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Filed pursuant to Rule 424(b)(3)
Registration No. 333-01093
PROSPECTUS SUPPLEMENT
(To Prospectus Dated February 28, 1996)
U.S. $450,000,000
THE SHERWIN-WILLIAMS COMPANY [LOGO]
MEDIUM-TERM NOTES, SERIES A
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
The Sherwin-Williams Company (the "Company") may from time to time offer
pursuant to this Prospectus Supplement its Medium-Term Notes, Series A (the
"Notes"), with an aggregate initial public offering price or purchase price of
up to $450,000,000, (or the equivalent thereof in one or more foreign or
composite currencies), subject to reduction as a result of the sale of other
securities under the Registration Statement of which this Prospectus Supplement
and the accompanying Prospectus form a part or under a Registration Statement to
which this Prospectus Supplement and the accompanying Prospectus relate.
Unless otherwise specified in the applicable Pricing Supplement, each Note will
mature on a Business Day more than nine months from its date of issue (the
"Stated Maturity"), which maturity date may be subject to extension at the
option of the Company. Each Note may also be subject to redemption at the option
of the Company, or to repayment at the option of the Holder, prior to maturity.
The Notes may bear interest at a fixed rate (a "Fixed Rate Note"), which may be
zero in the case of certain Discount Notes, or at a floating rate (a "Floating
Rate Note") determined by reference to LIBOR, the CD Rate, the Commercial Paper
Rate, the Federal Funds Rate, the Treasury Rate, the Prime Rate, the CMT Rate,
the Eleventh District Cost of Funds Rate or any other Base Rate, as selected by
the purchaser and agreed to by the Company, adjusted by the Spread or Spread
Multiplier, if any, applicable to such Note. Unless otherwise indicated,
interest on each Fixed Rate Note will be payable semiannually in arrears on each
June 1 and December 1 (each an "Interest Payment Date") and at Stated Maturity.
A Note may be issued as an amortizing note (an "Amortizing Note") on which a
portion or all the principal amount is payable prior to Stated Maturity in
accordance with a schedule, by application of a formula, or by reference to an
index. A Note may be issued as an indexed note (an "Indexed Note") on which the
amount of any interest payment will be determined by reference to the level of a
specific index as defined on the applicable Pricing Supplement. The Specified
Currency, interest rate or interest rate formula, reset provisions, Issue Price,
Stated Maturity, Interest Payment Dates, redemption, repayment and extension
provisions and certain other terms with respect to each Note will be established
at the time of issuance and set forth in a pricing supplement to this Prospectus
Supplement (a "Pricing Supplement").
Each Note will be represented by either a Global Security registered in the name
of a nominee of The Depository Trust Company, as Depositary (a "Book-Entry
Note") or a certificate delivered to the Holder thereof or a person designated
by such Holder (a "Certificated Note"). Beneficial interests in Global
Securities representing Book-Entry Notes will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary and its
participants. Book-Entry Notes will not be issuable as Certificated Notes except
under the circumstances described herein.
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 THE PROSPECTUS, THIS PROSPECTUS SUPPLEMENT OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO AGENT'S PROCEEDS TO THE
PUBLIC(1) COMMISSION(2) COMPANY(2)(3)
<S> <C> <C> <C>
Per Note...................... 100.000% .125%-.750% 99.875%-99.250%
Total(4)...................... US $450,000,000 $562,500-$3,375,000 $449,437,500-$446,625,000
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<FN>
(1) Unless otherwise specified in the applicable Pricing Supplement, the price
to public will be 100% of the principal amount.
(2) The Company will pay to Salomon Brothers Inc and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Agents") a
commission of from .125% to .750% of the principal amount of any Note,
depending upon its Stated Maturity through 30 years, sold through the
Agents.
(3) Before deduction of expenses payable by the Company estimated at $418,857,
including reimbursement of certain expenses of the Agents.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
</TABLE>
The Notes are being offered on a continuous basis by the Company through the
Agents, which have agreed to use their reasonable efforts to solicit orders to
purchase the Notes. The Company may also sell Notes at a discount to the Agents
for their own accounts or for resale to one or more purchasers at varying prices
related to prevailing market prices at the time of resale or, if set forth in
the applicable Pricing Supplement, at a fixed public offering price, as
determined by the Agents. In addition, the Agents may offer Notes purchased by
them as principal to other dealers. Unless otherwise specified in the applicable
Pricing Supplement, any Note purchased by an Agent as principal will be
purchased at 100% of the principal amount thereof less a percentage equal to the
commission applicable to an agency sale of a Note of identical maturity. The
Notes will not be listed on any securities exchange, and there can be no
assurance that the maximum amount of Notes offered by this Prospectus Supplement
will be sold or that there will be a secondary market for the Notes. The Company
reserves the right to withdraw, cancel or modify the offer made hereby without
notice. The Company or the Agents may reject any order to purchase Notes,
whether or not solicited, in whole or in part. See "Plan of Distribution".
SALOMON BROTHERS INC MERRILL LYNCH & CO.
The date of this Prospectus Supplement is February 28, 1996.
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COMPANY DESCRIPTION
The Sherwin-Williams Company, which was first incorporated in the State of
Ohio eighteen years after its founding in 1866, is engaged in the manufacture,
distribution and sale of paints, coatings and related products to professional,
industrial, commercial and retail customers.
RECENT DEVELOPMENTS
For the year ended December 31, 1995, net sales of the Company increased
5.6% to $3,273,819,000 from $3,100,069,000 for the year ended December 31, 1994.
Net income for 1995 increased 7.5% to $200,654,000, while income per share for
1995 increased 8.8% to $2.34 from $2.15 in 1994. Net sales in the Company's
Paint Stores Segment for 1995 were up 7.3% to $2,130,559,000, with
comparable-store sales increasing 6.5%. Operating profit for the Paint Stores
Segment for 1995 improved 12.7% to $158,458,000. The annual net sales of the
Company's Coating Segment for 1995 increased 2.7% to $1,129,429,000 from
$1,099,460,000 in 1994. Operating profits of the Coating Segment for 1995
increased .6% to $202,361,000.
In the three-month period ended December 31, 1995, consolidated net sales
of the Company were $740,907,000, 5.3% higher than the corresponding three-month
period of 1994. Net income for the three-month period increased 10.1% to
$33,766,000 and net income per share increased to $.39 from $.36 for the
corresponding three-month period in 1994. The Paint Stores Segment had a sales
gain of 5.4% in this three-month period and a 12.4% operating profit
improvement. The Coating Segment's sales increased 5.1% in this three-month
period while the operating profit for the Coating Segment increased 2.1 %.
PRICING SUPPLEMENT
Provisions of each transaction will be more fully described in a Pricing
Supplement to this Prospectus Supplement and the accompanying Prospectus.
Inconsistencies will be as described in the Pricing Supplement.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Debt Securities set forth in the Prospectus,
to which description reference is hereby made.
GENERAL
The Notes are a series of Debt Securities issued under an Indenture dated
as of February 1, 1996 with Chemical Bank as Trustee. At the date of this
Prospectus Supplement, the Notes offered pursuant to this Prospectus Supplement
are limited to an aggregate initial public offering price or purchase price of
up to $450,000,000 or the equivalent thereof in one or more foreign or composite
currencies, which amount is subject to reduction as a result of the sale of
other securities under the Registration Statement of which this Prospectus
Supplement and the accompanying Prospectus form a part or under a Registration
Statement to which this Prospectus Supplement and the accompanying Prospectus
relate. The aggregate amount of Notes may be increased from time to time to such
larger amount as may be authorized by the Company. The U.S. dollar equivalent of
the public offering price or purchase price of a Note having a Specified
Currency other than U.S. dollars will be determined on the basis 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
"Market Exchange Rate") for such Specified Currency on the applicable issue
date. Such determination will be made by the Company or its agent, as exchange
rate agent for the Notes (the "Exchange Rate Agent"). The Notes will constitute
part of the Senior
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Indebtedness of the Company and will rank pari passu with all other senior
unsecured debts of the Company.
The Notes will consist of Registered Notes, and will be offered on a
continuous basis. Notes will be issued in fully registered form only, without
coupons. Each Note will be issued initially as either a Book-Entry Note or, if
specified in the applicable Pricing Supplement, a Certificated Note. Except as
set forth in the Prospectus under "Description of Debt Securities -- Global
Securities", Book-Entry Notes will not be issuable as Certificated Notes. See
"Book-Entry System" below.
Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of Notes denominated in U.S. dollars will be $1,000 and
any larger amount that is an integral multiple of $1,000, and the authorized
denominations of Notes having a Specified Currency other than U.S. dollars will
be the approximate equivalents thereof in the Specified Currency.
Unless otherwise specified in the applicable Pricing Supplement, each Note
will mature on a Business Day more than nine months from its date of issue, as
selected by the purchaser and agreed to by the Company (the "Stated Maturity"),
which maturity date may be subject to extension at the option of the Company.
Each Note may also be subject to redemption at the option of the Company, or
repayment at the option of the Holder, prior to its Stated Maturity.
Notwithstanding the foregoing, each Note having a Specified Currency of Japanese
yen will have a Stated Maturity of not less than one year from its Original
Issue Date (as defined below), and will not be subject to optional redemption or
repayment prior to such time. Each Note having a Specified Currency of Pounds
Sterling will mature in compliance with such regulations as the Bank of England
may promulgate from time to time. Each Floating Rate Note will mature on an
Interest Payment Date for such Note.
The Pricing Supplement relating to a Note will describe the following
terms: (i) the Specified Currency for such Note; (ii) whether such Note is a
Fixed Rate Note, a Floating Rate Note, an Amortizing Note and/or an Indexed
Note; (iii) the price (expressed as a percentage of the aggregate principal
amount or face amount thereof) at which such Note will be issued (the "Issue
Price"); (iv) the date on which such Note will be issued (the "Original Issue
Date"); (v) the date of the Stated Maturity; (vi) if such Note is a Fixed Rate
Note, the rate per annum at which such Note will bear interest, if any, and
whether and the manner in which such rate may be changed prior to its Stated
Maturity; (vii) if such Note is a Floating Rate Note, the Base Rate, the Initial
Interest Rate, the Interest Reset Period or the Interest Reset Dates, the
Interest Payment Dates, and, if applicable, the Index Maturity, the Maximum
Interest Rate, the Minimum Interest Rate, the Spread or Spread Multiplier (all
as defined below), and any other terms relating to the particular method of
calculating the interest rate for such Note and whether and the manner in which
such Spread or Spread Multiplier may be changed prior to Stated Maturity; (viii)
whether such Note is an Original Issue Discount Note (as defined below); (ix) if
such Note is an Amortizing Note, the terms for repayment prior to Stated
Maturity; (x) if such Note is an Indexed Note, in the case of an Indexed Rate
Note, the manner in which the amount of any interest payment will be determined
or, in the case of an Indexed Principal Note, its Face Amount and the manner in
which the principal amount payable at Stated Maturity will be determined; (xi)
whether such Note may be redeemed at the option of the Company, or repaid at the
option of the Holder, prior to Stated Maturity as described under "Optional
Redemption, Repayment and Repurchase" below and, if so, the provisions relating
to such redemption or repayment, including, in the case of an Original Issue
Discount Note or Indexed Note, the information necessary to determine the amount
due upon redemption or repayment; (xii) whether such Note is subject to an
optional extension beyond its Stated Maturity as described under "Extension of
Maturity" below; and (xiii) any other terms of such Note not inconsistent with
the provisions of the Indenture under which such Note will be issued.
"Business Day" with respect to any Note means any day, other than a
Saturday or Sunday, that is (i) not a legal holiday or a day on which banking
institutions are authorized or required by law, regulation or executive order to
be closed in (a) The City of New York or (b) if the Specified Currency for such
Note is other than U.S. dollars, the financial center of the country issuing
such Specified Currency (which, in the case of ECU, shall be Brussels, Belgium)
and (ii) if such Note is a LIBOR Note (as defined below), a
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London Banking Day. "London Banking Day" with respect to any Note means any day
on which dealings in deposits in the Specified Currency of such Note are
transacted in the London interbank market.
"Original Issue Discount Note" means (i) a Note, including any such Note
whose interest rate is zero, that has a stated redemption price at Stated
Maturity that exceeds its Issue Price by at least 0.25% of its stated redemption
price at Stated Maturity, multiplied by the number of full years from the
Original Issue Date to the Stated Maturity for such Note and (ii) any other Note
designated by the Company as issued with original issue discount for United
States Federal income tax purposes.
A "basis point" or "bp" equals one one-hundredth of a percentage point.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of and any premium and interest on each Note are payable by
the Company in the Specified Currency for such Note. If the Specified Currency
for a Note is other than U.S. dollars, the Company will (unless otherwise
specified in the applicable Pricing Supplement) arrange to convert all payments
in respect of such Note into U.S. dollars in the manner described in the
following paragraph. The Holder of a Note having a Specified Currency other than
U.S. dollars may (if the applicable Pricing Supplement and such Note so
indicate) elect to receive all payments in respect of such Note in the Specified
Currency by delivery of a written notice to the Trustee for such Note not later
than fifteen calendar days prior to the applicable payment date, except under
the circumstances described under "Currency Risks -- Payment Currency" below.
Such election will remain in effect until revoked by written notice to such
Trustee received not later than fifteen calendar days prior to the applicable
payment date.
In the case of a Note having a Specified Currency other than U.S. dollars,
the amount of any U.S. dollar payment in respect of such Note will be determined
by the Exchange Rate Agent based on the highest firm bid quotation expressed in
U.S. dollars received by the Exchange Rate Agent at approximately 11:00 a.m.,
New York City time, on the second Business Day preceding the applicable payment
date (or, if no such rate is quoted on such date, the last date on which such
rate was quoted), from three (or, if three are not available, then two)
recognized foreign exchange dealers in The City of New York (one of which may be
an Agent and another of which may be the Exchange Rate Agent) selected by the
Exchange Rate Agent, for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of such Specified Currency payable on
such payment date in respect of all Notes denominated in such Specified
Currency. All currency exchange costs will be borne by the Holders of such Notes
by deductions from such payments. If no such bid quotations are available, such
payments will be made in such Specified Currency, unless such Specified Currency
is unavailable due to the imposition of exchange controls or to other
circumstances beyond the Company's control, in which case such payments will be
made as described under "Currency Risks -- Payment Currency" below.
Unless otherwise specified in the applicable Pricing Supplement, U.S.
dollar payments of interest on Notes (other than interest payable at Stated
Maturity, on redemption or repayment) will be made, except as provided below, by
check mailed to the Registered Holders of such Notes as of the preceding Regular
Record Date (which, in the case of Global Securities representing Book-Entry
Notes, will be a nominee of the Depositary); provided, however, that, in the
case of a Note issued between a Regular Record Date and the related Interest
Payment Date, unless otherwise specified in the related Pricing Supplement,
interest for the period beginning on the Original Issue Date for such Note and
ending on such Interest Payment Date shall be paid on the next succeeding
Interest Payment Date to the Registered Holder of such Note on the related
Regular Record Date. A Holder of $10,000,000 (or the equivalent thereof in a
Specified Currency other than U.S. dollars) or more in aggregate principal
amount of Notes of like tenor and terms shall be entitled to receive such U.S.
dollar interest payments by wire transfer of immediately available funds, but
only if appropriate wire transfer instructions have been received in writing by
the Paying Agent for such Notes not later than fifteen calendar days prior to
the applicable Interest Payment Date. Simultaneously with the election by any
Holder to receive payments in a Specified Currency other than U.S. dollars (as
provided above), such Holder shall provide appropriate wire transfer
instructions to the Paying Agent for such Notes. Unless otherwise specified in
the applicable Pricing Supplement,
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principal and any premium and interest payable at the Stated Maturity, on
redemption or repayment of a Note will be paid in immediately available funds
upon surrender of such Note at the corporate trust office or agency of the
Paying Agent for such Note in The City of New York, such interest being paid to
the person to whom principal is payable.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Discount Note is declared to be due and payable immediately as
described under "Description of Debt Securities -- Events of Default" in the
Prospectus, the amount of principal due and payable with respect to such Note
shall be limited to the aggregate principal amount (or face amount, in the case
of an Indexed Principal Note) of such Note multiplied by the sum of its Issue
Price (expressed as a percentage of the aggregate principal amount) plus the
original issue discount amortized from the date of issue to the date of
declaration, which amortization shall be calculated using the "interest method"
(computed in accordance with generally accepted accounting principles in effect
on the date of declaration).
The Regular Record Date with respect to any Interest Payment Date for a
Floating Rate Note or for an Indexed Rate Note shall be the date (whether or not
a Business Day) fifteen calendar days immediately preceding such Interest
Payment Date, and for a Fixed Rate Note (unless otherwise specified in the
applicable Pricing Supplement) shall be the May 15 or November 15 (whether or
not a Business Day) immediately preceding such Interest Payment Date.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date, or
from the last Interest Payment Date to which interest has been paid or duly
provided for, at the rate per annum stated in the applicable Pricing Supplement
until the principal amount thereof is paid or made available for payment, except
as described below under "Subsequent Interest Periods" and "Extension of
Maturity", and except that if so specified in the applicable Pricing Supplement,
the rate of interest payable on certain Fixed Rate Notes may be subject to
adjustment from time to time as described in such Pricing Supplement. Unless
otherwise set forth in the applicable Pricing Supplement, interest on each Fixed
Rate Note will be payable semiannually in arrears on each June 1 and December 1
(each such day being an "Interest Payment Date") and at Stated Maturity. If an
Interest Payment Date with respect to any Fixed Rate Note would otherwise be a
day that is not a Business Day, such Interest Payment Date shall not be
postponed; provided, however, that any payment required to be made in respect of
such Note on a date (including the day of Stated Maturity) that is not a
Business Day for such Note need not be made on such date, but may be made on the
next succeeding Business Day with the same force and effect as if made on such
date, and no additional interest shall accrue as a result of such delayed
payment. Each payment of interest in respect of an Interest Payment Date shall
include interest accrued through the day before such Interest Payment Date.
Interest on Fixed Rate Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, each
Floating Rate Note will bear interest from its Original Issue Date to the first
Interest Reset Date (such period, the "Initial Interest Period") for such Note
at the Initial Interest Rate set forth on the face thereof and in the applicable
Pricing Supplement. The interest rate on such Note for each Interest Reset
Period (as defined below) (and for the Initial Interest Period if so specified
in the applicable Pricing Supplement) will be determined by reference to an
interest rate basis (the"Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any. The "Spread" is the number of basis
points that may be specified in the applicable Pricing Supplement as being
applicable to such Note, and the "Spread Multiplier" is the percentage that may
be specified in the applicable Pricing Supplement as being applicable to such
Note, except in each case as described below under "Subsequent Interest Periods"
and "Extension of Maturity", and except that if so specified in the applicable
Pricing Supplement, the Spread or Spread Multiplier on certain Floating Rate
Notes may be subject to adjustment from time to time as described in such
Pricing Supplement. The applicable Pricing Supplement will designate one of the
following Base
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Rates as applicable to a Floating Rate Note: (i) LIBOR (a "LIBOR Note"), (ii)
the Commercial Paper Rate (a "Commercial Paper Rate Note"), (iii) the Treasury
Rate (a "Treasury Rate Note"), (iv) the Prime Rate (a "Prime Rate Note"), (v)
CMT Rate (a "CMT Note"), (vi) the Federal Funds Rate (a "Federal Funds Rate
Note"), (vii) the CD Rate (a "CD Rate Note"), (viii) the Eleventh District Cost
of Funds Rate (an "Eleventh District Cost of Funds Rate Note") or (ix) such
other Base Rate as is set forth in such Pricing Supplement and in such Note. The
"Index Maturity" for any Floating Rate Note is the period of maturity of the
instrument or obligation from which the Base Rate is calculated. "H.15(519)"
means the publication entitled "Statistical Release H.15(519), 'Selected
Interest Rates' ", or any successor publication, published by the Board of
Governors of the Federal Reserve System. "Composite Quotations" means the daily
statistical release entitled "Composite 3:30 p.m. Quotations for U.S. Government
Securities" published by the Federal Reserve Bank of New York.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following (in each case expressed as a rate per
annum on a simple interest basis): (i) a maximum limitation, or ceiling, on the
rate at which interest may accrue during any interest period ("Maximum Interest
Rate") and (ii) a minimum limitation, or floor, on the rate at which interest
may accrue during any interest period ("Minimum Interest Rate"). In addition to
any Maximum Interest Rate that may be applicable to any Floating Rate Note, the
interest rate on a Floating Rate Note will in no event be higher than the
maximum rate permitted by applicable law, as the same may be modified by United
States law of general application. The Notes will be governed by the law of the
State of New York and, under such law as of the date of this Prospectus
Supplement, the maximum rate of interest under provisions of the penal law, with
certain exceptions, is 25% per annum on a simple interest basis. Such maximum
rate of interest only applies to obligations that are less than $2,500,000.
Unless otherwise specified in the Pricing Supplement, the Trustee will be
the "Calculation Agent". Upon request of the holder of any Floating Rate Note,
the Calculation Agent will provide the interest rate then in effect and, if
determined, the interest rate which will become effective as a result of a
determination for the next Interest Reset Date with respect to such Floating
Rate Note. Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date", if applicable, pertaining to any Interest Determination Date
will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date, redemption date, repayment date or Stated Maturity, as
the case may be.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Interest
Reset Period" for such Note, and the first day of each Interest Reset Period
being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement, the
Interest Reset Dates will be, in the case of Floating Rate Notes that reset
daily, each Business Day; in the case of Floating Rate Notes (other than
Treasury Rate Notes) that reset weekly, Wednesday of each week; in the case of
Treasury Rate Notes that reset weekly, Tuesday of each week (except as provided
below under "Treasury Rate Notes"); in the case of Floating Rate Notes that
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes that reset quarterly, the third Wednesday of March, June, September and
December of each year; in the case of Floating Rate Notes that reset
semiannually, the third Wednesday of each of two months of each year specified
in the applicable Pricing Supplement; and, in the case of Floating Rate Notes
that reset annually, the third Wednesday of one month of each year specified in
the applicable Pricing Supplement. If an Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Business Day, such Interest
Reset Date shall be postponed to the next succeeding Business Day, except that,
in the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Reset Date shall be the immediately preceding
Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest that goes into effect on any Interest Reset Date shall be determined
on a date (the "Interest Determination Date") preceding such Interest Reset
Date, as further described below. Such Interest Determination Date may be
referred to below as a "CD Rate Determination Date" in the case of a CD Rate
Note, a "Commercial
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Paper Rate Determination Date" in the case of a Commercial Paper Rate Note, a
"Federal Funds Rate Determination Date" in the case of a Federal Funds Rate
Note, a "LIBOR Determination Date" in the case of a LIBOR Rate Note, a "Treasury
Rate Determination Date" in the case of a Treasury Rate Note, A "Prime Rate
Determination Date" in the case of a Prime Rate Note, a "CMT Rate Determination
Date" in the case of a Constant Maturity Treasury Rate Note or an "Eleventh
District Cost of Funds Rate Determination Date" in the case of an Eleventh
District Cost of Funds Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, interest
payable in respect of Floating Rate Notes shall be the accrued interest from and
including the Original Issue Date or the last date to which interest has been
paid or duly provided for, as the case may be, to but excluding the applicable
Interest Payment Date.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Note (or, in the case of a Floating
Rate Note that is an Indexed Principal Note, its Face Amount) by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which accrued
interest is being calculated. Unless otherwise specified in the applicable
Pricing Supplement the interest factor (expressed as a decimal calculated to
seven decimal places without rounding) for each such day is computed by dividing
the interest rate in effect on such day by 360, in the case of LIBOR Notes,
Prime Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes,
Eleventh District Cost of Funds Rate Notes, and CD Rate Notes or by the actual
number of days in the year, in the case of CMT Rate Notes or Treasury Rate
Notes. For purposes of making the foregoing calculation, the interest rate in
effect on any Interest Reset Date will be the applicable rate as reset on such
date.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest on a Floating
Rate Note will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward, and
all currency amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest one-hundredth of a unit (with .005 of a
unit being rounded upward).
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
that reset daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the applicable Pricing Supplement; in the case of Floating Rate
Notes that reset quarterly, on the third Wednesday of March, June, September,
and December of each year; in the case of Floating Rate Notes that reset
semiannually, on the third Wednesday of each of two months of each year
specified in the applicable Pricing Supplement; and, in the case of Floating
Rate Notes that reset annually, on the third Wednesday of one month of each year
specified in the applicable Pricing Supplement (each such day being an "Interest
Payment Date"). If an Interest Payment Date with respect to any Floating Rate
Note would otherwise be a day that is not a Business Day, such Interest Payment
Date shall be postponed to the next succeeding Business Day, except that, in the
case of a LIBOR Note, if such Business Day is in the next succeeding calendar
month, such Interest Payment Date shall be the immediately preceding Business
Day.
CD RATE NOTES
Each CD Rate Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the CD Rate and the Spread or Spread
Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "CD
Rate" for each Interest Reset Period shall be the rate as of the second Business
Day prior to the Interest Reset Date for such Interest Reset Period (a "CD Rate
Determination Date") for negotiable certificates of deposit having the Index
Maturity designated in the applicable Pricing Supplement as published in
H.15(519) under the heading "CDs (Secondary Market)". In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date pertaining to such CD Rate Determination Date, then the "CD
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Rate" for such Interest Reset Period will be the rate on such CD Rate
Determination Date for negotiable certificates of deposit of the Index Maturity
designated in the applicable Pricing Supplement as published in Composite
Quotations under the heading "Certificates of Deposit". If by 3:00 p.m., New
York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "CD Rate" for such Interest
Reset Period will be calculated by the Calculation Agent for such CD Rate Note
and will be the arithmetic mean of the secondary market offered rates as of
10:00 a.m., New York City time, on such CD Rate Determination Date of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The
City of New York selected by the Calculation Agent for such CD Rate Note for
negotiable certificates of deposit of major United States money center banks of
the highest credit standing (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the Index Maturity designated in
the Pricing Supplement in a denomination of $5,000,000; provided, however, that
if the dealers selected as aforesaid by such Calculation Agent are not quoting
offered rates as mentioned in this sentence, the "CD Rate" for such Interest
Reset Period will be the same as the CD Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES
Each Commercial Paper Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Commercial Paper
Rate and the Spread or Spread Multiplier, if any, specified in such Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by the
Calculation Agent for such Commercial Paper Rate Note as of the second Business
Day prior to the Interest Reset Date for such Interest Reset Period (a
"Commercial Paper Rate Determination Date") and shall be the Money Market Yield
(as defined below) on such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper". In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date pertaining to such
Commercial Paper Rate Determination Date, then the "Commercial Paper Rate" for
such Interest Reset Period shall be the Money Market Yield on such Commercial
Paper Rate Determination Date of the rate for commercial paper of the specified
Index Maturity as published in Composite Quotations under the heading
"Commercial Paper". If by 3:00 p.m., New York City time, on such Calculation
Date such rate is not yet published in either H.15(519) or Composite Quotations,
then the "Commercial Paper Rate" for such Interest Reset Period shall be the
Money Market Yield of the arithmetic mean of the offered rates, as of 11:00
a.m., New York City time, on such Commercial Paper Rate Determination Date of
three leading dealers of commercial paper in The City of New York selected by
the Calculation Agent for such Commercial Paper Rate Note for commercial paper
of the specified Index Maturity placed for an industrial issuer whose bonds are
rated "AA" or the equivalent by a nationally recognized rating agency; provided,
however, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting offered rates as mentioned in this sentence, the "Commercial Paper
Rate" for such Interest Reset Period will be the same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the Initial Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = ------------------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
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FEDERAL FUNDS RATE NOTES
Each Federal Funds Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Federal Funds Rate
and the Spread or Spread Multiplier, if any, specified in such Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" for each Interest Reset Period shall be the effective rate
on the Interest Reset Date for such Interest Reset Period (a "Federal Funds Rate
Determination Date") for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)". In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Federal Funds Rate Determination Date, the "Federal Funds
Rate" for such Interest Reset Period shall be the rate on such Federal Funds
Rate Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or Composite
Quotations, then the "Federal Funds Rate" for such Interest Reset Period shall
be the rate on such Federal Funds Rate Determination Date made publicly
available by the Federal Reserve Bank of New York which is equivalent to the
rate which appears in H.15(519) under the heading "Federal Funds (Effective)";
provided, however, that if such rate is not made publicly available by the
Federal Reserve Bank of New York by 3:00 p.m., New York City time, on such
Calculation Date, the "Federal Funds Rate" for such Interest Reset Period will
be the same as the Federal Funds Rate in effect for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Interest Rate).
LIBOR NOTES
Each LIBOR Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to LIBOR and the Spread or Spread
Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
"LIBOR" for each Interest Reset Period will be determined by the
Calculation Agent for such LIBOR Notes as follows:
(i) On the second London Banking Day prior to the Interest Reset Date for
such Interest Reset Period (a "LIBOR Determination Date"), the Calculation Agent
for such LIBOR Note will determine (a) in the case of LIBOR Telerate (as defined
below), the offered rate, and (b) in the case of LIBOR Reuters (as defined
below), the arithmetic mean of the offered rates, for deposits in the Specified
Currency for the period of the Index Maturity specified in the applicable
Pricing Supplement, commencing on such Interest Reset Date, which appear on the
Designated LIBOR Page at approximately 11:00 a.m., London time, on such LIBOR
Determination Date. "Designated LIBOR Page" means "LIBOR Telerate", which shall
be the display designated as page "3750" on the Dow Jones Telerate Service (or
such other page as may replace page "3750" on such service or such other service
as may be nominated by the British Bankers' Association for the purpose of
displaying the London interbank offered rates of major banks), unless "LIBOR
Reuters" is designated in the applicable Pricing Supplement, in which case
"Designated LIBOR Page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace the LIBO
page on such service or such other service as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates of major banks). In the case of LIBOR Reuters, if at least two such
offered rates appear on the Designated LIBOR Page, "LIBOR" for such Interest
Reset Period will be the arithmetic mean of such offered rates as determined by
the Calculation Agent for such LIBOR Note.
(ii) In the case of LIBOR Telerate, if no rate appears, or in the case of
LIBOR Reuters, if fewer than two offered rates appear, on the Designated LIBOR
Page on such LIBOR Determination Date, the Calculation Agent for such LIBOR Note
will request the principal London offices of each of four major banks in the
London interbank market selected by such Calculation Agent to provide such
Calculation Agent with its offered quotations for deposits in U.S. dollars for
the period of the specified Index Maturity, commencing on such Interest Reset
Date, to prime banks in the London interbank market at approxi-
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mately 11:00 a.m., London time, on such LIBOR Determination Date and in a
principal amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time. If at least
two such quotations are provided, "LIBOR" for such Interest Reset Period will be
the arithmetic mean of such quotations. If fewer than two such quotations are
provided, "LIBOR" for such Interest Reset Period will be the arithmetic mean of
rates quoted by three major banks in The City of New York selected by the
Calculation Agent for such LIBOR Note at approximately 11:00 a.m., New York City
time, on such LIBOR Determination Date for loans in U.S. dollars to leading
European banks, for the period of the specified Index Maturity, commencing on
such Interest Reset Date, and in a principal amount equal to an amount of not
less than $1,000,000 that is representative of a single transaction in such
market at such time; provided, however, that if fewer than three banks selected
as aforesaid by such Calculation Agent are quoting rates as mentioned in this
sentence, "LIBOR" for such Interest Reset Period will be the same as LIBOR for
the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Interest Rate).
TREASURY RATE NOTES
Each Treasury Rate Note will bear interest for each Interest Reset Period
at the interest rate calculated with reference to the Treasury Rate and the
Spread or Spread Multiplier, if any, specified in such Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" for each Interest Reset Period will be the rate for the auction
held on the Treasury Rate Determination Date (as defined below) for such
Interest Reset Period of direct obligations of the United States ("Treasury
securities") having the Index Maturity specified in the applicable Pricing
Supplement, as such rate shall be published in H.15(519) under the heading "U.S.
Government Securities -- Treasury bills -- auction average (investment)" or, in
the event that such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date pertaining to such Treasury Rate Determination
Date, the auction average rate (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) on such
Treasury Rate Determination Date as otherwise announced by the United States
Department of the Treasury. In the event the results of the auction of Treasury
securities having the specified Index Maturity are not published or reported as
provided above by 3:00 p.m., New York City time, on such Calculation Date, or if
no such auction is held on such Treasury Rate Determination Date, then the
"Treasury Rate" for such Interest Reset Period shall be calculated by the
Calculation Agent for such Treasury Rate Note and shall be a yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time,
on such Treasury Rate Determination Date, of three leading primary United States
government securities dealers selected by such Calculation Agent for the issue
of Treasury securities with a remaining maturity closest to the specified Index
Maturity; provided, however, that if the dealers selected as aforesaid by such
Calculation Agent are not quoting bid rates as mentioned in this sentence, then
the "Treasury Rate" for such Interest Reset Period will be the same as the
Treasury Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the Initial Interest Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury securities would normally be auctioned. Treasury
securities are normally sold at auction on Monday of each week, unless that day
is a legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Rate Determination Date pertaining to the
Interest Reset Period commencing in the next succeeding week. If an auction date
shall fall on any day that would otherwise be an Interest Reset Date for a
Treasury Rate Note, then such Interest Reset Date shall instead be the Business
Day immediately following such auction date.
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PRIME RATE NOTES
Each Prime Rate Note will bear interest at the interest rate calculated
with reference to the Prime Rate and the Spread or Spread multiplier, if any
specified in such Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Prime
Rate" for each Interest Reset Period will be determined by the Calculation Agent
for such Prime Rate Note as of the second Business Day prior to the Interest
Reset Date for such Interest Reset Period (a "Prime Rate Determination Date")
and shall be the rate on such date as published in H.15(519) under the heading
"Bank Prime Loan." In the event that such rate is not published by 9:00 a.m.,
New York City time, on the Calculation Date pertaining to such Prime Rate
Determination Date, then the Prime Rate will be determined by the Calculation
Agent and will be the arithmetic mean of the rates of interest publicly
announced by each bank that appears on the Reuters Screen USPRIME1 Page (as
defined below) as such bank's prime rate or base lending rate as in effect for
such Prime Rate Determination Date. "Reuters Screen USPRIME1" means the display
designated as page "USPRIME1" on the Reuters Monitor Money Rates Service (or
such other page as may replace the USPRIME1 page on that service or such other
service as may be nominated by the British Bankers' Association for the purpose
of displaying prime rates or base lending rates of major United States banks).
If fewer than four such rates but more than one such rate appear on the Reuters
Screen USPRIME1 Page for such Prime Rate Determination Date, the Prime Rate
shall be determined by the Calculation Agent and will be the arithmetic mean of
the prime rates quoted on the basis of actual number of days in the year divided
by 360 as of the close of business on such Prime Rate Determination Date by at
least two major money center banks in New York City selected by the Calculation
Agent (after consulting with the Company). If fewer than two such rates appear
on the Reuters Screen USPRIME1 Page, the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean of the prime rates furnished
in New York City by three substitute banks or trust companies organized and
doing business under the laws of the United States, or any State thereof, in
each case having total equity capital of at least U.S. $500,000,000 and being
subject to supervision or examination by Federal or State authority, selected by
the Calculation Agent (after consulting with the Company) to provide such rate
or rates; provided, however, that if the banks selected as aforesaid are not
quoting as mentioned in this sentence, the Prime Rate will remain the Prime Rate
in effect on such Prime Rate Determination Date (or, if there was no preceding
Interest Reset Period, the Initial Interest Rate).
CMT RATE NOTES
Each CMT Rate Note will bear interest at the rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Note and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "CMT
Rate" for each Interest Reset Period will be determined by the Calculation Agent
for such CMT Rate Note as of the second Business Day prior to the Interest Reset
Date for such Interest Reset Period (a "CMT Rate Interest Determination Date")
and shall be the rate displayed on the Designated CMT Telerate Page under the
caption "...Treasury Constant Maturities...Federal Reserve Board release H.15...
Mondays approximately 3:45 P.M.," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated Telerate Page is
7055, the rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index as published in H.15(519). If such rate is no longer published,
or if not published by 3:00 P.M., New York City time, on the related Calculation
Date, then the CMT Rate for such CMT Rate Interest Determination Date will be
such treasury constant maturity rate for the designated CMT Maturity Index (or
other United States Treasury rate for the Designated CMT
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Maturity Index) for the CMT Rate Interest Determination Date with respect to the
related Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for such CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing side offer prices as of approximately 3:30 P.M., New York City time, on
the CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in the City of New York selected by the Calculation
Agent (from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Note quotations, the CMT
Rate for such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 P.M., New
York City time, on the CMT Rate Interest Determination Date of three Reference
Dealers in the City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for such Treasury Notes with an original maturity
of the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index in an amount of at least U.S. $100 million. If three or four (and not
five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated; provided,
however, that if fewer than three Reference Dealers selected by the Calculation
Agent are quoting as described herein, the CMT Rate will be the CMT Rate in
effect on such CMT Rate Interest Determination Date (or, if there is no
preceding Interest Reset Period, the Initial Interest Rate). If two Treasury
Notes with an original maturity as described in the third preceding sentence
have remaining terms to maturity equally close to the Designated CMT Maturity
Index, the quotes for the CMT Rate Note with the shorter remaining term to
maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service designated in the applicable Pricing Supplement for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519) (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519)). If no such page is
specified in the applicable Pricing Supplement, the Designated CMT Telerate Page
shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
ELEVENTH DISTRICT COST OF FUNDS RATE
Each Eleventh District Cost of Funds Rate Note will bear interest at
interest rates calculated with reference to the Eleventh District Cost of Funds
Rate and the Spread or Spread Multiplier, if any, specified in such Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" for each Interest Reset Period shall be determined
by the Calculation Agent on the "Eleventh District Cost of Funds Rate
Determination Date" (as defined below) as the rate equal to the monthly weighted
average cost of funds for the calendar month immediately preceding the month in
which such
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Eleventh District Cost of Funds Rate Determination Date falls, as set forth
under the caption "11th district" on Telerate Page 7058 (as defined below) as of
11:00 A. M., San Francisco time, on such Eleventh District Cost of Funds Rate
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Determination Date, then the Eleventh
District Cost of Funds Rate on such Eleventh District Cost of Funds Rate
Determination Date will be the monthly weighted average cost of funds paid by
member institutions of the Eleventh Federal Home Loan Bank District that was
most recently announced (the "Index") by the FHLB of San Francisco as such cost
of funds for the calendar month immediately preceding the date of such
announcement. If the FHLB of San Francisco fails to announce such rate for the
calendar month immediately preceding such Eleventh District Cost of Funds Rate
Determination Date, then the Eleventh District Cost of Funds Rate determined as
of such Eleventh District Cost of Funds Rate Determination Date will be the
Eleventh District Cost of Funds Rate in effect on such Eleventh District Cost of
Funds Rate Determination Date (or, if there is no preceding Interest Reset
Period, the Initial Interest Rate).
The "Eleventh District Cost of Funds Rate Determination Date" will be the
last working day of the month on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as defined above)
immediately preceding the Interest Reset Date. "Telerate Page 7058" means the
display designated as page "7058" on the Dow Jones Telerate Service (or such
other page as may replace the 7058 page on that service or such other service as
may be nominated by the British Bankers' Association for the purpose of
displaying the monthly weighted average cost of funds paid by member
institutions of the Eleventh Federal Home Loan Bank District).
SUBSEQUENT INTEREST PERIODS
The Pricing Supplement relating to each Note will indicate whether the
Company has the option to reset the interest rate (in the case of a Fixed Rate
Note) with respect to such Note or the Spread or Spread Multiplier (in the case
of a Floating Rate Note) with respect to such Note and, if so, the date or dates
on which such interest rate or such Spread or Spread Multiplier, as the case may
be, may be reset (each an "Optional Reset Date").
The Company shall notify the Trustee for a Note whether or not it intends
to exercise such option with respect to such Note at least 50 but not more than
60 calendar days prior to an Optional Reset Date for such Note. Not later than
40 calendar days prior to such Optional Reset Date, the Trustee for such Note
will mail to the Holder of such Note a notice (the "Reset Notice"), first class,
postage prepaid, indicating whether the Company has elected to reset the
interest rate (in the case of a Fixed Rate Note) or the Spread or Spread
Multiplier (in the case of a Floating Rate Note) and if so, (i) such new
interest rate or such new Spread or Spread Multiplier, as the case may be; and
(ii) the provisions, if any, for redemption during the period from such Optional
Reset Date to the next Optional Reset Date or, if there is no such next Optional
Reset Date, to the Stated Maturity of such Note (each such period a "Subsequent
Interest Period"), including the date or dates on which or the period or periods
during which and the price or prices at which such redemption may occur during
such Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 calendar days prior to an
Optional Reset Date for a Note, the Company may, at its option, revoke the
interest rate (in the case of a Fixed Rate Note) or the Spread or Spread
Multiplier (in the case of a Floating Rate Note) provided for in the Reset
Notice with respect to such Optional Reset Date and establish a higher interest
rate (in the case of a Fixed Rate Note) or a higher Spread or Spread Multiplier
(in the case of a Floating Rate Note) for the Subsequent Interest Period
commencing on such Optional Reset Date by causing the Trustee for such Note to
mail notice of such higher interest rate or higher Spread or Spread Multiplier,
as the case may be, first class, postage prepaid, to the Holder of such Note.
Such notice shall be irrevocable. All Notes with respect to which the interest
rate or Spread or Spread Multiplier is reset on an Optional Reset Date will bear
such higher interest rate (in the case of Fixed Rate Notes) or higher Spread or
Spread Multiplier (in the case of Floating Rate Notes), whether or not tendered
for repayment.
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The Holder of a Note will have the option to elect repayment of such Note
by the Company on each Optional Reset Date at a price equal to the principal
amount thereof, plus interest accrued to such Optional Reset Date. In order for
a Note to be repaid on an Optional Reset Date, the Holder thereof must follow
the procedures set forth below under "Optional Redemption, Repayment and
Repurchase" for optional repayment, except that the period for delivery of such
Note or notification to the Trustee for such Note shall be at least 25 but not
more than 35 calendar days prior to such Optional Reset Date, and except that a
Holder who has tendered a Note for repayment pursuant to a Reset Notice may, by
written notice to the Trustee for such Note, revoke any such tender for
repayment until the close of business on the tenth day prior to such Optional
Reset Date.
AMORTIZING NOTES
The Company may from time to time offer Notes ("Amortizing Notes") on which
a portion or all the principal amount is payable prior to Stated Maturity in
accordance with a schedule, by application of a formula, or by reference to an
Index (as defined below). Further information concerning additional terms and
conditions of any Amortizing Notes, including terms for repayment thereof, will
be set forth in the applicable Pricing Supplement.
INDEXED NOTES
The Company may from time to time offer Notes ("Indexed Notes") on which
certain or all interest payments (in the case of an "Indexed Rate Note"), and/or
the principal amount payable at Stated Maturity or earlier redemption or
retirement (in the case of an "Indexed Principal Note"), is determined by
reference to the principal amount of such Notes (or, in the case of an Indexed
Principal Note, to the amount designated in the applicable Pricing Supplement as
the "Face Amount" of such Indexed Note) and by reference to prices, changes in
prices, or differences between prices, of securities, currencies, intangibles,
goods, articles or commodities or by such other objective price, economic or
other measures as are described in the applicable Pricing Supplement (the
"Index"). A description of the Index used in any determination of an interest or
principal payment, and the method or formula by which interest or principal
payments will be determined by reference to such Index, will be set forth in the
applicable Pricing Supplement.
In the case of a Fixed Rate Note, Floating Rate Note or Indexed Rate Note
that is also an Indexed Principal Note, the amount of any interest payment will
be determined by reference to the Face Amount of such Indexed Note unless
specified otherwise in the applicable Pricing Supplement. In the case of an
Indexed Principal Note, the principal amount payable at Stated Maturity or any
earlier redemption or repayment of the Indexed Note may be different from the
Face Amount.
If the determination of the Index on which any interest payment or the
principal amount of an Indexed Note is calculated or announced by a third party,
which may be an Agent or another affiliate of the Company, and such third party
either suspends the calculation or announcement of such Index or changes the
basis upon which such Index is calculated (other than changes consistent with
policies in effect at the time such Indexed Note was issued and permitted
changes described in the applicable Pricing Supplement), then such Index shall
be calculated for purposes of such Indexed Note by another third party selected
by the Company, which may be an Agent or another affiliate of the Company,
subject to the same conditions and controls as applied to the original third
party. If for any reason such Index cannot be calculated on the same basis and
subject to the same conditions and controls as applied to the original third
party, then the indexed interest payments, if any, or any indexed principal
amount of such Indexed Note shall be calculated in the manner set forth in the
applicable Pricing Supplement. Any determination of such third party shall in
the absence of manifest error be binding on all parties.
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EXTENSION OF MATURITY
The Pricing Supplement relating to each Note will indicate whether the
Company has the option to extend the Stated Maturity of such Note for one or
more periods of whole years from one to five (each an "Extension Period") up to
but not beyond the date (the "Final Maturity") set forth in such Pricing
Supplement.
The Company may exercise such option with respect to a Note by notifying
the Trustee for such Note at least 50 but not more than 60 calendar days prior
to the old Stated Maturity of such Note. Not later than 40 calendar days prior
to the old Stated Maturity of such Note, the Trustee for such Note will mail to
the Holder of such Note a notice (the "Extension Notice"), first class, postage
prepaid. The Extension Notice will set forth (i) the election of the Company to
extend the Stated Maturity of such Note; (ii) the new Stated Maturity; (iii) in
the case of a Fixed Rate Note, the interest rate applicable to the Extension
Period or, in the case of a Floating Rate Note, the Spread or Spread Multiplier
applicable to the Extension Period; and (iv) the provisions, if any, for
redemption during the Extension Period, including the date or dates on which or
the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing by such
Trustee of an Extension Notice to the Holder of a Note, the Stated Maturity of
such Note shall be extended automatically, and, except as modified by the
Extension Notice and as described in the next paragraph, such Note will have the
same terms as prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior to the
old Stated Maturity of such Note, the Company may, at its option, revoke the
interest rate (in the case of a Fixed Rate Note) or the Spread or Spread
Multiplier (in the case of a Floating Rate Note) provided for in the Extension
Notice for such Note and establish a higher interest rate (in the case of a
Fixed Rate Note) or a higher Spread or Spread Multiplier (in the case of a
Floating Rate Note) for the Extension Period, by causing the Trustee for such
Note to mail notice of such higher interest rate or higher Spread or Spread
Multiplier, as the case may be, first class, postage prepaid, to the Holder of
such Note. Such notice shall be irrevocable. All Notes with respect to which the
Stated Maturity is extended will bear such higher interest rate (in the case of
Fixed Rate Notes) or higher Spread or Spread Multiplier (in the case of Floating
Rate Notes) for the Extension Period, whether or not tendered for repayment.
If the Company extends the Stated Maturity of a Note, the Holder of such
Note will have the option to elect repayment of such Note by the Company on the
old Stated Maturity at a price equal to the principal amount thereof, plus
interest accrued to such date. In order for a Note to be repaid on the old
Stated Maturity once the Company has extended the Stated Maturity thereof, the
Holder thereof must follow the procedures set forth below under "Optional
Redemption, Repayment and Repurchase" for optional repayment, except that the
period for delivery of such Note or notification to the Trustee for such Note
shall be at least 25 but not more than 35 days prior to the old Stated Maturity
and except that a Holder who has tendered a Note for repayment pursuant to an
Extension Notice may, by written notice to the Trustee for such Note, revoke any
such tender for repayment until the close of business on the tenth day before
the old Stated Maturity.
OPTIONAL REDEMPTION, REPAYMENT AND REPURCHASE
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to its Stated Maturity or that such Note will be
redeemable at the option of the Company, in whole or in part, and the date or
dates (each an "Optional Redemption Date") on which such Note may be redeemed
and the price (the "Redemption Price") at which (together with accrued interest
to such Optional Redemption Date) such Note may be redeemed on each such
Optional Redemption Date. The Company may exercise such option with respect to a
Note by notifying the Trustee for such Note at least 60 days prior to any
Optional Redemption Date. Unless otherwise specified in the applicable Pricing
Supplement, at least 30 but not more than 60 days prior to the date of
redemption, such Trustee shall mail notice of such redemption, first class,
postage prepaid, to the Holder of such Note. In the event of redemption of a
Note in part only, a new Note or Notes for the unredeemed portion thereof shall
be issued to the Holder thereof upon the cancellation thereof. The Notes will
not be subject to any sinking fund.
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The Pricing Supplement relating to each Note will also indicate whether the
Holder of such Note will have the option to elect repayment of such Note by the
Company prior to its Stated Maturity, and, if so, such Pricing Supplement will
specify the date or dates on which such Note may be repaid (each an "Optional
Repayment Date") and the price (the "Optional Repayment Price") at which,
together with accrued interest to such Optional Repayment Date, such Note may be
repaid on each such Optional Repayment Date.
In order for a Note to be repaid, the Trustee for such Note must receive,
at least 30 but not more than 45 days prior to an Optional Repayment Date (i)
such Note with the form entitled "Option to Elect Repayment" on the reverse
thereof duly completed, or (ii) a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company in
the United States setting forth the name of the Holder of such Note, the
principal amount of such Note to be repaid, the certificate number or a
description of the tenor and terms of such Note, a statement that the option to
elect repayment is being exercised thereby and a guarantee that the Note to be
repaid with the form entitled "Option to Elect Repayment" on the reverse of the
Note duly completed will be received by such Trustee not later than five
Business Days after the date of such telegram, telex, facsimile transmission or
letter. If the procedure described in clause (ii) of the preceding sentence is
followed, then such Note and form duly completed must be received by such
Trustee by such fifth Business Day. Any tender of a Note by the Holder for
repayment (except pursuant to a Reset Notice or an Extension Notice) shall be
irrevocable. The repayment option may be exercised by the Holder of a Note for
less than the entire principal amount of such Note provided that the principal
amount of such Note remaining outstanding after repayment is an authorized
denomination. Upon such partial repayment, such Note shall be cancelled and a
new Note or Notes for the remaining principal amount thereof shall be issued in
the name of the Holder of such repaid Note.
If a Note is represented by a Global Security, the Depositary's nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different cut-off times for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a Note in
order to ascertain the cut-off time by which such an instruction must be given
in order for timely notice to be delivered to the Depositary.
Notwithstanding anything in this Prospectus Supplement to the contrary, if
a Note is an Original Issue Discount Note (other than an Indexed Note), the
amount payable on such Note in the event of redemption or repayment prior to its
Stated Maturity shall be the Amortized Face Amount of such Note as of the date
of redemption or the date of repayment, as the case may be. The "Amortized Face
Amount" of a Discount Note shall be the amount equal to (i) the Issue Price set
forth in the applicable Pricing Supplement plus (ii) that portion of the
difference between the Issue Price and the principal amount of such Note that
has accrued at the Yield to Maturity set forth in the Pricing Supplement
(computed in accordance with generally accepted United States bond yield
computation principles) by such date of redemption or repayment, but in no event
shall the Amortized Face Amount of a Discount Note exceed its principal amount.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the Trustee for cancellation.
BOOK-ENTRY SYSTEM
Upon issuance, and subject to the rules of the Depositary, all Book-Entry
Notes having the same Original Issue Date and otherwise identical terms will be
represented by a single Global Security. Each Global Security representing
Book-Entry Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York (the "Depositary"), and registered in the name of a
nominee of the
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Depositary. Book-Entry Notes will not be exchangeable for Certificated Notes
and, except under the circumstances described in the Prospectus under
"Description of Debt Securities -- Global Securities", will not otherwise be
issuable as Certificated Notes.
The Depositary has advised the Company and the Agents as follows: The
Depositary is a limited-purpose trust company organized under New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations, and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities -- Global Securities". The Depositary has
confirmed to the Company, the Agents and the Trustee that it intends to follow
such procedures.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in a Note having a Specified Currency other than U.S. dollars
entails significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and such Specified Currency and the possibility of the imposition or
modification of foreign exchange controls with respect to such Specified
Currency. Such risks generally depend on factors over which the Company has no
control and which cannot be readily foreseen, such as economic and political
events and the supply of and demand for the relevant currencies. In recent
years, rates of exchange between the U.S. dollar and certain currencies have
been highly volatile, and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Note. Depreciation of the Specified Currency for a Note
against the U.S. dollar would result in a decrease in the effective yield of
such Note below its coupon rate and, in certain circumstances, could result in a
substantial loss to the investor on a U.S. dollar basis.
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency for making payments in respect of Notes denominated in
such currency. At present, the Company has identified the following currencies
in which payments of principal, premium and interest on Notes may be made:
Australian dollars, Canadian dollars, Danish kroner, English pounds sterling,
French francs, German deutsche marks, Italian lire, Japanese yen, New Zealand
dollars, U.S. dollars and ECU. However, the Company may determine at any time to
issue Notes with Specified Currencies other than those listed. There can be no
assurances that exchange controls will not restrict or prohibit payments of
principal, premium or interest in any Specified Currency. Even if there are no
actual exchange controls, it is possible that, on a payment date with respect to
any particular Note, the currency in which amounts then due in respect of such
Note are payable would not be available to the Company. In that event, the
Company will make such payments in the manner set forth under "Description of
Notes -- Payment of Principal and Interest" above.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT DESCRIBE
ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED IN A CURRENCY OTHER
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THAN U.S. DOLLARS, AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN A CURRENCY OTHER THAN U.S.
DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers of Notes who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase or holding of, or receipt of payments of principal, premium
or interest in respect of, Notes. Such persons should consult their own advisors
with regard to such matters.
Any Pricing Supplement relating to Notes having a Specified Currency other
than U.S. dollars will contain a description of any material exchange controls
affecting such currency and any other required information concerning such
currency.
PAYMENT CURRENCY
Except as set forth below, if payment in respect of a Note is required to
be made in a Specified Currency other than U.S. dollars and such currency is
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or is no longer used by the government of the
country issuing such currency or for the settlement of transactions by public
institutions of or within the international banking community, then all payments
in respect of such Note shall be made in U.S. dollars until such currency is
again available or so used. The amounts so payable on any date in such currency
shall be converted into U.S. dollars on the basis of the most recently available
Market Exchange Rate for such currency or as otherwise indicated in the
applicable Pricing Supplement. Any payment in respect of such Note made under
such circumstances in U.S. dollars will not constitute an Event of Default under
the Indenture under which such Note shall have been issued.
If payment in respect of a Note is required to be made in ECU and ECU are
no longer used in the European Monetary System, then all payments in respect of
such Note shall be made in U.S. dollars until ECU are again so used. The amount
of each payment in U.S. dollars shall be computed on the basis of the equivalent
of ECU in U.S. dollars, determined as described below, as of the second Business
Day prior to the date on which such payment is due.
The equivalent of ECU in U.S. dollars as of any date (the "Day of
Valuation") shall be determined by the Trustee or the Exchange Rate Agent for
such Note on the following basis. The component currencies of ECU for this
purpose (the "Components") shall be the currency amounts that were components of
ECU as of the last date on which ECU were used in the European Monetary System.
The equivalent of ECU in U.S. dollars shall be calculated by aggregating the
U.S. dollar equivalents of the Components. The U.S. dollar equivalent of each of
the Components shall be determined by such Trustee or such Exchange Rate Agent,
as the case may be, on the basis of the most recently available Market Exchange
Rates for such Components or as otherwise indicated in the applicable Pricing
Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall be equal to the
amount of the former component currency divided by the number of currencies into
which that currency was divided.
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All determinations referred to above made by the Trustee for the Notes or
the Exchange Rate Agent, as the case may be, shall be at its sole discretion and
shall, in the absence of manifest error, be conclusive for all purposes and
binding on holders of Notes.
FOREIGN CURRENCY JUDGMENTS
The Notes will be governed by and construed in accordance with the law of
the State of New York. Courts in the United States customarily have not rendered
judgments for money damages denominated in any currency other than the U.S.
dollar. A 1987 amendment to the Judiciary Law of the State of New York provides,
however, that an action based upon an obligation denominated in a currency other
than U.S. dollars will be rendered in the foreign currency of the underlying
obligation and converted into U.S. dollars at the rate of exchange prevailing on
the date of the entry of the judgment or decree.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. Federal tax consequences
resulting from the beneficial ownership of Notes by certain persons. This
summary does not purport to consider all the possible U.S. Federal tax
consequences of the purchase, ownership or disposition of the Notes and is not
intended to reflect the individual tax position of any beneficial owner. It
deals only with Notes and currencies or composite currencies other than U.S.
dollars ("Foreign Currency") held as capital assets. Moreover, except as
expressly indicated, it addresses initial purchasers and does not address
beneficial owners with a special tax status or special tax situations, such as
dealers in securities or currencies, Notes (or Foreign Currency) held as a hedge
against currency risks or as part of a straddle with other investments or as
part of a "synthetic security" or other integrated investment (including a
"conversion transaction") comprised of a Note and one or more other investments,
or situations in which the functional currency of the beneficial owner is not
the U.S. dollar. This summary is not applicable to non-United States persons not
subject to U.S. Federal income tax on their worldwide income. This summary is
based upon the U.S. Federal tax laws and regulations as now in effect and as
currently interpreted and does not take into account possible changes in such
tax laws or such interpretations, any of which may be applied retroactively. It
does not include any description of the tax laws of any state, local or foreign
governments that may be applicable to the Notes or holders thereof. Persons
considering the purchase of Notes should consult their own tax advisors
concerning the application of the U.S. Federal tax laws to their particular
situations as well as any consequences to them under the laws of any other
taxing jurisdiction.
PAYMENTS OF INTEREST
In general, interest on a Note, whether payable in U.S. dollars or a
Foreign Currency (other than certain payments on a Discount Note, as defined and
described below under "Original Issue Discount"), will be taxable to a holder as
ordinary income at the time it is received or accrued, depending on the holder's
method of accounting for tax purposes. If an interest payment is denominated in
or determined by reference to a Foreign Currency, then special rules, described
below under "Foreign Currency Notes", apply.
The rate of interest payable on certain Fixed Rate Notes and the Spread and
Spread Multiplier on certain Floating Rate Notes may be subject to adjustment
from time to time as described in the applicable Pricing Supplement. These
adjustments may result in a United States Federal income tax treatment different
than described herein. The applicable Pricing Supplement will discuss such
different treatment.
ORIGINAL ISSUE DISCOUNT
The following discussion summarizes the United States Federal income tax
consequences to holders of Notes issued with original issue discount ("OID").
The basic rules for reporting OID are contained in the Internal Revenue Code of
1986, as amended (the "Code"). On February 4, 1994, the Treasury
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Department published final regulations (the "OID Regulations"), which expand and
illustrate the rules provided by the Code.
Special rules apply to OID on a Discount Note that is denominated in
Foreign Currency. See "Foreign Currency Notes--Foreign Currency Discount Notes".
General. A Note will be treated as issued with OID (a "Discount Note") if
the excess of the Note's "stated redemption price at maturity" over its issue
price is greater than a de minimis amount (set forth in the Code and the OID
Regulations). Generally, the issue price of a Note (or any Note that is part of
an issue of Notes) will be the first price at which a substantial amount of
Notes that are part of such issue of Notes are sold. Under the OID Regulations,
the "stated redemption price at maturity" of a Note is the sum of all payments
provided by the Note that are not payments of "qualified stated interest". A
"qualified stated interest" payment includes any stated interest payment on a
Note that is unconditionally payable at least annually at a single fixed rate
(or at certain floating rates) that appropriately takes into account the length
of the interval between stated interest payments. The applicable Pricing
Supplement will state whether a particular issue of Notes will constitute an
issue of Discount Notes.
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is de minimis, then such excess constitutes "de minimis
OID". Under the OID Regulations, unless the election described below under
"Election to Treat All Interest as Original Issue Discount" is made, such a Note
will not be treated as issued with OID, (in which case the following paragraphs
under "Original Issue Discount" will not apply) and a holder of such a Note will
recognize capital gain, with respect to such de minimis OID as stated principal
payments on the Note are made. The amount of such gain with respect to each such
payment will equal the product of the total amount of the Note's de minimis OID
and a fraction, the numerator of which is the amount of the principal payment
made and the denominator of which is the stated principal amount of the Note.
In certain cases, Notes that bear stated interest and are issued at par may
be deemed to bear OID for Federal income tax purposes, with the result that the
inclusion of interest in income for Federal income tax purposes may vary from
the actual cash payments of interest made on such Notes, generally accelerating
income for cash method taxpayers. Under the OID Regulations, a Note may be a
Discount Note where, among other things, (i) a Note bearing interest at a
floating rate (a "Floating Rate Note") provides for a maximum interest rate or a
minimum interest rate that is reasonably expected as of the issue date to cause
the yield on the debt instrument to be significantly less, in the case of a
maximum rate, or more, in the case of a minimum rate, than the expected yield
determined without the maximum or minimum rate, as the case may be, (ii) a
Floating Rate Note provides for significant front-loading or back-loading of
interest, or (iii) a Note bears interest at a floating rate in combination with
one or more other floating or fixed rates. Notice will be given in the
applicable Pricing Supplement when the Company determines that a particular Note
will be a Discount Note. Unless specified in the applicable Pricing Supplement,
Floating Rate Notes will not be Discount Notes.
The Code and the OID Regulations provide rules that require a holder of a
Discount Note having a maturity of more than one year from its date of issue to
include OID in gross income before the receipt of cash attributable to such
income, without regard to the holder's method of accounting for tax purposes.
The amount of OID includible in gross income by a holder of a Discount Note is
the sum of the "daily portions" of OID with respect to the Discount Note for
each day during the taxable year or portion of the taxable year in which the
holder holds such Discount Note ("accrued OID"). The daily portion is determined
by allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. Under the OID Regulations, accrual periods
with respect to a Note may be any set of periods (which may be of varying
lengths) selected by the holder as long as (i) no accrual period is longer than
one year and (ii) each scheduled payment of interest or principal on the Note
occurs on the first day or final day of an accrual period.
The amount of OID allocable to an accrual period equals the excess of (a)
the product of the Discount Note's adjusted issue price at the beginning of the
accrual period and the Discount Note's yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly
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adjusted for the length of the accrual period) over (b) the sum of any payments
of qualified stated interest on the Discount Note allocable to the accrual
period. The "adjusted issue price" of a Discount Note at the beginning of the
first accrual period is the issue price and at the beginning of any accrual
period thereafter is (x) the sum of the issue price of such Discount Note, the
accrued OID for each prior accrual period (determined without regard to the
amortization of any acquisition premium or bond premium, which are discussed
below), and the amount of any qualified stated interest on the Note that has
accrued prior to the beginning of the accrual period but is not payable until a
later date, less (y) any prior payments on the Discount Note that were not
qualified stated interest payments. If a payment (other than a payment of
qualified stated interest) is made on the first day of an accrual period, then
the adjusted issue price at the beginning of such accrual period is reduced by
the amount of the payment. If a portion of the initial purchase price of a Note
is attributable to interest that accrued prior to the Note's issue date, the
first stated interest payment on the Note is to be made within one year of the
Note's issue date and such payment will equal or exceed the amount of
pre-issuance accrued interest, then the holder may elect to decrease the issue
price of the Note by the amount of pre-issuance accrued interest, in which case
a portion of the first stated interest payment will be treated as a return of
the excluded pre-issuance accrued interest and not as an amount payable on the
Note.
The OID Regulations contain certain special rules that generally allow any
reasonable method to be used in determining the amount of OID allocable to a
short initial accrual period (if all other accrual periods are of equal length),
and require that the amount of OID allocable to the final accrual period equal
the excess of the amount payable at the maturity of the Note (other than any
payment of qualified stated interest) over the Note's adjusted issue price as of
the beginning of such final accrual period. In addition, if an interval between
payments of qualified stated interest on a Note contains more than one accrual
period, then the amount of qualified stated interest payable at the end of such
interval is allocated pro rata (on the basis of their relative lengths) between
the accrual periods contained in the interval.
Holders of Discount Notes generally will have to include in income
increasingly greater amounts of OID over the life of the Notes.
Acquisition Premium. A holder that purchases a Note at its original
issuance for an amount in excess of its issue price but less than its stated
redemption price at maturity (any such excess being "acquisition premium"), and
that does not make the election described below under "Original Issue Discount
- -- Election To Treat All Interest as Original Issue Discount", is permitted to
reduce the daily portions of OID by a fraction, the numerator of which is the
excess of the holder's purchase price for the Note over the issue price, and the
denominator of which is the excess of the sum of all amounts payable on the Note
after the purchase date, other than payments of qualified stated interest, over
the Note's issue price. Alternatively, a holder may elect to compute OID
accruals as described under "Original Issue Discount -- General" above, treating
the holder's purchase price as the issue price.
Optional Redemption. If the Company has an option to redeem a Note, or the
Holder has an option to cause a Note to be repurchased, prior to the Note's
stated maturity, such option will be presumed to be exercised if, by utilizing
any date on which such Note may be redeemed or repurchased as the maturity date
and the amount payable on such date in accordance with the terms of such Note
(the "redemption price") as the stated redemption price at maturity, the yield
on the Note would be (i) in the case of an option of the Company, lower than its
yield to stated maturity, or (ii) in the case of an option of the Holder, higher
than its yield to stated maturity. If such option is not in fact exercised when
presumed to be exercised, the Note would be treated solely for OID purposes as
if it were redeemed or repurchased, and a new Note were issued, on the presumed
exercise date for an amount equal to the Note's adjusted issue price on that
date.
Short-Term Notes. Under the Code, special rules apply with respect to OID
on Notes that mature one year or less from the date of issuance ("Short-Term
Notes"). In general, a cash basis holder of a Short-Term Note is not required to
include OID in income as it accrues for United States Federal income tax
purposes unless it elects to do so. Accrual basis holders and certain other
holders, including banks, regulated investment companies, dealers in securities,
and cash basis holders who so elect, are required
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to include OID, in income as it accrues on Short-Term Notes on either a
straight-line basis or under the constant yield method (based on daily
compounding), at the election of the holder. In the case of a holder not
required and not electing to include OID in income currently, any gain realized
on the sale or retirement of Short-Term Notes will be ordinary income to the
extent of the OID accrued on a straight-line basis (unless an election is made
to accrue the original issue discount under the constant yield method) through
the date of sale or retirement. Holders who are not required and do not elect to
include OID on Short-Term Notes in income as it accrues will be required to
defer deductions for interest on borrowings allocable to Short-Term Notes in an
amount not exceeding the deferred income until the deferred income is realized.
Any holder of a Short-Term Note can elect to apply the rules in the
preceding paragraph taking into account the amount of "acquisition discount", if
any, with respect to the Note (rather than the OID with respect to such Note).
Acquisition discount is the excess of the stated redemption price at maturity of
the Short-Term Note over the holder's purchase price therefor. Acquisition
discount will be treated as accruing on a ratable basis or, at the election of
the holder, on a constant-yield basis.
For purposes of determining the amount of OID subject to these rules, the
OID Regulations provide that no interest payments on a Short-Term Note are
qualified stated interest, but instead such interest payments are included in
the Short-Term Note's stated redemption price at maturity.
NOTES PURCHASED AT A PREMIUM
Under the Code, a holder that purchases a Note for an amount in excess of
its principal amount will not be subject to the OID rules, and may elect to
treat such excess as "amortizable bond premium", in which case the amount of
qualified stated interest required to be included in the holder's income each
year with respect to interest on the Note will be reduced by the amount of
amortizable bond premium allocable (based on the Note's yield to maturity) to
such year. Any election to amortize bond premium is applicable to all bonds
(other than bonds the interest on which is excludible from gross income) held by
the holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the holder, and may not be revoked without the
consent of the Internal Revenue Service ("IRS"). See also "Original Issue
Discount -- Election to Treat All Interest as Original Issue Discount".
NOTES PURCHASED AT A MARKET DISCOUNT
A Note, other than a Short-Term Note, will be treated as issued at a market
discount (a "Market Discount Note") if the amount for which a holder purchased
the Note is less than the Note's issue price, subject to a de minimis rule
similar to the rule relating to de minimis OID described under "Original Issue
Discount -- General".
In general, any (partial) payment of principal on, or gain recognized on
the maturity or disposition of a Market Discount Note will be treated as
ordinary income to the extent that such gain does not exceed the accrued market
discount on such Note. Alternatively, a holder of a Market Discount Note may
elect to include market discount in income currently over the life of the Market
Discount Note. Such an election applies to all debt instruments with market
discount acquired by the electing holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS.
Market discount accrues on a straight-line basis, unless the holder elects
to accrue such discount on a constant yield to maturity basis. Such an election
is applicable only to the Note with respect to which it is made and is
irrevocable. A holder of a Market Discount Note that does not elect to include
market discount in income currently generally will be required to defer
deductions for interest on borrowings allocable to such Note in an amount not
exceeding the accrued market discount on such Note, until the maturity or
disposition of such Note. Furthermore, in any year where there is "net interest
income" with respect to such Note, which means that the aggregate amount of
interest includible in income with respect to such Note in such year--including
any recognized market discount attributable to the receipt of a partial payment
of principal--exceeds the amount of interest paid or accrued on borrowings with
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<PAGE> 23
respect to such Note in such year, the holder may elect to deduct an amount of
disallowed interest expenses not exceeding such net interest income.
The market discount rules do not apply to a Short-Term Note.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT.
Any holder may elect to include in gross income all interest that accrues
on a Note using the constant yield method described above under the heading
"Original Issue Discount--General", with the modifications described below. For
purposes of this election, interest includes stated interest, OID, de minimis
OID, market discount, acquisition discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium or acquisition
premium.
In applying the constant yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
holder's adjusted basis in the Note immediately after its acquisition, the issue
date of the Note will be the date of its acquisition by the electing holder, and
no payments on the Note will be treated as payments of qualified stated
interest. This election is generally applicable only to the Note with respect to
which it is made and may not be revoked without the consent of the IRS. If this
election is made with respect to a Note with amortizable bond premium, the
electing holder will be deemed to have elected to apply amortizable bond premium
against interest with respect to all debt instruments with amortizable bond
premium (other than debt instruments the interest on which is excludible from
gross income) held by such electing holder as of the beginning of the taxable
year in which the Note with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the IRS.
If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Market Discount Note, as defined
above, then the electing holder will be treated as having made the election
discussed above under "Notes Purchased at a Market Discount" to include market
discount in income currently over the life of all debt instruments held or
thereafter acquired by such holder.
PURCHASE, SALE AND RETIREMENT OF THE NOTES
General. A holder's tax basis in a Note will generally be its U.S. dollar
cost (which, in the case of a Note purchased with a foreign currency, will be
the U.S. dollar value of the purchase price on the date of purchase), increased
by the amount of any OID, or market discount (or acquisition discount, in the
case of a Short-Term Note) included in the holder's income with respect to the
Note and the amount, if any, of income attributable to de minimis OID included
in the holder's income with respect to the Note, and reduced by the sum of (i)
the amount of any payments that are not qualified stated interest payments, and
(ii) the amount of any amortizable bond premium applied to reduce interest on
the Note. A holder generally will recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on the
sale or retirement and the tax basis of the Note. The amount realized on a sale
or retirement for an amount in foreign currency will be the U.S. dollar value of
such amount on the date of sale or retirement. Except to the extent described
above under "Original Issue Discount -- Short Term Notes" or "Market Discount"
or below under "Foreign Currency Notes -- Exchange Gain or Loss", and except to
the extent attributable to accrued but unpaid qualified stated interest, gain or
loss recognized on the sale or retirement of a Note will be capital gain or loss
and will be long-term capital gain or loss if the Note was held for more than
one year.
FOREIGN CURRENCY NOTES
Interest Payments. If a qualified stated interest payment is denominated in
or determined by reference to a Foreign Currency, the amount of income
recognized by a cash basis holder will be the U.S. dollar value of the interest
payment, based on the exchange rate in effect on the date of receipt, regardless
of whether the payment is in fact converted into U.S. dollars. Accrual basis
holders may determine the amount of income recognized with respect to such
interest payment in accordance with
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<PAGE> 24
either of two methods. Under the first method, the amount of income recognized
will be based on the average exchange rate in effect during the interest accrual
period (or, with respect to an accrual period that spans two taxable years, the
partial period within the taxable year). Upon receipt of an interest payment
(including a payment attributable to accrued but unpaid qualified stated
interest upon the sale or retirement of a Note) determined by reference to a
Foreign Currency, an accrual basis holder will recognize ordinary income or loss
measured by the difference between such average exchange rate and the exchange
rate in effect on the date of receipt, regardless of whether the payment is in
fact converted into U.S. dollars. Under the second method, an accrual basis
holder may elect to translate interest income into U.S. dollars at the spot
exchange rate in effect on the last day of the accrual period or, in the case of
an accrual period that spans two taxable years, at the exchange rate in effect
on the last day of the partial period within the taxable year. Additionally, if
a payment of interest is actually received within 5 business days of the last
day of the accrual period or taxable year, an accrual basis holder applying the
second method may instead translate such accrued interest into U.S. dollars at
the spot exchange rate in effect on the day of actual receipt (in which case no
exchange gain or loss will result). Any election to apply the second method will
apply to all debt instruments held by the holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the holder
and may not be revoked without the consent of the IRS.
Exchange of Amounts in Other than U.S. Dollars. Foreign Currency received
as interest on a Note or on the sale or retirement of a Note will have a tax
basis equal to its U.S. dollar value at the time such interest is received or at
the time of such sale or retirement, as the case may be. Foreign Currency that
is purchased will generally have a tax basis equal to the U.S. dollar value of
the Foreign Currency on the date of purchase. Any gain or loss recognized on a
sale or other disposition of a Foreign Currency (including its use to purchase
Notes or upon exchange for U.S. dollars) will be ordinary income or loss.
Foreign Currency Discount Notes. OID for any accrual period on a Discount
Note that is denominated in a Foreign Currency will be determined in the Foreign
Currency and then translated into U.S. dollars in the same manner as qualified
stated interest accrued by an accrual basis holder. Upon receipt of an amount
attributable to original issue discount (whether in connection with a payment of
interest or the sale or retirement of a Note), a holder may recognize ordinary
income or loss.
Amortizable Bond Premium. In the case of a Note that is denominated in a
Foreign Currency, bond premium will be computed in units of Foreign Currency,
and amortizable bond premium will reduce interest income in units of the Foreign
Currency. At the time amortized bond premium offsets interest income, a holder
may realize ordinary income or loss, measured by the difference between exchange
rates at that time and at the time of the acquisition of the Notes.
Market Discount. Market discount is determined in units of the Foreign
Currency. Accrued market discount that is required to be taken into account on
the maturity or upon disposition of a Note is translated into U.S. dollars at
the exchange rate on the maturity or the disposition date, as the case may be
(and no part is treated as exchange gain or loss). Accrued market discount
currently includible in income by an electing holder is translated into U.S.
dollars at the average exchange rate for the accrual period (or the partial
accrual period during which the holder held the Note), and exchange gain or loss
is determined on maturity or disposition of the Note (as the case may be) in the
manner described above under "Foreign Currency Notes--Interest Payments" with
respect to the computation of exchange gain or loss on the receipt of accrued
interest by an accrual method holder.
Exchange Gain or Loss. Gain or loss recognized by a holder on the sale or
retirement of a Note that is attributable to changes in exchange rates will be
treated as ordinary income or loss. However, exchange gain or loss is taken into
account only to the extent of total gain or loss realized on the transaction.
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<PAGE> 25
INDEXED NOTES, AMORTIZING NOTES OR NOTES WITH EXTENDABLE STATED MATURITY
The applicable Pricing Supplement will contain a discussion of any special
United States Federal income tax rules with respect to Indexed Rate Notes,
Indexed Principal Notes, Amortizing Notes or Notes the Stated Maturity of which
may be extended at the option of the Company.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes are outstanding, the Company is
required to provide the IRS with certain information, including the holder's
name, address and taxpayer identification number (either the holder's Social
Security number or its employer identification number, as the case may be), the
aggregate amount of principal and interest paid (including OID, if any) to that
holder during the calendar year and the amount of tax withheld, if any. This
obligation, however, does not apply with respect to certain holders, including
corporations, tax-exempt organizations, qualified pension and profit sharing
trusts and individual retirement accounts and foreign holders who provide
appropriate certification that they are not United States persons or have
otherwise established an exemption.
In the event that a holder subject to the reporting requirements described
above fails to supply its correct taxpayer identification number in the manner
required by applicable law or underreports its tax liability, the Company, its
agents or paying agents or a broker may be required to "backup" withhold a tax
equal to 31% of each payment of interest (including OID) and principal (and
premium, if any) on the Notes. This backup withholding is not an additional tax
and may be credited against the holder's U.S. Federal income tax liability,
provided that the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company through
the Agents which have agreed to use their reasonable efforts to solicit orders
to purchase Notes. The Company will have the sole right to accept orders to
purchase Notes and may reject proposed purchases in whole or in part. The Agents
shall have the right, in their discretion reasonably exercised and without
notice to the Company, to reject any proposed purchase of Notes in whole or in
part. The Company will pay the Agents a commission of from .125% to .750% of the
principal amount of Notes sold through them, depending upon the Stated Maturity.
The Company may also sell Notes at a discount to the Agents for their own
accounts or for resale to one or more purchasers at varying prices related to
prevailing market prices at the time of resale or, if set forth in the
applicable Pricing Supplement, at a fixed public offering price, as determined
by the Agents. After any initial public offering of Notes to be resold to
purchasers at a fixed public offering price, the public offering price and any
concession or discount may be changed. In addition, the Agents may offer Notes
purchased by them as principal to other dealers. Notes sold by an Agent to a
dealer may be sold at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed will not be in excess of
the discount received by such Agent from the Company. Unless otherwise specified
in the applicable Pricing Supplement, any Note purchased by an Agent as
principal will be purchased at 100% of the principal amount or face amount
thereof less a percentage equal to the commission applicable to an agency sale
of a Note of identical maturity.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. The Agents may make a market in the
Notes, but the Agents are not obligated to do so and may discontinue any
market-making at any time without notice. There can be no assurance of a
secondary market for any Notes, or that the Notes will be sold.
Each Agent, whether acting as agent or principal, may be deemed to be an
"underwriter" within the meaning of the Securities Act. The Company has agreed
to indemnify each Agent against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments that such Agent may be required
to make in respect thereof.
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<PAGE> 26
PROSPECTUS
THE SHERWIN-WILLIAMS COMPANY [LOGO]
DEBT SECURITIES
The Sherwin-Williams Company (the "Company") from time to time may offer its
debt securities (the "Debt Securities"), in one or more series, from which the
Company will receive up to $450,000,000 in proceeds, including the equivalent
thereof in other currencies or composite currency units such as the European
Currency Unit. The Debt Securities may be offered in one or more series, in
amounts, at prices and on terms determined at the time of sale and set forth in
a supplement to this Prospectus (a "Prospectus Supplement").
Unless otherwise specified in an accompanying Prospectus Supplement, the Debt
Securities will be senior securities of the Company, ranking equally with all
other unsubordinated and unsecured indebtedness of the Company.
The specific terms of the Debt Securities with respect to which this Prospectus
is being delivered will be set forth in an accompanying Prospectus Supplement
including, where applicable, the specific designation, aggregate principal
amount, ranking, authorized denomination, maturity, rate or method of
calculation of interest and dates for payment thereof, any exchangeability,
conversion, redemption, prepayment, or sinking fund provisions, the currency or
currency unit in which principal, premium, or interest is payable, the
designation of the trustee acting under the applicable indenture, the initial
offering price and any other specific terms of such Debt Securities. The
Prospectus Supplement will also contain information, where applicable, about
material United States federal income tax considerations relating to, and any
listing on a securities exchange of, the Debt Securities covered by such
Prospectus Supplement.
The Company may sell the Debt Securities directly, through agents designated
from time to time, or through underwriters or dealers. If any agents,
underwriters, or dealers are involved in the sale of the Debt Securities, the
names of such agents, underwriters, or dealers and any applicable commissions or
discounts and the net proceeds to the Company from such sale will be set forth
in the applicable Prospectus Supplement.
The Debt Securities may be issued only in registered form, including in the form
of one or more global securities ("Global Securities"), unless otherwise set
forth in the Prospectus Supplement.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF DEBT SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
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 February 28, 1996.
<PAGE> 27
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE DEBT SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied 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 Seven World Trade Center, 13th Floor, New York, New
York 10048; and Northwestern Atrium Center, 500 West Madison Street (Suite
1400), Chicago, Illinois 60661; and copies of such material may be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549, at
prescribed rates. Such reports, proxy statements and other information may also
be inspected at the offices of the New York Stock Exchange, Inc. ("NYSE"), 20
Broad Street, New York, New York.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Debt
Securities. Statements contained herein concerning the provisions of any
documents are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The Company incorporates herein by reference the following documents filed
with the Commission pursuant to the Exchange Act:
(a) The Company's Annual Report on Form 1O-K for the fiscal year ended
December 31, 1994.
(b) The Company's Quarterly Reports on Form 1O-Q for the quarters
ended March 31, 1995, June 30, 1995 and September 30, 1995.
(c) The Company's Current Report on Form 8-K dated January 8, 1996 and
Form 8-K/A dated February 8, 1996, amending such Form 8-K.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Debt Securities
shall be deemed to be incorporated herein by reference and to be a part hereof
from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus or any Prospectus Supplement to the extent that
a statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any Prospectus Supplement.
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<PAGE> 28
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus and the accompanying Prospectus
Supplement are delivered, upon the written or oral request of such person, a
copy of any or all the documents incorporated herein by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference in such documents, and any other documents specifically identified
herein as incorporated by reference into the Registration Statement to which
this Prospectus relates or into such other documents.
Requests for such copies should be addressed to:
The Sherwin-Williams Company
Att.: Corporate Secretary
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
Telephone Number: (216) 566-2000
THE COMPANY
The Sherwin-Williams Company, which was first incorporated under the Laws
of the State of Ohio eighteen years after its founding in 1866, is engaged in
the manufacture, distribution and sale of paints, coatings and related products
to professional, industrial, commercial and retail customers.
The Sherwin-Williams Company, together with its consolidated subsidiaries,
is herein called the "Company". The Company's principal executive offices are
located at 101 Prospect Avenue, N.W., Cleveland, Ohio 44115, and its telephone
number is (212) 566-2000.
RECENT DEVELOPMENTS
For the year ended December 31, 1995, net sales of the Company increased
5.6% to $3,273,819,000 from $3,100,069,000 for the year ended December 31, 1994.
Net income for 1995 increased 7.5% to $200,654,000, while income per share for
1995 increased 8.8% to $2.34 from $2.15 in 1994. Net sales in the Company's
Paint Stores Segment for 1995 were up 7.3% to $2,130,559,000, with
comparable-store sales increasing 6.5%. Operating profit for the Paint Stores
Segment for 1995 improved 12.7% to $158,458,000. The annual net sales of the
Company's Coating Segment for 1995 increased 2.7% to $1,129,429,000 from
$1,099,460,000 in 1994. Operating profits of the Coating Segment for 1995
increased .6% to $202,361,000.
In the three-month period ended December 31, 1995, consolidated net sales
of the Company were $740,907,000, 5.3% higher than the corresponding three-month
period of 1994. Net income for the three-month period increased 10.1% to
$33,766,000 and net income per share increased to $.39 from $.36 for the
corresponding three-month period in 1994. The Paint Stores Segment had a sales
gain of 5.4% in this three-month period and a 12.4% operating profit
improvement. The Coating Segment's sales increased 5.1 % in this three-month
period while the operating profit for the Coating Segment increased 2.1%.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Debt Securities will be used for general corporate
purposes, which may include repayment of indebtedness, acquisitions, additions
to working capital and capital expenditures. Additional information on the use
of net proceeds from the sale of any particular Debt Securities will be set
forth in the Prospectus Supplement relating to such Debt Securities.
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<PAGE> 29
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges (a) for each of 1994, 1993, 1992, 1991 and 1990 and
for the nine months ended September 30, 1995 on a historical basis and (b) for
1994 and the nine months ended September 30, 1995 on a pro forma basis. The pro
forma ratios give effect to the acquisition of all the capital stock of Pratt &
Lambert United, Inc., a New York corporation, at $35.00 per share, by the
Company pursuant to a public tender offer by SWACQ, Inc., a New York corporation
and a wholly owned subsidiary of the Company, which was followed by the merger
of SWACQ, Inc. into Pratt & Lambert United, Inc. resulting in Pratt & Lambert
United, Inc. becoming a wholly owned subsidiary of the Company, as if such
transaction had been completed on January 1, 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
NINE MONTHS ------------------------------------------------------------
ENDED
SEPTEMBER 30, 1995 1994 1993 1992 1991 1990
------------------------ ------------------------ ---- ---- ---- ----
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges(a) 4.6 4.1 4.1 3.5 3.7 3.4 3.1 3.0
<FN>
- ---------------
(a) For purposes of computing such ratio, earnings consist of income before
income taxes and the cumulative effect of accounting changes plus fixed
charges, and fixed charges consist of interest expense and gross rent
expense.
</TABLE>
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered will be described
in the Prospectus Supplement relating to such Debt Securities. Accordingly, for
a description of the terms of a particular issue of Debt Securities, reference
must be made to both the Prospectus Supplement relating thereto and to the
following description.
Debt Securities will be issued under an indenture dated as of February 1,
1996 (the "Indenture"), between the Company and Chemical Bank, as trustee (the
"Trustee"). A copy of the form of Indenture has been filed as an exhibit to the
Registration Statement filed with the Commission. The following discussion of
certain provisions of the Indenture is a summary only and does not purport to be
a complete description of the terms and provisions of the Indenture. References
appearing below are to the Indenture and, wherever particular provisions are
referred to, such provisions are incorporated by reference as a part of the
statement made, and the statement is qualified in its entirety by such
reference. Accordingly, the following discussion is qualified in its entirety by
reference to the provisions of the Indenture, including the definition therein
of terms used below with their initial letters capitalized.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that can be issued thereunder. The Debt Securities may be issued in
one or more series as may be authorized from time to time by the Company.
(Section 2.03.) Reference is made to the applicable Prospectus Supplement for
the following terms of the Debt Securities of the series with respect to which
such Prospectus Supplement is being delivered:
(a) The title of the Debt Securities of the series;
(b) Any limit on the aggregate principal amount of the Debt Securities
of the series that may be authenticated and delivered under the Indenture;
(c) The date or dates on which the principal and premium with respect
to the Debt Securities of the series are payable;
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<PAGE> 30
(d) The rate or rates (which may be fixed or variable) at which the
Debt Securities of the series shall bear interest (if any) or the method of
determining such rate or rates, the date or dates from which such interest
shall accrue, the interest payment dates on which such interest shall be
payable or the method by which such dates will be determined, the record
dates for the determination of holders thereof to whom such interest is
payable, and the basis upon which interest will be calculated if other than
that of a 360-day year of twelve 30-day months;
(e) The place or places, if any, in addition to or instead of the
Corporate Trust Office of the Trustee, where the principal, premium, and
interest with respect to Debt Securities of the series shall be payable;
(f) The price or prices at which, the period or periods within which,
and the terms and conditions upon which Debt Securities of the series may
be redeemed, in whole or in part, at the option of the Company or
otherwise;
(g) The obligation, if any, of the Company to redeem, purchase, or
repay Debt Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a holder thereof and the price or
prices at which, the period or periods within which, and the terms and
conditions upon which Debt Securities of the series shall be redeemed,
purchased, or repaid, in whole or in part, pursuant to such obligations;
(h) The terms, if any, upon which the Debt Securities of the series
may be convertible into or exchanged for Common Stock, Preferred Stock
(which may be represented by Depositary Shares), other Debt Securities, or
warrants for Common Stock, Preferred Stock, or indebtedness or other
securities of any kind of the Company or any other issuer or obligor and
the terms and conditions upon which such conversion or exchange shall be
effected, including the initial conversion or exchange price or rate, the
conversion or exchange period, and any other additional provisions;
(i) If other than denominations of $1,000 or any integral multiple
thereof, the denominations in which Debt Securities of the series shall be
issuable;
(j) If the amount of principal, premium, if any, or interest with
respect to the Debt Securities of the series may be determined with
reference to an index or pursuant to a formula, the manner in which such
amounts will be determined;
(k) If the principal amount payable at the stated maturity of Debt
Securities of the series will not be determinable as of any one or more
dates prior to such stated maturity, the amount that will be deemed to be
such principal amount as of any such date for any purpose, including the
principal amount thereof which will be due and payable upon any maturity
other than the stated maturity or which will be deemed to be outstanding as
of any such date (or, in any such case, the manner in which such deemed
principal amount is to be determined);
(l) Any changes or additions to the provisions of the Indenture
dealing with defeasance, including the addition of additional covenants
that may be subject to the Company's covenant defeasance option;
(m) If other than such coin or currency of the United States as at the
time of payment is legal tender for payment of public and private debts,
the coin or currency in which payment of the principal, premium, if any,
and interest with respect to Debt Securities of the series shall be
payable, and if necessary, the manner of determining the equivalent thereof
in United States currency.
(n) If other than the principal amount thereof, the portion of the
principal amount of Debt Securities of the series that shall be payable
upon declaration of acceleration of the maturity thereof or provable in
bankruptcy;
(o) Any addition to or change in the Events of Default with respect to
the Debt Securities of the series and any change in the right of the
Trustee or the holders to declare the principal, premium, if any, and
interest with respect to such Debt Securities due and payable;
5
<PAGE> 31
(p) If the Debt Securities of the series shall be issued in whole or
in part in the form of a Global Security, the terms and conditions, if any,
upon which such Global Security may be exchanged in whole or in part for
other individual Debt Securities in definitive registered form, the
Depositary for such Global Security, and the form of any legend or legends
to be borne by any such Global Security in addition to or in lieu of the
legend referred to in the Indenture;
(q) Any trustee, authenticating or paying agents, transfer agents, or
registrars;
(r) The applicability of, and any addition to or change in, the
covenants and definitions then set forth in the Indenture or in the terms
then set forth in the Indenture relating to permitted consolidations,
mergers, or sales of assets, including conditioning any merger, conveyance,
transfer, or lease permitted by the Indenture upon the satisfaction of an
indebtedness coverage standard by the Company and any successor to the
Company;
(s) The terms, if any, of any guarantee of the payment of principal,
premium, and interest with respect to Debt Securities of the series and any
corresponding changes to the provision of the Indenture as then in effect;
(t) The terms, if any, of the transfer, mortgage, pledge, or
assignment as security for the Debt Securities of the series of any
properties, assets, moneys, proceeds, securities, or other collateral,
including whether certain provisions of the Trust Indenture Act are
applicable and any corresponding changes to provisions of the Indenture as
then in effect;
(u) With regard to Debt Securities of the series that do not bear
interest, the dates for certain required reports to the Trustee; and
(v) Any other terms of the Debt Securities of the series (which terms
shall not be prohibited by the provisions of the Indenture). (Section
2.03.)
The Prospectus Supplement will also describe any material United States
federal income tax consequences or other special considerations applicable to
the series of Debt Securities to which such Prospectus Supplement relates,
including those applicable to (a) Debt Securities with respect to which payments
of principal, premium, if any, or interest are determined with reference to an
index or formula (including changes in prices of particular securities,
currencies or commodities), (b) Debt Securities with respect to which principal,
premium, if any, or interest is payable in a foreign or composite currency, (c)
Debt Securities that are issued at a discount below their stated principal
amount, bearing no interest or interest at a rate that at the time of issuance
is below market rates ("Original Issue Discount Debt Securities"), and (d)
variable rate Debt Securities that are exchangeable for fixed rate Debt
Securities.
Payments of interest on Registered Securities may be made at the option of
the Company by check mailed to the registered holders thereof or, if so provided
in the applicable Prospectus Supplement, at the option of a holder by wire
transfer to an account designated by such holder. (Section 2.12.)
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged at the office of the
Trustee at which its corporate trust business is principally administered in the
United States or at the office of the Trustee or the Trustee's agent in the
Borough of Manhattan, the City and State of New York, at which its corporate
agency business is conducted, subject to the limitations provided in the
Indenture, without the payment of any service charge, other than any tax or
governmental charge payable in connection therewith. (Section 2.07.)
All funds paid by the Company to a paying agent for the payment of
principal, premium, if any, or interest with respect to any Debt Securities that
remain unclaimed at the end of two years after such principal, premium, or
interest shall have become due and payable will be repaid to the Company, and
the holders of such Debt Securities will thereafter look only to the Company for
payment thereof.
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GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities. (Section 2.15.) A Global Security is a
Debt Security that represents, and is denominated in an amount equal to the
aggregate principal amount of, all outstanding Debt Securities of a series, or
any portion thereof, in either case having the same terms, including the same
original issue date, date or dates on which principal and interest are due, and
interest rate or method of determining interest. A Global Security will be
deposited with, or on behalf of, a Depositary, which will be identified in the
Prospectus Supplement relating to such Debt Securities. Global Securities may be
issued in only fully registered form and in either temporary or definitive form.
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred except
as a whole by the Depositary to a nominee of the Depositary, or by the
Depositary or any nominee of the Depositary to a successor Depositary or any
nominee of such successor. (Section 2.15.)
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such Debt Securities. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Debt Securities represented by
such Global Security to the accounts of persons that have accounts with the
Depositary ("participants"). Such accounts shall be designated by the dealers or
underwriters with respect to such Debt Securities or, if such Debt Securities
are offered and sold directly by the Company or through one or more agents, by
the Company or such agents. Ownership of beneficial interests in a Global
Security will be limited to participants or persons that hold beneficial
interests through participants. Ownership of beneficial interests in such Global
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the Depositary (with respect to interests of
participants) or records maintained by participants (with respect to interests
of persons other than participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limitations and laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or nominee, as the
case may be, will be considered the sole owner or holder of the individual Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Security will not be entitled to have any of the individual Debt Securities
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of any of such Debt Securities in
definitive form, and will not be considered the owners or holders thereof under
the Indenture. (Section 2.15.) Accordingly, each person owning a beneficial
interest in a Global Security must rely on the procedures of the Depository for
such Global Security and, if such person is not a participant, on the procedures
of the participant through which such person owns its interest, to exercise any
rights of a holder under the Indenture. The Company understands that under
existing industry practices, if the Company requests any action of holders or if
an owner of a beneficial interest in a Global Security desires to give or take
any action which a holder is entitled to give or take under the Indenture, the
Depositary for such Global Security would authorize the participants holding the
relevant beneficial interests to give or take such action, and such participants
would authorize beneficial owners owning through such participants to give or
take such action or would otherwise act upon the instructions of beneficial
owners holding through them.
Payments of principal, premium, if any, and interest with respect to
individual Debt Securities represented by a Global Security will be made to the
Depositary or its nominee, as the case may be, as the registered owner or holder
of such Global Security. Neither the Company, the Trustee, any paying agent or
registrar for such Debt Securities, or any agent of the Company or the Trustee
will have any responsibility or liability for (a) any aspect of the records
relating to or payments made by the
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Depositary, its nominee, or any participants on account of beneficial interests
in the Global Security or for maintaining, supervising, or reviewing any records
relating to such beneficial interests, (b) the payment to the owners of
beneficial interests in the Global Security of amounts paid to the Depositary or
its nominee, or (c) any other matter relating to the actions and practices of
the Depositary, its nominee, or its participants. (Section 2.15.) Neither the
Company, the Trustee, any paying agent or registrar for such Debt Securities, or
any agent of the Company or the Trustee will be liable for any delay by the
Depositary, its nominee, or any of its participants in identifying the owners of
beneficial interests in the Global Security, and the Company and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from the
Depositary or its nominee for all purposes.
The Company expects that the Depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium, if any, or
interest with respect to a definitive Global Security representing any of such
Debt Securities, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security, as shown on the records of the Depositary or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers and registered in "street
name." Such payments will be the responsibility of such participants.
If the Depositary for a series of Debt Securities is at any time unwilling,
unable, or ineligible to continue as depositary, the Company shall appoint a
successor depositary. If a successor depositary is not appointed by the Company
within 90 days, the Company will issue individual Debt Securities of such series
in exchange for the Global Security representing such series of Debt Securities.
(Section 2.15.) In addition, the Company may at any time and in its sole
discretion, subject to any limitations described in the Prospectus Supplement
relating to such Debt Securities, determine no longer to have Debt Securities of
a series represented by a Global Security and, in such event, will issue
individual Debt Securities of such series in exchange for the Global Security
representing such series of Debt Securities. (Section 2.15.) Furthermore, if the
Company so specifies with respect to the Debt Securities of a series, an owner
of a beneficial interest in a Global Security representing Debt Securities of
such series may, on terms acceptable to the Company, the Trustee, and the
Depositary for such Global Security, receive individual Debt Securities of such
series in exchange for such beneficial interests, subject to any limitations
described in the Prospectus Supplement relating to such Debt Securities. In any
such instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery of individual Debt Securities of the series
represented by such Global Security equal in principal amount to such beneficial
interest and to have such Debt Securities registered in its name.
CERTAIN COVENANTS OF THE COMPANY
Limitation on Liens
Unless otherwise provided in the Prospectus Supplement, the Company and its
Restricted Subsidiaries will not create any Liens unless Debt Securities then
outstanding are equally and ratably secured, with certain exceptions, including
but not limited to: (a) pledges or deposits under worker's compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (including government contracts, but
excluding contracts for the payment of Indebtedness) or other obligations of
like nature, in each case incurred in the ordinary course of business, (b)
statutory and tax Liens for sums not yet due or delinquent or being contested in
good faith by appropriate proceedings, (c) certain encumbrances and easements,
(d) Liens existing at the date of the Indenture, (e) Liens securing only
Indebtedness of a Wholly Owned Subsidiary of the Company to the Company or one
or more Wholly Owned Subsidiaries of the Company, (f) Purchase Money Liens, (g)
Liens on property or shares of stock of another Person at the time such other
Person becomes a Subsidiary of such Person, provided that such Liens are not
created in connection with such other Person becoming a Subsidiary of such
Person, (h) Liens securing a Hedging Obligation, (i) Liens created in connection
with a tax-free financing, (j) Liens resulting from the deposit of funds or
evidences of
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Indebtedness in trust for the purpose of defeasing Indebtedness of the Company
or any of its Subsidiaries, (k) rights of a common owner of any interest in
property, (l) Liens placed upon any real property owned or acquired by the
Company or any of its Subsidiaries securing Indebtedness in an amount up to 80%
of the fair market value of such real property, (m) Liens to secure any
refinancing, refunding, extension, renewal or replacement of any Indebtedness
secured by certain permitted Liens, and (n) additional Liens not to exceed a
total of 15% of Consolidated Net Tangible Assets. (Section 4.07.)
Limitation on Sale/Leaseback Transactions
Unless otherwise provided in the Prospectus Supplement, the Company and its
Restricted Subsidiaries shall not enter into any Sale/Leaseback Transaction with
respect to any Principal Property unless (i) the Company or such Restricted
Subsidiary would be entitled to create a Lien on such Principal Property
securing Indebtedness in an amount equal to the Attributable Indebtedness with
respect to such Sale/Leaseback Transaction without securing the Debt Securities
pursuant to the provisions described above under "-- Limitation on Liens" or
(ii) the Company, within six months from the effective date of such
Sale/Leaseback Transaction, applies an amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction to the voluntary
defeasance or retirement of Debt Securities or other Indebtedness ranking pari
passu with the Debt Securities; provided that the foregoing will not prevent the
Company or any Restricted Subsidiary from (x) entering into any Sale/Leaseback
Transaction involving a lease with a term of less than three years or (y)
entering into any Sale/Leaseback Transaction between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries. (Section 4.08.)
Limitation on Consolidations and Mergers
The Company shall not consolidate with or merge into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its assets
(in one transaction or a series of related transactions) to another entity
unless such entity is a corporation that assumes all the obligations under the
Debt Securities and the Indenture and certain other conditions are met
(whereupon all such obligations of the Company shall terminate). (Section
10.01.)
EVENTS OF DEFAULT AND REMEDIES
The following events are defined in the Indenture as "Events of Default"
with respect to a series of Debt Securities (Section 6.01.):
(a) Default in the payment of any installment of interest on any Debt
Securities of that series, as and when the same shall become due and
payable and continuance of such default for a period of 30 days;
(b) Default in the payment of all or any part of the principal or
premium with respect to any Debt Securities of that series as and when the
same shall become due and payable, whether at maturity, upon redemption, by
declaration, upon required repurchase, or otherwise;
(c) Default in the payment of any sinking fund payment with respect to
any Debt Securities of that series as and when the same shall become due
and payable and continuance of such default for a period of 30 days;
(d) Failure on the part of the Company to comply with the provisions
of the Indenture relating to consolidations, mergers, and sales of assets;
(e) Failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the Debt
Securities of that series, in the Indenture with respect to such series, or
in any supplemental Indenture with respect to such series (other than
covenants or agreements included solely by or for the benefit of a series
of Debt Securities thereunder other than that series) continuing for a
period of 90 days after the date on which written
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notice specifying such failure and requiring the Company to remedy the same
and stating that such notice is a "Notice of Default" hereunder shall have
been given to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in aggregate principal amount of the Debt
Securities of that series at the time outstanding;
(f) The Company or any of its "Significant Subsidiaries" (defined as
any subsidiary of the Company that would be a "significant subsidiary" as
defined in Rule 405 under the Securities Act as in effect on the date of
the Indenture) shall (1) voluntarily commence any proceeding or file any
petition seeking relief under the United States Bankruptcy Code or other
federal or state bankruptcy, insolvency, or similar law, (2) consent to the
institution of, or fail to controvert within the time and in the manner
prescribed by law, any such proceeding or the filing of any such petition,
(3) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, or similar official for the Company or any such
Significant Subsidiary or for a substantial part of its property, (4) file
an answer admitting the material allegations of a petition filed against it
in any such proceeding, (5) make a general assignment for the benefit of
creditors, (6) admit in writing its inability or fail generally to pay its
debts as they become due, (7) take corporate action for the purpose of
effecting any of the foregoing, or (8) take any comparable action under any
foreign laws relating to insolvency of the Company or any Significant
Subsidiary.
(g) The entry of an order or decree by a court having competent
jurisdiction for (1) relief with respect to the Company or any of its
Significant Subsidiaries or a substantial part of any of their property
under the United States Bankruptcy Code or any other federal or state
bankruptcy, insolvency, or similar law, (2) the appointment of a receiver,
trustee, custodian, sequestrator, or similar official for the Company or
any such Significant Subsidiary or for a substantial part of any of their
property (except any decree or order appointing such official of any
Significant Subsidiary pursuant to a plan under which the assets and
operations of such Significant Subsidiary are transferred to or combined
with another Subsidiary or Subsidiaries of the Company or to the Company),
or (3) the winding-up or liquidation of the Company or any such Significant
Subsidiary (except any decree or order approving or ordering the winding-up
or liquidation of the affairs of a Significant Subsidiary pursuant to a
plan under which the assets and operations of such Significant Subsidiary
are transferred to or combined with another Subsidiary or Subsidiaries of
the Company or to the Company), and such order or decree shall continue
unstayed and in effect for 60 consecutive days, or any similar relief is
granted under any foreign laws and the order or decree stays in effect for
60 consecutive days;
(h) Any other Event of Default provided with respect to Debt
Securities of that series.
An Event of Default with respect to one series of Debt Securities is not
necessarily an Event of Default for another series.
If an Event of Default described in clause (a), (b), (c), (d), (e), (f)
(other than with respect to the Company), (g) (other than with respect to the
Company) or (h) above occurs and is continuing with respect to any series of
Debt Securities, unless the principal and interest with respect to all the Debt
Securities of such series shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Debt Securities of such series (each such series voting as a separate class)
then outstanding may declare the principal amount (or, if Original Issue
Discount Debt Securities, such portion of the principal amount as may be
specified in such series) of and interest on all the Debt Securities of such
series due and payable immediately. If an Event of Default described in clause
(f) or (g) (in each case with respect to the Company) above occurs, unless the
principal and interest with respect to all the Debt Securities of all series
shall have become due and payable, the principal amount (or, if any series are
Original Issue Discount Debt Securities, such portion of the principal amount as
may be specified in such series) of and interest on all Debt Securities of all
series then outstanding shall become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holder of Debt
Securities. (Section 6.01.)
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If an Event of Default occurs and is continuing, the Trustee shall be
entitled and empowered to institute any action or proceeding for the collection
of the sums so due and unpaid or to enforce the performance of any provisions of
the Debt Securities of the affected series or the Indenture, to prosecute any
such action or proceeding to judgment or final decree, and to enforce any such
judgment or final decree against the Company or any other obligor on the Debt
Securities of such series. In addition, if there shall be pending proceedings
for the bankruptcy or reorganization of the Company or any other obligor on the
Debt Securities, or if a receiver, trustee, or similar official shall have been
appointed for its property, the Trustee shall be entitled and empowered to file
and prove a claim for the whole amount of principal, premium, and interest (or,
in the case of Original Issue Discount Debt Securities, such portion of the
principal amount as may be specified in the terms of such series) owing and
unpaid with respect to the Debt Securities. (Section 6.02.) No holder of any
Debt Security of any series shall have any right to institute any action or
proceeding upon or under or with respect to the Indenture, for the appointment
of a receiver or trustee, or for any other remedy, unless (a) such holder
previously shall have given to the Trustee written notice of an Event of Default
with respect to Debt Securities of that series and of the continuance thereof,
(b) the holders of not less than 25% in aggregate principal amount of the
outstanding Debt Securities of that series (each such series voting as a
separate class) shall have made written request to the Trustee to institute such
action or proceeding with respect to such Event of Default and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses, and liabilities to be incurred therein or thereby, and (c) the
Trustee, for 60 days after its receipt of such notice, request, and offer of
indemnity shall have failed to institute such action or proceeding and no
direction inconsistent with such written request shall have been given to the
Trustee pursuant to the provisions of the Indenture. (Section 6.04.)
Prior to the acceleration of the maturity of the Debt Securities of any
series, the holders of a majority in aggregate principal amount of the Debt
Securities of that series at the time outstanding may, on behalf of the holders
of all Debt Securities of that series, waive any past default or Event of
Default and its consequences for that series, except (a) a default in the
payment of the principal, premium, if any, or interest with respect to such Debt
Securities or (b) a default with respect to a provision of the Indenture that
cannot be amended without the consent of each holder affected thereby. In case
of any such waiver, such default shall cease to exist, any Event of Default
arising therefrom shall be deemed to have been cured for all purposes, and the
Company, the Trustee, and the holders of the Debt Securities of that series
shall be restored to their former positions and rights under the Indenture.
(Section 6.06.)
The Trustee shall promptly after the occurrence of a default known to it
with respect to a series of Debt Securities, give to the holders of the Debt
Securities of such series notice of all uncured defaults with respect to such
series known to it, unless such defaults shall have been cured or waived before
the giving of such notice; provided, however, that except in the case of default
in the payment of principal, premium, if any, or interest with respect to the
Debt Securities of such series or in the making of any sinking fund payment with
respect to the Debt Securities of such series, the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the interest of the holders of such Debt Securities. (Section
6.07.)
MODIFICATION OF THE INDENTURE
The Company and the Trustee may enter into supplemental Indentures without
the consent of the holders of Debt Securities for one or more of the following
purposes (Section 9.01.):
(a) To evidence the succession of another person to the Company
pursuant to the provisions of the Indenture relating to consolidations,
mergers, and sales of assets and the assumption by such successor of the
covenants, agreements, and obligations of the Company in the Indenture and
in the Debt Securities;
(b) To surrender any right or power conferred upon the Company by the
Indenture, to add to the covenants of the Company such further covenants,
restrictions, conditions, or provisions for the protection of the holders
of all or any series of Debt Securities as the Board of Directors of the
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Company shall consider to be for the protection of the holders of such Debt
Securities and to make the occurrence, or the occurrence and continuance,
of a default in any of such additional covenants, restrictions, conditions
or provisions a default or an Event of Default under the Indenture
(provided, however, that with respect to any such additional covenant,
restriction, condition or provision, such supplemental Indenture may
provide for a period of grace after default, which may be shorter or longer
than that allowed in the case of other defaults, may provide for an
immediate enforcement upon such default, may limit the remedies available
to the Trustee upon such default, or may limit the right of holders of a
majority in aggregate principal amount of any or all series of Debt
Securities to waive such default);
(c) To cure any ambiguity or to correct or supplement any provision
contained in the Indenture, in any supplemental Indenture, or in any Debt
Securities that may be defective or inconsistent with any other provision
contained therein;
(d) To modify or amend the Indenture in such a manner as to permit the
qualification of the Indenture or any supplemental Indenture under the
Trust Indenture Act as then in effect;
(e) To convey, transfer, assign, mortgage, or pledge any property to
or with the Trustee, or to make such other provisions in regard to matters
or questions arising under the Indenture as shall not adversely affect the
interests of any holders of Debt Securities of any series;
(f) To comply with the provisions of the Indenture relating to
consolidations, mergers, and sales of assets;
(g) To add guarantees with respect to the Debt Securities or to secure
the Debt Securities;
(h) To make any change that does not adversely affect the rights of
any holder;
(i) To add to, change, or eliminate any of the provisions of the
Indenture with respect to one or more series of Debt Securities, so long as
any such addition, change, or elimination not otherwise permitted under the
Indenture shall (1) neither apply to any Debt Security of any series
created prior to the execution of such supplemental Indenture and entitled
to the benefit of such provision nor modify the rights of the holders of
any such Debt Security with respect to such provision or (2) become
effective only when there is no such Debt Security outstanding;
(j) To evidence and provide for the acceptance of appointment by a
successor or separate Trustee with respect to the Debt Securities of one or
more series and to add to or change any of the provisions of the Indenture
as shall be necessary to provide for or facilitate the administration of
the Indenture by more than one Trustee; and
(k) To establish the form or terms of Debt Securities as described
under "Description of Debt Securities -- General" above.
With the consent of the holders of a majority in aggregate principal amount
of the outstanding Debt Securities of each series affected thereby, the Company
and the Trustee may from time to time and at any time enter into a supplemental
Indenture for the purpose of adding any provisions to, changing in any manner,
or eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holder of the Debt
Securities of such series; provided, however, that without the consent of the
holders of each Debt Security so affected, no such supplemental Indenture shall
(a) reduce the percentage in principal amount of Debt Securities of any series
whose holders must consent to an amendment, (b) reduce the rate of or extend the
time for payment of interest on any Debt Security, (c) reduce the principal of
or extend the stated maturity of any Debt Security, (d) reduce the premium
payable upon the redemption of any Debt Security or change the time at which any
Debt Security may or shall be redeemed, (e) make any Debt Security payable in a
currency other than that stated in the Debt Security, (f) release any security
that may have been granted with respect to the Debt Securities or (g) make any
change in the provisions of the Indenture relating to waivers of defaults or
amendments that require unanimous consent. (Section 9.02.)
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CONSOLIDATION, MERGER, AND SALE OF ASSETS
The Company may not consolidate with or merge with or into any person, or
sell, convey, transfer, lease or otherwise dispose of all or substantially all
of its assets (in one transaction or a series of related transactions), unless
the following conditions have been satisfied (Section 10.01.):
(a) Either (1) the Company shall be the continuing person in the case
of a merger or (2) the resulting, surviving, or transferee person, if other
than the Company (the "Successor Company"), shall be a corporation
organized and existing under the laws of the United States, any State, or
the District of Columbia and shall expressly assume all of the obligations
of the Company under the Debt Securities and the Indenture;
(b) Immediately after giving effect to such transaction (and treating
any indebtedness that becomes an obligation of the Successor Company or any
subsidiary of the Company as a result of such transaction as having been
incurred by the Successor Company or such subsidiary at the time of such
transaction), no Default or Event of Default would occur or be continuing;
(c) The Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that such
consolidation, merger, or transfer complies with the Indenture.
SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
The Indenture shall generally cease to be of any further effect with
respect to a series of Debt Securities if (a) the Company has delivered to the
Trustee for cancellation all Debt Securities of such series (with certain
limited exceptions) or (b) all Debt Securities of such series not theretofore
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be called
for redemption within one year, and the Company shall have deposited with the
Trustee as trust funds the entire amount sufficient (in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee) without consideration of
any reinvestment and after payment of all taxes or other charges and assessments
in respect thereof payable by the Trustee to pay at maturity or upon redemption
all such Debt Securities, no default with respect to the Debt Securities has
occurred and is continuing on the date of such deposit, such deposit does not
result in a breach or violation of, or constitute a default under, the Indenture
or any other agreement or instrument to which the Company is a party and the
Company delivered an officers' certificate and an opinion of counsel each
stating that such conditions have been complied with (and if, in either case,
the Company shall also pay or cause to be paid all other sums payable under the
Indenture by the Company). (Section 11.02.)
In addition, the Company shall have a "legal defeasance option" (pursuant
to which it may terminate, with respect to the Debt Securities of a particular
series, all of its obligations under such Debt Securities and the Indenture with
respect to such Debt Securities) and a "covenant defeasance option" (pursuant to
which it may terminate, with respect to the Debt Securities of a particular
series, its obligations with respect to such Debt Securities under certain
specified covenants contained in the Indenture). If the Company exercises its
legal defeasance option with respect to a series of Debt Securities, payment of
such Debt Securities may not be accelerated because of an Event of Default. If
the Company exercises its covenant defeasance option with respect to a series of
Debt Securities, payment of such Debt Securities may not be accelerated because
of an Event of Default related to the specified covenants. (Section 11.02.)
The Company may exercise its legal defeasance option or its covenant
defeasance option with respect to the Debt Securities of a series only if (a)
the Company irrevocably deposits in trust with the Trustee cash or U.S.
Government Obligations (as defined in the Indenture) for the payment of
principal, premium, if any, and interest with respect to such Debt Securities to
maturity or redemption, as the case may be, (b) the Company delivers to the
Trustee a certificate from a nationally recognized firm of independent public
accountants expressing their opinion that the payments of principal and interest
when due and without reinvestment on the deposited U.S. Government Obligations
plus any deposited
13
<PAGE> 39
money without investment will provide cash at such times and in such amounts as
will be sufficient to pay the principal, premium, if any, and interest when due
with respect to all the Debt Securities of such series to maturity or
redemption, as the case may be, (c) 91 days pass after the deposit is made and
during the 91-day period no default described in clause (f) or (g) under
"Description of Debt Securities -- Events of Default and Remedies" above with
respect to the Company occurs that is continuing at the end of such period, (e)
the deposit does not constitute a default under any other agreement binding on
the Company, (f) the Company delivers to the Trustee an opinion of counsel to
the effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company Act of
1940, (g) the Company shall have delivered to the Trustee an opinion of counsel
addressing certain federal income tax matters relating to the defeasance, and
(h) the Company delivers to the Trustee an officers' certificate and an opinion
of counsel, each stating that all conditions precedent to the defeasance and
discharge of the Debt Securities of such series as contemplated by the Indenture
have been complied with. (Section 11.03.)
The Trustee shall hold in trust cash or U.S. Government Obligations
deposited with it as described above and shall apply the deposited cash and the
proceeds from deposited U.S. Government Obligations to the payment of principal,
premium, if any, and interest with respect to the Debt Securities of the
defeased series. (Section 11.04.)
THE TRUSTEE
The Company may appoint a separate Trustee for any series of Debt
Securities. As used herein in the description of a series of Debt Securities,
the term "Trustee" refers to the Trustee appointed with respect to such series
of Debt Securities. In addition, the Company has the right to replace the
Trustee under certain circumstances, including (subject to certain conditions)
if the Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to another corporation
or banking association. (Section 7.08.)
The Company may maintain banking and other commercial relationships with
the Trustee and its affiliates in the ordinary course of business, and the
Trustee may own Debt Securities.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in or outside the United States
through underwriters or dealers, directly to one or more purchasers, or through
agents. The Prospectus Supplement with respect to the Debt Securities will set
forth the terms of the offering of the Debt Securities, including the name or
names of any underwriters, dealers, or agents, the purchase price of the Debt
Securities and the proceeds to the Company from such sale, any delayed delivery
arrangements, any underwriting discounts and other items constituting
underwriters' compensation, the initial public offering price, any discounts or
concessions allowed or reallowed or paid to dealers, and any securities
exchanges on which the Debt Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Debt
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Debt Securities will be named in the
Prospectus Supplement relating to such offering, and if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters or
agents to purchase the Debt Securities will be subject to conditions precedent
and the underwriters will be obligated to purchase all the Debt Securities if
any are purchased. The initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
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<PAGE> 40
If dealers are utilized in the sale of Debt Securities with respect to
which this Prospectus is delivered, the Company will sell such Debt Securities
to the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time at fixed prices, which may be
changed, or at varying prices determined at the time of sale. Any agent involved
in the offer or sale of the Debt Securities with respect to which this
Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such agent
will be acting on a best efforts basis for the period of its appointment.
In connection with the sale of the Debt Securities, underwriters or agents
may receive compensation from the Company or from purchasers of Debt Securities
for whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters, agents, and dealers participating in the distribution
of the Debt Securities may be deemed to be underwriters, and any discounts or
commissions received by them from the Company and any profit on the resale of
the Debt Securities by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters, or dealers to solicit offers from certain types of
institutions to purchase Debt Securities from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents, dealers, and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments that such agents, dealers, or underwriters may be
required to make with respect thereto. Agents, dealers, and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
The Debt Securities may or may not be listed on a national securities
exchange. No assurances can be given that there will be a market for the Debt
Securities.
LEGAL OPINIONS
Certain legal matters in connection with the Debt Securities will be passed
upon for the Company by Louis E. Stellato, Vice President, General Counsel and
Secretary of the Company, and for the underwriters or agents, if any, by
Cravath, Swaine & Moore. At December 31, 1995, Mr. Stellato beneficially owned
16,848 shares of Common Stock of the Company and held options to purchase an
additional 36,800 shares of Common Stock of which 25,799 shares were exercisable
at such date.
EXPERTS
The consolidated financial statements and schedules of the Company
appearing in the Company's Annual Report on Form 10-K for the year ended as of
December 31, 1994 have been audited by Ernst & Young LLP, independent auditors
as set forth in their report thereon included therein and incorporated therein
by reference. Such consolidated financial statements are incorporated by
reference herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The consolidated financial statements and schedules of Pratt & Lambert
United, Inc. as of December 31, 1994 and 1993, and for each of the years in the
three-year period ended December 31, 1994, have been incorporated by reference
herein in reliance upon the report of Deloitte & Touche LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
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<PAGE> 41
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATES HEREOF OR THEREOF. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE
ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Company Description.................. S-2
Recent Developments.................. S-2
Pricing Supplement................... S-2
Description of Notes................. S-2
Currency Risks....................... S-17
Certain U. S. Federal Income Tax
Considerations..................... S-19
Plan of Distribution................. S-25
PROSPECTUS
Available Information................ 2
Information Incorporated by
Reference.......................... 2
The Company.......................... 3
Recent Developments.................. 3
Use of Proceeds...................... 3
Ratios of Earnings to Fixed
Charges............................ 4
Description of Debt Securities....... 4
Plan of Distribution................. 14
Legal Opinions....................... 15
Experts.............................. 15
</TABLE>
U.S. $450,000,000
THE SHERWIN-WILLIAMS COMPANY
MEDIUM-TERM NOTES,
SERIES A
DUE NINE MONTHS OR
MORE FROM DATE OF ISSUE
[LOGO]
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
PROSPECTUS SUPPLEMENT
DATED FEBRUARY 28, 1996
