham will in no event be required to make any payment pursuant to the
Guarantee or to make, or cause to be made, a Capital Increase under the Support
Agreement at any time in an amount that would exceed the Adjusted Distributable
Reserves of SmithKline Beecham plc at such time. At December 31, 1995, the
Adjusted Distributable Reserves of SmithKline Beecham were L576 million ($893
million). In addition, SmithKline Beecham's obligations under the Support
Agreement will be limited initially to an aggregate amount of $3 billion, which
shall be increased to a limited extent if the aggregate liquidation preference
of the Shares issued by the Company exceeds $1.15 billion, and will be reduced
to the extent of any payments made under the SB Biologicals Support Agreement
described below. The Support Agreement is not a guarantee by SmithKline Beecham
of any obligation, liability or indebtedness of the Company, including the
Shares of any Series. SmithKline Beecham will not, by virtue of the Support
Agreement, have any obligation or liability to any holder of Shares of any
Series and, accordingly, the Support Agreement is not enforceable directly by
any such holder. See "Description of SmithKline Beecham Support -- The
Guarantee" and "-- The Support Agreement".
SmithKline Beecham will also guarantee the payment to the Company by SB
Biologicals of dividends declared and unpaid by SB Biologicals out of funds
legally available therefor on the shares of SB Biologicals Preferred Stock held
by the Company pursuant to the SB Biologicals Guarantee, and will enter into the
SB Biologicals Support Agreement, which will be in form and substance similar to
the Guarantee and the Support Agreement, respectively, and which will be subject
in each case to limitations corresponding to those described in the preceding
paragraph (except that SmithKline Beecham's obligations under the SB Biologicals
Support Agreement will be limited to an aggregate amount of $1 billion). The SB
Biologicals Support Agreement is not a guarantee of any obligation, liability or
indebtedness of SB Biologicals, including the SB Biologicals Preferred Stock.
Accordingly, SmithKline Beecham will not, by virtue of the SB Biologicals
Support Agreement, have any obligation to the Company or any holder of Shares of
any Series, and the SB Biologicals Support Agreement is not enforceable directly
by the Company or any such holder. See "Business -- SB Biologicals".
RELATIONSHIP WITH SMITHKLINE BEECHAM GROUP
All of the Common Stock of the Company is owned indirectly by SmithKline
Beecham and the operations of the Company are integrated with the rest of the
SmithKline Beecham Group on a worldwide basis. As a result, a portion of
products manufactured or sold by the Company will be sold to or purchased from
SmithKline Beecham and its subsidiaries (other than the Company and its
subsidiaries). The business and the operating and financial performance of the
Company is highly dependent on SmithKline Beecham and such subsidiaries.
Moreover, the Company is largely dependent on SmithKline Beecham and such
subsidiaries for new product development and patent and trademark rights. The
Company has entered into a management agreement under which it will receive
services from SmithKline Beecham, and subsidiaries of the Company have entered
into management, licensing and service agreements with other members of
SmithKline Beecham Group. However, SmithKline Beecham may establish, modify or
terminate business relationships affecting the Company without seeking the
acquiescence of the holders of Shares.
18
<PAGE> 20
SmithKline Beecham's determination to seek to establish, modify or terminate any
agreement or arrangement will be made on a case-by-case basis, generally with a
view to achieving the objectives of SmithKline Beecham Group as a whole, which
may not in each case be the same as the independent objectives of the Company
and the holders of the Shares. There can be no assurance that the Company or its
subsidiaries will be requested to produce or market any particular product or to
engage in any particular business of other members of SmithKline Beecham Group,
or that any existing business relationship between the Company and its
subsidiaries, on the one hand, and other members of SmithKline Beecham Group, on
the other hand, will not be so modified or terminated. See
"Business -- Relationship with SmithKline Beecham Group" and "Arrangements with
SmithKline Beecham Group". Further, a substantial portion of the Company's
assets, revenues and net income consist of or are derived from loans made by the
Company or its subsidiaries to other members of SmithKline Beecham Group, and
the SB Biologicals Preferred Stock held by the Company. A substantial portion of
the proceeds of the Offerings of the Shares will be used to make intercompany
loans. See "Use of Proceeds", "Arrangements with SmithKline Beecham
Group -- Intercompany Finance" and "Business -- SB Biologicals". The
availability of cash flow for dividends on the Shares will therefore be
dependent in part on the receipt of payments on loans made by the Company to
SmithKline Beecham and its subsidiaries and the receipt of dividends on the
shares of SB Biologicals Preferred Stock held by the Company.
HOLDING COMPANY STRUCTURE
All of the operations of the Company are conducted through subsidiaries
and, therefore, the Company is dependent on the earnings and cash flow of its
subsidiaries (and on the $41.25 million in dividends payable on the SB
Biologicals Preferred Stock per year) to meet its obligations with respect to
the Shares. The claims of holders of the Shares will be subordinate to claims of
stockholders and creditors of the Company's subsidiaries (and of creditors of SB
Biologicals).
NO OPERATING HISTORY AS A SEPARATE LEGAL ENTITY
The Company has no operating history as a separate legal entity. The
historical financial information of the Company presented in this Prospectus may
not necessarily be indicative of the results that would have been attained if
the Company had operated as a separate legal entity. See Note 1 to the Combined
Financial Statements.
CURRENCY FLUCTUATIONS
The operations of the Company are conducted in international markets and
therefore the combined financial results of the Company are subject to exchange
rate fluctuations involving the United States dollar and a number of foreign
currencies. Since dividends on the Shares are paid in United States dollars,
decreases in value in the currencies other than the dollar in which the
Company's revenues are derived could adversely affect the amount of funds
available for such payments.
IMPACT OF GOVERNMENT REGULATION
The operations of the Company's subsidiaries are subject to extensive
regulation by governmental agencies in each of the countries in which it
conducts manufacturing operations and to which it exports its products. These
governmental authorities have substantial power over manufacturers and exporters
of pharmaceutical products, including the power to withhold approvals, to
require the recall of products, to delay or prevent product sales and to halt
operations. The Company's operations are dependent on maintaining the approval
for its existing products and facilities and on receiving approval for each new
product and facility. In addition, the Company's business is dependent in part
upon government mandated public health programs, including vaccination programs.
There can be no assurance that the Company's business, operations or prospects
will not be adversely affected by future regulatory actions in its countries of
operation or its export markets, including actions relating to national
healthcare programs, quality control and environmental regulations, or by delays
or difficulties in maintaining existing approvals for its products or its plants
or in obtaining approvals in the future for new products or new manufacturing
facilities.
19
<PAGE> 21
ABILITY TO ISSUE ADDITIONAL SHARES
Under the Company's Certificate of Incorporation, the Company's Board of
Directors has the ability to issue additional shares of preferred stock ranking
pari passu with or junior to the Shares, as to participation in the profits or
assets of the Company, without the consent or approval of the holders of the
Shares.
ENFORCEABILITY OF U.S. SECURITIES LAWS
SmithKline Beecham is a public limited company incorporated in England and
Wales. Many of the directors and executive officers of SmithKline Beecham are
non-residents of the United States, and all or a substantial portion of the
assets of such persons are located outside the United States. As a result,
service of process upon such persons and enforcement against such persons of
judgments obtained in U.S. courts predicated upon the civil liability provisions
of the federal securities laws of the United States may be difficult to obtain
within the United States. SmithKline Beecham has been advised by its English
solicitors, Linklaters & Paines, that there is doubt as to the enforceability in
England, in original actions or in actions for enforcement of judgments of U.S.
courts, of civil liabilities to the extent predicated upon the federal
securities laws of the United States.
20
<PAGE> 22
THE COMPANY AND SMITHKLINE BEECHAM
The Company was incorporated in May 1996 for the principal purpose of
acquiring, owning and managing certain non-U.S. assets of SmithKline Beecham,
principally in the pharmaceuticals business. SmithKline Beecham owns indirectly
100 percent of the Common Stock of the Company. The Company had combined sales
of $1,698 million and $389 million and combined net income of $110 million and
$19 million for 1995 and the first quarter of 1996, respectively. The Company is
a holding company and conducts its operations through approximately 60
subsidiaries. The Company's holdings will also include fixed rate cumulative
preferred stock of SB Biologicals, an indirect Belgian pharmaceuticals
subsidiary of SmithKline Beecham, having an aggregate redemption price of $650
million. See "Business -- SB Biologicals". The Company's primary activities
consist of the manufacture and sale of pharmaceuticals (prescription medicines)
and consumer products (OTC medicines), as part of the worldwide business of
SmithKline Beecham Group, as well as intercompany lending to other companies
within SmithKline Beecham Group.
The principal activities of SmithKline Beecham Group are the discovery,
development, manufacture and marketing of pharmaceuticals and vaccines, the
provision of disease management and pharmaceutical benefit management services,
OTC medicines and health-related consumer products, and the provision of
clinical laboratory testing services.
The Company and its subsidiaries are, or will on or prior to the issuance
of the Shares be, parties to certain management, licensing and service
agreements with SmithKline Beecham and its subsidiaries that are expected to
remain in effect. See "Arrangements with SmithKline Beecham Group".
SmithKline Beecham will unconditionally and irrevocably guarantee the due
and punctual payment of dividends on the Shares to the extent that such
dividends have been declared by the Company's Board of Directors out of funds
legally available therefor and remain unpaid. SmithKline Beecham has also
entered into the Support Agreement with the Company pursuant to which SmithKline
Beecham has agreed to provide additional capital to the Company under certain
circumstances and subject to certain limitations so as to ensure that the equity
of the Company exceeds the sum of its debt and the aggregate liquidation
preference of the Shares. The obligations of SmithKline Beecham under the
Guarantee and the Support Agreement are limited in amount to the Adjusted
Distributable Reserves (as defined therein) of SmithKline Beecham, in the case
of the Support Agreement, have been capped initially at an aggregate amount of
$3 billion, which cap shall be increased to a limited extent if the aggregate
liquidation preference of the Shares issued by the Company exceeds $1.15
billion, and are subordinated to the obligations of SmithKline Beecham to its
other creditors. SmithKline Beecham will enter into similar arrangements in
respect of the SB Biologicals Preferred Stock. See "Description of SmithKline
Beecham Support" and "Risk Factors -- Limited Nature of Guarantees and Support
Agreements".
The Company's principal executive offices are located at 1403 Foulk Road,
Suite 102, P.O. Box 7108, Wilmington, Delaware 19803-2775, telephone (302)
479-5801. SmithKline Beecham's principal executive offices are located at New
Horizons Court, Brentford, Middlesex TW8 9EP, England, telephone
44-181-975-2000.
USE OF PROCEEDS
Of the net proceeds from the sale of the Shares, it is expected that
approximately $400 million will be loaned by the Company or one of its
subsidiaries to SB Corp and that SB Corp will use that amount to redeem five
outstanding series of its Money Market Cumulative Preferred Stock issued in a
private placement in April 1990 ("SB Corp MMP"). The remainder of the net
proceeds from the sale of the Shares will be loaned by the Company and its
subsidiaries to members of SmithKline Beecham Group for use for general
corporate purposes (including the possible redemption of other series of SB Corp
MMP). See "Arrangements with SmithKline Beecham Group -- Intercompany Finance".
21
<PAGE> 23
SELECTED COMBINED FINANCIAL DATA OF THE COMPANY
The selected combined financial data set forth below as of December 31,
1994 and 1995 and for the three years ended December 31, 1995 have been derived
from, and should be read in conjunction with, the Combined Financial Statements.
The selected combined financial data set forth below as of December 31, 1991 and
1992 and as of March 31, 1995 and 1996 and for the three month periods then
ended are unaudited. The selected combined financial data should also be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this Prospectus. The information for
interim periods is unaudited; however, in the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such information have been included. The interim results of
operations may not be indicative of the results for the full fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------- ---------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ---- ----
(UNAUDITED) (IN MILLIONS EXCEPT RATIOS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales................... $1,056 $1,221 $1,281 $1,490 $1,698 $418 $389
Operating costs and
expenses:
Cost of sales............. 499 607 629 783 867 219 199
Marketing, administrative
and general............ 352 388 412 449 531 122 117
Research and
development............ 13 14 16 18 22 5 6
Restructuring............. -- -- -- -- 60 60 --
------ ------ ------ ------ ------ ---- ----
Operating income............ 192 212 224 240 218 12 67
Non-operating income
(expense):
Interest expense.......... (35) (22) (19) (13) (3) (1) (1)
Interest income........... 27 35 33 20 33 7 6
Minority interests........ (32) (52) (42) (45) (45) (6) (9)
Equity in net income of
affiliates............. 4 21 20 9 21 9 4
Other, net................ (7) -- (5) 19 (5) (1) (36)
------ ------ ------ ------ ------ ---- ----
Income before income
taxes..................... 149 194 211 230 219 20 31
Provision for income
taxes..................... 66 87 61 81 109 10 12
------ ------ ------ ------ ------ ---- ----
Net income.................. $ 83 $ 107 $ 150 $ 149 $ 110 $ 10 $ 19
====== ====== ====== ====== ====== ==== ====
Ratio of earnings to fixed
charges................... 5.1x 9.4x 11.5x 17.4x 55.5x 21.0x 32.0x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------- AT MARCH 31,
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------------
(UNAUDITED) (IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets................. $1,511 $1,487 $1,582 $1,853 $2,615 $2,168
Total liabilities............ $1,224 $ 696 $ 688 $ 731 $1,182 $ 723
Total intercompany loans
receivable (payable),
net........................ $ (567) $ 71 $ 139 $ 265 $ 676 $ 731
Total shareholders' equity... $ 287 $ 791 $ 894 $1,122 $1,433 $1,445
</TABLE>
22
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA OF SMITHKLINE BEECHAM
The selected financial data set forth below as of December 31, 1994 and
1995 and for the three years ended December 31, 1995 have been derived from, and
should be read in conjunction with, the audited Consolidated Financial
Statements of the SmithKline Beecham Group included in the 1995 Form 20-F.
Financial data as of December 31, 1991, 1992 and 1993 and for the two years
ended December 31, 1992 have been derived from SmithKline Beecham's audited
Consolidated Financial Statements contained in the SmithKline Beecham's Annual
Reports to Shareholders.
SmithKline Beecham prepares its Consolidated Financial Statements in
accordance with U.K. GAAP which differ in certain significant respects from U.S.
GAAP. There is a fundamental difference between U.K. and U.S. GAAP in the
accounting for the Combination. Under U.K. GAAP the Combination has been
accounted for using merger accounting principles, whereas under U.S. GAAP the
transaction has been accounted for using the purchase accounting method. In
addition the requirements for making provision for restructuring costs are more
prescriptive under U.S. GAAP than under U.K. GAAP. A reconciliation to U.S. GAAP
of certain amounts at December 31, 1995 and 1994 and for the three years ended
December 31, 1995 is set out in Note 32 of the Notes to the Consolidated
Financial Statements of SmithKline Beecham included in the 1995 Form 20-F.
CONSOLIDATED INCOME STATEMENT DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1995 1996
------ ------ ------ ------ ------ ------- ------ ------
(L) ($)
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNTS IN ACCORDANCE WITH U.K. GAAP
Net sales
Continuing operations......................... L4,046 L4,587 L5,631 L6,071 L7,011 $11,077 L1,712 L1,874
Discontinued operations(1).................... 639 632 533 421 -- -- --
------ ------ ------ ------ ------ ------- ------ ------
Total sales................................. 4,685 5,219 6,164 6,492 7,011 11,077 L1,712 L1,874
Operating exceptional items................... -- -- -- (580) (250) (395) -- --
Research and development expenditure.......... (432) (478) (575) (638) (653) (1,032) (135) (162)
Trading income of continuing operations(2).... 898 942 1,078 657 1,216 1,921 384 414
Trading income of discontinued
operations(1)............................... 132 131 102 84 -- -- --
Non-operating exceptional items............... -- 42 51 -- 512 809 512 --
Income before taxes and minority interests.... 975 1,089 1,220 691 1,623 2,564 873 387
Taxes on income............................... (321) (351) (378) (571)(3) (591) (934) (348) (112)
Auction Rate Preference Stock (SB Corp MMP)
dividends................................... (24) (16) (15) (18) (24) (38) (6) (6)
Net income.................................... 619 711 813 72 970 1,533 510 260
Per Share/Equity Unit
Income excluding exceptional items............ 23.3p 25.3p 29.1p 32.3p 34.4p 0.54 9.1p 9.6p
Net income.................................... 23.3p 26.7p 30.4p 2.7p 36.1p 0.57 18.9p 9.6p
Per Equity Unit ADR
Income excluding exceptional items............ 116.5p 126.5p 145.5p 161.5p 172.0p 2.72 45.5p 48.0p
Net income.................................... 116.5p 133.5p 152.0p 13.5p 180.5p 2.85 94.5p 48.0p
Ratio of Earnings to Fixed Charges............ 4.03x 4.81x 6.01x 3.85x 5.16x 5.16x 7.84x 5.24x
------ ------ ------ ------ ------ ------- ------ ------
</TABLE>
23
<PAGE> 25
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------
1991 1992 1993 1994 1995 1995
----- ----- ----- ----- ----- -----
(L) ($)
(IN MILLIONS, EXCEPT PER SHARE DATA AND
RATIOS)
<S> <C> <C> <C> <C> <C> <C>
APPROXIMATE AMOUNTS IN ACCORDANCE WITH U.S. GAAP
Income from continuing operations.................... L 402 L 321 L 473 L 546 L 357 $ 564
Net income........................................... 474 385 518 600 446 705
Per Share/Equity Unit
Income from continuing operations.................... 15.1p 12.0p 17.7p 20.3p 13.3p 0.21
Net income........................................... 17.8p 14.4p 19.4p 22.4p 16.6p 0.26
Per Equity Unit ADR
Income from continuing operations.................... 75.5p 60.0p 88.5p 101.5p 66.5p 1.05
Net income........................................... 89.0p 72.0p 97.0p 112.0p 83.0p 1.31
Ratio of Earnings to Fixed Charges................... 3.15x 3.18x 4.98x 4.97x 3.23x 3.23x
</TABLE>
- ---------------
(1) The businesses sold in 1992 were the Manetti Roberts toiletries business and
the North American men's personal care business. The businesses disposed of
in 1993 were the hair care and the bath and body care businesses. The
business disposed of in 1994, with completion in January 1995, was the
animal health business. Prior year amounts have been restated on a
comparable basis.
(2) The trading income of continuing operations is after charging exceptional
items of L250 million in 1995 and L580 million in 1994. For information on
exceptional items, see Note 1 to the Consolidated Financial Statements.
(3) Taxes on income includes L216 million representing a charge on
reorganization of Sterling in connection with the sale by SmithKline Beecham
of Sterling's North American business and a credit associated with the
deferred tax asset arising on the creation of the restructuring provision.
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------- AT MARCH 31,
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------- ------------
(L) ($) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
AMOUNTS IN ACCORDANCE WITH U.K.
GAAP
Current assets.................... L2,595 L3,384 L3,476 L3,479 L3,403 $ 5,275 L3,536
Intangible assets................. -- -- 50 2,304 2,246 3,481 2,272
Total assets(2)................... 4,230 5,340 5,569 8,071 8,153 12,637 8,397
Long-term debt.................... 252 219 852 1,086 1,718 2,663 1,737
Total debt........................ 1,284 1,611 1,225 2,978 2,320 3,596 2,560
Total liabilities................. 3,143 3,854 3,726 6,940 6,414 9,942 6,596
Shareholders' funds -- equity
interests(2).................... 659 956 1,302 618 1,223 1,895 1,278
Auction Rate Preference Stock (SB
Corp MMP)....................... 428 530 541 513 516 800 523
------ ------ ------ ------ ------ ------- ------
APPROXIMATE AMOUNTS IN ACCORDANCE
WITH U.S. GAAP
Shareholders' funds -- equity
interests(1).................... L4,113 L4,385 L4,596 L4,769 L4,901 $ 7,597 N/A
</TABLE>
- ---------------
(1) Increase in shareholders' equity under U.S. GAAP principally arises from
goodwill and purchase accounting adjustments. See Note 32 to the
Consolidated Financial Statements included in the 1995 Form 20-F.
(2) The total assets and shareholders' funds have been restated for
capitalization of interest. See Statement of Accounting Policies, page 50,
included in the Consolidated Financial Statements included in the 1995 Form
20-F.
24
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
GENERAL
On May 20, 1996, the Company was formed with the intent of holding the
stock of certain indirectly owned subsidiaries of SmithKline Beecham, which was
transferred to it in consideration for all of the shares of Common Stock and
Junior Preferred Stock of the Company. The principal purpose of the formation of
the Company is the acquiring, owning and managing of certain non-U.S. assets of
SmithKline Beecham, primarily in the pharmaceutical business.
The Combined Financial Statements reflect the financial position and
results of operations of the entities comprising the Company and its
subsidiaries, on a combined basis at all dates and for all periods presented.
All financial information at dates and for periods prior to the formation
of the Company was prepared as if the Company had existed and operated as a
separate business at such dates and during such periods. Such financial
information reflects operating expenses incurred by SmithKline Beecham Group
that are specifically identifiable to the Company, and certain corporate
overhead allocations that management believes represent the value of services
performed on behalf of the Company.
The operations of the Company are conducted in international markets and
therefore the consolidated financial results of the Company are subject to
exchange rate fluctuations involving the United States dollar and a number of
foreign currencies. The functional currency for the majority of the Company's
foreign operations is the applicable local currency. The principal functional
currencies of the Company are the French franc, Singapore dollar, Belgian franc,
Irish punt and the Portuguese escudo. The Company's operations in Brazil and
Venezuela operate in highly inflationary economies and are re-measured as if the
functional currency were the U.S. dollar. Inflation in more highly developed
economies is at reduced levels in recent years. However, inflation continues to
raise the cost of goods and services used by the Company. Although the Company
attempts to fully recover higher costs through increased selling prices, the
competitive environment as well as government health policy in certain major
markets may restrict this ability. The Company is unable to predict what effect
inflation and pricing restrictions may ultimately have on its business.
In 1995, the Company recorded a provision of $60 million in connection with
the cost of integrating the consumer healthcare operations; the creation of
shared services across all of the business operations in finance, information
resources, human resources and purchasing; and the reorganization of the
Company's supply chain. The costs will be substantially incurred over two years
and include approximately $16 million of asset write-offs.
SmithKline Beecham continually analyzes its operational structure and
supply chain and explores possible opportunities to reduce operating costs and
increase manufacturing efficiencies. The Company's assets, including goodwill,
have been reviewed for permanent impairment in value. There has been no
identified reduction in the value of the Company's assets. In connection with
previous restructuring activity, the Company's manufacturing facility in Ireland
was designated as one of the principal cimetidine manufacturing facilities for
SmithKline Beecham Group, and its manufacturing activities were realigned
accordingly. Further restructuring of the Company's operations may occur as
SmithKline Beecham continues to explore opportunities to increase efficiencies.
While there may be no direct correlation between the financial results of
the Company and those of SmithKline Beecham in any particular period, the
overall performance of the Company is interdependent with the performance of
other units of SmithKline Beecham Group. Moreover, the Company is dependent upon
SmithKline Beecham Group with respect to new product development, the addition
of any resulting new products to the Company's product line and the expansion of
the Company's marketing and distribution activities. There can be no assurance
that the Company or its subsidiaries will be requested to market any particular
product or to engage in any particular business of SmithKline Beecham Group. See
"Business".
25
<PAGE> 27
RESULTS OF OPERATIONS
The following tables have been derived from the Combined Financial
Statements contained elsewhere in this document.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ---------------
1993 1994 1995 1995 1996
------ ------ ------ ---- ----
(IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales
Pharmaceuticals.................... $1,106 $1,285 $1,445 $357 $326
Consumer Healthcare................ 175 205 253 61 63
------ ------ ------ ---- ----
Total Sales.............. $1,281 $1,490 $1,698 $418 $389
====== ====== ====== ==== ====
Operating Income
Pharmaceuticals.................... $ 222 $ 225 $ 201 $ 25 $ 59
Consumer Healthcare................ 2 15 17 (13) 8
------ ------ ------ ---- ----
Total Operating Income... $ 224 $ 240 $ 218 $ 12 $ 67
====== ====== ====== ==== ====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(GROWTH RATES ARE AT COMPARABLE EXCHANGE RATES UNLESS OTHERWISE STATED.)
Pharmaceutical sales in the first quarter of 1996 (the "1996 Period") were
$326 million, compared to $357 million in the first quarter of 1995 (the "1995
Period"). Engerix-B sales for the 1996 Period declined $38 million. The
completion of the French-mandated hepatitis B vaccination campaign and a
reduction of intercompany antibiotic sales were the principal factors
contributing to the decline in 1996 first quarter sales. The decline in
Engerix-B sales in the first quarter of 1996 was partially offset by an increase
in new product sales, and the continued strong growth in the Brazil market.
Major contributors to the new product growth were Seroxat, Kytril and Havrix.
Seroxat sales in France were $13 million above those for the first quarter of
1995 driving much of the Company's new product growth. Brazil sales increased 25
percent, with Amoxil, Engerix-B, Seroxat, Augmentin and Bactroban each reporting
sales growth in excess of 16 percent or more.
Pharmaceutical operating income for the 1996 Period was $59 million
compared to $61 million of operating income, excluding a restructuring
provision, in the 1995 Period. The reduction is attributable to lower sales and
margins associated with intercompany antibiotics sales and lower third party
sales in France.
The Company's consumer healthcare segment reported sales of $63 million in
the 1996 Period, representing an increase of 2 percent over 1995 Period sales.
The increase is due primarily to increased Contac sales in Japan, resulting from
increased promotional activity and line extensions introduced in 1995.
The increase in consumer healthcare operating profit is attributed to a
non-recurring restructuring charge in the 1995 Period and an increase in margins
in Japan and Ireland. Also contributing to the increase in operating income are
lower monetary re-measurement costs in Brazil.
Net equity income decreased in the 1996 Period compared to the 1995 Period
due to lower royalty and interest income realized by equity investees.
Other net non-operating expense increased in the 1996 Period over that for
the 1995 Period by $35 million principally from the movement in exchange gains
and losses ($34 million) on unhedged intercompany financing activity.
The effective tax rate was 38.7 percent and 49.8 percent for the 1996
Period and 1995 Period, respectively. The decrease in the effective rate was due
to the 1996 Period not being impacted by the French exceptional tax, an increase
in foreign tax exempt income and the effects of increased income in operations
experiencing lower effective tax rates.
26
<PAGE> 28
Net income rose $9 million in the 1996 Period, an increase from $10 million
in the 1995 Period. The growth rate in net income is below the growth rate of
operating income in the 1996 Period, principally due to exchange losses on
unhedged related party loans.
FISCAL YEARS 1995 AND 1994
(GROWTH RATES ARE AT COMPARABLE EXCHANGE RATES UNLESS OTHERWISE STATED.)
The Company achieved pharmaceutical sales of $1,445 million in 1995, an
increase of 3 percent at comparable rates and 12 percent at actual rates over
the previous year. The growth was due primarily to strong anti-infective sales,
changing market dynamics in Brazil and increased new product sales. The growth
was partially offset by a reduction of related party raw material sales.
The Company's anti-infective products, including Amoxil, Augmentin and
Bactroban, increased $100 million. Sales of Augmentin increased $58 million,
with Brazil, Switzerland, Portugal and Austria each reporting growth rates in
excess of 15 percent over 1994.
Brazil's economic stability was maintained in 1995 and strengthened by
change directed at the privatization of government-owned companies,
acknowledgment of industrial patents and intellectual property rights, and
removal of importation barriers. Sales for Brazil increased by over 50 percent,
resulting in Brazil being the Company's second largest market. The increase over
1994 is due primarily to a change in the market dynamics as a result of the
stabilization program. The Company believes that Brazil's stabilization program
has improved purchasing power of the consumer and assisted in segments of the
population moving into the middle and upper income classes.
New products represented 11 percent of total product sales in 1995, up from
8 percent in 1994. The key performer was the antidepressant Seroxat, with sales
increasing $50 million to $57 million. In France, the Company's largest market,
the Company launched Seroxat, accounting for $40 million of the increase. Also
launched in 1995 was Infanrix, the combined acellular vaccine for diphtheria,
tetanus and pertussis (whooping cough) in Switzerland. Havrix continued its
success as a new product, reporting 22 percent growth over 1994.
Related party sales of active ingredients decreased by $101 million due
principally to the expiration of a related party manufacturing agreement for
paroxetine, the active ingredient in Seroxat, and termination of a related party
manufacturing agreement for famciclovir, the active ingredient in Famvir.
Famvir, indicated in the U.S. and U.K. for the treatment of shingles, is
scheduled for launch in Ireland in early 1996. The Irish manufacturing operation
disposed of $74 million of assets associated with the manufacturing activity of
paroxetine and famciclovir in 1995.
Pharmaceutical operating income in 1995 was adversely affected by
restructuring and one-time government-mandated social levy costs and the
expiration and termination of manufacturing agreements. The impact of the
preceding items was partially offset by lower monetary costs in Brazil.
The Company's consumer healthcare sales in 1995 were $253 million compared
to $205 million in 1994. The increase is primarily attributable to the inclusion
of 12 months of sales activity for products acquired via the Sterling
acquisition, as opposed to inclusion of 2 months of sales activity in 1994.
Sales of the Contac line in Japan increased by $6 million, or 6 percent,
reflecting the launch of two line extensions, Contac Cough and Contac Day.
Contac sales account for over 90 percent of the Company's consumer healthcare
sales in Japan. Other contributors to the growth in consumer healthcare 1995
sales were Lucozade and Aquafresh in Ireland, which grew by 23 and 20 percent,
respectively. Lucozade accounted for 54 percent of the consumer healthcare sales
in Ireland.
The consumer healthcare segment commenced restructuring programs in both
Brazil and Japan in 1995. The restructuring program in Brazil includes the
integration of the consumer healthcare organizations, restructuring of existing
manufacturing facilities, and the disposal of personal care products. The
program also includes co-location of existing operations. Staffing levels were
reduced in Japan by approximately 35 percent in 1995, redirecting the investment
towards promotional activity.
27
<PAGE> 29
Consumer healthcare operating income increased by $2 million in 1995, or
13% at actual rates. The increase is due to the full year inclusion of operating
income related to the businesses acquired by the Sterling acquisition, and a
significant reduction of currency devaluation costs in Brazil offset by
restructuring charges.
Net interest income for 1995 was $30 million (an increase of $23 million),
due to the settlement of related party loans. A significant amount of the
settlement relates to loans associated with a stock redemption program. In
addition, the Company's pharmaceutical operation in France loaned additional
funds to related parties.
Other net non-operating expense of $5 million in 1995 compares to an
operating income of $19 million in 1994. The reduction is primarily the result
of the inclusion in 1994 of $16 million of income associated with the gain on
disposal of fixed assets.
The effective income tax rate increased from 35.2 percent in 1994 to 49.8
percent in 1995. The significant items impacting the 1995 income tax rate are
net operating losses, reduction in foreign tax exempt income, the French
exceptional tax, and the effects of increased income in operations experiencing
higher effective tax rates.
Net income declined to $110 million in 1995, a reduction of 26 percent at
actual rates over 1994. The decline is primarily attributed to restructuring
charges.
FISCAL YEARS 1994 AND 1993
(GROWTH RATES ARE AT COMPARABLE EXCHANGE RATES UNLESS OTHERWISE STATED.)
The Company's sales of pharmaceutical products increased 15 percent at
comparable rates and 16 percent at actual rates in 1994 despite continued
pressure on prices in France, and the introduction of a new economic
stabilization program in Brazil.
In 1994, the pharmaceutical segment of the Company was favorably impacted
by the French government inspired campaign to vaccinate "at risk" sectors of
their population against hepatitis B and increased sales of active ingredients
to related parties. The French vaccination campaign was the primary contributor
to Engerix B sales, which increased by $103 million.
In 1993, the Company's primary production facility entered into short-term
contracts with SmithKline Beecham to produce the active ingredients of two new
products, Seroxat (paroxetine) and Famvir (famciclovir). Related party raw
material sales of these active ingredients increased by $108 million in 1994.
Partially offsetting the increase in vaccine and related party active
ingredient sales were lower sales of anti-infective products. Anti-infective
sales, which include Augmentin, Amoxil and Timentin, were impacted by low levels
of pathogens prevalent in Europe. In addition, France experienced
government-induced prescribing restrictions that were imposed due to the
successful volume growth of the Augmentin brand.
Growth in pharmaceutical operating income was lower than pharmaceutical
sales growth in 1994 due to lower margins on related party manufacturing
agreements.
The consumer healthcare business sector accounted for 14 percent of the
Company's sales, and 6 percent of the Company's operating income, in 1994. Sales
of $205 million in 1994 represented an increase of 11 percent at comparable
rates and 17 percent at actual rates over 1993 sales, with the oral care sales
increasing $21 million. Contac, the leading product for consumer healthcare,
declined 5 percent due to a weak cold and flu season in Japan. The
gastrointestinal category was led by sales of Eno, an effervescent antacid, that
grew 9 percent in 1994, primarily due to growth of Eno in Brazil and France.
Nutritional healthcare sales increased 11 percent, with Lucozade increasing 16
percent.
Consumer healthcare operating income at actual rates grew $13 million in
1994. This growth was driven by increased volume in France and Singapore and
lower monetary re-measurement expenses in Brazil.
Net interest income declined in 1994 from $14 million to $7 million due to
settlement of related party loans prior to consolidation of two entities in
Belgium.
The increase in other non-operating income is due to gain on disposal of
fixed assets of $16 million.
28
<PAGE> 30
The effective tax rate in 1994 increased primarily due to the effects of
reduced income in operations experiencing lower effective tax rates.
Net income declined slightly, versus a 7 percent growth in operating
income. The decline is principally due to increased income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's anticipated cash requirements will be funded primarily by
cash flow from operations, supplemented by dividends on the SB Biologicals
Preferred Stock, payments on loans to affiliates and the utilization of local
lines of credit for small daily cash activities in certain countries. Management
believes that these sources will be sufficient to fund the cash needs of the
Company's business for the foreseeable future.
Long-term liquidity is dependent upon the Company's competitive position,
including its ability to license and market new products and to maximize
benefits from new business alliances.
Net cash provided by operating activities was $142 million in 1993, $99
million in 1994 and $227 million in 1995. In 1995, net cash provided by
operations benefited from significant reduced working capital needs offset by
lower income due to $60 million in restructuring charges of which $35 million
will be paid in 1996 and 1997, and an increase in the effective tax rate. The
decrease in 1994 over 1993 reflects a continued reduction in working capital
needs.
Investing activities utilized cash in an amount of $45 million in 1993, and
$13 million in 1994 and provided cash of $60 million in 1995. Net cash provided
by investing activities in 1995 resulted from the sale of fixed assets for $86
million. Cash used in 1994 increased from 1993 due to the acquisition of
goodwill related to the purchase of Sterling.
Cash used in financing activities was $109 million in 1993, $84 million in
1994 and $227 million in 1995. The cash used in 1995 increased from 1994 due to
increased loans to affiliates, offset by cash provided from SmithKline Beecham
primarily related to the sale of the animal health business. Cash used in
financing activities decreased in 1994 due to increased loans to affiliates
offset mainly by liquidation dividends received from animal health companies
prior to sale.
Cash outflows for income taxes increased by $56 million from 1994 to 1995
due to the prior year deferral of tax payments and an increased effective tax
rate in 1995.
29
<PAGE> 31
BUSINESS
GENERAL
The Company was incorporated in May 1996 for the principal purpose of
acquiring, owning and managing certain non-U.S. assets of SmithKline Beecham,
primarily in the pharmaceuticals business. SmithKline Beecham owns indirectly
100 percent of the Common Stock of the Company. The Company had $1,698 million
and $389 million in sales and $110 million and $19 million in net income for
1995 and the first quarter of 1996, respectively. The Company is a holding
company and conducts its operations through approximately 60 subsidiaries. The
Company's holdings will also include fixed rate cumulative preferred stock of SB
Biologicals, a Belgian pharmaceuticals subsidiary of SmithKline Beecham, with an
aggregate redemption price of $650 million. See "-- SB Biologicals". The
Company's primary activities consist of the manufacture and sale of
pharmaceuticals (prescription medicines) and the manufacture and sale of certain
consumer healthcare products, such as OTC medicines, oral care products and
nutritional drinks as part of the worldwide sales of SmithKline Beecham Group.
The Company also engages in intercompany lending to other companies in
SmithKline Beecham Group.
RELATIONSHIP WITH SMITHKLINE BEECHAM GROUP
SmithKline Beecham conducts its pharmaceutical and consumer healthcare
businesses on a worldwide basis directly and through approximately 330
subsidiaries, including the Company and its subsidiaries. The operations of the
Company and its subsidiaries are fully integrated with those of SmithKline
Beecham Group as a whole through a series of intercompany arrangements including
purchases and sales of active ingredients and finished products, product and
intellectual property licenses, intercompany loans and management and shared
services agreements (see "Arrangements with SmithKline Beecham Group"). For
example, the Company's manufacturing operations produce certain pharmaceutical
and consumer healthcare products for sale by SmithKline Beecham Group marketing
units worldwide. Other operations produce the raw materials or semi-finished
ingredients which are sold to other SmithKline Beecham Group entities for use in
the manufacture of other products, which may in turn be sold back to the
Company's subsidiaries in finished form for marketing and sale to end users.
SmithKline Beecham Group also supplies a substantial portion of the raw
materials used by the Company in manufacturing finished products. In addition,
the Company and other members of SmithKline Beecham Group generally share the
results of their research and development efforts through mutual licensing
agreements or arrangements.
While there may be no direct correlation between the financial results of
the Company and those of SmithKline Beecham in any particular period, the
overall performance of the Company is interdependent with the performance of
other units of SmithKline Beecham Group. Moreover, the Company is dependent upon
other members of SmithKline Beecham Group with respect to new product
development, the addition of any resulting new products to the Company's product
line and the expansion of the Company's marketing and distribution activities.
The Company believes that the agreements and arrangements between the
Company and its subsidiaries, on the one hand, and other members of SmithKline
Beecham Group, on the other hand, are on arm's length terms. However, SmithKline
Beecham's determination to seek to establish, modify or terminate any such
agreement or arrangement is made on a case-by-case basis, generally with a view
to the objectives of SmithKline Beecham Group as a whole. There can be no
assurance that the Company or its subsidiaries will be requested to produce or
market any particular product or to engage in any particular business of
SmithKline Beecham Group, or that any existing business relationship between the
Company and its subsidiaries, on the one hand, and other members of SmithKline
Beecham Group, on the other hand, will not be so modified or terminated.
SmithKline Beecham will have the ability to modify or terminate business
relationships affecting the Company without seeking the approval of the holders
of Shares. See "Arrangements with SmithKline Beecham Group".
30
<PAGE> 32
The descriptions of the Company's two principal business
segments -- pharmaceuticals and consumer healthcare -- below summarize the
Company's role in SmithKline Beecham Group and should be read in conjunction
with the description of SmithKline Beecham's business contained in the 1995 Form
20-F.
BUSINESS SEGMENTS
Pharmaceuticals
The Company, in conjunction with other members of SmithKline Beecham Group,
manufactures and sells prescription medicines concentrated in three therapeutic
areas: anti-infectives/biologicals (vaccines), gastrointestinal and
neurosciences.
In 1995, the Company's total pharmaceuticals sales were $1,445 million or
approximately 85 percent of total sales. Approximately 78 percent of these sales
were made outside of SmithKline Beecham Group. The Company's sales of
pharmaceuticals to third parties represented approximately 13 percent of
SmithKline Beecham Group's continuing pharmaceuticals sales (after elimination
of intercompany sales) in 1995.
The Company's main anti-infective products marketed and sold to third
parties are Augmentin (amoxicillin and potassium clavulanate), a leading
broad-spectrum anti-infective against many penicillin-resistant organisms, and
Amoxil (amoxicillin), another antibiotic with a wide range of applications. The
leading vaccine products are Engerix-B, a hepatitis B vaccine, and Havrix, a
hepatitis A vaccine. In 1995, the Company's antibiotic and vaccines business
accounted for approximately 72 percent of its third party sales.
Tagamet (cimetidine), an H2 receptor antagonist product used in the
treatment of ulcer and other gastrointestinal diseases, is the Company's
principal gastrointestinal product. Sales of gastrointestinal products
represented approximately 12 percent of the Company's third party
pharmaceuticals sales in 1995.
Seroxat (paroxetine), belonging to the class of selective seratonin
reuptake inhibitors ("SSRI"), a treatment for depression and anxiety, is the
Company's leading neuroscience product. Sales of neuroscience products
represented approximately 8 percent of the Company's third party pharmaceuticals
sales in 1995.
Consumer Healthcare
The Company markets a varied range of OTC medicines, nutritional drinks and
oral care products. In 1995, the Company's consumer healthcare sales amounted to
$253 million, or approximately 15 percent of total sales, substantially all of
which were made to third parties. The Company's sales to third parties
represented approximately 11 percent of SmithKline Beecham Group's continuing
consumer health care sales (after elimination of intercompany sales).
The Company's OTC medicines include a range of respiratory tract,
gastrointestinal and analgesic medicines, skin care products and vitamins and
natural medicines. The most significant of these products are Contac, for the
treatment of colds and influenza; Eno, an effervescent antacid; Sonrisal, an
antacid; and Sythal, a dermatological product. Leading oral care products
include Aquafresh and Odol. The principal nutritional drink product is Lucozade,
a glucose-based energy replacement drink.
PRINCIPAL MARKETS
The Company's sales are made throughout the world, the principal markets
being France, Brazil, Japan, Africa, Belgium, Austria, Switzerland and Ireland.
Sales in these countries together accounted for approximately 79 percent of the
Company's sales in 1995. France is the most important country for the sale of
the Company's prescription medicines, which sales in France accounted for
approximately 40 percent of the Company's total sales in 1995. See Note 12 to
the Combined Financial Statements.
PRODUCTION
SmithKline Beecham's prescription medicines are manufactured at its bulk
chemical and secondary pharmaceutical production facilities. The Company is
involved in both types of manufacturing.
Bulk chemical production involves the manufacture in quantity of
therapeutically active compounds, principally through the application of
chemical synthesis or biological processes, such as fermentation. The Company's
principal bulk chemical production operations are located in Ireland and
Singapore.
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Production facilities for prescription drugs and OTC products are engaged
in the formulation of active ingredients and packaging into finished dosage
forms, including oral dosage forms, such as capsules, syrups and tablets, and
injectable dosage forms. The Company maintains its principal production plants
in France, Brazil, Austria and Pakistan.
The Company or other members of SmithKline Beecham Group manufacture most
of the active ingredients contained in the Company's pharmaceutical products and
therefore the Company is generally not dependent on third-party suppliers for
these materials. The Company procures Contac for the Japanese market and
toothbrushes from third party manufacturers.
Approximately $318 million, or 19 percent, of the Company's total sales
were derived from production activities for members of SmithKline Beecham Group
(other than the Company's subsidiaries) in 1995.
MARKETING AND DISTRIBUTION
The Company sells its prescription medicines primarily to wholesale drug
distributors, independent and chain retail drug outlets, physicians, hospitals,
clinics, government entities and other institutions. These products are
ordinarily dispensed to the public through pharmacies on the prescription of a
physician. Promotion of these products is directed primarily to physicians,
hospitals and pharmacists through personal visits by sales representatives
employed by SmithKline Beecham Group. Promotion of these products is
supplemented by scientific seminars, advertising in medical and other journals,
the provision of samples and the direct mailing of printed material.
The Company's OTC and oral care products are distributed to retail outlets
directly or through wholesalers who are not necessarily drug specialists.
Methods of selling are constantly under review to take advantage of changes in
market conditions.
Distribution of nutritional drinks is made to a wide selection of outlets,
either directly or through wholesalers. The organization of the selling teams is
very dependent on the outlet pattern of individual countries. Consumer
acceptance of the products is supported by specific advertising associated with
outlet promotions.
Approximately $1,380 million, or 81 percent, of the Company's total sales
was derived from marketing activities in 1995.
COMPETITION
The pharmaceutical industry is highly competitive. The principal
competitors of SmithKline Beecham Group are large international companies with
substantial resources operating in a worldwide marketplace. Some of these
companies and their major competing products are mentioned below. As an
affiliate of one of the largest pharmaceutical companies in the world, the
Company believes it has access to the resources to compete effectively and
efficiently in those markets and for the products for which it serves as the
SmithKline Beecham marketing organization.
A drug may be subject to competition from alternative therapies during the
period of patent protection and thereafter from generic copies. The
manufacturers of generic products typically do not bear the related research and
development costs and consequently are able to offer such products at
considerably lower prices than the branded equivalents. A research and
development-based pharmaceutical company will therefore normally seek to achieve
a sufficiently high profit margin and sales volume during the period of patent
protection to justify the original investment and to fund research for the
future. There are, however, a number of factors which enable products to remain
profitable once patent protection has ceased. These include the establishment of
a strong brand image with the prescriber or the consumer, supported by an active
trademark registration and enforcement policy, and the development of a broader
range of alternative formulations than the manufacturers of generic products
typically supply.
As is the case for the pharmaceutical industry in general, the introduction
of new products and processes by competitors may affect pricing levels or result
in product replacement for existing products, and there can
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<PAGE> 34
be no assurance that any of the Company's products may not become outmoded,
notwithstanding patent or trademark protection. In addition, increasing
governmental and other pressure towards the dispensing of generic products in
substitution for brand-name drugs may increase competition for products no
longer covered by patents.
Major products competing with the Company's semi-synthetic penicillins
(Augmentin and Amoxil) are other anti-infectives, including, but not limited to,
generic brands, cephalosporins and, to an increasing degree, quinolones. Amoxil,
the Company's third largest selling product in 1995, has been without patent
protection for a number of years and is subject to competition from generic
brands. Seroxat's major competitors in the SSRIs market are Prozac from Eli
Lilly, Zoloft from Pfizer and Efexor from Wyeth-Ayerst. Tagamet faces
competition from generic cimetidine products and other branded H2 receptor
antagonists, including Zantac from Glaxo Wellcome and Pepcid from Merck.
Competition from generic products generally occurs as patents in major
markets expire; in other markets the absence of patent protection permits
generic competition shortly after product launch. Strenuous efforts to counter
the effects of this competition are directed at three main areas: first, the
introduction of new ranges of products into as many markets as possible, second,
accelerating the process by which new compounds under development are brought to
the market, and third, increasing brand awareness among consumers. Ultimately,
the Company believes that its competitive position in the markets in which its
prescription drugs compete is dependent upon the discovery and development of
new products, together with effective marketing of existing and future products.
The major competitors in the consumer healthcare markets are Procter and
Gamble, Colgate-Palmolive, American Home Products, Unilever, Rhone Poulenc
Rorer, Bristol Myers Squibb, Warner Lambert and Johnson & Johnson. All of these
companies are major international companies and continue to be extremely active
in what is a highly competitive market. In addition, there are many other large
and small companies which compete with SmithKline Beecham Group, including the
Company's subsidiaries, in selected markets.
The consumer healthcare business of SmithKline Beecham Group has grown
through the development of high quality branded products with good consumer
acceptance, supported by advertising and brand promotion, line extensions, new
formulations and packaging innovations. SmithKline Beecham's (and the Company's)
ability to compete effectively is dependent on its skills in developing new
scientifically supported products and line extensions with performance superior
to those of its competitors.
RESEARCH AND DEVELOPMENT
The Company conducts no significant research and development activities and
is dependent upon SmithKline Beecham Group for such activities. For a discussion
of SmithKline Beecham Group's research and development activities, see the 1995
Form 20-F.
INTELLECTUAL PROPERTY
The Company is dependent upon SmithKline Beecham Group for intellectual
property rights in connection with its products, principally by way of licensing
agreements. See "Arrangements with SmithKline Beecham Group". For a more
detailed discussion of SmithKline Beecham Group's intellectual property, see the
1995 Form 20-F.
Patents
The Company has patent protection through licensing agreements with other
members of SmithKline Beecham Group for one or more forms of most of its
important existing pharmaceutical products in its major markets and, also
through SmithKline Beecham Group, either has obtained patents or anticipates
that patent protection will be granted for the new drugs which are under
development. However, the absence of effective patent protection for
pharmaceuticals in some developing countries continues to have an adverse effect
on pharmaceutical companies, including the Company, that conduct business in
those countries.
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The patent expiry date for the active ingredient in Seroxat is on or after
2005 in major countries around the world. The patent situation on potassium
clavulanate (Augmentin) is complex. Although patents on the compound expired in
some markets in 1995, patent extension regulations in France provide protection
beyond 2000. Useful secondary protection in important markets also lasts until
2000 or beyond. The patent on Amoxil has expired. Patents on Tagamet
(cimetidine) have expired in most countries. The patent positions on Engerix-B
and Havrix are complex but in general, the Company believes that key patents for
both products will extend into the next decade.
Trademarks
All of the Company's significant pharmaceutical products are protected by
registered trademarks in its major markets held by SmithKline Beecham Group.
SmithKline Beecham Group pursues a policy of enforcing its trademark rights
vigorously against infringements and other unauthorized uses. These trademarks
are used in many countries, although there may be local variations for each of
these trademarks.
Trademark protection continues in some countries as long as a trademark is
used and, in other countries, as long as a trademark is registered. The
Company's trademark rights with respect to a pharmaceutical product generally
assumes increasing importance when the patent for such product expires.
The Company's consumer healthcare businesses are brand-oriented, and
therefore the Company considers trademark rights for these products to be of
particular value. Most of its consumer brands are protected by trademarks held
by SmithKline Beecham Group in the majority of the markets where those brands
are sold and SmithKline Beecham Group vigorously protects these trademarks from
infringement.
SB BIOLOGICALS
The Company's assets will include 53,629 shares of Class A 6.5% Preferred
Shares of SB Biologicals with an aggregate liquidation preference of $550
million and 2,627,821 shares of Class B 5.5% Preferred Shares of SB Biologicals
with an aggregate liquidation preference of $100 million. Subject to funds
legally available for payment, the SB Biologicals Preferred Stock would entitle
the Company to an annual dividend of $41.25 million, prior to any applicable
withholding taxes. Under Belgian law, preferred stock dividends will be payable
from earnings of SB Biologicals accrued from January 1, 1996. All of SB
Biologicals' common stock is owned indirectly by SmithKline Beecham. The SB
Biologicals Preferred Stock is redeemable at the option of SB Biologicals at an
aggregate redemption price of $650 million, and represents, in the aggregate,
50% of the combined voting power of all classes of capital stock of SB
Biologicals. There are no other preferred shares of SB Biologicals outstanding.
In connection with the issuance of the SB Biologicals Preferred Stock,
SmithKline Beecham will issue the SB Biologicals Guarantee, pursuant to which
SmithKline Beecham will guarantee the payment to the Company by SB Biologicals
of dividends declared by SB Biologicals on the shares of SB Biologicals
Preferred Stock held by the Company, and will enter into the SB Biologicals
Support Agreement, under which SmithKline Beecham will agree to make additional
capital contributions to SB Biologicals in certain circumstances in order to
enable SB Biologicals to declare and pay dividends on the SB Biologicals
Preferred Stock. The terms and provisions of the SB Biologicals Guarantee and
the SB Biologicals Support Agreement are substantially identical to those of the
Guarantee and the Support Agreement, respectively. The obligations of SmithKline
Beecham under the SB Biologicals Support Agreement will be limited to an
aggregate amount of $1 billion. The SB Biologicals Support Agreement is not a
guarantee of any obligation, liability or indebtedness of SB Biologicals,
including the SB Biologicals Preferred Stock. Accordingly, SmithKline Beecham
will not, by virtue of the SB Biologicals Support Agreement, have any obligation
to the Company or any holder of the Shares of any Series, and the SB Biologicals
Support Agreement is not enforceable directly by the Company or any such holder.
See "Description of SmithKline Beecham Support".
SB Biologicals is a vertically integrated vaccines company engaged in the
research and development, manufacturing, marketing and selling of the full range
of SmithKline Beecham vaccine products. SB Biologicals sells directly to certain
categories of customers and to customers located in certain countries; in
others, vaccine products are sold to SmithKline Beecham affiliates on an
intercompany basis. SmithKline
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Beecham's worldwide vaccine sales to third parties were $966.6 million in 1995
and $817.4 million in 1994. Net income for SB Biologicals as an entity on a
Belgian statutory basis was $122.6 million for 1995 and $143.9 million for 1994.
On these bases SB Biologicals had total indebtedness and stockholders' equity of
$673.1 million at December 31, 1995.
REGULATION
The international pharmaceutical industry is highly regulated. National
drug regulatory authorities administer numerous laws and regulations governing
the testing, approval, manufacturing, importing, labeling and marketing of drugs
and also review the safety and efficacy of pharmaceutical products. Consumer
healthcare products are subject to similar laws, regulations and review. These
regulatory requirements are a major factor in determining whether a substance
can be developed into a marketable product and can also determine the amount of
time and expense associated with such development.
The national regulatory authorities in many countries, including those of
continental Europe and Japan, have high standards of technical appraisal and,
consequently, the introduction of new pharmaceutical and consumer healthcare
products generally entails a lengthy approval process. Of particular importance
is the requirement in all major countries that products be authorized or
registered prior to marketing and that such authorization or registration be
subsequently maintained. The Company anticipates that the introduction of new
products will continue to require substantial effort, time and expense in order
to comply with applicable regulatory requirements. National regulatory
authorization is also required to approve the switch of products from
prescription to OTC use. The process required to switch products from
prescription to OTC use requires a number of basic requirements. These include
the long-term experience of the quality, safety and efficacy of the product in a
wide patient population and data to confirm that the relevant condition is both
self-limiting and can easily be diagnosed by the patient.
The European Medicines Evaluation Agency has been established in the U.K.
and has been operational from January 1, 1995. From that date, two new
registration systems, the Centralized Procedure and the Decentralized Procedure,
have been introduced. Both of these procedures can lead to a binding decision
allowing a new product to be marketed simultaneously in all European Union
countries. These are major changes and only time will demonstrate whether the
new procedures will lead to faster or slower registration approvals in Europe.
The overall cost of providing healthcare services has been and will
continue to be subject to review. Prices for products are sometimes subject to
direct price controls and drug reimbursement programs which have varying price
control mechanisms. Elsewhere in many countries the prices of pharmaceutical
products are controlled by law. In some countries, such as France, the prices of
individual products are regulated. Governments may also influence the prices of
pharmaceutical products through their control of national healthcare
organizations which may bear a large part of the cost of supply of such products
to consumers.
In France, the government's medium-term program to reform its finances to
meet the economic conditions for European Monetary Union is having a significant
impact on the pharmaceutical sector. In 1995 the sector was required to pay a
special contribution towards the social security deficit.
The Company is unable to predict whether, and the extent to which, its
business may in the future be affected by legislative and regulatory
developments relating to specific products and to the pricing of such products.
ENVIRONMENTAL MATTERS
SmithKline Beecham Group has a worldwide program of corporate environmental
standards. These standards are designed to ensure that environmental protection
is a key business objective and they detail the purpose, scope, procedures and
responsibilities of every environmental concern throughout SmithKline Beecham
Group's worldwide operations. The Company is committed to adhering to these
standards and to being an environmentally responsible member in the local,
national and worldwide community in which it operates.
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The Company believes that its operations comply in all material respects
with applicable environmental laws and regulations. Although the Company makes
ongoing capital expenditures for environmental protection equipment, as well as
cash expenditures for site remediation and the operation and maintenance of
environmental facilities, it does not anticipate any such expenditures to have a
material impact upon the Company's capital expenditures, cash flow or financial
position.
The Company does not expect that its liability for environmental matters
will have a material impact on its financial condition, results of operations or
liquidity.
EMPLOYEES
On December 31, 1995, the Company had approximately 4,600 employees.
Employees in several countries, including France, are represented by unions or
work councils. The Company has not experienced any material work stoppages in
recent years, and it considers its employee relations to be good.
PROPERTIES
The Company's headquarters and principal executive offices are located at
1403 Foulk Road, Wilmington, Delaware.
The Company owns or leases nine production facilities, with its principal
facilities being located in France, Ireland, Singapore and Brazil. For further
information regarding the Company's principal production and research and
development facilities, see "Business -- Business Segments -- Pharmaceuticals"
and "-- Consumer Healthcare".
LEGAL PROCEEDINGS
The Company is involved from time to time in various legal and
administrative proceedings which it considers normal for its business, including
suits claiming damages as a result of the use of the Company's products and
other matters. Although the outcome of claims, legal proceedings and other
matters in which the Company is involved cannot be predicted with any certainty,
the Company does not expect its ultimate liability for such matters to have a
material adverse effect on its financial condition, results of operations or
liquidity.
ARRANGEMENTS WITH SMITHKLINE BEECHAM GROUP
The Company is an indirect wholly-owned subsidiary of SmithKline Beecham.
The Company and SmithKline Beecham have entered into a number of arrangements
relating to the ongoing relationship between them. The Company and SmithKline
Beecham believe that such arrangements and transactions, taken as a whole,
accommodate the parties' interests in a manner that is fair to both parties and
their respective economic interests, and that the terms and conditions of such
arrangements are consistent with those that would result from arm's-length
dealings.
GENERAL SERVICES AGREEMENT
The Company, SmithKline Beecham and SB Corp will enter into a management
and services agreement (the "General Services Agreement") under which SmithKline
Beecham and SB Corp will provide executive management services to the Company.
At present all the officers and directors of the Company are officers or
employees of SmithKline Beecham or SB Corp. There is no present intention that
officers and directors of the Company would become employees of the Company.
The General Services Agreement also provides that SmithKline Beecham, SB
Corp and certain of their subsidiaries will provide various services to the
Company. Such services will include executive management, legal, corporate
accounting, tax, treasury, internal audit, information resources, corporate
affairs and risk management. Employees of SmithKline Beecham and SB Corp
rendering services to the Company will continue to be, and will be paid as,
employees of SmithKline Beecham and SB Corp. In addition to the other
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<PAGE> 38
services to be provided under the General Services Agreement, SmithKline Beecham
will continue to provide the Company with insurance coverage under SmithKline
Beecham's policies and self insurance programs as long as SmithKline Beecham
owns all the outstanding Common Stock of the Company. Such insurance includes
coverage for public liability, workers' compensation, environmental impairment
liability, property damage, business interruption, directors' and officers'
liability, criminal liability, fiduciary liability and surety bonds. The charge
to the Company for such insurance will constitute an allocation of the costs to
SmithKline Beecham of maintaining the various policies. This charge will be
renegotiated annually based upon SmithKline Beecham's cost for the insurance and
the Company's loss experience.
The Company may terminate any type of service which it receives under the
General Services Agreement at any time upon 60 days' prior written notice. The
Company will reimburse SmithKline Beecham for reasonable charges for services
under the General Services Agreement, currently estimated to be approximately $1
million per year.
The Company, like other members of SmithKline Beecham Group, is party to a
number of shared service arrangements with other members of SmithKline Beecham
Group, including with respect to human resources, information resources and
finance. The amounts paid by members of SmithKline Beecham Group, including the
Company, for such shared services are generally determined by allocating the
full cost of the services based on the usage by the SmithKline Beecham Group
member.
PRODUCT AGREEMENTS
Within SmithKline Beecham Group, there are a number of supply and license
arrangements between and among SmithKline Beecham and its subsidiaries,
including the Company and its subsidiaries. The historical financial information
in the Combined Financial Statements reflects the financial effect of these
arrangements. Generally such arrangements are subject to termination on notice
of 30 to 180 days without provision for compensation with regard to such
termination. Product sales prices are typically based on an estimate of market
prices and a reasonable margin for the purchaser. The Company's subsidiaries pay
royalties to SmithKline Beecham Group based on a percentage of the Company's
third party sales for a number of products, based on patent, trademark, know-how
or other intellectual property rights retained by SmithKline Beecham Group. As a
general matter, the Company and its subsidiaries do not have license or
distribution rights to new SmithKline Beecham products within their respective
geographic markets.
INTERCOMPANY FINANCE
A substantial portion of the Company's assets, revenues and net income
consist of or are derived from loans made by the Company to other members of
SmithKline Beecham Group. The aggregate principal amount of loans made by the
Company to members of SmithKline Beecham Group (other than the Company's
subsidiaries) outstanding at December 31, 1995 was $1,144 million and the
Company recorded aggregate interest income of $33 million in respect of such
loans for the year ended December 31, 1995. The Company expects to increase the
amount of these loans substantially by lending all or a substantial portion of
the proceeds of the Offering to members of the SmithKline Beecham Group (see
"Use of Proceeds"). Such new loans will be fully and unconditionally guaranteed
by SmithKline Beecham. The intercompany loans will generally mature within one
year and bear interest at rates based upon the London Interbank Offered Rate
("LIBOR"), which rates will, in the Company's view, be no less favorable to the
Company in the aggregate than those offered by third parties for similar loans.
GUARANTEE AND SUPPORT AGREEMENT
SmithKline Beecham will enter into the Guarantee and Support Agreement in
relation to the Shares. See "Description of SmithKline Beecham Support".
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MANAGEMENT
Directors of the Company are to be elected at the annual meeting to serve
until the next annual meeting and until successors are elected and qualified.
Holders of the Common Stock and the Shares will be entitled to vote in each such
election, and through the exercise of cumulative voting rights, holders of the
Shares will have the power to elect up to approximately 27% of the Company's
directors, assuming the issuance of all of the Shares offered hereby. As the
indirect holder of all shares of Common Stock, SmithKline Beecham will have the
ability to elect the remainder of the Company's directors. Currently, eight
individuals have been elected to the Board of Directors. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board. Set
forth below is information with respect to each person who is a director or
executive officer of the Company as of June 26, 1996:
<TABLE>
<CAPTION>
NAME POSITION WITH COMPANY
- ----------------------------------------------- ------------------------------------
<S> <C>
Hugh R. Collum................................. Director, Vice President and Chief
Financial Officer
William J. Creelman............................ Director
Jean-Pierre Garnier, Ph.D...................... Director and Vice President
Jan Leschly.................................... Director, President and Chief
Executive Officer
Donald F. Parman............................... Director, Vice President and
Secretary
George H. Poste, D.V.M., Ph.D.................. Director and Vice President
William J. Shulby.............................. Director, Treasurer and Assistant
Secretary
Tadataka Yamada, M.D........................... Director and Vice President
</TABLE>
HUGH R. COLLUM, 55, DIRECTOR, VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER. Mr. Collum was appointed a director and Vice President and Chief
Financial Officer of the Company at the Company's inception in May 1996. He has
been a director and Chief Financial Officer of SmithKline Beecham since July
1989. Mr. Collum is also a director of M&G Group plc.
WILLIAM J. CREELMAN, 42, DIRECTOR. Mr. Creelman was appointed a director
of the Company at the Company's inception in May 1996. Mr. Creelman has been
Director of Audits and Tax Counsel-U.S. of SB Corp since June 1992. Prior
thereto, he was Associate Tax Counsel of SB Corp.
JEAN-PIERRE GARNIER, PH.D., 48, DIRECTOR AND VICE PRESIDENT. Dr. Garnier
was appointed a director and Vice President of the Company at the Company's
inception in May 1996. Dr. Garnier has served as President, SmithKline Beecham
Pharmaceuticals since April 1994 and Chief Operating Officer of SmithKline
Beecham since October 1995. Prior thereto he had been Executive Vice President,
SmithKline Beecham Pharmaceuticals since April 1993 and President, North
American Pharmaceuticals from September 1990 to April 1993. Dr. Garnier has been
a director of SmithKline Beecham since 1992.
JAN LESCHLY, 55, DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr.
Leschly was appointed a director and President and Chief Executive Officer of
the Company at the Company's inception in May 1996. Mr. Leschly has been Chief
Executive of SmithKline Beecham since April 1994. He joined SmithKline Beecham
as a director and Chairman, SmithKline Beecham Pharmaceuticals in June 1990.
DONALD F. PARMAN, 45, DIRECTOR, VICE PRESIDENT AND SECRETARY. Mr. Parman
was appointed a director and Secretary of the Company at the Company's inception
in May 1996 and a Vice President of the Company in June 1996. He has been the
Secretary and Associate General Counsel of SB Corp since July 1994. Prior
thereto he had been Assistant Secretary and Associate General Counsel of SB
Corp.
GEORGE H. POSTE, D.V.M., PH.D., 52, DIRECTOR AND VICE PRESIDENT. Dr. Poste
was appointed a director and Vice President of the Company at the Company's
inception in May 1996. Dr. Poste has served as Chairman, Pharmaceuticals
Research and Development, since 1991. He has held several senior R&D positions
prior to his appointment as Vice Chairman and Executive Vice President, R&D, in
1990. Dr. Poste has been a director of SmithKline Beecham since 1992.
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<PAGE> 40
WILLIAM J. SHULBY, 40, DIRECTOR, TREASURER AND ASSISTANT SECRETARY. Mr.
Shulby was appointed a director and Treasurer of the Company at the Company's
inception in May 1996 and an Assistant Secretary of the Company in June 1996. He
has served as Assistant Treasurer of SB Corp since July 1993. Mr. Shulby joined
SB Corp as Director, Corporate Finance in June 1992. Prior thereto, he was a
Senior Audit Manager with Coopers & Lybrand.
TADATAKA YAMADA, M.D., 51, DIRECTOR AND VICE PRESIDENT. Dr. Yamada was
appointed a director and Vice President of the Company at the Company's
inception in May 1996. Dr. Yamada joined SmithKline Beecham as President,
SmithKline Beecham Healthcare Services in February 1996. Prior thereto he had
been the John G. Searle Professor and Chairman of the Department of Internal
Medicine, Professor and Physician-in-Chief at the University of Michigan Medical
Center since 1990. Dr. Yamada has been a director of SmithKline Beecham since
February 1994.
EXECUTIVE COMPENSATION
SmithKline Beecham expects that each of the five most highly compensated
executive officers of the Company for 1996 will be a director and an executive
officer of SmithKline Beecham. Executive management services are provided to the
Company by SmithKline Beecham under the General Services Agreement. The Company
will not separately compensate any of its directors or officers. Information
concerning the compensation and stock options of directors and officers of
SmithKline Beecham is reported by SmithKline Beecham in Item 11 (Compensation of
Directors and Officers) and Item 12 (Options to Purchase Securities from
Registrant or Subsidiaries) of the 1995 Form 20-F.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of May 31, 1996, the beneficial interest
of the Company's directors individually and for current directors and executive
officers as a group in the voting securities of SmithKline Beecham. As of May
31, 1996, all of the Company's directors and executive officers as a group owned
less than 0.5 percent of the Ordinary Shares of SmithKline Beecham.
<TABLE>
<CAPTION>
NUMBER OF ORDINARY SHARES OF
NAME OF BENEFICIAL OWNER SMITHKLINE BEECHAM BENEFICIALLY OWNED(1)(2)
------------------------------------------------- -------------------------------------------
<S> <C>
Hugh R. Collum................................... 745,538(3)
William J. Creelman.............................. 20,240
Dr. Jean-Pierre Garnier.......................... 239,715
Jan Leschly...................................... 915,920
Donald F. Parman................................. 109,972
George Poste, D.V.M., Ph.D....................... 395,335
William J. Shulby................................ 1,960
Tadataka Yamada, M.D............................. 15,150
All current directors and officers as a group
(eight persons)................................ 2,443,830
</TABLE>
- ---------------
(1) To the extent that the Company's directors and executive officers
beneficially own American Depositary Receipts ("ADRs"), the table reflects
ownership of the underlying shares, i.e., ownership of 100 Ordinary Share
ADRs would be shown as ownership of 500 Ordinary Shares.
(2) The table also includes Ordinary Shares issuable under employee stock option
plans exercisable within 60 days as follows: Mr. Collum, 252,910 shares; Mr.
Creelman, 15,155 shares; Dr. Garnier, 233,165 shares; Mr. Leschly, 501,822
shares; Mr. Parman, 90,910 shares; Dr. Poste, 386,475 shares; Mr. Shulby,
none; Dr. Yamada, none; and all directors and officers as a group, 1,480,437
Ordinary Shares.
(3) Includes 1,968 shares held in a trust through which Mr. Collum has voting
and investment power as a trustee as to which Mr. Collum disclaims
beneficial ownership.
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<PAGE> 41
At June 26, 1996 wholly-owned subsidiaries of SmithKline Beecham owned all
the outstanding shares of the Company's Common Stock. Under the rules of the
Commission, in their capacity as directors of SmithKline Beecham or such
subsidiaries, Messrs. Collum, Creelman, Garnier, Leschly, Parman, Poste, Shulby
and Yamada may be deemed to beneficially own such shares. As of the date of this
Prospectus, no shares of the Company's voting stock other than its Common Stock
have been issued.
DESCRIPTION OF SECURITIES
The following is a summary of the terms of the Shares of each Series. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Company's Certificate of Incorporation (the "Certificate of
Incorporation") and the Certificate of Designations authorizing the issuance of
the Shares of the particular Series offered hereby and by the accompanying
Prospectus Supplement (the "Certificate of Designations"). Copies of the
Certificate of Incorporation and the Certificate of Designations may be obtained
upon request from the Company or SmithKline Beecham.
Certain of the capitalized terms used herein may be found by reference to
the Glossary that appears at the back of this Prospectus.
GENERAL
Under the Certificate of Incorporation, the Company's Board of Directors is
authorized, without further stockholder action, to issue from time to time up to
50,000 shares of preferred stock, no par value ("Preferred Stock"), in one or
more series and with such terms and conditions and at such times and for such
consideration as the Board of Directors or an authorized committee thereof may
determine. At the date of this Prospectus, no shares of Preferred Stock are
outstanding and, accordingly, there has not been a market for the Shares of any
Series.
The Shares will be shares of Preferred Stock that entitle their holders to
receive dividends when, as and if declared by the Board of Directors, out of
funds legally available therefor, at a rate per annum that may vary from
Dividend Period to Dividend Period for each Series. In general, as described
below, each Dividend Period after the Initial Dividend Period will be 49 days in
length (or such greater number of days as is at least equal to the Minimum
Holding Period) unless the Company has designated such Subsequent Dividend
Period as a Special Dividend Period of longer than 49 days. The Applicable Rate
for a particular Dividend Period generally will be determined by an Auction
conducted on the Business Day next preceding the start of such Dividend Period.
Through Broker-Dealers, Existing Holders and Potential Holders of Shares of
each Series may participate in Auctions for such Series, although, except in the
case of a Special Dividend Period, Existing Holders desiring to continue to hold
all of their Shares regardless of the Applicable Rate resulting from Auctions
need not participate. For an explanation of Auctions and the method of
determining the Applicable Rate, see "-- The Auction". The Shares of each Series
will be identical, except as to such matters as are specified in the applicable
Prospectus Supplement.
Except as otherwise required by law or unless there is no Securities
Depository, all outstanding Shares of each Series will be represented by one or
more certificates registered in the name of the Securities Depository or its
nominee and no person acquiring Shares will be entitled to receive a certificate
for such Shares. The Depository Trust Company ("DTC") will initially act as
Securities Depository for the Shares and one or more certificates for all of the
Shares of each Series shall be issued to the Securities Depository and
registered in the name of Cede & Co. ("Cede") as nominee of DTC. Each such
certificate shall bear a legend to the effect that such certificate is issued
subject to the provisions restricting the transfer of Shares contained in the
Certificate of Designations. During a Non-Payment Period, an Existing Holder may
obtain a certificate for the Shares owned by it. DTC, which is a New
York-chartered limited purpose trust company, performs services for its
participants (including members of the Securities Depository acting on behalf of
an Existing Holder, Potential Holder, beneficial owner or potential beneficial
owner of Shares of any Series, each an "Agent Member"), some of whom (and/or
their representatives) own shares of common stock of DTC. DTC will maintain
lists of
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<PAGE> 42
its participants and the Shares held by each Agent Member whether as an Existing
Holder for its own account or as a nominee for another Existing Holder.
When issued and sold, the Shares will have a liquidation preference per
Share equal to the sum of $100,000 plus an amount equal to accumulated and
unpaid dividends thereon (whether or not earned or declared), and will be fully
paid and nonassessable. See "Liquidation Rights" below. For each Share issued,
the amount of $100,000 will be credited to the Company's capital in excess of
par value account and the aggregate expenses of the offering of the Shares will
be charged to the same account.
The Shares will not be convertible into shares of Common Stock or any other
securities of the Company and will have no preemptive rights. Except during the
Initial Dividend Period (unless otherwise specified in the applicable Pricing
Supplement) and any Non-Call Period therefor, the Shares of each Series will be
redeemable, in whole or in part, on the second Business Day prior to any
Dividend Payment Date at the option of the Company, at $100,000 per Share plus
accumulated and unpaid dividends thereon. During a Regular Dividend Period, and,
if designated by the Company, a Special Dividend Period, Shares of each Series
will be subject to mandatory redemption upon the occurrence of a Change of
Control, in whole, at a redemption price of $100,000 per Share plus accumulated
and unpaid dividends thereon. If designated by the Company, during a Special
Dividend Period, Shares of each Series will be subject to repurchase by the
Company at the holder's option upon occurrence of a Change of Control at a
purchase price of $100,000 per Share plus any accumulated and unpaid dividends
thereon. During the Initial Dividend Period for Shares of each Series, such
Shares may be subject to such further redemption or repurchase provisions as are
set forth in the Prospectus Supplement for such Series.
The Shares of each Series will rank prior to or on a parity with any other
shares of Preferred Stock as to dividends and upon the liquidation, dissolution
or winding up of the Company, except under the circumstances described under
"-- Voting Rights" below.
The Certificate of Designations provides that, so long as any Shares are
outstanding, unless the Company has received written confirmation from Moody's
and S&P (and, as appropriate, any Substitute Rating Agency or Substitute Rating
Agencies) that such action will not impair the then current ratings then
assigned to the Shares of each Series by each of them, the Company will not (i)
issue any Parity Preferred or Senior Preferred if the aggregate liquidation
preference, including accumulated and unpaid dividends, of all outstanding
Shares, Parity Preferred and Senior Preferred would thereupon exceed 75% of the
maximum amount of SmithKline Beecham's obligations under the Support Agreement
(the "Preferred Stock Limitation Provision"), (ii) incur any indebtedness if the
aggregate amount of the Company's indebtedness would thereupon exceed one-third
of the Company's shareholders' equity (after deducting therefrom the aggregate
liquidation preference, including accumulated and unpaid but not declared
dividends, of all outstanding Shares, Parity Preferred and Senior Preferred)
(the "Debt Limitation Provision"), and (iii) make any loans to members of
SmithKline Beecham Group other than the Company and its subsidiaries unless such
loans are guaranteed as to payment of principal and interest by SmithKline
Beecham (the "Loan Guarantee Provision").
The Auction Agent will be specified in the applicable Prospectus Supplement
and will also be the transfer agent, registrar and dividend disbursing and
redemption agent for the Shares.
Except in an Auction, or as otherwise provided herein or as limited by law,
the Company shall have the right to purchase or otherwise acquire any Shares at
any price. Any Shares purchased or otherwise acquired by the Company may be
restored to the status of authorized but undesignated and unissued shares of
Preferred Stock.
DIVIDENDS
General. The holders of Shares of each Series shall be entitled to
receive, when, as and if declared by the Board of Directors of the Company or a
duly authorized committee thereof out of funds legally available therefor,
cumulative cash dividends at the Applicable Rate for the Shares of such Series,
determined as set forth below under "Determination of Dividend Rate", payable on
the respective dates as described below.
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<PAGE> 43
Dividends on the Shares so declared and payable will be paid in preference to
and priority over any dividends declared and payable on the Common Stock.
Dividends on the Shares of each Series will accumulate (whether or not
earned or declared) at the Applicable Rate for the Shares of such Series from
the date on which the Company originally issues the Shares of such Series (the
"Date of Original Issue"). Dividends on the Shares of each Series will be
payable for the Initial Dividend Period with respect thereto on the Dividend
Payment Date or Dates specified in the Prospectus Supplement for such Series or,
if any such date is not a Business Day, on the Business Day next succeeding such
date (each, an "Initial Dividend Payment Date"). Dividends on Shares of each
Series will be payable on the Business Day following the last day of each
Dividend Period with respect thereto, regardless of its length (the "Period-End
Dividend Payment Date"), and, in addition, in the case of Dividend Periods of
more than 99 days, on the following additional dates: (a) if such Dividend
Period is from 100 to 190 days, on the 91st day of such Dividend Period; (b) if
such Dividend Period is from 191 to 281 days, on the 91st and 182nd days of such
Dividend Period; (c) if such Dividend Period is from 282 days to 364 days, on
the 91st , 182nd and 273rd days of such Dividend Period; and (d) if such
Dividend Period is one year or longer, on January 15, April 15, July 15 and
October 15 of each year, provided that in all such cases, if such date is not a
Business Day, the Dividend Payment Date will be the Business Day next succeeding
such date.
Notwithstanding the foregoing, if any date on which dividends on the Shares
of any Series would be payable as described in the preceding paragraph is a day
that would result in the number of days in the then current Dividend Period not
being at least equal to the then current minimum holding period required for
corporate taxpayers to be entitled to the dividends received deduction in
respect of dividends (other than extraordinary dividends) paid on preferred
stock held by nonaffiliated corporations (the "Minimum Holding Period"), then
dividends with respect to such Dividend Period shall be payable on the first
Business Day following such date on which dividends would be so payable that
results in the number of days in such Dividend Period being at least equal to
the Minimum Holding Period or, if earlier, the 98th day of such Dividend Period.
Moreover, notwithstanding the foregoing, in the event of a change in law
altering the Minimum Holding Period, the Board of Directors of the Company or a
duly authorized committee thereof will be required to adjust, if necessary, the
number of days in each Regular Dividend Period and the minimum number of days of
each Special Dividend Period (such number of days being referred to herein as
"Dividend Period Days") commencing after the date of such change in law to equal
or exceed the Minimum Holding Period, provided that the number of Dividend
Period Days in a Regular Dividend Period shall not exceed by more than nine days
the length of the Minimum Holding Period and shall be evenly divisible by seven,
and the maximum number of Dividend Period Days in a Regular Dividend Period, as
adjusted pursuant to this provision, shall in no event exceed 98 days.
Upon any change in the number of Dividend Period Days in any then current
Dividend Period or in a Regular Dividend Period or Special Dividend Period as a
result of a change in the Minimum Holding Period, the Company will mail notice
of such change to all holders of record of Shares of the applicable Series. In
addition, under the Broker-Dealer Agreements (as defined below), each
Broker-Dealer will be required to mail notice of such change to each Existing
Holder who acquired Shares of such Series through such Broker-Dealer and, to the
knowledge of such Broker-Dealer, has not disposed of such shares of such Series.
Each date on which dividends on the Shares of a Series shall be payable as
determined as set forth above is referred to herein as a "Dividend Payment Date"
for the Shares of such Series. Although any particular Dividend Payment Date for
the Shares of a Series may not occur on the day of the week or the date
originally scheduled as a Dividend Payment Date for the Shares of such Series
because of the adjustments set forth above, each succeeding Dividend Payment
Date for the Shares of such Series shall occur, subject to such adjustments, on
the day of the week or the date originally scheduled as a Dividend Payment Date
for the Shares of such Series as if each preceding Dividend Payment Date had
occurred on such day of the week or date.
On or prior to any Dividend Payment Date for the Shares of any Series, the
Company is required to pay to the Auction Agent sufficient funds for the payment
in full of all accumulated dividends with respect to the
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<PAGE> 44
Shares of such Series payable on such Dividend Payment Date. The Company does
not intend to establish any reserves for the payment of dividends.
Each dividend on the Shares of any Series shall be payable to the holder or
holders of record of the Shares of such Series as they appear on the stock books
of the Company on the Business Day next preceding the applicable Dividend
Payment Date. Dividends in arrears for any past Dividend Period may be declared
and paid at any time, without reference to any regular Dividend Payment Date, to
such holder or holders of such Shares. Any dividend payment made on Shares of
any Series shall first be credited against the accumulated dividends with
respect to the earliest Dividend Period for the Shares of such Series for which
dividends have not been paid.
So long as the Shares of each Series are held of record by the nominee of
the Securities Depository, dividends will be paid to the nominee of the
Securities Depository on each Dividend Payment Date for the Shares of such
Series. The Securities Depository will credit the accounts of the Agent Members
of Existing Holders of the Shares of such Series in accordance with the
Securities Depository's normal procedures, which now provide for payments in
same-day funds. The Agent Member of an Existing Holder will be responsible for
holding or disbursing such payments to such Existing Holder in accordance with
the instructions of such Existing Holder.
Except as described below under "Determination of Dividend Rate", (i)
holders of Shares of any Series shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative dividends on
the Shares of such Series as provided herein, and (ii) no interest or amount in
lieu of interest or other charge shall be payable in respect of any dividend
payment or payments on the Shares of any Series which may be in arrears.
Except as provided in the next sentence, the Company shall not declare, pay
or set aside for payment any dividend or other distribution in respect of any
shares of the Company of any class ranking on a parity as to dividends or
distribution of assets with the Shares of any Series ("Parity Preferred") for
any period unless full cumulative dividends for all past Dividend Periods have
been or contemporaneously are declared and paid (or declared and a sum
sufficient for payment of the dividends set aside for payment) on all
outstanding Shares of such Series. If full cumulative dividends are not paid on
the Shares of any Series and any Parity Preferred, all dividends and other
distributions paid upon the Shares of such Series and such Parity Preferred will
be paid pro rata so that the amount of dividends paid per Share on the Shares of
such Series and such Parity Preferred will in all cases bear to each other the
same ratio that accumulated dividends per share on the Shares of such Series and
shares of such Parity Preferred bear to each other.
The Certificate of Designations provides that, so long as any Shares of any
Series are outstanding, the Company shall not declare, pay or set aside for
payment any dividend or other distribution (other than a dividend or
distribution paid in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock or in any other shares of the Company of any
class ranking junior to the shares of such Series as to dividends) in respect of
its Common Stock or any other shares of the Company of any class ranking junior
to the Shares of such Series as to dividends, or call for redemption, redeem,
purchase or otherwise acquire for consideration (or pay or make available for
payment any moneys for a sinking fund for the redemption of) any shares of its
Common Stock or any other shares of the Company of any class ranking junior to
or on a parity with the Shares of such Series as to dividends or upon the
liquidation, dissolution or winding up of the Company (except by conversion into
or exchange for shares of the Company of any class ranking junior to the shares
of such Series as to dividends or upon the liquidation, dissolution or winding
up of the Company) unless (i) full cumulative dividends for all past Dividend
Periods have been or contemporaneously are declared and paid (or declared and a
sum sufficient for the payment of the dividends set aside for payment) on all
outstanding Shares of such Series and (ii) the stockholders' equity of the
Company as a result would not be less than the aggregate liquidation preference
of, including any accumulated and unpaid dividends on, all Shares, Parity
Preferred and Senior Preferred.
The amount of dividends accumulated and payable on each Share on any
Dividend Payment Date with respect to any Dividend Period will be computed by
(i) multiplying the Applicable Rate for such Dividend Period by a fraction, the
numerator of which is the actual number of days in the portion of such Dividend
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<PAGE> 45
Period prior to such Dividend Payment Date as to which dividends have not been
paid and the denominator of which is 360, and (ii) multiplying $100,000 by the
rate so obtained.
Dividend Periods. After the Initial Dividend Period for the shares of any
Series, each subsequent Dividend Period for the Shares of such Series will be 49
days (such period, as it may be adjusted as a result of a change in the Minimum
Holding Period as described above, being herein referred to as a "Regular
Dividend Period" for the Shares of such Series); provided that, subject to the
Certificate of Designations and except as described in the next paragraph and
under "Determination of Dividend Rate" below, the Company may specify the
duration for any Dividend Period (a "Special Dividend Period") and other special
provisions for any Series by a notice (a "Special Dividend Period Notice") sent
by the Company to holders of such Series, by first-class mail, postage prepaid,
to the address of each such holder appearing in the record of stockholders of
the Company, not less than 10 days nor more than 60 days prior to the Auction
Date for such Subsequent Dividend Period, which notice will specify (A) the
Company's determination of the length of the Special Dividend Period (which
shall be at least as long as the Minimum Holding Period), (B) in the case of any
Special Dividend Period in excess of 99 days in duration, any Subsequent
Dividend Payment Date or Dates other than the Subsequent Period-End Dividend
Payment Date for such Dividend Period, (C) if the Company has elected that the
Shares of such Series should not be subject to redemption during all or any
specified portion of such Special Dividend Period (a "Non-Call Period"), a
statement with respect to such election, (D) if the Company has elected that the
Shares of such Series will be subject to the Mandatory Redemption Upon Change of
Control Provision during such Special Dividend Period, a statement to that
effect, (E) if the Company has elected that the Shares of such Series will be
subject to the Repurchase Upon Change of Control Provision during such Special
Dividend Period, a statement to that effect, and (F) if the Company has elected
that the DRD Gross-Up Provision shall apply during such Special Dividend Period,
a statement to that effect. In the event the Company has elected a Special
Dividend Period for a Subsequent Dividend Period for any Series, it may withdraw
such election by giving notice to holders of Shares of such Series by no later
than 3:00 p.m., New York City time, on the Business Day immediately preceding
the initial Auction Date with respect to which such notice was delivered, and in
such event such election shall be of no force and effect. Copies of such notices
shall be delivered physically, by telecopier or by other written electronic
communication to the Auction Agent by the Company at the same time they are
transmitted to the record holders of Shares of such Series. The Auction Agent
will thereupon provide copies of such notices to each Broker-Dealer as soon as
practicable after receiving such notice. No defect in the notice or in the
mailing thereof shall affect the validity of any change in any Dividend Period.
In the event that Sufficient Clearing Bids have not been made in any
Auction, such that the Dividend Rate for the next Dividend Period will be equal
to the Maximum Dividend Rate, then such Subsequent Dividend Period will be a
Regular Dividend Period (regardless of whether the Company has elected a Special
Dividend Period), and the Maximum Dividend Rate shall be determined based upon
such Dividend Period. In such event, Existing Holders that have submitted Sell
Orders will not be able to sell in the Auction all, and may not be able to sell
any, Shares subject to such Sell Orders. Thus, under certain circumstances,
Existing Holders may not have liquidity of investment.
Determination of Dividend Rate. The "Initial Dividend Rate" for the
Initial Dividend Period for the Shares of each Series will be described in the
Prospectus Supplement. The dividend rate for each Subsequent Dividend Period for
the Shares of each Series will be, except as provided below, the rate per annum
that the Auction Agent advises the Company has resulted from the implementation
of the Auction Procedures with respect to such Series. As used in this
Prospectus and any Prospectus Supplement with respect to the Shares of any
Series, "Applicable Rate" means the rate per annum at which dividends are
payable on the Shares of such Series for any Dividend Period. See "The
Auction -- Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate".
In the event that an Auction for any Subsequent Dividend Period for the
Shares of any Series is not held for any reason (other than as a result of the
existence of a failure to pay as described below), such Subsequent Dividend
Period shall be a Regular Dividend Period and the dividend rate on the Shares of
such Series for such Subsequent Dividend Period will be the Maximum Applicable
Rate on the Business Day immediately
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<PAGE> 46
preceding the commencement of such Subsequent Dividend Period. See "The
Auction -- Orders by Existing Holders and Potential Holders".
If the Company fails to pay to the Auction Agent on or prior to any
Period-End Dividend Payment Date for the Shares of any Series the full amount of
all accumulated and unpaid dividends payable on the Shares of such Series on
such Period-End Dividend Payment Date, then:
(a) if such failure to pay is cured as provided below, the Applicable Rate
for the Shares of such Series for the Dividend Period commencing on the
Period-End Dividend Payment Date on which the Company failed to pay shall be
equal to the dividend rate determined on the Auction Date immediately preceding
such Period-End Dividend Payment Date; and
(b) if such failure to pay is not cured as provided below, then, for the
period (the "Dividend Non-Payment Period") commencing on and including such
Period-End Dividend Payment Date and ending on and including the Business Day on
which, by 12:00 noon, New York City time, all unpaid cash dividends shall have
been deposited with the Auction Agent or otherwise made available for payment to
the applicable holders in same day funds (provided that, at least two Business
Days but no more than 30 days prior to such Business Day, the Company shall have
given the Auction Agent, the Securities Depository and the applicable holders
written notice of such deposit or availability):
(i) each Subsequent Dividend Period shall be a Regular Dividend Period
(regardless of any Special Dividend Period election made by the Company)
and Auctions for the Shares of such Series shall be suspended and shall not
resume, in each case until all accumulated and unpaid dividends on the
Shares of such Series for all past Dividend Periods shall have been paid to
the Auction Agent, not later than the second Business Day immediately
preceding an Auction Date for the Shares of such Series; and
(ii) the Applicable Rate for the Shares of such Series during such
Dividend Non-Payment Period shall be equal to the Maximum Applicable Rate
for the Shares of such Series, as determined on the Business Day
immediately preceding the first day of each such Subsequent Dividend
Period, but with the credit ratings for the Shares of such Series, for
purposes of determining such Maximum Applicable Rate, being deemed to be
below "baa3" by Moody's and below BBB- by S&P (the "Non-Payment Period
Rate").
If the Company fails to pay to the Auction Agent on or prior to any date
set for redemption or repurchase of less than all of the Shares of any Series
the full amount payable upon redemption of the Shares of such Series called for
redemption or upon repurchase of the Shares pursuant to the Repurchase Upon
Change of Control Provision, then:
(a) Auctions for the Shares of such Series shall be suspended and shall not
resume until all amounts payable upon the redemption or repurchase of the Shares
of such Series called for redemption or tendered for repurchase shall have been
paid to the Auction Agent not later than the second Business Day immediately
preceding an Auction Date for the Outstanding Shares of such Series;
(b) if such failure to pay is cured as provided below, the Applicable Rate
for the Shares of such Series for the Dividend Period commencing after the
redemption or repurchase date on which the Company failed to pay shall be equal
to the Maximum Applicable Rate for the Shares of such Series (as determined on
the Business Day immediately preceding the first day of such Dividend Period)
and such Dividend Period shall be a Regular Dividend Period (regardless of any
Special Dividend Period election made by the Company), unless on the Auction
Date for such Dividend Period, Auctions for the Shares of such Series may be
resumed as provided in clause (a) above; and
(c) if such failure to pay is not cured as provided below, then:
(i) each Subsequent Dividend Period shall be a Regular Dividend Period
(regardless of any Special Dividend Period election made by the Company)
and the Applicable Rate for the Shares of such Series not called for
redemption or subject to repurchase for each Dividend Period, commencing
after the redemption or repurchase date on which the Company failed to pay,
to but excluding the Dividend Period, if any, next succeeding the Auction
Date on which Auctions for the Shares of such Series may be
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resumed as provided in clause (a) above (the "Redemption Non-Payment
Period" and, together with the "Dividend Non-Payment Period", a
"Non-Payment Period"), shall be equal to the Non-Payment Period Rate for
the Shares of such Series (as determined on the Business Day immediately
preceding the first day of each such Dividend Period); and
(ii) the Applicable Rate for the Shares of such Series called for
redemption or subject to repurchase for each Dividend Period for the Shares
of such Series commencing after the redemption or repurchase date on which
the Company failed to pay shall be equal to the Non-Payment Period Rate for
the Shares of such Series (as determined on the Business Day immediately
preceding the first day of each such Dividend Period).
For purposes of the two preceding paragraphs, any such failure to pay with
respect to the Shares of any Series shall be deemed cured if, not later than
12:00 noon, New York City time, on the third Business Day next succeeding such
failure to pay, there shall have been paid to the Auction Agent (i) all
accumulated and unpaid dividends on the Shares of such Series, including the
full amount of any dividends to be paid on the Period-End Dividend Payment Date
with respect to which such failure to pay occurred but excluding amounts
accumulated after such Period-End Dividend Payment Date, plus additional
dividends in an amount computed by multiplying (1) the Non-Payment Period Rate
for the Shares of such Series (as determined on the Business Day immediately
preceding such Dividend Payment Date) by (2) a fraction, the numerator of which
shall be the number of days for which such failure to pay is not cured in
accordance herewith (including the day such failure to pay occurs and excluding
the day such failure to pay is cured) and the denominator of which shall be 360,
and multiplying the rate so obtained by the product of $100,000 times the number
of Shares of such Series then outstanding and (ii) the full amount payable upon
redemption or repurchase of the Shares of such Series called for redemption or
tendered for repurchase that have not been so redeemed or repurchased, plus
(except to the extent such amount has been paid pursuant to clause (i) above) an
amount computed by multiplying (1) the Non-Payment Period Rate for the Shares of
such Series (as determined on the Business Day immediately preceding the first
day of the current Dividend Period), by (2) a fraction, the numerator of which
shall be the number of days for which such failure to pay is not cured in
accordance herewith (including the day such failure to pay occurs and excluding
the day such failure to pay is cured) and the denominator of which shall be 360,
and applying the rate obtained against the product of $100,000 times the number
of Shares of such Series called for redemption or tendered for repurchase that
have not been so redeemed or repurchased.
If the Company fails to pay to the Auction Agent on or prior to any date
set for redemption or repurchase of all the Shares of any Series the full amount
payable upon such redemption or repurchase of the Shares of such Series, then
the Applicable Rate for the Shares of such Series for each Dividend Period for
the Shares of such Series or portion thereof commencing on or after the
redemption or repurchase date on which the Company failed to pay shall be equal
to the Non-Payment Period Rate for the Shares of such Series (as determined on
the Business Day immediately preceding the first day of each such Dividend
Period or portion thereof).
CHANGES IN THE DIVIDENDS RECEIVED DEDUCTION
If any amendment to the Code is enacted and becomes effective after the
date of this Prospectus that changes the percentage of dividends received by
corporate taxpayers which may be deducted for federal income tax purposes
pursuant to section 243(a)(1) of the Code (or any successor provision) (the
"Dividends Received Percentage"), then the Applicable Rate with respect to the
Shares of any Series for the Dividend Period in which the effective date of such
change occurs will, if this provision applies to such Dividend Period, be
adjusted on and after such effective date for the remainder of such Dividend
Period by multiplying the Applicable Rate (determined before any adjustment
described in this paragraph) by a factor, which will be the number
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<PAGE> 48
determined in accordance with the following formula (the "DRD Formula"), and
rounding the result to the nearest basis point:
1-[.35(1-.70)]
-------------------
1-[.35(1-DRP)]
For purposes of this formula, "DRP" means the Dividends Received
Percentage, measured as a fraction, applicable to the dividend in question. No
amendment to the Code other than a change in the percentage of the dividends
received deduction set forth in section 243(a)(1) (or any successor provision)
will give rise to an adjustment described in this paragraph. Notwithstanding the
foregoing provisions, if with respect to any such amendment, the Company
receives either an opinion of independent tax counsel or a private letter ruling
or similar form of guidance from the IRS to the effect that such amendment to
the Code generally would not affect corporate holders of such Shares, then such
amendment will not result in the adjustment provided for above. Notwithstanding
the foregoing, in no event will (i) the Applicable Rate for any Dividend Period
(if and as adjusted from time to time as set forth above) be more than the
Maximum Applicable Rate as of the Date of Original Issue or the preceding
Auction Date, as the case may be, or (ii) DRP be less than 0.50. If the
Applicable Rate is adjusted as described above, the Company will send notice of
such adjustment to each holder of Shares of each Series, the Auction Agent and
the Paying Agent on or prior to the next Dividend Payment Date for each Series.
Unless the context requires otherwise, all references to dividends in this
Prospectus and the applicable Prospectus Supplement mean dividends adjusted as
described above.
The foregoing provision (the "DRD Gross-Up Provision") shall not apply to
any Regular Dividend Period and will only apply to the Initial Dividend Period
or any Special Dividend Period for Shares of any Series if elected by the
Company and specified in the Prospectus Supplement or the applicable Special
Dividend Period Notice, as the case may be, for such Series.
REDEMPTION
Optional Redemption. At the option of the Company, the Shares of any
Series may be redeemed after the Initial Dividend Period therefor, other than
during a Non-Call Period therefor, as a whole or from time to time in part, out
of funds legally available therefor, on the second Business Day immediately
preceding any Dividend Payment Date for such Series, upon at least 15 but not
more than 45 days' notice pursuant to a Notice of Redemption, at a redemption
price per Share of $100,000, upon payment of accumulated and unpaid dividends as
described in the next sentence. The Company shall be required to declare and pay
on the redemption date a dividend in an amount equal to the accumulated and
unpaid dividends on such Shares (whether or not earned or declared) to the date
that the Company pays the full amount payable upon redemption of such Shares.
Pursuant to such right of optional redemption, the Company may elect to redeem
all or less than all of the Shares of a Series without redeeming Shares of any
other Series. Notwithstanding the foregoing, if any dividends on Shares of any
Series are in arrears, no Shares of any Series shall be redeemed unless all
outstanding Shares are simultaneously redeemed, and the Company shall not
purchase or otherwise acquire any Shares of any Series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of Shares pursuant
to an otherwise lawful purchase or exchange offer made on the same terms to
holders of all outstanding Shares of such Series.
Mandatory Redemption Upon Change of Control. If SmithKline Beecham shall
at any time cease to beneficially own, directly or indirectly, shares of capital
stock of the Company representing more than 50% of the voting power in respect
of all outstanding shares of capital stock of the Company (such event being
herein called a "Change of Control"), the Company shall redeem all outstanding
Shares of each Series as to which this provision at the time applies, to the
extent of funds legally available therefor, within 30 days of such event upon at
least 10 but not more than 20 days' notice pursuant to a Notice of Redemption,
at a redemption price per Share equal to the sum of $100,000 and an amount equal
to the accumulated and unpaid dividends on such Shares (whether or not earned or
declared) to the date that the Company pays the full amount payable upon
redemption of such Shares. The foregoing provision (the "Mandatory Redemption
Upon Change of Control Provision") shall apply to each Regular Dividend Period,
but will only apply to the Initial Dividend
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Period or any Special Dividend Period for Shares of any Series if elected by the
Company and specified in the Prospectus Supplement or the applicable Special
Dividend Period Notice, as the case may be, for such Series.
Redemption Procedures. If Shares of any Series are to be redeemed, the
Company will cause to be mailed, by first-class mail, postage prepaid, within
the applicable notice period specified above, a written notice of redemption (a
"Notice of Redemption") to each holder of record of Shares of such Series
(initially, the nominee of the Securities Depository) and the Auction Agent.
Each Notice of Redemption will state (i) the redemption date, (ii) the
redemption price, (iii) the Series of Shares and the number of such Shares to be
redeemed, (iv) the place or places where Shares of such Series are to be
surrendered for payment of the redemption price, (v) that dividends on the
Shares of such Series will cease to accumulate on the date that the Company pays
the full amount payable upon redemption of such Shares of such Series, and (vi)
the provision of the Certificate of Designations under which the redemption is
being made. No defect in the Notice of Redemption or in the mailing thereof
shall affect the validity of the redemption proceedings, except as required by
applicable law. A Notice of Redemption shall be deemed given on the day that it
is mailed in accordance with this provision.
In the event that less than all of the outstanding Shares of any Series are
to be redeemed, the number of Shares to be redeemed will be determined by the
Board of Directors of the Company and communicated to the Auction Agent. So long
as the Securities Depository's nominee is the record holder of all outstanding
Shares of any Series, the Auction Agent will give notice to the Securities
Depository, and the Securities Depository will determine the number of Shares of
such Series to be redeemed from the account of the Agent Member of each Existing
Holder of Shares of such Series. Each Agent Member may determine (i) whether to
redeem any Shares and (ii) the number of Shares to be so redeemed from the
account of each Existing Holder for which it acts as agent. An Agent Member may
select for redemption Shares from the accounts of some Existing Holders without
selecting for redemption any Shares from the accounts of other Existing Holders.
Notwithstanding the foregoing, if neither the Securities Depository nor its
nominee is the record holder of all of the Shares, the particular Shares to be
redeemed shall be redeemed pro rata from the holders of record of the Shares in
proportion to the number of such Shares held by such holders or by such other
method as the Company shall deem fair and equitable (with adjustments to avoid
redemption of fractional Shares). Any such redemption will be made in accordance
with applicable securities laws and rules.
On or prior to a date set for redemption of Shares of any Series, the
Company shall be required to pay to the Auction Agent sufficient funds for the
payment of the full amount payable upon redemption of such Shares.
If the Company gives or causes to be given a Notice of Redemption, timely
pays to the Auction Agent a sum sufficient to redeem the Shares of the Series as
to which such Notice of Redemption has been given and gives the Auction Agent
irrevocable instructions and authority to pay the full amount payable on
redemption of such Shares to the holders of such Shares, then on the date of
such payment, all rights of the holders of the Shares of such Series to be
redeemed, as such, will terminate (except the right of the holders of such
Shares to receive the full amount payable upon redemption thereof upon surrender
of the certificate or certificates therefor, but without interest) and such
Shares will no longer be deemed to be outstanding for any purpose (including,
without limitation, the right of holders of such Shares to vote on any matter or
to participate, with respect to such Shares, in any subsequent Auction for the
outstanding Shares of such Series). In addition, any Shares of any Series as to
which a Notice of Redemption has been given by the Company will be deemed to be
not outstanding for purposes of any Auction for the Shares of such Series held
subsequent to the date of such Notice of Redemption. The Company will be
entitled to receive from time to time from the Auction Agent the income, if any,
derived from the investment of monies or other assets paid it (to the extent
that such income is not required to pay the redemption price of the Shares to be
redeemed), and the holders of any Shares to be redeemed will not have any claim
to such income. Any funds so paid to the Auction Agent which are unclaimed at
the end of two years from the redemption date will be returned to the Company,
after which the holders of the Shares of the Series so called for redemption
will look only to the Company for payment of the redemption price of such
Shares.
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So long as all of the outstanding Shares of any Series are held by records
by a nominee of the Securities Depository, the amounts payable upon redemption
of such Shares will be paid to the Securities Depository on the redemption date.
The normal procedures of the Securities Depository currently provide for it to
distribute amounts payable upon redemption to Agent Members, who, in turn, are
to distribute such funds to the persons for whom they are acting as agent.
REPURCHASE UPON CHANGE OF CONTROL PROVISION
Upon the occurrence of a Change of Control, the Company shall be obligated
to purchase from all holders of Shares of each Series as to which this provision
at the time applies, at the option of such holders, Shares of such Series
tendered to the Company by such holders at a purchase price per Share equal to
the sum of $100,000 and the amount of accumulated and unpaid dividends thereon
(whether or not earned or declared) to the repurchase date.
If Shares of any Series are to be purchased pursuant to the Repurchase Upon
Change of Control Provision, within 20 days following a Change of Control, the
Company shall mail, or cause to be mailed, by first-class mail, postage prepaid,
within the applicable notice period specified above, a written Notice of Offer
to Purchase to each holder of record of Shares of such Series (initially the
nominee of the Securities Depository) and the Auction Agent. Each Notice of
Offer to Purchase will describe the circumstances resulting in the Change of
Control and state (i) that a Change of Control has occurred and that such holder
has the right to require the Company to purchase all or any part of such
holder's Shares of such Series, (ii) the purchase price, (iii) the Series of
Shares, (iv) the place or places where Shares of such Series are to be
surrendered for payment of the purchase price, (v) the circumstances and
relevant facts regarding the Change of Control, (vi) the purchase date (which
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed), (vii) any other instructions that a holder must follow in
order to have such holder's Shares of such Series purchased by the Company and
(viii) the provision of the Certificate of Designations under which the offer to
purchase is being made.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable in connection with any offer required to be made by
the Company in accordance with the Repurchase Upon Change of Control Provision.
The Repurchase Upon Change of Control Provision shall not apply to any
Regular Dividend Period and shall apply to the Initial Dividend Period or any
Special Dividend Period for Shares of any Series only if designated by the
Company and specified in the Prospectus Supplement or the applicable Special
Dividend Period Notice, as the case may be, for such Series.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Shares of each Series then
outstanding will be entitled to receive and to be paid, out of the assets of the
Company available for distribution to stockholders after satisfying claims of
creditors but before any payment or distribution of assets is made to holders of
the Common Stock or any other shares of the Company of any class ranking junior
to the Shares of such Series upon such a liquidation, dissolution or winding up,
liquidating distributions in an amount per Share equal to the sum of $100,000
and an amount equal to accumulated and unpaid dividends (whether or not earned
or declared) to and including the date of final dissolution. If, upon any such
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the amounts payable with respect to the Shares of any Series and any other
shares of the Company of any class ranking on a parity with the Shares of such
Series upon any such liquidation, dissolution or winding up are not paid in
full, the holders of the Shares of such Series and of such other shares will
share ratably in any such distribution of assets of the Company in proportion to
the full respective amounts to which they are entitled. After payment of the
full amount of the liquidating distributions to which they are entitled, the
holders of Shares of such Series will have no further right or claim to any of
the remaining assets of the Company and will not be entitled to any further
participation in such distribution of assets of the Company. Neither the sale,
lease or exchange (for cash, stock, securities or other consideration) of all or
substantially all
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of the property and assets of the Company, nor the merger or consolidation of
the Company with or into any other corporation, nor the merger or consolidation
of any other corporation with or into the Company, shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the Company
for purposes of the foregoing.
VOTING RIGHTS
General. Each Share will carry 0.08507 of a vote in connection with the
election of directors and other matters submitted generally to the holders of
shares of the Company's voting stock, voting cumulatively and together as a
single class with shares of Common Stock and other capital stock of the Company
entitled to vote generally in the election of directors and other matters
submitted to stockholders generally. Based on the number of shares of Common
Stock outstanding as of the date of this Prospectus and assuming that all Shares
offered hereby were issued and outstanding, the Shares would represent, in the
aggregate, approximately 27% of the combined voting power of the Shares and the
Common Stock. All of the issued and outstanding shares of Common Stock,
representing approximately 73% of such combined voting power, are held
indirectly by SmithKline Beecham. As a result, SmithKline Beecham will be able
to direct the outcome of matters submitted to stockholders of the Company.
Right to Vote in Connection with a Merger, Liquidation, Etc. Without the
affirmative vote of the holders of at least two-thirds of the Shares of each
Series outstanding with a Dividend Period having more than 99 remaining Dividend
Period Days, voting in person or by proxy at one or more special meetings for
the purpose, or the unanimous written consent of the holders of Shares of each
such Series, the Company shall not (i) consolidate with or merge with or into,
or convey, transfer or lease substantially all of its assets to, any person
unless: (A) the resulting, surviving or transferee Person (if not the Company)
shall be a corporation organized and existing under the laws of the United
States, any State thereof or the District of Columbia which shall, by a valid
and legally binding instrument, expressly assume all the obligations of the
Company with respect to, and afford the holders of all Outstanding Shares all
the legal rights as holders of, the Shares, including the rights established by
the Certificate of Designations and the Certificate of Incorporation; (B) there
shall not have occurred any downgrading, nor shall any notice have been given of
any intended or potential downgrading, in the rating accorded the Shares by
Moody's or S&P, or if Moody's or S&P, or both, shall not make a rating available
with respect to the Shares, by any Substitute Rating Agency, in connection with
such transaction; and (C) there shall have been delivered to the holders of the
Outstanding Shares an opinion of nationally recognized, qualified legal counsel
to the effect that (1) the holders of such Shares will not recognize income,
gain or loss for United States federal income tax purposes as a result of such
transaction, and will be subject to United States federal income tax on the same
amounts and at the same times as would be the case if the transaction had not
occurred and (2) such transaction complies with the terms of the foregoing
clause (i)(A), or (ii) voluntarily liquidate, dissolve or wind up. On such
matters, holders of Shares will vote on the basis of one vote per $100,000 in
liquidation preference and not cumulatively.
Right to Elect Two Additional Directors. During any period (referred to
herein as a "Default Period") in which accumulated dividends (whether or not
earned or declared, and whether or not funds are then legally available in an
amount sufficient therefor) on any Shares of any Series or Parity Preferred for
such number of dividend periods or portions thereof (or the equivalent thereof
in the case of Parity Preferred), which in the aggregate contain at least 180
days, shall not have been paid or declared and a sum sufficient for the payment
thereof set aside for payment, then in any such case the number of directors of
the Company will automatically be increased by two additional directors
("Default Directors") and the holders of record of the Shares of all Series and
Parity Preferred upon which like voting rights have been conferred and are then
exercisable will possess full voting powers (to the exclusion of the holders of
all other series and classes of capital stock of the Company), voting as a
single class, to elect such two Default Directors.
The Default Period and voting rights created by the occurrence of the
circumstances described in the next preceding paragraph will continue unless and
until all accumulated and unpaid dividends on all Shares and Parity Preferred
then outstanding shall have been paid or sufficient funds for the payment
thereof shall have been set apart, at which time the voting rights described in
the next preceding paragraph will cease,
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subject always, however, to the revesting of such voting power in the holders of
Shares of all Series and Parity Preferred upon the further occurrence of any of
the circumstances described in the next preceding paragraph.
Within five days following the accrual of any right of the holders of
Shares of any Series and Parity Preferred to elect directors upon the
commencement of a Default Period as described above, the Company will mail or
cause to be mailed to the holders of Shares of each Series and Parity Preferred
notice of a special meeting of stockholders for a date not less than 20 days nor
more than 60 days after the date of such notice. If the Company does not mail or
cause to be mailed notice of such meeting as provided in the next preceding
sentence, a meeting may be called by any holder of Shares or Parity Preferred.
The Company will notify the Auction Agent of the date on which such right
accrued, and such date will be the record date for determining the holders of
stock entitled to notice of and to vote at the special meeting. Holders of all
such stock will vote in such elections on the basis of one vote per $100,000
liquidation preference and not cumulatively, and the holder or holders of
one-third of the shares of such stock then outstanding, present in person or by
proxy, will constitute a quorum for the election of directors by them. At any
such meeting or adjournment thereof in the absence of a quorum, a majority of
the holders of such stock present in person or by proxy will have the power to
adjourn the meeting for the election of directors without notice, other than an
announcement at the meeting, until a quorum is present.
The term of office of all persons who are directors of the Company at the
time of such meeting will continue, notwithstanding the election of Default
Directors at such meeting by the holders of Shares of all Series and Parity
Preferred. The Default Directors, together with the incumbent directors elected
by stockholders of the Company generally, will constitute the duly elected
directors of the Company.
Simultaneously with the expiration of the Default Period, the term of
office of the Default Directors elected by the holders of Shares and Parity
Preferred at the special meeting referred to above will terminate, the number of
directors of the Company will automatically be decreased by two, only the
incumbent directors otherwise elected by stockholders of the Company generally
will constitute the duly elected directors of the Company, and the right of the
holders of Shares and Parity Preferred during a Default Period to elect
directors as provided above will cease.
During any period in which a Credit Rating Event shall exist (a "Downgrade
Period"), the authorized number of members of the Board of Directors of the
Company shall automatically be increased by two and the holders of record of the
Shares of all Series and Parity Preferred upon which like voting rights have
been conferred and are then exerciseable (the Shares of all Series and all such
other shares being referred to as the "Downgrade Voting Parity Shares") will be
entitled to fill the vacancies so created on the Board of Directors of the
Company by electing two additional directors for the Company. Each director so
elected (each a "Downgrade Director") shall be entitled to such number of votes
on all matters before the Board of Directors of the Company as shall result in
the Downgrade Directors together having a majority of the total voting power of
all directors on the Board of Directors of the Company; provided, however, that
each Downgrade Director shall be entitled to only one vote with respect to
matters concerning the redemption of Shares of any Series or the liquidation,
dissolution or winding up of the Company. The provisions set forth above with
respect to the calling of and voting at special meetings of holders of Shares
and Parity Preferred to elect Default Directors, the filling of vacancies in the
offices of Default Directors and related matters will apply equally to the
exercise of the right of the holders of Downgrade Voting Parity Preferred to
elect the Downgrade Directors.
A Credit Rating Event shall exist if: (i) the Company and SmithKline
Beecham shall have amended or terminated the Support Agreement (other than an
amendment solely to increase the maximum amount of SmithKline Beecham's
obligations thereunder); and (ii) (A) either Moody's shall have reduced its
credit rating assigned to the Shares of any Series to below "a3" (and shall not
have subsequently increased such rating to "a3" or higher) and Moody's shall
have issued a written statement stating that it so reduced such rating as a
result, in whole or in part, of such amendment or termination of the Support
Agreement or S&P shall have reduced its credit rating assigned to the Shares of
any Series to below A- (and shall not have subsequently increased such rating to
A- or higher) and S&P shall have issued a written statement stating that it so
reduced such rating as a result, in whole or in part, of such amendment or
termination of the Support Agreement and (B) such rating shall have been so
reduced and such statement so issued within 60 calendar
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days after Moody's or S&P, as the case may be, having been informed of such
amendment or termination of the Support Agreement; and (iii) any Downgrade
Voting Parity Shares shall not have been redeemed, retired, repurchased or
otherwise acquired by the Company. In no event shall a Credit Rating Event be
deemed to exist if, on or prior to the date of effectiveness of any such
amendment or termination of the Support Agreement, the Company shall have
informed Moody's and S&P in writing of such amendment or termination and Moody's
shall have confirmed in writing a credit rating of "a3" or higher for the Shares
of each Series and S&P shall have confirmed in writing a credit rating of A- or
higher for the Shares of each Series.
If a Downgrade Period shall commence and be continuing at any time during a
Default Period, or if a Default Period shall commence and be continuing during a
Downgrade Period, then the powers conferred upon the Default Directors elected
pursuant to the provisions set forth above shall be suspended or if Default
Directors shall not have been so elected, then the right of holders of the
Shares of all Series and Parity Preferred to elect the Default Directors as
described above shall be suspended, in either case, at such time and during such
period as the Downgrade Directors shall have assumed and remain in office,
provided that upon the expiration of such Downgrade Period, such powers of the
Default Directors or voting rights of holders of the Shares of all Series and
Parity Preferred, as the case may be, shall be automatically and immediately
reinstated.
If either Moody's or S&P shall change its rating categories for preferred
stock, then the determination of whether a Credit Rating Event exists shall be
made based upon the substantially equivalent new rating categories for preferred
stock of such rating agency. If either Moody's or S&P, or both, shall not make a
rating available for the Share of any Series or of any other series necessary to
make such a determination or neither Moody's nor S&P shall make such a rating
available, such determination will be made based upon the substantial equivalent
of either or both of such ratings by a Substitute Rating Agency or two
Substitute Rating Agencies or, in the event that only one such rating shall be
available, based upon such available rating. If an alternative nationally
recognized securities rating agency or agencies are not available, then for
purposes of such determination the rating for the Shares of such Series and of
any such other series shall be deemed to be the highest relevant rating last
published by Moody's, S&P or any such Substitute Rating Agency.
Right to Vote in Certain Events. Without the affirmative vote of the
holders of at least two-thirds of the outstanding Shares of all Series voting in
person or by proxy at a special meeting for the purpose, or the unanimous
written consent of the holders of the outstanding Shares of all Series acting
without such a meeting (subject to the provisions of any applicable law), the
Company may not amend, alter or repeal any provisions of the Certificate of
Designations or the Certificate of Incorporation so as to affect adversely the
preferences, special rights or powers of the Shares of any Series. Any increase
in the authorized number of any series of capital stock ranking on a parity with
the Shares with respect to the payment of dividends or the distribution of
assets, or creation, authorization or issuance of any securities convertible
into, or warrants, options or similar rights to purchase, acquire or receive,
shares of such capital stock or reclassification of any authorized capital stock
of the Company into any share ranking on a parity with Shares with respect to
the payment of dividends or the distribution of assets in accordance with the
Preferred Stock Limitation Provision shall be deemed not to affect adversely the
preferences, special rights or powers of the Shares.
In addition, without the affirmative vote of the holders of at least
two-thirds of the outstanding Shares of all Series and Parity Preferred upon
which like voting rights have been conferred and are then exercisable, voting
together as a single class, in person or by proxy at a special meeting for the
purpose, or the unanimous written consent of the holders of the outstanding
Shares of all Series and such Parity Preferred acting without such a meeting
(subject to the provisions of any applicable law), the Company may not create,
authorize or issue shares of any class or series of capital stock ranking senior
to the Shares and such Parity Preferred with respect to the payment of dividends
or the distribution of assets, or create, authorize or issue any securities
convertible into, or warrants, options or similar rights to purchase, acquire or
receive, shares of capital stock ranking senior to the Shares and such Parity
Preferred with respect to the payment of dividends or the distribution of assets
or reclassify any authorized capital stock of the Company into any shares
ranking senior to the Shares and such Parity Preferred with respect to the
payment of dividends or the distribution of assets.
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No Right to Vote in Certain Events. With respect to any right of holders
of Shares to vote on any matter, whether such right is created by the
Certificate of Designations thereof, by applicable law or otherwise, no holder
of any Share will be entitled to vote and no Share will be deemed to be
outstanding for the purpose of voting or determining the number of Shares
required to constitute a quorum, if prior to or concurrently with a
determination of shares entitled to vote or of shares deemed outstanding for
quorum purposes, as the case may be, such Share is held beneficially or of
record by the Company or any affiliate of the Company or if the Company of any
affiliate has, directly or indirectly, the power to vote or dispose of such
Share. In addition, Shares with respect to which a Notice of Redemption has been
issued and the redemption price has been deposited with the Auction Agent will
be deemed not to be outstanding for the purpose of voting or determining the
number of Shares required to constitute a quorum.
Voting by Securities Depository. Whenever the Shares are held of record by
the nominee of the Securities Depository in accordance with its normal
procedures, the Securities Depository will extend voting rights with respect to
such Shares to the Agent Members whose accounts are credited with such Shares.
In accordance with their normal procedures, such Agent Members are expected in
turn to extend such voting rights to Existing Holders.
Exclusive Remedy. If the Company fails to pay any dividends on the Shares
as required, the exclusive remedy of the holders of Shares will be the right to
vote for directors as described under "Voting Rights". In no event shall holders
of Shares have any right to sue for, or maintain a proceeding with respect to,
such dividends or damages for the failure to receive the same.
THE AUCTION
General. The Certificate of Designations authorizing the issuance of the
Shares of each Series by this Prospectus and the applicable Prospectus
Supplement which provide that the Applicable Rate for the Shares of each Series
for each Dividend Period after the Initial Dividend Period shall be equal to the
rate per annum that the Auction Agent advises the Company has resulted on the
Business Day preceding the first day of such Subsequent Dividend Period from
implementation of the auction procedures (the "Auction Procedures") set forth in
the Certificate of Designations. See Appendix B hereto. Each periodic
implementation of the Auction Procedures, under which persons determine to hold
or, based upon dividend rates bid by them, offer to sell or to purchase Shares
of any Series, is referred to herein as an "Auction". If, however, the Company
should fail to pay or duly provide for the full amount of any dividend on Shares
of any Series on any Dividend Payment Date or the redemption price of Shares of
such Series called for redemption, the Applicable Rate for Shares of such Series
will be determined as described under "-- Dividends -- Determination of Dividend
Rate" above.
As used herein, an "Existing Holder" of any Shares of a Series means a
person who is listed as the beneficial owner of such Shares of such Series in
the records of the Auction Agent. The Auction Agent may rely upon, as evidence
of the identities of the Existing Holders, a list of the owners of the Shares of
each Series provided by the Company or the Broker-Dealers, the results of
Auctions and notices from any Existing Holder, the Agent Member of any Existing
Holder or the Broker-Dealer of any Existing Holder with respect to such Existing
Holder's transfer of Shares of such Series to another person. References herein
to Existing Holders and Potential Holders shall, unless the context otherwise
requires, be deemed to include beneficial owners and potential beneficial owners
acting through their Broker-Dealers.
The Auction Agent will be required to register a transfer of Shares of any
Series from an Existing Holder to another person only if (i) such transfer is
pursuant to an Auction or (ii) the Auction Agent has been notified in writing
(A) by such Existing Holder, the Agent Member of such Existing Holder or the
Broker-Dealer of such Existing Holder of such transfer or (B) by the
Broker-Dealer of any person that purchased or sold such Shares in an Auction of
the failure of such Shares to be transferred as a result of such Auction. The
Auction Agent is not required to accept any such notice of transfer delivered
prior to an Auction unless it is received by the Auction Agent by 3:00 p.m. (New
York City time) on the Business Day next preceding such Auction.
Auction Agent Agreement. The Company will enter into an agreement (the
"Auction Agent Agreement") with an institution specified as the Auction Agent in
the applicable Prospectus Supplement (together
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with any successor bank or trust company or other entity entering into a similar
agreement with the Company, the "Auction Agent") which will provide, among other
things, that the Auction Agent will follow the Auction Procedures for the
purposes of determining the Applicable Rate for the Shares of each Series for so
long as the Applicable Rate for the Shares of such Series is to be based on the
results of an Auction. See "-- Concerning the Auction Agent".
Broker-Dealer Agreements. The Auctions require the participation of one or
more broker-dealers. The Auction Agent will enter into agreements (collectively,
the "Broker-Dealer Agreements") with one or more other broker-dealers
(collectively, the "Broker-Dealers") selected by the Company and specified in
the applicable Prospectus Supplement, which will provide for the participation
of such Broker-Dealers in Auctions. See "-- Broker-Dealers". A Broker-Dealer
Agreement may be terminated by the Auction Agent or a Broker-Dealer on five
days' notice to the other party.
Securities Depository. DTC will act as Securities Depository for the Agent
Members with respect to Shares of each Series (DTC, together with any successor
securities depositary selected by the Company, being referred to herein as the
"Securities Depository"). One or more registered certificates representing all
of the Shares of each Series offered hereby initially will be registered in the
name of Cede, as nominee of DTC. Such certificates will bear a legend to the
effect that such certificate is issued subject to the provisions restricting
transfers of Shares of any Series contained in the Certificate of Designations.
The Company will also issue stop-transfer instructions to the transfer agent for
the Shares of each Series. Cede will be the initial holder of record of all
Shares of each Series, and Existing Holders of the Shares of any Series will not
receive certificates representing their ownership interest in such Shares.
DTC, which is a New York chartered limited purpose trust company, performs
services for its participants (including the Agent Members), some of which
(and/or their representatives) own DTC. DTC maintains lists of its participants
and will maintain the positions (ownership interests) held by each Agent Member
in Shares of any Series, whether as an Existing Holder for its own account or as
nominee for another Existing Holder.
Except as otherwise provided herein, payments and communications made by
the Company to holders of Shares of any Series will be duly made by making
payments to, and communicating with, the Securities Depository, whose nominee
will be the record holder of all Shares of each Series.
Auction Procedures. The following summary of the Auction Procedures does
not purport to be complete and is qualified in its entirety by reference to the
Auction Procedures, which are attached to this Prospectus as Appendix B.
Separate auctions will be conducted for each Series. Accordingly, as used in the
following brief summary, unless the context otherwise requires, "Shares" means
the Series of Shares subject to the related Auction and "Existing Holders" and
"Potential Holders" mean Existing Holders and Potential Holders of such Series,
respectively. The Settlement Procedures to be used with respect to Auctions are
set forth in Appendix A hereto.
Auction Dates. After the Initial Dividend Period for the Shares of a
Series, an Auction to determine the Applicable Rate for the Shares of such
Series for a particular Dividend Period for the Shares of such Series will be
held on the first Business Day preceding the first day of such Dividend Period
(the date of each Auction being referred to herein as an "Auction Date"). The
term "Business Day" means a day on which the New York Stock Exchange is open for
trading and which is not a day on which banks in New York City are authorized or
obligated by law to close. Both the Auction Date and the first day of the
related Dividend Period (also a Period-End Dividend Payment Date) must be
Business Days but need not be consecutive calendar days. For example, in most
cases, if the date or day that would normally be an Auction Date is not a
Business Day, then such Auction Date will be the next preceding day that is a
Business Day even though such Period-End Dividend Payment Date remains the same.
See "Dividends" above for information concerning the circumstances under which a
Dividend Payment Date may fall on a date other than a date that would normally
be such Dividend Payment Date.
The first Auction Dates for the Shares of each Series will be specified in
the applicable Prospectus Supplement.
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<PAGE> 56
Orders by Existing and Potential Holders. Prior to the Submission Deadline
on each Auction Date:
(a) each Existing Holder of Shares of such Series may submit to a
Broker-Dealer by telephone or otherwise a:
(i) Hold Order -- indicating the number of outstanding Shares, if any,
held by such Existing Holder that such Existing Holder desires to continue
to hold without regard to the Applicable Rate for the next Dividend Period
for such Shares;
(ii) Bid -- indicating the number of outstanding Shares, if any, held
by such Existing Holder that such Existing Holder desires to hold if the
Applicable Rate for the next Dividend Period for such Shares is less than
the rate specified by such Existing Holder; and/or
(iii) Sell Order -- indicating the number of outstanding Shares, if
any, held by such Existing Holder that such Existing Holder desires to sell
without regard to the Applicable Rate for the next Dividend Period for such
Shares; and
(b) Broker-Dealers will contact prospective purchasers of Shares of such
Series (each such prospective purchaser is referred to herein as a "Potential
Holder", and the term Potential Holder includes an Existing Holder with respect
to an offer by such Existing Holder to purchase additional Shares) by telephone
or otherwise to determine whether such Potential Holders desire to submit Bids
in which such Potential Holders will indicate the number of Shares that they
offer to purchase if the Applicable Rate for the next Dividend Period for the
Shares is not less than the rates per annum specified in such Bids.
The communication to a Broker-Dealer by an Existing Holder of the
information referred to in paragraph (a) above and by a Potential Holder of the
information referred to in paragraph (b) above, and the communication by a
Broker-Dealer, whether or not for its own account, to the Auction Agent of the
foregoing information, is hereinafter referred to as an "Order", and
collectively, as "Orders". An Existing Holder or a Potential Holder placing an
Order, including a Broker-Dealer acting in such capacity for its own account, is
referred to herein as a "Bidder" and, collectively, as "Bidders". Any Order
submitted by an Existing Holder or a Potential Holder to its Broker-Dealer, or
by a Broker-Dealer to the Auction Agent, prior to the Submission Deadline on any
Auction Date shall be irrevocable.
An Existing Holder may submit different types of Orders in an Auction with
respect to Shares then held by such Existing Holder, as well as Bids for
additional Shares. An Existing Holder that offers to purchase additional Shares
is, for purposes of such offer, treated as a Potential Holder. For information
concerning the priority given to different types of Orders placed by an Existing
Holder, see "-- Submission of Orders by Broker-Dealers to Auction Agent".
Any Bid for Shares by an Existing Holder specifying a rate higher than the
Maximum Applicable Rate will be treated as a Sell Order, and any Bid for Shares
by a Potential Holder specifying a rate higher than the Maximum Applicable Rate
for the Shares will not be accepted. Accordingly, the Auction Procedures
establish the Maximum Applicable Rate as the maximum rate per annum that can
result from an Auction. See "-- Determination of Sufficient Clearing Bids,
Winning Bid Rate and Applicable Rate" and "-- Acceptance and Rejection of
Submitted Bids and Submitted Sell Orders and Allocation of Shares".
The Maximum Applicable Rate on any Auction Date for the Shares will be the
rate obtained by multiplying the Reference Rate on such Auction Date by a
percentage determined by the Auction Agent (with each Maximum Applicable Rate
being rounded to the nearest one thousandth (0.001) of one percent per annum,
with any such number ending in five ten-thousandths of one percent rounded
upwards to the nearest one thousandth (0.001) of one percent) as set forth below
based on the lower of the credit ratings assigned to the Shares by Moody's and
S&P (or if Moody's or S&P, or both, shall not make such a rating available, the
equivalent of either or both of such ratings by a Substitute Rating Agency or
two Substitute
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<PAGE> 57
Rating Agencies or, in the event that only one such rating shall be available,
the percentage based on such available rating) at the close of business on the
Business Day immediately preceding such Auction Date:
<TABLE>
<CAPTION>
CREDIT RATING
- ---------------------------------- APPLICABLE PERCENTAGE
MOODY'S S&P OF REFERENCE RATE
- ----------------- ------------- ---------------------
<S> <C> <C>
"aa3" or above AA- or above 110%
"a3" to "a1" A- to A+ 125%
"baa3" to "baa1" BBB- to BBB+ 150%
below "baa3" below BBB- 200%
</TABLE>
There is no minimum Applicable Rate in respect of any Dividend Period.
The "Reference Rate", with respect to a Dividend Period of 49 days to 183
days, is the "AA" Composite Commercial Paper Rate; with respect to a Dividend
Period of 184 days to 364 days, is the comparable U.S. Treasury Bill Rate; with
respect to a Dividend Period of one year to ten years, is the comparable U.S.
Treasury Note Rate; and, with respect to a Dividend Period in excess of ten
years, is the comparable U.S. Treasury Bond Rate.
" 'AA' Composite Commercial Paper Rate" on any date means (i) the Interest
Equivalent of the rate on commercial paper placed on behalf of issuers whose
corporate bonds are rated "AA" by S&P or "Aa" by Moody's or the equivalent of
such rating by another nationally recognized statistical rating organization, as
such rate is made available on a discount basis or otherwise by the Federal
Reserve Bank of New York for the Business Day immediately preceding such date,
or (ii) in the event that the Federal Reserve Bank of New York does not make
available such a rate, then the arithmetic average of the Interest Equivalent of
the rate on commercial paper placed on behalf of such issuers, as quoted on a
discount basis or otherwise by Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Lehman Brothers Inc. or their respective successors (the
"Commercial Paper Dealers"), to the Auction Agent for the close of business on
the Business Day immediately preceding such date. If one of the Commercial Paper
Dealers does not quote a rate required to determine the "AA" Composite
Commercial Paper Rate, the "AA" Composite Commercial Paper Rate will be
determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by the Company to provide such rate or rates not being supplied by the
Commercial Paper Dealers. If the number of Dividend Period Days shall be (i) 7
or more but fewer than 49 days, such rate shall be the Interest Equivalent of
the 30-day rate on such commercial paper; (ii) 49 or more but fewer than 70
days, such rate shall be the Interest Equivalent of the 60-day rate on such
commercial paper; (iii) 70 or more but fewer than 85 days, such rate shall be
the arithmetic average of the Interest Equivalent of the 60-day and 90-day rate
on such commercial paper; (iv) 85 or more days but fewer than 99 days, such rate
shall be the Interest Equivalent of the 90-day rate on such commercial paper; or
(v) 99 or more days but fewer than 183 days, such rate shall be determined by
linear interpolation between the Interest Equivalents of the 90-day rate and the
180-day rate on such commercial paper.
"Interest Equivalent" means a yield on a 360-day basis of a discount basis
security which is equal to the yield on an equivalent interest-bearing security.
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent of
the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on
any date means the Interest Equivalent of the yield as calculated by reference
to the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent.
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<PAGE> 58
"U.S. Treasury Bond Rate" on any date means (i) the yield as calculated by
reference to the bid price quotation of the actively traded, current coupon
Treasury Bond with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bond Rate on such date. "Alternate Treasury Bond Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Bond
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.
"U.S. Treasury Note Rate" on any date means (i) the yield as calculated by
reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Note
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.
Notwithstanding the foregoing, if at 9:00 a.m., New York City time, on any
Auction Date, (i) the rating of the Shares of any Series by Moody's shall be on
the "Corporate Credit Watch List" of Moody's with a designation of "downgrade"
or "uncertain", (ii) the rating of the Shares by S&P shall be on the
"CreditWatch" of S&P with a designation of "negative implications" or
"developing" or (iii) if Moody's or S&P, or both, shall not make such a rating
available, the rating of the Shares by any Substitute Rating Agency shall be the
substantial equivalent of clause (i) or (ii), then the Maximum Applicable Rate
for the Shares of the Series to which such Auction Date relates will be
determined as described above but as if the credit rating assigned to the Shares
by Moody's and S&P (or, as appropriate, by a Substitute Rating Agency) each fell
within a range one full level lower in the above table.
The Company will take all reasonable action necessary to enable Moody's and
S&P (and, as appropriate, any Substitute Rating Agency or Substitute Rating
Agencies referred to below) to provide a rating for the Shares. If either
Moody's or S&P shall not make such a rating available, or neither Moody's nor
S&P shall make such a rating available, the Company will select a nationally
recognized statistical rating organization (a "Substitute Rating Agency") or two
nationally recognized statistical rating organizations ("Substitute Rating
Agencies") to act as a Substitute Rating Agency or Substitute Rating Agencies,
as the case may be. If an alternative nationally recognized securities rating
agency or agencies are not available, the applicable rating shall be the highest
rating last published by Moody's, S&P or such Substitute Rating Agency or
Agencies.
Neither the Company nor the Auction Agent will be responsible for a
Broker-Dealer's failure to comply with any of the foregoing.
A Broker-Dealer also may hold Shares for its own account. A Broker-Dealer
thus may submit Orders to the Auction Agent as an Existing Holder or a Potential
Holder and therefore participate in an Auction on behalf of both itself and its
customers. An Order placed with the Auction Agent by a Broker-Dealer as an
Existing Holder or a Potential Holder as or on behalf of a customer will be
treated in the same manner as an Order placed with a Broker-Dealer by such
customer. Similarly, any failure by a Broker-Dealer to submit to the Auction
Agent an Order in respect of any Shares held by its customer will be treated in
the same manner as such customer's failure to submit to its Broker-Dealer an
Order in respect of Shares held by it, as described above. Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder
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<PAGE> 59
only to represent the interest of its customers, all discussion herein relating
to the consequences of an Auction for Existing Holders and Potential Holders
also applies to the underlying beneficial ownership interests.
The number of Shares purchased or sold may be subject to proration
procedures. See "-- Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation of Shares". Each purchase or sale of Shares shall be
made for settlement on the Business Day (also a Period-End Dividend Payment
Date) next succeeding the Auction Date at a price per Share equal to $100,000,
and such settlement will be made regardless of whether or not the Company shall
have paid on such Business Day or on any other day the full amount of any
dividends or any other amounts payable in respect of any Shares. See
"-- Notification of Results; Settlement".
If any Order or Orders covering in the aggregate all of the outstanding
Shares of a Series held by an Existing Holder is not submitted to the Auction
Agent prior to the Submission Deadline for any reason (including the failure of
a Broker-Dealer to contact such Existing Holder or to submit such Existing
Holder's Order or Orders), such Existing Holder shall be deemed to have
submitted a Hold Order (in the case of an Auction relating to a Regular Dividend
Period) or a Sell Order (in the case of an Auction relating to a Special
Dividend Period) covering the number of outstanding Shares held by such Existing
Holder and that are not subject to Orders submitted to the Auction Agent.
For purposes of an Auction, Shares for which the Company shall have given
notice of redemption and deposited moneys therefor with the Auction Agent will
not be considered as outstanding and will not be included in such Auction.
Neither the Company nor any affiliate of the Company may submit an Order in
any Auction except as described below under the caption "Broker-Dealers".
Submission of Orders by Broker-Dealers to Auction Agent. Prior to 1:00
p.m., New York City time, on each Auction Date, or such other time on the
Auction Date as may be specified by the Auction Agent (the "Submission
Deadline"), each Broker-Dealer will submit in writing or through the Auction
Agent's auction processing system to the Auction Agent all Orders obtained by it
for the Auction to be conducted on such Auction Date, designating itself (unless
otherwise permitted by the Company) as the Existing Holder or Potential Holder
in respect of the Shares subject to such Orders (each such "Hold Order", "Bid"
or "Sell Order" as submitted or deemed submitted by a Broker-Dealer being
referred to herein as a "Submitted Hold Order", a "Submitted Bid" or a
"Submitted Sell Order", as the case may be, or as a "Submitted Order"). Any
Order submitted by an Existing Holder or a Potential Holder to its
Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the
Submission Deadline on an Auction Date, shall be irrevocable.
If any rate specified in any Submitted Bid contains more than three figures
to the right of the decimal point, then the Auction Agent shall round such rate
up to the next highest one thousandth (0.001) of one percent.
A Submitted Order or Submitted Orders of an Existing Holder that cover in
the aggregate more than the number of outstanding Shares held by such Existing
Holder shall be considered valid in the following order of priority:
(i) any Submitted Hold Order of such Existing Holder shall be
considered valid up to and including the number of outstanding Shares held
by such Existing Holder, provided that if there is more than one Submitted
Hold Order of such Existing Holder and the number of Shares subject to such
Submitted Hold Orders exceeds the number of outstanding Shares held by such
Existing Holder, the number of such Shares subject to each such Submitted
Hold Order shall be reduced pro rata so that such Submitted Hold Orders
shall cover the number of outstanding Shares held by such Existing Holder;
(ii) (A) any Submitted Bids of such Existing Holder shall be
considered valid, in the ascending order of their respective rates per
annum if more than one such Submitted Bid is submitted, up to and including
the excess of the number of outstanding Shares held by such Existing Holder
over the number of Shares of such Series subject to any Submitted Hold
Order referred to in clause (i) above, and (B) subject to subclause (A), if
there is more than one Submitted Bid of such Existing Holder specifying
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<PAGE> 60
the same rate and the number of outstanding Shares of such Series subject
to such Submitted Bids is greater than such excess, such Submitted Bids
shall be considered valid up to and including the amount of such excess,
and the number of such Shares subject to such Submitted Bids shall be
reduced pro rata so that such Submitted Bids, in the aggregate shall cover
the number of outstanding Shares of such Series equal to such excess, and
(C) subject to subclause (A) and (B), if there are two or more Submitted
Bids of such Existing Holder specifying different rates, such Submitted
Bids shall be considered valid in the ascending order of their respective
rates and in any such event the number, if any, of such Shares subject to
Submitted Bids not valid under this clause (ii) shall be treated as subject
to a Submitted Bid by a Potential Holder; and
(iii) any Submitted Sell Order of an Existing Holder shall be
considered valid up to and including the excess of the number of
outstanding Shares held by such Existing Holder over the number of Shares
of such Series subject to Submitted Holder Orders referred to in clause (i)
and valid Submitted Bids referred to in clause (ii) above; provided that if
there is more than one Submitted Sell Order of such Existing Holder and the
number of such Shares subject to such Submitted Sell Orders is greater than
such excess, the number of such Shares subject to such Submitted Sell
Orders shall be reduced pro rata so that such Submitted Sell Orders, in the
aggregate, shall cover the number of outstanding Shares equal to such
excess.
If there is more than one Submitted Bid of any Potential Holder, each such
Submitted Bid shall be considered a separate Submitted Bid with the rate and
number of Shares therein specified.
Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate. Not earlier than the Submission Deadline on an Auction Date for the Shares
of a Series, the Auction Agent will assemble all Submitted Orders and will
determine the excess of the number of outstanding Shares of such Series over the
number of outstanding Shares of such Series subject to Submitted Hold Orders
(such excess being referred to herein as the "Available Shares") and whether
Sufficient Clearing Bids exist. "Sufficient Clearing Bids" will exist if the
number of outstanding Shares that are the subject of Submitted Bids by Potential
Holders specifying rates not higher than the Maximum Applicable Rate equals or
exceeds the number of outstanding Shares that are the subject of Submitted Sell
Orders (including the number of such Shares subject to Submitted Bids by
Existing Holders specifying rates higher than the Maximum Applicable Rate).
If Sufficient Clearing Bids exist, the Auction Agent will determine the
lowest rate specified in the Submitted Bids (the "Winning Bid Rate") that,
taking into account such rate and all lower rates bid by Existing Holders and
Potential Holders, would result in Existing Holders and Potential Holders owning
not less than the Available Shares. In that event, the Winning Bid Rate will be
the Applicable Rate for the next Dividend Period for all Shares of such Series
then outstanding.
If Sufficient Clearing Bids do not exist (other than because all of the
outstanding Shares are the subject of Submitted Hold Orders), the next Dividend
Period will be a Regular Dividend Period and the Applicable Rate for the next
Dividend Period will be the Maximum Applicable Rate. If Sufficient Clearing Bids
do not exist, Existing Holders that have submitted or are deemed to have
submitted Sell Orders will not be able to sell in the Auction all, and may not
be able to sell any, Shares subject to such Submitted Sell Orders. See
"Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares" below.
If all of the outstanding Shares of a Series are subject to Submitted Hold
Orders, the Applicable Rate for the next Dividend Period for the Shares of such
Series will be 59% of the Reference Rate in effect on the Auction Date with
respect to such Dividend Period.
Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares. Based on the determinations made under "-- Determination
of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate" above, and
subject to the discretion of the Auction Agent to round and allocate as
described below, Submitted Bids and Submitted Sell Orders shall be accepted or
rejected in the order of priority set forth in the Auction Procedures, with the
result that Existing Holders and Potential Holders shall sell, continue to hold
and/or purchase Shares as set forth below. Existing Holders that submit or are
deemed to have submitted Hold Orders shall continue to hold the Shares subject
to such Hold Orders.
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<PAGE> 61
If Sufficient Clearing Bids exist:
(a) each Existing Holder that placed a Submitted Sell Order or a Submitted
Bid specifying a rate higher than the Winning Bid Rate will sell the outstanding
Shares subject to such Submitted Sell Order or Submitted Bid;
(b) each Existing Holder that placed a Submitted Bid specifying a rate
lower than the Winning Bid Rate will continue to hold the outstanding Shares
subject to such Submitted Bid;
(c) each Potential Holder that placed or is deemed to have placed a
Submitted Bid specifying a rate lower than the Winning Bid Rate will purchase
the number of outstanding Shares subject to such Submitted Bid;
(d) each Existing Holder that placed a Submitted Bid specifying a rate
equal to the Winning Bid Rate shall continue to hold the outstanding Shares
subject to such Submitted Bid, unless the number of outstanding Shares subject
to all such Submitted Bids is greater than the excess of the Available Shares
over the number of Shares accounted for in clauses (b) and (c) above, in which
event each Existing Holder with such a Submitted Bid will continue to hold a
number of outstanding Shares determined on a pro rata basis based on the number
of outstanding Shares subject to all such Submitted Bids by such Existing
Holders; and
(e) each Potential Holder that placed a Submitted Bid specifying a rate
equal to the Winning Bid Rate will purchase any Available Share not accounted
for in clause (b), (c) or (d) above on a pro rata basis based on the number of
outstanding Shares subject to all such Submitted Bids.
If Sufficient Clearing Bids do not exist (other than because all of the
outstanding Shares are subject to Submitted Hold Orders):
(a) each Existing Holder that placed a Submitted Bid specifying a rate
equal to or lower than the Maximum Applicable Rate will continue to hold the
outstanding Shares subject to such Submitted Bid;
(b) each Potential Holder that placed a Submitted Bid specifying a rate
equal to or lower than the Maximum Applicable Rate will purchase the number of
outstanding Shares subject to such Submitted Bid; and
(c) each Existing Holder that placed a Submitted Sell Order or a Submitted
Bid specifying a rate higher than the Maximum Applicable Rate will sell a number
of outstanding Shares determined on a pro rata basis based on the number of
outstanding Shares subject to all such Submitted Sell Orders and Submitted Bids.
If, as a result of the Auction Procedures described above, any Existing
Holder would be required to sell, or any Potential Holder would be required to
purchase, a fraction of a Share, the Auction Agent shall, in such manner as it
shall determine in its sole discretion, (i) round up or down the number of
Shares being sold or purchased on such Auction Date so that the number of Shares
sold or purchased by each Existing Holder or Potential Holder shall be whole
Shares and (ii) allocate such whole Shares for purchase among Potential Holders
even if such allocation results in one or more of such Potential Holders not
purchasing Shares.
If the Company shall determine, as a result of a change in applicable law,
regulation or rule (or interpretation thereof by the Commission or its staff)
and based upon written advice of independent legal counsel of recognized
standing selected by the Company, that there is a significant possibility that
the Company would be required to register the Shares of any Series or shares of
any other series of the Company that may be outstanding from time to time
pursuant to the Exchange Act if there were five hundred or more different
beneficial owners of Shares of all Series and such other series considered
together, the Auction Procedures will be modified in the manner provided therein
so that no Auction will result in there being more than a total number of
different beneficial owners of Shares of all Series as such counsel shall
specify in such written advice; provided that in no event will the Auction
Procedures be modified in such a way that they would restrict the total number
of different beneficial owners for any Series to be less than 40.
Notification of Results; Settlement. The Auction Agent will advise each
Broker-Dealer that submitted an Order in an Auction of the Applicable Rate for
the next Dividend Period for the applicable Shares of such Series and, if the
Order was a Bid or Sell Order, whether such Bid or Sell Order was accepted or
rejected, in
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whole or in part, by telephone by approximately 3:00 p.m., New York City time,
on the Auction Date. Each Broker-Dealer that submitted a Bid or Sell Order on
behalf of one or more Bidders will then advise each Bidder whether its Bid or
Sell Order was accepted or rejected, in whole or in part, will confirm purchases
and sales with each Bidder purchasing or selling Shares as a result of the
Auction and will advise each Bidder purchasing or selling Shares as a result of
the Auction to give instructions to its Agent Member to pay the purchase price
against delivery of such Shares by book-entry against payment therefor, as
appropriate. Each Broker-Dealer that submitted a Hold Order on behalf of an
Existing Holder will also advise such Existing Holder of the Applicable Rate for
the next Dividend Period. The Auction Agent will record on the registry of
Existing Holders to be maintained by the Auction Agent each transfer of
beneficial ownership of Shares pursuant to an Auction.
If any Existing Holder selling Shares in an Auction fails to deliver such
Shares (by authorized book-entry), a Broker-Dealer may deliver to the Potential
Holder on behalf of which is submitted a Bid that was accepted a number of such
Shares that is less than the number of such Shares that otherwise was to be
purchased by such Potential Holder. In such event, the number of such Shares to
be so delivered will be determined by such Broker-Dealer in its sole discretion;
provided, however, that such delivery will be of whole Shares only. Delivery of
such lesser number of Shares will constitute good delivery.
In accordance with the Securities Depository's normal procedures, on the
Business Day next succeeding the Auction Date, the transactions described above
will be executed through the Securities Depository and the accounts of the
respective Agent Members at the Securities Depository will be debited and
credited as necessary to effect the purchases and sales of Shares as determined
in the Auction. Purchasers will make payment to the Securities Depository
through their Agent Members in same-day funds and shall make payments regardless
of whether or not the Company shall have paid on such day or on any other day
the full amount of any dividends or any other amounts payable in respect of any
Shares of such Series. The Securities Depository will make payment in accordance
with its normal procedures, which now provide for payment in same day funds. If
the procedures of the Securities Depository applicable to the Shares shall be
changed to provide for payment in next-day funds, then purchasers may be
required to make payment in next-day funds. If the certificates for Shares are
not held by the Securities Depository or is nominee, payment will be made in
same-day funds to the Auction Agent against delivery of such certificates.
CONCERNING THE AUCTION AGENT
The Auction Agent will act as agent for the Company in connection with
Auctions. The Company will pay the Auction Agent compensation for its services
under an Auction Agent Agreement.
In the absence of bad faith or negligence on its part, the Auction Agent
will not be liable for any action taken, suffered or omitted in the performance
of its duties under the Auction Agent Agreement and will not be liable for any
error of judgment made reasonably and in good faith unless the Auction Agent has
been negligent in ascertaining (or failing to ascertain) the pertinent facts.
Pursuant to the Auction Agent Agreement, the Company is required to indemnify
the Auction Agent for certain losses and liabilities incurred by the Auction
Agent without negligence or bad faith on its part in connection with the
performance of its duties under such agreement.
The Company may terminate any Auction Agent Agreement upon written notice
to the Auction Agent. The Auction Agent may resign under the Auction Agent
Agreement upon written notice to the Company on the date specified in such
notice, which may be no earlier than six months following delivery of such
notice. No such termination by the Company or resignation by the Auction Agent
shall be effective until (i) the Company has entered into an agreement with a
successor Auction Agent containing substantially the same terms and conditions
as the Auction Agent Agreement and (ii) such successor Auction Agent has entered
into agreements with the Broker-Dealers containing substantially the same terms
and conditions as the Broker-Dealer Agreements. Upon receiving a resignation
notice from the Auction Agent, the Company will use its best efforts to enter
into an agreement with a successor Auction Agent containing substantially the
same terms and conditions as the Auction Agent Agreement.
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BROKER-DEALERS
The Auction Agent after each Auction will pay a service charge from funds
provided by the Company to each Broker-Dealer on the basis of the purchase price
of Shares placed by such Broker-Dealer at such Auction. The service charge (i)
for any Regular Dividend Period shall be determined from time to time by mutual
consent of the Company and any such Broker-Dealer or Broker Dealers and (ii) for
any Special Dividend Period shall be determined by mutual consent of the Company
and any such Broker-Dealer or Broker-Dealers and shall be based upon a selling
concession that would be applicable to an underwriting of fixed or variable rate
preferred shares with a similar final maturity or variable rate dividend period,
respectively, at the commencement of the Dividend Period with respect to such
Auction. For the purposes of the preceding sentence, Shares shall be considered
placed by a Broker-Dealer if such Shares were (i) the subject of Hold Orders
deemed to have been made by Existing Holders that were acquired by such
Beneficial Owners through such Broker-Dealer or (ii) the subject of the
following Orders submitted by such Broker-Dealer; (A) a Submitted Bid of an
Existing Holder that resulted in such Existing Holder purchasing such Shares as
a result of the Auction, (B) a Submitted Bid of a Potential Holder that resulted
in such Potential Holder purchasing such Shares as a result of the Auction or
(C) a Submitted Hold Order.
The Broker-Dealer Agreements provide that a Broker-Dealer (other than an
affiliate of the Company) may submit Orders in Auctions for its own account,
unless the Company notifies all Broker-Dealers in writing that they may no
longer do so, in which case Broker-Dealers may continue to submit only Hold
Orders and Sell Orders for their own accounts. Any Broker-Dealer that is an
affiliate of the Company may submit Orders in Auctions but only if such Orders
are not for its own account, except that if such affiliated Broker-Dealer holds
Shares of any Series for its own account, it must submit a Sell Order in the
next Auction with respect to such Shares of such Series. If a Broker-Dealer
submits an Order for its own account in any Auction, it may have knowledge of
Orders placed through it in that Auction and therefore have an advantage over
other Bidders; such Broker-Dealer, however, would not have knowledge of Orders
submitted by other Broker-Dealers in that Auction. In the Broker-Dealer
Agreements, Broker-Dealers agree to handle customer orders in accordance with
their respective duties under applicable securities laws and rules.
Each Broker-Dealer Agreement provides that neither the Company nor
SmithKline Beecham, nor the Auction Agent, shall have any responsibility or
liability with respect to the failure of a Potential Holder, Existing Holder or
their respective Agent Members to deliver Shares or to pay for Shares of any
Series purchased or sold pursuant to an Auction or otherwise.
RATINGS
The Company expects that, on the Date of Original Issue for the Shares of
each Series offered hereby, such Shares will be rated "aa3" by Moody's and "A"
by S&P.
As recently described by Moody's, an issue of preferred stock rated "aa" is
considered to be a high-grade preferred stock and the rating indicates that
there is a reasonable assurance that earnings and asset protection will remain
relatively well maintained in the foreseeable future. The modifier "3" indicates
that the issue ranks in the lower end of the "aa" rating category. S&P has
recently described a preferred stock rating as an assessment of the capacity and
willingness of an issuer to pay preferred stock dividends and any applicable
sinking fund obligations. An A rating is the third highest rating that may be
assigned by S&P to a preferred stock issue and, as described by S&P, indicates
that the preferred stock issue is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.
Ratings are not recommendations to purchase, hold or sell Shares of any
Series, inasmuch as the ratings do not comment as to market price or suitability
for a particular investor. The ratings are based on current information
furnished to Moody's and S&P by the Company and obtained from other sources. The
ratings may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information. Ratings do not address the likelihood that
any Auction will be successful or that an investor will be able to resell Shares
of any Series in any Auction or otherwise.
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DESCRIPTION OF SMITHKLINE BEECHAM SUPPORT
THE GUARANTEE
The following is a summary of the terms of the Guarantee. This summary does
not purport to be complete and is qualified in its entirety by reference to the
Guarantee. A copy of the Guarantee may be obtained upon request from the Company
or SmithKline Beecham.
Under the Guarantee, SmithKline Beecham will, for the benefit of the
holders of record from time to time of the Shares of each Series offered hereby,
unconditionally and irrevocably guarantee the due and punctual payment, in U.S.
dollars, of all dividends on such shares held by such holders, provided that
such dividends have been declared by the Company's Board of Directors out of
funds legally available therefor and remain unpaid. SmithKline Beecham will in
no event be required to make any payment pursuant to the Guarantee at any time
in an amount that would exceed the Adjusted Distributable Reserves of SmithKline
Beecham at such time. Any amounts payable under the Guarantee but not paid as a
result of the foregoing will be paid over pro rata to the holders of record of
Shares of each Series from time to time as Adjusted Distributable Reserves
become available. The rights of holders of Shares of any Series under the
Guarantee will be subordinated to the rights of other creditors of SmithKline
Beecham.
The obligations of SmithKline Beecham under the Guarantee in respect of any
dividends declared by the Company's Board of Directors and not paid by the
Company shall not be subject to the passage of any grace or cure period with
respect thereto.
The Guarantee provides that to the extent that the dividends received
deduction under section 243(a)(1) of the Code or any successor provision is not
available to a Qualifying Holder with respect to payments made by SmithKline
Beecham under the Guarantee in respect of any dividend on the Shares of any
Series, payments under the Guarantee will be increased so that such payments
result in the same after-federal income tax yield that Qualifying Holders would
have received had the dividend been paid by the Company. Such after-federal
income tax yield shall be determined on the basis of the highest generally
applicable marginal federal corporate income tax rate in effect at the time of
payment and on the assumption that any dividends received deduction that is
available to Qualifying Holders is that deduction which is available to holders
of less than 20% of the stock of the Company. The obligations of SmithKline
Beecham under the Guarantee are not affected by the particular tax position or
circumstances of any holder or Qualifying Holder of any Shares of any Series and
no holder or Qualifying Holder shall be required at any time to furnish to the
Company or SmithKline Beecham any information as to its particular tax position
or circumstances.
For purposes of the Guarantee and the Support Agreement, "Adjusted
Distributable Reserves" means at any time the amount of the Distributable
Reserves of SmithKline Beecham at such time (i) reduced by an amount equal to
the aggregate of the Sterling Equivalents of all Capital Increases made by
SmithKline Beecham or its affiliates in accordance with any of the Preferred
Share Dividend Support Agreements and of the Sterling Equivalents of all amounts
paid by SmithKline Beecham under any of the Preferred Share Dividend Guarantees
and (ii) increased by an amount equal to the aggregate of the Sterling
Equivalents of all Written-Down Amounts; "Distributable Reserves" is defined by
reference to the Companies Act 1985 of Great Britain, which provides, in effect,
that distributable reserves or profits of a company constitute its accumulated,
realized profits less its accumulated, realized losses, subject to certain
further restrictions, and is determined by reference to a company's latest
published audited annual financial statements; "Preferred Share Dividend
Guarantees" mean the Guarantees and any other guarantee granted by SmithKline
Beecham on terms substantially similar to the Guarantee, guaranteeing payment by
the Company or another subsidiary of SmithKline Beecham of declared dividends on
preferred shares issued by such company; "Preferred Share Dividend Support
Agreements" mean the Support Agreement and any other support agreement on terms
substantially similar to the Support Agreement, which SmithKline Beecham may
enter into with one of its subsidiaries in connection with an issuance of
preferred shares by such company; "Sterling Equivalent" means (i) in relation to
any Capital Increase or any payment made under the Guarantee in a currency other
than pounds sterling, the amount of such payment in such other currency
translated into pounds sterling at the Noon Buying Rate on the date upon which
such Capital Increase or payment is made and (ii) in relation to
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any Written-Down Amount in respect of which the write-down is taken in a
currency other than pounds sterling, the amount of such write-down in such other
currency translated into pounds sterling at the rate applicable to the payment
or Capital Increase in respect of which such write-down is made; and "Written-
Down Amount" means (i) in relation to any Capital Increase, the amount, if any,
which SmithKline Beecham or, as the case may be, the relevant affiliate writes
down as irrecoverable the investment in the Company representing such Capital
Increase and (ii) in relation to any payment made under the Guarantee, the
amount, if any, by which SmithKline Beecham writes down as irrecoverable the
amount representing the right against the Company to which it is subrogated as a
consequence of such payment. At December 31, 1995, the Adjusted Distributable
Reserves of SmithKline Beecham were L576 million ($893 million).
Any payments made by SmithKline Beecham under the Guarantee shall be made
without deduction or withholding for or on account of any present or future tax,
levy, duty or governmental charge assessed by the U.K. or any political
subdivision thereof or taxing authority therein, exclusive of any tax, levy,
duty or governmental charge which would not have been imposed or assessed but
for the existence of any present or former connection between the holder of
Shares of any Series or the beneficial owner of an interest in such Shares (or
between a fiduciary, settlor, beneficiary, member or shareholder of, or
possessor of a power over, such holder or beneficial owner, if such holder or
beneficial owner is an estate, a trust, a partnership or a corporation) and the
U.K., including, without limitation, such holder or beneficial owner (or such
fiduciary, settlor, beneficiary, member, shareholder or possessor) being or
having been present therein, or being or having been engaged in trade or
business therein, or having or having had a permanent establishment therein
(each such non-excluded tax being herein referred to as a "U.K. Tax"); provided,
however, that to the extent that SmithKline Beecham is required by applicable
law to withhold or deduct any U.K. Tax from any such payment under the
Guarantee, SmithKline Beecham shall make additional payments so that, after
giving effect to all such deductions and withholdings, the net amount paid to
each holder is not less than the amount which would have been payable but for
such withholding or deduction.
If an order is made or an effective resolution is passed for the winding up
of SmithKline Beecham, SmithKline Beecham shall, to the extent required to make
payment under the Guarantee, make payment under the Guarantee only of such
amounts as would have been payable if the holders of Shares then outstanding
had, on the day preceding the commencement of the winding up, become holders of
shares in SmithKline Beecham of a class having a preferential right in a winding
up over all other classes of shares in SmithKline Beecham, issued or to be
issued, to receive an amount equal to the amount expressed to be payable under
the Guarantee on the date upon which such holders would be so treated as having
become holders of shares in SmithKline Beecham.
No amendment, modification or abrogation of the Guarantee or the rights of
the holders or beneficial owners of Shares of any Series thereunder shall be
made by SmithKline Beecham without the consent of the holders of at least
two-thirds of the aggregate liquidation preference of all outstanding Shares of
all Series, voting as a single class. Any such amendment, modification or
abrogation made by SmithKline Beecham with such consent shall be binding on each
holder, regardless of whether or not such holder shall have consented thereto.
Any holder of record of Shares of any Series will have the right to enforce
its rights against SmithKline Beecham under the Guarantee without first making a
demand upon, or instituting a legal proceeding against, the Company. SmithKline
Beecham has agreed that the courts of England, and the U.S. federal and New York
State courts sitting in New York, New York, are to have non-exclusive
jurisdiction in any legal proceeding arising out of or in connection with the
Guarantee, and has irrevocably submitted to the jurisdiction of such U.S. and
New York State courts.
The Guarantee will be governed by English law.
THE SUPPORT AGREEMENT
The following is a summary of the terms of the Support Agreement. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Support Agreement. A copy of the Support Agreement may be
obtained upon request from the Company, SmithKline Beecham or the Underwriters.
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In order to facilitate the raising of funds by the Company by borrowing and
the issue of debt and equity securities, including Shares of one or more Series,
on favorable terms, SmithKline Beecham has entered into the Support Agreement
with the Company pursuant to which SmithKline Beecham has agreed that (a) if the
Debt of the Company exceeds the Equity of the Company, SmithKline Beecham will
within three Business Days make, or cause an affiliate to make, in U.S. dollars,
an addition to the capital of the Company by subscribing for additional shares
of Common Stock or preferred stock ranking junior to any other class of
preferred stock of the Company (a "Capital Increase") to the extent necessary to
cause the Equity of the Company to exceed the Debt of the Company and (b) if the
Equity of the Company (after deducting therefrom the sum of the aggregate
liquidation preference of the Shares of all Series then outstanding and pari
passu securities (excluding amounts in respect of accumulated and unpaid
dividends thereon)) would be less than $1, SmithKline Beecham will make, or
cause an affiliate to make, a Capital Increase to the extent necessary to
maintain the Equity of the Company (after such deduction) at a minimum of $1.
SmithKline Beecham shall in no event be obligated to make, or cause to be made,
such a Capital Increase at any time in an amount that would exceed the Adjusted
Distributable Reserves of SmithKline Beecham at such time. The amount of any
Capital Increase that is not made as a result of the foregoing will be made by
SmithKline Beecham to the Company from time to time as Adjusted Distributable
Reserves become available. The rights of the Company under the Support Agreement
will be subordinated to the rights of other creditors of SmithKline Beecham. In
addition, SmithKline Beecham's obligations under the Support Agreement at any
time will be limited initially to an aggregate amount equal to the sum of (i) $3
billion and (ii) two times the excess of the liquidation preference of the
Shares issued at such time, over $1,150,000,000, reduced by the amount of any
payments made under the SB Biologicals Support Agreement described below.
If an order is made or an effective resolution is passed for the winding up
of SmithKline Beecham, SmithKline Beecham shall, to the extent required to make
payment under the Support Agreement, make payment under the Support Agreement
only of such amounts as would have been payable if the Company had, on the day
preceding the commencement of the winding up, become a holder of shares in
SmithKline Beecham of a class having a preferential right in a winding up over
all other classes of shares in SmithKline Beecham, issued or to be issued, to
receive an amount equal to the amount expressed to be payable under the Support
Agreement on the date upon which the Company would be so treated as having
become a holder of shares in SmithKline Beecham.
For purposes of the Support Agreement, the following terms shall have the
meanings set forth below:
"Equity" means at any time the aggregate of (i) the consolidated
shareholders' equity of the Company and its subsidiaries in accordance with U.S.
GAAP as shown in the then latest audited balance sheet of the Company for a
financial year and making adjustments thereto to reflect any variation in the
paid-up share capital of the Company, any capital in excess of the par value of
any issued shares, the amount of contributed capital and any other capital
reserve but without deducting from such reserves the amount of goodwill shown as
an intangible asset in such audited balance sheet and (ii) the amount, if any,
shown in the then latest audited balance sheet for minority interests. The
Support Agreement provides that certain underwritten issues of shares that have
not been consummated on the date of the then latest audited balance sheet of the
Company for a financial year will also be included in any such determination.
"Debt" means at any time all indebtedness for borrowed money of the Company
in accordance with U.S. GAAP as the same would be shown on a balance sheet of
the Company, prepared as of such date without consolidation of the accounts of
any of its subsidiaries (such reference to a balance sheet, unlike the reference
under "Equity", not being intended to mean the latest audited balance sheet of
the Company), and shall be deemed to include except insofar as otherwise taken
into account: (i) the par value of any issued share capital and the principal
amount of any debentures or borrowed monies, the beneficial interest wherein or
the right to repayment whereof is not for the time being owned by the Company,
of any body whether corporate or unincorporated and the payment or repayment
whereof is the subject of a guarantee or indemnity by the Company; (ii) the
outstanding principal amount raised by bankers acceptances (not being
acceptances of trade bills in respect of the purchase or sale of goods in the
ordinary course); (iii) the principal amount of any debenture of the Company;
and (iv) any fixed or minimum premium payable on repayment of any borrowing or
deemed borrowing by the Company. The Support Agreement provides that "Debt"
shall be deemed not to
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include: (a) borrowings for the purposes of repaying borrowings by the Company
for the time being outstanding and so to be applied within six months of being
so borrowed, pending their application for such purpose within such period; and
(b) the aggregate value for the time being of all cash in hand or deposited with
banks or financial institutions, certificates of deposit, commercial paper and
other marketable debt securities of governments and companies and similar
instruments owned by the Company which are or represent amounts available for
repayment of any borrowing provided that such commercial paper is rated A-1 or
better by S&P and P-1 or better by Moody's and such other marketable debt
securities are so rated or are rated A+ or better by S&P or A-1 or better by
Moody's but excluding cash in hand or deposited, certificates of deposit,
commercial paper and other marketable debt securities and similar instruments
representing borrowings which are deemed not to be borrowings by virtue of the
operation of the provisions of (a) above.
Each of the Company and SmithKline Beecham has agreed that the courts of
England, and the U.S. federal and New York State courts sitting in New York, New
York, are to have non-exclusive jurisdiction in any legal proceeding arising out
of or in connection with the Support Agreement. SmithKline Beecham has
irrevocably submitted to the jurisdiction of such U.S. and New York State
courts, and the Company has irrevocably submitted to the jurisdiction of the
courts of England.
The Support Agreement will be governed by English law.
The Certificate of Designations provides that during any period in which a
Credit Rating Event shall exist, the holders of record of the Shares of all
Series will have the right to elect two additional directors, each of which
shall be entitled to such number of votes on all matters before the Board of
Directors of the Company as shall result in such two additional directors
together having a majority of the total voting power of all directors on the
Board of Directors of the Company; provided, however, that each additional
director shall be entitled to only one vote with respect to matters concerning
the redemption of Shares of any Series or liquidation, dissolution or winding-up
of the Company. See "Description of the Securities -- Voting Rights".
The Support Agreement is not, and should not be deemed to constitute, a
guarantee by SmithKline Beecham of any obligation, liability, or indebtedness of
the Company, including the Shares of any Series. SmithKline Beecham will not, by
virtue of the Support Agreement, have any obligation or liability to any holder
of Shares of any Series. The Support Agreement does not run to, and is not
enforceable directly by, any holder of Shares of any Series. However, the
Support Agreement is enforceable by the Company and, in determining the manner
and extent to which the Support Agreement is to be enforced by the Company, the
Company's Board of Directors will, under currently applicable Delaware law, be
subject to a requirement to act in a manner consistent with their fiduciary
duties to holders of Shares of all Series and to holders of all other shares of
the Company (including the holder or holders of the Company's Common Stock, all
of which is currently held indirectly by SmithKline Beecham).
OTHER SMITHKLINE BEECHAM POLICIES AND COMMITMENTS
SmithKline Beecham has committed not to dispose of any shares of Common
Stock of the Company so long as any Shares are outstanding. In addition,
SmithKline Beecham's policy will be that the Company will have sufficient
earnings and profits to pay dividends on the Shares, and sufficient assets to
perform its obligations in respect of the Shares. This policy does not
constitute a guarantee or other legal obligation, and SmithKline Beecham's sole
legal obligations with respect to the payment of dividends or performance of
other obligations in respect of the Shares are those arising under the
Guarantee.
DESCRIPTION OF OTHER CAPITAL STOCK
The Company is currently authorized by its Certificate of Incorporation to
issue 10,000 shares of Common Stock, no par value, and 50,000 shares of
Preferred Stock. As of June 26, 1996, 2,935.2 shares of Common Stock and 9.719
shares of junior preferred stock, no par value, liquidation preference
$1,000,000 per share (the "Junior Preferred Stock"), were outstanding.
SmithKline Beecham is the indirect holder of all of the outstanding Common Stock
and all of the outstanding Junior Preferred Stock.
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Each share of Common Stock is entitled to one vote on all matters submitted
to a vote of stockholders and is entitled to receive such dividends as may be
paid to the holders of Common Stock when and if declared by the Board of
Directors out of funds legally available therefor. The Common Stock, as well as
the Shares, will have cumulative voting rights. The Common Stock has no
preemptive or similar rights. All outstanding shares of Common Stock are fully
paid and nonassessable. Upon liquidation, dissolution or winding up of the
affairs of the Company, the holders of the Common Stock are entitled to share
pro rata in all assets of the Company remaining available for distribution to
stockholders after payment of all liabilities and provision for the liquidation
of any shares of Preferred Stock at the time outstanding.
The outstanding shares of Junior Preferred Stock are held by SmithKline
Beecham International Co., SmithKline Beecham Corporation and SBCL, Inc., all of
which are members of SmithKline Beecham Group. The outstanding shares of Junior
Preferred Stock of the Company have an aggregate liquidation preference of
$9,719,000 and a fixed cumulative dividend rate of 7 1/8% per annum. The Junior
Preferred Stock has no voting rights and is subordinate in right of payment to
the Shares.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of Shares. The
discussion was prepared by Cleary, Gottlieb, Steen & Hamilton, special U.S.
counsel to the Company, and, to the extent indicated below, records opinions
that counsel will render to the Company prior to the closing. The discussion is
based on laws, regulations, rulings and decisions now in effect, all of which
are subject to change (which change could apply retroactively). The discussion
does not purport to deal with federal income tax consequences applicable to all
investors, some of which may be subject to special rules.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SHARES IN LIGHT
OF THEIR PARTICULAR CIRCUMSTANCES.
Cleary, Gottlieb, Steen & Hamilton will advise the Company that, in its
opinion, the Shares will be treated as stock of the Company for federal income
tax purposes, and that distributions with respect to the Shares (other than
liquidating distributions and distributions in redemption of Shares that are
subject to section 302(b) of the Internal Revenue Code of 1986 (the "Code")) to
the extent made from current or accumulated earnings and profits of the Company,
as determined under federal income tax principles, will constitute dividends for
federal income tax purposes. (As used below, the term "dividends" means
distributions that constitute dividends for federal income tax purposes.) The
discussion below assumes the correctness of the foregoing opinion, which in turn
is based on the assumptions and factual representations by the Company therein
specified. The opinion of counsel is not binding on the IRS or the courts, and
the IRS could take contrary positions, as indicated below.
A holder that is a corporation generally entitled to the corporate
dividends received deduction under section 243(a)(1) of the Code (the "dividends
received deduction") will be allowed that deduction with respect to dividends
received on the Shares, provided that the holder satisfies the minimum holding
period and other requirements applicable to the deduction. Under current law,
the dividends received deduction is equal to 70% of the amount of dividends
received. The federal income tax rate generally applicable to corporations is
35%. Thus, in general, the maximum effective federal income tax rate on
dividends fully qualifying for the dividends received deduction is 10.5%.
Individuals, partnerships, trusts and certain corporations are not eligible for
the dividends received deduction. The Clinton Administration has proposed to
reduce the dividends received deduction from 70% to 50%. It is impossible to
predict whether and in what form this proposal will be enacted into law.
The existence of earnings and profits in an amount sufficient for
distributions on the Shares to be treated as dividends will depend, in part, on
the amount of dividend income that the Company receives from its non-U.S.
subsidiaries. The ability of a particular subsidiary to pay dividends will
depend on factors including the
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subsidiary's financial and tax position and the laws to which the subsidiary is
subject. The Company expects that it will receive an aggregate amount of
dividends from its subsidiaries and interest income from its investment of the
proceeds of the offering that will be sufficient to ensure that distributions on
the Shares constitute dividends for U.S. tax purposes. This expectation is
subject to a number of factors (including, in addition to the considerations
described above, the rate of interest received by the Company on its loans and
the dividend rates in effect from time to time on the Shares), many of which are
beyond the control of the Company.
To the extent, if any, that distributions made by the Company with respect
to the Shares exceed the Company's current and accumulated earnings and profits,
those distributions will not constitute dividends for federal income tax
purposes and, therefore, will not be eligible for the dividends received
deduction. Instead, any such distribution would be treated first as a tax-free
return of capital, and would reduce a holder's basis in its Shares (but not
below zero). This reduction in basis would increase any gain, or reduce any
loss, realized by the holder on the subsequent sale, redemption or other
disposition of its Shares. Distributions in excess of a holder's basis would be
treated as gain from the sale of those Shares. Provided that the Shares are held
as capital assets, gain on the sale of Shares will be capital gain. Thus, the
failure of a distribution to qualify as a dividend would result in an increase
in the maximum federal income tax rate to a corporate holder generally entitled
to the dividends received deduction from 10.5% of such amount to 35%.
Section 246(c) of the Code disallows the dividends received deduction in
its entirety if the Shares with respect to which the dividend is paid are held
by the taxpayer for less than 46 days, excluding any day that is more than 45
days after the ex-dividend date. (A 91-day minimum holding period applies to
certain dividend arrearages.) A holder generally may not count towards these
minimum holding periods any period in which it (a) has the option to sell, is
under a contractual obligation to sell, or has made (and not closed) a short
sale of Shares or substantially identical stock or securities, (b) is the
grantor of an option to buy Shares or substantially identical stock or
securities or (c) otherwise has diminished its risk of loss by holding one or
more other positions with respect to substantially similar or related property.
The regulations provide that a taxpayer has diminished its risk of loss on stock
by holding a position in substantially similar or related property if the
taxpayer is the beneficiary of a guarantee, surety agreement, or similar
arrangement that provides for payments that will substantially offset decreases
in the fair market value of the stock. In addition, section 246(c) of the Code
disallows the dividends received deduction if the recipient of a dividend is
obligated to make related payments with respect to positions in substantially
similar or related property. This disallowance applies even if the minimum
holding period has been met.
Under Clinton Administration proposals, a holder of preferred stock would
be entitled to the dividends received deduction only if it satisfied the minimum
holding period requirements described above by reference to the period
immediately surrounding each dividend payment date. It is impossible to predict
whether and in what form this proposal will be enacted into law.
There are no regulations, published rulings or judicial decisions involving
the characterization for federal income tax purposes of securities with terms
substantially the same as the Shares. Although the IRS determined in a 1990
revenue ruling that holders of auction rate preferred stock could qualify for
the dividends received deduction, the Shares will differ in some respects from
the instruments described in that ruling. Accordingly, the IRS could assert a
contrary position with respect to the tax consequences described above. In the
opinion of the Company's counsel, however, the IRS would be unlikely to prevail
if it asserted such a position in a proceeding in which the issues were properly
presented.
Prospective investors should also consider the effect of section 246A of
the Code, which reduces the dividends received deduction allowed with respect to
"debt-financed portfolio stock", and the potential implications of the corporate
alternative minimum tax. Among the items of tax preference included in the
income base to which this tax applies is 75% of the excess of the corporation's
adjusted current earnings (subject to certain adjustments) over its alternative
minimum taxable income (computed without regard to this provision and the
alternative minimum tax net operating loss). Thus, a corporate holder's
alternative minimum tax base would, in the absence of any offsetting
adjustments, include 75% of the dividends received
68
<PAGE> 70
deduction. Investors should consult their own tax advisers in determining the
application of these rules in light of their particular circumstances.
In addition to federal income taxes, holders may be liable for state and
local income taxes with respect to Shares. States and municipalities may not
allow any deduction analogous to the dividends received deduction. Investors
should consult their own tax advisers in determining the state and local income
tax consequences to them of the purchase, ownership and disposition of Shares.
PLAN OF DISTRIBUTION
The Company may sell the Shares to one or more underwriters for public
offering and sale by them or may sell the Shares to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
the Shares will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Shares at a fixed price or prices,
which may be changed, at prices related to the prevailing market prices at the
time of sale or at negotiated prices. The Company also may, from time to time,
authorize underwriters acting as the Company's agents to offer and sell the
Shares upon the terms and conditions as are set forth in the applicable
Prospectus Supplement. In connection with the sale of Shares, underwriters may
be deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Shares for whom they may act as agent. Underwriters may sell
Shares to or through dealers, and such dealers may receive compensation in the
form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Shares, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Shares may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Shares may be deemed to be underwriting
discounts and commissions, under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company and SmithKline Beecham, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Shares of each Series offered hereby will be passed on
for the Company by Cleary, Gottlieb, Steen & Hamilton, New York, New York,
special U.S. counsel for the Company and SmithKline Beecham, and for the
Underwriters by Brown & Wood, New York, New York. Certain matters of English law
will be passed on for SmithKline Beecham by Linklaters & Paines, English
solicitors for SmithKline Beecham. Cleary, Gottlieb, Steen & Hamilton and Brown
& Wood may rely upon Linklaters & Paines as to matters of English law.
69
<PAGE> 71
EXPERTS
The consolidated balance sheets of SmithKline Beecham as of December 31,
1995 and 1994 and the consolidated statements of income, retained earnings, and
cash flows for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand (London) and Price Waterhouse
(London), independent accountants, given on the authority of those firms as
experts in accounting and auditing.
The combined balance sheets of the Company as of December 31, 1995 and 1994
and the combined statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1995, included in
this Prospectus, have been included herein in reliance on the report of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
70
<PAGE> 72
GLOSSARY
<TABLE>
<CAPTION>
DEFINED TERM PAGE ON WHICH TERM IS DEFINED
- ------------------------------------------------------------------- -----------------------------
<S> <C>
"AA" Composite Commercial Paper Rate............................... 56
Adjusted Distributable Reserves.................................... 63
Agent Member....................................................... 40
Alternate Treasury Bill Rate....................................... 56
Alternate Treasury Bond Rate....................................... 57
Alternate Treasury Note Rate....................................... 57
Applicable Rate.................................................... 44
Auction............................................................ Cover, 53
Auction Agent...................................................... 54
Auction Agent Agreement............................................ 53
Auction Date....................................................... 54
Auction Procedures................................................. 53
Available Shares................................................... 59
Bid................................................................ 10, 55
Bidder............................................................. 55
Broker-Dealers..................................................... 54
Broker-Dealer Agreements........................................... 54
Business Day....................................................... 54
Capital Increase................................................... 65
Cede............................................................... 40
Certificate of Designations........................................ 40
Change of Control.................................................. 9, 47
Commercial Paper Dealers........................................... 56
Common Stock....................................................... Cover
Date of Original Issue............................................. Cover, 42
Debt............................................................... 65
Debt Limitation Provision.......................................... 11, 41
Default Directors.................................................. 12
Default Period..................................................... 12
Distributable Reserves............................................. 63
Dividend Non-Payment Period........................................ 45
Dividend Payment Date.............................................. 42
Dividend Period.................................................... 6
Dividend Period Days............................................... 42
Dividends Received Percentage...................................... 8, 46
Downgrade Director................................................. 13, 51
Downgrade Period................................................... 12, 51
Downgrade Voting Parity Shares..................................... 12, 51
DRD Formula........................................................ 8, 47
DRD Gross-Up Provision............................................. 9, 47
DRP................................................................ 8, 47
DTC................................................................ 40
Existing Holder.................................................... 10, 53, 54
Equity............................................................. 65
Guarantee.......................................................... Cover
Hold Order......................................................... 10, 55
Initial Dividend Payment Date...................................... 42
Initial Dividend Period............................................ Cover
Initial Dividend Rate.............................................. 44
Interest Equivalent................................................ 56
</TABLE>
71
<PAGE> 73
<TABLE>
<CAPTION>
DEFINED TERM PAGE ON WHICH TERM IS DEFINED
- ------------------------------------------------------------------- -----------------------------
<S> <C>
Stock..................66Loan Guarantee Provision.................. 11, 41
Mandatory Redemption Upon Change of Control Provision.............. 9, 47
Maximum Applicable Rate............................................ 7
Minimum Holding Period............................................. 42
Moody's............................................................ 11
Non-Call Period.................................................... 44
Non-Payment Period................................................. 46
Non-Payment Period Rate............................................ 45
Noon Buying Rate................................................... 3
Notice of Offer to Purchase........................................ 9
Notice of Redemption............................................... 48
Order.............................................................. 55
Parity Preferred................................................... 43
Period-End Dividend Payment Date................................... 7, 42
Potential Holder................................................... 10, 55
Preferred Share Dividend Guarantees................................ 63
Preferred Share Dividend Support Agreements........................ 63
Preferred Stock.................................................... 40
Preferred Stock Limitation Provision............................... 11, 41
Redemption Non-Payment Period...................................... 46
Reference Rate..................................................... 56
Regular Dividend Period............................................ 44
Repurchase Upon Change of Control Provision........................ 9
S&P................................................................ 11
Securities Depository.............................................. 54
Sell Order......................................................... 10, 55
Series............................................................. Cover
Shares............................................................. Cover, 10, 54
Special Dividend Period............................................ 44
Special Dividend Period Notice..................................... 44
Sterling Equivalent................................................ 63
Submission Deadline................................................ 58
Submitted Bid...................................................... 58
Submitted Hold Order............................................... 58
Submitted Order.................................................... 58
Submitted Sell Order............................................... 58
Subsequent Dividend Period......................................... 6
Substitute Rating Agency........................................... 57
Sufficient Clearing Bids........................................... 59
Support Agreement.................................................. 5
U.K. Tax........................................................... 64
U.S. Treasury Bill Rate............................................ 56
U.S. Treasury Bond Rate............................................ 57
U.S. Treasury Note Rate............................................ 57
Winning Bid Rate................................................... 59
Written-Down Amount................................................ 64
</TABLE>
72
<PAGE> 74
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
------------------------
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Report of Independent Accountants............................................... F-2
Combined Balance Sheets as of December 31, 1994 and 1995 and as of March 31,
1996 (unaudited).............................................................. F-3
Combined Statements of Operations for the years ended December 31, 1993, 1994
and 1995, and for the three months ended March 31, 1995 and 1996
(unaudited)................................................................... F-4
Combined Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995 and for the three months ended March 31, 1995 and 1996 (unaudited)... F-5
Combined Statements of Shareholders' Equity for the years ended December 31,
1993, 1994 and 1995 and for the three months ended March 31, 1996
(unaudited)................................................................... F-6
Notes to Combined Financial Statements.......................................... F-7 to F-17
</TABLE>
F-1
<PAGE> 75
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of SmithKline Beecham Holdings Corporation
We have audited the accompanying combined balance sheets of the predecessor
companies to SmithKline Beecham Holdings Corporation (collectively, the Company,
as described in Note 1) as of December 31, 1995 and 1994, and the related
combined statements of operations, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Company as of
December 31, 1995 and 1994, and the combined results of their operations and
their combined cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
May 22, 1996, except for
the second paragraph of Note 14,
as to which the date is June 20, 1996.
F-2
<PAGE> 76
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
COMBINED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------- -----------
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 45 $ 120 $ 100
Trade receivables (net of allowance for doubtful accounts of
$14, $12 and $11, respectively).......................... 264 252 218
Inventories................................................. 175 195 177
Receivables from affiliates................................. 113 84 75
Loans receivable from affiliates............................ 373 1,144 799
Other current assets........................................ 47 55 49
------ ------ ------
Total current assets................................ 1,017 1,850 1,418
Property, plant and equipment, net............................ 251 190 183
Investments in affiliates..................................... 151 144 144
Deferred income taxes......................................... 3 15 15
Goodwill...................................................... 421 409 407
Other assets.................................................. 10 7 1
------ ------ ------
Total assets........................................ $1,853 $2,615 $ 2,168
====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 61 $ 65 $ 68
Payables to affiliates...................................... 130 105 86
Loans payable to affiliates................................. 108 468 68
Accrued payroll and payroll taxes........................... 64 66 66
Income taxes payable........................................ 51 62 51
Accrued restructuring....................................... -- 35 34
Other current liabilities................................... 86 116 92
------ ------ ------
Total current liabilities........................... 500 917 465
Minority interests............................................ 160 188 192
Deferred income taxes......................................... 11 7 7
Other liabilities............................................. 60 70 59
------ ------ ------
Total liabilities................................... 731 1,182 723
------ ------ ------
Commitments and contingent liabilities
Shareholders' equity:
Cumulative foreign currency translation adjustment.......... (30) 23 3
SmithKline Beecham equity................................... 1,152 1,410 1,442
------ ------ ------
Total shareholders' equity.......................... 1,122 1,433 1,445
------ ------ ------
Total liabilities and shareholders' equity.......... $1,853 $2,615 $ 2,168
====== ====== ======
</TABLE>
See accompanying notes.
F-3
<PAGE> 77
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ---------------
1993 1994 1995 1995 1996
------ ------ ------ ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales........................................ $1,281 $1,490 $1,698 $418 $389
Operating costs and expenses:
Cost of sales.................................. 629 783 867 219 199
Marketing, administrative and general.......... 412 449 531 122 117
Research and development....................... 16 18 22 5 6
Restructuring.................................. -- -- 60 60 --
------ ------ ------ ---- ----
Operating income................................. 224 240 218 12 67
Non-operating income (expense):
Interest expense............................... (19) (13) (3) (1) (1)
Interest income................................ 33 20 33 7 6
Minority interests............................. (42) (45) (45) (6) (9)
Equity in net income of affiliates............. 20 9 21 9 4
Other, net..................................... (5) 19 (5) (1) (36)
------ ------ ------ ---- ----
Income before income taxes....................... 211 230 219 20 31
Provision for income taxes....................... 61 81 109 10 12
------ ------ ------ ---- ----
Net income....................................... $ 150 $ 149 $ 110 $ 10 $ 19
====== ====== ====== ==== ====
</TABLE>
See accompanying notes.
F-4
<PAGE> 78
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating activities:
Net income........................................ $ 150 $ 149 $ 110 $ 10 $ 19
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 31 34 36 9 9
Gain on sale of fixed assets.................... -- (16) (5) -- --
Minority interests.............................. 42 45 45 6 9
Equity in net income of affiliates.............. (20) (9) (21) (9) (4)
Changes in assets and liabilities:
(Increase) decrease in trade receivables... (3) (45) 27 19 31
Decrease (increase) in receivables
from/payables to affiliates............. 30 (63) (1) (123) (8)
(Increase) decrease in inventories......... (17) (30) (20) 2 16
(Increase) decrease in other assets........ 10 (13) (4) (1) 13
(Increase) decrease in accounts payable,
other liabilities and income taxes...... (81) 47 60 37 (39)
----- ----- ----- ----- ----
Net cash (used in) provided by operating
activities...................................... 142 99 227 (50) 46
----- ----- ----- ----- ----
Cash flows (used in) provided by investing
activities:
Capital expenditures.............................. (55) (54) (26) (20) (3)
Proceeds from sale of fixed assets................ 10 41 86 80 2
----- ----- ----- ----- ----
Net cash (used in) provided by investing
activities...................................... (45) (13) 60 60 (1)
----- ----- ----- ----- ----
Cash flows (used in) provided by financing
activities:
(Increase) in intercompany loans.................. (83) (117) (411) (65) (62)
Net capitalization (to) from parent............... (26) 33 184 111 12
----- ----- ----- ----- ----
Net cash (used in) provided by financing
activities...................................... (109) (84) (227) 46 (50)
----- ----- ----- ----- ----
Effect of exchange rate changes on cash........... (3) 1 15 3 (15)
----- ----- ----- ----- ----
Change in cash and cash equivalents............... (15) 3 75 59 (20)
Cash and cash equivalents -- beginning of
period.......................................... 57 42 45 45 120
----- ----- ----- ----- ----
Cash and cash equivalents -- end of period........ $ 42 $ 45 $ 120 $ 104 $100
===== ===== ===== ===== ====
Supplemental cash flow information:
Cash paid for:
Income taxes................................. $ 69 $ 62 $ 118 $ 11 $ 25
Interest..................................... $ 18 $ 12 $ 3 $ 1 $ 1
</TABLE>
See accompanying notes.
F-5
<PAGE> 79
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN CURRENCY SMITHKLINE TOTAL
TRANSLATION BEECHAM SHAREHOLDERS'
ADJUSTMENT EQUITY EQUITY
---------------- ---------- -------------
<S> <C> <C> <C>
Balance at December 31, 1992......................... $(47) $ 838 $ 791
Translation adjustments.............................. (25) -- (25)
Net income........................................... -- 150 150
Net transfers to affiliates.......................... -- (22) (22)
---- ------ ------
Balance at December 31, 1993......................... (72) 966 894
Translation adjustments.............................. 42 -- 42
Net income........................................... -- 149 149
Net transfers from affiliates........................ -- 37 37
---- ------ ------
Balance at December 31, 1994......................... (30) 1,152 1,122
Translation adjustments.............................. 53 -- 53
Net income........................................... -- 110 110
Net transfers from affiliates........................ -- 148 148
---- ------ ------
Balance at December 31, 1995......................... 23 1,410 1,433
Translation adjustments (unaudited).................. (20) -- (20)
Net income (unaudited)............................... -- 19 19
Net transfers from affiliates (unaudited)............ -- 13 13
---- ------ ------
Balance at March 31, 1996 (unaudited)................ $ 3 $1,442 $ 1,445
==== ====== ======
</TABLE>
See accompanying notes.
F-6
<PAGE> 80
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(ALL AMOUNTS SHOWN IN MILLIONS EXCEPT SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
In May 1996, SmithKline Beecham Holdings Corporation was formed with the
intent of holding the stock of certain indirectly owned subsidiaries of
SmithKline Beecham plc ("SmithKline Beecham") and its affiliates (collectively,
"SmithKline Beecham Group") in consideration for all of the common and junior
preferred shares of the Company. SmithKline Beecham is a public limited company
incorporated in 1989 under the laws of England.
The combined financial statements include the accounts of the following
SmithKline Beecham affiliates and their related subsidiaries:
Penn Chemicals Ltd
SmithKline Beecham Consumer Healthcare K.K.
SmithKline Beecham Animal Health, Inc.
Franklin Chemicals Limited
Smith Kline & French of Pakistan Ltd
Smith Kline & French B.V.
SmithKline Beecham International Ltd
SmithKline Beecham Laboratories (Australia) Ltd
Walnut Insurance Company Ltd
SmithKline Beecham Holdings S.A.
SmithKline Beecham Corporation (Panama)
Smith Kline & French Portugesa Productos Farmaceuticos Ltd
Compagnie Industrielle De Specialites S.A.
SmithKline Beecham Animal Health Ltd
Eskaylab Holdings Ltd
SBCL Holdings Ltd
Smith Kline & French (Far East) Co.
The combined entity as described above is referred to as the Company in the
accompanying combined financial statements.
This basis of presentation reflects the financial position, results of
operations and cash flows of the Company, including certain adjustments to
recognize certain SmithKline Beecham corporate expenses so as to reflect the
financial statements on the historical cost basis of SmithKline Beecham. Also,
certain transactions with SmithKline Beecham as well as the transfer of net
assets of SmithKline Beecham affiliates to and from the Company have been
reflected in the Company's equity.
All financial information at dates and for periods prior to the transfer of
ownership was prepared as if the Company had existed and operated as a separate
business. All significant intercompany accounts and transactions within the
Company have been eliminated. Such financial information reflects operating
expenses incurred by SmithKline Beecham that are specifically identifiable to
the Company and certain corporate overhead allocations which management believes
represents the amounts that would have been incurred by the Company on a stand
alone basis.
The Company had no significant third party borrowings and there has been no
allocation of SmithKline Beecham's borrowings and related interest expense.
Amounts included in the combined balance sheet as receivables or payables to
affiliates relate to amounts receivable or payable from various SmithKline
Beecham entities (which are not among the entities that comprise the Company)
for transactions entered into during the normal course of business.
F-7
<PAGE> 81
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's principal activities are the manufacture and marketing of
pharmaceuticals and over-the-counter ("OTC") medicines and health-related
consumer products operating in two principal industry segments of
pharmaceuticals and consumer healthcare. In addition, the company participates
in related party lending activity. Its principal markets are France, Brazil,
Japan, Belgium, Austria, Switzerland and Ireland, which together accounted for
66%, 63%, and 73% of sales for 1993, 1994, and 1995 respectively. Since the
operations of the Company are conducted in international markets, the combined
financial results of the Company are subject to exchange rate fluctuations
involving the United States dollar and a number of foreign currencies. The
Company operation's are fully integrated with those of SmithKline Beecham Group
and its overall performance is largely dependent upon the performance of other
units of SmithKline Beecham Group. Moreover, the Company is dependent upon
SmithKline Beecham with respect to new product development, the addition of new
products to the Company's product line and the expansion of the Company's
marketing and distribution activities.
The financial statements conform with generally accepted accounting
principles. Preparation under these principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Interim Financial Information
In management's opinion, all adjustments (consisting of normal recurring
accruals, except for the restructuring accrual in 1995) necessary for a fair
presentation are reflected in the interim financial statements as of and for the
three month periods ended March 31, 1995 and 1996. These financial statements
have not been audited or reviewed by an independent accountant. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission.
Foreign Currency Translation
The functional currency for substantially all of the Company's foreign
operations is the applicable local currency. The translation from the applicable
foreign currencies to U.S. dollars is performed for balance sheet accounts using
the rates of exchange at the balance sheet date and for revenue and expense
accounts using average rates of exchange for the period. The resulting
translation adjustments are accumulated as a separate component of shareholders'
equity.
The financial statements of foreign subsidiaries located in highly
inflationary economies are remeasured as if the functional currency were the
U.S. dollar. Adjustments resulting from the remeasurement of these entities are
included in the results of operations. Net exchange losses (gains) in 1993, 1994
and 1995, resulting from foreign currency transactions were $15, $24 and $(20),
respectively (including $24, $30 and $2 of translation losses related to
subsidiaries located in highly inflationary economies) and are included in
operating income. Transaction losses on intercompany loans were $34 for the
three months ended March 31, 1996.
Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates its
recorded value.
F-8
<PAGE> 82
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Cash and Cash Equivalents
Cash and cash equivalents are considered to be all highly liquid
investments that have maturities of three months or less. The carrying amount of
cash and cash equivalents is a reasonable estimate of the fair value at December
31, 1994 and 1995.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
by the average cost and first-in, first-out methodologies.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and include interest on
funds borrowed to finance construction. The cost of additions and improvements
are capitalized, while maintenance and repairs are expensed as incurred.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets. Useful lives are estimated to be 20-50 years for buildings
and 2-20 years for machinery and equipment.
Investments in Affiliates
Investments in common stock of companies which are 20-50% owned by the
Company are accounted for using the equity method of accounting. Investments in
common stock of companies that are less than 20% owned by the Company for which
the remaining shares are owned by SmithKline Beecham or its other subsidiaries
are also accounted for using the equity method of accounting as they are
considered to be under common control. All other investments are accounted for
using the cost method.
Goodwill
Goodwill represents the excess of acquisition costs over the fair value of
net assets of purchased businesses and is amortized using the straight-line
method over 40 years.
In 1989, Beecham Group plc purchased SmithKline Beckman. The Company has
reflected goodwill of $400 related to the former operations of SmithKline
Beckman included in its financial statements. Management has included such
amount based on its evaluation of the respective businesses at the time of the
acquisition. Management's estimate of the allocated goodwill was based on a
number of factors primarily the proportion of the Company's sales of SmithKline
Beckman products to SmithKline Beecham sales of SmithKline Beckman products.
Recoverability of goodwill is evaluated based primarily on undiscounted cash
flows from operations.
Income Taxes
Income taxes were determined on a separate company basis in the combined
financial statements and reflect the application of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, for all periods
presented.
Withholding and U.S. income taxes have not been provided on unremitted
earnings of certain subsidiaries because management believes such earnings will
be indefinitely reinvested in operations.
(2) ACQUISITIONS
In October 1994 SmithKline Beecham purchased Sterling Winthrop Inc.
("Sterling") for cash and recorded goodwill arising from the acquisition. The
Company includes Sydney Ross S.A., a Sterling entity
F-9
<PAGE> 83
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
located in Brazil. No pro forma financial information is presented as the impact
on results of operations and financial position is insignificant.
(3) RELATED PARTY TRANSACTIONS
The Company is indirectly wholly owned by SmithKline Beecham and its
operations are integrated with SmithKline Beecham's other operations on a
worldwide basis.
The Company is involved in various transactions with SmithKline Beecham
affiliates as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Royalties paid to SmithKline Beecham affiliates............... $ 65 $ 67 $ 75
Royalties received from SmithKline Beecham affiliates......... $ 7 $ 11 $ 18
Sales to SmithKline Beecham affiliates........................ $350 $437 $318
Cost of sales to SmithKline Beecham affiliates................ $218 $302 $222
Purchases of raw materials and finished goods from SmithKline
Beecham affiliates.......................................... $358 $486 $589
Interest income attributable to SmithKline Beecham
affiliates.................................................. $ 30 $ 18 $ 33
Interest expense attributable to SmithKline Beecham
affiliates.................................................. $ 18 $ 12 $ 2
</TABLE>
The Company and SmithKline Beecham have entered into a number of supply and
license agreements, which are subject to termination on notice of 30 to 180
days.
(4) INVESTMENTS IN AFFILIATES
Upon the transfer of ownership described in Note 1, the Company will own
shares of the common and preferred stock of various affiliated entities. The
Company's preferred stock investments include a 50% voting interest in
SmithKline Beecham Biologicals S.A. ("SB Biologicals S.A".), a Belgian
affiliate. Investments in the preferred stock of affiliates are shown at cost in
the balance sheet. The following table provides information on the Company's
investments accounted for by the equity method. Ownership percentages represent
the Company's ownership of the common stock of the investee.
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996
----------------------- ----------------------- -----------------------
OWNERSHIP INVESTMENT OWNERSHIP INVESTMENT OWNERSHIP INVESTMENT
PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT
---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
SmithKline and French Laboratories
Ltd. ............................ 4.40% $ 99 4.40% $ 72 4.40% $ 71
SmithKline Beecham Overseas (No. 2)
Ltd. ............................ 40.00% 30 40.00% 33 40.00% 34
SmithKline Beecham Seiyaku K.K. ... 12.28% 18 12.28% 19 12.28% 18
---- ---- ----
$147 $124 $123
==== ==== ====
</TABLE>
F-10
<PAGE> 84
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized financial information for the Company's equity investees and
their wholly and majority owned subsidiaries is shown below on a 100 percent
basis.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET:
Current assets........................................ $2,907 $2,386 $ 2,393
Noncurrent assets..................................... 328 358 318
------ ------ ------
Total assets........................................ $3,235 $2,744 $ 2,711
====== ====== ======
Current liabilities................................... $ 758 $ 868 $ 862
Noncurrent liabilities................................ 6 2 3
------ ------ ------
Total liabilities................................... $ 764 $ 870 $ 865
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ---------------
1993 1994 1995 1995 1996
------ ------ ------ ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales................................ $1,241 $1,233 $1,253 $294 $279
Operating income......................... 386 324 395 151 35
Income before income taxes............... 661 363 572 206 72
Net income............................... 489 195 386 196 64
</TABLE>
(5) FOREIGN FINANCIAL INSTRUMENTS AND INVESTMENT
The Company's foreign subsidiaries enter into foreign exchange contracts
with related parties to hedge against fluctuating exchange rates for certain
transactions (such as export sales, raw material purchases, and short term
intercompany financing) denominated in a currency other than their local
currency, primarily British Pound (BP), French Franc (FF), Belgian Franc (BF),
Irish Punt (IP) and Singapore Dollar (SD). At December 31, 1994 and 1995, the
Company had contracts outstanding totaling $135 and $648, respectively, which
mature primarily over a twelve-month period. Gains and losses on currency
transactions in other than the functional currency are included in income when
incurred. Cash flows from these contracts are classified in the same category as
the hedged transactions. The Company estimates the aggregate contract value to
be representative of the fair value of these instruments.
The company's principal foreign currency net investment exposures are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996
---------------------- ---------------------- ----------------------
LOCAL U.S. DOLLAR LOCAL U.S. DOLLAR LOCAL U.S. DOLLAR
CURRENCY EQUIVALENT CURRENCY EQUIVALENT CURRENCY EQUIVALENT
-------- ----------- -------- ----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
France.................... FF 1,630 $ 304 FF 1,988 $ 406 FF 2,009 $ 401
United Kingdom............ BP 85 $ 133 BP 67 $ 108 BP 70 $ 108
Switzerland............... SF 88 $ 67 SF 90 $ 78 SF 89 $ 75
Japan..................... JY 6,692 $ 67 JY 6,026 $ 59 JY 6,013 $ 56
Ireland................... IP 73 $ 112 IP 29 $ 46 IP 26 $ 41
Belgium................... BF 2,910 $ 91 BF 1,187 $ 40 BF 1,124 $ 37
Brazil.................... BR 36 $ 42 BR 42 $ 44 BR 49 $ 49
Singapore................. SD 80 $ 54 SD 60 $ 43 SD 56 $ 40
</TABLE>
F-11
<PAGE> 85
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INVENTORIES
Inventories consist of the following and are shown net of total inventory
reserves of $8, $9 and $8 at December 31, 1994 and 1995, and March 31, 1996,
respectively:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Finished products........................................ $ 77 $ 93 $ 89
Work in process.......................................... 45 35 39
Raw materials and supplies............................... 53 67 49
---- ---- ----
$175 $195 $ 177
==== ==== ====
</TABLE>
(7) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land..................................................... $ 8 $ 8 $ 8
Buildings................................................ 101 95 95
Machinery and equipment.................................. 344 274 274
---- ---- ----
453 377 377
Less: accumulated depreciation........................... (202) (187) (194)
---- ---- ----
$251 $190 $ 183
==== ==== ====
</TABLE>
During 1995, in addition to other fixed asset sales, the Company sold fixed
assets with a book value of $74 to an affiliated entity for an amount that
approximated cost. Depreciation expense for the Company was approximately $19 in
1993, $23 in 1994, $23 in 1995 and $6 during the three month periods ended March
31, 1995 and 1996.
(8) GOODWILL
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill at cost......................................... $482 $483 $ 482
Less: accumulated amortization........................... (61) (74) (75)
---- ---- ----
$421 $409 $ 407
==== ==== ====
</TABLE>
Amortization expense was $12 in 1993, $11 in 1994 and $13 in 1995 and $2
during the three month period ended March 31, 1995 and 1996.
F-12
<PAGE> 86
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(9) INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS
31, ENDED MARCH 31,
-------------------- ---------------
1993 1994 1995 1995 1996
--- --- ---- --- ---
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Total current non-U.S. tax expense.............. $66 $76 $124 $10 $12
Total deferred non-U.S. tax expense............. (5) 5 (15) -- --
--- --- ---- --- ---
$61 $81 $109 $10 $12
=== === ==== === ===
</TABLE>
The reconciliation between the U.S. federal statutory income tax rate and
the Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS
31, ENDED MARCH 31,
---------------------- ---------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
U.S. federal statutory income tax rate...... 35.0% 35.0% 35.0% 35.0% 35.0%
Tax exempt foreign income................... 2.6 (.3) 1.8 1.8 (1.2)
Tax rate differential....................... (6.1) (5.3) 2.3 2.3 (0.6)
Minority interest........................... 5.0 7.6 6.9 6.9 6.9
Net operating losses........................ (2.6) (2.4) -- -- --
Equity income in affiliates................. (3.1) (1.3) (3.1) (3.1) (3.1)
Incentive credits........................... -- (1.3) (.3) (.3) (.3)
French exceptional surcharge tax............ -- -- 2.1 2.1 --
Other....................................... (1.9) 3.2 5.1 5.1 2.0
---- ---- ---- ---- ----
28.9% 35.2% 49.8% 49.8% 38.7%
==== ==== ==== ==== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The following is a
summary of the significant components of the Company's deferred tax assets and
liabilities:
<TABLE>
<CAPTION>
DECEMBER 31,
------------ MARCH 31,
1994 1995 1996
---- --- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating losses.................................... $ 10 $ 7 $ 7
Restructuring........................................... -- 6 6
Other accrued liabilities............................... 3 9 9
---- --- ---
13 22 22
Valuation allowance..................................... (10) (7) (7)
---- --- ---
3 15 15
Deferred tax liabilities:
Depreciation............................................ (11) (7) (7)
---- --- ---
Net deferred income tax asset (liability)................. $ (8) $ 8 $ 8
==== === ===
</TABLE>
F-13
<PAGE> 87
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(10) RETIREMENT PLANS
In accordance with local country practices, the Company contributes to
statutory retirement programs as required by law. Where retirement benefits are
not provided by the law, the Company may operate various types of retirement
plans, which include defined benefit plans. Contributions to the defined benefit
plans are determined in accordance with independent actuarial advice mainly
using the projected unit credit method. Assumptions used in actuarial
calculations vary by country and are based on local economic conditions. The
assets of the Company sponsored plans are generally held in separately
administered trusts or are insured. Retirement plan assets are managed by
independent professional investment managers. It is the Company's policy that
none of the assets of the funds are invested directly or indirectly in any
affiliated company. The Company's retirement plan assets and projected benefit
obligation are not material to the Company's financial position.
Total retirement plan expense for the Company was $1, $1, and $2 in 1993,
1994, and 1995, respectively. The total liability recorded for pension costs at
December 31, 1994 and 1995 was $9 and $11, respectively.
(11) COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases certain facilities, equipment and automobiles. Certain
of the leases provide for the payment of taxes, insurance and other charges by
the lessee. Rental expense was $13, $12 and $11 in 1993, 1994 and 1995,
respectively. Future minimum rental payments required under non-cancelable
operating leases that have initial or remaining terms of more than one year as
of December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996................................................................... $ 9
1997................................................................... 7
1998................................................................... 6
1999................................................................... 5
2000 and thereafter.................................................... 17
---
Total minimum lease payments........................................... $44
===
</TABLE>
At December 31, 1995 the Company has approximately $62 in letters of credit
outstanding with the Toronto Dominion Bank. The letters are required by Canadian
taxation authorities with respect to pending litigation. The letters are
unconditionally guaranteed by SmithKline Beecham Corporation, a wholly owned
subsidiary of SmithKline Beecham. The company is required to pay a commitment
fee to the bank of .25% per annum. In the opinion of management, any liabilities
related to the pending tax litigation, in excess of those reflected in the
financial statements, would not be material to the Company's combined financial
position at December 31, 1995.
The Company believes that it is in compliance with all environmental laws
and regulations in the various countries of operation. The Company incurs
routine annual costs aimed at ensuring continued compliance, which were $5 in
1995, with similar amounts expensed in 1993 and 1994. In addition, the Company
makes annual capital expenditures to install or improve waste treatment
processes as considered necessary. Such expenditures in 1995 were $3, which also
approximates expenditures for 1993 and 1994.
The Company is involved in various legal and administrative proceedings
related to its business. Although the outcome of claims, legal proceedings and
other matters in which the Company is involved cannot be predicted with any
certainty, management does not expect the Company's ultimate liability for such
matters to have a material adverse effect on its financial condition.
F-14
<PAGE> 88
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(12) BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
Financial information about the Company's business segments is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Net sales:
Pharmaceuticals........................................ $1,106 $1,285 $1,445
Consumer Healthcare.................................... 175 205 253
------ ------ ------
Total.......................................... $1,281 $1,490 $1,698
====== ====== ======
Operating income:
Pharmaceuticals........................................ $ 222 $ 225 $ 201
Consumer Healthcare.................................... 2 15 17
------ ------ ------
Total.......................................... $ 224 $ 240 $ 218
====== ====== ======
Identifiable assets at December 31:
Pharmaceuticals........................................ $1,505 $1,623 $2,456
Consumer Healthcare.................................... 127 230 159
------ ------ ------
Total.......................................... $1,632 $1,853 $2,615
====== ====== ======
Capital expenditures:
Pharmaceuticals........................................ $ 51 $ 52 $ 25
Consumer Healthcare.................................... 4 2 1
------ ------ ------
Total.......................................... $ 55 $ 54 $ 26
====== ====== ======
Depreciation:
Pharmaceuticals........................................ $ 17 $ 20 $ 21
Consumer Healthcare.................................... 2 3 2
------ ------ ------
Total.......................................... $ 19 $ 23 $ 23
====== ====== ======
</TABLE>
F-15
<PAGE> 89
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Financial information about the Company's continuing operations in
different geographic areas is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Net sales to customers:
Europe................................................. $ 806 $1,064 $1,128
Latin America.......................................... 136 153 235
Asia................................................... 170 119 156
Rest of the world...................................... 169 154 179
------ ------ ------
Total.......................................... $1,281 $1,490 $1,698
====== ====== ======
Operating income:
Europe................................................. $ 157 $ 158 $ 112
Latin America.......................................... 9 27 50
Asia................................................... 24 20 23
Rest of the world...................................... 34 35 33
------ ------ ------
Total.......................................... $ 224 $ 240 $ 218
====== ====== ======
Identifiable assets at December 31:
Europe................................................. $1,329 $1,447 $2,146
Latin America.......................................... 30 135 187
Asia................................................... 173 194 207
Rest of the world...................................... 100 77 75
------ ------ ------
Total.......................................... $1,632 $1,853 $2,615
====== ====== ======
</TABLE>
(13) RESTRUCTURING
In the first quarter of 1995, the Company recorded a restructuring charge
of $60. This relates principally to the reorganization of the Company's supply
chain in Singapore ($30), the integration of Consumer Healthcare operations
($25), and the creation of shared services across all business operations in
finance, information resources, human resources and purchasing ($5).
The major components of the restructuring charges are $37 of employee
separation costs and $16 of non-cash charges to dispose of certain assets
through sale or abandonment. Through the year ended December 31, 1995 $25 of
restructuring charges were incurred, which included $22 of employee separation
costs and $1 of non-cash charges to dispose of assets.
The restructuring plan is expected to result in the termination of
approximately 475 employees. The reduction through December 31, 1995 was 222
employees.
(14) REORGANIZATION
In May 1996, the Company's directors authorized the Company to file a
registration statement with the Securities and Exchange Commission in connection
with an initial public offering of Flexible Auction Market Preferred Stock
(AMPS) and Flexible Money Market Cumulative Preferred Stock (MMPS). Both the
AMPS and MMPS have a non-call feature and the certificate of designation of
their shares will provide that the Company may not put itself into liquidation
without the prior approval of two-thirds of the holders of each Series.
F-16
<PAGE> 90
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
On June 20, 1996, the Company entered into a share exchange agreement with
SmithKline Beecham International Co., SmithKline Beecham Corporation and SBCL,
Inc. (the Transferors). Under this agreement, the Transferors shall record or
otherwise give legal effect to the transfer to SmithKline Beecham Holdings
Corporation shares of capital stock of specified subsidiaries (Subsidiary
Shares) with effect from the date of the agreement. As consideration for the
transfer of Subsidiary Shares, the Company shall issue to each of the
Transferors shares of its common stock (10,000 shares authorized, 2,935.2 shares
issued) and junior preferred stock (10 shares authorized, 9.719 shares issued).
F-17
<PAGE> 91
APPENDIX A
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
will be incorporated by reference in the Auction Agent Agreement and each
Broker-Dealer Agreement. Nothing contained in this Appendix A constitutes a
representation by the Company that in each Auction each party referred to herein
actually will perform the procedures described herein to be performed by such
party. Capitalized terms used herein shall have the respective meanings
specified in the glossary of this Prospectus or Appendix B hereto, as the case
may be.
I. On each Auction Date, the Auction Agent shall notify by telephone or
through the Auction Agent's Auction Processing System the Broker-Dealers that
participated in the Auction held on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of:
(A) the Applicable Rate fixed for the next succeeding Dividend Period;
(B) whether Sufficient Clearing Bids existed for the determination of
the Applicable Rate;
(C) if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a Bid
or a Sell Order on behalf of an Existing Holder, the number of Shares, if
any, to be sold by such Existing Holder;
(D) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid
on behalf of a Potential Holder, the number of Shares, if any, to be
purchased by such Potential Holder;
(E) if the aggregate number of Shares to be sold by all Existing
Holder on whose behalf such Broker-Dealer submitted a Bid or a Sell Order
exceeds the aggregate number of Shares to be purchased by all Potential
Holders on whose behalf such Broker-Dealer submitted a Bid, the name or
names of one or more Buyer's Broker-Dealers (and the name of the Agent
Member, if any, of each such Buyer's Broker-Dealer) acting for one or more
purchasers of such excess number of Shares and the number of such Shares to
be purchased from one or more Existing Holder on whose behalf such
Broker-Dealer acted by one or more Potential Holders on whose behalf each
of such Buyer's Broker-Dealers acted;
(F) if the aggregate number of Shares to be purchased by all Potential
Holders on whose behalf such Broker-Dealer submitted a Bid exceeds the
aggregate number of Shares to be sold by all Existing Holders on whose
behalf such Broker-Dealer submitted a Bid or a Sell Order, the name or
names of one or more Seller's Broker-Dealers (and the name of the Agent
Member, if any, of each such Seller's Broker-Dealer) acting for one or more
sellers of such excess number of Shares and the number of such Shares to be
sold to one or more Potential Holder on whose behalf such Broker-Dealer
acted by one or more Existing Holders on whose behalf each of such Seller's
Broker-Dealers acted; and
(G) the Auction Date of the next succeeding Auction with respect to
the Shares.
II. On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
(A) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
instruct each Potential Holder on whose behalf such Broker-Dealer submitted
a Bid that was accepted, in whole or in part, to instruct such Potential
Holder's Agent Member to pay to such Broker-Dealer (or its Agent Member)
through the Securities Depository the amount necessary to purchase the
number of Shares to be purchased pursuant to such Bid against receipt of
such Shares and advise such Potential Holder of the Applicable Rate for the
next succeeding Dividend Period;
(B) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Broker-Dealer submitted
a Sell Order that was accepted, in whole or in part, or a Bid that was
accepted, in whole or in part, to instruct such Existing Holder's Agent
Member to deliver to such Broker-Dealer (or its Agent Member) through the
Securities Depository the number of Shares to
A-1
<PAGE> 92
be sold pursuant to such Order against payment therefor and advise any such
Existing Holder that will continue to hold Shares of the Applicable Rate
for the next succeeding Dividend Period;
(C) advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Applicable Rate for the next succeeding
Dividend Period;
(D) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction; and
(E) advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date
for the next succeeding Auction.
III. On the basis of the information provided to it pursuant to (I) above,
each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a Potential
Holder or an Existing Holder shall, in such manner and at such time or times as
in its sole discretion it may determine, allocate any funds received by it
pursuant to (II)(A) above and any Shares received by it pursuant to (II)(B)
above among the Potential Holders, if any, on whose behalf such Broker-Dealer
submitted Bids, the Existing Holders, if any, on whose behalf such Broker-Dealer
submitted Bids that were accepted or Sell Orders, and any Broker-Dealer or
Broker-Dealers identified to it by the Auction Agent pursuant to (I)(E) or
(I)(F) above.
IV. On each Auction Date:
(A) each Potential Holder and Existing Holder shall instruct its Agent
Member as provided in (II) (A) or (B) above, as the case may be;
(B) each Seller's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (1) pay through
the Securities Depository to the Agent Member of the Existing Holder
delivering Shares to such Broker-Dealer pursuant to (II)(B) above the
amount necessary to purchase such Shares against receipt of such Shares,
and (2) deliver such Shares through the Securities Depository to a Buyer's
Broker-Dealer (or its Agent Member) identified to such Seller's
Broker-Dealer pursuant to (I)(E) above against payment therefor; and
(C) each Buyer's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (1) pay through
the Securities Depository to a Seller's Broker-Dealer (or its Agent Member)
identified pursuant to (I) (F) above the amount necessary to purchase the
Shares to be purchased pursuant to (II)(A) above against receipt of such
Shares, and (2) deliver such Shares through the Securities Depository to
the Agent Member of the purchaser thereof against payment therefor.
V. On the day after the Auction Date:
(A) each Bidder's Agent Member referred to in (IV)(A) above shall
instruct the Securities Depository to execute the transactions described in
(II)(A) or (B) above, and the Securities Depository shall execute such
transactions;
(B) each Seller's Broker-Dealer or its Agent Member shall instruct the
Securities Depository to execute the transactions described in (IV)(B)
above, and the Securities Depository shall execute such transactions; and
(C) each Buyer's Broker-Dealer or its Agent Member shall instruct the
Securities Depository to execute the transactions described in (IV)(C)
above, and the Securities Depository shall execute such transactions.
VI. If an Existing Holder selling Shares in an Auction fails to deliver
such Shares (by authorized book-entry), a Broker-Dealer may deliver to the
Potential Holder on behalf of which it submitted a Bid that was accepted a
number of whole Shares that is less than the number of Shares that otherwise was
to be purchased by such Potential Holder. In such event, the number of Shares to
be so delivered shall be determined solely by such Broker-Dealer. Delivery of
such lesser number of Shares shall constitute good delivery. Notwithstanding the
foregoing terms of this paragraph (VI), any delivery or non-delivery of Shares
which shall represent any
A-2
<PAGE> 93
departure from the results of an Auction, as determined by the Auction Agent,
shall be of no effect unless and until the Auction Agent shall have been
notified of such delivery or non-delivery in accordance with the provisions of
the Auction Agent Agreement and the Broker-Dealer Agreements.
A-3
<PAGE> 94
APPENDIX B
AUCTION PROCEDURES
The following procedures will be set forth in provisions of the Certificate
of Designations relating to the Shares of such Series, and will be incorporated
by reference in the Auction Agent Agreement and each Broker-Dealer Agreement.
The terms not defined below are defined in the forepart of this Prospectus.
Nothing contained in this Appendix B constitutes a representation by the Company
that in each Auction each party referred to herein actually will perform the
procedures described herein to be performed by such party.
PARAGRAPH 7(a) CERTAIN DEFINITIONS.
As used in this paragraph 7, the following terms shall have the following
meanings, unless the context otherwise requires:
(i) "Auction Date" means the first Business Day preceding the first
day of each Subsequent Dividend Period.
(ii) "Available Shares" has the meaning specified in paragraph
7(d)(i) below.
(iii) "Bid" has the meaning specified in paragraph 7(b)(i) below.
(iv) "Bidder" has the meaning specified in paragraph 7(b)(i) below.
(v) "Hold Order" has the meaning specified in paragraph 7(b)(i)
below.
(vi) "Maximum Applicable Rate" for any Subsequent Dividend Period
will be the Applicable Percentage of the Reference Rate. The "Applicable
Percentage" will be determined based on the lower of the credit rating or
ratings assigned on such date to such Shares by Moody's and S&P (or if
Moody's or S&P or both shall not make such rating available, the equivalent
of either or both of such ratings by a Substitute Rating Agency or two
Substitute Rating Agencies or, in the event that only one such rating shall
be available, such rating) as follows:
<TABLE>
<CAPTION>
CREDIT RATING APPLICABLE
- -------------------------------------- PERCENTAGE OF
MOODY'S S&P REFERENCE RATE
- --------------------- ------------- --------------
<S> <C> <C>
"aa3" or higher AA- or Higher 110%
"a3" to "a1" A- to A+ 125%
"baa3" to "baa1" BBB- to BBB+ 150%
Below "baa3" Below BBB- 200%
</TABLE>
provided, however, that, if at 9:00 A.M., New York City time, on any
Auction Date, (i) the rating of any Shares by Moody's shall be on the
"Corporate Credit Watch List" of Moody's with a designation of "downgrade"
or "uncertain," (ii) the rating of any Shares by S&P shall be on the
"CreditWatch" of S&P with a designation of "negative implications" or
"developing" or (iii) if Moody's or S&P, or both, shall not make such a
rating available, the rating of any Shares by any Substitute Rating Agency
shall be on the substantial equivalent of clause (i) or (ii) above, then
the Maximum Applicable Rate for the Shares to which such Auction Date
relates will be determined pursuant to an Applicable Percentage based on
the credit rating that is one full level lower in the above table.
The Company shall take all reasonable action necessary to enable S&P and
Moody's (and, as appropriate, any Substitute Rating Agency or Substitute
Rating Agencies) to provide a rating for each Series of Shares. If either
S&P or Moody's shall not make such a rating available, or neither S&P nor
Moody's shall make such a rating available, the Company, after consultation
with the Broker-Dealers or their affiliates and successors, shall select a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations to act as a Substitute Rating
Agency or Substitute Rating Agencies, as the case may be.
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(vii) "Order" has the meaning specified in paragraph 7(b)(i) below.
(viii) "Sell Order" has the meaning specified in paragraph 7(b)(i)
below.
(ix) "Shares" means the Shares subject to the related Auction
pursuant to this paragraph 7.
(x) "Submission Deadline" means 1:00 P.M., New York City time, on
any Auction Date or such other time on the Auction Date as may be specified
by the Auction Agent from time to time as the time by which each
Broker-Dealer must submit to the Auction Agent in writing all Orders
obtained by it for the Auction to be conducted on such Auction Date.
(xi) "Submitted Bid" has the meaning specified in paragraph 7(d)(i)
below.
(xii) "Submitted Hold Order" has the meaning specified in paragraph
7(d)(i) below.
(xiii) "Submitted Order" has the meaning specified in paragraph
7(d)(i) below.
(xiv) "Submitted Sell Order" has the meaning specified in paragraph
7(d)(i) below.
(xv) "Sufficient Clearing Bids" has the meaning specified in
paragraph 7(d)(i) below.
(xvi) "Winning Bid Rate" has the meaning specified in paragraph
7(d)(i) below.
PARAGRAPH 7(b) ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS.
(i) Beneficial owners and potential beneficial owners may only participate
in Auctions through their Broker-Dealers. Broker-Dealers will submit the Orders
of their respective customers who are beneficial owners and potential beneficial
owners to the Auction Agent, designating themselves (unless otherwise permitted
by the Company) as Existing Holders in respect of Shares subject to Orders
submitted or deemed submitted to them by beneficial owners and as Potential
Holders in respect of Shares subject to Orders submitted to them by potential
beneficial owners. A Broker-Dealer may also hold Shares in its own account as a
beneficial owner or wish to purchase Shares for its own account as a potential
beneficial owner. A Broker-Dealer may thus submit Orders to the Auction Agent as
a beneficial owner or a potential beneficial owner and therefore participate in
an Auction as an Existing Holder or Potential Holder on behalf of both itself
and its customers.
Prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder may submit to its Broker-Dealer information
by telephone or otherwise as to:
(1) the number of Outstanding Shares, if any, held by such Existing
Holder which such Existing Holder desires to continue to hold without
regard to the Applicable Rate for the next succeeding Subsequent
Dividend Period;
(2) the number of Outstanding Shares, if any, held by such Existing
Holder which such Existing Holder desires to continue to hold, provided
that the Applicable Rate for the next succeeding Subsequent Dividend
Period shall not be less than the rate per annum specified by such
Existing Holder; and/or
(3) the number of Outstanding Shares, if any, held by such Existing
Holder which such Existing Holder offers to sell without regard to the
Applicable Rate for the next succeeding Subsequent Dividend Period; and
(B) each Broker-Dealer will contact Potential Holders by telephone or
otherwise to determine whether such Potential Holders desire to submit Bids
in which such Potential Holders will indicate the number of Outstanding
Shares, if any, which each such Potential Holder offers to purchase,
provided that the Applicable Rate for the next succeeding Subsequent
Dividend Period shall not be less than the rate per annum specified by such
Holder.
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For the purposes hereof, the communication by an Existing Holder pursuant
to clause (A) above or by a Potential Holder pursuant to clause (B) above to a
Broker-Dealer, or the communication by a Broker-Dealer acting for its own
account to the Auction Agent, of information referred to in clause (A) or (B) of
this paragraph 7(b)(i) is hereinafter referred to as an "Order" and each
Existing Holder and each Potential Holder placing an Order, including a
Broker-Dealer acting in such capacity for its own account, is hereinafter
referred to as a "Bidder"; an Order containing the information referred to in
clause (A)(1) of this paragraph 7(b)(i) is hereinafter referred to as a "Hold
Order"; an Order containing the information referred to in clause (A)(2) or (B)
of this paragraph 7(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
7(b)(i) is hereinafter referred to as a "Sell Order". Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of its customers or itself, all
discussion herein relating to the consequences of an Auction for Existing
Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented thereby.
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable offer
to sell:
(1) the number of Outstanding Shares specified in such Bid if the
Applicable Rate determined on such Auction Date shall be less than the
rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding Shares to be
determined as set forth in paragraph 7(e)(i)(D) if the Applicable Rate
determined on such Auction Date shall be equal to the rate per annum
specified therein; or
(3) a lesser number of Outstanding Shares to be determined as set
forth in paragraph 7(e)(ii)(C) if such specified rate per annum shall be
higher than the Maximum Applicable Rate and Sufficient Clearing Bids do
not exist.
(B) A Sell Order by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of Outstanding Shares specified in such Sell Order;
or
(2) such number or a lesser number of Outstanding Shares to be
determined as set forth in paragraph 7(e)(ii)(C) if Sufficient Clearing
Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable offer to
purchase:
(1) the number of Outstanding Shares specified in such Bid if the
Applicable Rate determined on such Auction Date shall be higher than the
rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding Shares to be
determined as set forth in paragraph 7(e)(i)(E) if the Applicable Rate
determined on such Auction Date shall be equal to the rate per annum
specified therein.
PARAGRAPH 7(c) SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
(i) Each Broker-Dealer shall submit in writing or through the Auction
Agent's auction processing system to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by such Broker-Dealer for the
Auction to be conducted on such Auction Date, designating itself (unless
otherwise permitted by the Company) as an Existing Holder or a Potential Holder
in respect of Shares subject to such Orders, and specifying with respect to each
Order:
(A) the name of the Bidder placing each Order (which shall be the
Broker-Dealer unless otherwise permitted by the Company);
(B) the aggregate number of Outstanding Shares that are the subject of
such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding Shares, if any, subject to any Hold
Order placed by such Existing Holder;
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(2) the number of Outstanding Shares, if any, subject to any Bid
placed by such Existing Holder and the rate per annum specified in such
Bid; and
(3) the number of Outstanding Shares, if any, subject to any Sell
Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate per
annum specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering in the aggregate all of the
Outstanding Shares held by an Existing Holder are not submitted to the Auction
Agent prior to the Submission Deadline for any reason (including the failure of
a Broker-Dealer to contact any Existing Holder or to submit an Order covering
such Existing Holder's Order or Orders), the Auction Agent shall deem a Hold
Order (in the case of an Auction relating to a Regular Dividend Period) and a
Sell Order (in the case of an Auction relating to a Special Dividend Period) to
have been submitted on behalf of such Existing Holder covering the number of
Outstanding Shares held by such Existing Holder and not subject to Orders
submitted to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering in the
aggregate more than the number of Outstanding Shares held by such Existing
Holder are submitted to the Auction Agent, such Order shall be considered valid
as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder shall
be considered valid up to and including the number of Outstanding Shares
held by such Existing Holder; provided that if more than one Hold Order is
submitted on behalf of such Existing Holder and the number of Shares
subject to such Hold Orders exceeds the number of Outstanding Shares held
by such Existing Holder, the number of Shares subject to each of such Hold
Orders shall be reduced pro rata so that such Hold Orders, in the
aggregate, will cover exactly the number of Outstanding Shares held by such
Existing Holder;
(B) (I) any Bids submitted on behalf of such Existing Holder shall be
considered valid, in the ascending order of their respective rates per
annum if more than one Bid is submitted on behalf of such Existing Holder,
up to and including the excess of the number of Outstanding Shares held by
such Existing Holder over the number of Shares subject to any Hold Order
referred to in paragraph 7(c)(iv)(A) above; (II) if more than one Bid
submitted on behalf of such Existing Holder specifies the same rate per
annum and together they cover more than the remaining number of Shares that
can be the subject of valid Bids after application of paragraph 7(c)(iv)(A)
above and of subclause (I) of this paragraph 7(c)(iv)(B) to any Bid or Bids
specifying a lower rate or rates per annum, the number of Shares subject to
each of such Bids shall be reduced pro rata so that such Bids, in the
aggregate, cover exactly such remaining number of Shares; and (III) subject
to subclauses (I) and (II) above, if more than one Bid submitted on behalf
of such Existing Holder specifies different rates per annum, such Bids
shall be considered valid in the ascending order of their respective rates
per annum and in any such event the number of Shares, if any, subject to
Bids not valid under this paragraph 7(c)(iv)(B) shall be treated as the
subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and including the
excess of the number of Outstanding Shares held by such Existing Holder
over the number of Shares subject to Hold Orders referred to in paragraph
7(c)(iv)(A) and valid Bids referred to in paragraph 7(c)(iv)(B); provided
that if more than one Sell Order is submitted on behalf of any Existing
Holder and the number of Shares subject to such Sell Orders is greater than
such excess, the number of Shares subject to each of such Sell Orders shall
be reduced pro rata so that such Sell Orders, in the aggregate, cover
exactly the number of Shares equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential Holder,
each Bid submitted shall be a separate Bid with the rate per annum and number of
Shares specified.
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(vi) Any Order submitted by a Existing Holder or a Potential Holder to its
Broker-Dealer, and any Order submitted by a Broker-Dealer to the Auction Agent,
prior to the Submission Deadline on any Auction Date, shall be irrevocable.
PARAGRAPH 7(d) DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE.
(i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted by the
Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Holder
Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or as
a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding Shares over the
number of Outstanding Shares that are the subject of Submitted Hold Orders
(such excess being hereinafter referred to as the "Available Shares");
(B) from the Submitted Orders whether the number of Outstanding Shares
that are the subject of Submitted Bids by Potential Holders specifying one
or more rates per annum equal to or lower than the Maximum Applicable Rate
exceeds or is equal to the sum of:
(1) the number of Outstanding Shares that are the subject of
Submitted Bids by Existing Holders specifying one or more rates per
annum higher than the Maximum Applicable Rate, and
(2) the number of Outstanding Shares that are subject to Submitted
Sell Orders (if such excess or such equality exists (other than because
the number of Outstanding Shares in clause (1) above and this clause (2)
are each zero because all of the Outstanding Shares are the subject of
Submitted Hold Orders), such Submitted Bids by Potential Holders being
hereinafter referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum
specified in the Submitted Bids (the "Winning Bid Rate") that, if:
(1) each Submitted Bid from Existing Holders specifying the Winning
Bid Rate and all other Submitted Bids from Existing Holders specifying
lower rates per annum were rejected, thus entitling such Existing
Holders to continue to hold the Shares that are the subject of such
Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the
Winning Bid Rate and all other Submitted Bids from Potential Holders
specifying lower rates per annum were accepted, thus entitling the
Potential Holders to purchase the Shares that are the subject of such
Submitted Bids,
would result in the number of Shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum being at least equal to the
Available Shares.
(ii) Promptly after the Auction Agent has made the determinations pursuant
to paragraph 7(d)(i), the Auction Agent shall advise the Company of the Maximum
Applicable Rate and, based on such determinations, the Applicable Rate for the
next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for
the next succeeding Subsequent Dividend Period shall be equal to the
Winning Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than because all
of the Outstanding Shares are the subject of Submitted Hold Orders), that
the Subsequent Dividend Period next succeeding the Auction shall
automatically be a Regular Dividend Period and the Applicable Rate for such
next succeeding Subsequent Dividend Period shall be equal to the Maximum
Applicable Rate; or
(C) if all of the Outstanding Shares are the subject of Submitted Hold
Orders, that the Subsequent Dividend Period next succeeding the Auction
shall automatically be a Regular Dividend Period and the
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Applicable Rate for such next succeeding Subsequent Dividend Period shall
be equal to 59% of the Reference Rate in effect on the date of such
Auction.
PARAGRAPH 7(e) ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL
ORDERS AND ALLOCATION OF SHARES.
Based on the determinations made pursuant to paragraph 7(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the provisions
of paragraph 7(e)(iii) and paragraph 7(e)(iv), Submitted Bids and Submitted Sell
Orders shall be accepted or rejected in the following order of priority and all
other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bid of each of the Existing Holders specifying any rate
per annum that is higher than the Winning Bid Rate shall be accepted, thus
requiring each such Existing Holder to sell the Outstanding Shares that are
the subject of such Submitted Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying any
rate per annum that is lower than the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
Outstanding Shares that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying any
rate per annum that is lower than the Winning Bid Rate shall be accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
Outstanding Shares that are the subject of such Submitted Bid, unless the
number of Outstanding Shares subject to all such Submitted Bids shall be
greater than the excess (the "Remaining Excess") of the Available Shares
over the number of Outstanding Shares subject to Submitted Bids described
in paragraph 7(e)(i)(B) and paragraph 7(e)(i)(C), in which event the
Submitted Bids of each such Existing Holder shall be accepted, and each
such Existing Holder shall be required to sell Outstanding Shares, but only
in an amount equal to the difference between (1) the number of Outstanding
Shares then held by such Existing Holder subject to such Submitted Bid and
(2) the number of Shares obtained by multiplying (x) the number of
Remaining Excess by (y) a fraction the numerator of which shall be the
number of Outstanding Shares held by such Existing Holder subject to such
Submitted Bid and the denominator of which shall be the sum of the number
of Outstanding Shares subject to such Submitted Bids made by all such
Existing Holders that specified a rate per annum equal to the Winning Bid
Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be accepted but
only in an amount equal to the number of Outstanding Shares obtained by
multiplying (x) the difference between the Available Shares and the number
of Outstanding Shares subject to Submitted Bids described in paragraph
7(e)(i)(B), paragraph 7(e)(i)(C) and paragraph 7(e)(i)(D) by (y) a fraction
the numerator of which shall be the number of Outstanding Shares subject to
such Submitted Bid and the denominator of which shall be the sum of the
number of Outstanding Shares subject to such Submitted Bids made by all
such Potential Holders that specified rates per annum equal to the Winning
Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because all
of the Outstanding Shares are subject to Submitted Hold Orders), subject to the
provisions of paragraph 7(e)(iii), Submitted Orders
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shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate per
annum that is equal to or lower than the Maximum Applicable Rate shall be
rejected, thus entitling such Existing Holder to continue to hold the
Outstanding Shares that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate per
annum that is equal to or lower than the Maximum Applicable Rate shall be
accepted, thus requiring such Potential Holder to purchase the Outstanding
Shares that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any rate per
annum that is higher than the Maximum Applicable Rate shall be accepted and
the Submitted Sell Orders of each Existing Holder shall be accepted, in
both cases only in an amount equal to the difference between (1) the number
of Outstanding Shares then held by such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and (2) the number of Shares obtained
by multiplying (x) the difference between the Available Shares and the
aggregate number of Outstanding Shares subject to Submitted Bids described
in paragraph 7(e)(ii)(A) and paragraph 7(e)(ii)(B) by (y) a fraction the
numerator of which shall be the number of Outstanding Shares held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order and
the denominator of which shall be the number of Outstanding Shares subject
to all such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 7(e)(i) or
paragraph 7(e)(ii), any Existing Holder would be entitled or required to sell,
or any Potential Holder would be entitled or required to purchase, a fraction of
a Share on any Auction Date, the Auction Agent shall, in such manner as it shall
determine in its sole discretion, round up or down the number of Shares to be
purchased or sold by any Existing Holder or Potential Holder on such Auction
Date so that each Outstanding Share purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be a whole Share.
(iv) If, as a result of the procedures described in paragraph 7(e)(i), any
Potential Holder would be entitled or required to purchase less than a whole
Share on any Auction Date, the Auction Agent shall, in such manner as in its
sole discretion it shall determine, allocate Shares for purchase among Potential
Holders so that only whole Shares are purchased on such Auction Date by any
Potential Holder, even if such allocation results in one or more of such
Potential Holders not purchasing any Shares on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders
on behalf of Existing Holders or Potential Holders, the aggregate number of
Outstanding Shares to be purchased and the aggregate number of the Outstanding
Shares to be sold by such Potential Holders and Existing Holders and, to the
extent that such aggregate number of Outstanding Shares to be purchased and such
aggregate number of Outstanding Shares to be sold differ, the Auction Agent
shall determine to which other Broker-Dealer or Broker-Dealers acting for one or
more purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, Outstanding Shares.
PARAGRAPH 7(F) SUSPENSION OF AUCTION DURING NON-PAYMENT PERIOD.
Upon occurrence and during the continuance of a Non-Payment Period with
respect to Shares of any Series that has not been duly cured by the Company
pursuant to paragraph 2(c)(i), Auctions of such Shares shall be suspended and
shall not resume in each case until (A) in the case of a Dividend Non-Payment
Period, all accumulated and unpaid dividends on such Shares for all past
Dividend Periods shall have been paid to the Auction Agent, or (B) in the case
of a Redemption Non-Payment Period in connection with an Optional Redemption or
Repurchase of less than all of the Shares of any Series, all amounts payable
upon such Optional Redemption or Repurchase of such Shares shall have been paid
to the Auction Agent, in each case by 12:00 noon, New York City time, on the
relevant Auction Date with respect to such Shares, provided that, at least two
Business Days but no more than 30 days prior to such Auction Date, the Company
shall have given
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the Auction Agent, the Securities Depository and the applicable holders of
record written notice of such deposit or availability.
PARAGRAPH 7(g) REGISTRATION UNDER SECURITIES EXCHANGE ACT.
If the Company shall determine, as a result of a change in applicable law,
regulation or rule (or interpretation thereof by the Securities and Exchange
Commission or its staff) and based upon written advice of independent legal
counsel of recognized standing selected by the Company, that there is a
significant possibility that the Company would be required to register Shares of
any Series that may be outstanding from time to time pursuant to the Securities
Exchange Act if there were 500 or more different beneficial owners of Shares of
all Series, the Auction Procedures will be modified so that no Auction will
result in there being more than a total number of different beneficial owners of
Shares of all Series as such counsel shall specify in such written advice;
provided that in no event shall the Auction Procedures be modified in such a way
that they would restrict the total number of different beneficial owners for
Shares of any Series to be less than 40.
PARAGRAPH 7(h) MISCELLANEOUS.
The Company may interpret the provisions of this paragraph 7 to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change or
modification that does not substantially adversely affect the rights of Existing
Holders of Shares. An Existing Holder (A) may sell, transfer or otherwise
dispose of Shares only pursuant to a Bid or Sell Order in accordance with the
procedures described in this paragraph 7 through a Broker-Dealer, except that
transfers of Shares may also be effected through means other than pursuant to
Auctions provided that each such transfer shall be valid and accepted by the
Auction Agent only if such Existing Holder or its Broker-Dealer or Agent Member,
as applicable, shall have advised the Auction Agent in writing of such transfer
by 3:00 P.M. on the Business Day next preceding the Auction Date with respect to
such Shares, and (B) except as otherwise required by law, shall have the
ownership of the Shares held by it maintained in book entry form by the
Securities Depository in the account of its Agent Member, which in turn will
maintain records of such Existing Holder's beneficial ownership. Neither the
Company nor any Affiliate shall submit an Order in any Auction. Any Existing
Holder that is an Affiliate shall not sell, transfer or otherwise dispose of
Shares to any Person other than the Company. All of the Outstanding Shares of a
Series shall be represented by one or more certificates registered in the name
of the nominee of the Securities Depository unless otherwise required by law or
unless there is no Securities Depository. If there is no Securities Depository,
at the Company's option and upon its receipt of such documents as it deems
appropriate, such Shares may be registered in the stock register in the name of
the Existing Holder thereof and such Existing Holder thereupon will be entitled
to receive certificates therefor and required to deliver certificates therefor
upon transfer or exchange thereof.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 28, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated July , 1996)
SHARES
SMITHKLINE BEECHAM HOLDINGS CORPORATION
FLEXIBLE AUCTION MARKET PREFERRED STOCK ("AMPS(R)")
LIQUIDATION PREFERENCE $100,000 PER SHARE
WITH A LIMITED GUARANTEE OF DECLARED AND UNPAID DIVIDENDS BY
SMITHKLINE BEECHAM PLC
SERIES A SHARES
SERIES B SHARES
SERIES C SHARES
------------------------
The shares offered hereby are respectively designated Flexible Auction
Market Preferred Stock ("AMPS") as Series A-1, Series A-2 and Series A-3
(collectively, "Series A Shares"); AMPS Series B-1, Series B-2 and Series B-3
(collectively, "Series B Shares"); and AMPS Series C-1, Series C-2 and Series
C-3 (collectively, "Series C Shares" and together with the Series A Shares and
the Series B Shares, the "Shares") and, in addition to the terms described in
the accompanying Prospectus under "Description of Securities," will have the
following terms:
<TABLE>
<CAPTION>
AGGREGATE INITIAL PERIOD-
LIQUIDATION INITIAL FIRST AUCTION END DIVIDEND
SERIES PREFERENCE DIVIDEND RATE DATE PAYMENT DATE
------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
A-1............... $
A-2............... $
A-3............... $
B-1............... $
B-2............... $
B-3............... $
C-1............... $
C-2............... $
C-3............... $
</TABLE>
The Dividend Payment Dates for the Shares until the Initial Period-End
Dividend Payment Date (the "Initial Dividend Period") will be January 15, April
15, July 15 and October 15 of each year, starting on October 15, 1996. During
their Initial Dividend Period, the DRD Gross-up Provision will apply, the Shares
may not be redeemed and the Shares will have the benefit of the Repurchase Upon
Change of Control Provision. See "Description of Securities -- Dividends",
"-- Redemption" and "-- Repurchase Upon Change of Control Provision" in the
accompanying Prospectus.
The Auction Agent for the Shares is Citibank, N.A. and the initial
Broker-Dealers for the Shares are Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Lehman Brothers Inc.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER
"RISK FACTORS" ON PAGE OF THE ACCOMPANYING PROSPECTUS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Series A-1 Shares....................... $ $ $
Per Series A-2 Shares.......................
Per Series A-3 Shares.......................
Per Series B-1 Shares.......................
Per Series B-2 Shares.......................
Per Series B-3 Shares.......................
Per Series C-1 Shares.......................
Per Series C-2 Shares.......................
Per Series C-3 Shares.......................
Total.......................................
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933,
amended. See "Underwriting."
(2) Before deducting expenses, estimated to be $ .
------------------------
The Shares are offered subject to prior sale, when, as and if issued by the
Company and accepted by the Underwriters and subject to their right to reject
orders in whole or in part. It is expected that delivery of the Shares will be
made in book-entry form only through the Same Day Funds Settlement system of The
Depository Trust Company on or about , 1996 (the "Date of Original
Issue").
------------------------
MERRILL LYNCH & CO. LEHMAN BROTHERS
The date of the Prospectus Supplement is July , 1996.
- ---------------
(R)Registered trademark of Merrill Lynch & Co.
<PAGE> 103
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OFFERED
HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms
and conditions of the Underwriting Agreement with the Company, to purchase the
respective numbers of Shares set forth opposite their names below. In the
Underwriting Agreement, the Underwriters have agreed, subject to the terms and
conditions set forth therein, to purchase all the Shares offered hereby if any
of such Shares are purchased. Each Underwriter will purchase Shares of each
Series offered hereby pro rata in accordance with the allocation set forth
opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated........................
Lehman Brothers Inc.......................................................
-------
Total...........................................................
=======
</TABLE>
The Company has been advised by the Underwriters that the Underwriters
propose initially to offer all or part of the Shares to the public at the public
offering price set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not in excess of % of the
offering price of the Shares. The Underwriters may allow and such dealers may
reallow a discount not in excess of % of the offering price of the Shares
to certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments that the Underwriters may be required to make in
respect thereof.
S-2
<PAGE> 104
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, THE SHARES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
PAGE
Use of Proceeds...........................
Underwriting..............................
PROSPECTUS
Available Information.....................
Incorporation of Certain Information by
Reference...............................
Enforceability of Civil Liabilities
Against Foreign Persons.................
Prospectus Summary........................
Risk Factors..............................
The Company and SmithKline Beecham........
Use of Proceeds...........................
Selected Combined Financial Data of the
Company.................................
Selected Consolidated Financial Data of
SmithKline Beecham......................
Management's Discussion and Analysis of
Predecessor Companies to SmithKline
Beecham Holdings Corporation's Results
of Operations and Financial Condition...
Business..................................
Arrangements with SmithKline Beecham
Group...................................
Management................................
Executive Compensation....................
Security Ownership of Directors and
Executive Officers......................
Description of Securities.................
Description of SmithKline Beecham
Support.................................
Description of Other Capital Stock........
Certain Federal Income Tax
Considerations..........................
Plan of Distribution......................
Legal Matters.............................
Experts...................................
Glossary..................................
Index to Combined Financial Statements....
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
SHARES
SMITHKLINE BEECHAM
HOLDINGS CORPORATION
FLEXIBLE AUCTION MARKET
PREFERRED STOCK ("AMPS(R)")
LIQUIDATION PREFERENCE $100,000 PER SHARE
WITH A LIMITED GUARANTEE OF DECLARED
AND UNPAID DIVIDENDS BY
SMITHKLINE BEECHAM PLC
SERIES A SHARES
SERIES B SHARES
SERIES C SHARES
------------------------
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 105
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 28, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY , 1996)
SHARES
SMITHKLINE BEECHAM HOLDINGS CORPORATION
FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK (MMP(R)), SERIES
LIQUIDATION PREFERENCE $100,000 PER SHARE
WITH A LIMITED GUARANTEE OF DECLARED AND UNPAID DIVIDENDS BY
SMITHKLINE BEECHAM PLC
SERIES SHARES
------------------------
The shares of Auction Rate Preferred Stock of the Company offered hereby
are designated as Flexible Money Market Cumulative Preferred Stock ("MMP"),
Series (the "Shares"). The Dividend Rate on the Shares will be %
until (the "Initial Period-End Dividend Payment Date"). The first
Auction Date will be , 1996. The Company may not elect a Special
Dividend Period for the Shares until after the first anniversary of the Date of
Original Issue for the Shares. Until the Initial Period-End Dividend Payment
Date and during any Regular Dividend Period, the Shares shall be subject to the
Mandatory Redemption Upon Change of Control Provision as described under
"Description of Securities -- Redemption" in the accompanying Prospectus. The
Shares shall otherwise have the terms described under "Description of
Securities" in the accompanying Prospectus.
The Auction Agent for the Shares is The Bank of New York and the initial
Broker-Dealers for the Shares are Lehman Brothers Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE OF THE ACCOMPANYING PROSPECTUS.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $ $ $
- ------------------------------------------------------------------------------------------------------
Total.................................. $ $ $
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933,
amended. See "Underwriting".
(2) Before deducting expenses, estimated to be $ .
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Shares offered by this Prospectus Supplement are offered by the
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriters and
to certain further conditions. It is expected that delivery of the Shares will
be made in book-entry form through The Depositary Trust Company on or about
, 1996 (the "Date of Original Issue").
------------------------
LEHMAN BROTHERS MERRILL LYNCH & CO.
July , 1996
- ---------------
(R)Registered trademark of Lehman Brothers Inc.
<PAGE> 106
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OFFERED
HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has agreed to purchase, the principal amount
of Shares set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Lehman Brothers Inc.......................................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated........................
-------
Total...........................................................
=======
</TABLE>
The Company has been advised that the Underwriters propose initially to
offer the Shares to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price.
The Underwriters may allow and such dealers may reallow a concession not in
excess of % of the offering price to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
S-2
<PAGE> 107
- ---------------------------------------------------------
- ---------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY AGENT OR UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds.............................
Underwriting................................
PROSPECTUS
Available Information.......................
Incorporation of Certain Information by
Reference.................................
Enforceability of Civil Liabilities Against
Foreign Persons...........................
Exchange Rate Information...................
Prospectus Summary..........................
Risk Factors................................
The Company and SmithKline Beecham..........
Use of Proceeds.............................
Selected Combined Financial Data of the
Company...................................
Selected Consolidated Financial Data of
SmithKline Beecham........................
Management's Discussion and Analysis of
Results of Operations and Financial
Condition.................................
Business....................................
Arrangements with SmithKline Beecham
Group.....................................
Management..................................
Executive Compensation......................
Security Ownership of Directors and
Executive Officers........................
Description of Securities...................
Description of SmithKline Beecham Support...
Description of Other Capital Stock..........
Certain Federal Income Tax Considerations...
Plan of Distribution........................
Legal Matters...............................
Experts.....................................
Glossary....................................
Index to Combined Financial Statements......
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
SHARES
SMITHKLINE BEECHAM
HOLDINGS CORPORATION
FLEXIBLE MONEY MARKET
CUMULATIVE PREFERRED STOCK (MMP(R))
LIQUIDATION PREFERENCE $100,000 PER SHARE
WITH A LIMITED GUARANTEE OF DECLARED
AND UNPAID DIVIDENDS BY
SMITHKLINE BEECHAM PLC
SERIES SHARES
---------------------------------------------
PROSPECTUS SUPPLEMENT
, 1996
---------------------------------------------
LEHMAN BROTHERS
MERRILL LYNCH & CO.
---------------------------------------------------------
---------------------------------------------------------
<PAGE> 108
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following sets forth estimated expenses, other than underwriting fees
and commissions, expected to be borne by the Registrants, in connection with the
distribution of the securities being registered.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.............. $ 445,518
Blue Sky Fees and Expenses....................................... 10,000
Rating Agency Fees............................................... 25,000
Legal............................................................ 600,000
Printing......................................................... 100,000
Accounting....................................................... 600,000
Miscellaneous.................................................... 50,000
----------
Total.................................................. $1,830,518
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Except as hereinafter set forth, there is no provision in the Company's
Certificate of Incorporation or Bylaws, SmithKline Beecham's Memorandum and
Articles of Association or any contract, arrangement or statute under which any
director or officer of the Company or SmithKline Beecham is insured or
indemnified in any manner against any liability that he or she may incur in his
or her capacity as such.
The Company's Certificate of Incorporation provides that the Company shall,
to the full extent permitted by Section 145 of the General Corporation Law of
the State of Delaware, as amended from time to time, indemnify all persons whom
it may indemnify pursuant thereto. Section 145 of the Delaware General
Corporation Law provides in part that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Similar
indemnification rights are authorized for such persons against expenses
(including attorneys' fees) actually and reasonably incurred in defense or
settlement of any threatened, pending or completed action or suit by or in the
right of the corporation, if such person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and provided further that (unless a court of competent jurisdiction
otherwise provides) such person shall not have been adjudged liable to the
corporation. Any such indemnification may be made only as authorized in each
specific case upon a determination by the shareholders or disinterested
directors of the Company that indemnification is proper because the indemnitee
has met the applicable standard of conduct.
Additionally, the Certificate of Incorporation eliminates in certain
circumstances the monetary liability of directors of the Company for breach of
their fiduciary duty as directors. This provision does not eliminate the
liability of a director (i) for a breach of the director's duty of loyalty to
the Company or its shareholders, (ii) for acts or omissions by the director not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for liability arising under Section 174 of the Delaware General
Corporation Law (relating to the declaration of dividends and purchase or
redemption of shares in violation of the Delaware General Corporation Law) or
(iv) for any transaction from which the director derived an improper personal
benefit.
II-1
<PAGE> 109
Indemnification of officers and directors of SmithKline Beecham is governed
by English law. Section 310 of the Companies Act 1985 provides:
"(1) This section applies to any provision, whether contained in a
company's articles or in any contract with the company or otherwise, for
exempting any officer of the company or any person (whether an officer or not)
employed by the company as auditor from, or indemnifying him against, any
liability which by virtue of any rule of law would otherwise attach to him in
respect of any negligence, default, breach of duty or breach of trust of which
he may be guilty in relation to the Company.
(2) Except as provided by the following subsection, any such provision is
void.
(3) A company may, in pursuance of such a provision, indemnify any such
officer or auditor against any liability incurred by him in defending any
proceedings (whether civil or criminal ) in which judgment is given in his
favour or he is acquitted, or in connection with any application under section
144(3) or (4) (acquisition of shares by innocent nominee) or section 727
(director in default but not dishonest or unreasonable), in which relief is
granted to him by the court".
Section 727 of the Companies Act 1985 further provides:
"(1) If in any proceedings for negligence, default, breach of duty or
breach of trust against an officer of a company or a person employed by a
company as auditor (whether he is or is not an officer of the company) it
appears to the court hearing the case that that officer or person is or may be
liable in respect of the negligence, default, breach of duty or breach of trust,
but that he has acted honestly and reasonably, and that having regard to all the
circumstances of the case (including those connected with his appointment) he
ought fairly to be excused for the negligence, default, breach of duty or breach
of trust, that court may relieve him, either wholly or partly, from his
liability on such terms as it thinks fit.
(2) If any such officer or person as above-mentioned has reason to
apprehend that any claim will or might be made against him in respect of any
negligence, default, breach of duty or breach of trust, he may apply to the
court for relief; and the court on the application has the same power to relieve
him under this section as it would have had if it had been a court before which
proceedings against that person for negligence, default, breach of duty or
breach of trust had been brought.
(3) Where a case to which subsection (1) applies is being tried by a judge
with a jury, the judge, after hearing the evidence, may, if he is satisfied that
the defendant or defender ought in pursuance of that subsection to be relieved
either in whole or in part from the liability sought to be enforced against him,
withdraw the case in whole or in part from the jury and forthwith direct
judgment to be entered for the defendant or defender on such terms as to costs
or otherwise as the judge may think proper".
The directors and officers of each of the Company and SmithKline Beecham
are insured under policies of insurance maintained by SmithKline Beecham,
subject to the limit of the policies, against certain losses arising from any
claim made against them by reason of being or having been such directors and
officers.
II-2
<PAGE> 110
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of SmithKline Beecham Holdings Corporation.
3.2 Bylaws of SmithKline Beecham Holdings Corporation.
4.1 Form of Certificate of Designations of Flexible Auction Rate Preferred Stock of
SmithKline Beecham Holdings Corporation.
4.2 Form of Stock Certificate for SmithKline Beecham Holdings Corporation Flexible
Auction Rate Preferred Stock.
4.3 Form of Guarantee of SmithKline Beecham plc.
4.4 Form of Support Agreement of SmithKline Beecham plc.
5.1 Opinion of Cleary, Gottlieb, Steen & Hamilton.
5.2 Opinion of Linklaters & Paines.
8.1 Opinion of Cleary, Gottlieb, Steen & Hamilton.
10.1 Form of General Services Agreement between SmithKline Beecham plc and SmithKline
Beecham Holdings Corporation.
10.2 Share Exchange Agreement, dated June 20, 1996, between SmithKline Beecham Holdings
Corporation and SmithKline Beecham International Co., SmithKline Beecham
Corporation and SBCL, Inc.
12.1 Statement of Computation of Ratios for Predecessor Companies to SmithKline Beecham
Holdings Corporation.
12.2 Statement of Computation of Ratios for SmithKline Beecham plc.
21.1 List of Subsidiaries.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Coopers & Lybrand (London).
23.3 Consent of Price Waterhouse (London) (included in Exhibit 23.2).
23.4 Consent of Cleary, Gottlieb, Steen & Hamilton (included in Exhibits 5.1 and 8.1).
23.5 Consent of Linklaters & Paines (included in Exhibit 5.2).
24 Powers of Attorney and Certified Board Resolutions.
27.1 Financial Data Schedule for the Period Ended December 31, 1995.
27.2 Financial Data Schedule for the Period Ended March 31, 1996.
28.1 Form of Auction Agent Agreements.
28.2 Form of Broker-Dealer Agreements.
</TABLE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the adjudication of such issue.
The undersigned registrants hereby undertake:
(1) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-3
<PAGE> 111
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If either of the registrants is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided that the registrants include in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements
and information are contained in periodic reports filed with or furnished to the
Commission by the registrants pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the Form
F-3.
(5) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual reports pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(6) The undersigned registrants hereby undertake to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(7) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of the
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(8) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The Company hereby undertakes to provide to the underwriters at the closing
specified in the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
II-4
<PAGE> 112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on the 27th day of June,
1996.
SMITHKLINE BEECHAM HOLDINGS
CORPORATION
By: /s/ DONALD F. PARMAN
--------------------------------------
Donald F. Parman
Attorney-In-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- --------------
<C> <S> <C>
* Director and Principal Accounting June 27, 1996
- --------------------------------------------- Officer
Hugh R. Collum
Director
- ---------------------------------------------
William J. Creelman
* Director June 27, 1996
- ---------------------------------------------
Jean-Pierre Garnier
* Director, President and Chief June 27, 1996
- --------------------------------------------- Executive Officer
Jan Leschly
/s/ DONALD F. PARMAN Director June 27, 1996
- ---------------------------------------------
Donald F. Parman
Director
- ---------------------------------------------
George H. Poste
Director
- ---------------------------------------------
William J. Shulby
* Director June 27, 1996
- ---------------------------------------------
Tadataka Yamada
*By /s/ DONALD F. PARMAN
- ---------------------------------------------
Donald F. Parman
Attorney-In-Fact
</TABLE>
II-5
<PAGE> 113
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on the 27th day of June,
1996.
SMITHKLINE BEECHAM PLC
By: /s/ DONALD F. PARMAN
--------------------------------------
Donald F. Parman
Attorney-In-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- --------------
<C> <S> <C>
* Director and Chief Executive June 27, 1996
- ---------------------------------------------
Jan Leschly
* Director and Principal Accounting June 27, 1996
- --------------------------------------------- Officer
Hugh R. Collum
* Director June 27, 1996
- ---------------------------------------------
Jean-Pierre Garnier
* Director June 27, 1996
- ---------------------------------------------
Tadataka Yamada
Director
- ---------------------------------------------
George M. Poste
* Director June 27, 1996
- ---------------------------------------------
Sir Peter Walters
* Director June 27, 1996
- ---------------------------------------------
Paul A. Allaire
* Director June 27, 1996
- ---------------------------------------------
Andrew R.F. Buxton
* Director June 27, 1996
- ---------------------------------------------
William R. Grant
*By /s/ DONALD F. PARMAN
- ---------------------------------------------
Donald F. Parman
Attorney-In-Fact
</TABLE>
II-6
<PAGE> 114
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- --------------
<C> <S> <C>
* Director June 27, 1996
- ---------------------------------------------
Sir Christopher Hogg
* Director June 27, 1996
- ---------------------------------------------
Baroness Hooper
Director
- ---------------------------------------------
Donald McHenry
* Director June 27, 1996
- ---------------------------------------------
John A. Young
* Director June 27, 1996
- ---------------------------------------------
E.J.P. Browne
*By /s/ DONALD F. PARMAN
- ---------------------------------------------
Donald F. Parman
Attorney-In-Fact
</TABLE>
II-7
<PAGE> 115
SIGNATURE OF AUTHORIZED REPRESENTATIVE OF
SMITHKLINE BEECHAM PLC
Pursuant to the requirements of the Securities Act of 1933, the duly
authorized representative in the United States of SmithKline Beecham plc, has
duly authorized this Registration Statement to be signed thereunto duly
authorized, in the City of Philadelphia, State of Pennsylvania, on June 27,
1996.
By: /s/ DONALD F. PARMAN
--------------------------------------
Donald F. Parman
Secretary, SmithKline
Beecham Holdings Corporation
II-8
<PAGE> 116
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of SmithKline Beecham Holdings Corporation.
3.2 Bylaws of SmithKline Beecham Holdings Corporation.
4.1 Form of Certificate of Designations of Flexible Auction Rate Preferred Stock of
SmithKline Beecham Holdings Corporation.
4.2 Form of Stock Certificate for SmithKline Beecham Holdings Corporation Flexible
Auction Rate Preferred Stock.
4.3 Form of Guarantee of SmithKline Beecham plc.
4.4 Form of Support Agreement of SmithKline Beecham plc.
5.1 Opinion of Cleary, Gottlieb, Steen & Hamilton.
5.2 Opinion of Linklaters & Paines.
8.1 Opinion of Cleary, Gottlieb, Steen & Hamilton.
10.1 Form of General Services Agreement between SmithKline Beecham plc and SmithKline
Beecham Holdings Corporation.
10.2 Share Exchange Agreement, dated June 20, 1996, between SmithKline Beecham
Holdings Corporation and SmithKline Beecham International Co., SmithKline
Beecham Corporation and SBCL, Inc.
12.1 Statement of Computation of Ratios for Predecessor Companies to SmithKline
Beecham Holdings Corporation.
12.2 Statement of Computation of Ratios for SmithKline Beecham plc.
21.1 List of Subsidiaries.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Coopers & Lybrand (London).
23.3 Consent of Price Waterhouse (London) (included in Exhibit 23.2).
23.4 Consent of Cleary, Gottlieb, Steen & Hamilton (included in Exhibits 5.1 and
8.1).
23.5 Consent of Linklaters & Paines (included in Exhibit 5.2).
24 Powers of Attorney and Certified Board Resolutions.
27.1 Financial Data Schedule for the Period Ended December 31, 1995.
27.2 Financial Data Schedule for the Period Ended March 31, 1996.
28.1 Form of Auction Agent Agreements.
28.2 Form of Broker-Dealer Agreements.
</TABLE>
<PAGE> 1
Exhibit 1.1
FORM OF UNDERWRITING AGREEMENT
12,920 Shares
SMITHKLINE BEECHAM HOLDINGS CORPORATION
Flexible Auction Rate Preferred Stock
Liquidation Preference $100,000 Per Share
With a limited guarantee of declared and unpaid dividends by
SMITHKLINE BEECHAM PLC
UNDERWRITING AGREEMENT
July __, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
LEHMAN BROTHERS
Lehman Brothers Inc.
As Representatives of the
several Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281
Ladies and Gentlemen:
SmithKline Beecham Holdings Corporation (the "Issuer") proposes to
issue and sell up to 12,920 shares of preferred stock, without par value and
with a liquidation preference of $100,000 per share (the "Shares"), from time to
time, in one or more offerings on terms to be determined at the time of sale.
SmithKline Beecham plc, a public limited company organized under the laws of
England and Wales (the "Parent"), will guarantee, subject to the provisions and
limitations set forth therein (the "SB Guarantee"), payment of declared and
unpaid dividends on the Shares and will enter into a support agreement (the "SB
Support Agreement") to make additional capital contributions to the Issuer in
certain circumstances. The Parent will also guarantee the payment to the Issuer
by SmithKline Beecham Biologicals S.A., an indirect Belgian pharmaceutical
subsidiary of Parent ("SB Biologicals"), of dividends declared by SB Biologicals
on the shares of its preferred stock ("SB Biologicals Preferred Stock") held by
the Issuer (the "SB Biologicals Guarantee" and together with the SB Guarantee,
the "Guarantees" and each a "Guarantee") and will enter into a support agreement
with SB Biologicals under which the Parent will be obligated to make additional
capital contributions to SB Biologicals in certain circumstances to enable SB
Biologicals to declare and pay dividends on the SB
1
<PAGE> 2
Biologicals Preferred Stock (the "SB Biologicals Support Agreement" and together
with the SB Support Agreement, the "Support Agreements" and each a "Support
Agreement").
The Shares will be issued in one or more series, and each series may
vary as to title, number of Shares, dividend rate or rates (or method of
calculation), dividend payment dates, redemption provisions and other terms set
forth in the Prospectus referred to in Section 1(a) as it may be amended or
supplemented from time to time, including any supplement setting forth the terms
of any Shares or class or series of Shares (a "Pricing Supplement"). The Shares
of a series will be issued, and the terms thereof established, from time to
time, by the Issuer in accordance with a certificate of designations (the
"Certificate of Designations") relating thereto. This Agreement shall apply only
to sales of the Shares and not to sales of any other securities of the Issuer
and only on the specific terms set forth herein. The Shares and the related SB
Guarantee of the Parent are sometimes collectively referred to herein as the
"Securities."
Whenever the Company determines to make an offering of Shares through
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Lehman Brothers Inc. ("Lehman Brothers"), or both, or through
an underwriting syndicate managed by either or both of them or by any one or
more other underwriters (each, a "Representative"), the Company will enter into
an agreement (each, a "Terms Agreement") providing for the sale of such Shares
to, and the purchase and offering thereof by, the Representative designated as
such in the applicable Terms Agreement and such other underwriters, if any,
selected thereby (the "Underwriters," which term shall include each of Merrill
Lynch and Lehman Brothers, whether acting as sole Underwriter or as a member of
an underwriting syndicate, as well as any Underwriter substituted pursuant to
Section 9 hereof). The Terms Agreement relating to the offering of Shares shall
specify the number of Shares to be issued, the name of each Underwriter
participating in such offering (subject to substitution as provided in Section 9
hereof) and the name of any Underwriter other than Merrill Lynch or Lehman
Brothers acting as co-manager in connection with such offering, the number of
Shares that each such Underwriter severally agrees to purchase, the initial
offering price, the price at which the Shares are to be purchased by the
Underwriters, the form, time, date and place of delivery and payment of the
Shares and any other material terms of the Shares. The Terms Agreement, which
shall be substantially in the form of Exhibit A hereto, may take the form of an
exchange of any standard form of written telecommunication between the Company
and one or more Representatives, each acting for itself and, if applicable, as
representative of any other Underwriters. Each offering of Shares through
Merrill Lynch or Lehman Brothers as sole Underwriter or through an underwriting
syndicate managed by
2
<PAGE> 3
Merrill Lynch, Lehman Brothers or both will be governed by this Underwriting
Agreement, as supplemented by the applicable Terms Agreement.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
The Issuer as regards itself and its consolidated subsidiaries and the
Parent as regards itself and its consolidated subsidiaries (including the
Issuer) represent and warrant to each of Merrill Lynch and Lehman Brothers as of
the date hereof and to each Underwriter named in the applicable Terms Agreement,
as of the date thereof, and as of the Closing Date (as defined herein) (each
such time being hereinafter sometimes referred to as a "Representation Date"),
as follows:
(a) General. A registration statement on Form F-3 with respect to the
Securities has been prepared and filed by the Issuer and the Parent in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has become
effective under the Act. As used in this Agreement, (i) "Registration Statement"
means such registration statement when it became effective under the Act and as
from time to time amended or supplemented thereafter (if any post-effective
amendment to such registration statement has been filed with the Commission
prior to the execution and delivery of this Agreement, the most recent such
amendment has been declared effective by the Commission); (ii) "Basic
Prospectus" means the prospectus (including all documents incorporated therein
by reference) included in the Registration Statement; and (iii) "Prospectus"
means the Basic Prospectus (together with all documents incorporated therein by
reference) and any amendments or supplements thereto (including the applicable
pricing supplement) relating to the Securities, as filed with the Commission
pursuant to paragraph (b) of Rule 424 of the Rules and Regulations. The
Commission has not issued any order preventing or suspending the use of the
Prospectus.
(b) Registration Statement and Prospectus; Contents. The Registration
Statement and the Prospectus comply, and the Registration Statement and the
Prospectus will comply as of the applicable Representation Date, in all material
respects with the Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission under such
Acts; and the Registration Statement did not, when such Registration Statement
became effective, and will not, as of the applicable Representation Date,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Prospectus did not, when the Registration
3
<PAGE> 4
Statement became effective, and will not, as of the applicable Representation
Date, include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that neither the Issuer nor the Parent makes any representation or warranty as
to information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information furnished
to the Issuer and the Parent by the Underwriters specifically for inclusion
therein.
(c) Accountants. The accountants who certified the financial statements
and supporting schedules thereto included or incorporated by reference in the
Registration Statement and the Prospectus are independent public accountants as
required by the Act and the Rules and Regulations.
(d) Financial Statements. The financial statements included or
incorporated by reference in the Prospectus present, and will present as of the
applicable Representation Date, fairly the financial condition and results of
operations of the entities purported to be shown thereby, at the dates and for
the periods indicated, and have been, and will be as of the applicable
Representation Date, prepared in conformity with (i) generally accepted
accounting principles in the United States in the case of the Issuer and its
consolidated subsidiaries and (ii) generally accepted accounting principles in
the United Kingdom, reconciled to generally accepted accounting principles in
the United States to the extent required by the Rules and Regulations, in the
case of the Parent and its consolidated subsidiaries, in each case applied on a
consistent basis throughout the period or periods involved; and the financial
statement schedules included or incorporated by reference in the Prospectus
present, and will present as of the applicable Representation Date, fairly the
information required to be stated therein at the dates and for the periods
indicated.
(e) Documents Incorporated by Reference. The documents incorporated by
reference into the Prospectus have been, and will be as of the applicable
Representation Date, prepared by the Issuer or the Parent, as the case may be,
in conformity with the applicable requirements of the Act and the Rules and
Regulations and the Exchange Act and the rules and regulations of the Commission
thereunder, and such documents have been, or will be, as of the applicable
Representation Date, timely filed as required by the Commission by the Issuer
and the Parent.
(f) Exhibits to Registration Statement. There are no
contracts or other documents which are required to be filed as
exhibits to the Registration Statement by the Act or by the Rules
and Regulations, or which were required to be filed as exhibits
4
<PAGE> 5
to any document incorporated by reference in the Prospectus by the Exchange Act
or the rules and regulations of the Commission thereunder, which have not been
filed as exhibits to the Registration Statement or to such document or
incorporated therein by reference as permitted by the Rules and Regulations or
the rules and regulations of the Commission under the Exchange Act, as the case
may be.
(g) Absence of Material Adverse Change. Since the dates of the latest
financial statements contained in or incorporated by reference in the
Registration Statement, there has been no material adverse change in the
financial position, results of operations or prospects of the Issuer or the
Parent and in either case its consolidated subsidiaries considered as a whole.
(h) Authorization, Validity and Binding Effect. (i) This Agreement has
been duly authorized, executed and delivered by the Issuer and the Parent and,
upon due execution, issue and delivery by the other parties thereto, will
constitute legal, valid and binding obligations of the Issuer and the Parent,
enforceable in accordance with its terms, subject to the laws of bankruptcy and
other laws affecting the rights of creditors generally and general principles of
equity; (ii) the Guarantees and the Support Agreements have each been duly
authorized by the Parent, and, when duly executed and delivered by the parties
thereto and with respect to the SB Guarantee, when the Shares are issued in
accordance with this Agreement, will each constitute a legal, valid and binding
obligation of the Parent enforceable in accordance with its terms, subject to
the laws of bankruptcy and other laws affecting the rights of creditors
generally and general principles of equity; (iii) the Shares being sold pursuant
to the applicable Terms Agreement have been, or as of the date of such Terms
Agreement will have been, duly authorized by the Issuer for issuance and sale
pursuant to this Agreement and such Terms Agreement and, when issued and
delivered by the Issuer pursuant to this Agreement and such Terms Agreement
against payment of the consideration therefor, will be validly issued, fully
paid and non-assessable and will not be subject to preemptive or other similar
rights of any securityholder of the Issuer; (iv) the Certificate of Designations
will have been duly executed and acknowledged and will be effective on each
Closing Date; and (v) the Shares, the Certificate of Designations, the
Guarantees and the Support Agreements conform in all material respects to the
descriptions thereof contained in the Prospectus.
(i) Conflict with Instruments. The execution and delivery of this
Agreement, any Terms Agreement, the Guarantees, the Support Agreements, the
additional agreements contemplated hereby, the issue of the Securities and the
performance of the terms of the Shares, the Guarantees, the Support Agreements,
this Agreement, any Terms Agreement and the additional agreements contemplated
hereby will not infringe any existing law or
5
<PAGE> 6
regulation and are not contrary to the provisions of the Certificate of
Incorporation, any Certificate of Designations or the By-Laws of the Issuer or
the Memorandum and Articles of Association of the Parent (as the case may be)
and will not result in any material breach of the terms of, or constitute a
material default under, any material instrument or agreement to which the Issuer
or the Parent (as the case may be) is a party or by which it or its property is
bound.
(j) Litigation. Neither the Issuer, nor the Parent nor any of the
Parent's consolidated subsidiaries is involved in any litigation or arbitration
proceedings which are required to be described in the Registration Statement or
Prospectus and which are not so described nor is any such litigation or
arbitration pending or, to the knowledge of the Issuer or the Parent, threatened
against the Issuer, the Parent or any of the Parent's consolidated subsidiaries.
(k) Governmental Approvals. Except with respect to compliance with
United States federal and state securities laws, no consents, approvals, orders
or decrees of any United States or United Kingdom court, governmental agency or
body, or other regulatory body are required by the Issuer or the Parent (as the
case may be) for the execution and delivery of this Agreement, any Terms
Agreement, the Guarantees or Support Agreements or the additional agreements
contemplated hereby, the issue of, and the performance of the terms of, the
Shares, the Guarantees, the Support Agreements, this Agreement, any Terms
Agreement or any additional agreements contemplated hereby, other than such
consents, approvals, orders or decrees that have been received by the Issuer or
the Parent as of the date hereof.
(l) Absence of Default. None of the Issuer, the Parent or any of the
Parent's consolidated subsidiaries is in violation of its charter, by-laws or
other constitutive documents or in default under any agreement, indenture or
instrument, the effect of which violation or default would have a material
adverse effect upon the business, properties, results of operations or financial
condition of the Issuer or the Parent and in either case its consolidated
subsidiaries considered as a whole.
(m) Corporate Status. Each of the Issuer and its consolidated
subsidiaries and the Parent has been duly incorporated, is validly existing and
in good standing under the laws of its respective jurisdiction of incorporation,
is duly qualified to do business and in good standing as a foreign corporation
in each jurisdiction in which its respective ownership of properties or the
conduct of its respective businesses requires such qualification (except to the
extent that the failure to so qualify would not have a material adverse impact
on the operations of the Issuer and its consolidated subsidiaries considered as
a whole), and has the power and
6
<PAGE> 7
authority necessary to own or hold its respective properties and to conduct the
businesses in which it is engaged, as described in the Prospectus.
(n) Capitalization. The authorized, issued and outstanding shares of
capital stock of the Issuer as of the date of the Prospectus is as set forth in
the column entitled "Actual" under the "Capitalization" section of the
Prospectus (except for subsequent issuances thereof, if any, contemplated under
this Agreement, pursuant to reservations, agreements or employee benefit plans
referred to in the Prospectus or pursuant to the exercise of convertible
securities or options referred to in the Prospectus). Such shares of capital
stock have been duly authorized and validly issued by the Issuer or the Parent,
as the case may be, and are fully paid and non-assessable, and none of such
shares of capital stock was issued in violation of preemptive or other similar
rights of any securityholder of the Issuer or the Parent, as the case may be.
[(o) Business with Cuba. Each of the Issuer and the Parent has complied
with all applicable provisions of Florida H.B. 1771, Section 1, Chapter 92-198
of the Florida Securities and Investors Act, and all regulations thereunder
relating to issuers doing business with Cuba.]
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING.
(a) Purchases of Shares. The several commitments of the Underwriters to
purchase the Shares pursuant to the applicable Terms Agreement shall be deemed
to have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth.
(b) Payment. Payment of the purchase price for, and delivery of, the
Shares shall be made at the offices of Brown & Wood, One World Trade Center, New
York, New York, or at such other place as shall be agreed upon by the
Representative and the Issuer, at 10:00 A.M. (Eastern time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day)
business day after the date of the applicable Terms Agreement (unless postponed
in accordance with the provisions of Section 9 hereof), or such other time not
later than ten business days after such date as shall be agreed upon by Merrill
Lynch or Lehman Brothers and the Company (such date of payment and delivery
being herein called the "Closing Date").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representative for the respective accounts of the Underwriters of the Shares
to be purchased by them. It is understood that each Underwriter has authorized
7
<PAGE> 8
Merrill Lynch, for its account, to accept delivery of, receipt for, and make
payment of the purchase price for, the Shares which it has severally agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Shares to be purchased by any Underwriter whose funds have not
been received by the Closing Date, but such payment shall not relieve such
Underwriter from its obligations hereunder.
(c) Denominations; Registration. The Shares or certificates for the
Shares shall be in such denominations and registered in such names as Merrill
Lynch may request in writing at least [two] full business days prior to the
Closing Date. The Shares or certificates for the Shares will be made available
for examination and packaging by Merrill Lynch in The City of New York not later
than 10:00 A.M. (Eastern time) on the business day prior to the Closing Date.
SECTION 3. COVENANTS OF THE ISSUER AND THE PARENT.
The Issuer and the Parent covenant and agree:
(a) Delivery of Signed Registration Statement and Prospectus. To
furnish promptly to the Underwriters and to their counsel signed copies of the
Registration Statement as originally filed and each amendment or supplement
thereto, all documents incorporated therein by reference and all consents and
exhibits filed therewith.
(b) Delivery of Other Documents. To deliver promptly to the
Underwriters, and in such number as they may request, each of the following: (i)
conformed copies of the Registration Statement (excluding exhibits other than
the computation of the ratio of earnings to fixed charges, the Guarantees, the
Support Agreements, and this Agreement), (ii) the Basic Prospectus, (iii) the
Prospectus and (iv) any documents incorporated by reference in the Prospectus.
(c) Revisions to Prospectus - Material Changes. If, at any time when
the Prospectus is required by the Act or the Exchange Act to be delivered in
connection with sales of the Shares, any event occurs as a result of which the
Prospectus would include an untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances in which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, to notify
the Underwriters promptly, in writing, to suspend solicitation of purchases of
the Securities; and if the Issuer shall decide to amend or supplement the
Registration Statement or the Prospectus, to promptly advise the Underwriters by
telephone (with confirmation in writing) and
8
<PAGE> 9
to promptly, in writing, prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or an amendment which
will effect such compliance; provided, however, that if during the period
referred to above any Underwriter shall own any Securities which it has
purchased from the Issuer as principal with the intention of reselling them, the
Issuer and the Parent shall promptly prepare and timely file with the Commission
any amendment or supplement to the Registration Statement or the Prospectus that
may, in the judgment of the Issuer, the Parent or the Underwriters, be required
by the Act or requested by the Commission.
(d) Commission Filings. To timely file with the Commission all
documents (and any amendments to previously filed documents) required to be
filed by the Issuer pursuant to section 13(a), 13(c), 14 or 15(d) of the
Exchange Act.
(e) Copies of Filings with Commission. To deliver to the Underwriters
and their counsel, from time to time, upon written request, copies of each
document filed with the Commission that is incorporated by reference into the
Prospectus.
(f) Notice to Underwriters of Certain Events. To advise the
Underwriters promptly (i) when any post-effective amendment to the Registration
Statement relating to or covering the Securities becomes effective, (ii) of any
request by the Commission for an amendment or supplement to the Registration
Statement, to the Prospectus, to any document incorporated by reference in any
of the foregoing or for any additional information and will afford the
Underwriters a reasonable opportunity to comment on any such proposed amendment
or supplement, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any part thereof
or any order directed to the Prospectus or any document incorporated therein by
reference or the initiation or threat of any stop order proceeding or of any
challenge of the accuracy or adequacy of any document incorporated by reference
in the Prospectus, (iv) of receipt by the Issuer or the Parent of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threat of any
proceeding for that purpose, (v) of any downgrading in the rating of the
Securities or any other securities of the Issuer or the Parent, or any proposal
to downgrade the rating of the Securities or any other securities of the Issuer
or the Parent, by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act), or any listing with
negative implications of any debt securities of the Issuer or the Parent on
"Creditwatch" or other similar publication of formal review by any such
organization as soon as the Issuer or the Parent, as the case may be, learns of
any such downgrading, listing or publication and (vi) of the happening of any
event which makes untrue any statement of a material fact
9
<PAGE> 10
made in the Registration Statement or the Prospectus or which requires the
making of a change in the Registration Statement or the Prospectus in order to
make any material statement therein not misleading.
(g) Stop Orders. If the Commission shall issue a stop order suspending
the effectiveness of the Registration Statement, to make every reasonable effort
to obtain lifting of that order at the earliest possible time.
(h) Earnings Statements. As soon as practicable, but not later than 18
months, after the date of each acceptance by the Issuer of an offer to purchase
Securities hereunder and each sale of Securities to an Underwriter pursuant to a
Terms Agreement, to make generally available to its security holders an earnings
statement of the Parent covering a period of at least 12 months beginning after
the later of (i) the effective date of the Registration Statement, (ii) the
effective date of the most recent post-effective amendment to the Registration
Statement to become effective prior to the date of such acceptance and (iii) the
date of the Parent's most recent Annual Report on Form 20-F filed with the
Commission prior to the date of such acceptance which will satisfy the
provisions of Section 11(a) of the Act (including, at the option of the Issuer,
Rule 158 of the Rules and Regulations under the Act);
(i) Copies of Reports, Release and Financial Statements. So long as any
of the Securities are outstanding, to furnish to the Underwriters, not later
than the time the Parent makes the same available to others, copies of all
public reports or releases and all reports and financial statements furnished by
the Issuer or the Parent to any securities exchange on which the Securities are
listed pursuant to requirements of or agreements with such exchange or to the
Commission pursuant to the Exchange Act or any rule or regulation of the
Commission thereunder.
(j) Blue Sky Qualifications. To endeavor, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Underwriters may reasonably
designate, and to maintain such qualifications in effect for as long as may be
required for the distribution of the Securities; and to file such statements and
reports as may be required by the laws of each jurisdiction in which the
Securities have been qualified as above provided. Nothing in this Section 3(j)
shall require either the Issuer or the Parent to qualify as a foreign
corporation or execute a general consent to the service of process in any state
in connection with qualification of the Securities.
10
<PAGE> 11
SECTION 4. PAYMENT OF EXPENSES.
The Issuer will pay:
(a) the costs incident to the authorization, issuance, sale and
delivery of the Securities pursuant to this Agreement and any transfer taxes
payable in that connection,
(b) the costs incident to the preparation, printing and filing under
the Act of the Registration Statement and any amendments and exhibits thereto,
(c) the costs incident to the preparation, printing and filing of any
document and any amendments and exhibits thereto required to be filed by the
Issuer under the Exchange Act,
(d) the costs of distributing the Registration Statement, as originally
filed, and each amendment and post-effective amendment thereof (including
exhibits), the Basic Prospectus, the Prospectus, any supplement or amendment to
the Prospectus and any documents incorporated by reference in any of the
foregoing documents,
(e) the fees and disbursements of the Auction Agent and any other
agents appointed by the Issuer, and their respective counsel,
(f) the costs and fees in connection with the listing of the Securities
on any securities exchange,
(g) the cost and fees in connection with any filings with the National
Association of Securities Dealers, Inc.,
(h) the reasonable fees and disbursements of counsel to the Issuer and
the Parent,
(i) the fees paid to rating agencies in connection with the rating of
the Securities,
(j) the fees and expenses of qualifying the Securities under the
securities laws of the several jurisdictions as provided in Section 3(j) hereof
and of preparing and printing a Blue Sky Memorandum and a memorandum concerning
the legality of the Securities as an investment (including reasonable fees and
expenses of counsel for the Underwriters in connection therewith),
(k) all advertising expenses in connection with the offering of the
Securities incurred with the consent of the Issuer and with the Issuer's prior
consent to accept responsibility for such expenses, and
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<PAGE> 12
(l) all other costs and expenses incident to the performance by the
Issuer and the Parent of their respective obligations under this Agreement.
SECTION 5. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The obligation of any Underwriter under this Agreement to purchase and
pay for any Securities pursuant to a Terms Agreement is subject to the accuracy,
on each Representation Date, of the representations and warranties of the Issuer
and the Parent contained herein, to the accuracy of the statements of the
officers of the Issuer and the Parent made in any certificate furnished pursuant
to the provisions hereof, to the performance by the Issuer and the Parent of
their obligations hereunder, and to each of the following additional terms and
conditions:
(a) Registration Statement. No stop order suspending the effectiveness
of the Registration Statement or any part thereof nor any order directed to any
document incorporated by reference in the Prospectus shall have been issued and
no stop order proceeding shall have been initiated or threatened by the
Commission and no comments shall have been received from the Commission
requiring an amendment to any previously filed document incorporated by
reference in the Prospectus; any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise shall have been complied with; and neither the Issuer nor the Parent
shall have filed with the Commission any amendment or supplement to the
Registration Statement or the Prospectus (excluding any document incorporated by
reference therein) without the consent of the Underwriters.
(b) No Suspension of Sale of the Securities. No order suspending the
sale of the securities in any jurisdiction designated by the Underwriters
pursuant to Section 3(j) hereof shall have been issued, and no proceeding for
that purpose shall have been initiated or threatened.
(c) No Material Omissions or Untrue Statements. The Registration
Statement, at the time it was declared effective, did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and no
Prospectus shall include an untrue statement of a fact which, in the opinion of
counsel for the Underwriters, is material or omit to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(d) Legal Matters Satisfactory to Counsel. At the Closing
Date with respect to any Terms Agreement, all corporate
12
<PAGE> 13
proceedings and other legal matters incident to the authorization, form and
validity of this Agreement, any Terms Agreement, the Shares, the Guarantees, the
Support Agreements, the form of the Registration Statement, the Prospectus
(other than financial statements and other financial data) and all other legal
matters relating to this Agreement or any Terms Agreement and the transactions
contemplated hereby or thereby shall be reasonably satisfactory in all respects
to counsel for the Underwriters and the Issuer and the Parent shall have
furnished to such counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.
(e) Opinions of Issuer and Parent Counsel. At the Closing Date with
respect to any Terms Agreement, the Underwriters shall have received the
opinions, addressed to the Underwriters and dated the Closing Date, of (i)
Cleary, Gottlieb, Steen & Hamilton, special U.S. counsel to the Issuer and the
Parent, (ii) internal legal counsel for the Issuer, (iii) internal legal counsel
for the Parent, substantially in the form of Exhibits B-1, B-2, C and D hereto,
respectively, together with certified copies of all resolutions of the Boards of
Directors of the Issuer and the Parent or any committee of such Boards passed in
connection with the issue of the Securities, (iv) Richards, Layton & Finger,
Delaware counsel to the Issuer, in form and substance satisfactory to the
Underwriters and to the effect that the relative rights, preferences and powers
of the Shares are as set forth in the Issuer's Certificate of Incorporation (as
supplemented by the Certificate of Designations relating to the Shares), and all
such rights, preferences and powers are valid under the laws of the State of
Delaware and (v) internal counsel for SB Biologicals, SK&F B.V., SB Laboratoires
Pharmaceutiques SA, SB Laboratorios Ltda, and PCL Produtos Cosmeticos Ltd with
respect to the due incorporation, valid existence and good standing of SB
Biologicals, SK&F B.V., SB Laboratoires Pharmaceutiques SA, SB Laboratorios
Ltda, and PCL Produtos Cosmeticos Ltd.
(f) Opinion of Underwriters' Counsel. At the Closing Date with respect
to any Terms Agreement, the Underwriters shall have received from Brown & Wood,
counsel to the Underwriters, such opinion or opinions, dated the Closing Date,
with respect to the issuance and sale of the Shares, the Registration Statement,
the Prospectus and other related matters as the Underwriters may reasonably
require, and the Issuer shall have furnished to such counsel such documents as
they may request for the purpose of enabling them to pass upon such matters.
(g) Officers' Certificate. Each of the Issuer and the Parent shall have
furnished to the Underwriters at the Closing Date with respect to any Terms
Agreement, a certificate, dated the Closing Date, of its President or a Vice
President and the Chief Financial Officer or Treasurer (as regards the Issuer)
or a Director and either the Director and Chief Financial Officer or the
Treasurer (as regards the Parent) stating that the representations and
warranties of the Issuer or the Parent (as the case may be) in Section 1 hereof
are true and correct with the same force and effect as though expressly made at
and as of the date of such certificate; the Issuer or the Parent (as the
13
<PAGE> 14
case may be) has complied in all material respects with all its agreements
contained herein; and the conditions set forth in Sections 5(a) and 5(b) hereof
have been fulfilled.
(h) Accountant's Letter. The Parent shall have furnished to the
Underwriters at the Closing Date with respect to any Terms Agreement a letter of
Price Waterhouse and Coopers & Lybrand, addressed jointly to the Issuer, the
Parent and the Underwriters and dated the Closing Date, of the type described in
the American Institute of Certified Public Accountants' Statement on Auditing
Standards No. 49, in form and substance reasonably satisfactory to the
Underwriters, the scope of which is set forth in Exhibit E.
(i) Ratings. As of the Closing Date with respect to any Terms
Agreement, the Securities to which such Terms Agreement relates shall have the
ratings accorded by one or more "nationally recognized statistical rating
organizations" (as defined by the Commission for purposes of Rule 436(g)(2) of
the Rules and Regulations) specified in such Terms Agreement, and the Issuer
shall have delivered to Merrill Lynch and Lehman Brothers a letter, dated as of
such date, from each such rating organization, or other evidence satisfactory to
Merrill Lynch and Lehman Brothers, confirming that the Shares have such ratings.
(j) Additional Conditions. There shall not have occurred: (i) any
material adverse change in or affecting the business, properties, condition
(financial or other) or results of operations or prospects of the Parent or the
Issuer and in either case its consolidated subsidiaries considered as a whole
which materially impairs the investment quality of the Securities; (ii) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange or the establishment of minimum prices on such exchange;
(iii) a general moratorium on commercial banking activities declared by Federal
or New York State authorities; (iv) any downgrading in the rating accorded the
Parent's debt securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act), or any
listing with negative implications of any debt securities of the Parent on
"Creditwatch" or other similar publication of formal review by any such
organization; (v) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national calamity or emergency; or (vi) any change in existing
domestic and international financial conditions which materially adversely
affects the financial markets in the United States; that in any such case in the
judgment of the Underwriters makes it impracticable or inadvisable to proceed
with the purchase of Securities from the Issuer pursuant to the applicable Terms
Agreement.
14
<PAGE> 15
(k) Other Information and Documentation. Prior to the Closing Date with
respect to any Terms Agreement, the Issuer and the Parent shall have furnished
to the Underwriters such further information, certificates and documents as the
Underwriters or counsel to the Underwriters may reasonably request to the extent
required by such Terms Agreement.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in the form and substance satisfactory to
counsel for the Underwriters and the form and substance of all such opinions,
letters, evidence and certificates shall be deemed satisfactory to counsel for
the Underwriters if in the form specified therefor in an exhibit to this
Agreement.
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of Underwriters. The Issuer and the Parent shall,
jointly and severally, indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the Act from
and against any loss, claim, damage or liability, joint or several and any
action in respect thereof, to which such Underwriter or controlling person may
become subject, under the Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus, or arises out of or is based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse each Underwriter and controlling person for any legal and other
expenses, as incurred, reasonably incurred by such Underwriter or controlling
person in investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action; provided, however, that neither the
Issuer nor the Parent shall be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the Issuer or the Parent by the
Underwriters specifically for inclusion therein; provided further, that as to
any prospectus included in the Registration Statement before it became effective
under the Act (a "Preliminary Prospectus") this indemnity agreement shall not
inure to the benefit of any Underwriter on account of any loss, claim, damage,
liability or action arising from the sale of Securities to any person by that
Underwriter if that Underwriter
15
<PAGE> 16
failed to send or give a copy of the Prospectus, as the same may be amended or
supplemented, to that person within the time required by the Act, and the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary Prospectus was corrected
in the Prospectus, unless such failure resulted from non-compliance by the
Issuer with Section 3(b). The foregoing indemnity agreement is in addition to
any liability which the Issuer may otherwise have to any Underwriter or
controlling Person.
(b) Indemnification of the Issuer and the Parent. Each Underwriter
shall indemnify and hold harmless the Issuer and the Parent, each of their
respective directors, each of their respective officers who signed the
Registration Statement and any person who controls the Issuer or the Parent
within the meaning of the Act from and against any loss, claim, damage or
liability, joint or several, and any action in respect thereof, to which the
Issuer or the Parent or any such director, officer or controlling person may
become subject, under the Act, the Exchange Act or federal or state statutory
law or regulation, at common law or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus, or arises out of, or is based upon,
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Issuer or the Parent by
such Underwriter specifically for inclusion therein, and shall reimburse the
Issuer or the Parent or any such director, officer or controlling person for any
legal and other expenses, as incurred, reasonably incurred by such indemnified
party in investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action. The foregoing indemnity agreement is
in addition to any liability which any Underwriter may otherwise have to the
Issuer or the Parent or any of its directors, officers or controlling persons.
(c) Notice. Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, suit or proceeding, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify the indemnifying party in writing
of the commencement of that action, suit or proceeding; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section. If any such action, suit or proceeding shall be brought against an
indemnified party, and it shall notify the indemnifying party
16
<PAGE> 17
thereof, the indemnifying party shall be entitled to participate therein, and,
to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel satisfactory to
the indemnified party. After notice from the indemnifying party of the
indemnified party of its election to assume the defense of such action, suit or
proceeding, the indemnifying party shall not be liable to the indemnified party
under this Section for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that an Underwriter shall have the
right to employ counsel to represent such Underwriter who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by such Underwriter against the Issuer or the Parent under this Section if such
Underwriter is advised by counsel that such Underwriter might have defenses not
available to the indemnifying party, and in that event the fees and expenses of
such counsel shall be paid by the indemnifying party. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 60
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) Contribution. If the indemnification provided for in this Section 6
shall for any reason be unavailable to an indemnified party under Section 6(a)
or 6(b) hereof in respect of any loss, claim, damage or liability, or any action
in respect thereof, referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Issuer and the
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<PAGE> 18
Parent on the one hand and any Underwriters on the other from the offering of
the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Issuer and the Parent on the one hand and any Underwriters on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the Issuer
on the one hand and any Underwriter on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (after deducting expenses) received by the Issuer and
the Parent bears to the total commission received by such Underwriter with
respect to such offering. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Issuer, the Parent or any Underwriter, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Issuer, the Parent and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 6(d) were to be determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 6(d) shall be deemed to include, for purposes
of this Section 6(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6(d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities sold through such Underwriter and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter have otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
SECTION 7. REPRESENTATIONS AND WARRANTIES TO SURVIVE
DELIVERY.
All representations and warranties of the Issuer and the Parent
contained in this Agreement or any Terms Agreement, or
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<PAGE> 19
contained in certificates of officers of the Issuer and the Parent submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of the termination or cancellation of this Agreement or any investigation made
by or on behalf of any Underwriter or any person controlling such Underwriter by
or on behalf of the Issuer or the Parent, and shall survive each delivery of and
payment for any of the Securities.
SECTION 8. TERMINATION.
This Agreement may be terminated for any reason with respect to any
party hereto, at any time, by any party hereto upon the giving of five days'
written notice of such termination to the other parties hereto; provided,
however, such termination shall be effective only with respect to such
terminating party. Any Underwriter may also terminate any Terms Agreement,
immediately upon notice to the Issuer, at any time prior to the Closing Date
relating thereto, if prior thereto there shall have occurred: (i) any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the business, properties, condition (financial or
other) or results of operations of the Issuer or the Parent and in either case
its consolidated subsidiaries and SB Biologicals considered as a whole, which
materially impairs the investment quality of the Securities; (ii) a suspension
or material limitation in trading in securities generally on the New York Stock
Exchange or the establishment of minimum prices on such exchange; (iii) a
general moratorium on commercial banking activities declared by Federal or New
York State authorities; (iv) any downgrading in the rating accorded the Parent's
debt securities by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act), or any listing with
negative implications of any debt securities of the Parent on "Creditwatch" or
other similar publication of formal review by any such organization; (v) any
outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial national
calamity or emergency; or (vi) any change in existing domestic and international
financial conditions which materially adversely affects the financial markets in
the United States; that in any such case in the judgment of such Underwriter
makes it impracticable or inadvisable to proceed with the purchase of Securities
from the Issuer pursuant to the applicable Terms Agreement. In the event of any
such termination, no party will have any liability to the other party, except
that (i) if at the time of termination (A) any Underwriter shall own any
Securities purchased pursuant to a Terms Agreement with the intention of
reselling them or (B) an offer to purchase any of the Securities has been
accepted by the Issuer but the time of delivery to the purchaser has not
occurred, the covenants set forth in Section 3
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<PAGE> 20
hereof shall remain in effect until such Securities are so resold or delivered,
as the case may be, and (ii) the provisions of Sections 3(d), 3(h), 3(i), 4, 6,
7, 10, 11 and 12 hereof shall remain in effect.
SECTION 9. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS.
If one or more of the Underwriters shall fail at the Closing Date to
purchase the Shares which it or they are obligated to purchase under the
applicable Terms Agreement (the "Defaulted Securities"), then the Representative
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Shares in such amounts as
may be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then:
(a) if the aggregate liquidation preference of Defaulted
Securities does not exceed 10% of the aggregate liquidation preference
of Shares to be purchased on such date pursuant to such Terms
Agreement, the non-defaulting Underwriters shall be obligated,
severally and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations under such
Terms Agreement bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the aggregate liquidation preference of Defaulted
Securities exceeds 10% of the aggregate liquidation preference of
Shares to be purchased on such date pursuant to such Terms Agreement,
such Terms Agreement shall terminate without liability on the part of
any non-defaulting Underwriter.
No action taken pursuant to this Section 9 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of the applicable Terms Agreement, either the Representative or the Issuer shall
have the right to postpone the Closing Date for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
the Prospectus or in any other documents or arrangements.
SECTION 10. NOTICES.
Except as otherwise provided herein, all notices and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if mailed or transmitted by any standard
20
<PAGE> 21
form of telecommunication. Notices to the Underwriters shall be directed to them
as follows: ___________________________________ notices to the Issuer and the
Parent shall be directed to them at SmithKline Beecham Corporation, One Franklin
Plaza, Philadelphia, Pennsylvania 19102, Attention: General Counsel (FP2225),
telecopier: 215-751-3935.
SECTION 11. BINDING EFFECT; BENEFITS.
This Agreement shall be binding upon each Underwriter, the Issuer, the
Parent and their respective successors and any Terms Agreement shall be binding
upon the applicable Underwriter or Underwriters, the Issuer and their respective
successors. This Agreement and any Terms Agreement and the terms and provisions
hereof and thereof are for the sole benefit of only those persons, except that
(a) the representations, warranties, indemnities and agreements of the Issuer
and the Parent contained in this Agreement shall also be deemed to be for the
benefit of the person or persons, if any, who control any Underwriter within the
meaning of Section 15 of the Act, and (b) the indemnity agreement of the
Underwriters contained in Section 7 hereof shall be deemed to be for the benefit
of directors of the Issuer and the Parent, officers of the Issuer and the Parent
who have signed the Registration Statement and any person controlling the Issuer
or the Parent. Nothing in this Agreement or any Terms Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section, any legal or equitable right, remedy or claim under or in respect
of this Agreement or any Terms Agreement or any provision contained herein or
therein. Without limiting the foregoing, purchasers of Securities through an
Underwriter shall not be deemed successors to any rights under this Agreement.
SECTION 12. GOVERNING LAW AND JURISDICTION; COUNTERPARTS.
(a) Governing Law and Jurisdiction. This Agreement and any Terms
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be performed wholly
within such jurisdiction. Each of the parties hereto hereby expressly and
irrevocably submits to the jurisdiction of any competent court in the place of
its domicile and any United States Federal or New York State court sitting in
the Borough of Manhattan, City and State of New York in any action or proceeding
arising out of or relating to this Agreement or any Terms Agreement, to the
extent that such court has subject matter jurisdiction over the controversy, and
expressly and irrevocably waives, to the extent permitted under applicable law,
any immunity from the jurisdiction thereof and any claim or defense in such
action or proceeding based on a claim of improper venue, forum non conveniens or
any similar basis to which it might otherwise be entitled in any such action
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<PAGE> 22
or proceeding. The Parent and the Issuer each hereby appoints CT Corporation
System as their authorized agent (hereinafter called the "Authorized Agent")
upon which process may be served in any action to enforce any claim arising out
of or relating to this Agreement or any Terms Agreement which may be instituted
in any United Stated Federal or New York State court in the Borough of
Manhattan, City and State of New York by the Underwriters; such appointment
shall be for a period of six years from the settlement date in relation to the
last sale of Securities hereunder. The Parent and the Issuer each will take any
and all action including the filing of any and all documents and instruments
that may be necessary to continue such appointment or appointments in full force
and effect as aforesaid. Service of such process upon the Authorized Agent shall
be deemed in every respect, effective service of process upon the Parent or the
Issuer, as the case may be. Either the Parent or the Issuer may substitute a new
Authorized Agent by giving notice thereof as provided in Section 11 of this
Agreement.
(b) Counterparts. This Agreement may be executed in
counterparts and the executed counterparts shall together
constitute a single instrument.
SECTION 13. PARAGRAPH HEADINGS.
The paragraph headings used in this Agreement are for convenience of
reference only, and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
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<PAGE> 23
If the foregoing correctly sets forth our agreement, please
indicate your acceptance hereof in the space provided for that purpose below.
Very truly yours,
SMITHKLINE BEECHAM HOLDINGS
CORPORATION
By:______________________________
Authorized Signatory
SMITHKLINE BEECHAM plc
By:_______________________________
Authorized Signatory
CONFIRMED AND ACCEPTED, as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:_________________________________
Authorized Signatory
LEHMAN BROTHERS INC.
By:_________________________________
Authorized Signatory
each acting on behalf of itself
and the other Underwriters
<PAGE> 24
Exhibit A
SMITHKLINE BEECHAM HOLDINGS CORPORATION
Flexible Auction Rate Preferred Stock
Liquidation Preference $100,000 Per Share
With a limited guarantee of declared and unpaid dividends by
SMITHKLINE BEECHAM PLC
TERMS AGREEMENT
[Closing Date]
To: SMITHKLINE BEECHAM HOLDINGS CORPORATION
One Franklin Plaza
Philadelphia, Pennsylvania 19102
Ladies and Gentlemen:
We understand that SMITHKLINE BEECHAM HOLDINGS CORPORATION (the
"Company"), proposes to issue and sell shares of its preferred stock, without
par value and with a liquidation preference of $100,000 per share (the
"Shares"). Subject to the terms and conditions set forth or incorporated by
reference herein, the underwriters named below (the "Underwriters") offer to
purchase, severally and not jointly, the number of Shares opposite their names
set forth below at the purchase price set forth below, to the extent any are
purchased.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
- ----------- ---------
<S> <C>
---------------
Total [$]
===============
</TABLE>
Title:
Rank:
Ratings:
Number of Shares:
Dividend rate (or formula) per share: $
Dividend payment dates:
Liquidation preference per share: $100,000
Redemption provisions:
Listing requirements:
Black-out provisions:
Lock-up provisions:
A-1
<PAGE> 25
Initial public offering price per share: $___ plus accumulated dividends, if
any, from _____
Purchase price per share: $___ plus accumulated dividends, if any, from _____
Other terms and conditions:
Closing date and location:
All of the provisions contained in the Underwriting Agreement to which
this Terms Agreement relates are hereby incorporated by reference in their
entirety herein and shall be deemed to be a part of this Terms Agreement to the
same extent as if such provisions had been set forth in full herein. Terms
defined in such document are used herein as therein defined.
Please accept this offer no later than ____ o'clock P.M. (New York City
time) on ______________ by signing a copy of this Terms Agreement in the space
set forth below and returning the signed copy to us.
Very truly yours,
[INSERT NAME(S) OF UNDERWRITER(S)]
By _________________________
Authorized Signatory
[Acting on behalf of itself and the
other named Underwriters.]
Accepted:
SMITHKLINE BEECHAM HOLDINGS CORPORATION
By _________________________
Name:
Title:
A-2
<PAGE> 26
EXHIBIT B-1
[Letterhead of Cleary, Gottlieb, Steen & Hamilton]
July __, 1996
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Lehman Brothers Inc.
as Representatives of the several Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center
North Tower
New York, New York 10281
Ladies and Gentlemen:
We have acted as special counsel to SmithKline Beecham
Holdings Corporation, a Delaware corporation (the "Company"), and SmithKline
Beecham plc, an English public limited company ("SmithKline Beecham"), in
connection with the Company's offering pursuant to a registration statement on
Form F-3 (No. 333-____) of Flexible Auction Rate Preferred Stock, with a limited
guarantee of declared and unpaid dividends by SmithKline Beecham (collectively,
the "Securities"). Such registration statement, as amended when it became
effective, but excluding the documents incorporated by reference therein, is
herein called the "Registration Statement," and the related prospectus, as
supplemented by the prospectus supplement dated July __, 1996 (the "Prospectus
Supplement"), and as first filed with the Securities and Exchange Commission
pursuant to Rule 424(b)(2) under the Securities Act of 1933, as amended (the
"Securities Act"), but excluding the documents incorporated by reference
therein, is herein called the "Prospectus." This opinion letter is furnished
pursuant to Section 5(e) of the underwriting agreement dated July __, 1996 (the
"Underwriting Agreement") between the Company and the several underwriters named
therein (the "Underwriters").
<PAGE> 27
In arriving at the opinions expressed below, we have reviewed
the following documents:
(a) an executed copy of the Underwriting Agreement;
(b) an executed copy of a Terms Agreement, dated July __,
1996, setting forth the terms of the offering and sale of
the Securities to which the Prospectus Supplement
relates;
(c) the Registration Statement and the documents incorporated
by reference therein;
(d) the Prospectus and the documents incorporated by
reference therein;
(e) a specimen of the Securities; and
(f) the documents delivered to you by the Company at the
closing pursuant to the Underwriting Agreement, including
copies of the Company's Certificate of Incorporation and
By-Laws, and the Certificate of Designations under which
the terms of the Securities have been designated, each
certified by the Secretary of State of the State of
Delaware and the corporate secretary of the Company,
respectively.
In addition, we have reviewed the originals or copies
certified or otherwise identified to our satisfaction of all such corporate
records of the Company and such other instruments and other certificates of
public officials, officers and representatives of the Company and such other
persons, and we have made such investigations of law, as we have deemed
appropriate as a basis for the opinions expressed below.
In rendering the opinions expressed below, we have assumed the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies. In addition, we have
assumed and have not verified (i) the accuracy as to factual matters of each
document we have reviewed (including, without limitation, the accuracy of the
representations and warranties of the Company in the Underwriting Agreement) and
2
<PAGE> 28
(ii) that the Securities conform to the specimen thereof that we have reviewed.
Terms capitalized but not otherwise defined herein shall have the meanings set
forth in the Underwriting Agreement.
Based on the foregoing, and subject to the further assumptions
and qualifications set forth below, it is our opinion that:
1. The Company is validly existing as a corporation in good
standing under the laws of the State of Delaware.
2. The Company has corporate power to own its properties and
conduct its business as described in the Prospectus, and the Company has
corporate power to issue the Securities, to enter into the Underwriting
Agreement and to perform its obligations thereunder.
3. The Securities have been duly authorized by all necessary
corporate action of the Company and, when issued and delivered by the Company
pursuant to the Underwriting Agreement and the applicable Terms Agreement
against payment of the consideration therefor, will be validly issued, fully
paid and nonassessable; and the holders of outstanding shares of capital stock
of the Company will not be entitled to any preemptive rights to subscribe for
the Securities under the Certificate of Incorporation or By-Laws of the Company
or the General Corporation Law of the State of Delaware.
4. The statements set forth under the headings "Description of
Securities" and "Description of Other Capital Stock" in the Prospectus, insofar
as such statements purport to summarize certain provisions of the Securities and
the Certificate of Incorporation of the Company, provide a fair summary of such
provisions.
5. The execution and delivery of the Underwriting Agreement
have been duly authorized by all necessary corporate action of the Company, and
the Underwriting Agreement has been duly executed and delivered by each of the
Company and the Guarantor.
3
<PAGE> 29
6. The issuance and sale of the Securities to the Underwriters
pursuant to the Underwriting Agreement, and the performance by the Company and
the Guarantor of their obligations in the Underwriting Agreement, (a) do not
require any consent, approval, authorization, registration or qualification of
or with any governmental authority of the United States or the State of New
York, except such as have been obtained or effected under the Securities Act and
the Securities Exchange Act of 1934, as amended, (but we express no opinion as
to any consent, approval, authorization, registration or qualification that may
be required under state securities or Blue Sky laws), and (b) do not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under the Certificate of Incorporation or By-Laws of the Company.
7. The Company is not required to register as an "investment
company" under the Investment Company Act of 1940, as amended.
Insofar as the foregoing opinions relate to the valid
existence and good standing of the Company, they are based solely on a
certificate of good standing received from the Secretary of State of the State
of Delaware and on a telephonic confirmation from such Secretary of State.
Insofar as the foregoing opinions relate to the legality, validity, binding
effect or enforceability of any agreement or obligation of the Company or the
Guarantor, (a) we have assumed that each other party to such agreement or
obligation has satisfied those legal requirements that are applicable to it to
the extent necessary to make such agreement or obligation enforceable against
it, and (b) such opinions are subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general principles of
equity.
4
<PAGE> 30
The foregoing opinions are limited to the federal law of the
United States of America, the law of the State of New York and the General
Corporation Law of the State of Delaware.
We are furnishing this opinion letter to you, as
Representatives of the Underwriters, solely for the benefit of the Underwriters
in connection with the offering of the Securities. This opinion letter is not to
be used, circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By: ____________________________________
Paul J. Shim, a Partner
5
<PAGE> 31
EXHIBIT B-2
[Letterhead of Cleary, Gottlieb, Steen & Hamilton]
July __, 1996
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Lehman Brothers Inc.
as Representatives of the several Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center
North Tower
New York, New York 10281
Ladies and Gentlemen:
We have acted as special counsel to SmithKline Beecham
Holdings Corporation, a Delaware corporation (the "Company"), and SmithKline
Beecham plc, an English public limited company ("SmithKline Beecham"), in
connection with the Company's offering pursuant to a registration statement on
Form F-3 (No. 333-____) of Flexible Auction Rate Preferred Stock with a limited
guarantee of declared and unpaid dividends by SmithKline Beecham (collectively,
the "Securities"). Such registration statement, as amended when it became
effective, but excluding the documents incorporated by reference therein, is
herein called the "Registration Statement," and the related prospectus, as
supplemented by the prospectus supplement dated July __, 1996 (the "Prospectus
Supplement") and as first filed with the Securities and Exchange Commission (the
"Commission") pursuant to Rule 424(b)(2) under the Securities Act of 1933, as
amended (the "Securities Act"), but excluding the documents incorporated by
reference therein, is herein called the "Prospectus." This letter is furnished
to you pursuant to Section 5(e) of the underwriting
<PAGE> 32
agreement dated July __, 1996 (the "Underwriting Agreement") between the Company
and the several Underwriters named therein (the "Underwriters").
Because the primary purpose of our professional engagement was
not to establish or confirm factual matters or financial, accounting or
statistical information, and because many determinations involved in the
preparation of the Registration Statement and the Prospectus and the documents
incorporated by reference therein are of a wholly or partially non-legal
character or relate to legal matters outside the scope of our opinion letter to
you of even date herewith, we are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus or the documents
incorporated by reference therein (except to the extent expressly set forth in
numbered paragraph 4 of our opinion letter to you of even date herewith) and we
make no representation that we have independently verified the accuracy,
completeness or fairness of such statements (except as aforesaid).
However, in the course of our acting as special counsel to the
Company in connection with its preparation of the Registration Statement and the
Prospectus, we participated in conferences and telephone conversations with
representatives of the Company, representatives of the independent public
accountants for the Company, your representatives and representatives of your
counsel, during which conferences and conversations the contents of the
Registration Statement and the Prospectus and related matters were discussed,
and we reviewed certain corporate records and documents furnished to us by the
Company.
Based on our participation in such conferences and
conversations and our review of such records and documents as described above,
our understanding of the U.S. federal securities laws and the experience we have
gained in our practice thereunder, we advise you that:
2
<PAGE> 33
(a) The Registration Statement (except the financial
statements and schedules and other financial and statistical data
included therein, as to which we express no view), at the time it
became effective, and the Prospectus (except as aforesaid), as of the
date thereof, appeared on their face to be appropriately responsive in
all material respects to the requirements of the Securities Act and the
rules and regulations thereunder. In addition, we do not know of any
contracts or other documents of a character required to be filed as
exhibits to the Registration Statement or required to be described in
the Registration Statement or the Prospectus that are not filed or
described as required.
(b) No information has come to our attention that
causes us to believe that the Registration Statement, including the
documents incorporated by reference therein (except the financial
statements and schedules and other financial and statistical data
included therein, as to which we express no view), at the time it
became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) No information has come to our attention that
causes us to believe that the Prospectus, including the documents
incorporated by reference therein (except the financial statements and
schedules and other financial and statistical data included therein, as
to which we express no view), as of the date thereof or hereof,
contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
We confirm to you that (based solely upon a telephonic
confirmation from a representative of the Commission) the Registration Statement
is effective under the Securities Act
3
<PAGE> 34
and, to the best of our knowledge, no stop order with respect thereto has been
issued, and no proceeding for that purpose has been instituted or threatened, by
the Commission. To the best of our knowledge, no order directed to any document
incorporated by reference in the Registration Statement or the Prospectus has
been issued by the Commission and remains in effect, and no proceeding for that
purpose has been instituted or threatened by the Commission.
We are furnishing this letter to you, as Representatives of
the Underwriters, solely for the benefit of the Underwriters in connection with
the offering of the Securities. This letter is not to be used, circulated,
quoted or otherwise referred to for any other purpose.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By
------------------------------------
Paul J. Shim, a Partner
4
<PAGE> 35
EXHIBIT C
[letterhead of SmithKline Beecham
Holdings Corporation]
[Closing Date]
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
LEHMAN BROTHERS
Lehman Brothers Inc.
As Representatives of the
several Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281
Dear Sirs:
I am _______________ for SmithKline Beecham Holdings Corporation (the
"Issuer") and in that capacity have acted, together with members of my staff, as
counsel for the Issuer in connection with the preparation of the Registration
Statement of the Issuer and SmithKline Beecham plc (the "Parent") on Form F-3
(Registration No. __________) and the Prospectus and Prospectus Supplement
included therein, filed with the U.S. Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Act"), relating to the issuance and
sale by the Issuer of up to 11,500 shares of preferred stock, without par value
and with a liquidation preference of $100,000 per share (the "Shares"), from
time to time, in one or more offerings on terms to be determined at the time of
sale. Payment of declared and unpaid dividends on the Shares is unconditionally
and irrevocably guaranteed (the "SB Guarantee") by the Parent, which has entered
into a support agreement (the "SB Support Agreement") to make additional capital
contributions to the Issuer in certain circumstances. The Parent has also
guaranteed the payment to the Issuer by SmithKline Beecham Biologicals S.A., an
indirect Belgian pharmaceutical subsidiary of Parent ("SB Biologicals"), of
dividends declared by SB Biologicals on the shares of its preferred stock ("SB
Biologicals Preferred Stock") held by the Issuer (the "SB Biologicals Guarantee"
and together with the SB Guarantee, the "Guarantees" and each a "Guarantee") and
has entered into a support agreement with SB Biologicals under which the Parent
will be obligated to make additional capital contributions to SB Biologicals in
certain
C-1
<PAGE> 36
circumstances to enable SB Biologicals to declare and pay dividends on the SB
Biologicals Preferred Stock (the "SB Biologicals Support Agreement" and together
with the SB Support Agreement, the "Support Agreements" and each a "Support
Agreement"). Capitalized terms used herein without definition have the
respective meanings specified in the Underwriting Agreement.
In so acting, I have participated in the preparation of the
Registration Statement, the Underwriting Agreement, and the various agreements
and instruments contemplated thereby. I have also examined and relied as to
factual matters upon the representations contained in and made pursuant to the
Registration Statement, the Underwriting Agreement, and originals or copies,
certified or otherwise identified to my satisfaction, of such records,
documents, certificates and other instruments and such information otherwise
supplied to me by the Issuer and the Parent as in my judgment are necessary or
appropriate to enable me to render the opinion expressed below.
I am of the following opinion:
(i) The Issuer has been duly incorporated and is validly
existing and in good standing under the laws of Delaware, is duly
qualified to do business and in good standing as a foreign corporation
in each jurisdiction in which its ownership of properties or the
conduct of its business requires such qualification (except to the
extent that the failure to so qualify would not have a material adverse
impact on the operations of the Issuer and its consolidated
subsidiaries considered as a whole), and has the power and authority
necessary to own or hold its properties and to conduct the businesses
in which it is engaged, as described in the Prospectus.
(ii) I have no reason to believe that the Registration
Statement, as of its effective date and as of the date hereof,
contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus, as of the effective date of the Registration Statement and
as of the date hereof, included or includes any untrue statement of a
material fact or omitted or omits to state a material fact required to
be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(iii) All of the issued and outstanding capital stock of each
subsidiary of the Issuer has been duly authorized and is validly
issued, fully paid and non-assessable and is owned by the Issuer,
directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance,
C-2
<PAGE> 37
claim or equity. None of the outstanding shares of capital stock of any
such subsidiary was issued in violation of preemptive or other similar
rights of any securityholder of such subsidiary.
(iv) The Issuer is not involved in any litigation or
arbitration proceedings which are required to be described in the
Registration Statement or Prospectus and which are not so described nor
is any such litigation or arbitration pending nor, to my knowledge,
threatened against the Issuer.
(v) I do not know of any contracts or other documents which
are required to be filed as exhibits to the Registration Statement by
the Act or by the Rules and Regulations, or which are required to be
filed by the Exchange Act or the rules and regulations of the
Commission thereunder as exhibits to any document incorporated by
reference in the Prospectus, which have not been filed as exhibits to
the Registration Statement or to such document or incorporated therein
by reference as permitted by the Rules and Regulations or the rules and
regulations of the Commission under the Exchange Act, as the case may
be.
(vi) To the best of my knowledge, the Issuer is not in
violation of its corporate charter or by-laws, or in default under any
agreement, indenture or instrument, the effect of which violation or
default would be material to the Issuer and its consolidated
subsidiaries considered as a whole.
(vii) The execution and delivery of the Underwriting Agreement
and any Terms Agreement, the additional agreements contemplated by the
Underwriting Agreement, the Shares, and the SB Support Agreement, and
the issue of the Shares and the performance of the terms of the Shares,
the Underwriting Agreement, any Terms Agreement and the additional
agreements contemplated by the Underwriting Agreement and the Shares,
and the SB Support Agreement, and will not infringe any existing law or
regulation and are not contrary to the provisions of the Certificate of
Incorporation, any Certificate of Designations or the By-Laws of the
Issuer and will not result in any material breach of the terms of, or
constitute a material default under, any instrument or agreement to
which the Issuer is a party or by which it or its property is bound.
(viii) The authorized, issued and outstanding shares of
capital stock of the Issuer is as set forth in the column entitled
"Actual" under the "Capitalization" section of the Prospectus (except
for subsequent issuances thereof, if any, contemplated under the
Underwriting Agreement, pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectus or pursuant to the
exercise of convertible securities or options referred to in the
Prospectus). Such shares of capital stock have been duly authorized and
validly issued by the Issuer and are fully paid and non-assessable, and
none of such shares of capital stock was issued in violation of
preemptive or other similar rights of any securityholder of the
Issuer.
(ix) The Issuer has complied with all applicable provisions
of Florida H.B. 1771, Section 1, Chapter 92-198 of the Florida
Securities and Investors Act, and all regulations thereunder relating
to issuers doing business with Cuba.
I call your attention to the fact that I am an attorney qualified to
practice law in the Commonwealth of Pennsylvania and am not an expert in the law
of the State of New York. Accordingly, in giving this opinion I have, with your
permission, relied as to all matters governed by New York law upon the opinion
of even date herewith rendered to you by Cleary, Gottlieb, Steen & Hamilton
relating to the Shares.
C-3
<PAGE> 38
In rendering their opinion to you of even date herewith, Brown & Wood
and Cleary, Gottlieb, Steen & Hamilton may rely, to the extent indicated in such
opinion, upon this letter as if it were addressed directly to them.
Very truly yours,
Donald F. Parman
Associate General Counsel
C-4
<PAGE> 39
EXHIBIT D
[letterhead of counsel for SmithKline Beecham plc]
[Closing Date]
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
LEHMAN BROTHERS
Lehman Brothers Inc.
As Representatives of the
several Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281
USA
Dear Sirs:
I am Legal Counsel for SmithKline Beecham plc (the "Parent") and in
that capacity have acted, together with members of my staff, as counsel for the
Parent in connection with the preparation of the Registration Statement of
SmithKline Beecham Holdings Corporation (the "Issuer") and the Parent on Form
F-3 (Registration No. __________) and the Prospectus and Prospectus Supplement
included therein, filed with the U.S. Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Act"), relating to the issuance and
sale by the Issuer of up to 12,920 shares of Flexible Auction Rate Preferred
Stock, with a liquidation preference of $100,000 per share (the "Shares"), from
time to time, in one or more series. Payment of declared and unpaid dividends on
the Shares is guaranteed on the terms an subject to the conditions of a
guarantee (the "SB Guarantee") granted by the Parent, which has entered into a
support agreement (the "SB Support Agreement") to make additional capital
contributions to the Issuer in certain circumstances. The Parent has also
guaranteed the payment to the Issuer by SmithKline Beecham Biologicals S.A., an
indirect Belgian pharmaceutical subsidiary of Parent ("SB Biologicals"), of
dividends declared by SB Biologicals on the shares of its preferred stock ("SB
Biologicals Preferred Stock") held by the Issuer on the terms and subject to the
conditions of a guarantee (the "SB Biologicals Guarantee" and together with the
SB Guarantee, the "Guarantees" and each a "Guarantee") and has entered into a
support agreement with SB Biologicals under which the Parent will be obligated
to make additional capital contributions to SB Biologicals in certain
circumstances to enable SB Biologicals to declare and pay dividends on the SB
Biologicals Preferred Stock (the "SB Biologicals Support Agreement" and together
with the SB Support Agreement, the "Support Agreements" and each a "Support
Agreement"). Capitalized terms used herein without definition have the
respective meanings specified in the underwriting agreement between the Parent,
the Issuer and yourselves as representatives of the underwriters relating to the
underwriting of the issuance of the Shares (the "Underwriting Agreement").
D-1
<PAGE> 40
In so acting, I have participated in the preparation of the
Registration Statement, the Underwriting Agreement, the Guarantees, the
Support Agreements and the various agreements and instruments contemplated
thereby. I have also examined and relied as to factual matters upon the
representations contained in and made pursuant to the Registration Statement,
the Underwriting Agreement, the Support Agreements and the Guarantees and
originals or copies, certified or otherwise identified to my satisfaction, of
such records, documents, certificates and other instruments and such information
otherwise supplied to me by the Issuer and the Parent as in my judgment are
necessary or appropriate to enable me to render the opinion expressed below.
I am of the following opinion:
(i) The Parent has been duly incorporated and is validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the power and authority necessary to own or hold
its properties and to conduct the businesses in which it is engaged, as
described in the Prospectus.
(ii) I have no reason to believe that the Registration
Statement, as of its effective date and as of the date hereof,
contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus, as of the effective date of the Registration Statement and
as of the date hereof, included or includes any untrue statement of a
material fact or omitted or omits to state a material fact required to
be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(iii) Neither SB Biologicals, nor the Parent nor any of the
Parent's consolidated subsidiaries is involved in any litigation or
arbitration proceedings which are required to be described in the
Registration Statement or Prospectus and which are not so described nor
is any such litigation or arbitration pending or, to the knowledge of
the Parent, threatened against SB Biologicals, the Parent or any of the
Parent's consolidated subsidiaries.
(iv) No consents, approvals, orders or decrees of any United
Kingdom court, governmental agency or body, or other regulatory body
are required by the Parent for the execution and delivery by the Parent
of the Underwriting Agreement, the Guarantees or Support Agreements or
the additional agreements contemplated by the Underwriting Agreement,
the issue of, and the performance of the terms of, the Shares by the
Issuer, the performance of the terms of the Guarantees, the Support
Agreements and the Underwriting Agreement by the Parent or the
execution, delivery and performance by the Parent of any additional
agreements contemplated by the Underwriting Agreement.
(v) I do not know of any contracts or other documents which
are required to be filed as exhibits to the Registration Statement by
the Act or by the Rules and Regulations, or which are required to be
filed by the Exchange Act or the rules and regulations of the
Commission thereunder as exhibits to any document incorporated by
reference in the Prospectus, which have not been filed as exhibits
D-2
<PAGE> 41
to the Registration Statement or to such document or incorporated
therein by reference as permitted by the Rules and Regulations or the
rules and regulations of the Commission under the Exchange Act, as the
case may be.
(vi) The Parent is not in violation of its Memorandum or
Articles of Association or other constitutive documents or in default
under any agreement, indenture or instrument, the effect of which
violation or default would be material to the Parent and its
consolidated subsidiaries considered as a whole.
(vii) The Underwriting Agreement has been duly authorized,
executed and delivered by Parent.
(viii) The Guarantees and the Support Agreements have each
been duly authorized, executed and delivered by the Parent.
(ix) The execution and delivery of the Underwriting Agreement,
the Guarantees, the Support Agreements and the additional agreements
contemplated by the Underwriting Agreement and the performance of the
terms thereof by the Parent will not infringe on any existing law or
regulation and are not contrary to the provisions of the Memorandum and
Articles of Association of the Parent and will not result in any
material breach of the terms of, or constitute a material default
under, any instrument or agreement to which the Parent is a party or
by which it or its property is bound.
(x) The authorized, issued and outstanding share capital of
the Parent as of December 31, 1995 was as set forth in the financial
statements of the Parent as of December 31, 1995, which are
incorporated by reference in the Prospectus.
I call your attention to the fact that I am an attorney qualified to
practice law in England and, accordingly, express no opinion as to any laws
other than the laws of England.
Very truly yours,
Legal Counsel
D-3
<PAGE> 42
EXHIBIT E
SMITHKLINE BEECHAM HOLDINGS CORPORATION
Flexible Auction Rate Preferred Stock
Liquidation Preference $100,000 per Share
With Limited Guarantee of Declared and Unpaid Dividends by
SmithKline Beecham plc
SCOPE OF AUDITORS' COMFORT LETTER
I. Consent to inclusion in the Registration Statement of the
auditors' report relating to the financial statements of the
Issuer contained therein and incorporation by reference in the
Registration Statement of the auditors' report contained in
the most recent annual report of the Parent.
II. Statement confirming that the auditors are duly appointed
independent auditors of the Issuer and the Parent.
III. Confirmation regarding the accounting principles followed
in the preparation of the accounts included or
incorporated by reference in the Registration Statement.
IV. For each of the Issuer and Parent, with respect to the
consolidated balance sheets as of March 31, 1996 and 1995
and the statements of income, cash flows and shareholders
equity for the three months ended March 31, 1996 and
1995, confirmation that the auditors have read such
information and made inquiries of certain officials of
the Issuer or Parent, as the case may be, who have
responsibility for financial and accounting matters
regarding whether such information is in conformity with
applicable generally accepted accounting principles
("GAAP") applied on a basis substantially consistent with
that of the audited consolidated financial statements.
V. Based on procedures consisting of a reading of the
unaudited interim financial statements of each of Issuer
and Parent included in the Registration Statement, a
review of interim financial information in accordance
with applicable accounting standards, the procedures
described in Item IV above and such other inquiries and
procedures as may be appropriate, negative assurance that
the unaudited interim financial statements of Issuer and
Parent included in the Registration Statement comply as
to form with the accounting requirements of the Act and
the Rules and Regulations applicable to unaudited interim
E-1
<PAGE> 43
financial statements included in registration statements, and
that no material modifications are needed for such financial
statements to be in conformity with applicable GAAP;
VI. Based on the procedures set forth or referred to in Item
V above and a reading of the selected financial data
included in the Registration Statement and a reading of
the financial statements from which such data were
derived, negative assurance that the selected financial
data included in the Registration Statement comply as to
form in all material respects with the disclosure
requirements of Item 301 of Regulation S-K under the Act,
that the amounts included in the selected financial data
are in agreement with the corresponding amounts in the
audited financial statements for the respective periods
and that the financial statements not included in the
Registration Statement from which certain of such data
were derived are in conformity with applicable generally
accepted accounting principles;
VII. Confirmation that the disclosure under applicable
captions in the Registration Statement complies as to
form in all material respects with the requirements of
Items 302, 402 and 503(d) of Regulation S-K;
VIII. Procedures to be followed in respect of certain other
specified information set out in the Registration Statement
and the Parent's annual report on Form 20-F and the Parent's
quarterly reports on Form 6-K not set forth in the audited
accounts:
A. Compared the specified sterling or dollar amounts or number of
shares to the audited financial statements of the Issuer or
the Parent, as applicable, included or incorporated by
reference in the Registration Statement, to the extent such
amounts are included in or can be derived from such statements
and found them to be in agreement;
B. Compared the specified sterling or dollar amounts or
number of shares to the general accounting records of the
Issuer or the Parent, as applicable, to the extent such
amounts are included in or can be derived from such
records and found them to be in agreement;
C. Compared other sterling or dollar amounts or number of
shares to amounts in analyses prepared by the Issuer or
the Parent, as applicable, and found them to be in
agreement;
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D. Proved the arithmetic accuracy of the ratios and
percentages based upon the data in the above mentioned
audited financial statements, unaudited financial
statements, accounting records and analyses.
IX. Confirmation that with respect to the period since the
most recent year-end for which audited financial
statements have been prepared, such auditors have carried
out certain procedures including, without limitation, a
reading of all minutes of meetings of the Board of
Directors of each of the Issuer and the Parent since such
year-end, a review of unaudited management information
reports for such period for consistency with the audited
accounts, and discussions with the chief financial and
accounting officers of the Issuer and the Parent
regarding matters which arose from such review and the
questions whether (i) there were any increases, at the
date not more than five days prior to the date of the
comfort letter, with respect to long-term indebtedness or
any decreases in stockholders' equity of the Issuer and
its subsidiaries and SB Biologicals or the Parent and its
subsidiaries or (ii) for the period from such year-end
through the date not more than five days prior to the
date of the comfort letter there were any decreases, as
compared with the corresponding period in the preceding
year, in net income, and that on the basis of such
procedures, nothing came to their attention that caused
them to believe that there was any such increase or
decrease in the stockholders' equity, long-term
indebtedness, or net income of the Issuer and its
subsidiaries and SB Biologicals or the Parent and its
subsidiaries since such year-end.
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<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
SMITHKLINE BEECHAM HOLDINGS CORPORATION
I, THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is SmithKline Beecham Holdings
Corporation (hereinafter referred to as the "Corporation").
SECOND: The name and address of its registered agent is Corporation
Service Company, 1013 Centre Road, in the City of Wilmington, in the County of
New Castle, in the State of Delaware.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: A. Authorized Stock. The total number of shares of all classes
which the Corporation shall have authority to issue is sixty thousand (60,000)
shares, of which ten thousand (10,000) shares, no par value, shall be of a class
designated "Common Stock," and fifty thousand (50,000) shares, no par value,
shall be of a class designated "Preferred Stock."
<PAGE> 2
B. Common Stock. The Common Stock shall be subject to the
express terms of the Preferred Stock and any series thereof. Each share of
Common Stock shall have the right to cast one vote for each share for the
election of Directors and on all other matters upon which stockholders are
entitled to vote.
C. Preferred Stock. The Board of Directors is authorized,
subject to limitations prescribed by law and the provisions of this certificate,
to provide for the issuance from time to time in one or more series of any
number of shares of Preferred Stock, and, by filing a certificate pursuant to
the GCL (the "Preferred Stock Designation"), to establish the number of shares
to be included in each series, and to fix the designation, relative rights,
preferences, qualifications and limitations of the shares of each such series.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(i) The designation of the series, which may be by
distinguishing number, letter or title.
(ii) The number of shares of the series, which number the
Board of Directors may thereafter (except where otherwise provided in
the Preferred Stock Designation) increase or decrease (but not below
the number of shares thereof then outstanding).
(iii) The voting rights, if any, of the holders of shares of
the series.
(iv) Whether dividends, if any, shall be cumulative or
noncumulative and the dividend rate of the series, and the preferences,
if any, over any other series (or of any other series over such series)
with respect to dividends.
(v) Dates at which dividends, if any, shall be payable.
(vi) The redemption rights and price or prices, if any, for
shares of the series.
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(vii) The amounts payable on, and the preferences, if any, of
shares of the series in the event of any voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up of the
affairs of the Corporation.
(viii) The terms and amount of any purchase, retirement or
sinking fund provided for the purchase or redemption of shares of the
series.
(ix) Whether the shares of the series shall be convertible
into or exchangeable for shares of any other class or series, or any
other security, of the Corporation or any other corporation, and, if
so, the specification of such other class or series of such other
security, the conversion or exchange price or prices or rate or rates,
any adjustments thereof, the date or dates at which such shares shall
be convertible or exchangeable and all other terms and conditions upon
which such conversion or exchange may be made.
(x) Whether the issuance of additional shares of Preferred
Stock shall be subject to restrictions as to issuance, or as to the
powers, preferences or other rights of any other series.
(xi) The right of the shares of such series to the benefit of
conditions and restrictions upon the creation of indebtedness of the
Corporation or any subsidiary of the Corporation, upon the issue of any
additional stock (including additional shares of such series or any
other series) and upon the payment of dividends or the making of other
distributions on, and the purchase, redemption or other acquisition by
the Corporation or any subsidiary of any outstanding stock of the
Corporation.
(xii) Such other powers, preferences and relative,
participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof as the Board of
Directors shall determine.
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The holders of Preferred Stock shall not have any preemptive
rights except to the extent such rights shall be specifically provided for in
the resolution or resolutions providing for the issuance thereof adopted by the
Board of Directors.
FIFTH: The name and address of the sole incorporator is
as follows:
NAME ADDRESS
Margo Baender c/o Cleary, Gottlieb,
Steen & Hamilton
One Liberty Plaza
New York, New York 10006
SIXTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of the
Corporation, and for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders:
(1) The number of directors of the Corporation shall be such
as from time to time shall be fixed by, or in the manner provided in, the
by-laws. Election of directors need not be by written ballot unless the by-laws
so provide.
(2) The Board of Directors shall have powers without the
assent or vote of the stockholders to make, alter, amend, change, add to or
repeal the by-laws of the Corporation; to fix and vary the amount to be reserved
for any proper purpose; to authorize and cause to be executed mortgages and
liens upon all or any part of the property of the Corporation; to determine the
use and disposition of any surplus or net profits; and to fix the times for the
declaration and payment of dividends.
(3) The directors in their discretion may submit any contract
or act for approval or ratification at any annual meeting of the stockholders or
at any meeting of the stockholders called for the purpose of considering any
such act or contract, and any contract or
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<PAGE> 5
act that shall be approved or be ratified by the vote of the holders of a
majority of the stock of the Corporation which is represented in person or by
proxy at such meeting and entitled to vote thereat (provided that a lawful
quorum of stockholders be there represented in person or by proxy) shall be as
valid and as binding upon the Corporation and upon all the stockholders as
though it had been approved or ratified by every stockholder of the Corporation,
whether or not the contract or act would otherwise be open to legal attack
because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or
by statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts as may be exercised or done by the
Corporation; subject, nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and of any by-laws from time to time made by the
stockholders; provided, however, that no by-laws so made shall invalidate any
prior act of the directors which would have been valid if such by-laws had not
been made.
SEVENTH: The Corporation shall, to the full extent permitted
by Section 145 of the General Corporation Law of the State of Delaware, as
amended from time to time, indemnify all persons whom it may indemnify pursuant
thereto. A director of the Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for breach of his fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the Corporation hereunder in respect of any
act or omission occurring prior to the timing of such amendment, modification or
repeal.
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<PAGE> 6
EIGHTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for the Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
NINTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of incorporation in
the manner now or hereafter prescribed by law, and all rights and powers
conferred herein on stockholders, directors and officers are subject to this
reserved power.
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<PAGE> 7
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day
of May, 1996.
/s/ Margo Baender
-----------------
Margo Baender
Sole Incorporator
7
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
SMITHKLINE BEECHAM HOLDINGS CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be
established and maintained at the office of the Corporation Service Company, in
the City of Wilmington, in the County of New Castle, in the State of Delaware,
and said Corporation shall be the registered agent of the Corporation in charge
thereof.
SECTION 2. OTHER OFFICES. The Corporation may have other
offices, either within or without the State of Delaware, at such place or places
as the Board of Directors may from time to time appoint or the business of the
Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders
for the election of directors and for such other business as may be stated in
the notice of the meeting, shall be held at such place, either within or without
the State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting. In
the event the Board of Directors fails to so determine the time, date and place
of meeting, the annual meeting of stockholders shall be held at the offices of
the Corporation in Wilmington, Delaware on the second Tuesday of April at 10:00
a.m.
If the date of the annual meeting shall fall upon a legal
holiday, the meeting shall be held on the next business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.
<PAGE> 2
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any
purpose other than the election of directors may be held at such time and place,
within or without the State of Delaware, as shall be stated in the notice of
meeting.
SECTION 3. VOTING. Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation and in accordance
with the provisions of these Bylaws shall be entitled to one vote, in person or
by proxy, for each share of stock entitled to vote held by such stockholder, but
no proxy shall be voted after three years from its date unless such proxy
provides for a longer period. Upon the demand of any stockholder, the vote for
directors and the vote upon any question before the meeting, shall be by ballot.
All elections for directors shall be decided by plurality vote; all questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the
ensuing election, arranged in alphabetical order, with the address of each, and
the number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM. Except as otherwise required by the laws of
the State of Delaware, by the Certificate of Incorporation or by these Bylaws,
the presence, in person or by proxy, of stockholders holding a majority of the
stock of the Corporation entitled to vote shall constitute a quorum at all
meetings of the stockholders. In case a quorum shall not be present at any
meeting, a majority in interest of the stockholders entitled to vote thereat,
present in person or by proxy, shall have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until the
requisite amount of stock entitled to vote shall be present. At any such
adjourned meeting at which the requisite amount of stock entitled to vote shall
be represented, any business may be transacted which might have been transacted
at the meeting as originally noticed; but only those stockholders entitled to
vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the
stockholders for any purpose or purposes may be called by the President or
Secretary, or by resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. Written notice, stating the
place, date and time of the meeting, and the general nature of the business to
be considered, shall be given to each stockholder entitled to vote thereat at
his address as it appears on the records of the Corporation, not less than ten
nor more than sixty days before the date of the meeting. No business other than
that stated in the notice shall be transacted at any meeting without the
unanimous consent of all the stockholders entitled to vote thereat.
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<PAGE> 3
SECTION 7. ACTION WITHOUT MEETING. Unless otherwise provided
by the Certificate of Incorporation, any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. The number of directors shall be
eight (8). Except for the first Board of Directors, or as otherwise provided in
these Bylaws, the directors shall be elected at the annual meeting of the
stockholders. Each director shall be elected to serve until his successor shall
be elected and shall qualify. Directors need not be stockholders.
SECTION 2. RESIGNATIONS. Any director, member of a committee
or other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director, member of
a committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum, by a majority vote, or the holders of a majority of
all the shares of stock outstanding and entitled to vote, at a special meeting
of the stockholders called for the purpose, may appoint any qualified person to
fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
SECTION 4. REMOVAL. Except as hereinafter provided, any
director or directors may be removed either for or without cause at any time by
the affirmative vote of the holders of a majority of all the shares of stock
outstanding and entitled to vote, at a special meeting of the stockholders
called for the purpose, and the vacancies thus created may be filled, at the
meeting held for the purpose of removal, by the affirmative vote of a majority
in interest of the stockholders entitled to vote.
Unless the Certificate of Incorporation otherwise provides,
stockholders may effect removal of a director who is a member of a classified
Board of Directors only for cause. If the Certificate of Incorporation provides
for cumulative voting and if less than the entire Board is to be removed, no
director may be removed without cause if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election of
the entire Board of
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Directors, or if there be classes of directors, at an election of the class of
directors of which he or she is a part.
If the holders of any class or series are entitled to elect
one or more directors by the provisions of the Certificate of Incorporation,
these provisions shall apply, in respect to the removal without cause of a
director or directors so elected, to the vote of the holders of the outstanding
shares of that class or series and not to the vote of the outstanding shares as
a whole.
SECTION 5. INCREASE OF NUMBER. The number of directors may be
increased or decreased at any time by the affirmative vote of a majority of the
directors, though less than a quorum, or by the affirmative vote of a majority
interest of the stockholders, at the annual meeting or at a special meeting
called for that purpose, and by like vote the additional directors (if any) may
be chosen at such meeting to hold office until the next annual election and
until their successors are elected and qualify.
SECTION 6. POWERS. The Board of Directors shall exercise all
of the powers of the Corporation except such as are by the laws of the State of
Delaware, or by the Certificate of Incorporation of the Corporation or by these
Bylaws conferred upon or reserved to the stockholders.
SECTION 7. COMMITTEES. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board, designate one
or more committees, each committee to consist of two or more directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he, she or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
Any such committee, to the extent provided in the resolution
of the Board of Directors, or in these Bylaws, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the Bylaws of the Corporation; and, unless the resolution, these
Bylaws, or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 8. MEETINGS. The newly elected directors may hold
their first meeting for the purpose of organization and the transaction of
business, if a quorum be present,
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immediately after the annual meeting of the stockholders; or the time and place
of such meeting may be fixed by consent in writing of all the directors.
Regular meetings of the directors may be held without notice
at such places and times as shall be determined from time to time by resolution
of the directors.
Special meetings of the Board may be called by the President
or by the Secretary on the written request of any two directors on at least two
days' notice to each director and shall be held at such place or places as may
be determined by the directors, or shall be stated in the call of the meeting.
Unless otherwise restricted by the Certificate of
Incorporation or by these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
SECTION 9. QUORUM. One-third of the directors shall constitute
a quorum for the transaction of business. If at any meeting of the Board there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned.
SECTION 10. COMPENSATION. Directors shall not receive any
stated salary for their services as directors or as members of committees, but
by resolution of the Board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if prior to such action a
written consent thereto is signed by all members of the Board, or of such
committee as the case may be, and such written consent is filed with the minutes
of proceedings of the Board or committee.
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ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be
a President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one or
more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as
they may deem proper. None of the officers of the Corporation need be directors.
The officers shall be elected at the first meeting of the Board of Directors
after each annual meeting. Any number of offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors
may appoint such other officers and agents as it may deem advisable, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. The Chairman of the Board of Directors,
if one be elected, shall preside at all meetings of the Board of Directors and
he or she shall have and perform such other duties as from time to time may be
assigned to him by the Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief
executive officer of the Corporation and shall have the general powers and
duties of supervision and management usually vested in the office of President
of a corporation. He or she shall preside at all meetings of the stockholders if
present thereat, and in the absence or nonelection of the Chairman of the Board
of Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the Corporation. Except as
the Board of Directors shall authorize the execution thereof in some other
manner, he or she shall execute bonds, mortgages and other contracts on behalf
of the Corporation, and shall cause the seal to be affixed to any instrument
requiring it and when so affixed the seal shall be attested by the signature of
the Secretary or the Treasurer or an Assistant Secretary or an Assistant
Treasurer.
SECTION 5. VICE-PRESIDENT. Each Vice-President shall have such
powers and shall perform such duties as shall be assigned to him by the
directors.
SECTION 6. TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. He or she
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositaries as may be designated by the Board of
Directors.
The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, or the President, taking proper
vouchers for such disbursements. He or
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she shall render to the President and Board of Directors at the regular meetings
of the Board of Directors, or whenever they may request it, an account of all
his transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, he or she shall give the Corporation a
bond for the faithful discharge of his duties in such amount and with such
surety as the Board shall prescribe.
SECTION 7. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these Bylaws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders, upon
whose requisition the meeting is called as provided in these Bylaws. He or she
shall record all the proceedings of the meetings of the Corporation and of the
directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the directors or the President. He or she
shall have the custody of the seal of the Corporation and shall affix the same
to all instruments requiring it, when authorized by the directors or the
President, and attest the same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
Assistant Treasurers and Assistant Secretaries, if any, shall be elected and
shall have such powers and shall perform such duties as shall be assigned to
them, respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. Certificate of stock, signed
by the Chairman or Vice Chairman of the Board of Directors, if they be elected,
President or Vice-President, and the Treasurer or an Assistant Treasurer, or
Secretary or an Assistant Secretary, shall be issued to each stockholder
certifying the number of shares owned by him in the Corporation. Any of or all
the signatures may be facsimiles.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may
be issued in the place of any certificate theretofore issued by the Corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss of
any such certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall
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be surrendered to the Corporation by the delivery thereof to the person in
charge of the stock and transfer books and ledgers, or to such other person as
the directors may designate, by whom they shall be cancelled, and new
certificates shall thereupon be issued. A record shall be made of each transfer
and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of the
Certificate of Incorporation, the Board of Directors may, out of funds legally
available therefor at any regular or special meeting, declare dividends upon the
capital stock of the Corporation as and when they deem expedient. Before
declaring any dividend there may be set apart out of any funds of the
Corporation available for dividends, such sum or sums as the directors from time
to time in their discretion deem proper for working capital or as a reserve fund
to meet contingencies or for equalizing dividends or for such other purposes as
the directors shall deem conducive to the interests of the Corporation.
SECTION 6. SEAL. The corporate seal shall be circular in form
and shall contain the name of the Corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. The fiscal year of the Corporation
shall be the calendar year.
SECTION 8. CHECKS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the Corporation, and in such manner as shall be determined from time to time by
resolutions of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required by these Bylaws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage prepaid,
addressed to the person entitled thereto at his address as it appears on the
records of the Corporation, and such notice shall be deemed to have been given
on
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the day of such mailing. Stockholders not entitled to vote shall not be entitled
to receive notice of any meetings except as otherwise provided by Statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the Corporation or these Bylaws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These Bylaws may be altered or repealed and Bylaws may be made
at any annual meeting of the stockholders or at any special meeting thereof if
notice of the proposed alteration or repeal or Bylaw or Bylaws to be made be
contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal, or Bylaw or Bylaws to
be made, be contained in the notice of such special meeting.
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EXHIBIT 4.1
FORM OF CERTIFICATE OF DESIGNATIONS
OF FLEXIBLE AUCTION RATE PREFERRED STOCK OF
SMITHKLINE BEECHAM HOLDINGS CORPORATION
SMITHKLINE BEECHAM HOLDINGS CORPORATION
Certificate of Designations
creating fourteen series of
Flexible Auction Rate Preferred Stock
SMITHKLINE BEECHAM HOLDINGS CORPORATION, a Delaware corporation having
its principal executive offices at 1403 Foulk Road, Suite 102, P.O. Box 7108,
Wilmington, Delaware 19803-2775 (the "Company"), certifies to the Secretary of
State of Delaware that:
FIRST: Pursuant to authority expressly vested in the Board of Directors
by Article FOURTH, paragraph C of its Certificate of Incorporation, the Board of
Directors has authorized the issuance of fourteen series of flexible auction
rate preferred stock, no par value, liquidation preference $100,000 per share
plus an amount equal to accumulated but unpaid dividends (whether or not earned
or declared) thereon, of the Company to be designated respectively: Flexible
Auction Market Preferred Stock, Series A-1; Flexible Auction Market Preferred
Stock, Series A-2; Flexible Auction Market Preferred Stock, Series A-3; Flexible
Auction Market Preferred Stock, Series B-1; Flexible Auction Market Preferred
Stock, Series B-2; Flexible Auction Market Preferred Stock, Series B-3; Flexible
Auction Market Preferred Stock, Series C-1; Flexible Auction Market Preferred
Stock, Series C-2; Flexible Auction Market Preferred Stock, Series C-3;
(collectively, the "AMPS Series" and individually, an "AMPS Series"); and
Flexible Money Market Cumulative Preferred Stock, Series E; Flexible Money
Market Cumulative Preferred Stock, Series F; Flexible Money Market Cumulative
Preferred Stock, Series G; Flexible Money Market Cumulative Preferred Stock,
Series H; and Flexible Money Market Cumulative Preferred Stock, Series I
(collectively, the "MMP Series" and individually, an "MMP Series" and, together
with the AMPS Series, "Series").
SECOND: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption or repurchase, of the Shares of each such Series are as follows:
DESIGNATION
Series A-1: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Auction Market Preferred Stock, Series A-1". Each share of
Flexible Auction Market Preferred Stock, Series A-1 (sometimes collectively
referred to herein as the "Series A-1 AMPS") shall be issued on a date to be
determined by the Board of Directors or pursuant to its delegated authority;
have the Initial Dividend Rate, the Initial Dividend Payment Date or Dates, if
any, and the Initial
<PAGE> 2
Period-End Dividend Payment Date as shall be determined in advance of the
issuance thereof by the Board of Directors or pursuant to its delegated
authority; and have such other preferences, voting powers, limitations as to
dividends, qualifications, relative rights and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series A-1 AMPS shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
Series A-2: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Auction Market Preferred Stock, Series A-2". Each share of
Flexible Auction Market Preferred Stock, Series A-2 (sometimes collectively
referred to herein as the "Series A-2 AMPS") shall be issued on a date to be
determined by the Board of Directors or pursuant to its delegated authority;
have the Initial Dividend Rate, the Initial Dividend Payment Date or Dates, if
any, and the Initial Period-End Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Directors or pursuant to its
delegated authority; and have such other preferences, voting powers, limitations
as to dividends, qualifications, relative rights and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series A-2 AMPS shall constitute a separate series of Preferred Stock of
the Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or
winding up of the Company, except as described herein.
Series A-3: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Auction Market Preferred Stock, Series A-3". Each share of
Flexible Auction Market Preferred Stock, Series A-3 (sometimes collectively
referred to herein as the "Series A-3 AMPS") shall be issued on a date to be
determined by the Board of Directors or pursuant to its delegated authority;
have the Initial Dividend Rate, the Initial Dividend Payment Date or Dates, if
any, and the Initial Period-End Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Directors or pursuant to its
delegated authority; and have such other preferences, voting powers, limitations
as to dividends, qualifications, relative rights and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series A-3 AMPS shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
Series B-1: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Auction Market Preferred Stock, Series B-1". Each share of
Flexible Auction Market Preferred Stock, Series B-1 (sometimes collectively
referred to herein as the "Series B-1 AMPS") shall be issued on a date to be
determined by the Board of Directors or pursuant to its delegated authority;
have
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the Initial Dividend Rate, the Initial Dividend Payment Date or Dates, if any,
and the Initial Period-End Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Directors or pursuant to its
delegated authority; and have such other preferences, voting powers, limitations
as to dividends, qualifications, relative rights and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series B-1 AMPS shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
Series B-2: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Auction Market Preferred Stock, Series B-2". Each share of
Flexible Auction Market Preferred Stock, Series B-2 (sometimes collectively
referred to herein as the "Series B-2 AMPS") shall be issued on a date to be
determined by the Board of Directors or pursuant to its delegated authority;
have the Initial Dividend Rate, the Initial Dividend Payment Date or Dates, if
any, and the Initial Period-End Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Directors or pursuant to its
delegated authority; and have such other preferences, voting powers, limitations
as to dividends, qualifications, relative rights and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series B-2 AMPS shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
Series B-3: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Auction Market Preferred Stock, Series B-3". Each share of
Flexible Auction Market Preferred Stock, Series B-3 (sometimes collectively
referred to herein as the "Series B-3 AMPS") shall be issued on a date to be
determined by the Board of Directors or pursuant to its delegated authority;
have the Initial Dividend Rate, the Initial Dividend Payment Date or Dates, if
any, and the Initial Period-End Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Directors or pursuant to its
delegated authority; and have such other preferences, voting powers, limitations
as to dividends, qualifications, relative rights and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series B-3 AMPS shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
Series C-1: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Auction Market Preferred Stock, Series C-1". Each share of
Flexible Auction Market Preferred Stock, Series C-1 (sometimes collectively
referred to herein as the "Series C-1 AMPS") shall be issued on a
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<PAGE> 4
date to be determined by the Board of Directors or pursuant to its delegated
authority; have the Initial Dividend Rate, the Initial Dividend Payment Date or
Dates, if any, and the Initial Period-End Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors or
pursuant to its delegated authority; and have such other preferences, voting
powers, limitations as to dividends, qualifications, relative rights and terms
and conditions of redemption or repurchase as are set forth in this Certificate
of Designations. The Series C-1 AMPS shall constitute a separate series of
Preferred Stock of the Company, and shall rank prior to or on a parity with any
other Shares of Preferred Stock as to dividends and upon the liquidation,
dissolution or winding up of the Company, except as described herein.
Series C-2: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Auction Market Preferred Stock, Series C-2". Each share of
Flexible Auction Market Preferred Stock, Series C-2 (sometimes collectively
referred to herein as the "Series C-2 AMPS") shall be issued on a date to be
determined by the Board of Directors or pursuant to its delegated authority;
have the Initial Dividend Rate, the Initial Dividend Payment Date or Dates, if
any, and the Initial Period-End Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Directors or pursuant to its
delegated authority; and have such other preferences, voting powers, limitations
as to dividends, qualifications, relative rights and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series C-2 AMPS shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
Series C-3: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Auction Market Preferred Stock, Series C-3". Each share of
Flexible Auction Market Preferred Stock, Series C-3 (sometimes collectively
referred to herein as the "Series C-3 AMPS") shall be issued on a date to be
determined by the Board of Directors or pursuant to its delegated authority;
have the Initial Dividend Rate, the Initial Dividend Payment Date or Dates, if
any, and the Initial Period-End Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Directors or pursuant to its
delegated authority; and have such other preferences, voting powers, limitations
as to dividends, qualifications, relative rights and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series C-3 AMPS shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
Series E: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Money Market Cumulative Preferred Stock, Series E". Each
share of Flexible Money Market Cumulative
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<PAGE> 5
Preferred Stock, Series E (sometimes collectively referred to herein as the
"Series E MMP") shall be issued on a date to be determined by the Board of
Directors or pursuant to its delegated authority; have the Initial Dividend
Rate, the Initial Dividend Payment Date or Dates, if any, and the Initial
Period-End Dividend Payment Date as shall be determined in advance of the
issuance thereof by the Board of Directors or pursuant to its delegated
authority; and have such other preferences, voting powers, limitations as to
dividends, qualifications and terms and conditions of redemption or repurchase
as are set forth in this Certificate of Designations. The Series E MMP shall
constitute a separate series of Preferred Stock of the Company, and shall rank
prior to or on a parity with any other Shares of Preferred Stock as to dividends
and upon the liquidation, dissolution or winding up of the Company, except as
described herein.
Series F: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Money Market Cumulative Preferred Stock, Series F". Each
share of Flexible Money Market Cumulative Preferred Stock, Series F (sometimes
collectively referred to herein as the "Series F MMP") shall be issued on a date
to be determined by the Board of Directors or pursuant to its delegated
authority; have the Initial Dividend Rate, the Initial Dividend Payment Date or
Dates, if any, and the Initial Period-End Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors or
pursuant to its delegated authority; and have such other preferences, voting
powers, limitations as to dividends, qualifications and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series F MMP shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
Series G: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Money Market Cumulative Preferred Stock, Series G". Each
share of Flexible Money Market Cumulative Preferred Stock, Series G (sometimes
collectively referred to herein as the "Series G MMP") shall be issued on a date
to be determined by the Board of Directors or pursuant to its delegated
authority; have the Initial Dividend Rate, the Initial Dividend Payment Date or
Dates, if any, and the Initial Period-End Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors or
pursuant to its delegated authority; and have such other preferences, voting
powers, limitations as to dividends, qualifications and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series G MMP shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
Series H: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Money Market
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Cumulative Preferred Stock, Series H". Each share of Flexible Money Market
Cumulative Preferred Stock, Series H (sometimes collectively referred to herein
as the "Series H MMP") shall be issued on a date to be determined by the Board
of Directors or pursuant to its delegated authority; have the Initial Dividend
Rate, the Initial Dividend Payment Date or Dates, if any, and the Initial
Period-End Dividend Payment Date as shall be determined in advance of the
issuance thereof by the Board of Directors or pursuant to its delegated
authority; and have such other preferences, voting powers, limitations as to
dividends, qualifications and terms and conditions of redemption or repurchase
as are set forth in this Certificate of Designations. The Series H MMP shall
constitute a separate series of Preferred Stock of the Company, and shall rank
prior to or on a parity with any other Shares of Preferred Stock as to dividends
and upon the liquidation, dissolution or winding up of the Company, except as
described herein.
Series I: A Series of ____ shares of Preferred Stock, no par value,
liquidation preference $100,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Flexible Money Market Cumulative Preferred Stock, Series I". Each
share of Flexible Money Market Cumulative Preferred Stock, Series I (sometimes
collectively referred to herein as the "Series I MMP") shall be issued on a date
to be determined by the Board of Directors or pursuant to its delegated
authority; have the Initial Dividend Rate, the Initial Dividend Payment Date or
Dates, if any, and the Initial Period-End Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors or
pursuant to its delegated authority; and have such other preferences, voting
powers, limitations as to dividends, qualifications and terms and conditions of
redemption or repurchase as are set forth in this Certificate of Designations.
The Series I MMP shall constitute a separate series of Preferred Stock of the
Company, and shall rank prior to or on a parity with any other Shares of
Preferred Stock as to dividends and upon the liquidation, dissolution or winding
up of the Company, except as described herein.
1. Definitions. Unless the context or use indicates another or
different meaning or intent, in this Certificate of Designations the following
terms have the following meanings, whether used in the singular or plural:
"'AA' Composite Commercial Paper Rate," on any date of determination,
means (i) the Interest Equivalent of the rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's
or the equivalent of such rating by another nationally recognized statistical
rating organization, as such rate is made available on a discount basis or
otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date, or (ii) in the event that the Federal Reserve
Bank of New York does not make available such a rate, then the arithmetic
average of the Interest Equivalent of the rate on commercial paper placed on
behalf of such issuers, as quoted on a discount basis or otherwise by the
Commercial Paper Dealers, to the Auction Agent for the close of business on
the Business Day immediately preceding such date. If one of the Commercial
Paper Dealers does not quote a rate required to determine the "AA" Composite
Commercial Paper Rate, the "AA" Composite Commercial Paper Rate will be
determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by the Company to provide such rate or rates not being supplied by the
Commercial Paper Dealers.
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If the number of Dividend Period Days shall be (i) 7 or more but fewer than 49
days, such rate shall be the Interest Equivalent of the 30-day rate on such
commercial paper; (ii) 49 or more but fewer than 70 days, such rate shall be the
Interest Equivalent of the 60-day rate on such commercial paper; (iii) 70 or
more days but fewer than 85 days, such rate shall be the arithmetic average of
the Interest Equivalent on the 60-day and 90-day rates on such commercial paper;
(iv) 85 or more days but fewer than 99 days, such rate shall be the Interest
Equivalent of the 90-day rate on such commercial paper; (v) 99 or more days but
fewer than 183 days, such rate shall be determined by linear interpolation
between the Interest Equivalents of the 90-day rate and the 180-day rate on
such commercial paper.
"Affiliate" means any Person known to the Auction Agent to be
controlled by, in control of, or under common control with, the Company.
"Agent Member" means a member of the Securities Depository that will
act on behalf of an Existing Holder, a beneficial owner, or a Potential Holder
or potential beneficial owner of one or more Shares.
"Applicable Rate" means, with respect to any Series for any Dividend
Period therefor, the rate per annum at which cash dividends are payable on the
Shares of such Series for such Dividend Period.
"Auction" means a periodic implementation of the Auction Procedures.
"Auction Agent" means a commercial bank, trust company or other
financial institution appointed by a resolution of the Board of Directors that
has entered into an agreement with the Company to follow the Auction Procedures
for the purpose of determining the Applicable Rate and to act as transfer agent,
registrar, dividend disbursing agent and redemption agent for the Shares. There
may be more than one Auction Agent for the Shares provided that there may be no
more than one Auction Agent for any Series.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 7.
"beneficial ownership" or "beneficially own" shall have the meanings
ascribed to them under Rule 13d-3 under the Securities Exchange Act.
"Board of Directors" means the Board of Directors of the Company or
any duly authorized committee thereof.
"Broker-Dealer" means any broker-dealer, or other entity permitted by
law to perform the functions required of a Broker-Dealer in paragraph 7, that
has been selected by the Company and has entered into a Broker-Dealer Agreement
with the Auction Agent that remains effective.
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"Broker-Dealer Agreement" means an agreement between the Auction Agent
and one or more Broker-Dealers pursuant to which each such Broker-Dealer agrees
to follow the procedures specified in paragraph 7 of this Certificate of
Designations.
"Business Day" means a day on which the New York Stock Exchange, Inc.
is open for trading and which is not a day on which banks in The City of New
York are authorized or obligated by law to close.
"Change of Control" means that SmithKline Beecham shall at any time
cease to beneficially own, directly or indirectly, shares of capital stock of
the Company representing more than 50% of the voting power in respect of all
outstanding shares of capital stock of the Company.
"Certificate of Incorporation" means the Company's Certificate of
Incorporation, as amended and supplemented, on file in the office of the
Secretary of State of the State of Delaware.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means a commercial paper dealer or dealers
as the Company may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.
"Commission" means the Securities and Exchange Commission and its
successors.
"Common Stock" means the common stock, no par value, of the Company.
"Company" means SmithKline Beecham Holdings Corporation, a Delaware
corporation, and its successors.
"Credit Rating Event" means that (i) the Company and SmithKline Beecham
shall have amended or terminated the Support Agreement (other than an amendment
solely to increase the maximum amount of SmithKline Beecham's obligations
thereunder); and (ii) (a) either Moody's shall have reduced its credit rating
assigned to Shares of any Series to below "a3" (and shall not have subsequently
increased such rating to "a3" or higher) and Moody's shall have issued a written
statement stating that it so reduced such rating as a result, in whole or in
part, of such amendment or termination of the Support Agreement or S&P shall
have reduced its credit rating assigned to Shares of any Series to below A- (and
shall not have subsequently increased such rating to A- or higher) and S&P shall
have issued a written statement stating that it so reduced such rating as a
result, in whole or in part, of such amendment or termination of the Support
Agreement and (b) such rating shall have been so reduced and such statement so
issued within 60 calendar days after Moody's or S&P, as the case may be, having
been informed of such amendment or termination of the Support Agreement; and
(iii) any Downgrade Voting Parity Shares shall not have been redeemed, retired,
repurchased or otherwise acquired by the Company; provided, however, that (A) in
no event shall a Credit Rating Event be deemed to exist if, on or prior to the
date of effectiveness of any amendment or termination of the Support Agreement
by SmithKline Beecham and the Company, the Company shall have informed Moody's
and S&P in writing of such amendment or termination and Moody's shall have
confirmed in writing a credit rating of "a3" or higher for Shares of each Series
and S&P shall have confirmed in writing a credit rating of A- or higher for
Shares of each Series; (B) if either Moody's or S&P shall change its rating
categories for preferred stock, then the determination of whether a Credit
Rating Event exists shall be made based upon the substantially equivalent new
rating categories for preferred stock of such rating agency; (C) if either
Moody's or S&P shall not make available, or neither Moody's nor S&P shall make
available, a rating for the Shares of any Series necessary to make such a
determination, such determination shall be made based upon the substantial
equivalent of either or both of such ratings by a Substitute Rating Agency or
two Substitute Rating Agencies or, in the event that only one such rating shall
be available, based upon such available rating; and (D) if Substitute Rating
Agency or Agencies are not available, then for purposes of such determination
the rating for Shares of such Series shall be deemed to be the highest relevant
rating last published by Moody's, S&P or any such Substitute Rating Agency or
Agencies.
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"Date of Original Issue" means, with respect to any Share, the date on
which the Company originally issues such Share.
"Default Directors" has the meaning as defined in paragraph 5(c).
"Default Period" has the meaning set forth in paragraph 5(c).
"Dividend Non-Payment Period" has the meaning set forth in paragraph
2(b)(iii)(B).
"Dividend Payment Date," with respect to any Series, includes each
Initial Dividend Payment Date, Subsequent Dividend Payment Date and Period-End
Dividend Payment Date.
"Dividend Period," with respect to any Series, includes each Initial
Dividend Period and each Subsequent Dividend Period for such Series.
"Dividend Period Days," with respect to any Dividend Period, means the
calendar days included in such Dividend Period.
"Dividends Received Percentage" means the percentage of dividends
received by corporate taxpayers which may be deducted for federal income tax
purposes pursuant to section 243(a)(1) of the Code (or any successor
provision).
"Downgrade Directors" means the two additional directors elected by
holders of Downgrade Voting Parity Shares pursuant to paragraph 5(d).
"Downgrade Period" has the meaning set forth in paragraph 5(d).
"Downgrade Voting Parity Shares" has the meaning set forth in paragraph
5(d).
"DRD Factor" means the amount derived from the following fraction:
1 - [.35(1-.70)]
----------------
1 - [.35(1-DRP)]
"DRD Gross-Up Provisions" has the meaning set forth in paragraph 2(e).
"DRP," as used in computing the DRD Factor, means the Dividends
Received Percentage, measured as a fraction, applicable to the relevant
dividend; provided, however, that DRP shall in no event be less than .50.
"Existing Holder," with respect to Shares of any Series, means a Person
who is listed as the beneficial owner of such Shares in the Stock Books.
"Guarantee" means the Guarantee, dated __________, 1996, of
SmithKline Beecham with respect to the Shares.
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<PAGE> 10
"Initial Dividend Payment Date" means, with respect to any Series, each
dividend payment date or dates, if any, as determined by the Board of Directors
to occur during the Initial Dividend Period for such Series, excluding the
Initial Period-End Dividend Payment Date for such Series.
"Initial Dividend Period," with respect to each Series, means the
period from and including the Date of Original Issue for such Series to but
excluding the Initial Period-End Dividend Payment Date for such Series.
"Initial Dividend Rate," with respect to each Series, means the rate
per annum applicable to the Initial Dividend Period for such Series as shall be
determined by the Board of Directors.
"Initial Period-End Dividend Payment Date," with respect to any
Series, means the dividend payment date occurring at the end of the Initial
Dividend Period for such Series, as determined by the Board of Directors with
respect to each Series of Shares.
"Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
"Mandatory Redemption" means a mandatory redemption of Shares by the
Company pursuant to paragraph 4(a)(ii).
"Mandatory Redemption Date" means the date selected by the Company for
a Mandatory Redemption, which is within 30 days of the occurrence of a Change of
Control and is at least 10 days but not more than 20 days after the delivery of
a Notice of Redemption with respect to such Mandatory Redemption.
"Maximum Applicable Rate" has the meaning set forth in paragraph
7(a)(vi) of this Certificate of Designations.
"Minimum Holding Period" means, at the time of reference thereto, the
minimum holding period then required for corporate taxpayers to be entitled to
the dividends received deduction set forth in section 243(a)(1) of the Code
(or any successor provision) in respect of dividends (other than extraordinary
dividends) paid on preferred stock held by nonaffiliated corporations.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Non-Call Period," with respect to any Series, means a specified
portion or the entirety of a Special Dividend Period for such Series during
which Shares of such Series shall not be subject to Optional Redemption, as
selected by the Company pursuant to a Notice of Special Dividend Period.
"Non-Payment Period" includes any Dividend Non-Payment Period and
Redemption Price Non-Payment Period.
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<PAGE> 11
"Non-Payment Period Rate," with respect to any Shares, means 200% of
the Reference Rate applicable to such Shares.
"Notice of Offer to Purchase" has the meaning set forth in paragraph 4.
"Notice of Redemption" means a written notice of redemption given
pursuant to paragraph 4.
"Notice of Revocation" has the meaning set forth in paragraph
2(c)(iii).
"Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii).
"Optional Redemption" means an optional redemption of Shares by the
Company pursuant to paragraph 4(a)(i).
"Optional Redemption Date" means the second Business Day immediately
preceding any Dividend Payment Date selected by the Company for an Optional
Redemption, which is at least 15 days but not more than 45 days after delivery
of a Notice of Redemption with respect to such Optional Redemption.
"Outstanding" means, as of any date, (i) with respect to Shares of any
Series, Shares theretofore issued by the Company except, without duplication,
(A) any Shares theretofore cancelled, or delivered to the Auction Agent for
cancellation, or redeemed by the Company, or as to which a Notice of Redemption
shall have been given and the full amount payable upon such redemption shall
have been deposited in trust by the Company with irrevocable payment
instructions given pursuant to paragraph 4(c), provided that Shares as to which
a Notice of Redemption has been given by the Company shall be deemed to be not
outstanding for purposes of any Auction for such Shares held subsequent to the
date of such Notice of Redemption, and (B) any Shares as to which the Company or
any Affiliate shall be an Existing Holder or beneficial owner and (ii) with
respect to shares of other Preferred Stock, has the equivalent meaning.
"Parity Preferred" means, with respect to any Series, Shares of each
other Series and shares of each other outstanding series of Preferred Stock the
holders of which, together with the holders of the Shares, shall be entitled to
the receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in proportion to the full
respective preferential amounts to which they are entitled, without preference
or priority of one over the other.
"Period-End Dividend Payment Dates" include the Initial Period-End
Dividend Payment Date and each Subsequent Period-End Dividend Payment Date.
"Person" means and includes an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
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<PAGE> 12
"Potential Holder" means any Person who is not an Existing Holder but
who may be interested in acquiring Shares, or who is an Existing Holder but who
wishes to acquire additional Shares.
"Preferred Stock" means any preferred stock of the Company, including
the Shares, that the Board of Directors has authority to issue under the
Certificate of Incorporation.
"Redemption Non-Payment Period" has the meaning set forth in
paragraph 2(b)(iv).
"Reference Rate" means: (i) with respect to a Dividend Period of 49
days to 183 days, the applicable "AA" Composite Commercial Paper Rate, (ii) with
respect to a Dividend Period of 184 days to 364 days, the applicable U.S.
Treasury Bill Rate, (iii) with respect to a Dividend Period of one year to ten
years, the applicable U.S. Treasury Note Rate, and (iv) with respect to a
Dividend Period in excess of ten years, the applicable U.S. Treasury Bond Rate.
"Regular Dividend Period" means a Subsequent Dividend Period consisting
of 49 days as the same may be adjusted from time to time pursuant to paragraph
2(b)(i) in connection with requirements of, or a change of law altering the
requirements of, the Minimum Holding Period, but in no event exceeding 98 days.
"Repurchase" means a repurchase of Shares by the Company pursuant to
paragraph 4(a)(iii).
"Repurchase Date" means the date selected by the Company for a
Repurchase, which is no earlier than 30 days and no later than 60 days from the
date the Notice of Offer to Purchase with respect to such Repurchase is mailed.
"S&P" means Standard & Poor's Ratings Group or its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Company as securities
depository for the Shares that agrees to follow the procedures required to be
followed by such securities depository in connection with the Shares.
"Senior Preferred" means each Series of Preferred Stock the holders of
which shall be entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in preference
to and in priority over holders of Parity Preferred.
"Shares" means Series A-1 AMPS, Series A-2 AMPS, Series A-3 AMPS,
Series B-1 AMPS, Series B-2 AMPS, Series B-3 AMPS, Series C-1 AMPS, Series C-2
AMPS, Series C-3 AMPS, Series E MMP, Series F MMP, Series G MMP, Series H MMP
and Series I MMP.
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<PAGE> 13
"SmithKline Beecham" means SmithKline Beecham plc, an English public
limited company.
"SmithKline Beecham Group" means SmithKline Beecham and its
subsidiaries.
"Special Dividend Period" means a Subsequent Dividend Period consisting
of at least 49 days as selected by the Company pursuant to a Notice of Special
Dividend Period, to the extent that such selection by the Company shall be
available pursuant hereto and subject to adjustment from time to time pursuant
to paragraph 2(b)(i) in connection with requirements of, or a change of law
altering the requirements of, the Minimum Holding Period.
"Stock Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders.
"Subsequent Dividend Payment Date" has the meaning set forth in
paragraph 2(b)(i) of this Certificate of Designations.
"Subsequent Dividend Period" has the meaning set forth in paragraph
2(c)(i) of this Certificate of Designations.
"Subsequent Period-End Dividend Payment Date," with respect to each
Subsequent Dividend Period, means the Business Day next succeeding the last day
of such Subsequent Dividend Period.
"Substitute Commercial Paper Dealer" or "Substitute Commercial Paper
Dealers" means such substitute Commercial Paper Dealer or substitute Commercial
Paper Dealers as the Company may from time to time appoint or, in lieu of any
thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization and two nationally
recognized statistical rating organizations, respectively, each term as defined
for purposes of Rule 436(g)(2) under the Securities Act, selected by the
Company after consultation with each Broker-Dealer, to act as the substitute
rating agency or substitute rating agencies, as the case may be, to determine
the credit ratings of the Shares.
"Sufficient Clearing Bids" has the meaning as defined in paragraph
7(a).
"Support Agreement" means the Support Agreement dated _______, 1996
between SmithKline Beecham and the Company.
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent
of the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the
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<PAGE> 14
Federal Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S.
Government Securities report for such Business Day, or (ii) if such yield as so
calculated is not available, the Alternate Treasury Bill Rate on such date.
"Alternate Treasury Bill Rate" on any date means the Interest Equivalent of the
yield as calculated by reference to the arithmetic average of the bid price
quotations of the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as determined by bid
price quotations as of any time on the Business Day immediately preceding such
date, obtained from at least three recognized primary U.S. Government securities
dealers selected by the Auction Agent.
"U.S. Treasury Bond Rate" on any date means (i) the yield as calculated
by reference to the bid price quotation of the actively traded, current coupon
Treasury Bond with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bond Rate on such date. "Alternate Treasury Bond Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Bond
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.
"U.S. Treasury Note Rate" on any date means (i) the yield as calculated
by reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Note
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.
2. Dividends. (a) The holders of Shares of each Series shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available therefor, cumulative cash dividends at the Applicable
Rate for such Series determined as set forth in paragraph 2(c), payable on the
respective Dividend Payment Dates for such Series. Dividends on the Shares so
declared and payable shall be paid in preference to and in priority over any
dividends declared and payable on the Common Stock.
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<PAGE> 15
(b) (i) Dividends on Shares of each Series shall accumulate (whether
or not earned or declared) at the Applicable Rate for such Shares from
the Date of Original Issue of such Series and shall be payable, when, as and if
declared by the Board of Directors, out of funds legally available therefor, on
each Initial Dividend Payment Date, if any, for such Series and on the Initial
Period-End Dividend Payment Date for such Series. Following the Initial
Period-End Dividend Payment Date for each Series, dividends on such Series
will be payable on each Subsequent Period-End Dividend Payment Date, and
in addition, (A) with respect to any Subsequent Dividend Period of 100 days to
190 days, on the 91st day, (B) with respect to any Subsequent Dividend Period
of 191 days to 281 days, on the 91st and 182nd days, (C) with respect to any
Subsequent Dividend Period of 282 days to 364 days, on the 91st, 182nd and 273rd
days, and (D) with respect to any Subsequent Dividend Period of one year or
longer, on January 15, April 15, July 15 and October 15 of each year (each such
date referred to in clause (A) through (D) above being herein referred to as a
"Subsequent Dividend Payment Date"). Notwithstanding the foregoing, if any
Dividend Payment Date is not a Business Day, then such Dividend Payment Date
shall be the next succeeding Business Day.
Notwithstanding the foregoing, if any date on which dividends on the
Shares of any Series would be payable as described above is a day that would
result in the number of Dividend Period Days in the then current Dividend Period
not being at least equal to the then current Minimum Holding Period, then
dividends with respect to such Dividend Period shall be payable on the first
Business Day following such date on which dividends would be so payable that
results in the number of Dividend Period Days in such Dividend Period being at
least equal to the Minimum Holding Period or, if earlier, the 98th day of such
Dividend Period. Moreover, notwithstanding the foregoing, in the event of a
change in law altering the Minimum Holding Period, the Board of Directors shall
adjust, if necessary, the number of Dividend Period Days in each Regular
Dividend Period and the minimum number of days of each Special Dividend Period
commencing after the date of such change in law to equal or exceed the Minimum
Holding Period, provided that the number of Dividend Period Days in a Regular
Dividend Period shall not exceed by more than nine days the length of the
Minimum Holding Period and shall be evenly divisible by seven, and the maximum
number of Dividend Period Days in a Regular Dividend Period and the minimum
number of Dividend Period Days in a Special Dividend Period, as adjusted
pursuant hereto, shall in no event exceed 98 days. Upon any change in the number
of Dividend Period Days in any then current Dividend Period or in a Regular
Dividend Period or Special Dividend Period as a result of a change in the
Minimum Holding Period, the Company will mail notice of such change to all
holders of record of Shares of the applicable Series. Although any particular
Dividend Payment Date for the Shares of a Series may not occur on the day of the
week or the date originally scheduled as a Dividend Payment Date for the Shares
of such Series because of the adjustments set forth above, each succeeding
Dividend Payment Date for the Shares of such Series shall occur, subject to such
adjustments, on the day of the week or the date originally scheduled as a
Dividend Payment Date for the Shares of such Series as if each preceding
Dividend Payment Date had occurred on such day of the week or date.
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<PAGE> 16
(ii) On or prior to any Dividend Payment Date for the Shares of any
Series, the Company shall pay to the Auction Agent sufficient funds for the
payment in full of all accumulated dividends with respect to the Shares of such
Series payable on such Dividend Payment Date. Each dividend shall be paid to
the holder or holders of record of the Shares of such Series as they appear on
the stock register of the Company on the Business Day next preceding the
applicable Dividend Payment Date. Dividends in arrears in respect of Shares for
any past Dividend Period may be declared and paid at any time, without reference
to any regular Dividend Payment Date, to the holder or holders of such Shares as
they appear on the Stock Register on a date, not exceeding 15 days prior to the
payment date therefor, as may be fixed by the Board of Directors. Any dividend
payment made on Shares of any Series shall be applied, without duplication, in
the following order of priority:
First, in or toward payment of all accumulated dividends with respect
to such earliest Dividend Period for such Shares for which dividends have not
been paid; and
Second, in or toward payment of all then accumulated dividends with
respect to each succeeding Dividend Period for such Shares for which dividends
have not been paid.
(iii) If the Company fails to pay to the Auction Agent on or prior to
any Period-End Dividend Payment Date for the Shares of any Series the full
amount of all accumulated and unpaid dividends payable on the Shares of such
Series on such Period-End Dividend Payment Date, then:
(A) if such failure to pay is cured as provided below, the
Applicable Rate for the Shares of such Series for the Dividend Period
commencing on the Period-End Dividend Payment Date on which the Company
failed to pay shall be equal to the dividend rate determined on the
Auction Date immediately preceding such Period-End Dividend Payment
Date; and
(B) if such failure to pay is not cured as provided below,
then, for the period (the "Dividend Non-Payment Period") commencing on
and including such Period-End Dividend Payment Date and ending on and
including the Business Day on which, by 12:00 noon, New York City time,
all unpaid cash dividends shall have been deposited with the Auction
Agent or otherwise made available for payment to the applicable Holders
in same day funds (provided that, at least two Business Days but no
more than 30 days prior to such Business Day, the Company shall have
given the Auction Agent, the Securities Depository and the applicable
Holders written notice of such deposit or availability):
(1) each Subsequent Dividend Period shall be a
Regular Dividend Period (regardless of any Special Dividend
Period election made by the Company) and
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<PAGE> 17
Auctions for the Shares of such Series shall be suspended and
shall not resume, in each case until all accumulated and
unpaid dividends on the Shares of such Series for all past
Dividend Periods shall have been paid to the Auction Agent,
not later than the second Business Day immediately preceding
an Auction Date of the Shares of such Series; and
(2) the Applicable Rate for the Shares of such Series
during such Dividend Non-Payment Period shall be equal to the
Non-Payment Period Rate for the Shares of such Series.
(iv) If the Company fails to pay to the Auction Agent on or prior to
any date set for redemption or repurchase of less than all of the Shares of
any Series the full amount payable upon redemption of the Shares of such
Series called for redemption or upon repurchase of the Shares pursuant to
a Repurchase, then:
(A) Auctions for the Shares of such Series shall be suspended
and shall not resume until all amounts payable upon the redemption or
repurchase of the Shares of such Series called for redemption or
tendered for repurchase shall have been paid to the Auction Agent not
later than the second Business Day immediately preceding an Auction
Date for the Outstanding Shares of such Series;
(B) if such failure to pay is cured as provided below, the
Applicable Rate for the Shares of such Series for the Dividend Period
commencing after the redemption or repurchase date on which the
Company failed to pay shall be equal to the Maximum Applicable Rate
for the Shares of such Series (as determined on the Business Day
immediately preceding the first day of such Dividend Period) and such
Dividend Period shall be a Regular Dividend Period (regardless of any
Special Dividend Period election made by the Company) unless on the
Auction Date for such Dividend Period, Auctions for the Shares of such
Series may be resumed as provided in clause (A) above; and
(C) if such failure to pay is not cured as provided below,
then:
(1) each Subsequent Dividend Period shall be a
Regular Dividend Period (regardless of any Special Dividend
Period election made by the Company) and the Applicable Rate
for the Shares of such Series not called for redemption or
subject to repurchase for each Dividend Period, commencing
after the redemption or repurchase date on which the Company
failed to pay, to but excluding the Dividend Period, if any,
next succeeding the Auction Date on which Auctions for the
Shares of such Series may be resumed as provided in clause
(A) above (the "Redemption Non-Payment Period") shall be
equal to the Non-Payment Period Rate for the Shares of such
Series (as determined on the Business Day immediately
preceding the first day of each such Dividend Period); and
(2) the Applicable Rate for the Shares of such Series
called for redemption or subject to repurchase for each
Dividend Period for the Shares of such Series commencing
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<PAGE> 18
after the redemption or repurchase date on which the Company
failed to pay shall be equal to the Non-Payment Period Rate
for the Shares of such Series (as determined on the Business
Day immediately preceding the first day of each such
Dividend Period).
For purposes of the two preceding paragraphs, any such failure to pay
with respect to the Shares of any Series shall be deemed cured if, not later
than 12:00 noon, New York City time, on the third Business Day next succeeding
such failure to pay, there shall have been paid to the Auction Agent (i) all
accumulated and unpaid dividends on the Shares of such Series, including the
full amount of any dividends to be paid on the Period-End Dividend Payment Date
with respect to which such failure to pay occurred but excluding amounts
accumulated after such Period-End Dividend Payment Date, plus additional
dividends in an amount computed by multiplying (1) the Non-Payment Period Rate
for the Shares of such Series (as determined on the Business Day immediately
preceding such Dividend Payment Date) by (2) a fraction, the numerator of which
shall be the number of days in respect of which such failure to pay is not cured
in accordance herewith (including the day such failure to pay occurs and
excluding the day such failure to pay is cured) and the denominator of which
shall be 360, and multiplying the rate so obtained by the product of $100,000
times the number of Shares of such Series then outstanding and (ii) the full
amount payable upon redemption or repurchase of the Shares of such Series called
for redemption or tendered for repurchase that have not been so redeemed or
repurchased, plus (except to the extent such amount had been paid pursuant to
paragraph 2(b)(iv)(C)(1) above) an amount computed by multiplying (1) the
Non-Payment Period Rate for the Shares of such Series (as determined on the
Business Day immediately preceding the first day of the current Dividend
Period), by (2) a fraction, the numerator of which shall be the number of days
for which such failure to pay is not cured in accordance herewith (including the
day such failure to pay occurs and excluding the day such failure to pay is
cured) and the denominator of which shall be 360, and applying the rate so
obtained against the product of $100,000 times the number of Shares of such
Series called for redemption or tendered for repurchase that have not been so
redeemed or repurchased.
If the Company fails to pay to the Auction Agent on or prior to any
date set for redemption or repurchase of all the Shares of any Series the full
amount payable upon such redemption or repurchase to the Shares of such Series,
then the Applicable Rate for the Shares of such Series for each Dividend
Period for the Shares of such Series or portion thereof commencing on or after
the redemption or repurchase date on which the Company failed to pay shall be
equal to the Non-Payment Period Rate for the Shares of such Series (as
determined on the Business Day immediately preceding the first day of each
such Dividend Period or portion thereof).
(c) (i) During the Initial Dividend Period for each Series the
Applicable Rate for such Series shall be the Initial Dividend Rate. Commencing
on the Initial Period-End Dividend Payment Date for such Series of Shares, the
Applicable Rate for such Series for the period commencing on and including the
Initial Period-End Dividend Payment Date and ending on and including the
calendar day prior to the next following Subsequent Period-End Dividend Payment
Date and for each period thereafter commencing on and including each Subsequent
Period-End Dividend Payment Date and ending on and including the calendar day
prior to the next succeeding Subsequent Period-End Dividend Payment Date (each
such period being herein
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<PAGE> 19
referred to as a "Subsequent Dividend Period"), shall be equal to the rate per
annum that results from implementation of the Auction Procedures with respect to
Shares of such Series as the Auction Agent advises the Company following the
conclusion of the Auction for such Shares.
Each Subsequent Dividend Period shall be a Regular Dividend Period
unless the Company has duly selected a Special Dividend Period with respect
thereto pursuant to paragraph 2(c)(iii) and such selection is available
hereunder. In the event that Sufficient Clearing Bids have not been made in any
Auction under paragraph 7, then the immediately succeeding Subsequent Dividend
Period shall automatically be a Regular Dividend Period regardless of whether
the Company has elected a Special Dividend Period.
In the event that an Auction for any Subsequent Dividend Period with
respect to Shares of any Series is not held for any reason (other than as a
result of the existence and continuance of a Non-Payment Period), such
Subsequent Dividend Period next succeeding the originally scheduled Auction
shall automatically be a Regular Dividend Period and the Applicable Rate for
such Subsequent Dividend Period shall be equal to the Maximum Applicable Rate on
the Business Day immediately preceding the commencement of such Subsequent
Dividend Period.
The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a Regular Dividend Period regardless of any election made by the
Company for a Special Dividend Period relating thereto.
(ii) The amount of dividends accumulated and payable on each Share on
any Dividend Payment Date with respect to any Dividend Period will be computed
by (A) multiplying the Applicable Rate for such Dividend Period by a fraction,
the numerator of which is the actual number of days in the portion of such
Dividend Period prior to such Dividend Payment Date as to which dividends have
not been paid and the denominator of which is 360, and (B) multiplying $100,000
by the rate so obtained.
(iii) The Company may, at its option and to the extent permitted by
law, by telephonic and written notice (a "Notice of Special Dividend Period") to
the Auction Agent and each Holder of the relevant Series of Shares, request that
the next succeeding Dividend Period for a Series of Shares be a number of days,
evenly divisible by seven and at least as long as the Minimum Holding Period,
specified in such notice, provided that the Company may not elect a Special
Dividend Period for the Shares of any MMP Series until after the first
anniversary of the Date of Original Issue for such Shares, and provided,
further, that such Notice of Special Dividend Period shall be null and void if
Sufficient Clearing Bids have not been made in the relevant Auction and the
Company may not again give a Notice of Special Dividend Period for such Shares
(and any such attempted
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<PAGE> 20
notice shall be null and void) until Sufficient Clearing Bids have been made in
an Auction with respect to such Shares. Such Notice of Special Dividend Period
shall be sent by the Company, by first-class mail, postage prepaid, to each
Holder of such Series of Shares, not less than 10 days nor more than 60 days
prior to the Auction for the relevant Subsequent Dividend Period. A Notice of
Special Dividend Period with respect to a Series of Shares will specify (A) the
Company's determination of the length of the Special Dividend Period (which
shall be equal to or longer than a Regular Dividend Period), (B) in the case of
any Special Dividend Period in excess of 99 days in duration, any Subsequent
Dividend Payment Date or Dates other than the Subsequent Period-End Dividend
Payment Date for such Dividend Period, (C) if the Company has elected that
Shares of such Series will be subject to a Non-Call Period during such Special
Dividend Period, a statement to that effect, (D) if the Company has elected that
such Shares of such Series will be subject to Mandatory Redemption as described
in paragraph 4(a)(ii) upon the occurrence of a Change of Control during such
Special Dividend Period, a statement to that effect, (E) if the Company has
elected that such Shares of such Series will be subject to repurchase as
described in paragraph 4(a)(ii) upon the occurrence of a Change of Control
during such Special Dividend Period, a statement to that effect, and (F) if the
Company has elected that the DRD Gross-Up Provisions shall apply during such
Special Dividend Period, a statement to that effect. If the Company has given a
Notice of Special Dividend Period, the Company may withdraw such election by
giving telephonic and written notice of its revocation (a "Notice of
Revocation") to each Holder of such Series of Shares by no later than 3:00 p.m.,
New York City time, on the Business Day immediately preceding the Auction with
respect to which such Notice of Special Dividend Period and Notice of Revocation
were delivered, and in such event such election by the Company of a Special
Dividend Period shall be of no force and effect. The Company shall deliver, or
cause to be delivered, physically, by telecopier or by other written electronic
communication, copies of each Notice of Special Dividend Period and each Notice
of Revocation to the Auction Agent at the same time such notices are transmitted
to the holders of the relevant Series of Shares. In the event that the Company
has effectively revoked its election of a Special Dividend Period for a Series
of Shares as described above, the next succeeding Dividend Period for such
Series of Shares will be a Regular Dividend Period. No defect in a Notice of
Special Dividend Period or in the mailing thereof shall affect the validity of
any change in any Dividend Period.
(d) (i) Except as provided in this Certificate of Designations, Holders
shall not be entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends and applicable late charges, as
herein provided, on any Shares, and no interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment on any Shares that
may be in arrears.
(ii) So long as any Shares of any Series are outstanding, except as
provided in the next sentence, the Company shall not declare, pay or set aside
for payment any dividend or other distribution in respect of any shares of any
Parity Preferred for any period unless full cumulative dividends for all past
Dividend Periods have been or contemporaneously are declared and paid (or
declared and a sum sufficient for payment of the dividends set aside for
payment) on all outstanding Shares of each Series. If full cumulative dividends
are not paid on the Shares of any Series and any Parity Preferred, all dividends
and other distributions paid upon the Shares of such Series and such Parity
Preferred will be paid pro rata so that the amount of
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<PAGE> 21
dividends paid per share on the Shares of such Series and such Parity Preferred
will in all cases bear to each other the same ratio that accumulated dividends
per share on the Shares of such Series and such Parity Preferred bear to each
other.
So long as any Shares of any Series are outstanding, the Company shall
not declare, pay or set aside for payment any dividend or other distribution
(other than a dividend or distribution paid in shares of, or options, warrants
or rights to subscribe for or purchase shares of, Common Stock or in any other
shares of the Company of any class ranking junior to the Shares of such Series
as to dividends) in respect of its Common Stock or any other shares of the
Company of any class ranking junior to the Shares of such Series as to
dividends, or call for redemption, redeem, purchase or otherwise acquire for
consideration (or pay or make available for payment any moneys of sinking fund
for the redemption of) any shares of its Common Stock or any other shares of the
Company of any class ranking junior to or on a parity with the Shares of such
Series as to dividends or upon the liquidation, dissolution or winding up of the
Company (except by conversion into or exchange for shares of the Company of any
class ranking junior to the Shares of such Series as to dividends or upon the
liquidation, dissolution or winding up of the Company unless (i) full cumulative
dividends for all past Dividend Periods have been or contemporaneously are
declared and paid (or declared and a sum sufficient for the payment of the
dividends set aside for payment) on all outstanding Shares of such Series and
(ii) the stockholders' equity of the Company as a result would not be less than
the aggregate liquidation preference of, including any accumulated and unpaid
dividends on, all Shares, Parity Preferred and Senior Preferred.
(e) If any amendment to the Code shall have been enacted and become
effective during any period in which Shares of any Series shall be outstanding
that shall have the effect of changing the Dividends Received Percentage, then
the Applicable Rate with respect to such Shares for the Dividend Period in which
the effective date of such amendment to the Code occurs will, to the extent that
such amendment applies to such Dividend Period, be adjusted on and after such
effective date for the remainder of such Dividend Period by multiplying the
Applicable Rate (determined before such adjustment) by the DRD Factor and
rounding the result to the nearest basis point. Notwithstanding the foregoing,
in no event shall the Applicable Rate for any Dividend Period, if and as
adjusted from time to time as set forth above, be more than the Maximum
Applicable Rate as of the Date of Original Issue or the date of the preceding
Auction, as the case may be.
If the Applicable Rate shall have been adjusted pursuant to the
provisions of this paragraph 2(e) (the "DRD Gross-Up Provisions"), the Company
shall send notice of such adjustment to each Holder of such Shares, the
Auction Agent and the Paying Agent on or prior to the next succeeding Dividend
Payment Date for such Shares.
Unless otherwise required by the context, any reference in this
Certificate of Designations to dividends shall mean dividends adjusted pursuant
to the DRD Gross-Up Provisions. The DRD Gross-Up Provisions shall apply to the
Initial Dividend Period for the AMPS Series and
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<PAGE> 22
shall only apply to any Special Dividend Period for Shares of any Series if so
designated by the Board of Directors in the applicable Notice of Special
Dividend Period. The DRD Gross-Up Provisions shall not apply to any Regular
Dividend Period.
(f) No fractional Share shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary, the holders of each Series of
Shares then outstanding shall be entitled to receive and to be paid, out of the
assets of the Company available for distribution to holders of the Company's
capital stock after satisfying claims of creditors but before any distribution
or payment is made upon any Common Stock or any other shares of the Company of
any class ranking junior to the Shares in right of payment upon such a
liquidation, dissolution or winding up, liquidating distributions in an amount
equal to the sum of $100,000 per Share plus an amount equal to accumulated and
unpaid dividends (whether or not earned or declared) thereon to and including
the date of final dissolution. If, upon any such voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable with
respect to the Shares and any other Outstanding Parity Preferred of the Company
are not paid in full, the holders and the holders of such other Parity Preferred
will share ratably in any such distribution of assets of the Company in
proportion to the full respective amounts to which they are entitled. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders will not be entitled to any further participation in any
distribution of assets by the Company. Neither the sale, lease or exchange (for
cash, stock, securities or other consideration) of all or substantially all of
the property and assets of the Company, nor the consolidation or merger of the
Company with or into any other corporation or entity, nor the consolidation or
merger of any other corporation or entity with or into the Company, shall be
deemed to be a liquidation, dissolution or winding up, voluntary or involuntary,
of the Company for the purpose of the foregoing.
4. Redemption; Repurchase. (a) Shares of any Series shall be
redeemable or shall be required to be repurchased by the Company as provided
below:
(i) Upon giving a Notice of Redemption with respect to an Optional
Redemption to the Auction Agent, the Securities Depository and each holder of
record of such Shares, the Company at its option may redeem Shares of such
Series, in whole or from time to time in part, out of funds legally available
therefor, at a redemption price per Share of $100,000, on an Optional Redemption
Date; provided that the Board of Directors shall have declared and shall pay on
the redemption date all accumulated and unpaid dividends in respect of such
Shares through the redemption date (whether earned or declared); and provided,
further, that no Share of such Series may be redeemed at the option of the
Company during (A) the Initial Dividend Period for Shares of any AMPS Series or
(B) a Non-Call Period to which such Shares is subject. Pursuant to such right of
Optional Redemption, the Company may elect to redeem all or less than all of the
Shares of a Series without redeeming remaining Shares of such Series or Shares
of any other Series. Notwithstanding the foregoing, the Company may not give a
Notice of Redemption relating to, or redeem pursuant to, an Optional Redemption
as described in this paragraph 4(a)(i) if any dividend on any Share is in
arrears unless all outstanding Shares are simultaneously redeemed. So long as
any dividend on any Share in arrears remains unpaid, the Company shall not
purchase or otherwise acquire any Shares of any Series; provided that the
foregoing shall not prevent the purchase or acquisition of Shares
22
<PAGE> 23
pursuant to an otherwise lawful purchase or exchange offer made on the same
terms to the holders of all outstanding Shares.
(ii) Within 30 days of the occurrence of a Change of Control, the
Company shall be required to deliver a Notice of Redemption with respect to such
Mandatory Redemption to the Auction Agent, the Securities Depository and each
Holder of Shares of such Series and to redeem on a Mandatory Redemption Date,
out of funds legally available therefor, at a redemption price per Share equal
to the sum of $100,000 per Share plus an amount equal to accumulated and
unpaid dividends (whether or not earned or declared) to the repurchase date, all
outstanding Shares of such Series; provided that (A) the above Mandatory
Redemption provisions shall apply to a Change of Control during the Initial
Dividend Period for the MMP Series but not for the AMPS Series and (B) the above
Mandatory Redemption provisions shall apply to a Change of Control during any
Special Dividend Period for such Series only if the Company has made such an
election in the Notice of Special Dividend Period relating to such Special
Dividend Period.
(iii) Upon the occurrence of a Change of Control, the Company shall be
obligated to purchase from all Holders of Shares of each Series as to which this
provision at the time applies, at the option of such Holders, Shares of such
Series tendered to the Company by such Holders at a purchase price per Share
equal to the sum of $100,000 per Share plus an amount equal to accumulated and
unpaid dividends (whether or not earned or declared) to the repurchase date. If
Shares of any Series are to be purchase pursuant hereto, within 20 days of the
occurrence of a Change of Control, the Company will be required to deliver, or
cause to be delivered, a Notice of Offer to Purchase with respect thereto to the
Auction Agent, the Securities Depository and each Holder of Shares of such
Series and to comply with any tender rules under the Securities Exchange Act
which may then be applicable in connection with any offer required to be made by
the Company in accordance with the provisions hereof; provided that (A) the
above repurchase provisions shall apply to a Change of Control during the
Initial Dividend Period for the AMPS Series but not for the MMP Series and (B)
the above repurchase provisions shall apply to a Change of Control during any
Special Dividend Period for Shares of any Series only if the Company has made
such an election in the Notice of Special Dividend Period relating to such
Special Dividend Period.
(b) In the event that less than all the Outstanding Shares of any
Series are to be redeemed and there is more than one Holder, the number of
Shares of that Series to be redeemed shall be determined by the Board of
Directors and communicated to the Auction Agent, and, if the Securities
Depository or its nominee is the holder of all such Shares, each Agent Member
will determine the number of Shares of that Series to be redeemed from the
account of each Holder for which it acts as agent and, if neither the Securities
Depository nor its nominee is the holder of all such Shares, the particular
Shares of such Series to be redeemed shall be selected by the Company by lot or
by such other method as the Company shall deem fair and equitable, provided that
adjustments may be made by the Company with respect to the number of Shares of
such Series to be redeemed from each Holder to avoid redemption of fractional
Shares.
(c) Whenever Shares are to be redeemed pursuant to an Optional
Redemption, the Notice of Redemption shall be mailed by first-class mail,
postage prepaid, not less than 15 nor more than 45 days prior to the date
fixed for such Optional Redemption, to each Holder of such Shares to be
redeemed and the Auction Agent.
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<PAGE> 24
Whenever Shares are to be redeemed pursuant to a Mandatory Redemption, the
Notice of Redemption shall be mailed, not less than 10 nor more than 20 days
prior to the date fixed for such Mandatory Redemption, by first-class mail,
postage prepaid, to each Holder of such Shares to be redeemed and the Auction
Agent. The Notice of Redemption shall set forth (i) the redemption date, (ii)
the amount of the redemption price, (iii) the Series of Shares and the aggregate
number of Shares of such Series to be redeemed, (iv) the place or places where
Shares of such Series are to be surrendered for payment of the redemption price,
(v) a statement that dividends on the Shares to be redeemed shall cease to
accumulate on such date that the Company pays the full amount payable upon
redemption of such Shares, and (vi) the provision of this Certificate of
Designations pursuant to which such redemption is being made. A Notice of
Redemption, once given, is irrevocable. No defect in the Notice of Redemption or
in the mailing thereof shall affect the validity of the redemption proceedings,
except as required by applicable law.
If the Company gives or causes to be given a Notice of Redemption,
timely pays to the Auction Agent a sum sufficient to redeem the Shares of any
Series as to which such Notice of Redemption has been given and gives the
Auction Agent irrevocable instructions and authority to pay the full amount
payable on redemption of such Shares to the Holders of such Shares, then on the
date of such payment, all rights of the Holders of the Shares of such Series to
be redeemed, as such, will terminate (except the right of the Holders of such
Shares to receive the full amount payable upon redemption thereof upon surrender
of the certificate or certificates therefor, but without interest) and such
Shares will no longer be deemed to be outstanding for any purpose (including,
without limitation, the right of Holders of such Shares to vote on any matter or
to participate, with respect to such Shares, in any subsequent Auction for the
outstanding Shares of such Series). In addition, any Shares of any Series as to
which a Notice of Redemption has been given by the Company will be deemed to be
not outstanding for purposes of any Auction for the Shares of such Series held
subsequent to the date of such Notice of Redemption. The Company will be
entitled to receive from time to time from the Auction Agent the income, if any,
derived from the investment of monies or other assets paid to it (to the extent
that such income is not required to pay the redemption price of the Shares to be
redeemed), and the holders of any Shares to be redeemed will not have any claim
to such income. Any funds so paid to the Auction Agent which are unclaimed at
the end of two years from the redemption date will be returned to the Company,
after which the holders of the Shares of the Series so called for redemption
will look only to the Company for payment of the redemption price of such
Shares.
(d) Whenever Shares are to be repurchased pursuant to a Repurchase, the
Company, within 20 days following the occurrence of such Change of Control,
shall mail, or cause to be mailed, a Notice of Offer to Purchase, by first-class
mail, postage prepaid, to each Holder of
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<PAGE> 25
such Shares to be repurchased and the Auction Agent. The Notice of Offer to
Purchase shall describe the circumstances resulting in the Change of Control and
shall state (i) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase all or any part of such Holder's
Shares of such Series, (ii) the purchase price, (iii) the Series of Shares, (iv)
the place or places where Shares of such Series are to be surrendered for
payment of the purchase price, (v) the circumstances and relevant facts
regarding the Change of Control, (vi) the purchase date (which shall be no
earlier than 30 days and no later then 60 days from the date such notice is
mailed), (vii) any other instructions that a Holder must follow in order to have
such Holder's Shares of such Series purchased by the Company, and (viii) the
provision of this Certificate of Designations pursuant to which such offer to
purchase is being made. A Notice of Offer to Purchase, once given, is
irrevocable. No defect in the Notice of Offer to Purchase or in the mailing
thereof shall affect the validity of the repurchase proceedings, except as
required by applicable law.
(e) So long as the Shares of each Series is held of record by the
nominee of the Securities Depository, the amounts payable upon either a
Mandatory Redemption, an Optional Redemption or a Repurchase shall be paid to
such nominee of the Securities Depository on each Mandatory Redemption Date,
Optional Redemption Date and Repurchase Date, respectively, for such Shares.
5. Voting Rights. (a) General. Each Share shall carry 0.08507 of a
vote in connection with the election of directors of the Company and each other
matter submitted generally to a vote of the holders of shares of the Company's
voting stock, voting cumulatively and together as a single class with shares of
Common Stock and other capital stock of the Company entitled to vote generally
in the election of directors and other matters submitted to shareholders
generally.
(b) Right to Vote in Connection with a Merger, Liquidation, Etc. So
long as any Shares are outstanding, the Company shall not, without the
affirmative vote of the holders of at least two-thirds of the Shares Outstanding
at the time with a Dividend Period having more than 99 Dividend Period Days
remaining, voting in person or by proxy at one or more special meetings for the
purpose, or the unanimous written consent of the holders of Shares of each such
Series, (i) consolidate with or merge with or into, or convey, transfer or lease
substantially all of its assets to, any Person unless: (A) the resulting,
surviving or transferee Person (if not the Company) shall be a corporation
organized and existing under the laws of the United States, any State thereof or
the District of Columbia which shall, by a valid and legally binding instrument,
expressly assume all the obligations of the Company with respect to, and afford
the holders of all Outstanding Shares all the legal rights as holders of, the
Shares, including the rights established by the Charter; (B) there shall not
have occurred any downgrading, nor shall any notice have been given of any
intended or potential downgrading, in the rating accorded the Shares by Moody's
or S&P, or if Moody's or S&P, or both, shall not make a rating available with
respect to the Shares, by any Substitute Rating Agency, in connection with such
transaction; and (C) there shall have been delivered to the holders of the
Outstanding Shares an opinion of nationally recognized, qualified legal counsel
to the effect that (1) the holders will not recognize income, gain or loss for
United States federal income tax purposes as a result of
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<PAGE> 26
such transaction, and will be subject to United States federal income tax on the
same amounts and at the same times as would be the case if the transaction had
not occurred and (2) such transaction complies with the terms of the foregoing
clause (i)(A), or (ii) voluntarily liquidate, dissolve or wind up. On matters
described in this paragraph 5(b), Holders will vote on the basis of one vote per
$100,000 in liquidation preference of the Shares.
(c) Right to Elect Two Default Directors. During any period (referred
to herein as a "Default Period") in which accumulated dividends (whether or not
earned or declared, and whether or not funds are then legally available in an
amount sufficient therefor) on the outstanding Shares and other Parity Preferred
in the aggregate equal to at least 180 days' dividends shall be due and unpaid
and sufficient funds shall not have been deposited with the Auction Agent for
the payment of such accumulated dividends, the number of directors constituting
the Board of Directors shall be automatically increased by two in addition to
then existing directors; and the holders and the holders of other Parity
Preferred upon which like voting rights have been conferred and are then
exercisable will possess full voting powers (to the exclusion of the holders of
all other series and classes of capital stock of the Company), voting as a
single class to elect such two directors (the "Default Directors").
The Default Period and the voting rights with respect thereto as
described in the preceding paragraph will continue unless and until all
accumulated and unpaid dividends (whether or not earned or declared) on the
outstanding Shares and other Parity Preferred shall have been paid or sufficient
funds shall not have been deposited with the Auction Agent for the payment of
such accumulated dividends, at which time the voting rights described in this
paragraph 5(c) shall cease, subject always, however, to the revesting of such
voting rights in the holders and the holders of other Parity Preferred upon the
further occurrence of any of the circumstances described in this paragraph 5(c).
(d) Right to Elect Two Downgrade Directors. During any period (referred
to herein as a "Downgrade Period") in which a Credit Rating Event shall exist,
the number of directors constituting the Board of Directors shall be
automatically increased by two; and the holders and the holders of such other
Parity Preferred upon which like voting rights have been conferred and are then
exercisable (the Shares of all Series and all such other Shares being referred
to as the "Downgrade Voting Parity Shares") shall be entitled, voting as one
single class (to the exclusion of the holders of all of the Series and classes
of capital stock of the Company), to elect such two directors (the "Downgrade
Directors");
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The Downgrade Period and the voting rights with respect thereto as
described in this paragraph 5(d) will continue unless and until the relevant
Credit Rating Event shall no longer exist and be continuing, at which time the
voting rights described in this paragraph 5(d) shall cease, subject always,
however, to the revesting of such voting rights in the Holders of Downgrade
Voting Parity Shares upon the further occurrence of a Credit Rating Event
pursuant to this paragraph 5(d).
Each Downgrade Director shall be entitled to such number of votes on
all matters before the Board of Directors as shall result in the Downgrade
Directors together having a majority of the total voting power of all directors
then on the Board of Directors; provided, however, that each Downgrade Director
shall be entitled to only one vote with respect to matters concerning the
redemption of Shares of any Series or the liquidation, dissolution or winding up
of the Company.
(e) Right to Vote with Respect to Certain Other Matters. So long as any
Shares are outstanding, the Company shall not, without the affirmative vote of
the holders of at least two-thirds of the Shares of all Series Outstanding at
the time, voting in person or by proxy at a special meeting for the purpose, or
the unanimous written consent of the holders of Shares of all Series then
outstanding acting without such a special meeting (subject to the provisions of
any applicable law): (i) amend, alter or repeal any provisions of the Charter so
as to adversely affect any of the preferences, special rights or powers of
Shares of any Series, or (ii) authorize, create or issue shares of any class or
series of capital stock ranking senior to any Series of Shares or other Parity
Preferred with respect to the payment of dividends or the distribution of
assets, or authorize, create or issue any securities convertible into, or
warrants, options or similar rights to purchase, acquire or receive, shares of
capital stock ranking senior to any Series of Shares or other Parity Preferred
with respect to the payment of dividends or the distribution of assets, or
reclassify any authorized capital stock of the Company into any shares ranking
senior to any Series of Shares or other Parity Preferred with respect to the
payment of dividends or the distribution of assets. Any increase in the
authorized number of any series of capital stock ranking on a parity with the
Shares with respect to the payment of dividends or the distribution of assets,
or authorization, creation or issuance of any securities convertible into, or
warrants, options or similar rights to purchase, acquire or receive, shares of
such capital stock, or reclassification of any authorized capital stock of the
Company into any shares ranking on a parity with any Series of Shares with
respect to the payment of dividends or the distribution of assets shall be
deemed not to adversely affect any of the preferences, special rights or powers
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<PAGE> 28
of Shares of any Series. Unless a higher percentage is provided for under the
Charter, the affirmative vote of the holders of a majority of the outstanding
shares of Preferred Stock, including the Shares, voting together as a single
class, will be required to approve any plan of reorganization (including
bankruptcy proceedings) adversely affecting such Shares.
(f) Voting Procedures. (i) Within five days following the accrual of
any right of (A) the holders of Shares and other Parity Preferred to elect two
Default Directors as described in paragraph 5(c) above or (B) the holders of the
Downgrade Voting Parity Shares to elect two Downgrade Directors as described in
paragraph 5(d) above, subject to paragraph 5(f)(v) below, the Company shall call
a special meeting of such relevant holders and mail or cause to be mailed a
notice of such special meeting to such relevant holders, such meeting to be held
not less than 20 days nor more than 60 days after the date of such notice. If
the Company fails to mail, or to cause to be mailed, such notice as set forth
above or if the Company does not call such a special meeting, it may be called
by any such relevant holder. The Company will notify the Auction Agent of the
date on which the relevant voting right accrued, and such date will be the
record date for determining the holders entitled to notice of and to vote at
such special meeting. At any such special meeting and at each meeting held
during a Default Period or a Downgrade Period, as the case may be, such relevant
holders will vote in such elections on the basis of one vote per $100,000
liquidation preference and not cumulatively, and the holders or holders of
one-third of such Shares and Parity Preferred or Downgrade Voting Parity Shares,
as the case may be, then outstanding, present in person or by proxy, will
constitute a quorum for the election of directors by them. At any such meeting
or adjournment thereof in the absence of a quorum, a majority of such holders
present in person or by proxy shall have the power to adjourn the meeting for
the election of directors without notice, other than by an announcement at the
meeting, until a quorum is present.
(ii) For purposes of determining any rights of the holders to vote on
any matter or thenumber of Shares required to constitute a quorum, whether such
right is created by this Certificate of Designations, by the other provisions of
the Charter, by applicable law or otherwise, a Share or a share of other Parity
Preferred or a Downgrade Voting Parity Share, as the case may be, which is not
Outstanding prior to or concurrently with such determination shall not be
counted.
(iii) The terms of office of all persons who are directors of the
Company at the time of a special meeting to elect the Default Directors or the
Downgrade Directors, as the case may be, shall continue, notwithstanding the
election of the Default Directors or Downgrade Directors at such meeting, and,
subject to paragraph 5(f)(v) below, the persons so elected as Default Directors
or Downgrade Directors, together with the Regular Preferred Directors and the
remaining incumbent directors elected by the holders of the Common Stock, shall
constitute the duly elected directors of the Company.
(iv) Subject to paragraph 5(f)(v) below, simultaneously with the
expiration of a Default Period or a Downgrade Period, as the case may be, the
terms of office of the Default Directors elected pursuant to paragraph 5(c)
above or the Downgrade Directors elected pursuant to
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<PAGE> 29
paragraph 5(d) above, as the case may be, shall terminate, the number of
directors of the Company will automatically be decreased by two, the Regular
Preferred Directors and remaining incumbent directors otherwise elected by the
holders of the Common Stock shall thereupon constitute the duly elected
directors of the Company, and the voting rights of such holders to elect the
Default Directors during such Default Period pursuant to paragraph 5(c) above or
such holders to elect the Downgrade Directors during such Downgrade Period
pursuant to paragraph 5(d) above shall cease, subject always, however, to the
revesting of such voting rights in the relevant holders upon the further
occurrence of any of the circumstances described in paragraph 5(c) or paragraph
5(d).
(v) If a Downgrade Period shall commence and be continuing at any time
during a Default Period, or if a Default Period shall commence and be continuing
during a Downgrade Period, then the powers conferred upon the Default Directors
elected pursuant to the provisions of paragraph 5(c) above shall be suspended,
or if the Default Directors shall not have been so elected, then the right of
the holders and holders of other Parity Preferred to elect the Default Directors
as set forth in paragraph 5(c) above shall be suspended, in either case, at such
time and during such period as the Downgrade Directors shall have assumed and
remain in office, provided that upon the expiration of such Downgrade Period,
such powers of the Default Directors or voting rights of the holders and such
other holders, as the case may be, shall be automatically and immediately
reinstated.
(g) Exclusive Remedy. Unless otherwise required by law, the holders of
Shares shall not have any rights or preferences other than those specifically
set forth herein. Shares will not be convertible into shares of Common Stock or
any other securities of the Company. The holders of Shares shall have no
preemptive rights. In the event that the Company fails to pay any dividends on
the Shares as required, the exclusive remedy of the holders shall be the right
to vote for Default Directors pursuant to the provisions of this paragraph 5. In
no event shall Holders have any right to sue for, or maintain a proceeding with
respect to, such dividends or damages for the failure to receive the same.
(h) No Right to Vote in Certain Events. With respect to any right of
holders of shares to vote on any matter, whether such right is created by this
Certificate of Designations, by applicable law or otherwise, no holder of any
Share will be entitled to vote and no Share will be deemed to be outstanding
for the purpose of voting or determining the number of Shares required to
constitute a quorum, if prior to or concurrently with a determination of Shares
entitled to vote or of Shares deemed outstanding for quorum purposes, as the
case may be, such Share is held beneficially or of record by the Company or any
Affiliate of the Company or if the Company or any Affiliate has, directly or
indirectly, the power to vote or dispose of such Share.
(i) Voting by Securities Depository. Whenever Shares of any Series are
held of record by the nominee of the Securities Depository in accordance with
its normal procedures, the Securities Depository will extend voting rights with
respect to such Shares to the Agent Members whose accounts are credited with
such Shares. In accordance with their normal procedures, such Agent Members are
expected in turn to extend such voting rights to Existing Holders.
6. Restriction on Issuance of Parity Preferred and Senior Preferred;
Debt Limitation. So long as any Share is Outstanding, except as otherwise
expressly permitted by Moody's and S&P or any Substitute Rating Agency or
Substitute Rating Agencies, (i) it will not issue any other Parity Preferred or
any Senior Preferred if (A) after giving effect to such issuance, the aggregate
liquidation preference of the Outstanding Shares of all Series, all Parity
Preferred and all Senior Preferred, including all accumulated and unpaid
dividends thereon would exceed 75 percent of the maximum amount of SmithKline
Beecham's obligations under the
29
<PAGE> 30
Support Agreement at such time, and (B) there occurs a Rating Downgrade Event,
(ii) the aggregate amount of the Company's indebtedness shall not exceed one
third of the Company's shareholders' equity (after deducting therefrom the
aggregate liquidation preference of the Shares of all Series, any Parity
Preferred and any Senior Preferred, including, in each case, accumulated and
unpaid dividends thereon), and (iii) make any loans other than loans to the
Company's subsidiaries unless such loans are guaranteed as to payment of
principal and interest by SmithKline Beecham.
7. Auction Procedures. (a) Certain Definitions. As used in this
paragraph 7, the following terms shall have the following meanings, unless the
context otherwise requires:
(i) "Auction Date" means the first Business Day preceding the
first day of each Subsequent Dividend Period.
(ii) "Available Shares" has the meaning specified in paragraph
7(d)(i) below.
(iii) "Bid" has the meaning specified in paragraph 7(b)(i)
below.
(iv) "Bidder" has the meaning specified in paragraph 7(b)(i)
below.
(v) "Hold Order" has the meaning specified in paragraph
7(b)(i) below.
(vi) "Maximum Applicable Rate" for any Subsequent Dividend
Period will be the Applicable Percentage of the Reference Rate. The
"Applicable Percentage" will be determined based on the lower of the
credit rating or ratings assigned on such date to such Shares by
Moody's and S&P (or if Moody's or S&P or both shall not make such
rating available, the equivalent of either or both of such ratings by a
Substitute Rating Agency or two Substitute Rating Agencies or, in the
event that only one such rating shall be available, such rating) as
follows:
<TABLE>
<CAPTION>
Applicable
Credit Ratings Percentage of
Moody's S&P Reference Rate
-------------- ---------------- --------------
<S> <C> <C> <C>
"aa3" or higher AA- or higher 110%
"a3" to "a1" A- to A+ 125%
"baa3" to "baa1" BBB- to BBB+ 150%
Below "baa3" Below BBB- 200%
</TABLE>
provided, however, that, if at 9:00 a.m., New York City time, on any
Auction Date, (i) the rating of any Shares by Moody's shall be on the
"Corporate Credit Watch List" of Moody's with a designation of
"downgrade" or "uncertain," (ii) the rating of any Shares by S&P shall
be on the "CreditWatch" of S&P with a designation of "negative
implications" or "developing" or (iii) if Moody's or S&P, or both,
shall not make such a rating available, the rating of any Shares by any
Substitute Rating Agency shall be on
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<PAGE> 31
the substantial equivalent of clause (i) or (ii) above, then the
Maximum Applicable Rate for the Shares to which such Auction Date
relates will be determined pursuant to an Applicable Percentage based
on the credit rating that is one full level lower in the above table.
The Company shall take all reasonable action necessary to
enable S&P and Moody's (and, as appropriate, any Substitute Rating
Agency or Substitute Rating Agencies) to provide a rating for each
Series of Shares. If either S&P or Moody's shall not make such a rating
available, or neither S&P nor Moody's shall make such a rating
available, the Company, after consultation with the Broker-Dealers or
their affiliates and successors, shall select a nationally recognized
statistical rating organization or two nationally recognized statistical
rating organizations to act as a Substitute Rating Agency or Substitute
Rating Agencies, as the case may be.
(vii) "Order" has the meaning specified in paragraph 7(b)(i)
below.
(viii) "Sell Order" has the meaning specified in paragraph
7(b)(i) below.
(ix) "Shares" means the Shares subject to the related Auction
pursuant to this paragraph 7.
(x) "Submission Deadline" means 1:00 p.m., New York City time,
on any Auction Date or such other time on the Auction Date as may be
specified by the Auction Agent from time to time as the time by which
each Broker-Dealer must submit to the Auction Agent in writing all
Orders obtained by it for the Auction to be conducted on such Auction
Date.
(xi) "Submitted Bid" has the meaning specified in paragraph
7(d)(i) below.
(xii) "Submitted Hold Order" has the meaning specified in
paragraph 7(d)(i) below.
(xiii) "Submitted Order" has the meaning specified in
paragraph 7(d)(i) below.
(xiv) "Submitted Sell Order" has the meaning specified in
paragraph 7(d)(i) below.
(xv) "Sufficient Clearing Bids" has the meaning specified in
paragraph 7(d)(i) below.
(xvi) "Winning Bid Rate" has the meaning specified in
paragraph 7(d)(i) below.
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<PAGE> 32
(b) Orders by Existing Holders and Potential Holders. (i) Beneficial
owners and potential beneficial owners may only participate in Auctions through
their Broker-Dealers. Broker- Dealers will submit the Orders of their respective
customers who are beneficial owners and potential beneficial owners to the
Auction Agent, designating themselves (unless otherwise permitted by the
Company) as Existing Holders in respect of Shares subject to Orders submitted or
deemed submitted to them by beneficial owners and as Potential Holders in
respect of Shares subject to Orders submitted to them by potential beneficial
owners. A Broker-Dealer may also hold Shares in its own account as a beneficial
owner or wish to purchase Shares for its own account as a potential beneficial
owner. A Broker-Dealer may thus submit Orders to the Auction Agent as a
beneficial owner or a potential beneficial owner and therefore participate in an
Auction as an Existing Holder or Potential Holder on behalf of both itself and
its customers.
Prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder may submit to its Broker-Dealer
information by telephone or otherwise as to:
(1) the number of Outstanding Shares, if any, held by
such Existing Holder which such Existing Holder desires to
continue to hold without regard to the Applicable Rate for the
next succeeding Subsequent Dividend Period;
(2) the number of Outstanding Shares, if any, held by
such Existing Holder which such Existing Holder desires to
continue to hold, provided that the Applicable Rate for the
next succeeding Subsequent Dividend Period shall not be less
than the rate per annum specified by such Existing Holder;
and/or
(3) the number of Outstanding Shares, if any, held by
such Existing Holder which such Existing Holder offers to
sell without regard to the Applicable Rate for the next
succeeding Subsequent Dividend Period; and
(B) each Broker-Dealer will contact Potential Holders
by telephone or otherwise to determine whether such Potential Holders
desire to submit Bids in which such Potential Holders will indicate the
number of Outstanding Shares, if any, which each such Potential Holder
offers to purchase, provided that the Applicable Rate for the next
succeeding Subsequent Dividend Period shall not be less than the rate
per annum specified by such Holder.
For the purposes hereof, the communication by a Existing Holder
pursuant to clause (A) above or by a Potential Holder pursuant to clause (B)
above to a Broker-Dealer, or the communication by a Broker-Dealer acting for its
own account to the Auction Agent, of information referred to in clause (A) or
(B) of this paragraph 7(b)(i) is hereinafter referred to as an "Order" and each
Existing Holder and each Potential Holder placing an Order, including a
Broker-Dealer acting in such capacity for its own account, is hereinafter
referred to as a "Bidder"; an Order containing the information referred to in
clause (A)(1) of this paragraph 7(b)(i) is hereinafter referred to as a "Hold
Order"; an Order containing the information referred
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<PAGE> 33
to in clause (A)(2) or (B) of this paragraph 7(b)(i) is hereinafter referred to
as a "Bid"; and an Order containing the information referred to in clause (A)(3)
of this paragraph 7(b)(i) is hereinafter referred to as a "Sell Order". Inasmuch
as a Broker-Dealer participates in an Auction as an Existing Holder or a
Potential Holder only to represent the interests of its customers or itself, all
discussion herein relating to the consequences of an Auction for Existing
Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented thereby.
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding Shares specified in
such Bid if the Applicable Rate determined on such Auction
Date shall be less than the rate per annum specified in such
Bid; or
(2) such number or a lesser number of Outstanding
Shares to be determined as set forth in paragraph 7(e)(i)(D)
if the Applicable Rate determined on such Auction Date shall
be equal to the rate per annum specified therein; or
(3) a lesser number of Outstanding Shares to be
determined as set forth in paragraph 7(e)(ii)(C) if such
specified rate per annum shall be higher than the Maximum
Applicable Rate and Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding Shares specified in
such Sell Order; or
(2) such number or a lesser number of Outstanding
Shares to be determined as set forth in paragraph 7(e)(ii)(C)
if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding Shares specified in
such Bid if the Applicable Rate determined on such Auction
Date shall be higher than the rate per annum specified in such
Bid; or
(2) such number or a lesser number of Outstanding
Shares to be determined as set forth in paragraph 7(e)(i)(E)
if the Applicable Rate determined on such Auction Date shall
be equal to the rate per annum specified therein.
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<PAGE> 34
(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the Auction
Agent's auction processing system to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by such Broker-Dealer for the
Auction to be conducted on such Auction Date, designating itself (unless
otherwise permitted by the Company) as an Existing Holder or a Potential Holder
in respect of Shares subject to such Orders, and specifying with respect to each
Order:
(A) the name of the Bidder placing each Order (which shall be
the Broker-Dealer unless otherwise permitted by the Company);
(B) the aggregate number of Outstanding Shares that are the
subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding Shares, if any, subject
to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding Shares, if any, subject
to any Bid placed by such Existing Holder and the rate per
annum specified in such Bid; and
(3) the number of Outstanding Shares, if any, subject
to any Sell Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate
per annum specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more than
three figures to the right of the decimal point, the Auction Agent shall round
such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If a Order or Orders covering in the aggregate all of the
Outstanding Shares held by an Existing Holder are not submitted to the Auction
Agent prior to the Submission Deadline for any reason (including the failure of
a Broker-Dealer to contact any Existing Holder or to submit a Order covering
such Existing Holder's Order or Orders), the Auction Agent shall deem a Hold
Order (in the case of an Auction relating to a Regular Dividend Period) and a
Sell Order (in the case of an Auction relating to a Special Dividend Period) to
have been submitted on behalf of such Existing Holder covering the number of
Outstanding Shares held by such Existing Holder and not subject to Orders
submitted to the Auction Agent.
34
<PAGE> 35
(iv) If one or more Orders on behalf of an Existing Holder covering in
the aggregate more than the number of Outstanding Shares held by such Existing
Holder are submitted to the Auction Agent, such Order shall be considered valid
as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder
shall be considered valid up to and including the number of Outstanding
Shares held by such Existing Holder; provided that if more than one
Hold Order is submitted on behalf of such Existing Holder and the
number of Shares subject to such Hold Orders exceeds the number of
Outstanding Shares held by such Existing Holder, the number of Shares
subject to each of such Hold Orders shall be reduced pro rate so that
such Hold Orders, in the aggregate, will cover exactly the number of
Outstanding Shares held by such Existing Holder;
(B) (I) any Bids submitted on behalf of such Existing Holder
shall be considered valid, in the ascending order of their respective
rates per annum if more than one Bid is submitted on behalf of such
Existing Holder, up to and including the excess of the number of
Outstanding Shares held by such Existing Holder over the number of
Shares subject to any Hold Order referred to in paragraph 7(c)(iv)(A)
above; (II) if more than one Bid submitted on behalf of such Existing
Holder specifies the same rate per annum and together they cover more
than the remaining number of Shares that can be the subject of valid
Bids after application of paragraph 7(c)(iv)(A) above and of subclause
(I) of this paragraph 7(c)(iv)(B) to any Bid or Bids specifying a lower
rate or rates per annum, the number of Shares subject to each of such
Bids shall be reduced pro rate so that such Bids, in the aggregate,
cover exactly such remaining number of Shares; and (III) subject to
subclauses (I) and (II) above, if more than one Bid submitted on behalf
of such Existing Holder specifies different rates per annum, such Bids
shall be considered valid in the ascending order of their respective
rates per annum and in any such event the number of Shares, if any,
subject to Bids not valid under this paragraph 7(c)(iv)(B) shall be
treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and
including the excess of the number of Outstanding Shares held by such
Existing Holder over the number of Shares subject to Hold Orders
referred to in paragraph 7(c)(iv)(A) and valid Bids referred to in
paragraph 7(c)(iv)(B); provided that if more than one Sell Order is
submitted on behalf of any Existing Holder and the number of Shares
subject to such Sell Orders is greater than such excess, the number of
Shares subject to each of such Sell Orders shall be reduced pro rate so
that such Sell Orders, in the aggregate, cover exactly the number of
Shares equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per annum and
number of Shares specified.
35
<PAGE> 36
(vi) Any Order submitted by a Existing Holder or a Potential Holder to
its Broker-Dealer, and any Order submitted by a Broker-Dealer to the Auction
Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted by the
Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Holder
Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or as
a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding Shares over
the number of Outstanding Shares that are the subject of Submitted Hold
Orders (such excess being hereinafter referred to as the "Available
Shares");
(B) from the Submitted Orders whether the number of
Outstanding Shares that are the subject of Submitted Bids by Potential
Holders specifying one or more rates per annum equal to or lower than
the Maximum Applicable Rate exceeds or is equal to the sum of:
(1) the number of Outstanding Shares that are the
subject of Submitted Bids by Existing Holders specifying one
or more rates per annum higher than the Maximum Applicable
Rate, and
(2) the number of Outstanding Shares that are subject
to Submitted Sell Orders (if such excess or such equality
exists (other than because the number of Outstanding Shares in
clause (1) above and this clause (2) are each zero because all
of the Outstanding Shares are the subject of Submitted Hold
Orders), such Submitted Bids by Potential Holders being
hereinafter referred to collectively as "Sufficient Clearing
Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per
annum specified in the Submitted Bids (the "Winning Bid Rate") that,
if:
(1) each Submitted Bid from Existing Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Existing Holders specifying lower rates per annum were
rejected, thus entitling such Existing Holders to continue to
hold the Shares that are the subject of such Submitted Bids,
and
(2) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Potential Holders specifying lower rates per annum were
accepted, thus entitling the Potential Holders to purchase
36
<PAGE> 37
the Shares that are the subject of such Submitted Bids,
would result in the number of Shares subject to all Submitted Bids
specifying the Winning Bid Rate or a lower rate per annum being at least
equal to the Available Shares.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 7(d)(i), the Auction Agent shall advise the Company of the
Maximum Applicable Rate and, based on such determinations, the Applicable Rate
for the next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable
Rate for the next succeeding Subsequent Dividend Period shall be equal
to the Winning Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than
because all of the Outstanding Shares are the subject of Submitted Hold
Orders), that the Subsequent Dividend Period next succeeding the
Auction shall automatically be a Regular Dividend Period and the
Applicable Rate for such next succeeding Subsequent Dividend Period
shall be equal to the Maximum Applicable Rate; or
(C) if all of the Outstanding Shares are the subject of
Submitted Hold Orders, that the Subsequent Dividend Period next
succeeding the Auction shall automatically be a Regular Dividend Period
and the Applicable Rate for such next succeeding Subsequent Dividend
Period shall be equal to 59% of the Reference Rate in effect on the
date of such Auction.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares. Based on the determinations made pursuant to
paragraph 7(d)(i), the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected and the Auction Agent shall take such other action as set
forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 7(e)(iii) and paragraph 7(e)(iv), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following order of
priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is higher than the Winning Bid Rate
shall be accepted, thus requiring each such Existing Holder to sell the
Outstanding Shares that are the subject of such Submitted Sell Order or
Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be rejected, thus entitling each such Existing Holder to continue
to hold the Outstanding Shares that are the subject of such Submitted
Bid;
37
<PAGE> 38
(C) the Submitted Bid of each of the Potential Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be accepted;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be rejected, thus entitling each such Existing Holder to continue to
hold the Outstanding Shares that are the subject of such Submitted Bid,
unless the number of Outstanding Shares subject to all such Submitted
Bids shall be greater than the excess (the "Remaining Excess") of the
Available Shares over the number of Outstanding Shares subject to
Submitted Bids described in paragraph 7(e)(i)(B) and paragraph
7(e)(i)(C), in which event the Submitted Bids of each such Existing
Holder shall be accepted, and each such Existing Holder shall be
required to sell Outstanding Shares, but only in an amount equal to the
difference between (1) the number of Outstanding Shares then held by
such Existing Holder subject to such Submitted Bid and (2) the number
of Shares obtained by multiplying (x) the number of Remaining Excess by
(y) a fraction the numerator of which shall be the number of
Outstanding Shares held by such Existing Holder subject to such
Submitted Bid and the denominator of which shall be the sum of the
number of Outstanding Shares subject to such Submitted Bids made by all
such Existing Holders that specified a rate per annum equal to the
Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be accepted but only in an amount equal to the number of Outstanding
Shares obtained by multiplying (x) the difference between the Available
Shares and the number of Outstanding Shares subject to Submitted Bids
described in paragraph 7(e)(i)(B), paragraph 7(e)(i)(C) and paragraph
7(e)(i)(D) by (y) a fraction the numerator of which shall be the number
of Outstanding Shares subject to such Submitted Bid and the denominator
of which shall be the sum of the number of Outstanding Shares subject
to such Submitted Bids made by all such Potential Holders that
specified rates per annum equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because
all of the Outstanding Shares are subject to Submitted Hold Orders), subject to
the provisions of paragraph 7(e)(iii), Submitted Orders shall be accepted or
rejected as follows in the following order of priority and all other Submitted
Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable
Rate shall be rejected, thus entitling such Existing Holder to
continue to hold the Outstanding Shares that are the subject of such
Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable
Rate shall be accepted, thus requiring such Potential Holder to
purchase the Outstanding Shares that are the subject of such
Submitted Bid; and
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<PAGE> 39
(C) the Submitted Bids of each Existing Holder specifying any
rate per annum that is higher than the Maximum Applicable Rate shall be
accepted and the Submitted Sell Orders of each Existing Holder shall be
accepted, in both cases only in an amount equal to the difference
between (1) the number of Outstanding Shares then held by such Existing
Holder subject to such Submitted Bid or Submitted Sell Order and (2)
the number of Shares obtained by multiplying (x) the difference between
the Available Shares and the aggregate number of Outstanding Shares
subject to Submitted Bids described in paragraph 7(e)(ii)(A) and
paragraph 7(e)(ii)(B) by (y) a fraction the numerator of which shall be
the number of Outstanding Shares held by such Existing Holder subject
to such Submitted Bid or Submitted Sell Order and the denominator of
which shall be the number of Outstanding Shares subject to all such
Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 7(e)(i)
or paragraph 7(e)(ii), any Existing Holder would be entitled or required to
sell, or any Potential Holder would be entitled or required to purchase, a
fraction of a Share on any Auction Date, the Auction Agent shall, in such manner
as it shall determine in its sole discretion, round up or down the number of
Shares to be purchased or sold by any Existing Holder or Potential Holder on
such Auction Date so that each Outstanding Share purchased or sold by each
Existing Holder or Potential Holder on such Auction Date shall be a whole Share.
(iv) If, as a result of the procedures described in paragraph 7(e)(i),
any Potential Holder would be entitled or required to purchase less than a whole
Share on any Auction Date, the Auction Agent shall, in such manner as in its
sole discretion it shall determine, allocate Shares for purchase among Potential
Holders so that only whole Shares are purchased on such Auction Date by any
Potential Holder, even if such allocation results in one or more of such
Potential Holders not purchasing any Shares on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders
on behalf of Existing Holders or Potential Holders, the aggregate number of
Outstanding Shares to be purchased and the aggregate number of the Outstanding
Shares to be sold by such Potential Holders and Existing Holders and, to the
extent that such aggregate number of Outstanding Shares to be purchased and such
aggregate number of Outstanding Shares to be sold differ, the Auction Agent
shall determine to which other Broker-Dealer or Broker-Dealers acting for one or
more purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, Outstanding Shares.
(f) Suspension of Auction During Non-Payment Period. Upon occurrence
and during the continuance of a Non-Payment Period with respect to Shares of any
Series that has not been duly cured by the Company pursuant to paragraph
2(c)(i), Auctions of such Shares shall be suspended and shall not resume in each
case until (A) in the case of a Dividend Non-Payment Period, all accumulated and
unpaid dividends on such Shares for all past Dividend Periods shall
39
<PAGE> 40
have been paid to the Auction Agent, or (B) in the case of a Redemption
Non-Payment Period in connection with an Optional Redemption or Repurchase of
less than all of the Shares of any Series, all amounts payable upon such
Optional Redemption or Repurchase of such Shares shall have been paid to the
Auction Agent, in each case by 12:00 noon, New York City time, on the relevant
Auction Date with respect to such Shares, provided that, at least two Business
Days but no more than 30 days prior to such Auction Date, the Company shall have
given the Auction Agent, the Securities Depository and the applicable holders of
record written notice of such deposit or availability.
(g) Registration Under Securities Exchange Act. If the Company shall
determine, as a result of a change in applicable law, regulation or rule (or
interpretation thereof by the Securities and Exchange Commission or its staff)
and based upon written advice of independent legal counsel of recognized
standing selected by the Company, that there is a significant possibility that
the Company would be required to register Shares of any Series that may be
outstanding from time to time pursuant to the Securities Exchange Act if
there were 500 or more different beneficial owners of Shares of all Series, the
Auction Procedures will be modified so that no Auction will result in there
being more than a total number of different beneficial owners of Shares of all
Series as such counsel shall specify in such written advice; provided that in no
event shall the Auction Procedures be modified in such a way that they would
restrict the total number of different beneficial owners for Shares of any
Series to be less than 40.
(h) Miscellaneous. The Company may interpret the provisions of this
paragraph 7 to resolve any inconsistency or ambiguity, remedy any formal defect
or make any other change or modification that does not substantially adversely
affect the rights of Existing Holders of Shares. An Existing Holder (A) may
sell, transfer or otherwise dispose of Shares only pursuant to a Bid or Sell
Order in accordance with the procedures described in this paragraph 7 through a
Broker-Dealer, except that transfers of Shares may also be effected through
means other than pursuant to Auctions provided that each such transfer shall be
valid and accepted by the Auction Agent only if such Existing Holder or its
Broker-Dealer or Agent Member, as applicable, shall have advised the Auction
Agent in writing of such transfer by 3:00 P.M. on the Business Day next
preceding the Auction Date with respect to such Shares, and (B) except as
otherwise required by law, shall have the ownership of the Shares held by it
maintained in book entry form by the Securities Depository in the account of its
Agent Member, which in turn will maintain records of such Existing Holder's
beneficial ownership. Neither the Company nor any Affiliate shall submit an
Order in any Auction. Any Existing Holder that is an Affiliate shall not sell,
transfer or otherwise dispose of Shares to any Person other than the Company.
All of the Outstanding Shares of a Series shall be represented by one or more
certificates registered in the name of the nominee of the Securities Depository
unless otherwise required by law or unless there is no Securities Depository. If
there is no Securities Depository, at the Company's option and upon its receipt
of such documents as it deems appropriate, such Shares may be registered in the
stock register in the name of the Existing Holder thereof and
40
<PAGE> 41
such Existing Holder thereupon will be entitled to receive certificates therefor
and required to deliver certificates therefor upon transfer or exchange thereof.
8. Notices. All notices or communications to the Company, unless
otherwise specified in the By-Laws of the Company or this Certificate of
Designations, shall be sufficiently given if in writing and delivered in person
or mailed by first-class mail, postage prepaid, to the Company at its principal
executive offices at 1403 Foulk Road, Suite 102, P.O. Box 7108, Wilmington,
Delaware 19803-2775, attention: Corporate Secretary. Notice shall be deemed
given on the earlier of the date received or the date seven days after such
notice is mailed.
9. Securities Depository; Stock Certificates. (a) If there is a
Securities Depository, one or more certificates for all of the Shares of each
Series shall be issued to the Securities Depository and registered in the name
of the Securities Depository or its nominee. Additional certificates may be
issued as necessary to represent Shares. All such certificates shall bear a
legend to the effect that such certificates are issued subject to the provisions
restricting the transfer of Shares contained in this Certificate of
Designations. Unless the Company shall have elected, during a Non-Payment
Period, to waive this requirement, the Company will also issue stop-transfer
instructions to the Auction Agent for the Shares. Except as provided in
paragraph (b) below, the Securities Depository or its nominee will be the
holder, and no Existing Holder shall receive certificates representing its
ownership interest in such Shares.
(b) If the Applicable Rate applicable to all Shares of a Series shall
be the Non-Payment Period Rate or there is no Securities Depository, the Company
may at its option issue one or more new certificates with respect to such Shares
(without the legend referred to in paragraph 9(a) above) registered in the names
of the Existing Holders or their nominees and rescind the stop-transfer
instructions referred to in paragraph 9(a) above with respect to such Shares.
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<PAGE> 42
IN WITNESS WHEREOF, SMITHKLINE BEECHAM HOLDINGS CORPORATION has caused
these presents to be signed in its name and on its behalf by a duly authorized
officer, and its corporate seal to be hereunto affixed and attested by its
Secretary, and the said officers of the Company further acknowledge said
instrument to be the act and deed of the Company, and state under the penalties
of perjury that to the best of their knowledge, information and belief the
matters and facts herein set forth with respect to approval are true in all
material respects, all on _____________, 1996.
SMITHKLINE BEECHAM HOLDINGS CORPORATION
By: ___________________________________
Name:
Title:
Attest:
____________________
Name:
Title: Secretary
<PAGE> 1
EXHIBIT 4.2
FORM OF STOCK CERTIFICATE FOR SMITHKLINE BEECHAM HOLDINGS
CORPORATION FLEXIBLE AUCTION RATE PREFERRED STOCK
[FORM OF FACE OF PREFERRED STOCK CERTIFICATE]
__________________ PREFERRED STOCK
SMITHKLINE BEECHAM HOLDINGS CORPORATION
Incorporated under the Laws of the State of Delaware
This Certificate is Transferable in New York
See Reverse for Certain Definitions
CUSIP ___________
CERTIFICATE NUMBER SHARES
This certifies that ________________________________________ is the
owner of __________ fully paid and non-assessable shares of
_____________________ Preferred Stock, no par value, of SmithKline Beecham
Holdings Corporation, transferable upon the books of the corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the
Certificate of Incorporation and all amendments thereto (copies of which are on
file at the office of the Transfer Agent) to all of which the holder hereof by
acceptance hereof expressly assents. This certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the corporation and the facsimile
signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
- ----------------------------------,
TRANSFER AGENT AND REGISTRAR
By__________________________________ __________________________________
Authorized Officer Secretary
----------------------------------
Chairman of the Board
(FACSIMILE SEAL)
CERTIFICATE OF STOCK
<PAGE> 2
[FORM OF REVERSE OF PREFERRED STOCK CERTIFICATE]
SMITHKLINE BEECHAM HOLDINGS CORPORATION
The Corporation will furnish without charge to each stockholder who so
requests, the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such powers, preferences
and/or rights. Any such request should be addressed to the Secretary of
SmithKline Beecham Holdings Corporation, care of SmithKline Beecham Corporation
(FP2225), One Franklin Plaza, Philadelphia, Pennsylvania 19101 or to the
Transfer Agent named on the face of this certificate.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT--____Custodian____
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received _____________________________ hereby sell, assign
and transfer unto (Please insert social security or other identifying number of
assignee --------------) -------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE) Shares of the stock
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ____________________________________________ Attorney, to transfer the
said stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated: _______________________
X_______________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE, IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 4.3
FORM OF GUARANTEE OF SMITHKLINE BEECHAM PLC
DATED 1996
SMITHKLINE BEECHAM P.L.C.
GUARANTEE
RELATING TO SMITHKLINE BEECHAM
HOLDINGS CORPORATION
LINKLATERS & PAINES
BARRINGTON HOUSE
59-67 GRESHAM STREET
LONDON EC2V 7JA
TEL: 0171-606 7080
<PAGE> 2
THIS DEED POLL is made on [ ] 1996, by SMITHKLINE BEECHAM
P.L.C., an English public limited company, ("SMITHKLINE BEECHAM") whose
registered office is at New Horizons Court, Great West Road, Brentford,
Middlesex, TW8 9EP, England.
WHEREAS SmithKline Beecham Holdings Corporation (the "COMPANY"), a
Delaware corporation and a wholly-owned subsidiary of SmithKline
Beecham, proposes to issue to 12,920 shares of Voting Flexible Auction
Rate Preferred Stock ("FARP"), each with a liquidation preference of
U.S. $100,000, in one or more series, as described in the Company's
Registration Statement on Form F-3 filed with The Securities and
Exchange Commission on [ ]; and
WHEREAS the Company intends to use the proceeds of the issue of the
FARP, among other things, to make intercompany loans to SmithKline
Beecham and its subsidiaries;
NOW THIS DEED WITNESSES AND SMITHKLINE BEECHAM DECLARES as follows:
1 DEFINED TERMS
For the purposes of this Deed:
"ADJUSTED DISTRIBUTABLE RESERVES OF SMITHKLINE BEECHAM" means at any
time an amount equal to the amount of the Distributable Reserves of
SmithKline Beecham at such time
REDUCED (if applicable) by an amount equal to the aggregate of the
amount in pounds sterling or the Sterling Equivalents of:
(i) all Capital increases made by SmithKline Beecham or its
Affiliates at any time in accordance with any of the Support
Agreements since the date of such agreement; and
(ii) the aggregate of all amounts paid by SmithKline Beecham under
any of the Preferred Share Dividend Guarantees (including, for
the avoidance of doubt, this Deed Poll) since the date upon
which such guarantee was made; and
INCREASED (if applicable) by an amount equal to the aggregate of the
amount in pounds sterling of the Sterling Equivalents of all
Written-Down Amounts;
"AFFILIATE" means any subsidiary (as defined in Section 736 of the
Companies Act 1985 in force at the date hereof) of SmithKline Beecham;
<PAGE> 3
"BUSINESS DAY" means a day on which the New York Stock Exchange is open
for trading and which is not a day in which banks in New York City are
authorised or obliged by law to close;
"CAPITAL INCREASE" has the meaning ascribed to it in the SB Holdings
Support Agreement;
"COMPANIES ACT 1985" includes any subsequent re-enactments or
amendments thereof;
"DECLARED DIVIDENDS" shall have the meaning specified in paragraph 2
hereof;
"DISTRIBUTABLE RESERVES OF SMITHKLINE BEECHAM" means at any time the
amount of those profits of SmithKline Beecham which it could lawfully
distribute at such time in accordance with the Companies Act 1985,
determined by reference to the most recently published annual audited
accounts of SmithKline Beecham;
"DIVIDENDS-RECEIVED DEDUCTION" shall have the meaning specified in
paragraph 3.2 hereof;
"HOLDER" means, with respect to a share of FARP of any series at any
time, the registered holder of such share as the same appears on the
stock books of the Company at such time;
"PREFERRED SHARE DIVIDEND GUARANTEES" means this Deed, the SB Bio
Preferred Share Dividend Guarantee, the SB Corp Preferred Share
Dividend Guarantee and any other guarantee granted in the future by
SmithKline Beecham on terms substantially similar to those contained in
this Deed, guaranteeing payment by the Company or another subsidiary of
SmithKline Beecham of dividends on preferred shares issued by such
company;
"SB BIO PREFERRED SHARE DIVIDEND GUARANTEE" means the guarantee made on
the same date as the date of this Deed by SmithKline Beecham in
favour of the Holders (as defined therein) from time to time of
preferred shares of SmithKline Beecham Biologicals S.A.;
"SB BIO SUPPORT AGREEMENT" means the support agreement dated the same
date as the date of this Deed between SmithKline and SmithKline Beecham
Biologicals S.A.;
"SB CORP PREFERRED SHARE DIVIDEND GUARANTEE" means the guarantee dated
30 April 1990 made by SmithKline Beecham in favour of the Holders (as
defined therein) from time to time of Money Market Cumulative
Preferred(TM) Stock, as amended and restated by a deed poll dated the
same date as the date of this Deed;
2
<PAGE> 4
"SB CORP SUPPORT AGREEMENT" means the support agreement dated 30 April
1990 between SmithKline Beecham and SmithKline Beecham Americas Inc.
(subsequently merged with and into SmithKline Beecham Corporation), as
amended and restated by an agreement dated the same date as the date of
this Deed;
"SB HOLDINGS SUPPORT AGREEMENT" means the support agreement between
SmithKline Beecham and the Company dated the same date as the date of
this Deed; and
"STERLING EQUIVALENT" has the meaning ascribed to it in the SB Holdings
Support Agreement;
"SUPPORT AGREEMENTS" means the SB Holdings Support Agreement, the SB
Bio Support Agreement, the SB Corp Support Agreement and any other
support agreement on substantially similar terms to the SB Holdings
Support Agreement which SmithKline Beecham may enter into with one of
its subsidiaries in connection with an issuance of preferred shares by
such subsidiary; and
"WRITTEN-DOWN AMOUNT" has the meaning ascribed to it in the SB Holdings
Support Agreement.
2 GUARANTEE OF DIVIDENDS
SmithKline Beecham hereby unconditionally and irrevocably guarantees to
and in favour of each Holder the due and punctual payments in U.S.
dollars of all dividends on the shares of FARP of any series registered
in the name of such Holder, PROVIDED that such dividends have been
declared by the Company's Board of Directors out of funds legally
available therefor ("DECLARED DIVIDENDS"), and if the Company fails
punctually to pay any Declared Dividends, SmithKline Beecham hereby
undertakes to and in favour of each Holder to pay or cause to be paid
to each Holder an amount in U.S. dollars equal to such Declared
Dividends to which such Holder is entitled. SmithKline Beecham hereby
agrees that its obligations to make any such payment hereunder shall be
as if it were principal debtor and not merely surety, and shall be
absolute and unconditional, irrespective of, and unaffected by, any
invalidity, irregularity or unenforceability of any share of FARP of
any series or this Deed, any failure to enforce the provisions of this
Deed, any waiver, modification or indulgence granted to the Company by
any Holder, or any other circumstances which may otherwise constitute a
legal or equitable discharge of a surety or guarantor.
3 PAYMENTS
3.1 SmithKline Beecham undertakes to and in favour of each Holder, to the
fullest extent that it may effectively do so under applicable law, that
(i) its obligations
3
<PAGE> 5
hereunder shall not be affected by any setoff or counterclaim which
SmithKline Beecham may have or assert against the Company and (ii) all
payments to or for the account of any Holder hereunder shall be made
without deduction or withholding for or on account of any present or
future tax, levy, duty or governmental charge assessed by the United
Kingdom or any political subdivision thereof or taxing authority
therein, exclusive of any tax, levy, duty or governmental charge which
would not have been imposed or assessed but for the existence of any
present or former connection between such Holder or the beneficial
owner of an interest in any share of FARP of any series (or between a
fiduciary, settlor, beneficiary, member or shareholder of, or possessor
of a power over, such Holder or beneficial owner, if such Holder or
beneficial owner is an estate, a trust, a partnership or a corporation)
and the United Kingdom, including, without limitation, such Holder or
beneficial owner (or such fiduciary, settlor, beneficiary, member,
shareholder or possessor) being or having been present therein, or
being or having been engaged in trade or business therein, or having or
having had a permanent establishment therein (each such non-excluded
tax being herein referred to as a "U.K. TAX"); PROVIDED, HOWEVER, that
to the extent that SmithKline Beecham is required by applicable law to
withhold or deduct any U.K. Tax from any such payment hereunder,
SmithKline Beecham shall make additional payments so that, after giving
effect to all such deductions and withholdings, the net amount paid to
each Holder would not be less than the amount which would have been
payable but for such a withholding or deduction.
3.2 SmithKline Beecham undertakes to and in favour of each Holder, to the
fullest extent that it may effectively do so under applicable law, that
to the extent that the dividends-received deduction under Section
243(a)(1) or any successor provision of the U.S. Internal Revenue Code
of 1986, as amended (the "DIVIDENDS-RECEIVED DEDUCTION"), is not
available to beneficial owners of shares of FARP of any series that are
otherwise entitled to the Dividends-Received Deduction (each such
beneficial owner being called a "QUALIFYING HOLDER") with respect to
any payments made by SmithKline Beecham hereunder in respect of any
Declared Dividends, then the amounts of such payments will be increased
so that such payments will result in the same after federal income tax
yield that Qualifying Holders would have received had such Declared
Dividends been paid by the Company. Such after federal income tax yield
shall be determined on the basis of the highest generally applicable
marginal federal corporate income tax rate in effect at the time of
payment and on the assumption that any Dividends-Received Deduction
that is available to Qualifying Holders is that deduction which is
available to holders of less than 20 per cent of the stock of the
Company. The obligations of SmithKline Beecham hereunder shall not be
affected by the particular tax position or circumstances of any Holder
or Qualifying Holder, and no Holder or Qualifying Holder of any shares
of FARP of any series shall be required at any time to provide to the
Company or
4
<PAGE> 6
SmithKline Beecham any information as to its particular tax position or
circumstances.
4 RESTRICTION ON PAYMENTS
Notwithstanding paragraphs 2 and 3 above or any other provision of this
Deed, SmithKline Beecham shall in no event be obliged to make any
payment under this Deed of an amount which, at the time such payment is
to be made, would exceed the Adjusted Distributable Reserves of
SmithKline Beecham at such time. In such circumstances the obligation
of SmithKline Beecham shall be limited to making payment under this
Deed of an aggregate amount equal to the Adjusted Distributable
Reserves of SmithKline Beecham at such time and such amount shall be
paid to the Holders pro rata according to the amount of Declared
Dividends then owing to them respectively. Any amount due to the
Holders but not paid as a result of the Adjusted Distributable Reserves
of SmithKline Beecham being insufficient shall become due and payable
by SmithKline Beecham to the Holders, and shall be paid over to them,
from time to time as Adjusted Distributable Reserves of SmithKline
Beecham become available. To the extent that obligations to make
payments under this Deed arise simultaneously with obligations to meet
payments under any other Preferred Share Dividend Guarantee or to make
Capital Increases under any Support Agreement such obligations shall be
discharged in the order and to the extent provided for in Clause 2.3 of
the SB Holdings Support Agreement as though such clause (excluding the
first sentence thereof) was incorporated herein with references to
"this Agreement" being references to the SB Holdings Support Agreement
and references to the "FARP Dividend Guarantee" being references to
this Deed.
5 CONTINUING GUARANTEE
This guarantee is to be a continuing guarantee and accordingly is to
remain in force until all the obligations of SmithKline Beecham
referred to in paragraph 2 shall have been performed or satisfied. This
guarantee is in addition to and without prejudice to and not in
substitution for any rights or security which the Holders may now or
hereafter have or hold in relation to the shares of FARP of any series.
6 ENFORCEMENT AGAINST SMITHKLINE BEECHAM
SmithKline Beecham expressly acknowledges that any Holder may enforce
its rights against SmithKline Beecham under this Deed without first
making a demand upon, or instituting a legal proceeding against, the
Company.
7 TIME OF PAYMENT
Any payment which SmithKline Beecham shall be obliged to make under
this Deed shall be made forthwith after the date on which the Company
failed punctually to pay any Declared Dividends, without giving effect
to any grace or
5
<PAGE> 7
cure period in respect of the payment of such Declared Dividends to
which the Company may be entitled.
8 SUBROGATION
SmithKline Beecham shall be subrogated to the rights of each Holder
against the Company in respect of any amounts paid by SmithKline
Beecham to such Holder pursuant to the provisions of this Deed;
PROVIDED, HOWEVER, that SmithKline Beecham shall not be entitled to
enforce, or receive any payments arising out of or based upon, such
right of subrogation until all Declared Dividends with respect to all
outstanding shares of all series have been paid in full.
9 SUBORDINATION
If an order is made or an effective resolution is passed for the
winding up of SmithKline Beecham, SmithKline Beecham shall, to the
extent required to make payment under this Deed, make payment under
this Deed only of such amounts as would have been payable if the
Holders had, on the day preceding the commencement of the winding up,
become holders of shares in SmithKline Beecham of a class having a
preferential right in a winding up over all other classes of shares in
SmithKline Beecham, issued or to be issued, to receive an amount equal
to the amount expressed to be payable under this Deed on the date upon
which the Holders are treated as having become holders of shares in
SmithKline Beecham as aforesaid.
10 GOVERNING LAW AND JURISDICTION
This Deed shall be governed by and construed in accordance with English
law. SmithKline Beecham hereby agrees, for the benefit of the Holders,
that the courts of England, the state courts of the State of New York,
and the United States federal courts sitting in New York, New York, are
to have jurisdiction in any suit, action or proceeding arising out of
or in connection with this Deed. SmithKline Beecham hereby irrevocably
submits to the jurisdiction of the state courts of the State of New
York and the United States federal courts sitting in New York, New York
in any such suit, action or proceeding, and hereby agrees that service
of process in any such suit, action or proceeding may be made by
mailing a copy thereof to it at its address set forth above and agrees
that any such service of process shall constitute good and sufficient
service.
11 CURRENCY OF PAYMENT
If, under any applicable law, whether as a result of judgment against
SmithKline Beecham, the liquidation of SmithKline Beecham or any other
reason, any payment under this Deed is made to or recovered by a Holder
in a currency (the "OTHER CURRENCY") other than U.S. dollars then, to
the extent that the payment (when the other currency is converted into
U.S. dollars at the rate of exchange on the date of payment or, in the
case of a liquidation, the latest date for the determination of
liabilities permitted by applicable law) falls short of the amount
6
<PAGE> 8
unpaid, SmithKline Beecham shall, as a separate and independent
obligation, fully indemnify such Holder against the amount of the
shortfall. For purposes of the foregoing, the term "RATE OF EXCHANGE"
means the noon buying rate in New York City for cable transfers in
foreign currencies as announced for customs purposes by the Federal
Reserve Bank of New York on the date in question.
12 AMENDMENTS ETC.
No amendment, modification, variation or abrogation of the terms,
conditions and provisions contained in this Deed or the rights of the
Holders or beneficial owners of shares of FARP of any series shall be
made by SmithKline Beecham without the consent of the HoIders of at
least two-thirds of the aggregate liquidation preference of all shares
of FARP of all series outstanding at the time, given in person or by
proxy, either in writing or at a meeting (voting as a single class).
Any such amendment, modification, variation or abrogation made by
SmithKline Beecham with such consent of the Holders of shares of FARP
of all series, shall be binding upon each Holder of shares of FARP of
any series, regardless of whether or not any particular Holder of
shares of FARP of any series shall have consented thereto. The
provisions of the Company's Certificate of Incorporation and By-laws
and the provisions of the Delaware General Corporation Law, so far as
not inconsistent with this Deed, shall apply to any such consent of
Holders of shares of FARP of any series.
13 CAPTIONS
The descriptive headings of the various paragraphs of this Deed are for
convenience only and shall not affect the meaning or construction of
any of the provisions hereof.
IN WITNESS WHEREOF this Deed has been executed on the date
first above written.
THE COMMON SEAL of
SMITHKLINE BEECHAM p.l.c.
was hereunto affixed in the presence of:
7
<PAGE> 1
EXHIBIT 4.4
FORM OF SUPPORT AGREEMENT OF SMITHKLINE BEECHAM PLC
Dated 1996
SmithKline Beecham p.l.c.
and
SmithKline Beecham Holdings Corporation
SUPPORT AGREEMENT
LINKLATERS & PAINES
Barrington House
59-67 Gresham Street
London EC2V 7JA
Tel: 0171-808 7080
<PAGE> 2
THIS AGREEMENT is made on [ ] 1996 BETWEEN:
(1) SMITHKLINE BEECHAM P.L.C., an English public limited company
("SMITHKLINE BEECHAM") whose registered office is at New Horizons
Court, Great West Road, Brentford, Middlesex TW8 9EP, England; and
(2) SMITHKLINE BEECHAM HOLDINGS CORPORATION, a Delaware corporation and a
wholly-owned subsidiary of SmithKline Beecham (the "COMPANY") whose
principal office is at 1403 Foulk Road, Wilmington, Delaware, 19803,
United States of America.
WHEREAS:
The Company has determined to enter into this Agreement in order to facilitate
the raising of funds by the Company (by borrowing and the issue of debt and
equity securities, including shares of Voting Flexible Auction Rate Cumulative
Preferred Stock ("FARP") of one or more series, from time to time) on favourable
terms.
Now therefore, in consideration of the following agreements and covenants, it is
agreed as follows:
1 DEFINED TERMS
Unless the context requires otherwise, the following terms shall for
all purposes of this Agreement have the meanings herein specified:
"ADJUSTED DISTRIBUTABLE RESERVES OF SMITHKLINE BEECHAM" means at any
time an amount equal to the amount of the Distributable Reserves of
SmithKline Beecham at such time:
REDUCED (if applicable) by an amount equal to the aggregate of the
amount in pounds sterling or the Sterling Equivalents of:
(i) all Capital Increases made by SmithKline Beecham or its
Affiliates at any time in accordance with any of the Support
Agreements (including, for the avoidance of doubt, this
Agreement) since the date such agreement was made; and
(ii) the aggregate of all amounts paid by SmithKline Beecham under
any of the Preferred Share Dividend Guarantees since the date
upon which such guarantee was made; and
INCREASED (if applicable) by an amount equal to the aggregate of the
amount in pounds sterling or the Sterling Equivalents of all
Written-Down Amounts;
"ADJUSTED MAXIMUM AMOUNT" means the Maximum Amount reduced (if
applicable) by an amount equal to the aggregate of (1) all Capital
Increases made by SmithKline Beecham or its Affiliates in accordance
with this Agreement and (2) all Capital
<PAGE> 3
Increases (as defined in the SB Bio Support Agreement) made by
SmithKline Beecham or its Affiliates in accordance with the SB Bio
Support Agreement;
"AFFILIATE" means any subsidiary (as defined in Section 736 of the
Companies Act 1985 in force at the date hereof) of SmithKline Beecham;
"BUSINESS DAY" means a day on which the New York Stock Exchange is open
for trading and which is not a day on which banks in New York City are
authorised or obligated by law to close;
"CAPITAL INCREASE" means an addition by SmithKline Beecham, or an
Affiliate, to the capital of any subsidiary of SmithKline Beecham
pursuant to any Support Agreement by one or both of the following means
(at the option of SmithKline Beecham):
(i) the subscription of, and payment for, additional
shares of common stock of the relevant company; or
(ii) the subscription of, and payment for, shares of
preferred stock of the relevant company ranking
junior upon any voluntary or involuntary liquidation,
dissolution or winding-up of such company to any
other class of preferred stock of such company (other
than preferred stock subscribed as a Capital Increase
pursuant to any Support Agreement);
"COMPANIES ACT 1985" includes any subsequent re-enactments or
amendments thereof;
"DEBT", at any date, shall have the meaning set out in the Schedule to
this Agreement;
"DISTRIBUTABLE RESERVES OF SMITHKLINE BEECHAM" means at any time the
amount of those profits of SmithKline Beecham which it could lawfully
distribute at such time in accordance with the Companies Act 1985,
determined by reference to the most recently published annual audited
accounts of SmithKline Beecham;
"EQUITY", at any date, shall have the meaning set out in the Schedule
to this Agreement;
"FARP DIVIDEND GUARANTEE" means the guarantee made on the same date as
the date of this Agreement by SmithKline Beecham in favour of the
Holders (as defined therein) from time to time of shares of FARP of any
series;
"MAXIMUM AMOUNT" means the sum of U.S.$3,000,000,000 (three thousand
million U.S. dollars) provided that if at any time the Company has
issued and outstanding shares of FARP or other shares ranking pari
passu with the FARP with an aggregate liquidation preference exceeding
U.S.$1,150,000,000 (such excess amount the "EXCESS AMOUNT"), the
Maximum Amount shall be increased by the amount that is twice the
2
<PAGE> 4
Excess Amount, except that the Maximum Amount shall never exceed
U.S.$3,800,000,000;
"PREFERRED SHARE DIVIDEND GUARANTEES" means the FARP Dividend
Guarantee, the SB Corp Preferred Share Dividend Guarantee, the SB Bio
Preferred Share Dividend Guarantee and any other guarantee granted in
the future by SmithKline Beecham on terms substantially similar to the
FARP Dividend Guarantee, guaranteeing payment by the Company or another
subsidiary of SmithKline of dividends on preferred shares issued by
such company;
"SB BIO PREFERRED SHARE DIVIDEND GUARANTEE" means the guarantee made on
the same date as the date of this Agreement by SmithKline Beecham in
favour of the Holders (as defined therein) from time to time of certain
preferred shares of SmithKline Beecham Biologicals S.A. of any series;
"SB BIO SUPPORT AGREEMENT" means the support agreement dated the same
date as the date of this Agreement between SmithKline Beecham and
SmithKline Beecham Biologicals S.A.;
"SB CORP PREFERRED SHARE DIVIDEND GUARANTEE" means the guarantee dated
30 April 1990 by SmithKline Beecham in favour of the Holders (as
defined therein) from time to time of Money Market Cumulative
Preferred(TM) Stock, as amended and restated by a deed poll dated the
same date as the date of this Agreement;
"SB CORP SUPPORT AGREEMENT" means the support agreement dated 30 April
1990 between SmithKline Beecham and SmithKline Beecham Americas Inc.
(subsequently merged with and into SmithKline Beecham Corporation), as
amended and restated by an agreement dated the same date as the date of
this Agreement;
"STERLING EQUIVALENT" means (i) subject to (ii) and (iii) below, in
relation to any Capital Increase or any payment made under any of the
Preferred Share Dividend Guarantees, the amount in U.S. dollars thereof
translated into pounds sterling at the noon buying rate in New York
City for cable transfers in foreign currencies as announced for customs
purposes by the Federal Reserve Bank of New York on the date upon which
the Capital Increase or payment is made, (ii) in relation to any
Capital Increase or any payment under any of the Preferred Share
Dividend Guarantees made in a currency other than U.S. dollars or
pounds sterling, the amount in the relevant currency thereof translated
into pounds sterling at such current market rate as SmithKline Beecham
may reasonably determine to be appropriate on the date on which the
Capital Increase or payment is made and (iii) in relation to any
Written-Down Amount in respect of which the write-down is taken by
SmithKline Beecham or, as the case may be, the relevant Affiliate, in a
currency other than pounds sterling, the amount in such currency
thereof translated into pounds sterling at the rate applicable to the
payment or Capital Increase in respect of which such write-down is
made;
3
<PAGE> 5
"SUPPORT AGREEMENTS" means this Agreement, the SB Bio Support
Agreement, the SB Corp Support Agreement and any other support
agreement on substantially similar terms to this Agreement which
SmithKline Beecham may enter into with one of its subsidiaries in
connection with an issuance of preferred shares by such subsidiary; and
"WRITTEN-DOWN AMOUNT" means (i) in relation to any Capital Increase
made in accordance with any of the Support Agreements, the amount (if
any) by which SmithKline Beecham or, as the case may be, the relevant
Affiliate, writes down as irrecoverable the investment in the relevant
company representing such Capital Increase and (ii) in relation to any
payment made under any of the Preferred Share Dividend Guarantees, the
amount (if any) by which SmithKline Beecham writes down as
irrecoverable the amount representing the right against the relevant
company to which it is subrogated as a consequence of such payment.
2 SUPPORT BY SMITHKLINE BEECHAM
SmithKline Beecham agrees with the Company that:
2.1 If at any time Debt exceeds Equity, SmithKline Beecham will forthwith
make, or cause an Affiliate to make, a Capital Increase in respect of
the Company to the extent necessary to cause Equity to exceed Debt.
2.2 If at any time Equity (after deducting therefrom the aggregate
liquidation preference of all shares of FARP of all series then
outstanding, excluding amounts in respect of accumulated and unpaid
dividends thereon) would be less than one U.S. dollar, SmithKline
Beecham will forthwith make, or cause an Affiliate to make, a Capital
Increase in respect of the Company to the extent necessary to maintain
Equity (after such deduction) at not less than one U.S. dollar.
2.3 Notwithstanding sub-paragraphs 2.1 and 2.2 above or any other provision
of this Agreement, SmithKline Beecham shall in no event be obliged to
make, or cause any Affiliate to make, a Capital Increase of an amount
which, at the time the Capital Increase is to be made, would exceed
either the Adjusted Distributable Reserves of SmithKline Beecham at
such time or the Adjusted Maximum Amount at such time. In the event
that any obligation to make a Capital Increase in accordance with any
Support Agreement or a payment under any Preferred Share Dividend
Guarantee is not discharged at any time because the amount of such
Capital Increase or payment would exceed the Adjusted Distributable
Reserves of SmithKline Beecham at such time, then obligations to make
payment under any Preferred Share Dividend Guarantee or a Capital
Increase in accordance with any Support Agreement shall be discharged
in the order in which such obligations arose. In the event such
obligations arose simultaneously, the obligations shall be discharged
pro rata save that the obligation to make payment under any Preferred
Share Dividend Guarantee shall (subject to any provision thereof
providing for Capital Increases to be made under this Agreement in
priority to payments under such guarantees), take priority over the
obligations to make
4
<PAGE> 6
a Capital Increase in accordance with any Support Agreement. The amount
of any Capital Increase under any Support Agreement or payment under
any Preferred Share Dividend Guarantee which is not made as a result of
the Adjusted Distributable Reserves of SmithKline Beecham being
insufficient shall become due and payable by SmithKline Beecham, and
shall be made or paid in accordance with the priorities and principles
of the preceding two sentences, from time to time as Adjusted
Distributable Reserves of SmithKline Beecham become available, subject
to Capital Increases made under this Agreement not exceeding the
Adjusted Maximum Amount at the applicable time.
2.4 This Agreement shall remain in full force and effect until it is
terminated by SmithKline Beecham and the Company pursuant to a written
instrument.
2.5 SmithKline Beecham's obligations to make, or cause to be made, Capital
Increases under this Agreement shall not be subject to any set-off or
counterclaim which SmithKline Beecham may have or assert against the
Company.
2.6 A certificate or report by an officer for the time being of the Company
as to the amount of Equity or the amount of Debt or to the effect that
the limit imposed by any provision of this Agreement has been or will
be or has not been or will not be exceeded at any particular time or
times shall be conclusive evidence, absent manifest error, of such
amount or fact for the purposes of this Agreement.
3 ENFORCEABILITY OF SUPPORT AGREEMENT
The agreement, undertakings, covenants and obligations of SmithKline
Beecham hereunder are for the benefit of the Company only and do not
run to and are not enforceable directly by any creditor or holder of
any shares of the Company, nor shall this Agreement cause SmithKline
Beecham to be responsible for the payment of any obligation of the
Company to a creditor thereof. The Company covenants that it will not
give or make any warranty or representation to third party creditors
which is inconsistent with the provisions of this clause.
4 SUBORDINATION
If an order is made or an effective resolution is passed for the
winding up of SmithKline Beecham, SmithKline Beecham shall, to the
extent required to make payment under this Agreement, make payment
under this Agreement only of such amounts as would have been payable if
the Company had, on the day preceding the commencement of the winding
up, become a holder of shares in SmithKline Beecham of a class having a
preferential right in a winding up over all other classes of shares in
SmithKline Beecham, issued or to be issued, to receive an amount equal
to the amount expressed to be payable under this Agreement on the date
upon which the Company is treated as having become a holder of shares
in SmithKline Beecham as aforesaid.
5
<PAGE> 7
5 GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by and construed in accordance with
English law. Each of the parties hereby agrees that the courts of
England, the state courts of the State of New York, and the United
States federal courts sitting in New York, New York, are to have
jurisdiction in any suit, action or proceeding arising out of or in
connection with this Agreement and each party hereby agrees that
service of process in any such suit, action or proceeding may be made
by mailing a copy thereof to it at its address set forth above and
agrees that any such service of process shall constitute good and
sufficient service.
6 CURRENCY OF CAPITAL INCREASES
If, under any applicable law, whether as a result of judgment against
SmithKline Beecham, the liquidation of SmithKline Beecham or any other
reason, any payment under this Agreement is made to or recovered by the
Company in a currency (the "OTHER CURRENCY") other than U.S. dollars
then, to the extent that the payment (when the other currency is
converted into U.S. dollars at the rate of exchange on the date of
payment or, in the case of a liquidation, the latest date for the
determination of liabilities permitted by applicable law) falls short
of the amount unpaid, SmithKline Beecham shall, as a separate and
independent obligation, fully indemnify the Company against the amount
of the shortfall. For the purposes of the foregoing, the term "RATE OF
EXCHANGE" means the noon buying rate in New York City for cable
transfers in foreign currencies as announced for customs purposes by
the Federal Reserve Bank of New York on the date in question.
7 CAPTIONS
The descriptive headings of the various paragraphs of this Agreement
are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF this Agreement has been executed on the date first
above written.
6
<PAGE> 8
SIGNED by )
)
for and on behalf of )
SMITHKLINE BEECHAM p.l.c. )
Witness's signature
Name
Address
Occupation
SIGNED by )
)
for and on behalf of )
SMITHKLINE BEECHAM )
HOLDINGS CORPORATION
Witness's signature
Name
Address
Occupation
7
<PAGE> 9
SCHEDULE
For the purposes of the Agreement:
(a) "EQUITY" shall mean at any time the aggregate of:
(i) the consolidated shareholders' equity of the Company and its
subsidiaries in accordance with generally accepted accounting
principles in the United States as shown in the then latest
audited balance sheet of the Company (including the amount
paid up or credited as paid up on the issued share capital of
the Company, the amount of any capital in excess of the par
value of any issued shares, the amount of any contributed
capital and any other capital reserve after adding thereto any
credit balance or deducting therefrom any debit balance on
account of retained earnings) and making adjustments thereto
reflect any variation in the paid-up share capital of the
Company, any capital in excess of the par value of any issued
shares, the amount of contributed capital and any other
capital reserve but without deducting from such reserves the
amount of goodwill shown as an intangible asset in such
audited balance sheet; and
(ii) the amount, if any, shown in the then latest audited balance
sheet for minority interests;
(b) For the purposes of paragraph (a) above if any issue or proposed issue
of shares by the Company for cash has been underwritten then such
shares shall be deemed to have been issued and the amount (including
the premium) of the subscription monies payable in respect thereof (not
being monies payable later than six months after the date of allotment)
shall, to the extent so underwritten, be deemed to have been paid up on
the date when the issue of such shares was underwritten (or, if such
underwriting was conditional, on the date when it became
unconditional);
(c) "DEBT" shall mean at any time all indebtedness for borrowed money of
the company in accordance with generally accepted accounting principles
in the United States as the same would be shown on a balance sheet of
the Company, prepared as of such date without consolidation of the
accounts of its subsidiaries (if any) (it being expressly acknowledged
that, for the purposes of this paragraph (c), any references to a
balance sheet do not refer to the latest audited balance sheet of the
Company) and shall be deemed to include except in so far as otherwise
taken into account:
(i) the par value of any issued share capital and the principal
amount of any debentures or borrowed monies, the beneficial
interest wherein or the right to repayment whereof is not for
the time being owned by the Company, of any body whether
corporate or unincorporated and the payment or repayment
whereof is the subject of a guarantee or indemnity by the
Company;
8
<PAGE> 10
(ii) the outstanding principal amount raised by bankers acceptances
(not being acceptances of trade bills in respect of the
purchase or sale of goods in the ordinary course);
(iii) the principal amount of any debenture (whether secured or
unsecured) of the Company; and
(iv) any fixed or minimum premium payable on repayment of any
borrowing or deemed borrowing by the Company;
But shall be deemed not to include:
(v) borrowings for the purposes of repaying the whole or any part
of borrowings by the Company for the time being outstanding
and so to be applied within six months of being so borrowed,
pending their application for such purpose within such period;
(vi) an amount equal to the aggregate value for the time being of
all cash in hand or deposited (and credit balances on current
account) with banks or financial institutions (not being
Affiliates of the Company), certificates of deposit,
commercial paper and other marketable debt securities of
governments and companies and similar instruments owned by the
Company which are or represent amounts available for repayment
of any borrowing provided that such commercial paper is rated
A-1 or better by Standard and Poor's Corporation Inc. ("S&P")
and P-1 or better by Moody's Investors Service Inc.
("MOODY'S") and such other marketable debt securities are so
rated or are rated A+ or better by S&P or A1 or better by
Moody's but excluding cash in hand or deposited (and credit
balances on current account), certificates of deposit,
commercial paper and other marketable debt securities and
similar instruments representing borrowings which are deemed
not to be borrowings by virtue of the operation of the
provisions of sub-paragraph (v) above and "VALUE" means at any
relevant time:
(A) in relation to cash, the amount thereof; and
(B) in relation to certificates of deposit, commercial
paper and other marketable debt securities and
similar instruments, the best price at which a sale
and purchase thereof at arm's length could reasonably
be expected to take place as certified by an
investment bank approved for such purpose by the
Company;
(d) when Debt on any particular date is being ascertained:
(i) any of such monies denominated or repayable (or repayable at
the option of any person other than the Company) in a currency
other than U.S. dollars shall be converted for the purpose of
calculating the U.S. dollar equivalent at the rate of
9
<PAGE> 11
exchange prevailing on that date in New York City provided
that any of such monies shall be converted at the rate of
exchange prevailing in New York City six months before such
day if thereby such aggregate amount would be less (and so
that for this purpose the rate of exchange shall be taken as
the middle market rate as at the opening of business); and
(ii) where under the terms of any borrowing the amount of money
that would be required to discharge the principal amount of
such borrowing in full if it fell to be repaid (at the option
of the Company or by reason of default) on such date is less
than the amount that would otherwise be taken into account in
respect of such borrowing for the purpose of this Agreement,
the amount of such borrowing to be taken into account for the
purpose of this Agreement shall be such lesser amount;
(e) "AUDITED BALANCE SHEET" shall mean the audited balance sheet of the
Company prepared in accordance with generally accepted accounting
principles in the United States as at the end of any financial year of
the Company, and such balance sheet shall for the purposes of this
Agreement be deemed to be audited as from the date of the auditors'
report thereon and the Company shall procure that an audited balance
sheet of the Company as at the end of the financial year of the Company
will be available not later than the expiry of four months after the
end of such year; and
(f) the Company may from time to time change the accounting convention or
principles on which the audited balance sheet is based, provided that
any new convention or principles adopted comply with the requirements
of applicable law.
10
<PAGE> 1
EXHIBIT 5.1
OPINION OF CLEARY, GOTTLIEB, STEEN & HAMILTON
[Letterhead of Cleary, Gottlieb, Steen & Hamilton]
Writer's Direct Dial: (212) 225-2930
June 27, 1996
SmithKline Beecham Holdings Corporation
c/o SmithKline Beecham Corporation
One Franklin Plaza
Philadelphia, Pennsylvania 19101
Re: Flexible Auction Rate Preferred Stock of SmithKline Beecham
Holdings Corporation
Ladies and Gentlemen:
We have acted as counsel to SmithKline Beecham Holdings Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the United States Securities and Exchange Commission (the
"Commission") under the United States Securities Act of 1933, as amended (the
"Securities Act"), of the Company's registration statement on Form F-3 (the
"Registration Statement") relating to the issuance, as described in the
Registration Statement and the form of prospectus contained therein (the
"Prospectus"), of up to 12,920 shares of the Company's Flexible Auction Rate
Preferred Stock, liquidation preference $100,000 per share (the "Securities").
The Securities are to be issued in accordance with the terms of the Company's
Certificate of Incorporation (the "Certificate of Incorporation") and By- Laws
(the "By-Laws") and the Certificate of Designations under which the terms of the
Securities will be designated (the "Certificate of Designations").
In arriving at the opinions expressed below, we have reviewed the
Registration Statement as filed with the Commission and the exhibits thereto,
including the Certificate of Incorporation, the By-Laws and a form of the
Certificate of Designations. In addition, we have
<PAGE> 2
SmithKline Beecham Holdings Corporation, p. 2
reviewed the originals or copies certified or otherwise identified to our
satisfaction of all such corporate records of the Company and such other
instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and we have made such
investigations of law, as we have deemed appropriate as a basis for the opinions
expressed below. In rendering the opinions expressed below, we have assumed that
the signatures on all documents that we have reviewed are genuine and that the
Securities will conform in all material respects to the description thereof set
forth in the Prospectus.
Based on the foregoing, it is our opinion that, upon filing of the
Certificate of Designations with the Secretary of State of the State of
Delaware, the Securities will have been duly authorized by all necessary
corporate action of the Company and, when issued and delivered in accordance
with such authorization, will be validly issued, fully paid and nonassessable.
The foregoing opinions are limited to the General Corporation Law of
the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name in the Prospectus under
the heading "Legal Matters." By giving such consent, we do not admit that we are
"experts" under the Securities Act or the rules and regulations of the
Commission issued thereunder with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By /s/ Paul J. Shim
------------------------------------------
Paul J. Shim, a Partner
<PAGE> 1
EXHIBIT 5.2
OPINION OF LINKLATERS & PAINES
[Letterhead of Linklaters & Paines]
SmithKline Beecham p.l.c 27 June 1996
New Horizons Court, Great West Road
Brentford
Middlesex
England
TW8 9EP
(the "GUARANTOR")
SmithKline Beecham Holdings Corporation
1409 Foulk Road
Suite 102
PO Box 7108
Wilmington
Delaware 19803-2775
USA
(the "COMPANY")
Dear Sirs,
REGISTRATION STATEMENT ON FORM F-3 OF SMITHKLINE BEECHAM P.L.C (THE
"REGISTRATION STATEMENT")
1 We have acted as your English legal advisers in connection with the
Registration Statement filed with the United States Securities and Exchange
Commission relating to the issuance, offering and sale of Flexible Auction
Rate Preferred Stock of the Company and the limited guarantee of the
Guarantor with respect thereto (the "GUARANTEE").
2 This opinion is limited to English law as applied by the English courts and
is given on the basis that it will be governed by and construed in
accordance with English law.
3 For the purpose of this opinion, we have examined the documents listed in
the Schedule to this letter.
4 In our opinion:
(a) the Guarantor is duly organized under the laws of England and Wales and
is an existing company;
(b) the execution and delivery of the Guarantee has been duly authorised by
the Guarantor. The Guarantor has taken all necessary corporate action
to authorise the
<PAGE> 2
execution and delivery of the Guarantee by a person or persons
authorised by resolution of a duly authorised committee of the Board of
Directors of the Guarantor;
(c) when executed and delivered by a person or persons duly authorised by
the relevant resolution of a duly authorised committee of the Board of
Directors of the Guarantor, the Guarantee will have been duly executed
and delivered by the Guarantor;
(d) the statements set forth in the Registration Statement under the
headings "Enforceability of Civil Liabilities Against Foreign Persons"
and "Risk Factors - Enforceability of U.S. Securities Laws", insofar as
such statements purport to summarise the enforceability in England of
civil liabilities to the extent predicated upon the federal securities
laws of the United States, provide a fair summary of such provisions,
and we hereby consent to the references to our name and to our opinion
in such sections and in the section entitled "Legal Matters" of the
Registration Statement. By giving such consent, we do not admit that we
are "experts" within the meaning of the Securities Act of 1933, as
amended, or the rules and regulations of the United States Securities
and Exchange Commission issued thereunder with respect to any part of
the Registration Statement, including this exhibit;
(e) the provisions of the Guarantee will, when the Guarantee has been
executed and delivered by the Guarantor, constitute legal, valid,
binding and enforceable obligations of the Guarantor.
5 The term "ENFORCEABLE" as used above means that the obligations assumed by
the Guarantor under the Guarantee are of a type which the English courts
enforce. It does not mean that those obligations will necessarily be
enforced in all circumstances in accordance with their terms. In particular:
(a) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganisation and other laws of general application relating to or
affecting the rights of creditors;
(b) enforcement may be limited by general principles of equity - for
example, equitable remedies may not be available where damages are
considered by the court to be an adequate remedy;
(c) claims may become barred under the Limitation Act 1980 or may be or
become subject to set-off counterclaim;
(d) where obligations are to be performed in a jurisdiction outside
England, they may not be enforceable in England to the extent that
performance would be illegal under the laws of that jurisdiction.
6 This opinion is subject to the following qualifications:
(a) a certificate, determination, notification, opinion or the like might
be held by the English courts not to be conclusive if it could be shown
to have an unreasonable or
2
<PAGE> 3
arbitrary basis or in the event of manifest error despite any provision
in the Guarantee to the contrary;
(b) we express no opinion as to compliance or otherwise with the financial
limitations on borrowings or the giving of guarantees by the Guarantor
contained in Article 91 of the Guarantor's Articles of Association.
7 This opinion is addressed to you solely for your benefit and solely for the
purpose of the Registration Statement. It is not to be transmitted to anyone
else nor is it to be relied upon by anyone else or for any other purpose or
quoted or referred to in any public document or filed with anyone without
our express consent save that a copy may be delivered to Cleary, Gottlieb,
Steen & Hamilton, US counsel to the Company, for the purpose of giving their
opinion in connection with the Registration Statement.
Yours faithfully
/s/ Linklaters & Paines
Linklaters & Paines
3
<PAGE> 4
SCHEDULE
1 A draft dated 24 June 1996 of the Registration Statement.
2 A certified copy of the minutes of the meeting of a duly authorised
committee of the Board of Directors of the Guarantor relating, inter alia,
to the Guarantee.
3 A form of the Guarantee.
4 Such other corporate records, certificates, instruments and other documents
as in our judgement are necessary or appropriate to enable us to register
this opinion.
4
<PAGE> 1
EXHIBIT 8.1
OPINION OF CLEARY, GOTTLIEB, STEEN & HAMILTON
[Letterhead of Cleary, Gottlieb, Steen & Hamilton]
June 27, 1996
SmithKline Beecham Holdings Corporation
c/o SmithKline Beecham Corporation
One Franklin Plaza
Philadelphia, PA 19101
Ladies and Gentlemen:
We have acted as your counsel in connection with the offering
and sale of several series of Auction Rate Preferred Stock (the "Shares")
pursuant to a Registration Statement on Form F-3 (the "Registration Statement")
and the forms of Prospectus (the "Prospectus") and Prospectus Supplements (the
"Prospectus Supplements") contained therein. Capitalized terms used herein have
the meanings ascribed to them in the Prospectus and the Prospectus Supplements.
The Shares will be offered pursuant to Underwriting Agreements between the
Company, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and the other underwriters named therein.
In arriving at the opinions expressed below, we have examined
and relied on the following documents:
(a) the Registration Statement, the Prospectus and the
Prospectus Supplements;
(b) the Support Agreement and the SB Biologicals Support
Agreement;
<PAGE> 2
-2-
(c) the Certificate of Incorporation and Bylaws of the
Company and the Certificate of Designations relating
to the Shares;
(d) the Auction Agent Agreement and the Broker-Dealer
Agreements; and
(e) a letter of representations (and annexed financial
projections) signed by William J. Shulby on behalf of
the Company (the "Representations").
In addition, we have reviewed copies identified to our
satisfaction of such corporate records of the Company and such other instruments
and other certificates, and we have made such investigations of law, as we have
deemed appropriate as a basis for the opinions expressed below. We have assumed
and have not verified the accuracy as to factual matters of each document we
have reviewed and have assumed that the Company will comply with the
Representations at all times.
Based on the foregoing, it is our opinion that:
1. The discussion in the Prospectus under the heading "Certain
Federal Income Tax Considerations", insofar as it purports to summarize certain
provisions of United States federal income tax law, represents a fair summary of
those provisions;
2. The description of our opinions under that heading
accurately describes opinions that we are rendering herewith. In particular,
subject to the assumptions and qualifications set out in the Prospectus, we are
of the opinion that:
a. The Shares will be treated as stock of the Company
for federal income tax purposes;
b. Distributions with respect to the Shares (other than
liquidating distributions and distributions in
redemption of Shares that are subject to section
302(b) of the Internal Revenue Code of 1986), to the
extent made from current or accumulated earnings and
profits of the Company, as determined under federal
income tax principles, will constitute dividends for
federal income tax purposes;
c. A holder that is a corporation generally entitled to
the dividends received deduction under section
243(a)(1) of the Code will be allowed that deduction
with respect to dividends received on the Shares,
provided that the holder satisfies the minimum
holding period and other requirements applicable to
the deduction; and
d. The Internal Revenue Service would be unlikely to
prevail if it asserted a contrary position with
respect to the conclusions set forth above in a
proceeding in which the issues were properly
presented.
<PAGE> 3
-3-
The foregoing opinions are limited to the federal law of the
United States of America.
We are furnishing this opinion letter to you solely for your
benefit. This opinion letter is not to be used, circulated, quoted or otherwise
referred to for any other purpose. We hereby consent to the filing of this
opinion as an exhibit to the Registration Statement and to the reference to our
name in the Prospectus under the heading "Certain Federal Income Tax
Considerations". By giving such consent, we do not admit that we are "experts"
under the Securities Act of 1933 or the rules and regulations of the Securities
and Exchange Commission thereunder with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By: /s/ James A. Duncan
------------------------------------------
James A. Duncan, a Partner
<PAGE> 1
EXHIBIT 10.1
FORM OF GENERAL SERVICES AGREEMENT
BETWEEN SMITHKLINE BEECHAM PLC AND SMITHKLINE
BEECHAM HOLDINGS CORPORATION
GENERAL SERVICES AGREEMENT
THIS AGREEMENT effective the first day of ____________________
by and between SMITHKLINE BEECHAM CORPORATION, a Pennsylvania corporation, with
its principal office at One Franklin Plaza P.O. Box 7929, Philadelphia,
Pennsylvania 19101 ("SB CORP") and SMITHKLINE BEECHAM HOLDINGS CORPORATION, a
Delaware corporation, with its principal office at 1403 Foulk Road, Foulkstone
Plaza, Wilmington, Delaware ("SBHC").
WHEREAS, SBHC wishes to contract SB CORP to provide the
Services listed in Appendix I hereto (as may be amended from time to time) in
support of the corporate management and administration of SBHC's business (as
hereinafter defined), upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, SB CORP and SBHC,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 "SERVICES" shall mean, at any given time, the total of all
services being provided by SB CORP to SBHC pursuant to this
Agreement as reflected on Appendix I, as amended from time to
time to modify, add, or delete SERVICES from the scope of this
Agreement.
1.2 "SB CORP FEE" shall mean the total compensation, as determined
in accordance with Section 3.1, payable to SB CORP for all
SERVICES performed by SB CORP on behalf of SBHC pursuant to
this Agreement.
1.3 "TAX RETURN" shall mean any return, report, information return
or other document (including any related or supporting
information) filed or required to be filed with the Internal
Revenue Service ("IRS") in connection with the determination,
assessment or collection of any tax or the administration of
any federal laws, regulations or administrative requirements
relating to any tax.
2. SERVICES
2.1 Beginning with the effective date of this Agreement, SB CORP
shall provide to SBHC the SERVICES listed in Appendix I hereto
in connection with the corporate management and administration
of SBHC's businesses. It is understood and agreed that, upon
thirty (30) days prior written notice by SBHC to SB CORP,
the parties hereto may agree to amend Appendix I to modify,
add to, or delete SERVICES from the scope of this Agreement.
Such agreement shall include an appropriate amendment to the
Accounting Methodology and adjustment of the SB CORP FEE. The
SB CORP FEE, as so adjusted, shall be applicable for the
remainder of any quarterly period from and after the
modification, initiation or discontinuation of Services
pursuant to such agreement.
3. FEES AND PAYMENTS
3.1 The SB CORP FEE for SERVICES performed hereunder shall be
determined by, and billed to SBHC in accordance with, the
accounting methodology (the "ACCOUNTING METHODOLOGY") set
forth in Appendix II.
3.2 The SB CORP FEE shall be determined by SB CORP on a quarterly
basis in accordance with the ACCOUNTING METHODOLOGY based on
SERVICES performed by SB CORP during the preceding quarter and
shall be paid by SBHC not later than thirty (30) days after
the end of each calendar quarter during which SERVICES were
provided.
3.3 The parties acknowledge that it is their good faith belief,
after due diligence, that (i) the cost to SB CORP of
performing SERVICES hereunder, as embodied in the SB CORP FEE,
represents the fully absorbed cost to SB CORP of performing
such SERVICES and (ii) the allocation of such costs to SBHC,
in accordance with
<PAGE> 2
the ACCOUNTING METHODOLOGY, represents a fair and reasonable
method of allocating such costs to SBHC.
4. RECORDKEEPING; ANNUAL REVIEW; ADJUSTMENTS TO SB CORP FEE
4.1 During the term of this Agreement, SB CORP shall keep such
records to enable a review to be performed to determine
whether the calculation of the SB CORP FEE is in accordance
with the criteria set forth in this Agreement and in the
ACCOUNTING METHODOLOGY set forth in Appendix II. Throughout
the term of this Agreement, SBHC and its representatives shall
have the right, at SBHC's sole cost and expense, to inspect
the records maintained pursuant to this Section 4.1 upon
reasonable notice and during reasonable business hours at the
place of business where such records are maintained.
4.2 In the event that either party disputes all or any portion of
any adjustment to the SB CORP FEE, as set forth in any Report,
and the parties are unable to amiably resolve such dispute
within thirty (30) days of the issuance of such Report, then
such dispute shall be submitted to binding arbitration by
nationally recognized independent certified public accounting
firm acceptable to both parties. Such accounting firm
(hereinafter referred to as the 'ARBITRATOR') shall settle all
disputes in accordance with the criteria established in this
Agreement and in the ACCOUNTING METHODOLOGY. The ARBITRATOR
shall issue a report within thirty (30) days following the
submission of such dispute indicating its conclusions and the
basis thereof. The determination of the ARBITRATOR shall
be final and binding on both parties. The amount of any
adjustment to the SB CORP FEE awarded by the ARBITRATOR shall
be added to or subtracted from, as the case may be, the next
succeeding quarterly payment of the SB CORP FEE. All costs and
expenses of the ARBITRATOR shall be equally shared by the
parties.
4.3 In the event that, as a result of any audit of any TAX RETURN
by the IRS, the SB CORP FEE relating to any period hereunder
is finally determined to be different from the SB CORP FEE as
actually charged to SBHC as determined in accordance with the
procedures set forth herein, then the SB CORP FEE actually
paid by SBHC shall be adjusted in accordance with the
adjustment to the SB CORP FEE as finally determined by such
audit, as follows: in the event that such audit results in a
downward adjustment to the SB CORP FEE, SB CORP shall pay to
SBHC, in immediately available funds, within thirty (30) days
of the final determination of the adjustment by such audit,
the amount of such adjustment plus interest on such amount at
the appropriate rate of interest pursuant to Section 482 of
the Internal Revenue Code ("IRC"), plus any interest or
penalty on any tax deficiency in connection with such
adjustment to the SB CORP FEE; in the event that such audit
results in an upward adjustment to the SB CORP FEE, SBHC shall
pay to SB CORP, in immediately available funds, within thirty
(30) days of the final determination of the adjustment by such
audit, the amount of such adjustment plus interest on such
amount at the appropriate rate of interest pursuant to Section
482 of the IRC, plus any interest or penalty on any tax
deficiency in connection with such adjustment to the SB CORP
FEE.
5. COOPERATION; CERTAIN UNDERSTANDINGS
5.1 During the term of this Agreement, the parties shall cooperate
with one another by providing each other with such documents,
information and other assistance as is necessary for the
orderly and efficient performance of SERVICES hereunder.
6. TERM AND TERMINATION
6.1 Beginning with the effective date, this Agreement shall remain
in effect until (the "Initial Term") and thereafter shall
renew for succeeding annual periods unless sooner terminated
hereunder.
6.2 From and after the Initial Term, either party may terminate
this Agreement upon sixty (60) days written notice to the
other party with or without cause.
6.3 If either party hereto at any time shall commit a material
breach of any of the provisions of this Agreement and shall
not within thirty (30) days of request or written notice of
breach by the other party remedy such breach, then the
nonbreaching party may by written notice to the breaching
party immediately terminate this Agreement. The right of
either party to take this action with respect to any breach
shall not be affected in any way by its waiver of or failure
to take any action with respect to any previous breach.
2
<PAGE> 3
6.4 Either party shall have the right to terminate this Agreement
at any time upon thirty (30) days' written notice to the other
party in the event of the insolvency or bankruptcy of such
other party.
6.5 Termination of this Agreement for the reasons set forth in
this Section 6, shall be without prejudice to (a) any remedies
with any party may then or thereafter have hereunder or at law
(including remedies as to breaches prior to termination); (b)
the right of SB CORP to receive any payment accrued under the
Agreement prior to the termination date but which would become
payable thereafter; and (c) either party's right to obtain
performance of any obligations provided for in this Agreement
(including Sections 3, 8 and 9) which survive termination by
their terms.
7. FORCE MAJEURE
7.1 If either party shall be delayed, interrupted in or prevented
from the performance of any obligation hereunder by reason of
an act of God, fire, flood, war (declared or undeclared),
public disaster, strike or labor differences, governmental
enactment, rule or regulation, or any other cause beyond such
party's control, such party shall not be liable to the other
party therefor.
7.2 Within fifteen (15) days of the beginning of the event
constituting the Force Majeure, the party invoking his Force
Majeure rights must notify the other party of
this fact. The termination of the Force Majeure must also be
notified to the other party within fifteen (15) days of such
termination. If the Force Majeure renders either of the
required notifications impossible, notification must be given
as soon as possible.
8. CONFIDENTIALITY
8.1 SBHC and SB CORP agree that they shall treat this Agreement
and all commercial and technical information received by them
from the other and designated confidential at the time of
transmittal to the receiving party, as confidential, and shall
not disclose the said information to any third party without
express written permission of the other party and shall use
the said information only as contemplated hereunder. In the
event of termination of this Agreement, it is expressly agreed
that the obligations contained in this Section 8, shall
survive the Agreement by three (3) years.
9. LIABILITY AND INDEMNIFICATION
9.1 (a) Each party hereto shall perform the Services for the other
party with the same degree of care, skill and prudence
customarily exercised by it for its own operations.
(b) Except as provided in Paragraph 9.2, (i) SB CORP shall
have no liability under this Agreement for damage or loss of
any type suffered by SBHC or any third party as a result of
the performances of Services provided hereunder by SB CORP and
(ii) SB CORP WILL NOT BE RESPONSIBLE FOR GENERAL, SPECIAL,
INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES THAT SBHC OR
ANY THIRD PARTY MAY INCUR OR EXPERIENCE ON ACCOUNT OF ENTERING
INTO OR RELYING ON THIS AGREEMENT.
(c) Except as provided in Paragraph 9.2, (i) SBHC shall have
no liability under this Agreement for damage or loss of any
type suffered by SB CORP or any third party as a result of the
performance of Services provided hereunder by SBHC and (ii)
SBHC WILL NOT BE RESPONSIBLE FOR GENERAL, SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES THAT SB CORP ANY THIRD
PARTY MAY INCUR OR EXPERIENCE ON ACCOUNT OF ENTERING INTO OR
RELYING ON THIS AGREEMENT.
9.2 (a) SBHC shall indemnify, defend and hold SB CORP its
directors, officers and employees harmless from and against
all damages, losses, and out-of-pocket expenses (including
fees) caused by or arising out of any willful failure to
perform any obligation or agreement of SBHC herein.
(b) SB CORP shall indemnify, defend and hold SBHC its
directors, officers and employees harmless from and against
all damages, losses, and out-of-pocket expenses (including
fees) caused by or arising out of any willful failure to
perform any obligation or agreement of SB CORP herein.
9.3 Notwithstanding Section 9.1 above, neither party shall be
entitled to indemnification pursuant to this Section 9 if the
event giving rise to a claim for indemnification hereunder is
determined by any court having jurisdiction over the matter to
be
3
<PAGE> 4
attributable solely to the gross negligence or intentional
wrongdoing of the party claiming such indemnification, or its
employees, officers, directors or affiliates.
9.4 Any party claiming indemnification pursuant to this Section 9
(the "CLAIMING PARTY") shall give prompt written notice to the
other party (the "INDEMNIFYING PARTY") of the commencement of
any action, suit or proceeding for which indemnification may
be sought, provided that the failure to give such notice shall
not excuse the INDEMNIFYING PARTY from its indemnity
obligations hereunder. Upon receipt of such notice, the
INDEMNIFYING PARTY shall assume the defense thereof; provided,
however, that the CLAIMING PARTY shall be entitled to
participate in any such action, suit or proceeding with
counsel of its own choice, but at its own expense. If the
INDEMNIFYING PARTY fails to assume the defense within a
reasonable time, the CLAIMING PARTY may assume such defense
and the fees and expenses of its attorneys will be covered by
the INDEMNIFYING PARTY pursuant to the indemnity provisions
provided for herein.
9.5 For purposes of this Section 9, any assertion of fact and/or
law by a third party which, if true, would constitute a breach
of a representation or warranty made by a party to this
Agreement or make operational any idemnification obligation
hereunder, shall, on the date that such assertion is make, be
deemed a breach of such representation or warranty or make
operational any indemnification obligation and immediately
invoke that party's obligation to protect, defend, hold
harmless and indemnify the other party to the Agreement
pursuant to this Section 9.
10. ASSIGNMENT
10.1 SB CORP may not assign the rights and/or obligations under
this Agreement in whole or in part to another party without
prior written agreement from SBHC. In the event that there
should occur a change in control of SB CORP, then SBHC shall
have the right to terminate this Agreement upon sixty (60)
days written notice to SB CORP.
11. INDEPENDENT CONTRACTORS
11.1 The parties hereto are independent contractors. Nothing
contained in this Agreement shall place or be construed to
place the parties in the relationship of partners or joint
venturers or agents and no party hereto shall have any power
to obligate or to bind the other party in any manner
whatsoever except as may otherwise be expressly provided in
this Agreement.
12. NOTICES
12.1 Any notice required or permitted under this Agreement shall be
sent by air mail, postage pre-paid, facsimile transmission or
telex to the following addresses, or to such other addresses
as the parties may specify in writing;
If to SB CORP:
SmithKline Beecham Corporation
One Franklin Plaza
P.O. Box 7929
Philadelphia, Pennsylvania 19101
Attention: D. P. Zangara
If to SBHC:
SmithKline Beecham Holdings Corporation
1403 Foulk Road
Foulkstone Plaza
Wilmington, Del 19899
13. GOVERNING LAW
13.1 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers effective as of
SMITHKLINE BEECHAM CORPORATION
By:__________________________________
Title: _________________________________
SMITHKLINE BEECHAM HOLDINGS CORPORATION
By:___________________________________
Title: ________________________________
4
<PAGE> 5
Appendix I
LIST OF SERVICES TO BE PROVIDED BY SB CORP IN
SUPPORT OF SBHC'S BUSINESS OF ACQUIRING, OWNING AND MANAGING ASSETS
The Services to be provided include overall executive management,
legal, corporate accounting, tax, treasury, internal audit, information
resourses, corporate affairs and risk management.
13
<PAGE> 6
Appendix II
ACCOUNTING METHODOLOGY
EXECUTIVE MANAGEMENT Annual cost: $100,000
Services for executive and corporate management will cover overall strategic
direction and executive management for SBHC.
LEGAL Annual cost: $150,000
Legal will include general advice, corporate finance services, patent and
trademarks services, litigation support and environmental support.
CORPORATE ACCOUNTING Annual cost: $100,000
Accounting services will include consolidation of SBHC, preparation of
consolidated financial statements and general ledger accounting and reports for
SmithKline Beecham Holdings Corporation as a separate entity.
TAX Annual cost: $70,000
Tax services will include strategic tax planning and preparation of all Federal
and State income tax returns.
14
<PAGE> 7
TREASURY Annual cost: $50,000
Treasury services will include overall cash management covering foreign currency
hedging and transactions, arranging for and maintaining borrowings, investment
of excess funds and banking relationships.
INTERNAL AUDIT Annual cost: $50,000
Internal audit services will be performed to ensure coverage consistent with SB
Corp practices regarding financial and operations audits.
INFORMATION RESOURCES Annual cost: $50,000
Information resources to be provided on a central basis will include overall
strategic planning and managing of central services such as telecommunications.
CORPORATE AFFAIRS Annual cost: $30,000
Corporate affairs will provide such services as investor relations management
and communications.
RISK MANAGEMENT Annual cost: $80,000
Risk management services will be provided in the form of overall management of
SBHC's insurance matters as well as specific costs for directors' and officers'
liability, fiduciary liability and surety bonds.
Note: Shared services currently in place to support the operations of SBHC will
continue to be provided on a basis consistent with current practices.
Significant out-of-pocket costs incurred by SB Corp which are not contemplated
in the above services costs will be charged direct to SBHC.
15
<PAGE> 1
EXHIBIT 10.2
SHARE EXCHANGE AGREEMENT
Agreement made this 20th day of June, 1996 between SmithKline Beecham
Holdings Corporation, a Delaware corporation ("SB Holdings") and SmithKline
Beecham International Co., a Delaware corporation ("Intco"), SmithKline Beecham
Corporation, a Pennsylvania corporation ("SB Corp"), and SBCL, Inc., a Delaware
corporation ("SBCL", collectively Intco, SB Corp and SBCL are sometimes referred
to herein as the "Transferors").
Background. The Transferors are the record and beneficial owners of a
number of subsidiary corporations engaged in business activities outside the
United States. SB Holdings has been organized with the purpose of consolidating
ownership of those subsidiaries in a single holding company. The parties intend
that these transfers of subsidiary shares be effected on a tax free basis under
Section 351 of the Internal Revenue Code, as amended.
The parties hereto intending to be legally bound hereby agree as
follows:
1. Transfer of Share Ownership. Concurrently with execution of this
Agreement, each of the Transferors shall record or otherwise give full legal
effect to transfer to SB Holdings the shares of capital stock set forth in
EXHIBIT A to this Agreement (collectively the "Subsidiary Shares") with effect
from the date of this Agreement.
2. Consideration for Transfer of Share Ownership. As consideration for
the transfer of the Subsidiary Shares, SB Holdings shall issue to each of the
Transferors such shares of SB Holdings common stock and junior preferred stock
(collectively, the SBHC Shares) as are set forth in EXHIBIT A. The terms of the
junior preferred stock are set forth in EXHIBIT B to this Agreement.
3. Representations and Warranties of SB Holdings. SB Holdings
represents and warrants to each of the Transferors as follows:
(a) Organization and Standing of SB Holdings. SB Holdings is a
duly organized and validly existing corporation in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority for
the ownership and operation of its properties and for the carrying on of its
business as now conducted and as now proposed to be conducted.
(b) Corporate Action. This Agreement and any other agreements
and instruments executed in connection herewith and therewith are the valid and
binding obligations of SB Holdings, enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency or similar laws of general
application
<PAGE> 2
affecting the enforcement of rights of creditors, and subject to equitable
principles limiting rights to specific performance or other equitable remedies.
The execution, delivery and performance of this Agreement and the issuance of
the Shares have been duly authorized by all necessary corporate actions of SB
Holdings. The issuance of the SBHC Shares will not require any further corporate
action and will not be subject to preemptive or other preferential rights or
similar statutory or contractual rights either arising pursuant to any agreement
or instrument to which SB Holdings is a party or which are otherwise binding on
SB Holdings. The SBHC Shares when issued under this Agreement shall be duly
authorized, validly issued, fully paid and nonassessable.
4. Representations and Warranties of Transferors. Each of the
Transferors severally represents and warrants to SB Holdings as follows:
(a) Organization and Standing of the Transferors. Each of the
transferors is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority for the ownership and operation of its
properties and for the carrying on of its business as now conducted and as now
proposed to be conducted.
(b) Corporate Action. This Agreement and any other agreements
and instruments executed in connection herewith and therewith are the valid and
binding obligations of each Transferor, enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency or similar laws of general
application affecting the enforcement of rights of creditors, and subject to
equitable principles limiting rights to specific performance or other equitable
remedies. The execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate actions of each Transferor. The
transfer of the Subsidiary Shares held by each of the Transferors will not
require any further corporate action and will not be subject to preemptive or
other preferential rights or similar statutory or contractual rights either
arising pursuant to any agreement or instrument to which such Transferor is a
party or which are otherwise binding on such Transferor. To the knowledge of
each Transferor the Subsidiary Shares to be transferred by such Transferor are
duly authorized, validly issued, fully paid and nonassessable. Each of the
Transferors owns, beneficially and of record, the Subsidiary Shares set forth on
Exhibit A, free and clear of all liens, claims and encumbrances, and has full
power and authority to transfer such Subsidiary Shares to SB Holdings as
provided in this Agreement. Upon the transfer of the Subsidiary Shares to SB
Holdings in accordance with this Agreement, SB Holdings will have good and valid
title to the Subsidiary Shares, free and clear of all liens, claims and
encumbrances.
2
<PAGE> 3
4. Further Assurances. Each of the parties hereto upon the request of
the other party or parties hereto shall do, execute, acknowledge and deliver or
cause to be done, executed acknowledged or delivered all such further acts,
deeds, documents, assignments, transfers, conveyances, powers of attorney and
assurances as may be reasonably necessary or desirable to effect complete
consummation of the transactions contemplated by this Agreement.
5. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware.
IN WITNESS WHEREOF the parties have executed this Agreement on the date
first set forth above.
SMITHKLINE BEECHAM HOLDINGS
CORPORATION
By: /s/ William J. Shulby
------------------------
SMITHKLINE BEECHAM CORPORATION
By: /s/ Donald F. Parman
------------------------
SMITHKLINE BEECHAM
INTERNATIONAL CO.
By: /s/ Donald F. Parman
------------------------
SBCL, INC.
By: /s/ Donald F. Parman
------------------------
3
<PAGE> 4
EXHIBIT A
The following tables set forth with respect to each Transferor the
Subsidiary Shares to be transferred by such Transferor and the SBHC Shares to be
issued by SB Holdings with respect to such shares. Except as noted, the
Subsidiary Shares represent 100% of the outstanding common shares (other than
qualifying shares) of the respective subsidiary.
1. SMITHKLINE BEECHAM INTERNATIONAL CO.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY SUBSIDIARY SHARES SBHC SHARES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Franklin Chemicals Ltd 4,999,996 common shares 41.3 common shares
0.417 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
SmithKline Beecham Biologicals S.A. (1) $550MM Series A Prefred 550.0 common shares
$100MM Series B Prefred 100.0 common shares
- --------------------------------------------------------------------------------------------------------------------------
Walnut Insurance Co., Ltd. 9,994 shares 1.9 common shares
0.019 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
SmithKline Beecham Animal Health Inc. 995 shares 33.7 common shares
0.340 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
SmithKline Beecham Animal Health Limited 1000 ordinary shares of 1 Irish Punt 0.4 common shares
0.004 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
Eskaylad Holdings Limited 4,998(pound)1 ordinary shares 53.4 common shares
0.539 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
SmithKline Beecham International Limited 99(pound)1 ordinary shares (2) 139.4 common shares
1.408 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
SmithKline Beecham Laboratories 863,999(pound)1 ordinary shares 2.4 common shares
(Australia) Ltd. 0.024 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
Compagnie Industrielle de Specialites SA 79,994 FF500 502.3 common shares
5.074 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
Penn Chemicals Ltd. 99,900 ordinary shares of Irish 1p 0.5 common shares
0.005 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
SmithKline Beecham Seiyaku KK 800,000 common shares (3) 15.7 common shares
0.159 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
SmithKline Beecham Consumer Healthcare KK 31,000 ordinary shares; 11,625 38.1 common shares
preferred shares 0.385 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
Smith Kline & French BV 1,757 shares of Ned Gld 1,000 (4) 1297.7 common shares
- --------------------------------------------------------------------------------------------------------------------------
Smith Kline & French Portuguesa Produtos 73,750 shares of Port Esc 1,000 (5) 0.2 common shares
Farmaceuticos
- --------------------------------------------------------------------------------------------------------------------------
SmithKline Beecham Holdings SA 500 shares of CHF 1,000 67.0 common shares
0.677 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
Sterling Drug International Inc. 200 ordinary shares 2.4 common shares
- --------------------------------------------------------------------------------------------------------------------------
Smith Kline & French (Far East) Co. 1,000 shares of common stock 13.6 common shares
0.137 junior preferred
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 5
2. SBCL, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SUBSIDIARY SUBSIDIARY SHARES SBHC SHARES
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SBCL Holdings Limited 120 shares 42.2 common shares
0.426 junior preferred
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
3. SMITHKLINE BEECHAM CORPORATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SUBSIDIARY SUBSIDIARY SHARES SBHC SHARES
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Smith Kline & French of Pakistan Ltd. 3,375,000 of RS 10 (6) 12.6 common shares
- ----------------------------------------------------------------------------------------------------------------------
SmithKline Beecham Corporation (Panama) 215,000 shares (7) 10.4 common shares
0.105 junior preferred
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All the outstanding common shares of SmithKline Beecham Biologicals SA are
owned by SmithKline Beecham International Co.
(2) All the outstanding preferred shares of SmithKline Beecham International
Limited are owned by SmithKline Beecham plc.
(3) The remaining 87.76% of the outstanding stock is owned by SmithKline Beecham
Capital B.V. and SmithKline Beecham Intercredit B.V.
(4) The remaining 25% of the outstanding common shares of Smith Kline & French
B.V. is owned by SmithKline Beecham Biologicals S.A.
(5) The remaining 75% of the outstanding shares are held by SmithKline Beecham
Intercredit.
(6) The remaining 25% is held by third parties.
(7) The remaining 13.58% of the outstanding common shares of SmithKline Beecham
Corporation (Panama) is owned by Walnut Insurance Company, Ltd.
5
<PAGE> 1
EXHIBIT 12.1
PREDECESSOR COMPANIES TO SMITHKLINE BEECHAM HOLDINGS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS EXCEPT RATIOS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ---------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Income before taxes................ $149 $194 $211 $230 $219 $20 $31
Interest expense................... 35 22 19 13 3 1 1
---- ---- ----- ----- ----- ----- -----
Income, as adjusted................ $184 $216 $230 $243 $222 $21 $32
==== ==== ===== ===== ===== ===== =====
Fixed charges:
Interest expensed and
capitalized...................... $ 36 $ 23 $ 20 $ 14 $ 4 $ 1 $ 1
==== ==== ===== ===== ===== ===== =====
Ratio of earnings to fixed
charges.......................... 5.11x 9.39x 11.50x 17.36x 55.50x 21.00x 32.00x
---- ---- ----- ----- ----- ----- -----
---- ---- ----- ----- ----- ----- -----
</TABLE>
<PAGE> 1
EXHIBIT 12.2
SMITHKLINE BEECHAM PLC
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS EXCEPT RATIOS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------ ---------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
AMOUNTS IN ACCORDANCE WITH U.K. GAAP
Income from continuing operations
before taxes........................... L 843 L 885 L 958 L 607 L1,111 L 360 L 387
Interest expense......................... 160 131 83 102 137 26 57
Portion of rent expense representative of
the interest factor.................... 17 22 28 26 26 6 7
Preferred stock dividends requirements... 76 63 67 63 73 18 18
Deferred stock dividends not
deductible............................. (76) (63) (67) (63) (73) (18) (18)
------ ------ ------ ------ ------ ----- -----
Income as adjusted....................... L1,020 L1,038 L1,069 L 735 L1,274 L 392 L 451
====== ====== ====== ====== ====== ===== =====
Fixed charges:
Interest expensed and capitalized........ L 160 L 131 L 83 L 102 L 148 L 26 L 61
Portion of rent expense representative of
the interest factor.................... 17 22 28 26 26 6 7
Preferred stock dividends................ 76 63 67 63 73 18 18
------ ------ ------ ------ ------ ----- -----
Total fixed charges...................... L 253 L 216 L 178 L 191 L 247 L 50 L 86
====== ====== ====== ====== ====== ===== =====
Ratio of earnings to fixed charges....... 4.03x 4.81x 6.01x 3.85x 5.16x 7.84x 5.24x
====== ====== ====== ====== ====== ===== =====
AMOUNTS IN ACCORDANCE WITH U.S. GAAP
Income from continuing operations
before taxes........................... L 637 L 582 L 862 L 890 L 717
Interest expense......................... 158 130 81 102 126
Portion of rent expense representative of
the interest factor.................... 17 22 28 26 26
Preferred stock dividends requirements... 81 78 84 77 106
Deferred stock dividends not
deductible............................. (81) (78) (84) (77) (106)
------ ------ ------ ------ ------
Income as adjusted....................... L 812 L 734 L 971 L1,018 L 869
====== ====== ====== ====== ======
Fixed charges:
Interest expensed and capitalized........ L 160 L 131 L 83 L 102 L 137
Portion of rent expense representative of
the interest factor.................... 17 22 28 26 26
Preferred stock dividends................ 81 78 84 77 106
------ ------ ------ ------ ------
Total fixed charges...................... L 258 L 231 L 195 L 205 L 269
====== ====== ====== ====== ======
Ratio of earnings to fixed charges....... 3.15x 3.18x 4.98x 4.97x 3.23x
====== ====== ====== ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF
SMITHKLINE BEECHAM HOLDINGS CORPORATION
<TABLE>
<CAPTION>
NAME JURISDICTION OF ORGANIZATION
---- ----------------------------
<S> <C>
SmithKline Beecham Holdings Corporation USDE
Penn Chemcials Ltd. IRELAND
SB Seiyaku K.K. JAPAN
SmithKline Beecham Consumer Healthcare K.K. JAPAN
SmithKline Beecham Animal Health Inc. CANADA
Franklin Chemcials Limited BAHAMAS
Smith Kline & French of Pakistan Limited PAKISTAN
SK&F B.V. NETHERLANDS
SmithKline Beecham de Venezuela S.A. VENEZUELA
SmithKline Beecham Consumer Healthcare Pte. Ltd. SINGAPORE
SmithKline Beecham AG SWITZERLAND
SmithKline Beecham Markenartikel AG SWITZERLAND
S.R. One International B.V. NETHERLANDS
Beecham Pharmaceuticals (PTE) Limited SINGAPORE
SmithKline Beecham Markenartikel G.m.b.H. AUSTRIA
Medisana Pharmazeutisch Drogen-Handel Ges.m.b.H. AUSTRIA
SmithKline Beecham Markenartikel G.m.b.H. & CO. AUSTRIA
SmithKline Beecham (Mfg.) Ltd. IRELAND
SmithKline Beecham (Ireland) Ltd.. IRELAND
SmithKline Beecham Pharmaceuticals Limited IRELAND
SmithKline Beecham Consumer Brands Ltd. IRELAND
Beecham Products (Ireland) Limited IRELAND
SB Laboratoires Pharmaceutiques SA FRANCE
Groupement de Production Pharmaceutique FRANCE
Laboratoires Pharmaceutique Algeriens ALGERIA
Beecham Portuguesa Produtos Farmaceuticos E Quimicos Lda. PORTUGAL
Instituto Luso Farmaco S.A. PORTUGAL
Paolo Cocco Lda. PORTUGAL
Fournex S.A. BELGIUM
SmithKline Beecham Pharma Ges.m.b.H. AUSTRIA
SB Laboratorios LTDA BRAZIL
The Syndey Ross Farma Ltda.. BRAZIL
White Industria e Comercio Ltda. BRAZIL
Publimark Publicidade e Marketing Ltda. BRAZIL
PCL Produtos Cosmeticos Ltda. BRAZIL
SmithKline Beecham Animal Health Limited IRELAND
Bridge Pharmaceuticals Ireland Limited IRELAND
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Compagnie Industrielle Specialites S.A. FRANCE
SmithKline Beecham Pharmacie Sante SA FRANCE
SB Portuguesa Produtos Farmaceuticos PORTUGAL
SmithKline Beecham Corporation PANAMA
Smith Kline & French (Pty.) Limited SOUTH AFRICA
Menley & James (Australia) Limited ENGLAND
SmithKline Beecham Investments Proprietary AUSTRALIA
SmithKline Beecham Holdings S.A. SWITZERLAND
Walnut Insurance Company Limited BERMUDA
Eskaylad Holdings Limited CHANNEL ISLANDS
Eskaylab Limited ENGLAND
SmithKline Beecham Pharmaceuticals Limited INDIA
SBCL Holdings, LTD CANADA
SmithKline Beecham Overseas (No. 2) Limited ENGLAND
SmithKline Beecham Inc.. CANADA
SmithKline Beecham Pharma Inc. CANADA
SB Labs (Australia) Ltd. ENGLAND
Smith Kline & French (Far East) Co. USDE
Valmont Limited" THAILAND
Smith Kline & French (Thailand) Limited THAILAND
Sterling Drug International Inc. USAR
SB International Ltd. ENGLAND
SK Instrument Co., Ltd." ENGLAND
Monolance Ltd. ENGLAND
Menley and James Laboratories Ltd. ENGLAND
SB Funding Plc ENGLAND
Smith Kline & French Laboratories Ltd. ENGLAND
Beecham Group Plc ENGLAND
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form F-3
of our report dated May 21, 1996, except for the second paragraph of Note 14, as
to which the date is June 20, 1996, on our audits of the combined financial
statements of SmithKline Beecham Holdings Corporation. We also consent to the
reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Philadelphia, PA
June 24, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statements on Form F-3 of our
report dated March 1, 1996, on our audit of the financial statements of
SmithKline Beecham plc and subsidiary undertakings included in the Form 20-F for
the year ended December 31, 1995. Our report on our audit of the financial
statements includes an explanatory paragraph with respect to the change in the
method of accounting for capitalized interest. We also consent to the reference
to our firms under the caption "Experts".
/s/ Coopers & Lybrand /s/ Price Waterhouse
COOPERS & LYBRAND PRICE WATERHOUSE
Chartered Accountants Chartered Accountants
and Registered Auditors and Registered Auditors
London, England London, England
June 24, 1996
<PAGE> 1
EXHIBIT 24
POWERS OF ATTORNEY
AND CERTIFIED BOARD RESOLUTIONS
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ H R Collum
---------------------
Name: Mr H R Collum
Dated: June 20, 1996
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ J Leschly
--------------------
Name: Mr J Leschly
Dated: June 20, 1996
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ W R Grant
--------------------
Name: Mr W R Grant
Dated: June 20, 1996
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ J-P Garnier
--------------------
Name: Dr J-P Garnier
Dated: June 20, 1996
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ P Allaire
--------------------
Name: Mr P Allaire
Dated: June 20, 1996
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ A R F Buxton
--------------------
Name: Mr A R F Buxton
Dated: June 20, 1996
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ Christopher Hogg
-----------------------
Name: Sir Christopher
Hogg
Dated: June 20, 1996
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ J A Young
--------------------
Name: Mr J A Young
Dated: June 20, 1996
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ Peter Walters
----------------------
Name:Sir Peter Walters
Dated: June 20, 1996
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ Gloria Hooper
-----------------------
Name:Lady Gloria Hooper
Dated: June 20, 1996
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ T Yamada
--------------------
Name: Dr T Yamada
Dated: June 20, 1996
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Donald F. Parman and William J. Shulby and each of them
(with full power to act without the others), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including as applicable his capacity as a director and/or officer of
SmithKline Beecham plc and/or SmithKline Beecham Holdings Corporation) to sign
the registration statement on United States Securities and Exchange Commission
Form F-3 for the registration with the said Commission of preferred stock of
SmithKline Beecham Holdings Corporation and the related guaranty and support
agreement of SmithKline Beecham plc (the "Securities"), any and all amendments
including post effective amendments and supplements to the said registration
statement and to file the same together with all exhibits thereto and other
documents in connection therewith with the said Commission and further to sign
any and all documents and file the same with any authority in the United Kingdom
or elsewhere requisite and necessary in connection with the said registration
and further to take any and all action and sign and file any and all documents,
statements or other papers which may be necessary or desirable in order to
effect the registration or qualification (or exemption therefrom) of the
Securities for issue, offer, sale or trade under the Blue Sky or other
securities laws of any of the States of the United States of America and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, granting unto the said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and agents or any
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ E J P Browne
---------------------
Name: Mr E J P Browne
Dated: June 20, 1996
<PAGE> 14
SMITHKLINE BEECHAM plc
Extract of Minutes of a Meeting of a Committee of the Board
(Corporate Administration)
held at New Horizons Court, Brentford on June 24, 1996
266. SMITHKLINE BEECHAM HOLDINGS CORPORATION
RESOLVED, that the proper officers of the Company may execute the
registration statement on Form F-3 under the U.S. Securities Act of
1933 with respect to the offering and sale of shares of preferred stock
of SmithKline Beecham Holdings Corporation either personally or by
power of attorney granted to either Donald F. Parman or William J.
Shulby.
Certified True Copy
/s/ A.M. Horler
Mrs. A.M. Horler
Assistant Secretary
<PAGE> 15
SECRETARY'S CERTIFICATE
The undersigned, Donald F. Parman, Secretary of SmithKline
Beecham Holdings Corporation (the "Corporation"), does hereby certify that
attached hereto as Annex I is a true and complete copy of a resolution adopted
by the Board of Directors of the Corporation on June 20, 1996.
IN WITNESS WHEREOF, I have hereunto set my hand as of the date
set forth below.
Dated: June 26, 1996
/s/ Donald F. Parman
----------------------
Donald F. Parman
<PAGE> 16
ANNEX I
RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS OF SMITHKLINE
BEECHAM HOLDINGS CORPORATION
RESOLVED, that the proper officers of the Corporation, be, and hereby
are, authorized to prepare, execute and deliver (either
personally or by power of attorney granted to another officer
of the Corporation) a registration statement on Form F-3 (the
"Registration Statement") under the Securities Act of 1933 (the
"Act") with respect to the offering and sale of shares of
Flexible Term Auction Preferred Stock (the "APS"), to file the
Registration Statement in the name of and on behalf of the
Corporation and under its corporate seal or otherwise with the
Securities and Exchange Commission, and to cause such
Registration Statement to become effective under the Act.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 102
<SECURITIES> 18
<RECEIVABLES> 1,492
<ALLOWANCES> 12
<INVENTORY> 195
<CURRENT-ASSETS> 1,850
<PP&E> 377
<DEPRECIATION> 187
<TOTAL-ASSETS> 2,615
<CURRENT-LIABILITIES> 917
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,433
<TOTAL-LIABILITY-AND-EQUITY> 2,615
<SALES> 1,698
<TOTAL-REVENUES> 1,698
<CGS> 867
<TOTAL-COSTS> 1,480
<OTHER-EXPENSES> (1)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 219
<INCOME-TAX> 109
<INCOME-CONTINUING> 110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110
<EPS-PRIMARY> 0.0
<EPS-DILUTED> 0.0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 98
<SECURITIES> 2
<RECEIVABLES> 1,103
<ALLOWANCES> 11
<INVENTORY> 177
<CURRENT-ASSETS> 1,418
<PP&E> 377
<DEPRECIATION> 194
<TOTAL-ASSETS> 2,168
<CURRENT-LIABILITIES> 465
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,445
<TOTAL-LIABILITY-AND-EQUITY> 2,168
<SALES> 389
<TOTAL-REVENUES> 389
<CGS> 199
<TOTAL-COSTS> 322
<OTHER-EXPENSES> 36
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 31
<INCOME-TAX> 12
<INCOME-CONTINUING> 19
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19
<EPS-PRIMARY> 0.0
<EPS-DILUTED> 0.0
</TABLE>
<PAGE> 1
EXHIBIT 28.1
FORM OF AUCTION AGENT AGREEMENTS
<PAGE> 2
================================================================================
AUCTION AGENT AGREEMENT
between
SMITHKLINE BEECHAM HOLDINGS CORPORATION
and
CITIBANK, N.A.
Dated as of ______________, 1996
Relating to
FLEXIBLE AUCTION MARKET PREFERRED STOCK(R)
("AMPS"(R))
Series A, B and C
of
SMITHKLINE BEECHAM HOLDINGS CORPORATION
================================================================================
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS AND RULES OF CONSTRUCTION
1.1. Terms Defined by Reference to
Certificate of Designations............................... 1
1.2. Terms Defined Herein...................................... 2
1.3. Rules of Construction..................................... 2
II. THE AUCTION
2.1. Purpose; Incorporation by Reference of Auction
Procedures and Settlement Procedures...................... 3
2.2. Preparation for Each Auction; Maintenance
of Registry of Beneficial Owners.......................... 3
2.3. Auction Schedule.......................................... 7
2.4. Notice of Auction Results................................. 8
2.5. Broker-Dealers............................................ 8
2.6. Ownership of Shares of AMPS and Submission of Bids
by the Company and its Affiliates......................... 9
2.7. Access to and Maintenance of Auction Records.............. 9
III. THE AUCTION AGENT AS PAYING AGENT
3.1. The Paying Agent.......................................... 10
3.2. The Company's Notices to the Paying Agent................. 10
3.3. The Company to Provide Funds for Dividends and
Redemptions............................................... 10
3.4. Disbursing Dividends and Redemption Price................. 11
IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR
4.1. Original Issue of Stock Certificates...................... 11
4.2. Registration of Transfer or Exchange of Shares............ 12
4.3. Removal of Legend......................................... 12
4.4. Lost, Stolen or Destroyed Stock Certificates.............. 12
4.5. Disposition of Canceled Certificates;
Record Retention.......................................... 13
4.6. Stock Register............................................ 13
4.7. Return of Funds........................................... 13
V. REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company............. 14
5.2. Representations and Warranties of Citibank N.A............ 15
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C> <C>
VI. THE AUCTION AGENT
6.1. Duties and Responsibilities............................... 15
6.2. Rights of the Auction Agent............................... 15
6.3. Auction Agent's Disclaimer................................ 16
6.4. Compensation, Expenses and Indemnification................ 16
VII. MISCELLANEOUS
7.1. Term of Agreement......................................... 17
7.2. Communications............................................ 17
7.3. Entire Agreement.......................................... 18
7.4. Benefits.................................................. 18
7.5. Amendment; Waiver......................................... 18
7.6. Successors and Assigns.................................... 19
7.7. Severability.............................................. 19
7.8. Execution in Counterparts................................. 19
7.9. Governing Law............................................. 19
</TABLE>
3
<PAGE> 5
THIS AUCTION AGENT AGREEMENT, dated as of _____________, 1996, is
between SMITHKLINE BEECHAM HOLDINGS CORPORATION, a Delaware corporation (the
"Company"), and CITIBANK N.A., a national banking association.
The Company proposes to duly authorize and issue up to ______ Shares in
nine Series designated Flexible Auction Market Preferred Stock(R) ("AMPS"),
Series A-2 and Series A-3 (collectively, "Series A AMPS"); AMPS Series B-1,
Series B-2 and Series B-3 (collectively, "Series B AMPS"), and AMPS Series C-1,
Series C-2 and Series C-3 (collectively, "Series C-3 AMPS") (all with no par
value and a liquidation preference of $100,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared)), pursuant
to the Company's Certificate of Designations (as defined below). The Series A
AMPS, Series B AMPS and Series C AMPS are sometimes referred to together herein
as Shares. A separate Auction (as defined below) will be conducted for each
Series of Shares. The Company desires that Citibank N.A. perform certain duties
as agent in connection with each Auction of Shares (in such capacity, the
"Auction Agent"), and as the transfer agent, registrar, dividend disbursing
agent and redemption agent with respect to the Shares (in such capacity, the
"Paying Agent"), upon the terms and conditions of this Agreement, and the
Company hereby appoints Citibank N.A. as said Auction Agent and Paying Agent in
accordance with those terms and conditions (hereinafter generally referred to as
the "Auction Agent", except in Sections 3 and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company and Citibank N.A. agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. Terms Defined by Reference to Certificate of Designations.
Capitalized terms not defined herein shall have their respective
meanings specified in the Certificate of Designations, including, without
limitation, Paragraph 1 and Paragraph 7 thereof, unless the context otherwise
requires.
- ----------------------
(R) Registered trademark of Merrill Lynch & Co., Inc.
1
<PAGE> 6
1.2. Terms Defined Herein.
As used herein and in the Settlement Procedures (as defined below), the
following terms shall have the following meanings, unless the context otherwise
requires:
(a) "Agent Member" of any Person shall mean such Person's agent
member of the Securities Depository that will act on behalf of a
Bidder.
(b) "Auction" shall have the meaning specified in Section 2.1
hereof.
(c) "Authorized Officer" shall mean each Senior Vice President,
Vice President, Assistant Vice President, Trust Officer, and Assistant
Secretary and Assistant Treasurer of the Auction Agent assigned to its
[Corporate Trust and Agency Group] and every other officer or employee
of the Auction Agent designated as an "Authorized Officer" for purposes
hereof in a communication to the Company.
(d) "Broker-Dealer Agreement" shall mean each agreement between
the Auction Agent and a Broker-Dealer substantially in the form
attached hereto as Exhibit A.
(e) "Certificate of Designations" shall mean the Certificate of
Designations of the Company, establishing the powers, preferences and
rights of the Shares, filed on _________, 1996 with the Secretary of
State of the State of Delaware.
(f) "Company Officer" shall mean the Chairman and Chief Executive
Officer, the President, each Vice President (whether or not designated
by a number or word or words added before or after the title "Vice
President"), the Secretary, the Treasurer, each Assistant Secretary and
each Assistant Treasurer of the Company and every other officer or
employee of the Company designated as a "Company Officer" for purposes
hereof in a notice from the Company to the Auction Agent.
(g) "Holder" shall be a holder of record of one or more Shares,
listed as such in the stock register maintained by the Paying Agent
pursuant to Section 4.6 hereof.
(h) "Settlement Procedures" shall mean the Settlement Procedures
attached as Exhibit A to the Broker-Dealer Agreement.
1.3. Rules of Construction.
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of this Agreement:
2
<PAGE> 7
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall
they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of
similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to
New York City time.
II. THE AUCTION.
2.1. Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) The Certificate of Designations provides that the Applicable
Rate on Shares of each Series of Shares, as the case may be, for each
Dividend Period therefor after the Initial Dividend Period shall be the
rate per annum that the Auction Agent advises results from
implementation of the Auction Procedures. The Board of Directors of the
Company has adopted a resolution appointing Citibank N.A. as Auction
Agent for purposes of the Auction Procedures. Citibank N.A. hereby
accepts such appointment and agrees that, on each Auction Date, it
shall follow the procedures set forth in this Section 2 and the Auction
Procedures for the purpose of determining the Applicable Rate for the
Shares for each Subsequent Dividend Period therefor. Each periodic
operation of the procedures set forth in this Section 2 and the Auction
Procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and
in the Settlement Procedures are incorporated herein by reference in
their entirety and shall be deemed to be a part hereof to the same
extent as if such provisions were set forth fully herein.
2.2. Preparation for Each Auction; Maintenance of Registry of
Beneficial Owners.
(a) Pursuant to Section 2.5 hereof, the Company shall not
designate any Person to act as a Broker-Dealer without prior written
approval of the Auction Agent (which approval shall not be withheld
unreasonably). As of the date hereof, the Company shall provide the
Auction Agent with a list of the Broker-Dealers previously approved by
the Auction Agent and shall cause to be delivered to the Auction Agent
for execution
3
<PAGE> 8
by the Auction Agent a Broker-Dealer Agreement signed by each such
Broker-Dealer. The Auction Agent shall keep such list current and
accurate and shall indicate thereon, or on a separate list, the
identity of each Existing Holder, if any, whose most recent Order was
submitted by a Broker-Dealer on such list and resulted in such Existing
Holder continuing to hold or purchasing Shares. Not later than five
Business Days prior to any Auction Date for which any change in such
list of Broker-Dealers is to be effective, the Company shall notify the
Auction Agent in writing of such change and, if any such change is the
addition of a Broker-Dealer to such list, the Company shall cause to be
delivered to the Auction Agent for execution by the Auction Agent a
Broker-Dealer Agreement signed by such Broker-Dealer. The Auction Agent
shall have entered into a Broker-Dealer Agreement with each
Broker-Dealer prior to the participation of any such Broker-Dealer in
any Auction.
(b) In the event that the Auction Date for any Auction shall be
changed after the Auction Agent shall have given the notice referred to
in clause (vii) of Paragraph (a) of the Settlement Procedures, the
Auction Agent, by such means as the Auction Agent deems practicable,
shall give notice of such change to the Broker-Dealers not later than
the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the
old Auction Date.
(c) The provisions contained in Paragraph 2 of the Certificate of
Designations concerning Special Dividend Periods and the notification
of a Special Dividend Period will be followed by the Company and, to
the extent applicable, the Auction Agent, and the provisions contained
therein are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Agreement to the same extent as if
such provisions were set forth fully herein.
(d)(i) On each Auction Date, the Auction Agent shall determine the
Reference Rate and the Maximum Dividend Rate. If the Reference Rate is
not quoted on an interest basis but is quoted on a discount basis, the
Auction Agent shall convert the quoted rate to an Interest Equivalent,
as set forth in Paragraph 1 of the Certificate of Designations; or, if
the rate obtained by the Auction Agent is not quoted on an interest or
discount basis, the Auction Agent shall convert the quoted rate to an
interest rate after consultation with the Company as to the method of
such conversion. Not later than 9:30 A.M. on each Auction Date, the
Auction Agent shall notify the Company and the Broker-Dealers of the
Reference Rate so determined and of the Maximum Dividend Rate.
4
<PAGE> 9
(ii) If the Reference Rate is the applicable "AA" Composite
Commercial Paper Rate and such rate is to be based on rates supplied by
Commercial Paper Dealers and one or more of the Commercial Paper
Dealers shall not provide a quotation for the determination of the
applicable "AA" Composite Commercial Paper Rate, the Auction Agent
immediately shall notify the Company so that the Company can determine
whether to select a Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers to provide the quotation or quotations not
being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers. The Company promptly shall advise the Auction Agent of any
such selection. If the Company does not select any such Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers, then
the rates shall be supplied by the remaining Commercial Paper Dealer or
Commercial Paper Dealers.
(iii) If, after the date of this Agreement, there is any change
in the prevailing rating of the Shares by either Moody's or S&P (or the
Substitute Rating Agency or Substitute Rating Agencies), thereby
resulting in any change in the corresponding applicable percentage for
the Shares, the Company shall notify the Auction Agent in writing of
such change in the applicable percentage prior to 9:00 A.M. on the
Auction Date for Shares next succeeding such change. The Company shall
inform the Auction Agent of the applicable percentage for the Shares on
the date of this Agreement. The Auction Agent shall be entitled to rely
on the last applicable percentage of which it has received notice from
the Company in determining the Maximum Dividend Rate as set forth in
Section 2.2(d)(i) hereof.
(e)(i) The Auction Agent shall maintain a current registry of
the Existing Holders of the Shares of each Series of Shares for
purposes of each Auction. The Company shall use its best efforts to
provide or cause to be provided to the Auction Agent within ten
Business Days following the closing of the initial offering of Shares
of any Series a list of the initial Existing Holders of such Series of
Shares, and the Broker-Dealer of each such Existing Holder through
which such Existing Holders purchased such Shares. The Auction Agent
may rely upon, as evidence of the identities of the Existing Holders,
such list, the results of each Auction and notices from any Existing
Holder, the Agent Member of any Existing Holder or the Broker-Dealer of
any Beneficial Owner with respect to such Existing Holder's transfer of
any Shares to another Person.
(ii) In the event of any partial Optional Redemption of any
Series of Shares, upon notice by the Company to the Auction Agent of
such partial Optional Redemption, the Auction Agent promptly shall
request the Securities Depository to
5
<PAGE> 10
notify the Auction Agent of the identities of the Agent Members (and
the respective numbers of Shares) from the accounts of which Shares
have been called for redemption and the person or department at such
Agent Member to contact regarding such redemption, and at least two
Business Days prior to the Auction Date preceding such Optional
Redemption Date, the Auction Agent shall request each Agent Member so
identified to disclose to the Auction Agent (upon selection by such
Agent Member of the Existing Holders whose Shares are to be redeemed)
the number of Shares of such Series of Shares of each such Existing
Holder, if any, to be redeemed by the Company, provided that the
Auction Agent has been furnished with the name and telephone number of
a person or department at such Agent Member from which it is to request
such information. In the absence of receiving any such information with
respect to an Existing Holder, from such Existing Holder's Agent Member
or otherwise, the Auction Agent may continue to treat such Beneficial
Owner as having beneficial ownership of the number of Shares of the
Series of Shares shown in the Auction Agent's registry of Existing
Holders.
(iii) The Auction Agent shall register a transfer of the
beneficial ownership of Shares if (A) such transfer is made pursuant to
an Auction or (B) if such transfer is made other than pursuant to an
Auction, the Auction Agent has been notified of such transfer in
writing in a notice substantially in the form of Exhibit C to the
Broker-Dealer Agreements, by such Existing Holder or by the
Broker-Dealer or Agent Member of such Existing Holder. The Auction
Agent is not required to accept any notice of transfer, for transfers
made either pursuant to clause (A) or clause (B) above, delivered prior
to an Auction with respect thereto unless it is received by the Auction
Agent by 3:00 P.M. on the Business Day next preceding such Auction
Date. The Auction Agent shall rescind a transfer made on the registry
of the Existing Holders of any Shares if the Auction Agent has been
notified in writing, in a notice substantially in the form of Exhibit D
to the Broker-Dealer Agreement, by the Agent Member or the
Broker-Dealer of any Person that (i) purchased any Shares that the
seller failed to deliver such Shares or (ii) sold any Shares that the
purchaser failed to make payment to such Person upon delivery to the
purchaser of such Shares, provided that the Auction Agent is not
required to accept any such notice delivered prior to an Auction with
respect thereto unless it is received by the Auction Agent by 3:00 P.M.
on the Business Day next preceding such Auction Date.
(f) The Auction Agent may request that the Broker Dealers, as set
forth in Section 3.2(c) of the Broker-Dealer Agreements, provide the
Auction Agent with a list of their respective customers that such
Broker-Dealers believe are beneficial owners of Shares. The Auction
Agent shall keep
6
<PAGE> 11
confidential any such information and shall not disclose any such
information so provided to any Person other than the relevant
Broker-Dealer and the Company, provided that the Auction Agent reserves
the right to disclose any such information if it is advised by its
counsel that its failure to do so would be unlawful.
2.3. Auction Schedule.
The Auction Agent shall conduct Auctions on each Auction Date in
accordance with the schedule set forth below. Such schedule may be changed by
the Auction Agent with the consent of the Company, which consent shall not be
withheld unreasonably. The Auction Agent shall give notice of any such change to
each Broker-Dealer. Such notice shall be received prior to the first Auction
Date on which any such change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the Companyand the
Broker-Dealers of the Reference Rate and
the Maximum Dividend Rate as set forth
in Section 2.2(d)(i) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker- Dealers as
provided in Paragraph 7(c)(i) of the
Certificate of Designations. Submission
Deadline is 1:00 P.M.
Not earlier than Auction Agent makes determinations
1:00 P.M. pursuant to Paragraph 7(d)(i) of the
Certificate of Designations.
By approximately Auction Agent advises the Company of the
3:00 P.M. results of the Auction as provided in
Paragraph 7(d)(ii) of the Certificate of
Designations.
Submitted Bids and Submitted Sell Orders
are accepted and rejected in whole or in
part and Shares allocated as provided in
Paragraph 7(e) of the Certificate of
Designations.
Auction Agent gives notice of the
Auction results as set forth in Section
2.4 hereof.
7
<PAGE> 12
2.4. Notice of Auction Results.
On each Auction Date, the Auction Agent shall notify each Broker-Dealer
of the results of the Auction held on such date by telephone or through the
Auction Agent's Auction Processing System as set forth in Paragraph (a) of the
Settlement Procedures.
2.5. Broker-Dealers.
(a) Not later than 12:00 noon on each Auction Date, the Company
shall pay to the Auction Agent in Federal Funds or similar same-day
funds an amount in cash equal to (i) in the case of any Auction Date
immediately preceding a Regular Dividend Period, the product of (A) a
fraction the numerator of which is the number of days in such Regular
Dividend Period (calculated by counting the first day of such Regular
Dividend Period but excluding the last day thereof) and the denominator
of which is 360, times (B) [1/4 of 1%], times (C) $100,000 times (D)
the sum of the aggregate number of Outstanding Shares for which the
Auction is conducted and (ii) in the case of any Special Dividend
Period, the amount determined by mutual consent of the Company and the
Broker-Dealers pursuant to Section 3.5 of the Broker-Dealer Agreements.
The Auction Agent shall apply such moneys as set forth in Section 3.5
of the Broker-Dealer Agreements and shall thereafter remit to the
Company any remaining funds paid to the Auction Agent pursuant to this
Section 2.5(a).
(b) The Company shall not designate any Person to act as a
Broker-Dealer, or permit an Existing Holders or a Potential Holder to
participate in Auctions through any Person other than a Broker-Dealer,
without the prior written approval of the Auction Agent, which approval
shall not be withheld unreasonably. The Company may designate Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Lehman Brothers Inc. to
act as Broker-Dealers.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement
as set forth therein if so directed by the Company.
(d) Subject to Section 2.5(b) hereof, the Auction Agent from time
to time shall enter into such Broker-Dealer Agreements as the Company
shall request.
(e) The Auction Agent shall maintain a list of Broker-Dealers.
8
<PAGE> 13
2.6. Ownership of Shares and Submission of Bids by the Company and its
Affiliates.
Neither the Company nor any Affiliate may submit any Sell Order or Bid,
directly or indirectly, in any Auction. The Company shall notify the Auction
Agent if the Company or, to the best of the Company's knowledge, any Affiliate
becomes a Beneficial Owner of any Shares. Any Shares redeemed, purchased or
otherwise acquired (i) by the Company shall not be reissued, except in
accordance with the requirements of the Securities Act or (ii) by its Affiliates
shall not be transferred (other than to the Company). The Auction Agent shall
have no duty or liability with respect to enforcement of this Section 2.6.
2.7. Access to and Maintenance of Auction Records.
The Auction Agent shall afford to the Company, its agents, independent
public accountants and counsel, access at reasonable times during normal
business hours to review and make extracts or copies (at the Company's sole cost
and expense) of all books, records, documents and other information concerning
the conduct and results of Auctions, provided that any such agent, accountant or
counsel shall furnish the Auction Agent with a letter from the Company
requesting that the Auction Agent afford such person access. The Auction Agent
shall maintain records relating to any Auction for a period of two years after
such Auction (unless requested by the Company to maintain such records for such
longer period not in excess of four years, then for such longer period), and
such records, in reasonable detail, shall accurately and fairly reflect the
actions taken by the Auction Agent hereunder. The Company agrees to keep
confidential any information regarding the customers of any Broker-Dealer
received from the Auction Agent in connection with this Agreement or any
Auction, and shall not disclose such information or permit the disclosure of
such information without the prior written consent of the applicable
Broker-Dealer to anyone except such agent, accountant or counsel engaged to
audit or review the results of Auctions as permitted by this Section 2.7,
provided that the Company reserves the right to disclose any such information if
it is advised by its counsel that its failure to do so would (i) be unlawful or
(ii) expose it to liability, unless the Broker-Dealer shall have offered
indemnification satisfactory to the Company. Any such agent, accountant or
counsel, before having access to such information, shall agree to keep such
information confidential and not to disclose such information or permit
disclosure of such information without the prior written consent of the
applicable Broker-Dealer, provided that such agent, accountant or counsel may
reserve the right to disclose any such information if it is advised by its
counsel that its failure to do so would (i) be unlawful or (ii) expose it to
liability, unless the Broker-Dealer shall have offered indemnification
satisfactory to such agent, accountant or counsel.
9
<PAGE> 14
III. THE AUCTION AGENT AS PAYING AGENT.
3.1. The Paying Agent.
The Board of Directors of the Company has adopted a resolution
appointing Citibank N.A. as transfer agent, registrar, dividend disbursing agent
and redemption agent for the Company in connection with any Shares (in such
capacity, the "Paying Agent"). Citibank N.A. hereby accepts such appointment and
agrees to act in accordance with its standard procedures and the provisions of
the Certificate of Designations which are specified herein with respect to the
Shares and as set forth in this Article III.
3.2. The Company's Notices to the Paying Agent.
Whenever any Shares are to be redeemed pursuant to a Mandatory
Redemption or an Optional Redemption, as the case may be, the Company promptly
shall deliver to the Paying Agent a Notice of Redemption, which will be mailed
by the Company to each Holder at least five Business Days prior to the date such
Notice of Redemption is required to be mailed pursuant to the Certificate of
Designations. The Paying Agent shall have no responsibility to confirm or verify
the accuracy of any such Notice of Redemption.
3.3. The Company to Provide Funds for Dividends and Redemptions.
(a) Not later than noon on [the Business Day immediately prior to]
each Dividend Payment Date, the Company shall deposit with the Paying
Agent an aggregate amount of Federal Funds or similar same-day funds
equal o the declared dividends to be paid to Holders on such Dividend
Payment Date, and shall give the Paying Agent irrevocable instructions
to apply such funds to the payment of such dividends on such Dividend
Payment Date.
(b) If the Company shall give a Notice of Redemption, then by noon
of [the Business Day immediately prior to the Mandatory Redemption Date
or the Optional Redemption Date, as the case may be,] the Company shall
deposit in trust with the Paying Agent an aggregate amount of Federal
Funds or similar same-day funds sufficient to redeem such Shares called
for redemption and shall give the Paying Agent irrevocable instructions
and authority to pay the redemption price to the Holders of Shares
called for redemption upon surrender of the certificate or certificates
therefor, if any.
(c) If the Company should deposit funds with the Auction Agent for
the purposes set forth in (a) or (b) of this Section 3.3 on the
Business Day immediately preceding the applicable Dividend Payment Date
or date fixed for redemption, and such funds are immediately available
funds, the Company may direct
10
<PAGE> 15
the Auction Agent to invest the funds so deposited, and if so directed,
such directions shall be given prior to such deposit, in short-term
money market instruments specified in writing by the Company which
mature on or before the opening of business on such Dividend Payment
Date or day fixed for redemption, as the case may be, provided that the
proceeds of such overnight investments will be available at the opening
of business on the Dividend Payment Date or date fixed for redemption,
as the case may be. The investments made pursuant to the foregoing
sentence are solely for the accoun and at the risk of the Company, and
the Auction Agent shall not be liable or responsible for any loss, in
whole or in part, resulting from such investments. Upon the request of
the Company, the Auction Agent shall transmit any interest received on
such investments to the Company that is not applied on a Dividend
Payment Date or a date fixed for redemption.
3.4. Disbursing Dividends and Redemption Price.
After receipt of the Federal Funds or similar same-day funds and
instructions from the Company described in Sections 3.3(a) and (b) above, the
Paying Agent shall pay to the Holders (or former Holders) entitled thereto (i)
on each corresponding Dividend Payment Date, dividends on the Shares and (ii) on
any date fixed for redemption, the redemption price of any Shares called for
redemption. The amount of dividends for any Dividend Period to be paid by the
Paying Agent to Holders will be determined by the Company as set forth in
Paragraph 2 of the Certificate of Designations. The redemption price to be paid
by the Paying Agent to the Holders of any Shares called for redemption will be
determined as set forth in Paragraph 4 of the Certificate of Designations. The
Company shall notify the Paying Agent in writing of a decision to redeem any
Shares on or prior to the date specified in Section 3.2 above, and such notice
by the Company to the Paying Agent shall contain the information required to be
stated in a Notice of Redemption required to be mailed by the Company to such
Holders. The Paying Agent shall have no duty to determine the redemption price
and may rely on the amount thereof set forth in a Notice of Redemption.
IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.
4.1. Original Issue of Stock Certificates.
On the Date of Original Issue for any share of Shares, one or more
certificates for each Series of Shares shall be issued by the Company and
registered in the name of Cede & Co., as nominee of the Securities Depository,
and countersigned by the Paying Agent. The Company will give the Auction Agent
prior written notice and instruction as to the issuance and redemption of
Shares.
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<PAGE> 16
4.2. Registration of Transfer or Exchange of Shares.
Except as provided in this Section 4.2, the Shares shall be registered
solely in the name of the Securities Depository or its nominee. If the
Securities Depository shall give notice of its intention to resign as such, and
if the Company shall not have selected a substitute Securities Depository
acceptable to the Paying Agent prior to such resignation, then upon such
resignation, the Shares of each Series of Shares, at the Company's request, may
be registered for transfer or exchange, and new certificates thereupon shall be
issued in the name of the designated transferee or transferees, upon surrender
of the old certificate in form deemed by the Paying Agent properly endorsed for
transfer with (a) all necessary endorsers' signatures guaranteed in such manner
and form as the Paying Agent may require by a guarantor reasonably believed by
the Paying Agent to be responsible, (b) such assurances as the Paying Agent
shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement and (c) satisfactory evidence of
compliance with all applicable laws relating to the collection of taxes in
connection with any registration of transfer or exchange or funds necessary for
the payment of such taxes. If the certificate or certificates for Shares are not
held by the Securities Depository or its nominee, payments upon transfer of
Shares in an Auction shall be made in Federal Funds or similar same-day funds to
the Auction Agent against delivery of certificates therefor.
4.3. Removal of Legend.
Any request for removal of a legend indicating a restriction on
transfer from a certificate evidencing Shares shall be accompanied by an opinion
of counsel stating that such legend may be removed and such Shares may be
transferred free of the restriction described in such legend, said opinion to be
delivered under cover of a letter from a Company Officer authorizing the Paying
Agent to remove the legend on the basis of said opinion.
4.4. Lost, Stolen or Destroyed Stock Certificates.
The Paying Agent shall issue and register replacement certificates for
certificates represented to have been lost, stolen or destroyed, upon the
fulfillment of such requirements as shall be deemed appropriate by the Company
and by the Paying Agent, subject at all times to provisions of law, the By-Laws
of the Company governing such matters and resolutions adopted by the Company
with respect to lost, stolen or destroyed securities. The Paying Agent may issue
new certificates in exchange for and upon the cancellation of mutilated
certificates. Any request by the Company to the Paying Agent to issue a
replacement or new certificate pursuant to this Section 4.4 shall be deemed to
be a representation and warranty by the Company to the Paying Agent that such
issuance
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<PAGE> 17
will comply with provisions of applicable law and the By-Laws and resolutions of
the Company.
4.5. Disposition of Canceled Certificates; Record Retention.
The Paying Agent shall retain stock certificates which have been
canceled in transfer or in exchange and accompanying documentation in accordance
with applicable rules and regulations of the Commission for two calendar years
from the date of such cancellation. The Paying Agent, upon written request by
the Company, shall afford to the Company, its agents and counsel access at
reasonable times during normal business hours to review and make extracts or
copies (at the Company's sole cost and expense) of such certificates and
accompanying documentation. Upon request by the Company at any time after the
expiration of this two-year period, the Paying Agent shall deliver to the
Company the canceled certificates and accompanying documentation. The Company,
at its expense, shall retain such records for a minimum additional period of
four calendar years from the date of delivery of the records to the Company and
shall make such records available during this period at any time, or from time
to time, for reasonable periodic, special, or other examinations by
representatives of the Commission. The Company also shall undertake to furnish
to the Commission, upon demand, either at their principal office or at any
regional office, complete, correct and current hard copies of any and all such
records. Thereafter, such records shall not be destroyed by the Company without
the approval of the Paying Agent, which approval shall not be withheld
unreasonably, but will be safely stored for possible future reference.
4.6. Stock Register.
The Paying Agent shall maintain the stock register, which shall contain
a list of the Holders, the number of Shares held by each Holder and the address
of each Holder. The Paying Agent shall record in the stock register any change
of address of a Holder upon notice by such Holder. In case of any written
request or demand for the inspection of the stock register or any other books of
the Company in the possession of the Paying Agent, the Paying Agent will notify
the Company and secure instructions as to permitting or refusing such
inspection. The Paying Agent reserves the right, however, to exhibit the stock
register or other records to any person in case it is advised by its counsel
that its failure to do so would (i) be unlawful or (ii) expose it to liability,
unless the Company shall have offered indemnification satisfactory to the Paying
Agent.
4.7. Return of Funds.
Any funds deposited with the Paying Agent by the Company for any reason
under this Agreement, including for the payment of
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<PAGE> 18
dividends or the redemption of Shares of any Series of Shares, that remain with
the Paying Agent after 12 months shall be repaid to the Company upon written
request by the Company.
V. REPRESENTATIONS AND WARRANTIES.
5.1. Representations and Warranties of the Company.
The Company represents and warrants to the Auction Agent that:
(i) the Company is duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware,
and has full power to execute and deliver this Agreement and to
authorize, create and issue the Shares;
(ii) this Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject as to such enforceability to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles;
(iii) the forms of the certificates evidencing the Shares of each
Series of Shares comply with all applicable laws of the State of
Delaware;
(iv) the Shares of each Series of Shares have been duly and
validly authorized by the Company and, upon completion of the initial
sale of the Shares of such Series of Shares and receipt of payment
therefor, will be validly issued, fully paid and nonassessable;
(v) at the time of the offering of the Shares of each Series of
Shares, the Shares offered will be registered under the Securities Act,
and no further action by or before any governmental body or authority
of the United States or of any state thereof is required in connection
with the execution and delivery of this Agreement or will be required
in connection with the issuance of the Shares, except such action as
required by applicable state securities or insurance laws, all of which
action will have been taken;
(vi) the execution and delivery of this Agreement and the
issuance and delivery of the Shares of each Series of Shares do not and
will not conflict with, violate, or result in a breach of, the terms,
conditions or provisions of, or constitute a default under, the Charter
or the By-Laws of the
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<PAGE> 19
Company, any law or regulation applicable to the Company, any order or
decree of any court or public authority having jurisdiction over the
Company, or any mortgage, indenture, contract, agreement or undertaking
to which the Company is a party or by which it is bound; and
(vii) no taxes are payable upon or in respect of the execution of
this Agreement or will be payable upon or in respect of the issuance of
the Shares of each Series of Shares.
5.2. Representations and Warranties of Citibank N.A.
Citibank N.A. represents and warrants to the Company that the Citibank
N.A. is duly organized and is validly existing as a national banking association
in good standing under the laws of the United States, and has the corporate
power to enter into and perform its obligations under this Agreement.
VI. THE AUCTION AGENT.
6.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Company
hereunder and owes no fiduciary duties to any Person except as provided
by this Agreement.
(b) The Auction Agent undertakes to perform such duties and only
such duties as are set forth specifically in this Agreement, and no
implied covenants or obligations shall be read into this Agreement
against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or
omitted by it or for any error of judgment made by it in the
performance of its duties under this Agreement. The Auction Agent shall
not be liable for any error of judgment made in good faith unless the
Auction Agent shall have been negligent in ascertaining (or failing to
ascertain) the pertinent facts.
6.2. Rights of the Auction Agent.
(a) The Auction Agent may rely upon, and shall be protected in
acting or refraining from acting upon, any communication authorized
hereby and any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other instrument,
paper or document reasonably believed by it to be genuine. The Auction
Agent shall not be liable for acting upon any telephone communication
authorized hereby which the Auction Agent
15
<PAGE> 20
believes in good faith to have been given by the Company or by a
Broker-Dealer. The Auction Agent may record telephone communications
with the Company or with the Broker-Dealers or with both.
(b) The Auction Agent may consult with counsel of its choice, and
the written advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder. The Auction Agent
shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed in writing with the Company.
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys.
6.3. Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or
the adequacy of this Agreement, the Broker-Dealer Agreements or the Shares.
6.4. Compensation, Expenses and Indemnification.
(a) The Company shall pay to the Auction Agent from time to time
reasonable compensation for all services rendered by it under this
Agreement and under the Broker-Dealer Agreements as shall be set forth
in a separate writing signed by the Company and the Auction Agent,
subject to adjustments if the Shares no longer are held of record by
the Securities Depository or its nominee or if there shall be such
other change as shall increase materially the Auction Agent's
obligations hereunder or under the Broker-Dealer Agreements.
(b) The Company shall reimburse the Auction Agent upon its request
for all reasonable expenses, disbursements and advances incurred or
made by the Auction Agent in accordance with any provision of this
Agreement and of the Broker-Dealer Agreements (including the reasonable
compensation, expenses and disbursements of its agents and counsel),
except any expense, disbursement or advance attributable to its
negligence or bad faith.
(c) The Company shall indemnify the Auction Agent for, and hold it
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part arising
16
<PAGE> 21
out of or in connection with its agency under this Agreement and under
the Broker-Dealer Agreements, including the costs and expenses of
defending itself against any claim of liability in connection with its
exercise or performance of any of its duties hereunder and thereunder,
except such as may result from its negligence or bad faith.
VII. MISCELLANEOUS.
7.1. Term of Agreement.
(a) The term of this Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Company may terminate
this Agreement at any time by so notifying the Auction Agent, provided
that if any Shares remain outstanding the Company shall have entered
into an agreement in substantially the form of this Agreement with a
successor auction agent. The Auction Agent may terminate this Agreement
upon prior notice to the Company on the date specified in such notice,
which date shall be no earlier than 60 days after delivery of such
notice. If the Auction Agent resigns while any Shares remain
outstanding, the Company shall use its best efforts to enter into an
agreement with a successor auction agent containing substantially the
same terms and conditions as this Agreement.
(b) Except as otherwise provided in this Section 7.1(b), the
respective rights and duties of the Company and the Auction Agent under
this Agreement shall cease upon termination of this Agreement. The
Company's representations, warranties, covenants and obligations to the
Auction Agent under Articles V and Section 6.4 hereof shall survive the
termination hereof. Upon termination of this Agreement, the Auction
Agent shall (i) resign as Auction Agent under the Broker-Dealer
Agreements, (ii) at the Company's request, deliver promptly to the
Company copies of all books and records maintained by it in connection
with its duties hereunder, and (iii) at the request of the Company,
transfer promptly to the Company or to any successor auction agent any
funds deposited by the Company with the Auction Agent (whether in its
capacity as Auction Agent or as Paying Agent) pursuant to this
Agreement which have not been distributed previously by the Auction
Agent in accordance with this Agreement.
7.2. Communications.
Except for (i) communications authorized to be made by telephone
pursuant to this Agreement or the Auction Procedures and (ii) communications in
connection with Auctions (other than those expressly required to be in writing),
all notices, requests and other communications to any party hereunder shall be
in writing
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<PAGE> 22
(including telecopy or similar writing) and shall be given to such party at its
address or telecopier number set forth below:
If to the Company, SMITHKLINE BEECHAM HOLDINGS CORPORATION
addressed to: c/o SmithKline Beecham Corporation
One Franklin Plaza
Philadelphia, Pennsylvania 19101
Attention: Secretary
Telephone No.: (215) 751-7633
Telecopier No.: (215) _________
If to the Auction CITIBANK, N.A.
Agent, addressed to: _____________________
________________________
Attention: ________________
Telephone No.: _______________
Telecopier No.: _______________
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Company by a Company Officer and
on behalf of the Auction Agent by an Authorized Officer.
7.3. Entire Agreement.
This Agreement contains the entire agreement between the parties
relating to the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or inferred,
between the parties relating to the subject matter hereof, except for agreements
relating to the compensation of the Auction Agent.
7.4. Benefits.
Nothing herein, express or implied, shall give to any Person, other
than the Company, the Auction Agent and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim hereunder.
7.5. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part,
except by a written instrument signed by a duly authorized
representative of the party to be charged. The Company shall notify the
Auction Agent of any change in the Certificate of Designations prior to
the effective date of any such change. If any such change in the
Certificate of
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<PAGE> 23
Designations materially increases the Auction Agent's obligations
hereunder, the Company shall obtain the written consent to the Auction
Agent prior to the effective date of such change.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any
subsequent breach.
7.6. Successors and Assigns.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of each of the
Company and the Auction Agent. This Agreement may not be assigned by either
party hereto absent the prior written consent of the other party, which consent
shall not be withheld unreasonably.
7.7. Severability.
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
7.8. Execution in Counterparts.
This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
7.9. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said State.
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
SMITHKLINE BEECHAM HOLDINGS CORPORATION
By: __________________________________
Name:
Title:
CITIBANK N.A.
By: __________________________________
Name:
Title:
20
<PAGE> 25
================================================================================
AUCTION AGENT AGREEMENT
between
SMITHKLINE BEECHAM HOLDINGS CORPORATION
and
THE BANK OF NEW YORK
Dated as of ______________, 1996
Relating to
FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK(R)
("MMP"(R))
Series __________
of
SMITHKLINE BEECHAM HOLDINGS CORPORATION
================================================================================
(R) Registered trademark of Lehman Brothers Inc.
<PAGE> 26
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. DEFINITIONS AND RULES OF CONSTRUCTION
1.1. Terms Defined by Reference to
Certificate of Designations.................................. 1
1.2. Terms Defined Herein......................................... 2
1.3. Rules of Construction........................................ 3
II. THE AUCTION
2.1. Purpose; Incorporation by Reference of Auction
Procedures and Settlement Procedures......................... 3
2.2. Preparation for Each Auction; Maintenance
of Registry of Beneficial Owners............................. 4
2.3. Auction Schedule............................................. 7
2.4. Notice of Auction Results.................................... 8
2.5. Broker-Dealers............................................... 8
2.6. Ownership of Shares and Submission of Bids
by the Company and its Affiliates............................ 9
2.7. Access to and Maintenance of Auction Records................. 9
III.THE AUCTION AGENT AS PAYING AGENT
3.1. The Paying Agent............................................. 10
3.2. The Company's Notices to the Paying Agent.................... 10
3.3. The Company to Provide Funds for Dividends and
Redemptions.................................................. 10
3.4. Disbursing Dividends and Redemption Price.................... 11
IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR
4.1. Original Issue of Stock Certificates......................... 12
4.2. Registration of Transfer or Exchange of Shares............... 12
4.3. Removal of Legend............................................ 12
4.4. Lost, Stolen or Destroyed Stock Certificates................. 13
4.5. Disposition of Canceled Certificates;
Record Retention............................................. 13
4.6. Stock Register............................................... 13
4.7. Return of Funds.............................................. 14
V. REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company................ 14
5.2. Representations and Warranties of The Bank of New
York......................................................... 15
</TABLE>
2
<PAGE> 27
<TABLE>
<S> <C>
VI. THE AUCTION AGENT
6.1. Duties and Responsibilities................................ 15
6.2. Rights of the Auction Agent................................ 16
6.3. Auction Agent's Disclaimer................................. 16
6.4. Compensation, Expenses and Indemnification................. 16
VII. MISCELLANEOUS
7.1. Term of Agreement.......................................... 17
7.2. Communications............................................. 18
7.3. Entire Agreement........................................... 18
7.4. Benefits................................................... 18
7.5. Amendment; Waiver.......................................... 19
7.6. Successors and Assigns..................................... 19
7.7. Severability............................................... 19
7.8. Execution in Counterparts.................................. 19
7.9. Governing Law.............................................. 19
</TABLE>
3
<PAGE> 28
THIS AUCTION AGENT AGREEMENT, dated as of _____________, 1996, is
between SMITHKLINE BEECHAM HOLDINGS CORPORATION, a Delaware corporation (the
"Company"), and THE BANK OF NEW YORK, a national banking association.
The Company proposes to duly authorize and issue up to ______ Shares in
_____ Series designated Flexible Money Market Cumulative Preferred Stock(R)
("MMP"), Series __________ (all with no par value and a liquidation preference
of $100,000 per share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared)), pursuant to the Company's Certificate of
Designations (as defined below). The Series __________ MMP are sometimes
referred to together herein as Shares. A separate Auction (as defined below)
will be conducted for each Series of Shares. The Company desires that The Bank
of New York perform certain duties as agent in connection with each Auction of
Shares (in such capacity, the "Auction Agent"), and as the transfer agent,
registrar, dividend disbursing agent and redemption agent with respect to the
Shares (in such capacity, the "Paying Agent"), upon the terms and conditions of
this Agreement, and the Company hereby appoints The Bank of New York as said
Auction Agent and Paying Agent in accordance with those terms and conditions
(hereinafter generally referred to as the "Auction Agent", except in Sections 3
and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company and The Bank of New York agree as
follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. Terms Defined by Reference to Certificate of Designations.
Capitalized terms not defined herein shall have their respective
meanings specified in the Certificate of Designations, including, without
limitation, Paragraph 1 and Paragraph 7 thereof, unless the context otherwise
requires.
- ----------------------
(R) Registered trademark of Lehman Brothers Inc.
1
<PAGE> 29
1.2. Terms Defined Herein.
As used herein and in the Settlement Procedures (as defined below), the
following terms shall have the following meanings, unless the context otherwise
requires:
(a) "Agent Member" of any Person shall mean such Person's agent
member of the Securities Depository that will act on behalf of a
Bidder.
(b) "Auction" shall have the meaning specified in Section 2.1
hereof.
(c) "Authorized Officer" shall mean each Senior Vice President,
Vice President, Assistant Vice President, and Assistant Treasurer of
the Auction Agent assigned to its Corporate Trust Group and every other
officer or employee of the Auction Agent designated as an "Authorized
Officer" for purposes hereof in a communication to the Company.
(d) "Broker-Dealer Agreement" shall mean each agreement between
the Auction Agent and a Broker-Dealer substantially in the form
attached hereto as Exhibit A.
(e) "Certificate of Designations" shall mean the Certificate of
Designations of the Company, establishing the powers, preferences and
rights of the Shares, filed on _________, 1996 with the Secretary of
State of the State of Delaware.
(f) "Company Officer" shall mean the Chairman and Chief Executive
Officer, the President, each Vice President (whether or not designated
by a number or word or words added before or after the title "Vice
President"), the Secretary, the Treasurer, each Assistant Secretary and
each Assistant Treasurer of the Company and every other officer or
employee of the Company designated as a "Company Officer" for purposes
hereof in a notice from the Company to the Auction Agent.
(g) "Holder" shall be a holder of record of one or more Shares,
listed as such in the stock register maintained by the Paying Agent
pursuant to Section 4.6 hereof.
(h) "Settlement Procedures" shall mean the Settlement Procedures
attached as Exhibit A to the Broker-Dealer Agreement.
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<PAGE> 30
1.3. Rules of Construction.
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall
they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of
similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to
New York City time.
II. THE AUCTION.
2.1. Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) The Certificate of Designations provides that the Applicable
Rate on Shares of each Series of Shares, as the case may be, for each
Dividend Period therefor after the Initial Dividend Period shall be the
rate per annum that the Auction Agent advises results from
implementation of the Auction Procedures. The Board of Directors of the
Company has adopted a resolution appointing The Bank of New York as
Auction Agent for purposes of the Auction Procedures. The Bank of New
York hereby accepts such appointment and agrees that, on each Auction
Date, it shall follow the procedures set forth in this Section 2 and
the Auction Procedures for the purpose of determining the Applicable
Rate for the Shares for each Subsequent Dividend Period therefor. Each
periodic operation of the procedures set forth in this Section 2 and
the Auction Procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and
in the Settlement Procedures are incorporated herein by reference in
their entirety and shall be deemed to be a part hereof to the same
extent as if such provisions were set forth fully herein.
3
<PAGE> 31
2.2. Preparation for Each Auction; Maintenance of Registry of
Beneficial Owners.
(a) Pursuant to Section 2.5 hereof, the Company shall not
designate any Person to act as a Broker-Dealer without prior written
approval of the Auction Agent (which approval shall not be withheld
unreasonably). As of the date hereof, the Company shall provide the
Auction Agent with a list of the Broker-Dealers previously approved by
the Auction Agent and shall cause to be delivered to the Auction Agent
for execution by the Auction Agent a Broker-Dealer Agreement signed by
each such Broker-Dealer. The Auction Agent shall keep such list current
and accurate and shall indicate thereon, or on a separate list, the
identity of each Existing Holder, if any, whose most recent Order was
submitted by a Broker-Dealer on such list and resulted in such Existing
Holder continuing to hold or purchasing Shares. Not later than five
Business Days prior to any Auction Date for which any change in such
list of Broker-Dealers is to be effective, the Company shall notify the
Auction Agent in writing of such change and, if any such change is the
addition of a Broker-Dealer to such list, the Company shall cause to be
delivered to the Auction Agent for execution by the Auction Agent a
Broker-Dealer Agreement signed by such Broker-Dealer. The Auction Agent
shall have entered into a Broker-Dealer Agreement with each
Broker-Dealer prior to the participation of any such Broker-Dealer in
any Auction.
(b) In the event that the Auction Date for any Auction shall be
changed after the Auction Agent shall have given the notice referred to
in clause (vii) of Paragraph (a) of the Settlement Procedures, the
Auction Agent, by such means as the Auction Agent deems practicable,
shall give notice of such change to the Broker-Dealers not later than
the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the
old Auction Date.
(c) The provisions contained in Paragraph 2 of the Certificate of
Designations concerning Special Dividend Periods and the notification
of a Special Dividend Period will be followed by the Company and, to
the extent applicable, the Auction Agent, and the provisions contained
therein are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Agreement to the same extent as if
such provisions were set forth fully herein.
(d)(i) On each Auction Date, the Auction Agent shall determine the
Reference Rate and the Maximum Dividend Rate. If the Reference Rate is
not quoted on an interest basis but is quoted on a discount basis, the
Auction Agent shall convert the quoted rate to an Interest Equivalent,
as set forth in Paragraph 1 of the Certificate of Designations; or, if
the
4
<PAGE> 32
rate obtained by the Auction Agent is not quoted on an interest or
discount basis, the Auction Agent shall convert the quoted rate to an
interest rate after consultation with the Company as to the method of
such conversion. Not later than 9:30 A.M. on each Auction Date, the
Auction Agent shall notify the Company and the Broker-Dealers of the
Reference Rate so determined and of the Maximum Dividend Rate.
(ii) If the Reference Rate is the applicable "AA" Composite
Commercial Paper Rate and such rate is to be based on rates supplied by
Commercial Paper Dealers and one or more of the Commercial Paper
Dealers shall not provide a quotation for the determination of the
applicable "AA" Composite Commercial Paper Rate, the Auction Agent
immediately shall notify the Company so that the Company can determine
whether to select a Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers to provide the quotation or quotations not
being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers. The Company promptly shall advise the Auction Agent of any
such selection. If the Company does not select any such Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers, then
the rates shall be supplied by the remaining Commercial Paper Dealer or
Commercial Paper Dealers.
(iii) If, after the date of this Agreement, there is any change
in the prevailing rating of the Shares by either Moody's or S&P (or the
Substitute Rating Agency or Substitute Rating Agencies), thereby
resulting in any change in the corresponding applicable percentage for
the Shares, the Company shall notify the Auction Agent in writing of
such change in the applicable percentage prior to 9:00 A.M. on the
Auction Date for Shares next succeeding such change. The Company shall
inform the Auction Agent in writing of the applicable percentage for
the Shares on the date of this Agreement. The Auction Agent shall be
entitled to rely on the last applicable percentage of which it has
received notice from the Company in determining the Maximum Dividend
Rate as set forth in Section 2.2(d)(i) hereof.
(e)(i) The Auction Agent shall maintain a current registry of
the Existing Holders of the Shares of each Series of Shares for
purposes of each Auction. The Company shall use its best efforts to
provide or cause to be provided to the Auction Agent within ten
Business Days following the closing of the initial offering of Shares
of any Series a list of the initial Existing Holders of such Series of
Shares, and the Broker-Dealer of each such Existing Holder through
which such Existing Holders purchased such Shares. The Auction Agent
may rely upon, as evidence of the identities of the Existing Holders,
such list, the results of each Auction and notices from any Existing
Holder, the Agent Member of any Existing
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<PAGE> 33
Holder or the Broker-Dealer of any Beneficial Owner with respect to
such Existing Holder's transfer of any Shares to another Person.
(ii) In the event of any partial Optional Redemption of any
Series of Shares, upon notice by the Company to the Auction Agent of
such partial Optional Redemption, the Auction Agent promptly shall
request the Securities Depository to notify the Auction Agent of the
identities of the Agent Members (and the respective numbers of Shares)
from the accounts of which Shares have been called for redemption and
the person or department at such Agent Member to contact regarding such
redemption, and at least two Business Days prior to the Auction Date
preceding such Optional Redemption Date, the Auction Agent shall
request each Agent Member so identified to disclose to the Auction
Agent (upon selection by such Agent Member of the Existing Holders
whose Shares are to be redeemed) the number of Shares of such Series of
Shares of each such Existing Holder, if any, to be redeemed by the
Company, provided that the Auction Agent has been furnished with the
name and telephone number of a person or department at such Agent
Member from which it is to request such information. In the absence of
receiving any such information with respect to an Existing Holder, from
such Existing Holder's Agent Member or otherwise, the Auction Agent may
continue to treat such Beneficial Owner as having beneficial ownership
of the number of Shares of the Series of Shares shown in the Auction
Agent's registry of Existing Holders.
(iii) The Auction Agent shall register a transfer of the
beneficial ownership of Shares if (A) such transfer is made pursuant to
an Auction or (B) if such transfer is made other than pursuant to an
Auction, the Auction Agent has been notified of such transfer in
writing in a notice substantially in the form of Exhibit C to the
Broker-Dealer Agreements, by such Existing Holder or by the
Broker-Dealer or Agent Member of such Existing Holder. The Auction
Agent is not required to accept any notice of transfer, for transfers
made either pursuant to clause (A) or clause (B) above, delivered prior
to an Auction with respect thereto unless it is received by the Auction
Agent by 3:00 P.M. on the Business Day next preceding such Auction
Date. The Auction Agent shall rescind a transfer made on the registry
of the Existing Holders of any Shares if the Auction Agent has been
notified in writing, in a notice substantially in the form of Exhibit D
to the Broker-Dealer Agreement, by the Agent Member or the
Broker-Dealer of any Person that (i) purchased any Shares that the
seller failed to deliver such Shares or (ii) sold any Shares that the
purchaser failed to make payment to such Person upon delivery to the
purchaser of such Shares, provided that the Auction Agent is not
required to accept any such notice delivered prior to an Auction with
respect thereto unless it is received by the
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Auction Agent by 3:00 P.M. on the Business Day next preceding such
Auction Date.
(f) The Auction Agent may request that the Broker Dealers, as set
forth in Section 3.2(c) of the Broker-Dealer Agreements, provide the
Auction Agent with a list of their respective customers that such
Broker-Dealers believe are beneficial owners of Shares. The Auction
Agent shall keep confidential any such information and shall not
disclose any such information so provided to any Person other than the
relevant Broker-Dealer and the Company, provided that the Auction Agent
reserves the right to disclose any such information if it is advised by
its counsel that its failure to do so would be unlawful.
2.3. Auction Schedule.
The Auction Agent shall conduct Auctions on each Auction Date in
accordance with the schedule set forth below. Such schedule may be changed by
the Auction Agent with the consent of the Company, which consent shall not be
withheld unreasonably. The Auction Agent shall give notice of any such change to
each Broker-Dealer. Such notice shall be received prior to the first Auction
Date on which any such change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the Companyand the
Broker-Dealers of the Reference Rate and
the Maximum Dividend Rate as set forth
in Section 2.2(d)(i) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker- Dealers as
provided in Paragraph 7(c)(i) of the
Certificate of Designations. Submission
Deadline is 1:00 P.M.
Not earlier than Auction Agent makes determinations
1:00 P.M. pursuant to Paragraph 7(d)(i) of the
Certificate of Designations.
By approximately Auction Agent advises the Company of the
3:00 P.M. results of the Auction as provided in
Paragraph 7(d)(ii) of the Certificate of
Designations.
Submitted Bids and Submitted Sell Orders
are accepted and rejected in whole or in
part and Shares
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<PAGE> 35
allocated as provided in Paragraph 7(e)
of the Certificate of Designations.
Auction Agent gives notice of the
Auction results as set forth in Section
2.4 hereof.
2.4. Notice of Auction Results.
On each Auction Date, the Auction Agent shall notify each Broker-Dealer
of the results of the Auction held on such date by telephone or through the
Auction Agent's Auction Processing System as set forth in Paragraph (a) of the
Settlement Procedures.
2.5. Broker-Dealers.
(a) Not later than 12:00 noon on each Auction Date, the Company
shall pay to the Auction Agent in Federal Funds or similar same-day
funds an amount in cash equal to (i) in the case of any Auction Date
immediately preceding a Regular Dividend Period, the product of (A) a
fraction the numerator of which is the number of days in such Regular
Dividend Period (calculated by counting the first day of such Regular
Dividend Period but excluding the last day thereof) and the denominator
of which is 360, times (B) [1/4 of 1%], times (C) $100,000 times (D)
the sum of the aggregate number of Outstanding Shares for which the
Auction is conducted and (ii) in the case of any Special Dividend
Period, the amount determined by mutual consent of the Company and the
Broker-Dealers pursuant to Section 3.5 of the Broker-Dealer Agreements.
The Auction Agent shall apply such moneys as set forth in Section 3.5
of the Broker-Dealer Agreements and shall thereafter remit to the
Company any remaining funds paid to the Auction Agent pursuant to this
Section 2.5(a).
(b) The Company shall not designate any Person to act as a
Broker-Dealer, or permit an Existing Holders or a Potential Holder to
participate in Auctions through any Person other than a Broker-Dealer,
without the prior written approval of the Auction Agent, which approval
shall not be withheld unreasonably. The Company may designate Lehman
Brothers Inc. to act as Broker-Dealers.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement
as set forth therein if so directed by the Company.
(d) Subject to Section 2.5(b) hereof, the Auction Agent from time
to time shall enter into such Broker-Dealer Agreements as the Company
shall request.
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(e) The Auction Agent shall maintain a list of Broker-Dealers.
2.6. Ownership of Shares and Submission of Bids by the Company and its
Affiliates.
Neither the Company nor any Affiliate may submit any Sell Order or Bid,
directly or indirectly, in any Auction. The Company shall notify the Auction
Agent if the Company or, to the best of the Company's knowledge, any Affiliate
becomes a Beneficial Owner of any Shares. Any Shares redeemed, purchased or
otherwise acquired (i) by the Company shall not be reissued, except in
accordance with the requirements of the Securities Act or (ii) by its Affiliates
shall not be transferred (other than to the Company). The Auction Agent shall
have no duty or liability with respect to enforcement of this Section 2.6.
2.7. Access to and Maintenance of Auction Records.
The Auction Agent shall afford to the Company, its agents, independent
public accountants and counsel, access at reasonable times during normal
business hours to review and make extracts or copies (at the Company's sole cost
and expense) of all books, records, documents and other information concerning
the conduct and results of Auctions, provided that any such agent, accountant or
counsel shall furnish the Auction Agent with a letter from the Company
requesting that the Auction Agent afford such person access. The Auction Agent
shall maintain records relating to any Auction for a period of two years after
such Auction (unless requested by the Company to maintain such records for such
longer period not in excess of four years, then for such longer period), and
such records, in reasonable detail, shall accurately and fairly reflect the
actions taken by the Auction Agent hereunder. The Company agrees to keep
confidential any information regarding the customers of any Broker-Dealer
received from the Auction Agent in connection with this Agreement or any
Auction, and shall not disclose such information or permit the disclosure of
such information without the prior written consent of the applicable
Broker-Dealer to anyone except such agent, accountant or counsel engaged to
audit or review the results of Auctions as permitted by this Section 2.7,
provided that the Company reserves the right to disclose any such information if
it is advised by its counsel that its failure to do so would (i) be unlawful or
(ii) expose it to liability, unless the Broker-Dealer shall have offered
indemnification satisfactory to the Company. Any such agent, accountant or
counsel, before having access to such information, shall agree to keep such
information confidential and not to disclose such information or permit
disclosure of such information without the prior written consent of the
applicable Broker-Dealer, provided that such agent, accountant or counsel may
reserve the right to disclose any such information if it is advised by its
counsel that its failure to do so would (i) be unlawful or (ii)
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<PAGE> 37
expose it to liability, unless the Broker-Dealer shall have offered
indemnification satisfactory to such agent, accountant or counsel.
III. THE AUCTION AGENT AS PAYING AGENT.
3.1. The Paying Agent.
The Board of Directors of the Company has adopted a resolution
appointing The Bank of New York as transfer agent, registrar, dividend
disbursing agent and redemption agent for the Company in connection with any
Shares (in such capacity, the "Paying Agent"). The Bank of New York hereby
accepts such appointment and agrees to act in accordance with its standard
procedures and the provisions of the Certificate of Designations which are
specified herein with respect to the Shares and as set forth in this Article
III.
3.2. The Company's Notices to the Paying Agent.
Whenever any Shares are to be redeemed pursuant to a Mandatory
Redemption or an Optional Redemption, as the case may be, the Company promptly
shall deliver to the Paying Agent a Notice of Redemption, which will be mailed
by the Company to each Holder at least five Business Days prior to the date such
Notice of Redemption is required to be mailed pursuant to the Certificate of
Designations. The Paying Agent shall have no responsibility to confirm or verify
the accuracy of any such Notice of Redemption.
3.3. The Company to Provide Funds for Dividends and Redemptions.
(a) Not later than noon on the Business Day immediately prior to
each Dividend Payment Date, the Company shall deposit with the Paying
Agent an aggregate amount of Federal Funds or similar same-day funds
equal to the declared dividends to be paid to Holders on such Dividend
Payment Date, and shall give the Paying Agent irrevocable instructions
to apply such funds to the payment of such dividends on such Dividend
Payment Date.
(b) If the Company shall give a Notice of Redemption, then by noon
of the Business Day immediately prior to the Mandatory Redemption Date
or the Optional Redemption Date, as the case may be, the Company shall
deposit in trust with the Paying Agent an aggregate amount of Federal
Funds or similar same-day funds sufficient to redeem such Shares called
for redemption and shall give the Paying Agent irrevocable instructions
and authority to pay the redemption price to the Holders of Shares
called for redemption upon surrender of the certificate or certificates
therefor, if any.
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(c) If the Company should deposit funds with the Auction Agent for
the purposes set forth in (a) or (b) of this Section 3.3 on the
Business Day immediately preceding the applicable Dividend Payment Date
or date fixed for redemption, and such funds are immediately available
funds, the Company may direct the Auction Agent to invest the funds so
deposited, and if so directed, such directions shall be given prior to
such deposit, in short-term money market instruments specified in
writing by the Company which mature on or before the opening of
business on such Dividend Payment Date or day fixed for redemption, as
the case may be, provided that the proceeds of such overnight
investments will be available at the opening of business on the
Dividend Payment Date or date fixed for redemption, as the case may be.
The investments made pursuant to the foregoing sentence are solely for
the account and at the risk of the Company, and the Auction Agent shall
not be liable or responsible for any loss, in whole or in part,
resulting from such investments. Upon the request of the Company, the
Auction Agent shall transmit any interest received on such investments
to the Company that is not applied on a Dividend Payment Date or a date
fixed for redemption.
3.4. Disbursing Dividends and Redemption Price.
After receipt of the Federal Funds or similar same-day funds and
instructions from the Company described in Sections 3.3(a) and (b) above, the
Paying Agent shall pay to the Holders (or former Holders) entitled thereto (i)
on each corresponding Dividend Payment Date, dividends on the Shares and (ii) on
any date fixed for redemption, the redemption price of any Shares called for
redemption. The amount of dividends for any Dividend Period to be paid by the
Paying Agent to Holders will be determined by the Company as set forth in
Paragraph 2 of the Certificate of Designations. The redemption price to be paid
by the Paying Agent to the Holders of any Shares called for redemption will be
determined as set forth in Paragraph 4 of the Certificate of Designations. The
Company shall notify the Paying Agent in writing of a decision to redeem any
Shares on or prior to the date specified in Section 3.2 above, and such notice
by the Company to the Paying Agent shall contain the information required to be
stated in a Notice of Redemption required to be mailed by the Company to such
Holders. The Paying Agent shall have no duty to determine the redemption price
and may rely on the amount thereof set forth in a Notice of Redemption.
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IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.
4.1. Original Issue of Stock Certificates.
On the Date of Original Issue for any share of Shares, one or more
certificates for each Series of Shares shall be issued by the Company and
registered in the name of Cede & Co., as nominee of the Securities Depository,
and countersigned by the Paying Agent. The Company will give the Auction Agent
prior written notice and instruction as to the issuance and redemption of
Shares.
4.2. Registration of Transfer or Exchange of Shares.
Except as provided in this Section 4.2, the Shares shall be registered
solely in the name of the Securities Depository or its nominee. If the
Securities Depository shall give notice of its intention to resign as such, and
if the Company shall not have selected a substitute Securities Depository
acceptable to the Paying Agent prior to such resignation, then upon such
resignation, the Shares of each Series of Shares, at the Company's request, may
be registered for transfer or exchange, and new certificates thereupon shall be
issued in the name of the designated transferee or transferees, upon surrender
of the old certificate in form deemed by the Paying Agent properly endorsed for
transfer with (a) all necessary endorsers' signatures guaranteed in such manner
and form as the Paying Agent may require by a guarantor reasonably believed by
the Paying Agent to be responsible, (b) such assurances as the Paying Agent
shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement and (c) satisfactory evidence of
compliance with all applicable laws relating to the collection of taxes in
connection with any registration of transfer or exchange or funds necessary for
the payment of such taxes. If the certificate or certificates for Shares are not
held by the Securities Depository or its nominee, payments upon transfer of
Shares in an Auction shall be made in Federal Funds or similar same-day funds to
the Auction Agent against delivery of certificates therefor.
4.3. Removal of Legend.
Any request for removal of a legend indicating a restriction on
transfer from a certificate evidencing Shares shall be accompanied by an opinion
of counsel stating that such legend may be removed and such Shares may be
transferred free of the restriction described in such legend, said opinion to be
delivered under cover of a letter from a Company Officer authorizing the Paying
Agent to remove the legend on the basis of said opinion.
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<PAGE> 40
4.4. Lost, Stolen or Destroyed Stock Certificates.
The Paying Agent shall issue and register replacement certificates for
certificates represented to have been lost, stolen or destroyed, upon the
fulfillment of such requirements as shall be deemed appropriate by the Company
and by the Paying Agent, subject at all times to provisions of law, the By-Laws
of the Company governing such matters and resolutions adopted by the Company
with respect to lost, stolen or destroyed securities. The Paying Agent may issue
new certificates in exchange for and upon the cancellation of mutilated
certificates. Any request by the Company to the Paying Agent to issue a
replacement or new certificate pursuant to this Section 4.4 shall be deemed to
be a representation and warranty by the Company to the Paying Agent that such
issuance will comply with provisions of applicable law and the By-Laws and
resolutions of the Company.
4.5. Disposition of Canceled Certificates; Record Retention.
The Paying Agent shall retain stock certificates which have been
canceled in transfer or in exchange and accompanying documentation in accordance
with applicable rules and regulations of the Commission for two calendar years
from the date of such cancellation. The Paying Agent, upon written request by
the Company, shall afford to the Company, its agents and counsel access at
reasonable times during normal business hours to review and make extracts or
copies (at the Company's sole cost and expense) of such certificates and
accompanying documentation. Upon request by the Company at any time after the
expiration of this two-year period, the Paying Agent shall deliver to the
Company the canceled certificates and accompanying documentation. The Company,
at its expense, shall retain such records for a minimum additional period of
four calendar years from the date of delivery of the records to the Company and
shall make such records available during this period at any time, or from time
to time, for reasonable periodic, special, or other examinations by
representatives of the Commission. The Company also shall undertake to furnish
to the Commission, upon demand, either at their principal office or at any
regional office, complete, correct and current hard copies of any and all such
records. Thereafter, such records shall not be destroyed by the Company without
the approval of the Paying Agent, which approval shall not be withheld
unreasonably, but will be safely stored for possible future reference.
4.6. Stock Register.
The Paying Agent shall maintain the stock register, which shall contain
a list of the Holders, the number of Shares held by each Holder and the address
of each Holder. The Paying Agent shall record in the stock register any change
of address of a Holder upon notice by such Holder. In case of any written
request or demand
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<PAGE> 41
for the inspection of the stock register or any other books of the Company in
the possession of the Paying Agent, the Paying Agent will notify the Company and
secure instructions as to permitting or refusing such inspection. The Paying
Agent reserves the right, however, to exhibit the stock register or other
records to any person in case it is advised by its counsel that its failure to
do so would (i) be unlawful or (ii) expose it to liability, unless the Company
shall have offered indemnification satisfactory to the Paying Agent.
4.7. Return of Funds.
Any funds deposited with the Paying Agent by the Company for any reason
under this Agreement, including for the payment of dividends or the redemption
of Shares of any Series of Shares, that remain with the Paying Agent after 12
months shall be repaid to the Company upon written request by the Company.
V. REPRESENTATIONS AND WARRANTIES.
5.1. Representations and Warranties of the Company.
The Company represents and warrants to the Auction Agent that:
(i) the Company is duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
and has full power to execute and deliver this Agreement and to
authorize, create and issue the Shares;
(ii) this Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject as to such enforceability to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles;
(iii) the forms of the certificates evidencing the Shares of
each Series of Shares comply with all applicable laws of the State of
Delaware;
(iv) the Shares of each Series of Shares have been duly and
validly authorized by the Company and, upon completion of the initial
sale of the Shares of such Series of Shares and receipt of payment
therefor, will be validly issued, fully paid and nonassessable;
(v) at the time of the offering of the Shares of each Series
of Shares, the Shares offered will be registered under
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<PAGE> 42
the Securities Act, and no further action by or before any governmental
body or authority of the United States or of any state thereof is
required in connection with the execution and delivery of this
Agreement or will be required in connection with the issuance of the
Shares, except such action as required by applicable state securities
or insurance laws, all of which action will have been taken;
(vi) the execution and delivery of this Agreement and the
issuance and delivery of the Shares of each Series of Shares do not and
will not conflict with, violate, or result in a breach of, the terms,
conditions or provisions of, or constitute a default under, the Charter
or the By-Laws of the Company, any law or regulation applicable to the
Company, any order or decree of any court or public authority having
jurisdiction over the Company, or any mortgage, indenture, contract,
agreement or undertaking to which the Company is a party or by which it
is bound; and
(vii) no taxes are payable upon or in respect of the execution
of this Agreement or will be payable upon or in respect of the issuance
of the Shares of each Series of Shares.
5.2. Representations and Warranties of The Bank of New York
The Bank of New York represents and warrants to the Company that The
Bank of New York is duly organized and is validly existing as a national banking
association in good standing under the laws of the United States, and has the
corporate power to enter into and perform its obligations under this Agreement.
VI. THE AUCTION AGENT.
6.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Company
hereunder and owes no fiduciary duties to any Person except as provided
by this Agreement.
(b) The Auction Agent undertakes to perform such duties and only
such duties as are set forth specifically in this Agreement, and no
implied covenants or obligations shall be read into this Agreement
against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or
omitted by it or for any error of judgment made by it in the
performance of its duties under this Agreement. The Auction Agent shall
not be liable for any error of judgment made in good faith unless the
Auction Agent
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<PAGE> 43
shall have been negligent in ascertaining (or failing to ascertain) the
pertinent facts.
6.2. Rights of the Auction Agent.
(a) The Auction Agent may rely upon, and shall be protected in
acting or refraining from acting upon, any communication authorized
hereby and any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other instrument,
paper or document reasonably believed by it to be genuine. The Auction
Agent shall not be liable for acting upon any telephone communication
authorized hereby which the Auction Agent believes in good faith to
have been given by the Company or by a Broker-Dealer. The Auction Agent
may record telephone communications with the Company or with the
Broker-Dealers or with both.
(b) The Auction Agent may consult with counsel of its choice, and
the written advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder. The Auction Agent
shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed in writing with the Company.
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys.
6.3. Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or the
adequacy of this Agreement, the Broker-Dealer Agreements, the Certificate of
Designations or the Shares.
6.4. Compensation, Expenses and Indemnification.
(a) The Company shall pay to the Auction Agent from time to time
reasonable compensation for all services rendered by it under this
Agreement and under the Broker-Dealer Agreements as shall be set forth
in a separate writing signed by the Company and the Auction Agent,
subject to adjustments if the Shares no longer are held of record by
the Securities Depository or its nominee or if there shall be such
other change as shall increase materially the Auction Agent's
obligations hereunder or under the Broker-Dealer Agreements.
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(b) The Company shall reimburse the Auction Agent upon its request
for all reasonable expenses, disbursements and advances incurred or
made by the Auction Agent in accordance with any provision of this
Agreement and of the Broker-Dealer Agreements (including the reasonable
compensation, expenses and disbursements of its agents and counsel),
except any expense, disbursement or advance attributable to its
negligence or bad faith.
(c) The Company shall indemnify the Auction Agent for, and hold it
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part arising out of or in connection
with its agency under this Agreement and under the Broker-Dealer
Agreements, including the costs and expenses of defending itself
against any claim of liability in connection with its exercise or
performance of any of its duties hereunder and thereunder, except such
as may result from its negligence or bad faith.
VII. MISCELLANEOUS.
7.1. Term of Agreement.
(a) The term of this Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Company may terminate
this Agreement at any time by so notifying the Auction Agent, provided
that if any Shares remain outstanding the Company shall have entered
into an agreement in substantially the form of this Agreement with a
successor auction agent. The Auction Agent may terminate this Agreement
upon prior notice to the Company on the date specified in such notice,
which date shall be no earlier than 60 days after delivery of such
notice. If the Auction Agent resigns while any Shares remain
outstanding, the Company shall use its best efforts to enter into an
agreement with a successor auction agent containing substantially the
same terms and conditions as this Agreement.
(b) Except as otherwise provided in this Section 7.1(b), the
respective rights and duties of the Company and the Auction Agent under
this Agreement shall cease upon termination of this Agreement. The
Company's representations, warranties, covenants and obligations to the
Auction Agent under Articles V and Section 6.4 hereof shall survive the
termination hereof. Upon termination of this Agreement, the Auction
Agent shall (i) resign as Auction Agent under the Broker-Dealer
Agreements, (ii) at the Company's request, deliver promptly to the
Company copies of all books and records maintained by it in connection
with its duties hereunder, and (iii) at the request of the Company,
transfer promptly to the Company or to any successor auction agent any
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funds deposited by the Company with the Auction Agent (whether in its
capacity as Auction Agent or as Paying Agent) pursuant to this
Agreement which have not been distributed previously by the Auction
Agent in accordance with this Agreement.
7.2. Communications.
Except for (i) communications authorized to be made by telephone
pursuant to this Agreement or the Auction Procedures and (ii) communications in
connection with Auctions (other than those expressly required to be in writing),
all notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) and shall be given to such
party at its address or telecopier number set forth below:
If to the Company, SMITHKLINE BEECHAM HOLDINGS CORPORATION
addressed to: c/o SmithKline Beecham Corporation
One Franklin Plaza
Philadelphia, Pennsylvania 19101
Attention: Secretary
Telephone No.: (215) 751-7633
Telecopier No.: (215) _________
If to the Auction THE BANK OF NEW YORK
Agent, addressed to: _____________________
________________________
Attention: ________________
Telephone No.: _______________
Telecopier No.: _______________
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Company by a Company Officer and
on behalf of the Auction Agent by an Authorized Officer.
7.3. Entire Agreement.
This Agreement contains the entire agreement between the parties
relating to the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or inferred,
between the parties relating to the subject matter hereof, except for agreements
relating to the compensation of the Auction Agent.
7.4. Benefits.
Nothing herein, express or implied, shall give to any Person, other
than the Company, the Auction Agent and their respective
18
<PAGE> 46
successors and assigns, any benefit of any legal or equitable right, remedy or
claim hereunder.
7.5. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part,
except by a written instrument signed by a duly authorized
representative of the party to be charged. The Company shall notify the
Auction Agent of any change in the Certificate of Designations prior to
the effective date of any such change. If any such change in the
Certificate of Designations materially increases the Auction Agent's
obligations hereunder, the Company shall obtain the written consent to
the Auction Agent prior to the effective date of such change.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any
subsequent breach.
7.6. Successors and Assigns.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of each of the
Company and the Auction Agent. This Agreement may not be assigned by either
party hereto absent the prior written consent of the other party, which consent
shall not be withheld unreasonably.
7.7. Severability.
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
7.8. Execution in Counterparts.
This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
7.9. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said State.
19
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
SMITHKLINE BEECHAM HOLDINGS CORPORATION
By: _______________________________
Name:
Title:
THE BANK OF NEW YORK
By: _______________________________
Name:
Title:
20
<PAGE> 1
EXHIBIT 28.2
FORM OF BROKER-DEALER AGREEMENTS
<PAGE> 2
===============================================================================
BROKER-DEALER AGREEMENT
between
CITIBANK N.A.
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Dated as of ___________, 1996
Relating to
FLEXIBLE AUCTION MARKET PREFERRED STOCK(R)
("AMPS"(R))
Series A, B and C
of
SMITHKLINE BEECHAM HOLDINGS CORPORATION
===============================================================================
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE> 3
TABLE OF CONTENTS
I. DEFINITIONS AND RULES OF CONSTRUCTION
1.1. Terms Defined by Reference to the Certificate of
Designations............................................ 2
1.2. Terms Defined Herein.................................... 2
1.3. Rules of Construction................................... 3
II. NOTIFICATION OF DIVIDEND PERIOD
2.1. ........................................................ 3
III. THE AUCTION
3.1. Purpose; Incorporation by Reference of Auction
Procedures and Settlement Procedures.................... 3
3.2. Preparation for Each Auction............................ 4
3.3. Auction Schedule; Method of Submission of Orders........ 5
3.4. Notice of Auction Results............................... 6
3.5. Service Charge to Be Paid to BD......................... 7
IV. THE AUCTION AGENT
4.1. Duties and Responsibilities............................. 7
4.2. Rights of the Auction Agent............................. 8
4.3. Auction Agent's Disclaimer.............................. 8
V. MISCELLANEOUS
5.1. Termination............................................. 8
5.2. Participant in Securities Depository; Payment of
Dividends in Same-Day Funds............................. 9
5.3. Agent Member............................................ 9
5.4. Communications.......................................... 9
5.5. Entire Agreement........................................10
5.6. Benefits................................................10
5.7. Amendment; Waiver.......................................10
5.8. Successors and Assigns..................................10
5.9. Severability............................................10
5.10. Execution in Counterparts...............................10
5.11. Governing Law...........................................10
2
<PAGE> 4
BROKER-DEALER AGREEMENT dated as of ________________, 1996, between
CITIBANK N.A., a national banking association (the "Auction Agent") (not in its
individual capacity, but solely as agent of SmithKline Beecham Holdings
Corporation, a Delaware corporation (the "Company"), pursuant to authority
granted to it under the Auction Agent Agreement dated as of _____________, 1996,
between the Company and the Auction Agent (the "Auction Agent Agreement")) and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (together with its successors
and assigns, "BD").
The Company proposes to duly authorize and issue up to _____ Shares in
nine series designated Flexible Auction Market Preferred Stock(R), Series A-1,
Series A-2 and Series A-3 (collectively, "Series A AMPS"); AMPS Series B-1,
Series B-2 and Series B-3 (collectively, "Series B AMPS"), and AMPS Series C-1,
Series C-2 and Series C-3 (collectively, "Series C-3 AMPS"), all with no par
value and a liquidation preference of $100,000 per Share plus accumulated but
unpaid dividends (whether or not earned or declared), each pursuant to the
Company's Certificate of Designations (as defined below). The Series A AMPS,
Series B AMPS and Series C AMPS are sometimes referred to together herein as
"Shares".
The Company's Certificate of Designations provides that the dividend
rate on each Series of Shares for each Subsequent Dividend Period therefor shall
be the Applicable Rate therefor, which in each case, in general shall be the
rate per annum that a Broker- Dealer appointed by the Company advises results
from implementation of the Auction Procedures (as defined below). The Board of
Directors of the Company has adopted a resolution appointing Citibank N.A. as
Auction Agent for purposes of the Auction Procedures, and pursuant to Section
2.5(d) of the Auction Agent Agreement, the Company has requested and directed
the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
- ---------------------------
(R) Registered trademark of Merrill Lynch & Co., Inc.
1
<PAGE> 5
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. Terms Defined by Reference to the Certificate of
Designations. Capitalized terms not defined herein shall have their respective
meanings specified in the Certificate of Designations of the Company, including,
without limitation, Paragraph 1 and Paragraph 7 thereof, unless the context
otherwise requires.
1.2. Terms Defined Herein. As used herein and in the
Settlement Procedures (as defined below), the following terms shall
have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in
Section 3.1 hereof.
(b) "Auction Procedures" shall mean the Auction Procedures
that are set forth in Paragraph 7 of the Certificate of Designations.
(c) "Authorized Officer" shall mean each Senior Vice
President, Vice President, Assistant Vice President, Trust Officer, Assistant
Secretary and Assistant Treasurer of the Auction Agent assigned to its Corporate
Trust and Agency Group and every other officer or employee of the Auction Agent
designated as an "Authorized Officer" for purposes of this Agreement in a
communication to BD.
(d) "Broker-Dealer Agreement" shall mean this Agreement and
any substantially similar agreement between the Auction Agent and a
Broker-Dealer.
(e) "Certificate of Designations" shall mean the Certificate
of Designations, as amended, of the Company, establishing the powers,
preferences and rights of the Shares filed on _________ 1996 with the Secretary
of State of the State of Delaware.
(f) "BD Officer" shall mean each officer or employee of BD
designated as a "BD Officer" for purposes of this Agreement in a communication
to the Auction Agent.
(g) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit A.
2
<PAGE> 6
1.3. Rules of Construction. Unless the context or use
indicates another or different meaning or intent, the following
rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the
plural number and vice versa.
(b) The captions and headings herein are solely for
convenience of reference and shall not constitute a part of this Agreement, nor
shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words
of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall
be to New York City time.
II. NOTIFICATION OF DIVIDEND PERIOD.
2.1. The provisions contained in Paragraph 2 of the Certificate
of Designations concerning the notification of a Special Dividend Period will be
followed by the Auction Agent and BD, and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were set forth
fully herein.
III. THE AUCTION.
3.1. Purpose; Incorporation by Reference of Auction
Procedures and Settlement Procedures.
(a) On each Auction Date for a Series of AMPS, the
provisions of the Auction Procedures will be followed by the Auction Agent for
the purpose of determining the Applicable Rate for such Series of Shares, for
the next Subsequent Dividend Period therefor. Each periodic operation of such
procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Pro
cedures and the Settlement Procedures are incorporated herein by reference in
their entirety and shall be deemed to be a part of this Agreement to the same
extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of
and limitations and restrictions placed upon, a Broker-Dealer under
this Agreement. BD understands that other Persons meeting the
3
<PAGE> 7
requirements specified in the definition of "Broker-Dealer" contained in
Paragraph 1 of the Certificate of Designations may execute a Broker-Dealer
Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions
for their own accounts. However, the Company, by notice to BD and all other
Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions
for their own accounts, provided that Broker-Dealers may continue to submit Hold
Orders and Sell Orders.
3.2. Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for a
Series of Shares, the Auction Agent shall advise BD by telephone of the
Reference Rate and the Maximum Dividend Rate in effect on such Auction Date.
(b) In the event that the Auction Date for any Auction of a
Series of AMPS shall be changed after the Auction Agent has given the notice
referred to in clause G of paragraph I of the Settlement Procedures, the Auction
Agent, by such means as the Auction Agent deems practicable, shall give notice
of such change to BD not later than the earlier of 9:15 A.M. on the new Auction
Date or 9:15 A.M. on the old Auction Date. Thereafter, BD promptly shall notify
customers of BD that BD believes are beneficial owners of such Series of such
change in the Auction Date.
(c) The Auction Agent from time to time may request BD to
provide it with a list of the respective customers BD believes are beneficial
owners of AMPS of each Series of Shares. BD shall comply with any such request,
and the Auction Agent shall keep confidential any such information, including
information received as to the identity of Bidders in any Auction, and shall not
disclose any such information so provided to any Person other than the Company;
and such information shall not be used by the Auction Agent or its officers,
employees, agents or representatives for any purpose other than such purposes as
are described herein. The Auction Agent shall transmit any list of customers BD
believes are beneficial owners of AMPS of each Series of Shares and information
related thereto only to its officers, employees, agents or representatives in
the [Corporate Trust and Agency Group] who need to know such information for the
purposes of acting in accordance with this Agreement, and the Auction Agent
shall prevent the transmission of such information to others and shall cause its
officers, employees, agents and representatives to abide by the foregoing
confidentiality restrictions.
4
<PAGE> 8
3.3. Auction Schedule; Method of Submission of Orders.
(a) The Company and the Auction Agent shall conduct separate
Auctions for each Series of Shares in accordance with the schedule set forth
below. Such schedule may be changed at any time by the Auction Agent with the
consent of the Company, which consent shall not be withheld unreasonably. The
Auction Agent shall give notice of any such change to BD. Such notice shall be
received prior to the first Auction Date on which any such change shall be
effective.
Time Event
---- -----
By 9:30 A.M. Auction Agent advises the Company
and Broker-Dealers of the Reference
Rate and the Maximum Dividend Rate
as set forth in Section 3.2(a)
hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker-
Dealers as provided in Paragraph
7(c)(i) of the Certificate of
Designations. Submission Deadline
is 1:00 P.M.
Not earlier than Auction Agent makes determinations
1:00 P.M. pursuant to Paragraph 7(d)(i) of
the Certificate of Designations.
By approximately Auction Agent advises the Company
3:00 P.M. of the results of the Auction as
provided in Paragraph 7(d)(ii) of
the Certificate of Designations.
Submitted Bids and Submitted Sell
Orders are accepted and rejected in
whole or in part and Shares are
allocated as provided in Paragraph
7(e) of the Certificate of
Designations.
Auction Agent gives notice of
the Auction results as set forth
in Section 3.4(a) hereof.
(b) BD agrees to maintain a list of Potential Holders and to contact
the Potential Holders on such list on or prior to each Auction Date for the
purposes set forth in Paragraph 7 of the Certificate of Designations.
5
<PAGE> 9
(c) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit B. BD shall submit separate
Orders to the Auction Agent for each Potential Holder or Existing Holder on
whose behalf BD is submitting an Order and shall not net or aggregate the Orders
of Potential Holder or Existing Holder on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written
notice, substantially in the form attached hereto as Exhibit C, of transfers of
Shares of any Series of Shares, made through BD by a Beneficial Owner to another
Person other than pursuant to an Auction, and (ii) a written notice,
substantially in the form attached hereto as Exhibit D, of the failure of Shares
of any Series of Shares to be transferred to or by any Person that purchased or
sold Shares of any Series of Shares through BD pursuant to an Auction. The
Auction Agent is not required to accept any notice delivered pursuant to the
terms of the foregoing sentence with respect to an Auction unless it is received
by the Auction Agent by 3:00 P.M. on the Business Day next preceding the
applicable Auction Date.
3.4. Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify BD by
telephone as set forth in paragraph (a) of the Settlement Procedures. On the
Business Day next succeeding such Auction Date, the Auction Agent shall notify
BD in writing of the disposition of all Orders submitted by BD in the Auction
held on such Auction Date.
(b) BD shall notify each Existing Holder or Potential Holder
on whose behalf BD has submitted an Order as set forth in paragraph II of the
Settlement Procedures, and take such other action as is required of BD pursuant
to the Settlement Procedures.
If any Existing Holder selling Shares in an Auction, on whose behalf BD
has submitted an Order as set forth in paragraph II of the Settlement
Procedures, fails to deliver such Shares, BD may deliver to any Person that was
to have purchased Shares of such Series of Shares in such Auction a number of
whole Shares of such Series of Shares that is less than the number of Shares
that otherwise was to be purchased by such Person. In such event, the number of
Shares of such Series of Shares to be so delivered shall be determined by BD.
Delivery of such lesser number of Shares shall constitute good delivery. Upon
the occurrence of any such failure to deliver Shares, BD shall deliver to the
Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding
the foregoing terms of this Section 3.4(b), any delivery or non-delivery of
Shares of any Series of Shares which represents any departure from the results
of an Auction, as determined by the Auction Agent, shall be of no effect unless
and until the Auction
6
<PAGE> 10
Agent shall have been notified of such delivery or non-delivery in accordance
with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or
liability with respect to enforcement of this Section 3.4(b).
3.5. Service Charge to Be Paid to BD. On the Business Day next
succeeding each Auction Date, the Auction Agent shall pay to BD from moneys
received from the Company an amount equal to: (a) in the case of any Auction
Date immediately preceding a Regular Dividend Period, the product of (i) a
fraction the numerator of which is the number of days in such Subsequent
Dividend Period (calculated by counting the first day of such Subsequent
Dividend Period but excluding the last day thereof) and the denominator of which
is 360, times (ii) [1/4 of 1%], times (iii) $100,000, times (iv) the sum of (A)
the aggregate number of Shares placed by BD in the applicable Auction that were
(x) the subject of a Submitted Bid of an Existing Holder submitted by BD and
continued to be held as a result of such submission and (y) the subject of a
Submitted Bid of a Potential Holder submitted by BD and were purchased as a
result of such submission plus (B) the aggregate number of Shares subject to
valid Hold Orders (determined in accordance with Paragraph 7 of the Certificate
of Designations) submitted to the Auction Agent by BD plus (C) the number of
Shares deemed to be subject to Hold Orders by Existing Holders pursuant to
Paragraph 7 of the Certificate of Designations that were acquired by such
Existing Holders through BD; and (b) in the case of any Auction Date immediately
preceding a Special Dividend Period, that amount as mutually agreed upon by the
Company and BD, based on the selling concession that would be applicable to an
underwriting of fixed or variable rate preferred Shares with a similar final
maturity or variable rate dividend period, at the commencement of such Special
Dividend Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired Shares of any Series of Shares through BD
transfers those Shares to another Person other than pursuant to an Auction, then
the Broker-Dealer for the Shares so transferred shall continue to be BD,
provided, however, that if the transfer was effected by, or if the transferee
is, a Broker- Dealer other than BD, then such Broker-Dealer shall be the
Broker-Dealer for such Shares.
IV. THE AUCTION AGENT.
4.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Company
hereunder and owes no fiduciary duties to any other Person by reason of this
Agreement.
7
<PAGE> 11
(b) The Auction Agent undertakes to perform such duties and only such
duties as are set forth specifically in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or omitted by it, or
for any error of judgment made by it in the performance of its duties under this
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
(or failing to ascertain) the pertinent facts.
4.2. Rights of the Auction Agent.
(a) The Auction Agent may rely upon, and shall be protected in acting
or refraining from acting upon, any communication authorized by this Agreement
and any written instruction, notice, request, direction, consent, report,
certificate, Share certificate or other instrument, paper or document believed
by it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized by this Agreement which the Auction Agent
believes in good faith to have been given by the Company or by BD. The Auction
Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and
the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.
4.3. Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the validity or adequacy of this Agreement or the Shares.
V. MISCELLANEOUS.
5.1. Termination. Either party may terminate this Agreement at any
time upon five days' prior written notice to the other party; provided, however,
that if BD is Merrill Lynch, Pierce, Fenner & Smith Incorporated or Lehman
Brothers Inc., neither BD nor the Auction Agent may terminate this Agreement
without first
8
<PAGE> 12
obtaining prior written consent of the Company to such termination, which
consent shall not be withheld unreasonably.
5.2. Participant in Securities Depository; Payment of
Dividends in Same-Day Funds.
(a) BD is, and shall remain for the term of this Agreement, a member
of, or a participant in, the Securities Depository (or an affiliate of such a
member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one
of its affiliates) shall make all dividend payments on the Shares available in
same-day funds on each Dividend Payment Date to customers that use BD (or its
affiliate) as Agent Member.
5.3. Agent Member. At the date hereof, BD is a participant of
the Securities Depository.
5.4. Communications. Except for (i) communications authorized to be
made by telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given to such party at its address or telecopier number set forth
below:
If to BD, Merrill Lynch, Pierce, Fenner & Smith
addressed to: Incorporated
Merrill Lynch World Headquarters
World Financial Center, North Tower
New York, New York 10281-1307
Attention: [Carter S. Kegel]
Telecopier No.: [(212) 449-2761]
Telephone No.: [(212) 449-4940]
If to the Auction Citibank N.A.
Agent, addressed to:
------------------------------------
------------------------------------
Attention:
----------------------------------------
Telecopier No.: [(212) 797-1148]
Telephone No.: [(212) 858-2135]
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction
9
<PAGE> 13
Agent by an Authorized Officer. BD may record telephone communications with the
Auction Agent.
5.5. Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.
5.6. Benefits. Nothing in this Agreement, express or implied, shall
give to any person, other than the Company, the Auction Agent and BD and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim under this Agreement.
5.7. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the party to
be charged.
(b) Failure of either party to this Agreement to exercise
any right or remedy hereunder in the event of a breach of this Agreement by the
other party shall not constitute a waiver of any such right or remedy with
respect to any subsequent breach.
5.8. Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the respective successors and
permitted assigns of each of BD and the Auction Agent. This Agreement may not be
assigned by either party hereto absent the prior written consent of the other
party; provided, however, that this Agreement may be assigned by the Auction
Agent to a successor Auction Agent selected by the Company without the consent
of BD.
5.9. Severability. If any clause, provision or section of this
Agreement shall be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any remaining clause, provision or section hereof.
5.10. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
5.11. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed in said State.
10
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
CITIBANK N.A.
By:
-------------------------------
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-------------------------------
Name:
Title:
11
<PAGE> 15
EXHIBIT A
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
are incorporated by reference in the Auction Agent Agreement and the
Broker-Dealer Agreement. Nothing contained in this Exhibit A constitutes a
representation by the Company that in each Auction each party referred to herein
actually will perform the procedures described herein to be performed by such
party. Capitalized terms used herein shall have the respective meanings
specified in the Broker-Dealer Agreement.
I. On each Auction Date, the Auction Agent shall notify by telephone or
through the Auction Agent's Processing System the Broker-Dealers that
participated in the Auction held on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of:
A. the Applicable Rate fixed for the next succeeding Dividend Period;
B. whether Sufficient Clearing Bids existed for the determination of
the Applicable Rate;
C. if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a Bid
or a Sell Order on behalf of an Existing Holder, the number of Shares, if
any, to be sold by such Existing Holder;
D. if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid
on behalf of a Potential Holder, the number of Shares, if any, to be
purchased by such Potential Holder;
E. if the aggregate number of Shares to be sold by all Existing
Holders on whose behalf such Broker-Dealer submitted a Bid or a Sell Order
exceeds the aggregate number of Shares to be purchased by all Potential
Holders on whose behalf such Broker-Dealer submitted a Bid, the name or
names of one or more Buyer's Broker-Dealers (and the name of the Agent
Member, if any, of each such Buyer's Broker-Dealer) acting for one or more
purchasers of such excess number of Shares and the number of such Shares to
be purchased from one or more Existing Holders on whose behalf such
Broker-Dealer acted by one or more Potential Holders on whose behalf each
of such Buyer's Broker-Dealers acted;
F. if the aggregate number of Shares to be purchased by all Potential
Holders on whose behalf such Broker-Dealer submitted a Bid exceeds the
aggregate number of Shares to be sold by all Existing Holders on whose
behalf such Broker-Dealer submitted a Bid or a Sell Order, the name or
names of one or more Seller's Broker-Dealers (and the name of the Agent
Member, if any, of each such Seller's Broker-Dealer) acting for one or more
sellers of such excess number of Shares and the number of such Shares to be
sold to one or more Potential Holders on whose behalf such Broker-Dealer
acted by one or more Existing Holders on whose behalf each of such Seller's
Broker-Dealers acted; and
G. the Auction Date of the next succeeding Auction with respect to the
Shares.
II. On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
A. in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
instruct each Potential Holder on whose behalf such Broker-Dealer submitted
a Bid that was accepted, in whole or in part, to instruct such Potential
Holder's Agent Member to pay to such Broker-Dealer (or its Agent Member)
through the Securities Depository the amount necessary to purchase the
number of Shares to be purchased pursuant to such Bid against receipt of
such Shares and advise such Potential Holder of the Applicable Rate for the
next succeeding Dividend Period;
B. in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Broker-Dealer submitted
a Sell Order that was accepted, in whole or in part, or a Bid that was
accepted, in whole or in part, to instruct such Existing Holder's Agent
Member to deliver to such Broker-Dealer (or its Agent Member) through the
Securities Depository the number of Shares to
A-1
<PAGE> 16
be sold pursuant to such Order against payment therefor and advise any such
Existing Holder that will continue to hold Shares of the Applicable Rate
for the next succeeding Dividend Period;
C. advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Applicable Rate for the next succeeding
Dividend Period;
D. advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction; and
E. advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date
for the next succeeding Auction.
III. On the basis of the information provided to it pursuant to (I) above,
each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a Potential
Holder or an Existing Holder shall, in such manner and at such time or times as
in its sole discretion it may determine, allocate any funds received by it
pursuant to (II)(A) above and any Shares received by it pursuant to (II)(B)
above among the Potential Holders, if any, on whose behalf such Broker-Dealer
submitted Bids, the Existing Holders, if any, on whose behalf such Broker-Dealer
submitted Bids that were accepted or Sell Orders, and any Broker-Dealer or
Broker-Dealers identified to it by the Auction Agent pursuant to (I)(E) or
(I)(F) above.
IV. On each Auction Date:
A. each Potential Holder and Existing Holder shall instruct its Agent
Member as provided in (II) (A) or (B) above, as the case may be;
B. each Seller's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to the Agent Member of the Existing Holder
delivering Shares to such Broker-Dealer pursuant to (II)(B) above the
amount necessary to purchase such Shares against receipt of such Shares,
and (B) deliver such Shares through the Securities Depository to a Buyer's
Broker-Dealer (or its Agent Member) identified to such Seller's
Broker-Dealer pursuant to (I)(E) above against payment therefor; and
C. each Buyer's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to a Seller's Broker-Dealer (or its Agent Member)
identified pursuant to (I) (F) above the amount necessary to purchase the
Shares to be purchased pursuant to (II)(A) above against receipt of such
Shares, and (B) deliver such Shares through the Securities Depository to
the Agent Member of the purchaser thereof against payment therefor.
V. On the day after the Auction Date:
A. each Bidder's Agent Member referred to in (IV)(A) above shall
instruct the Securities Depository to execute the transactions described in
(II)(A) or (B) above, and the Securities Depository shall execute such
transactions;
B. each Seller's Broker-Dealer or its Agent Member shall instruct the
Securities Depository to execute the transactions described in (IV)(B)
above, and the Securities Depository shall execute such transactions; and
C. each Buyer's Broker-Dealer or its Agent Member shall instruct the
Securities Depository to execute the transactions described in (IV)(C)
above, and the Securities Depository shall execute such transactions.
VI. If a an Existing Holder selling Shares in an Auction fails to deliver
such Shares (by authorized book-entry), a Broker-Dealer may deliver to the
Potential Holder on behalf of which it submitted a Bid that was accepted a
number of whole Shares that is less than the number of Shares that otherwise was
to be purchased by such Potential Holder. In such event, the number of Shares to
be so delivered shall be determined solely by such Broker-Dealer. Delivery of
such lesser number of Shares shall constitute good delivery. Notwithstanding the
foregoing terms of this paragraph (VI), any delivery or non-delivery of Shares
A-2
<PAGE> 17
which shall represent any departure from the results of an Auction, as
determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall have been notified of such delivery or non-delivery in
accordance with the provisions of the Auction Agent Agreement and the
Broker-Dealer Agreements.
A-3
<PAGE> 18
EXHIBIT B
CITIBANK N.A.
AUCTION BID FORM
Submit To: Citibank N.A. Issue: SmithKline Beecham
[Securities Transfer Department] Holdings Corporation
[Address] Series: _______________________
New York, New York _______ Auction Date:__________________
Attention: [Auction Window] Telephone: (215) 751-7633
Facsimile: (215) ________
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:_____________________________
EXISTING HOLDER
Shares now held_____________________________ HOLD ___________________
BID at rate of___________________
SELL ___________________
POTENTIAL BENEFICIAL OWNER
# of Shares bid__________________
BID at rate of___________________
Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding Shares held by any Existing Holder are submitted, such Bid
shall be considered valid in the order of priority set forth in the
Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by an Existing Holder covering
a number of Shares not greater than the number of Shares currently
held.
(4) Potential Holders may make only Bids, each of which must specify a
rate. If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate
specified.
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER__________________________________________
Authorized Signature___________________________________________
13
<PAGE> 19
EXHIBIT C
(Note: To be used only for transfers made
other than pursuant to an Auction)
TRANSFER FORM
Re: SmithKline Beecham Holdings Corporation
Flexible Auction Market Preferred Stock(R),
Series [A-1][A-2][A-3][B-1][B-2][B-3][C-1][C-2][C-3]
("Shares"(R))
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Existing Holder has transferred
_____Shares to ____________.
________________________________
(Name of Existing Holder)
________________________________
(Name of Broker-Dealer)
________________________________
(Name of Agent Member)
By:____________________________
Printed Name:
Title:
14
<PAGE> 20
EXHIBIT D
(Note: To be used only for failures to deliver
Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for ________________________ (the
"Purchaser"), which purchased_________ Shares, Series
[A-1][A-2][A-3][B-1][B-2][B-3][C-1][C-2][C-3], of
SmithKline Beecham Holdings Corporation in the Auction
held on________________________from the Seller of such
Shares.
II. We are a Broker-Dealer for ________________________ (the
"Seller"), which sold________ Shares, Series
[A-1][A-2][A-3][B-1][B-2][B-3][C-1][C-2][C-3], of
SmithKline Beecham Holdings Corporation in the Auction
held on________________to the Purchaser of such Shares.
We hereby notify you that (check one):
______________ The Seller failed to deliver such Shares to
the Purchaser
______________ The Purchaser failed to make payment to the
Seller upon delivery of such Shares
Name:____________________________________
(Name of Broker-Dealer)
By:____________________________________
Printed Name:
Title:
15
<PAGE> 21
===============================================================================
BROKER-DEALER AGREEMENT
between
THE BANK OF NEW YORK
and
LEHMAN BROTHERS INC.
Dated as of ___________, 1996
Relating to
FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK(R)
("MMP"(R))
Series __________
of
SMITHKLINE BEECHAM HOLDINGS CORPORATION
===============================================================================
(R) Registered trademark of Lehman Brothers Inc.
1
<PAGE> 22
TABLE OF CONTENTS
I. DEFINITIONS AND RULES OF CONSTRUCTION
1.1. Terms Defined by Reference to the Certificate of
Designations......................................... 2
1.2. Terms Defined Herein................................. 2
1.3. Rules of Construction................................ 3
II. NOTIFICATION OF DIVIDEND PERIOD
2.1. ..................................................... 3
III. THE AUCTION
3.1. Purpose; Incorporation by Reference of Auction
Procedures and Settlement Procedures................. 3
3.2. Preparation for Each Auction......................... 4
3.3. Auction Schedule; Method of Submission of Orders..... 5
3.4. Notice of Auction Results............................ 6
3.5. Service Charge to Be Paid to BD...................... 7
IV. THE AUCTION AGENT
4.1. Duties and Responsibilities.......................... 7
4.2. Rights of the Auction Agent.......................... 8
4.3. Auction Agent's Disclaimer........................... 8
V. MISCELLANEOUS
5.1. Termination.......................................... 8
5.2. Participant in Securities Depository; Payment of
Dividends in Same-Day Funds.......................... 9
5.3. Agent Member......................................... 9
5.4. Communications....................................... 9
5.5. Entire Agreement..................................... 10
5.6. Benefits............................................. 10
5.7. Amendment; Waiver.................................... 10
5.8. Successors and Assigns............................... 10
5.9. Severability......................................... 10
5.10. Execution in Counterparts............................ 10
5.11. Governing Law........................................ 10
2
<PAGE> 23
BROKER-DEALER AGREEMENT dated as of ________________, 1996, between THE
BANK OF NEW YORK, a national banking association (the "Auction Agent") (not in
its individual capacity, but solely as agent of SmithKline Beecham Holdings
Corporation, a Delaware corporation (the "Company"), pursuant to authority
granted to it under the Auction Agent Agreement dated as of _____________, 1996,
between the Company and the Auction Agent (the "Auction Agent Agreement")) and
LEHMAN BROTHERS INC. (together with its successors and assigns, "BD").
The Company proposes to duly authorize and issue up to _____ Shares in
_____ series designated Flexible Money Market Cumulative Preferred Stock(R),
Series ___, Series ___, Series ___, Series ___ and Series ___, all with no par
value and a liquidation preference of $100,000 per Share plus accumulated but
unpaid dividends (whether or not earned or declared), each pursuant to the
Company's Certificate of Designations (as defined below). The Series __ MMP,
Series __ MMP, Series __ MMP, Series __ MMP and Series __ MMP are sometimes
referred to together herein as "Shares".
The Company's Certificate of Designations provides that the dividend
rate on each Series of Shares for each Subsequent Dividend Period therefor shall
be the Applicable Rate therefor, which in each case, in general shall be the
rate per annum that a Broker- Dealer appointed by the Company advises results
from implementation of the Auction Procedures (as defined below). The Board of
Directors of the Company has adopted a resolution appointing The Bank of New
York as Auction Agent for purposes of the Auction Procedures, and pursuant to
Section 2.5(d) of the Auction Agent Agreement, the Company has requested and
directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
- --------------------
(R) Registered trademark of Lehman Brothers Inc.
<PAGE> 24
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. Terms Defined by Reference to the Certificate of Designations.
Capitalized terms not defined herein shall have their respective meanings
specified in the Certificate of Designations of the Company, including, without
limitation, Paragraph 1 and Paragraph 7 thereof, unless the context otherwise
requires.
1.2. Terms Defined Herein. As used herein and in the Settlement
Procedures (as defined below), the following terms shall have the following
meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in
Section 3.1 hereof.
(b) "Auction Procedures" shall mean the Auction Procedures
that are set forth in Paragraph 7 of the Certificate of Designations.
(c) "Authorized Officer" shall mean each Senior Vice
President, Vice President, Assistant Vice President, and Assistant Treasurer of
the Auction Agent assigned to its Corporate Trust and Agency Group and every
other officer or employee of the Auction Agent designated as an "Authorized
Officer" for purposes of this Agreement in a communication to BD.
(d) "Broker-Dealer Agreement" shall mean this Agreement and
any substantially similar agreement between the Auction Agent and a
Broker-Dealer.
(e) "Certificate of Designations" shall mean the Certificate
of Designations, as amended, of the Company, establishing the powers,
preferences and rights of the Shares filed on _________ 1996 with the Secretary
of State of the State of Delaware.
(f) "BD Officer" shall mean each officer or employee of BD
designated as a "BD Officer" for purposes of this Agreement in a communication
to the Auction Agent.
(g) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit A.
2
<PAGE> 25
1.3. Rules of Construction. Unless the context or use
indicates another or different meaning or intent, the following
rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the
plural number and vice versa.
(b) The captions and headings herein are solely for
convenience of reference and shall not constitute a part of this Agreement, nor
shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words
of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall
be to New York City time.
II. NOTIFICATION OF DIVIDEND PERIOD.
2.1. The provisions contained in Paragraph 2 of the Certificate
of Designations concerning the notification of a Special Dividend Period will be
followed by the Auction Agent and BD, and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were set forth
fully herein.
III. THE AUCTION.
3.1. Purpose; Incorporation by Reference of Auction
Procedures and Settlement Procedures.
(a) On each Auction Date for a Series of MMP, the provisions
of the Auction Procedures will be followed by the Auction Agent for the purpose
of determining the Applicable Rate for such Series of Shares, for the next
Subsequent Dividend Period therefor. Each periodic operation of such procedures
is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Pro
cedures and the Settlement Procedures are incorporated herein by reference in
their entirety and shall be deemed to be a part of this Agreement to the same
extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of
and limitations and restrictions placed upon, a Broker-Dealer under
this Agreement. BD understands that other Persons meeting the
3
<PAGE> 26
requirements specified in the definition of "Broker-Dealer" contained in
Paragraph 1 of the Certificate of Designations may execute a Broker-Dealer
Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions
for their own accounts. However, the Company, by notice to BD and all other
Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions
for their own accounts, provided that Broker-Dealers may continue to submit Hold
Orders and Sell Orders.
3.2. Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for a
Series of Shares, the Auction Agent shall advise BD by telephone of the
Reference Rate and the Maximum Dividend Rate in effect on such Auction Date.
(b) In the event that the Auction Date for any Auction of a
Series of MMP shall be changed after the Auction Agent has given the notice
referred to in clause G of paragraph I of the Settlement Procedures, the Auction
Agent, by such means as the Auction Agent deems practicable, shall give notice
of such change to BD not later than the earlier of 9:15 A.M. on the new Auction
Date or 9:15 A.M. on the old Auction Date. Thereafter, BD promptly shall notify
customers of BD that BD believes are beneficial owners of such Series of such
change in the Auction Date.
(c) The Auction Agent from time to time may request BD to
provide it with a list of the respective customers BD believes are beneficial
owners of MMP of each Series of Shares. BD shall comply with any such request,
and the Auction Agent shall keep confidential any such information, including
information received as to the identity of Bidders in any Auction, and shall not
disclose any such information so provided to any Person other than the Company;
and such information shall not be used by the Auction Agent or its officers,
employees, agents or representatives for any purpose other than such purposes as
are described herein. The Auction Agent shall transmit any list of customers BD
believes are beneficial owners of MMP of each Series of Shares and information
related thereto only to its officers, employees, agents or representatives in
the [Corporate Trust and Agency Group] who need to know such information for the
purposes of acting in accordance with this Agreement, and the Auction Agent
shall prevent the transmission of such information to others and shall cause its
officers, employees, agents and representatives to abide by the foregoing
confidentiality restrictions.
4
<PAGE> 27
3.3. Auction Schedule; Method of Submission of Orders.
(a) The Company and the Auction Agent shall conduct separate
Auctions for each Series of Shares in accordance with the schedule set forth
below. Such schedule may be changed at any time by the Auction Agent with the
consent of the Company, which consent shall not be withheld unreasonably. The
Auction Agent shall give notice of any such change to BD. Such notice shall be
received prior to the first Auction Date on which any such change shall be
effective.
Time Event
---- -----
By 9:30 A.M. Auction Agent advises the Company
and Broker-Dealers of the Reference
Rate and the Maximum Dividend Rate
as set forth in Section 3.2(a) hereof.
9:30 A.M. - 1:00 P.M Auction Agent assembles information
communicated to it by Broker-
Dealers as provided in Paragraph
7(c)(i) of the Certificate of
Designations. Submission Deadline
is 1:00 P.M.
Not earlier than Auction Agent makes determinations
1:00 P.M. pursuant to Paragraph 7(d)(i) of
the Certificate of Designations.
By approximately Auction Agent advises the Company
3:00 P.M. of the results of the Auction as
provided in Paragraph 7(d)(ii) of
the Certificate of Designations.
Submitted Bids and Submitted Sell
Orders are accepted and rejected in
whole or in part and Shares are
allocated as provided in Paragraph
7(e) of the Certificate of Designations.
Auction Agent gives notice of
the Auction results as set forth
in Section 3.4(a) hereof.
(b) BD agrees to maintain a list of Potential Holders and
to contact the Potential Holders on such list on or prior to each Auction Date
for the purposes set forth in Paragraph 7 of the Certificate of Designations.
5
<PAGE> 28
(c) BD shall submit Orders to the Auction Agent in
writing in substantially the form attached hereto as Exhibit B. BD shall submit
separate Orders to the Auction Agent for each Potential Holder or Existing
Holder on whose behalf BD is submitting an Order and shall not net or aggregate
the Orders of Potential Holder or Existing Holder on whose behalf BD is
submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written
notice, substantially in the form attached hereto as Exhibit C, of transfers of
Shares of any Series of Shares, made through BD by a Beneficial Owner to another
Person other than pursuant to an Auction, and (ii) a written notice,
substantially in the form attached hereto as Exhibit D, of the failure of Shares
of any Series of Shares to be transferred to or by any Person that purchased or
sold Shares of any Series of Shares through BD pursuant to an Auction. The
Auction Agent is not required to accept any notice delivered pursuant to the
terms of the foregoing sentence with respect to an Auction unless it is received
by the Auction Agent by 3:00 P.M. on the Business Day next preceding the
applicable Auction Date.
3.4. Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify
BD by telephone as set forth in paragraph (a) of the Settlement Procedures. [As
soon as practicable thereafter, if so requested by the Broker-Dealer,] the
Auction Agent shall notify BD in writing of the disposition of all Orders
submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Existing Holder or Potential
Holder on whose behalf BD has submitted an Order as set forth in paragraph II of
the Settlement Procedures, and take such other action as is required of BD
pursuant to the Settlement Procedures.
If any Existing Holder selling Shares in an Auction, on whose behalf BD
has submitted an Order as set forth in paragraph II of the Settlement
Procedures, fails to deliver such Shares, BD may deliver to any Person that was
to have purchased Shares of such Series of Shares in such Auction a number of
whole Shares of such Series of Shares that is less than the number of Shares
that otherwise was to be purchased by such Person. In such event, the number of
Shares of such Series of Shares to be so delivered shall be determined by BD.
Delivery of such lesser number of Shares shall constitute good delivery. Upon
the occurrence of any such failure to deliver Shares, BD shall deliver to the
Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding
the foregoing terms of this Section 3.4(b), any delivery or non-delivery of
Shares of any Series of Shares which represents any departure from the results
of an Auction, as determined by the Auction Agent, shall be of no effect unless
and until the Auction
6
<PAGE> 29
Agent shall have been notified of such delivery or non-delivery in accordance
with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or
liability with respect to enforcement of this Section 3.4(b).
3.5. Service Charge to Be Paid to BD. On the Business Day next
succeeding each Auction Date, the Auction Agent shall pay to BD from moneys
received from the Company an amount equal to: (a) in the case of any Auction
Date immediately preceding a Regular Dividend Period, the product of (i) a
fraction the numerator of which is the number of days in such Subsequent
Dividend Period (calculated by counting the first day of such Subsequent
Dividend Period but excluding the last day thereof) and the denominator of which
is 360, times (ii) [1/4 of 1%], times (iii) $100,000, times (iv) the sum of (A)
the aggregate number of Shares placed by BD in the applicable Auction that were
(x) the subject of a Submitted Bid of an Existing Holder submitted by BD and
continued to be held as a result of such submission and (y) the subject of a
Submitted Bid of a Potential Holder submitted by BD and were purchased as a
result of such submission plus (B) the aggregate number of Shares subject to
valid Hold Orders (determined in accordance with Paragraph 7 of the Certificate
of Designations) submitted to the Auction Agent by BD plus (C) the number of
Shares deemed to be subject to Hold Orders by Existing Holders pursuant to
Paragraph 7 of the Certificate of Designations that were acquired by such
Existing Holders through BD; and (b) in the case of any Auction Date immediately
preceding a Special Dividend Period, that amount as mutually agreed upon by the
Company and BD, based on the selling concession that would be applicable to an
underwriting of fixed or variable rate preferred Shares with a similar final
maturity or variable rate dividend period, at the commencement of such Special
Dividend Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired Shares of any Series of Shares through BD
transfers those Shares to another Person other than pursuant to an Auction, then
the Broker-Dealer for the Shares so transferred shall continue to be BD,
provided, however, that if the transfer was effected by, or if the transferee
is, a Broker- Dealer other than BD, then such Broker-Dealer shall be the
Broker-Dealer for such Shares.
IV. THE AUCTION AGENT.
4.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the
Company hereunder and owes no fiduciary duties to any other Person by reason of
this Agreement.
7
<PAGE> 30
(b) The Auction Agent undertakes to perform such duties and
only such duties as are set forth specifically in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Auction
Agent.
(c) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or omitted by
it, or for any error of judgment made by it in the performance of its duties
under this Agreement. The Auction Agent shall not be liable for any error of
judgment made in good faith unless the Auction Agent shall have been negligent
in ascertaining (or failing to ascertain) the pertinent facts.
4.2. Rights of the Auction Agent.
(a) The Auction Agent may rely upon, and shall be protected in
acting or refraining from acting upon, any communication authorized by this
Agreement and any written instruction, notice, request, direction, consent,
report, certificate, Share certificate or other instrument, paper or document
believed by it to be genuine. The Auction Agent shall not be liable for acting
upon any telephone communication authorized by this Agreement which the Auction
Agent believes in good faith to have been given by the Company or by BD. The
Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own
choice, and the advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys.
4.3. Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the validity or adequacy of this Agreement or the Shares.
V. MISCELLANEOUS.
5.1. Termination. Either party may terminate this Agreement
at any time upon five days' prior written notice to the other
party; provided, however, that if BD is Lehman Brothers Inc.,
neither BD nor the Auction Agent may terminate this Agreement
8
<PAGE> 31
without first obtaining prior written consent of the Company to such
termination, which consent shall not be withheld unreasonably.
5.2. Participant in Securities Depository; Payment of
Dividends in Same-Day Funds.
(a) BD is, and shall remain for the term of this Agreement, a
member of, or a participant in, the Securities Depository (or an affiliate of
such a member or participant).
(b) BD represents that it (or if BD does not act as Agent
Member, one of its affiliates) shall make all dividend payments on the Shares
available in same-day funds on each Dividend Payment Date to customers that use
BD (or its affiliate) as Agent Member.
5.3. Agent Member. At the date hereof, BD is a participant of
the Securities Depository.
5.4. Communications. Except for (i) communications authorized to be
made by telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given to such party at its address or telecopier number set forth
below:
If to BD, _____________________________________
addressed to: _____________________________________
_____________________________________
_____________________________________
_____________________________________
Attention: __________________
Telecopier No.: [(212) _____________
Telephone No.: [(212) _____________
If to the Auction _____________________________________
Agent, addressed to: _____________________________________
_____________________________________
Attention: _________________________
Telecopier No.: [(212) ______________
Telephone No.: [(212) ______________
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction
9
<PAGE> 32
Agent by an Authorized Officer. BD may record telephone communications with the
Auction Agent.
5.5. Entire Agreement. This Agreement contains the entire
agreement between the parties relating to the subject matter
hereof, and there are no other representations, endorsements,
promises, agreements or understandings, oral, written or inferred,
between the parties relating to the subject matter hereof.
5.6. Benefits. Nothing in this Agreement, express or implied,
shall give to any person, other than the Company, the Auction Agent
and BD and their respective successors and assigns, any benefit of
any legal or equitable right, remedy or claim under this Agreement.
5.7. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the party to
be charged.
(b) Failure of either party to this Agreement to exercise
any right or remedy hereunder in the event of a breach of this Agreement by the
other party shall not constitute a waiver of any such right or remedy with
respect to any subsequent breach.
5.8. Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the respective successors and
permitted assigns of each of BD and the Auction Agent. This Agreement may not be
assigned by either party hereto absent the prior written consent of the other
party; provided, however, that this Agreement may be assigned by the Auction
Agent to a successor Auction Agent selected by the Company without the consent
of BD.
5.9. Severability. If any clause, provision or section of
this Agreement shall be ruled invalid or unenforceable by any court
of competent jurisdiction, the invalidity or unenforceability of
such clause, provision or section shall not affect any remaining
clause, provision or section hereof.
5.10. Execution in Counterparts. This Agreement may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.
5.11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed in said State.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
THE BANK OF NEW YORK
By:________________________________
Name:
Title:
LEHMAN BROTHERS INC.
By:________________________________
Name:
Title:
11
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EXHIBIT A
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
are incorporated by reference in the Auction Agent Agreement and the
Broker-Dealer Agreement. Nothing contained in this Exhibit A constitutes a
representation by the Company that in each Auction each party referred to herein
actually will perform the procedures described herein to be performed by such
party. Capitalized terms used herein shall have the respective meanings
specified in the Broker-Dealer Agreement.
I. On each Auction Date, the Auction Agent shall notify by telephone or
through the Auction Agent's Processing System the Broker-Dealers that
participated in the Auction held on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of:
A. the Applicable Rate fixed for the next succeeding Dividend Period;
B. whether Sufficient Clearing Bids existed for the determination of
the Applicable Rate;
C. if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a Bid
or a Sell Order on behalf of an Existing Holder, the number of Shares, if
any, to be sold by such Existing Holder;
D. if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid
on behalf of a Potential Holder, the number of Shares, if any, to be
purchased by such Potential Holder;
E. if the aggregate number of Shares to be sold by all Existing
Holders on whose behalf such Broker-Dealer submitted a Bid or a Sell Order
exceeds the aggregate number of Shares to be purchased by all Potential
Holders on whose behalf such Broker-Dealer submitted a Bid, the name or
names of one or more Buyer's Broker-Dealers (and the name of the Agent
Member, if any, of each such Buyer's Broker-Dealer) acting for one or more
purchasers of such excess number of Shares and the number of such Shares to
be purchased from one or more Existing Holders on whose behalf such
Broker-Dealer acted by one or more Potential Holders on whose behalf each
of such Buyer's Broker-Dealers acted;
F. if the aggregate number of Shares to be purchased by all Potential
Holders on whose behalf such Broker-Dealer submitted a Bid exceeds the
aggregate number of Shares to be sold by all Existing Holders on whose
behalf such Broker-Dealer submitted a Bid or a Sell Order, the name or
names of one or more Seller's Broker-Dealers (and the name of the Agent
Member, if any, of each such Seller's Broker-Dealer) acting for one or more
sellers of such excess number of Shares and the number of such Shares to be
sold to one or more Potential Holders on whose behalf such Broker-Dealer
acted by one or more Existing Holders on whose behalf each of such Seller's
Broker-Dealers acted; and
G. the Auction Date of the next succeeding Auction with respect to the
Shares.
II. On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
A. in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
instruct each Potential Holder on whose behalf such Broker-Dealer submitted
a Bid that was accepted, in whole or in part, to instruct such Potential
Holder's Agent Member to pay to such Broker-Dealer (or its Agent Member)
through the Securities Depository the amount necessary to purchase the
number of Shares to be purchased pursuant to such Bid against receipt of
such Shares and advise such Potential Holder of the Applicable Rate for the
next succeeding Dividend Period;
B. in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Broker-Dealer submitted
a Sell Order that was accepted, in whole or in part, or a Bid that was
accepted, in whole or in part, to instruct such Existing Holder's Agent
Member to deliver to such Broker-Dealer (or its Agent Member) through the
Securities Depository the number of Shares to
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<PAGE> 35
be sold pursuant to such Order against payment therefor and advise any such
Existing Holder that will continue to hold Shares of the Applicable Rate
for the next succeeding Dividend Period;
C. advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Applicable Rate for the next succeeding
Dividend Period;
D. advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction; and
E. advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date
for the next succeeding Auction.
III. On the basis of the information provided to it pursuant to (I) above,
each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a Potential
Holder or an Existing Holder shall, in such manner and at such time or times as
in its sole discretion it may determine, allocate any funds received by it
pursuant to (II)(A) above and any Shares received by it pursuant to (II)(B)
above among the Potential Holders, if any, on whose behalf such Broker-Dealer
submitted Bids, the Existing Holders, if any, on whose behalf such Broker-Dealer
submitted Bids that were accepted or Sell Orders, and any Broker-Dealer or
Broker-Dealers identified to it by the Auction Agent pursuant to (I)(E) or
(I)(F) above.
IV. On each Auction Date:
A. each Potential Holder and Existing Holder shall instruct its Agent
Member as provided in (II) (A) or (B) above, as the case may be;
B. each Seller's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to the Agent Member of the Existing Holder
delivering Shares to such Broker-Dealer pursuant to (II)(B) above the
amount necessary to purchase such Shares against receipt of such Shares,
and (B) deliver such Shares through the Securities Depository to a Buyer's
Broker-Dealer (or its Agent Member) identified to such Seller's
Broker-Dealer pursuant to (I)(E) above against payment therefor; and
C. each Buyer's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to a Seller's Broker-Dealer (or its Agent Member)
identified pursuant to (I) (F) above the amount necessary to purchase the
Shares to be purchased pursuant to (II)(A) above against receipt of such
Shares, and (B) deliver such Shares through the Securities Depository to
the Agent Member of the purchaser thereof against payment therefor.
V. On the day after the Auction Date:
A. each Bidder's Agent Member referred to in (IV)(A) above shall
instruct the Securities Depository to execute the transactions described in
(II)(A) or (B) above, and the Securities Depository shall execute such
transactions;
B. each Seller's Broker-Dealer or its Agent Member shall instruct the
Securities Depository to execute the transactions described in (IV)(B)
above, and the Securities Depository shall execute such transactions; and
C. each Buyer's Broker-Dealer or its Agent Member shall instruct the
Securities Depository to execute the transactions described in (IV)(C)
above, and the Securities Depository shall execute such transactions.
VI. If a an Existing Holder selling Shares in an Auction fails to deliver
such Shares (by authorized book-entry), a Broker-Dealer may deliver to the
Potential Holder on behalf of which it submitted a Bid that was accepted a
number of whole Shares that is less than the number of Shares that otherwise was
to be purchased by such Potential Holder. In such event, the number of Shares to
be so delivered shall be determined solely by such Broker-Dealer. Delivery of
such lesser number of Shares shall constitute good delivery. Notwithstanding the
foregoing terms of this paragraph (VI), any delivery or non-delivery of Shares
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<PAGE> 36
which shall represent any departure from the results of an Auction, as
determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall have been notified of such delivery or non-delivery in
accordance with the provisions of the Auction Agent Agreement and the
Broker-Dealer Agreements.
A-3
<PAGE> 37
EXHIBIT B
THE BANK OF NEW YORK
AUCTION BID FORM
Submit To: The Bank of New York issue: SmithKline Beecham
[Securities Transfer Department] Holdings Corporation
[Address] Series: _______________________
New York, New York _______ Auction Date:__________________
Attention: [Auction Window] Telephone: (215) 751-7633
Facsimile: (215) ________
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:______________________________________
EXISTING HOLDER
Shares now held____________________________ HOLD ______________
BID at rate of ______________
SELL ______________
POTENTIAL BENEFICIAL OWNER
# of Shares bid ______________
BID at rate of ______________
Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding Shares held by any Existing Holder are submitted, such Bid
shall be considered valid in the order of priority set forth in the
Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by an Existing Holder covering
a number of Shares not greater than the number of Shares currently
held.
(4) Potential Holders may make only Bids, each of which must specify a
rate. If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate
specified.
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER _____________________________________
Authorized Signature _____________________________________
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EXHIBIT C
(Note: To be used only for transfers made
other than pursuant to an Auction)
TRANSFER FORM
Re: SmithKline Beecham Holdings Corporation
Flexible Money Market Cumulative Preferred Stock(R),
Series _____________________________________________
("Shares"(R))
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Existing Holder has transferred Shares
__________to____________.
_________________________________
(Name of Existing Holder)
_________________________________
(Name of Broker-Dealer)
_________________________________
(Name of Agent Member)
By:________________________________
Printed Name:
Title:
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<PAGE> 39
EXHIBIT D
(Note: To be used only for failures to deliver
Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for_________________________(the
"Purchaser"), which purchased__________Shares, Series
_____________________________________________, of SmithKline
Beecham Holdings Corporation in the Auction held on_________
from the Seller of such Shares.
II. We are a Broker-Dealer for _____________________________(the
"Seller"), which sold _____________ Shares, Series
_____________________________________________, of
SmithKline Beecham Holdings Corporation in the Auction
held on ______________ to the Purchaser of such Shares.
We hereby notify you that (check one):
_______________ the Seller failed to deliver such Shares to
the Purchaser
_______________ the Purchaser failed to make payment to the
Seller upon delivery of such Shares
Name:__________________________________
(Name of Broker-Dealer)
By:__________________________________
Printed Name:
Title:
15
