Filed Pursuant to Rule 424(b)(2)
Registration No. 333-62597
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 25, 1998)
(EASTMAN CHEMICAL COMPANY LOGO)
EASTMAN CHEMICAL COMPANY
$400,000,000
7% Notes due 2012
Interest payable April 15 and October 15
ISSUE PRICE: 99.174%
The notes will mature on April 15, 2012. Interest will accrue from April 3,
2002. We may redeem the notes in whole or in part at any time at the redemption
price described on page S-6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes or determined that this
prospectus supplement or the accompanying prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
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PRICE TO UNDERWRITING PROCEEDS
PUBLIC DISCOUNTS TO US
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Per Note 99.174% .650% 98.524%
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Total $396,696,000 $2,600,000 $394,096,000
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The notes will not be listed on any securities exchange. Currently, there is no
public market for the notes.
We expect to deliver the notes to investors through the book-entry delivery
system of The Depository Trust Company on or about April 3, 2002.
JPMORGAN
March 26, 2002
No person is 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 and, if given or made, such
information or representations must not be relied upon as having been
authorized. This prospectus supplement and the accompanying prospectus do not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities described in this prospectus supplement or
an offer to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this prospectus supplement or the accompanying prospectus, nor any
sale made hereunder and thereunder, shall under any circumstances create any
implication that there has been no change in the affairs of Eastman Chemical
Company since the date of this prospectus supplement or the accompanying
prospectus, or that the information contained or incorporated by reference
herein or therein is correct as of any time subsequent to the date of such
information.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
About This Prospectus Supplement............................ S-3
Eastman Chemical Company.................................... S-4
Use of Proceeds............................................. S-5
Ratios of Earnings to Fixed Charges......................... S-5
Description of the Notes.................................... S-6
Underwriting................................................ S-10
Validity of the Notes....................................... S-11
Experts..................................................... S-11
Where You Can Find Additional Information................... S-12
PROSPECTUS
PAGE
----
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
Use of Proceeds............................................. 3
Ratios of Earnings to Fixed Charges......................... 3
Description of Capital Stock................................ 3
Description of Debt Securities.............................. 10
Material Federal Income Tax Consequences.................... 18
Plan of Distribution........................................ 18
Validity of Securities...................................... 19
Experts..................................................... 19
S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement contains the terms of this offering of notes. This
prospectus supplement, or the information incorporated by reference in this
prospectus supplement, may add, update or change information in the accompanying
prospectus. If information in this prospectus supplement, or the information
incorporated by reference in this prospectus supplement or the accompanying
prospectus, is inconsistent with the accompanying prospectus, this prospectus
supplement, or the information incorporated by reference in this prospectus
supplement or the accompanying prospectus, will apply and will supersede that
information in the accompanying prospectus. Capitalized terms used in this
prospectus supplement but not defined herein have the meanings ascribed to them
in the accompanying prospectus.
It is important for you to read and consider all information contained in this
prospectus supplement and the accompanying prospectus in making your investment
decision. You should also read and consider the information in the documents we
have referred you to under "Where You Can Find Additional Information" in this
prospectus supplement.
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S-3
EASTMAN CHEMICAL COMPANY
Eastman Chemical Company, a global chemical company engaged in the manufacture
and sale of a broad portfolio of chemicals, plastics and fibers, began business
in 1920 for the purpose of producing chemicals for Eastman Kodak Company's
photographic business. We were incorporated in Delaware in 1993 and became an
independent entity as of December 31, 1993, when Eastman Kodak spun off its
chemicals business. Our headquarters and largest manufacturing site are located
in Kingsport, Tennessee.
We are the largest producer of polyethylene terephthalate, or PET, polymers for
packaging based on market share and are a leading supplier of raw materials for
paints and coatings, inks and graphic arts, adhesives, textile sizes, and other
formulated products, and of cellulose acetate fibers. We have 41 manufacturing
sites in 17 countries that supply major chemicals, fibers and plastics products
to customers throughout the world.
Our products and operations are managed and reported in five operating segments.
Eastman Division, previously called the Chemicals Group, contains the Coatings,
Adhesives, Specialty Polymers and Inks, or CASPI, segment; the Performance
Chemicals and Intermediates, or PCI, segment; and the Specialty Plastics, or SP,
segment. Voridian Division, previously called the Polymers Group, contains the
Polymers segment and the Fibers segment.
In 2001, Eastman Division accounted for 58% of total revenues and Voridian
Division accounted for 42% of total revenues. Within Eastman Division, revenues
were attributable 48% to the CASPI segment, 36% to the PCI segment and 16% to
the SP segment. Within Voridian, revenues were attributable 72% to the Polymers
segment and 28% to the Fibers segment.
S-4
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the notes, which we estimate
to be $393,896,000, after deducting underwriting discounts and our estimated
expenses of the offering, for the repayment of portions of our commercial paper
borrowings and borrowings under our revolving credit facility. Our commercial
paper borrowings, which typically have maturities of 90 days or less, are
supported by our revolving credit facility. Indebtedness under the credit
facility, which expires in July 2005, is subject to interest at varying spreads
above quoted market rates, principally LIBOR. As of December 31, 2001, our
credit facility and commercial paper borrowings totalled $637,000,000 at an
effective interest rate of 3.17%.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to fixed
charges for the periods shown:
FISCAL YEAR ENDED DECEMBER 31,
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(1) 3.6x 1.5x 3.2x 3.7x
(1) Due to the net loss reported for 2001, the coverage ratio was less than
1.0x. To achieve a coverage ratio of 1.0x, additional pre-tax earnings of
$287 million would be required for 2001. Before nonrecurring items, the
ratio of earnings to fixed charges for 2001 was 2.0x.
The ratios of earnings to fixed charges were computed by dividing our earnings
by our fixed charges. For this purpose, earnings consist of income from
continuing operations before income taxes plus interest expense, one-third of
rent expense, which approximates the interest component of rental expense, and
amortization of capitalized interest. Fixed charges consist of interest expense,
one-third of rent expense and capitalized interest.
S-5
DESCRIPTION OF THE NOTES
GENERAL
The notes will be issued under an indenture dated as of January 10, 1994 between
us and The Bank of New York, as trustee. 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 accompanying prospectus, to which reference is
made.
The notes:
- will be our unsecured, unsubordinated general obligations,
- will rank pari passu with our other unsecured and unsubordinated indebtedness,
- will initially be limited to $400 million principal amount,
- will be issued in book-entry form only, in denominations of $1,000 and
integral multiples thereof,
- will mature on April 15, 2012,
- will bear interest from April 3, 2002 at the rate of 7% per annum and
- will bear interest payable semi-annually on April 15 and October 15,
commencing October 15, 2002, to the persons in whose names the notes are
registered at the close of business on the preceding April 1 and October 1,
respectively. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
ISSUANCE OF ADDITIONAL NOTES
We may, without the consent of the holders of notes, increase the principal
amount of the notes by issuing additional notes in the future on the same terms
and conditions, except for any differences in the issue price and interest
accrued prior to the issue date of the additional notes, and with the same CUSIP
number as the notes offered hereby. The notes offered by this prospectus
supplement and any additional notes would rank equally and ratably and would be
treated as a single class for all purposes under the indenture. No additional
notes may be issued if any event of default has occurred with respect to the
notes.
OPTIONAL REDEMPTION
We may redeem the notes, in whole or in part, at our option, at any time at a
redemption price equal to the greater of:
- 100% of the principal amount of the notes to be redeemed or
- as determined by a Quotation Agent (as defined below), the sum of the present
values of the remaining scheduled payments of principal and interest thereon
(not including any portion of such payments of interest accrued to the date of
redemption) discounted to the redemption date on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate,
as defined below, plus 25 basis points
plus, in each case, accrued and unpaid interest on the notes to the redemption
date.
S-6
"Adjusted Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security selected
by a Quotation Agent as having a maturity comparable to the remaining term of
the notes to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of such notes.
"Quotation Agent" means the Reference Treasury Dealer appointed by the trustee
after consultation with us.
"Reference Treasury Dealer" means (1) J.P. Morgan Securities Inc. and its
successors; provided, however, that if the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), we shall substitute therefor another Primary Treasury Dealer; and (2)
any other Primary Treasury Dealer selected by the trustee after consultation
with us.
"Comparable Treasury Price" means, with respect to any redemption date, (1) the
average of the Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (2) if the trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date.
We will give notice to The Depository Trust Company, or DTC, of any redemption
we propose to make at least 30 days, but not more than 60 days, before the
redemption date. If we redeem only some of the notes, it is the practice of DTC
to determine by lot the amount of notes to be redeemed of each of its
participating institutions. Notice by DTC to these participants and by
participants to "street name" holders of indirect interests in the notes will be
made according to arrangements among them and may be subject to statutory or
regulatory requirements.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the notes or portions of the
notes called for redemption.
SINKING FUND
The notes will not be entitled to any sinking fund.
DEFEASANCE
The notes are subject to defeasance under the conditions described in the
accompanying prospectus under "Description of Debt Securities -- Defeasance and
Covenant Defeasance."
BOOK-ENTRY SYSTEM
We will initially issue the notes in the form of one or more global securities
in book-entry form. The notes will be deposited with, or on behalf of, DTC
located in the Borough of Manhattan, The
S-7
City of New York, and will be registered in the name of Cede & Co., which is
DTC's nominee. One or more fully-registered global securities will be issued for
these notes representing the aggregate principal amount of the notes and will be
deposited with or on behalf of DTC.
We understand that DTC is:
- a limited-purpose trust company organized under the New York Banking Law,
- a "banking organization" within the meaning of the New York Banking Law,
- a member of the Federal Reserve System,
- a "clearing corporation" within the meaning of the New York Uniform Commercial
Code and
- a "clearing agency" registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934, as amended.
DTC holds securities that its participants deposit with it. DTC also facilitates
the settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thereby eliminating the need for physical
movement of securities certificates. The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the global securities. Direct participants
include securities brokers and dealers (which may include the underwriter),
banks, trust companies, clearing corporations and certain other organizations.
DTC is owned by a number of its participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, LLC and the National Association of
Securities Dealers, Inc. Access to DTC's system is also available to others,
known as indirect participants, such as securities brokers and dealers (which
may include the underwriter), banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the Securities and Exchange Commission.
So long as DTC, or its nominee, is the registered holder and owner of such
global securities, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the notes represented by such global securities for
the purposes of receiving payment on the notes, receiving notices and for all
other purposes under the indenture and the notes. Except as described in the
accompanying prospectus, owners of beneficial interests in the global securities
will not be entitled to receive physical delivery of notes in definitive form
and will not be considered the holders thereof for any purpose under the
indenture. Accordingly, each person owning a beneficial interest in the global
securities must rely on the procedures of DTC 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 indenture provides that DTC may grant proxies and otherwise authorize
participants to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action which a holder is entitled to give or
take under the indenture. We understand that under existing industry practices,
in the event that we request any action of holders or that an owner of a
beneficial interest in such global securities desires to give or take any action
which a holder is entitled to give or take under the indenture, DTC would
authorize the participants holding the relevant beneficial interest 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 through them.
S-8
We expect that pursuant to procedures established by DTC, upon the issuance of
the global securities, DTC or its nominee will credit, on its book-entry
registration and transfer system, the principal amount of notes represented by
such global securities to the accounts of participants. The ownership interests
of each actual purchaser, commonly known as the beneficial owner, in the global
securities is in turn to be recorded on the direct and indirect participants'
records. Beneficial owners will not receive written confirmation from DTC of
their purchase, but beneficial owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participant through
which the beneficial owner entered into the transaction. DTC has no knowledge of
the actual beneficial owners of the securities issued in the form of global
securities. DTC's records reflect only the identity of the direct participants
to whose accounts such securities are credited, which may or may not be the
beneficial owners. The direct and indirect participants will remain responsible
for keeping account of their holdings on behalf of their customers.
We will make payments of principal of, premium, if any, and interest on the
notes represented by the global securities registered in the name of and held by
DTC or its nominee to DTC or its nominee, as the case may be, as the registered
owner and holder of the global securities.
We expect that DTC or its nominee, upon receipt of any payment of principal of,
premium, if any, or interest on the global securities will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such global securities as shown on the
records of DTC. We also expect that payments by direct or indirect participants
to owners of beneficial interests in the global securities held through such
direct or indirect participants will be governed by standing instructions and
customary practices, as is now the case with securities held for customer
accounts registered in "street name", and will be the sole responsibility of
such participants. Neither we nor the trustee, nor any of our agents or the
trustee, will have any responsibility or liability for any aspect of DTC's
records relating to, or payments made on account of, beneficial ownership
interests in the global securities representing any notes or for maintaining,
supervising or reviewing any of DTC's records relating to such beneficial
ownership interests.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
S-9
UNDERWRITING
We are selling $400,000,000 aggregate initial principal amount of the notes to
J.P. Morgan Securities Inc., or JPMorgan, as the underwriter, under an
underwriting agreement dated March 26, 2002. The underwriter has agreed to
purchase from us the entire principal amount of the notes, subject to certain
conditions in the underwriting agreement.
Under the terms and conditions of the underwriting agreement, if the underwriter
takes any of the notes, then it is obligated to take and pay for all of the
notes.
The notes are a new issue of securities with no established trading market and
will not be listed on any national securities exchange. The underwriter has
advised us that it intends to make a market for the notes, but it has no
obligation to do so and may discontinue market making at any time without
providing any notice. No assurance can be given as to the liquidity of any
trading market for the notes.
The underwriter initially proposes to offer part of the notes directly to the
public at the offering price described on the cover page of this prospectus
supplement and part to certain dealers at a price that represents a concession
not in excess of .40% of the principal amount of the notes. The underwriter may
allow, and any such dealer may reallow, a concession not in excess of .25% of
the principal amount of the notes to certain other dealers. After the initial
offering of the notes, the underwriter may from time to time vary the offering
price and other selling terms.
We have also agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments which the underwriter may be required to make in respect
of any such liabilities.
In connection with the offering of the notes, the underwriter may engage in
transactions that stabilize, maintain or otherwise affect the price of the
notes. Specifically, the underwriter may overallot in connection with the
offering of the notes, creating a short position. In addition, the underwriter
may bid for, and purchase, notes in the open market to cover short positions or
to stabilize the price of the notes. Any of these activities may stabilize or
maintain the market price of the notes above independent market levels. The
underwriter is not required to engage in any of these activities, and may end
any of them at any time.
Our expenses associated with this offering, to be paid by us, are estimated to
be $200,000.
JPMorgan will make the notes available for distribution on the Internet through
a proprietary web site and/or a third-party system operated by Market Axess
Inc., an Internet-based communications technology provider. Market Axess Inc. is
providing the system as a conduit for communications between JPMorgan and its
customers and is not a party to any transactions. Market Axess Inc., a
registered broker-dealer, will receive compensation from JPMorgan based on
transactions JPMorgan conducts through the system. JPMorgan will make the notes
available to its customers through the Internet distributions, whether made
through a proprietary or third-party system, on the same terms as distributions
made through other channels.
In the ordinary course of their respective business, the underwriter and its
affiliates have engaged, and may in the future engage, in commercial banking
and/or investment banking transactions with us and our affiliates. In
particular, JPMorgan Chase Bank, an affiliate of JPMorgan, is a lender under our
revolving credit facility and will receive its proportional share of amounts due
under that facility from the proceeds of this offering.
S-10
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for us by Theresa K. Lee, our
Senior Vice President and General Counsel, and for the underwriter by Sullivan &
Cromwell, New York, New York. As of December 31, 2001, Ms. Lee held 2,291 shares
of our common stock, as well as options to purchase 26,340 additional shares of
our common stock under our stock option plans.
EXPERTS
The consolidated financial statements incorporated in this prospectus supplement
and the accompanying prospectus by reference to the Annual Report on Form 10-K
of Eastman Chemical Company for the fiscal year ended December 31, 2001 have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
S-11
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC file number is 1-12626. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room and its copy charges.
You may also inspect the information we file with the SEC at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
We are "incorporating by reference" specified documents that we file with the
SEC, which means:
- incorporated documents are considered part of this prospectus supplement and
the accompanying prospectus,
- we are disclosing important information to you by referring you to those
documents; and
- information that we file in the future with the SEC will automatically update
and supersede the information in this prospectus supplement and the accompanying
prospectus.
We incorporate by reference the documents listed below, and any documents that
we file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of this prospectus supplement until the termination of the
offering of all of the securities registered pursuant to the registration
statement of which the prospectus is a part:
- our Annual Report on Form 10-K for the year ended December 31, 2001, and
- our Current Report on Form 8-K filed February 14, 2002.
You may also request a copy of these filings, at no cost, by writing or
telephoning our investor relations department at the following address:
Eastman Chemical Company
100 N. Eastman Road
Kingsport, Tennessee 37660
Attention: Investor Relations
Telephone: (423) 229-4647
S-12
(EASTMAN LOGO)
$1,000,000,000
EASTMAN CHEMICAL COMPANY
COMMON STOCK, PREFERRED STOCK AND DEBT SECURITIES
---------------------
The Company may from time to time offer (i) Common Stock, (ii) Preferred
Stock or (iii) Debt Securities consisting of debentures, notes and/or other
unsecured evidences of indebtedness in one or more series (collectively, the
"Securities") at an aggregate initial offering price not to exceed
$1,000,000,000, or its equivalent in such other currency or in composite
currencies as may be designated by the Company at the time of offering. The
Securities may be offered separately or together, in separate series, in
amounts, at prices and on terms to be determined at the time of sale. The
accompanying Prospectus Supplement sets forth with regard to the particular
Securities with respect to which this Prospectus is being delivered, the terms
of the offering thereof, including (i) in the case of Common Stock, the number
of shares, (ii) in the case of Preferred Stock, with respect to the relevant
class or series, the title, maximum number of shares, rate, if any (which may be
fixed or variable), time of payment, and relative priority of any dividends, any
terms for redemption at the option of the Company or the holder, any terms for
sinking fund payments, any terms for conversion or exchange into other
securities, any voting rights, any restrictions on further issuances, and any
other terms of the Preferred Stock, and (iii) in the case of Debt Securities,
the title, aggregate principal amount, denominations (which may be in United
States dollars, in any other currency or in composite currencies), maturity,
rate, if any (which may be fixed or variable), and time of payment of any
interest, any terms for redemption at the option of the Company or the holder,
any terms for sinking fund payments, any listing on a securities exchange and
the initial public offering price and any other terms in connection with the
offering and sale of such Debt Securities.
The Company may sell Securities to or through underwriters or dealers, and
also may sell Securities directly to other purchasers or through agents. The
accompanying Prospectus Supplement sets forth the names of any underwriters,
dealers or agents employed by the Company in the sale of the Securities in
respect of which this Prospectus is being delivered, the principal amounts or
number of shares, if any, to be purchased by such underwriters or dealers and
the compensation, if any, of such underwriters, dealers or agents. If the
Company, directly or through agents, solicits offers to purchase Securities, the
Company reserves the sole right to accept and, together with its agents, to
reject in whole or in part any proposed purchase of Securities. See "Plan of
Distribution". Any underwriters, dealers or agents participating in the offering
may be deemed "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"). See "Plan of Distribution" for possible
indemnification arrangements for such underwriters, dealers, agents and their
controlling persons.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
This Prospectus may not be used to consummate the sale of any Securities
unless accompanied by a Prospectus Supplement.
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The date of this Prospectus is September 25, 1998.
CERTAIN PERSONS PARTICIPATING IN AN OFFERING OF SECURITIES MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH SUCH OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN
OF DISTRIBUTION".
AVAILABLE INFORMATION
Eastman Chemical Company (the "Company") has filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Securities offered hereby. This Prospectus, which forms a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information about the Company and the Securities,
reference is hereby made to the Registration Statement and to such exhibits and
schedules. Statements contained herein concerning the provisions of any document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
In addition, the Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Reports, proxy and information 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 Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Northeast Regional Office, Seven World Trade Center, Suite 1300,
New York, New York 10048, and Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material or
any part thereof may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Certain of such reports, proxy statements and other information are also
available over the Internet at http://www.sec.gov. The Company's Common Stock is
listed and traded on the New York Stock Exchange, Inc. (the "NYSE"). Reports,
proxy and information statements and other information concerning the Company
can also be inspected at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company has filed the following documents with the Commission and
hereby incorporates such documents by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "Form 10-K");
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998 (the "Form 10-Q"); and
(3) The description of the Company's capital stock in the Company's
Form 10/A, filed with the Commission on December 9, 1993 (the "Form 10/A").
Each document or report subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and
prior to the termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document. Any statement contained
herein, or in a document all or a portion of which is incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent
2
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference, other than
certain exhibits to such documents. Written requests should be directed to:
Eastman Chemical Company, P.O. Box 431, Kingsport, Tennessee 37662-5371,
Attention: Corporate Information Center (telephone: (423) 229-1150).
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
net proceeds from the sale of the Securities will be used for general corporate
purposes, which may include additions to working capital, refinancing existing
indebtedness, capital expenditures, and possible acquisitions. The Company has
not allocated a specific portion of the net proceeds for any particular use at
this time. Specific information concerning the use of proceeds from the sale of
any Securities may be included in the Prospectus Supplement relating to such
Securities.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges and earnings to combined fixed charges and preferred
stock dividends for the indicated periods:
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ---------------------------------
JUNE 30, 1998 1997 1996 1995 1994 1993
---------------- ---- ---- ---- ---- -----
Ratio of earnings to fixed
charges.......................... 4.2x 3.7x 6.1x 9.7x 6.3x 11.2x
Ratio of earnings to fixed charges
and preferred stock dividends.... 4.2x 3.7x 6.1x 9.7x 6.3x 11.2x
For purposes of computing these ratios, earnings represents income from
continuing operations before income taxes plus interest expense, the interest
component of rental expense and amortization of capitalized interest. Fixed
charges consist of interest expense, one-third of rent expense, which
approximates the interest portion of rent expense, and capitalized interest. At
this time, no preferred stock dividends are being paid as there are no shares of
preferred stock outstanding.
The historical information for 1993, as presented above, was determined
during the period when the Company was a wholly owned chemical business of
Eastman Kodak Company ("Kodak"). Pro forma ratio of earnings to fixed charges,
giving effect to the spin-off of the Company from Kodak as of December 31, 1993,
would approximate 3.7x, reflecting the assumption of $1.8 billion of new
borrowings at a 6% annual interest rate, and adjustments for pension,
post-retirement and certain other employee benefit costs. These costs were not
allocated to the Company by Kodak during 1993 and therefore are not reflected in
the historical information presented above.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The Company is authorized to issue up to 400,000,000 shares of capital
stock, of which 50,000,000 may be shares of preferred stock, par value $.01 per
share ("Preferred Stock"), and 350,000,000 may be shares of common stock, par
value $.01 per share ("common stock" and, together with attached Rights, as
defined below, "Common Stock"). As of August 28, 1998, 79,246,594 shares of
Common Stock and no shares of Preferred Stock were issued and outstanding.
3
The following descriptions of the capital stock of the Company are
summaries, and as such do not purport to be complete and are subject, and
qualified in their entirety by reference, to the more complete descriptions
contained in (i) the Amended and Restated Certificate of Incorporation of the
Company (the "Certificate of Incorporation"), (ii) the Amended and Restated
By-laws of the Company (the "By-laws"), and (iii) the Company's Stockholder
Protection Rights Agreement (the "Rights Agreement"), copies of each of which
are incorporated by reference as exhibits to the Registration Statement of which
this Prospectus is a part.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders. Holders of Common Stock do not have cumulative
voting rights in the election of directors. Holders of Common Stock do not have
any preemptive right to subscribe for or purchase any securities of any class or
kind of the Company.
Holders of Common Stock do not have any subscription, redemption or
conversion privileges. Subject to the preferences or other rights of any
Preferred Stock that may be issued from time to time, holders of Common Stock
are entitled to participate ratably in dividends on the Common Stock as declared
by the Board of Directors. Holders of Common Stock are entitled to share ratably
in all assets available for distribution to stockholders in the event of
liquidation or dissolution of the Company, subject to distribution of the
preferential amount, if any, to be distributed to holders of Preferred Stock.
PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors, without
any vote or action by the holders of Common Stock, to issue up to 50,000,000
shares of Preferred Stock from time to time in one or more classes or series.
Other than the participating Preferred Stock relating to the Rights described in
"-- Rights Plan" below, no class or series of Preferred Stock has been
established, and no shares of Preferred Stock have been issued.
Subject to limitations prescribed by law, the Board of Directors is
authorized to determine the rights, preferences, limitations and other terms of
any class or series of Preferred Stock. Issuances of Preferred Stock would be
subject to the applicable rules of the NYSE or other organizations on whose
systems the stock of the Company may then be quoted or listed. Depending upon
the terms of Preferred Stock established by the Board of Directors, any or all
classes or series of Preferred Stock may have preference over the Common Stock
with respect to dividends and other distributions and upon liquidation of the
Company. Issuance of any such shares with voting powers would dilute the voting
power of the outstanding Common Stock. Except as otherwise provided in an
applicable Prospectus Supplement, holders of Preferred Stock will not have any
preemptive right to subscribe for or purchase any securities of any class or
kind of the Company.
A Prospectus Supplement relating to any class or series of Preferred Stock
offered thereby will describe the following terms of such class or series of
Preferred Stock: (i) the designation of such class or series and the number of
shares offered; (ii) the initial public offering price at which such shares will
be issued; (iii) the dividend rate of such class or series, the conditions and
dates upon which such dividends shall be payable, and whether such dividends
shall be cumulative or noncumulative; (iv) the relative ranking and preferences
of such class or series as to dividend rights and rights upon any liquidation,
dissolution or winding up of the affairs of the Company; (v) any redemption or
sinking fund provisions; (vi) any conversion or exchange rights of the holder or
the Company; (vii) any voting rights; (viii) any restrictions on further
issuances; (ix) any listing of such class or series on any securities exchange;
and (x) any other terms of such class or series.
RIGHTS PLAN
Each share of the Company's common stock has attached to it one right
("Right") issued pursuant to the Rights Agreement. Each Right entitles its
registered holder to purchase one one-hundredth of a share
4
of a participating Preferred Stock, designed to have economic and voting terms
similar to those of one share of common stock, for $120.00 (the "Exercise
Price"), subject to adjustment, after the earlier of (i) the tenth business day
(subject to extension) after commencement of a tender or exchange offer which,
if consummated, would result in a person becoming the beneficial owner of 15
percent or more of the outstanding shares of Common Stock (an "Acquiring
Person"), and (ii) the tenth business day (subject to prior adjustment) after
the first date (the "Flip-in Date") of a public announcement by the Company that
a person has become an Acquiring Person, other than as a result of a Flip-over
Transaction or Event (as defined below) (in either such case, the "Separation
Time"). The Rights will not trade separately from the shares of common stock
unless and until the Separation Time. Until a Right is exercised or exchanged
pursuant to the terms of the Rights Agreement, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
The Rights will not be exercisable until the business day following the
Separation Time. The Rights will expire on the earliest of (i) the Exchange Time
(as defined below), (ii) the close of business on December 13, 2003, (iii) the
date on which the Rights are redeemed or terminated as described below and (iv)
the merger of the Company into another corporation pursuant to an agreement
entered into when there is no Acquiring Person (in any such case, the
"Expiration Time"). The Exercise Price and the number of Rights outstanding, or
in certain circumstances the securities purchasable upon exercise of the Rights,
are subject to adjustment upon the occurrence of certain events.
In the event that prior to the Expiration Time a Flip-in Date occurs, the
Company will take such action as shall be necessary to ensure and provide that
each Right (other than Rights beneficially owned by an Acquiring Person or any
affiliate, associate or transferee thereof, which Rights shall become void)
shall constitute the right to purchase from the Company that number of shares of
common stock having an aggregate market price equal to twice the Exercise Price
for an amount in cash equal to the then current Exercise Price. In addition, the
Board of Directors of the Company may, at its option, at any time after a
Flip-in Date and prior to the time that an Acquiring Person becomes the
beneficial owner of more than 50 percent of the outstanding shares of Common
Stock, elect to exchange all of the then outstanding Rights for shares of common
stock at an exchange ratio of one share of common stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date of the Separation Time (the "Exchange Ratio").
Immediately upon such action by the Board of Directors (the "Exchange Time"),
the right to exercise the Rights will terminate and each Right will thereafter
represent only the right to receive a number of shares of common stock equal to
the Exchange Ratio. If the Company becomes obligated to issue shares of common
stock upon exercise of or in exchange for Rights, the Company, at its option,
may substitute therefor shares of Participating Preferred Stock, at a rate of
one one-hundredth of a share of Participating Preferred Stock for each share of
common stock so issuable.
In the event that prior to the Expiration Time the Company enters into,
consummates or permits to occur a transaction or series of transactions after
the time an Acquiring Person has become such in which, directly or indirectly,
(i) the Company shall consolidate or merge or participate in a binding share
exchange with any other Person if, at the time of the consolidation, merger or
share exchange or at the time the Company enters into an agreement with respect
to such consolidation, merger or share exchange, the Acquiring Person controls
the Board of Directors of the Company and any term of or arrangement concerning
the treatment of shares of capital stock in such merger, consolidation or share
exchange relating to the Acquiring Person is not identical to the terms and
arrangements relating to other holders of Common Stock or (ii) the Company shall
sell or otherwise transfer (or one or more of its subsidiaries shall sell or
otherwise transfer) assets (A) aggregating more than 50% of the assets (measured
by either book value or fair market value) or (B) generating more than 50% of
the operating income or cash flow, of the Company and its subsidiaries (taken as
a whole) to any other Person (other than the Company or one or more of its
wholly owned subsidiaries) or to two or more such Persons which are affiliated
or otherwise acting in concert, if, at the time of such sale or transfer of
assets or at the time the Company (or any such subsidiary) enters into an
agreement with respect to such sale or transfer, the Acquiring
5
Person controls the Board of Directors of the Company (a "Flip-over Transaction
or Event"), the Company shall take such action as shall be necessary to ensure,
and shall not enter into, consummate or permit to occur such Flip-over
Transaction or Event until it shall have entered into a supplemental agreement
with the Person engaging in such Flip-over Transaction or Event or the parent
corporation thereof (the "Flip-over Entity"), for the benefit of the holders of
the Rights, providing, that upon consummation or occurrence of the Flip-over
Transaction or Event (i) each Right shall thereafter constitute the right to
purchase from the Flip-over Entity, upon exercise thereof in accordance with the
terms of the Rights Agreement, that number of shares of common stock of the
Flip-over Entity having an aggregate Market Price on the date of consummation or
occurrence of such Flip-over Transaction or Event equal to twice the Exercise
Price for an amount in cash equal to the then current Exercise Price and (ii)
the Flip-over Entity shall thereafter be liable for, and shall assume, by virtue
of such Flip-over Transaction or Event and such supplemental agreement, all the
obligations and duties of the Company pursuant to the Rights Agreement. For
purposes of the foregoing description, the term "Acquiring Person" shall include
any Acquiring Person and its Affiliates and Associates counted together as a
single Person.
The Rights are redeemable by the Company at $0.01 per Right, subject to
adjustment upon the occurrence of certain events, at any date prior to the date
they become exercisable, and, in certain events, may be canceled and terminated
without any payment to holders. The Rights have no voting rights and are not
entitled to dividends.
The Rights will not prevent a takeover of the Company. The Rights, however,
may cause substantial dilution to a person or group that acquires 15 percent or
more of the Common Stock unless the Rights are first redeemed or terminated by
the Board of Directors of the Company. Nevertheless, the Rights should not
interfere with a transaction that is in the best interests of the Company and
its stockholders because the Rights can be redeemed or terminated as hereinabove
described, before the consummation of such transaction.
The complete terms of the Rights are set forth in the Rights Agreement. The
Rights Agreement is incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part. A copy of the Rights Agreement can
be obtained from the Company as described under "Incorporation of Certain
Documents By Reference" or upon written request to the Rights Agent, First
Chicago Trust Company of New York, Suite 4660, 525 Washington Boulevard, Jersey
City, New Jersey 07310, Attn: Corporate Actions Department.
CERTAIN PROVISIONS AFFECTING CONTROL OF THE COMPANY
GENERAL
The provisions of the Certificate of Incorporation, the Company's Bylaws
and Delaware statutory law described in this section may delay or make more
difficult acquisitions or changes of control of the Company not approved by the
Company's Board of Directors. See also "-- Rights Plan" above. Such provisions
could have the effect of discouraging third parties from making proposals
involving an acquisition or change of control of the Company, although such
proposals, if made, might be considered desirable by a majority of the Company's
stockholders. Such provisions may also have the effect of making it more
difficult for third parties to cause the replacement of the current management
of the Company without the concurrence of the Board of Directors.
NUMBER OF DIRECTORS; REMOVAL; VACANCIES
The Certificate of Incorporation and the Bylaws provide that the number of
directors shall be determined from time to time exclusively by a vote of a
majority of the Company's Board of Directors then in office. The Certificate of
Incorporation also provides that the Company's Board shall have the exclusive
right to fill vacancies, including vacancies created by expansion of the Board.
The Certificate of Incorporation further provides that directors may be removed
only for cause and only by the affirmative vote of the holders of at least
66 2/3% of the voting power of all of the shares of the Company's capital stock
then entitled to vote in the election of directors. This provision, in
conjunction with the provision of
6
the Certificate of Incorporation authorizing the Board to fill vacant
directorships, could prevent stockholders from removing incumbent directors
without cause and filling the resulting vacancies with their own nominees.
CLASSIFIED BOARD OF DIRECTORS
The Certificate of Incorporation provides for the Company's Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one third of the Company's Board of
Directors are elected each year. This provision could prevent a party who
acquires control of a majority of the outstanding voting stock from obtaining
control of the Company's Board of Directors until the second annual stockholders
meeting following the date the acquiror obtains the controlling stock interest,
could have the effect of discouraging a potential acquiror from making a tender
offer or otherwise attempting to obtain control of the Company and could thus
increase the likelihood that incumbent directors will retain their positions.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The Certificate of Incorporation provides that stockholder action can be
taken only at an annual or special meeting of stockholders and cannot be taken
by written consent in lieu of a meeting. The Certificate of Incorporation also
provides that special meetings of the stockholders can only be called pursuant
to a resolution approved by a majority of the Company's Board of Directors then
in office. Stockholders are not permitted to call a special meeting or to
require the Company's Board of Directors to call a special meeting of
stockholders. These provisions could delay a stockholder vote on certain
matters, such as business combinations and removal of directors, and could have
the effect of discouraging a potential acquiror from making a tender offer.
ADVANCE NOTICE FOR RAISING BUSINESS OR MAKING NOMINATIONS AT MEETINGS
The Bylaws establish an advance notice procedure for stockholder proposals
to be brought before a meeting of stockholders of the Company and for
nominations by stockholders of candidates for election as directors at an annual
meeting or a special meeting at which directors are to be elected. As described
more fully in the Bylaws, only such business may be conducted at a meeting of
stockholders as has been brought before the meeting by, or at the direction of,
the Company's Board of Directors, or by a stockholder who has given to the
Secretary of the Company timely written notice, in proper form, of the
stockholder's intention to bring that business before the meeting. The presiding
officer at such meeting has the authority to make such determinations. Only
persons who are nominated by, or at the direction of, the Company's Board of
Directors, or who are nominated by a stockholder who has given timely written
notice, in proper form, to the Secretary prior to a meeting at which directors
are to be elected will be eligible for election as directors of the Company.
To be timely, notice of nominations or other business to be brought before
an annual meeting must be received by the Secretary of the Company not later
than 60 days prior to the date of such annual meeting. The notice of any
nomination by a stockholder of any individual for election as a director must
set forth certain specified information, as required by the Bylaws, and must
contain the consent of each such person to serve as a director if elected. The
person submitting the notice of nomination, and any person acting in concert
with such person, must provide their names and business addresses and certain
other information.
These provisions could make it more difficult for stockholders to raise
matters affecting control of the Company, including tender offers, business
combinations or the election or removal of directors, for stockholder vote.
AMENDMENTS TO BYLAWS
The Certificate of Incorporation provides that the Board of Directors or
the holders of at least 66 2/3% of the voting power of all shares of the
Company's capital stock then entitled to vote generally in the election of
directors have the power to amend or repeal the Company's Bylaws. This provision
could make
7
it difficult for stockholders to amend or repeal any provisions of the Bylaws
adopted by the Board of Directors of the Company or to adopt any Bylaws
provisions opposed by the Board of Directors.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
Any proposal to amend, alter, change or repeal any provision of the
Certificate of Incorporation requires approval by the affirmative vote of both a
majority of the members of the Company's Board of Directors then in office and a
majority vote of the voting power of all of the shares of the Company's capital
stock entitled to vote generally in the election of directors. This provision
could make it difficult for stockholders to adopt, amend or repeal any provision
of the Certificate of Incorporation, including a provision affecting control of
the Company.
PREFERRED STOCK AND ADDITIONAL COMMON STOCK
Under the Certificate of Incorporation, the Company's Board of Directors
has the authority to provide by Board resolution for the issuance of shares of
one or more classes or series of preferred stock. The Company's Board of
Directors is authorized to fix by resolution the terms and conditions of each
such other class or series. See "-- Preferred Stock." The authorized shares of
the Company's Preferred Stock, as well as authorized but unissued shares of
Common Stock of the Company, are available for issuance without further action
by the Company's stockholders, unless stockholder action is required by
applicable law or the rules of the New York Stock Exchange or any other stock
exchange on which any class or series of the Company's stock may then be listed.
These provisions give the Company's Board of Directors the power to approve
the issuance of a class or series of Preferred Stock, or additional shares of
Common Stock, of the Company that could, depending on its terms, either impede
or facilitate the completion of a merger, tender offer or other takeover
attempt. For example, the issuance of new shares might impede a business
combination if the terms of those shares include voting rights which would
enable a holder to block business combinations; the issuance of new shares might
facilitate a business combination if those shares have general voting rights
sufficient to cause an applicable percentage vote requirement to be satisfied.
CONSTITUENCY OR STAKEHOLDER PROVISION
The Certificate of Incorporation authorizes the Board of Directors in its
discretion in determining what is in the best interests of the Company and its
stockholders to consider, in addition to the long-term and short-term interests
of the stockholders, (i) the social and economic effects of the matter being
considered on employees, customers, creditors and communities in which the
Company operates and (ii) in evaluating a potential business combination such
matters as the business and financial condition of the acquiror, the competence
and integrity of the acquiror's management, and prospects for successful
conclusion of the business combination being considered.
This provision gives the Company's Board of Directors the authority to take
into account factors other than the financial interests of the stockholders and
could result in the rejection of a business combination or tender offer even if
proposed at a price exceeding market value.
DELAWARE BUSINESS COMBINATION STATUTE
Section 203 of the Delaware General Corporation Law, as amended ("Section
203"), provides that, subject to certain exceptions specified therein, an
"interested stockholder" of a Delaware corporation shall not engage in any
business combination with the corporation for a three-year period following the
time that such stockholder becomes an "interested stockholder" unless (i) prior
to such time, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an "interested stockholder," (ii) upon consummation of the transaction
which resulted in the stockholder becoming an "interested stockholder," the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares), or
(iii) on or subsequent to such time, the business combination is approved by the
board
8
of directors of the corporation and authorized at an annual or special meeting
of stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the "interested stockholder." Except as
otherwise specified in Section 203, an "interested stockholder" is defined to
include (x) any person that is the owner of 15% or more of the outstanding
voting stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation at any time within three years immediately prior to the relevant
time and (y) the affiliates and associates of any such person.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The Company's Certificate of Incorporation does not exclude the
Company from the restrictions imposed under Section 203. The provisions of
Section 203 may encourage companies interested in acquiring the Company to
negotiate in advance with the Company's Board of Directors, since the
stockholder approval requirement would be avoided if a majority of the directors
then in office approve either the business combination or the transaction which
results in the stockholder becoming an interested stockholder. Such provisions
also may have the effect of preventing changes in the management of the Company.
It is possible that such provisions could make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best
interests.
Copies of the Certificate of Incorporation and the Bylaws are included in
the Registration Statement of which this Prospectus is a part and are
incorporated herein by reference. The foregoing description of certain
provisions of the Certificate of Incorporation and the Bylaws does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, the Certificate of Incorporation and the Bylaws, including the definitions
of certain terms in each respective document.
TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company of New York is the transfer agent and registrar
for the shares of the Common Stock.
9
DESCRIPTION OF DEBT SECURITIES
Any debt securities offered hereby (the "Debt Securities") are to be issued
under an indenture, dated as of January 10, 1994 (the "Indenture"), between the
Company and The Bank of New York, as Trustee (the "Trustee"), a copy of which is
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus is a part. The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject, and are qualified in
their entirety by reference, to all the provisions of the Indenture, including
the definitions therein of certain terms. Wherever particular sections or
defined terms of the Indenture are referred to herein, such sections or defined
terms are incorporated by reference herein.
The following sets forth certain general terms and provisions of any Debt
Securities offered hereby. The particular terms of the Debt Securities offered
by any Prospectus Supplement (the "Offered Debt Securities") will be described
in the Prospectus Supplement relating to such Offered Debt Securities (the
"Applicable Prospectus Supplement").
GENERAL
The Indenture provides that Debt Securities in separate series may be
issued thereunder from time to time without limitation as to aggregate principal
amount. The Company may specify a maximum aggregate principal amount for the
Debt Securities of any series. (Section 301). Such Debt Securities may have such
terms and provisions which are not inconsistent with the Indenture, including as
to maturity, principal and interest, as the Company may determine. All Debt
Securities issued under the Indenture will be unsecured senior obligations of
the Company and will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Company.
The Applicable Prospectus Supplement will describe the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt Securities; (2)
any limit on the aggregate principal amount of the Offered Debt Securities; (3)
the Person to whom any interest on the Offered Debt Securities will be payable,
if other than the person in whose name that Debt Security (or one or more
Predecessor Debt Securities) is registered at the close of business on the
Regular Record Date for such interest; (4) the date or dates on which the
principal of and premium, if any, on the Offered Debt Securities is payable or
the method of determination thereof; (5) the rate or rates at which the Offered
Debt Securities will bear interest, if any, the date or dates from which any
such interest will accrue or the method by which such date or dates shall be
determined, the Interest Payment Dates on which any such interest will be
payable and the Regular Record Date for interest payable on any Interest Payment
Date; (6) the place or places where the principal of, premium, if any, and
interest on the Offered Debt Securities will be payable; (7) the period or
periods within which, the price or prices at which, the currency or currencies
(including currency units) in which and the other terms and conditions upon
which the Offered Debt Securities may be redeemed, in whole or in part, at the
option of the Company; (8) the obligation, if any, of the Company to redeem or
purchase the Offered Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods within
which, the price or prices at which and the other terms and conditions upon
which the Offered Debt Securities will be redeemed or purchased, in whole or in
part, pursuant to such obligation; (9) if other than denominations of $1,000 and
any integral multiple thereof, the denominations in which the Offered Debt
Securities will be issuable; (10) the currency, currencies or currency units in
which payment of the principal of and any premium and interest on any Offered
Debt Securities will be payable if other than the currency of the United States
of America; (11) if the amount of payments of principal of or any premium or
interest on any Offered Debt Securities may be determined with reference to an
index, formula or other method, the index, formula or other method by which such
amounts will be determined; (12) if the principal of or any premium or interest
on any Offered Debt Securities is to be payable, at the election of the Company
or a Holder thereof, in one or more currencies or currency units other than that
or those in which the Debt Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on the Offered Debt Securities as to which such election is
made will be payable, and the periods within which and the other terms and
conditions upon which such election is to
10
be made; (13) if other than the principal amount thereof, the portion of the
principal amount of the Offered Debt Securities that will be payable upon
declaration of acceleration of the Maturity thereof or the method by which such
portion may be determined; (14) the applicability of the provisions described
under "Defeasance and Covenant Defeasance"; (15) if the Offered Debt Securities
will be issuable only in the form of a Global Security as described under
"Book-Entry Securities", the depositary or its nominee with respect to the
Offered Debt Securities, if other than The Depository Trust Company, and the
circumstances under which the Global Security may be registered for transfer or
exchange or authenticated and delivered in the name of a Person other than the
depositary or its nominee; and (16) any other terms of the Offered Debt
Securities. (Section 301).
The Debt Securities may be offered and sold at a substantial discount below
their stated principal amount. Federal income tax consequences and other special
considerations applicable to any such Original Issue Discount Securities will be
described in the Applicable Prospectus Supplement.
FORM, EXCHANGE AND TRANSFER
The Debt Securities of each series will be issued in fully registered form,
without coupons, and, unless otherwise specified in the Applicable Prospectus
Supplement, in denominations of $1,000 and any integral multiple thereof.
(Section 302). At the option of the Holder, subject to the terms of the
Indenture, Debt Securities of any series will be exchangeable for other Debt
Securities of such series of any authorized denomination and of a like tenor and
aggregate principal amount. Subject to the terms of the Indenture and the limits
applicable to Global Securities, Debt Securities may be presented for exchange
as provided above or for registration of transfer (duly endorsed or with the
form of transfer endorsed thereon duly executed) at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose. No service charge will be made for any registration of transfer or
exchange of Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Section 305). Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request. The
Company has appointed the Trustee as Security Registrar. The Company may at any
time designate additional transfer agents or rescind the designation of any
transfer agent or approve a change in the office through which any transfer
agent acts, except that the Company will be required to maintain a transfer
agent in each place of payment for the Debt Securities of each series. (Section
1002).
If the Debt Securities of any series are to be redeemed in part, the
Company will not be required to (i) issue, register the transfer of or exchange
any Debt Security of such series during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of any such
Debt Security that may be selected for redemption and ending at the close of
business on the day of such mailing or (ii) register the transfer of or exchange
the Debt Security selected for redemption, in whole or in part, except the
unredeemed portion of the Debt Security being redeemed in part. (Section 305).
NOTICES
Notices to Holders of Debt Securities will be given by mail to the
addresses of such Holders as they may appear in the Security Register. (Sections
101 and 106).
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Debt Security is registered as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the purpose
of making payment and for all other purposes. (Section 308).
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the law of the State of New York. (Section 112).
11
BOOK-ENTRY SYSTEM
Some or all of the Debt Securities of any series may be represented by one
or more global securities (each, a "Global Security") registered in the name of
The Depository Trust Company, New York, New York ("DTC") or its nominee, as
depositary. Upon the issuance of a Global Security, DTC or its nominee will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by such Global Security to
the accounts of the participants. The accounts to be credited shall be
designated by the Underwriters. Ownership of beneficial interests in such Global
Securities will be limited to institutions that have accounts with DTC or its
nominee ("participants") and to persons that may hold interests through
participants. Ownership of beneficial interests by participants in such Global
Securities will be shown on, and the transfer of those ownership interests will
be effected only through, records maintained by such participants. The laws of
some jurisdictions may require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and laws
may impair the ability to transfer beneficial interests in a Global Security.
Notwithstanding any provision of the Indentures or of any series of Debt
Securities, no Global Security may be exchanged in whole or in part for Debt
Securities registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than DTC or any nominee of
DTC unless (i) DTC has notified the Company that it is unwilling or unable to
continue as depositary for such Global Security or has ceased to be qualified to
act as such as required by the Indenture, (ii) there shall have occurred and be
continuing an Event of Default with respect to the Debt Securities represented
by such Global Security or (iii) there shall exist such other circumstances, in
addition to or in lieu of those described above, as may be described in the
applicable Prospectus Supplement. All Debt Securities issued in exchange for a
Global Security or any portion thereof will be registered in such names as DTC
may direct.
As long as DTC or its nominee is a registered holder and owner of such
Global Security, DTC or such nominee, as the case may be, will be considered the
sole owner and holder of the related Debt Securities for all purposes of such
Debt Securities and for all purposes under the Indenture. Except in the limited
circumstances referred to above, owners of beneficial interests in any such
Global Securities will not be entitled to have the Debt Securities represented
by such Global Securities registered in their names, will not receive or be
entitled to receive physical delivery of certificated Debt Securities in
definitive form and will not be considered to be the owners or holders of any
Debt Securities under the Indenture or the Debt Securities. Payment of principal
of, interest, if any, and premium, if any, on Debt Securities represented by a
Global Security registered in the name of or held by DTC or its nominee will be
made to DTC or its nominee, as the case may be, as the registered owner or
holder of such Global Security.
Payments, transfers, exchanges and other matters relating to beneficial
interests in a Global Security may be subject to various policies and procedures
adopted by DTC from time to time. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in a Global Security
for any Debt Securities or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests or for any other aspect of the
relationship between DTC and its participants or the relationship between such
participants and the owners of beneficial interests in a Global Security owning
through such participants.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the Applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to the
Person in whose name such Debt Security (or one or more Predecessor Debt
Securities) is registered at the close of business on the Regular Record Date
for such interest. (Section 307).
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
the Company may designate for such purpose from time to time, except that at the
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option of the Company payment of any interest may be made by check mailed to the
address of the Person entitled thereto as such address appears in the Security
Register. Unless otherwise indicated in the Applicable Prospectus Supplement,
the corporate trust office of the Trustee in The City of New York will be
designated as the Company's sole Paying Agent for payments with respect to Debt
Securities of each series. Any other Paying Agents initially designated by the
Company for the Debt Securities of a particular series will be named in the
applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for the Debt Securities of a particular series. (Section 1002).
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to the Company, and the Holder of such
Debt Security thereafter may look only to the Company for payment thereof.
(Section 1003).
COVENANTS
The Indenture contains, among others, the following covenants:
MAINTENANCE OF PROPERTIES
The Company will cause all properties material to the conduct of its
business or the business of any Subsidiary (as defined below) to be maintained
and kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times. However,
this covenant will not prohibit the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business or the business of any
Subsidiary and not disadvantageous in any material respect to the holders of the
Debt Securities.
RESTRICTIONS ON SECURED DEBT
If the Company or any Restricted Subsidiary (as defined below) shall incur
or guarantee any Debt (as defined) secured by a Mortgage (as defined) on any
Principal Property (as defined below) or on any shares of stock of or Debt of
any Restricted Subsidiary, the Company will secure the Debt Securities equally
and ratably with (or prior to) such secured Debt, unless after giving effect
thereto, the aggregate amount of all such Debt so secured, together with all
Attributable Debt (as defined below) in respect of sale and leaseback
transactions involving Principal Properties (see "Restrictions on Sales and
Leasebacks" below), would not exceed 10% of the Consolidated Net Tangible Assets
of the Company and its consolidated Subsidiaries. This restriction will not
apply to, and there will be excluded from secured Debt in any computation under
such restriction, Debt secured by (a) Mortgages on property, shares of stock or
Debt existing on the date of the Indenture, (b) Mortgages securing only Debt
Securities issued under the Indenture, (c) Mortgages on property of, or on any
shares of stock of or Debt of, any Person, which Mortgages are existing at the
time (i) such Person became a Restricted Subsidiary, (ii) such Person is merged
into or consolidated with the Company or any Subsidiary or (iii) another
Subsidiary merges into or consolidates with such Person (in a transaction in
which such Person becomes a Restricted Subsidiary), which Mortgage was not
incurred in anticipation of such transaction and was outstanding prior to such
transaction, (d) Mortgages in favor of the Company or a Subsidiary, (e)
Mortgages in favor of governmental bodies to secure progress or advance
payments, (f) Mortgages of property, shares of stock or Debt existing at the
time of acquisition thereof (including acquisition through merger or
consolidation), (g) certain purchase money Mortgages and Mortgages to secure the
construction cost of property, and (h) any extension, renewal or replacement of
any Mortgage referred to in the foregoing clauses (a)through (g), inclusive.
(Section 1008).
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RESTRICTIONS ON SALES AND LEASEBACKS
Neither the Company nor any Restricted Subsidiary may enter into any sale
and leaseback transaction involving any Principal Property, completion of
construction and commencement of full operation of which has occurred more than
180 days prior thereto, unless (a) the Company or such Restricted Subsidiary
could create Debt secured by a Mortgage on such property as provided for above
under the caption "Restrictions on Secured Debt" in an amount equal to the
Attributable Debt with respect to the sale and leaseback transaction without
equally and ratably securing the Debt Securities of each series issued under the
Indenture, or (b) the net proceeds of the sale or transfer of the Principal
Property leased pursuant to such arrangement exceeds the fair market value of
such Principal Property and the Company, within 180 days, applies to the
retirement of its Funded Debt (as defined) an amount not less than the greater
of (i) the net proceeds of the sale of the Principal Property leased pursuant to
such arrangement or (ii) the fair market value of the Principal Property so
leased (subject to credits for certain voluntary retirements of Funded Debt).
This restriction will not apply to any sale and leaseback transaction (a)
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries or (b) involving the taking back of a lease for a period, including
renewals, of less than three years. (Section 1009).
RESTRICTIONS ON SUBSIDIARY DEBT
The Company may not permit any Restricted Subsidiary to incur or assume any
Debt except (a) Debt that is or could be secured by a Mortgage permitted
pursuant to the restrictions described above under the caption "Restrictions on
Secured Debt"; (b) Debt that is outstanding on the date of the Indenture; (c)
Debt that is issued to and held by the Company or another Restricted Subsidiary;
(d) Debt incurred by a Person prior to the time (i) such person became a
Restricted Subsidiary, (ii) such Person is merged into or consolidated with the
Company or any Subsidiary or (iii) another Subsidiary merges into or
consolidates with such Person (in a transaction in which such Person becomes a
Restricted Subsidiary), which Debt was not incurred in anticipation of such
transaction and was outstanding prior to such transaction; (e) Debt that is
incurred in the ordinary course of business and that matures within one year;
and (f) extensions, renewals or replacements of any of the foregoing. The
Company may permit a Restricted Subsidiary to incur Debt as described in clauses
(b) through (f) of the preceding sentence only to the extent that the aggregate
amount of all such Debt of all Restricted Subsidiaries does not exceed 10% of
Consolidated Net Tangible Assets. (Section 1010).
The Company does not currently have any Restricted Subsidiaries that would
be subject to this limitation.
CONSOLIDATION, MERGER AND CERTAIN SALES OF ASSETS
The Company, without the consent of the Holders of any Outstanding Debt
Securities, may consolidate with or merge into, or convey, transfer or lease its
properties and assets substantially as an entirety to, any Person, and may
permit any Person to merge into, or convey, transfer or lease its properties and
assets substantially as an entirety to, the Company, provided that (i) any
successor Person must be a corporation, partnership, trust or other entity
organized and validly existing under the laws of any domestic jurisdiction and
must assume the Company's obligations on the Debt Securities and under the
Indenture, (ii) after giving effect to the transaction no Event of Default, and
no event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing and (iii) certain other
conditions are met. (Article Eight).
CERTAIN DEFINITIONS
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof, discounted from the
respective due dates thereof to such date at the weighted average rate per annum
borne by the Debt Securities compounded annually. The net amount of rent
required to be paid under any such lease for any such
14
period shall be the aggregate amount of the rent payable by the lessee with
respect to such period after excluding amounts required to be paid on account of
maintenance and repairs, insurance, taxes, assessments, water rates and similar
charges. In the case of any lease which is terminable by the lessee upon the
payment of penalty, such net amount shall also include the amount of such
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities, except for (i) notes and loans payable,
(ii) current maturities of long-term debt and (iii) current maturities of
obligations under capital leases and (b) goodwill and other intangibles.
"Principal Property" means any single parcel of real estate, any
manufacturing plant or warehouse owned or leased by the Company or any
Subsidiary which is located within the United States and the gross book value
(without reduction of any depreciation reserves) of which on the date as of
which the determination is being made exceeds 1% of Consolidated Net Tangible
Assets, other than any manufacturing plant or warehouse or portion thereof (a)
which is a pollution control or other facility financed by obligations issued by
a state or local government unit, or (b) which, in the good faith opinion of the
Board of Directors of the Company as evidenced by a resolution of the Board of
Directors of the Company, is not of material importance to the total business
conducted by the Company and its Subsidiaries as an entirety.
"Restricted Subsidiary" means any wholly owned Subsidiary of the Company
substantially all of the assets of which are located in the United States
(excluding territories or possessions) and which owns a Principal Property,
except for a Subsidiary that is principally engaged in the business of
financing, of owning, buying, selling, leasing, dealing in or developing real
property, or of exporting goods or merchandise from or importing goods or
merchandise into the United States.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock that ordinarily
has voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to the Debt Securities of any series: (a) failure to pay
principal of or any premium on any Debt Security of the same series when due;
(b) failure to pay any interest on any Debt Securities of that series when due,
continued for 30 days; (c) failure to perform any other covenant of the Company
in the Indenture, continued for 90 days after written notice has been given by
the Trustee, or the Holders of at least 10% in principal amount of the
Outstanding Debt Securities of that series, as provided in the Indenture; and
(d) certain events in bankruptcy, insolvency or reorganization. (Section 501).
If an Event of Default (other than an Event of Default described in clause
(d) above) with respect to the Debt Securities of any series at the time
Outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Debt Securities of
such series by notice as provided in the Indenture may declare the principal
amount of the Debt Securities of such series to be due and payable immediately.
If an Event of Default described in clause (d) above with respect to the Debt
Securities of such series at the time Outstanding shall occur, the principal
amount of all the Debt Securities of such series will automatically, and without
any action by the Trustee or any Holder, become immediately due and payable.
After any such acceleration, but before a judgment or decree based on
acceleration, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of such series may, under certain circumstances,
rescind and annul such acceleration if all Events of Default in respect of such
series, other than the non-payment of accelerated principal (or other
15
specified amount), have been cured or waived as provided in the Indenture.
(Section 502). For information as to waiver of defaults, see "Modification and
Waiver".
Subject to the provisions of the Indenture relating to the duties of the
Trustee if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnity. (Section 603). Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of any series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the Debt Securities of that series.
(Section 512).
No Holder of a Debt Security will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless (i) such Holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the Debt Securities of such series, (ii) the Holders of at least
25% in aggregate principal amount of the Outstanding Debt Securities of such
series have made written request, and such Holder or Holders have offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee and
(iii) the Trustee has failed to institute such proceeding, and has not received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of such series a direction inconsistent with such request,
within 60 days after such notice, request and offer. (Section 507). However,
such limitations do not apply to a suit instituted by a Holder of a Debt
Security for the enforcement of payment of the principal of or any premium or
interest on such Debt Security on or after the applicable due date specified in
such Debt Security. (Section 508).
The Indenture does not contain any provisions that would provide protection
to holders of Debt Securities against a sudden and dramatic decline in credit
quality resulting from a takeover, recapitalization or similar restructuring of
the Company.
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their knowledge,
is in default in the performance or observance of any of the terms, provisions
and conditions of the Indenture and, if so, specifying all such known defaults.
(Section 1004).
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity of
the principal of, or any installment of principal of or interest on, any Debt
Security, (b) reduce the principal amount of, or any premium or interest on, any
Debt Security, (c) change the place or currency of payment of principal of, or
any premium or interest on, any Debt Security, (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any Debt Security,
(e) reduce the percentage in principal amount of Outstanding Debt Securities,
the consent of whose Holders is required for modification or amendment of the
Indenture, (f) reduce the percentage in principal amount of Outstanding Debt
Securities of any series necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults or (g) modify such
provisions with respect to modification and waiver. (Section 902).
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may waive compliance by the Company
with certain restrictive provisions of the Indenture with respect to such
series. (Section 1011). The Holders of a majority in principal amount of the
Outstanding Debt Securities of such series may waive any past default under the
Indenture, except a default in the payment of principal, premium or interest and
certain covenants and provisions of the Indenture which
16
cannot be amended without the consent of the Holder of each Outstanding Debt
Security affected. (Section 513).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities of any series have
given or taken any direction, notice, consent, waiver or other action under the
Indenture as of any date, certain Debt Securities, including those for whose
payment or redemption money has been deposited or set aside in trust for the
Holders and those that have been fully defeased pursuant to Section 1302, will
not be deemed to be Outstanding. (Section 101).
Except in certain limited circumstances, the Company will be entitled to
set any day as a record date for the purpose of determining the Holders of
Outstanding Debt Securities entitled to give or take any direction, notice,
consent, waiver or other action under the Indenture, in the manner and subject
to the limitations provided in the Indenture. In certain limited circumstances,
the Trustee also will be entitled to set a record date for action by Holders. If
a record date is set for any action to be taken by Holders, such action may be
taken only by persons who are Holders of Outstanding Debt Securities on the
record date. To be effective, such action must be taken by Holders of the
requisite principal amount of the Debt Securities within a specified period
following the record date. For any particular record date, this period will be
180 days or such shorter period as may be specified by the Company (or the
Trustee, if it set the record date), and may be shortened or lengthened (but not
beyond 180 days) from time to time. (Section 104).
DEFEASANCE AND COVENANT DEFEASANCE
The Company may elect, at its option at any time, to have the provisions of
Section 1302, relating to defeasance and discharge of indebtedness, or Section
1303, relating to defeasance of certain restrictive covenants in the Indenture,
applied to any series of Debt Securities, or to any specified part of a series.
(Section 1301).
DEFEASANCE AND DISCHARGE
The Indenture provides that, upon the Company's exercise of its option to
have Section 1302 applied to any Debt Securities, the Company will be discharged
from all its obligations with respect to such Debt Securities (except for
certain obligations to exchange or register the transfer of Debt Securities, to
replace stolen, lost or mutilated Debt Securities, to maintain paying agencies
and to hold moneys for payment in trust) upon the deposit in trust for the
benefit of the Holders of such Debt Securities of money or U.S. Government
Obligations, or both, which, through the payment of principal and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on such Debt
Securities on the respective Stated Maturities in accordance with the terms of
the Indenture and such Debt Securities. Such defeasance or discharge may occur
only if, among other things, the Company has delivered to the Trustee an Opinion
of Counsel to the effect that the Company has received from, or there has been
published by, the United States Internal Revenue Service a ruling, or there has
been a change in tax law, in either case to the effect that Holders of such Debt
Securities will not recognize gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to federal
income tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge were not to occur.
(Sections 1302 and 1304).
DEFEASANCE OF CERTAIN COVENANTS
The Indenture provides that, upon the Company's exercise of its option to
have Section 1303 applied to any Debt Securities, the Company may omit to comply
with certain restrictive covenants, including those described above under the
caption "Covenants" and certain of the conditions referred to in clause (iii)
under the caption "Consolidation, Merger and Certain Sales of Assets", and the
occurrence of certain Events of Default, which are described above in clause (c)
under the caption "Events of Default", will be deemed not to be or result in an
Event of Default with respect to such Debt Securities. The
17
Company, in order to exercise such option, will be required to deposit, in trust
for the benefit of the Holders of such Debt Securities, money or U.S. Government
Obligations, or both, which, through the payment of principal and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on such Debt
Securities on the respective Stated Maturities in accordance with the terms of
the Indenture and such Debt Securities. The Company will also be required, among
other things, to deliver to the Trustee an Opinion of Counsel to the effect that
Holders of such Debt Securities will not recognize gain or loss for federal
income tax purposes as a result of such deposit and defeasance of certain
obligations and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit
and defeasance were not to occur. In the event the Company exercised this option
with respect to any Debt Securities and such Debt Securities were declared due
and payable because of the occurrence of any Event of Default, the amount of
money and U.S. Government Obligations so deposited in trust would be sufficient
to pay amounts due on such Debt Securities at the time of their respective
Stated Maturities but may not be sufficient to pay amounts due on such Debt
Securities upon any acceleration resulting from such Event of Default. In such
case, the Company would remain liable for such payments. (Sections 1303 and
1304).
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
A summary of the material United States federal income tax consequences to
persons investing in Securities may be set forth in an applicable Prospectus
Supplement. Such summary will be presented for information purposes only,
however, and will not be intended as legal or tax advice to prospective
purchasers. Prospective purchasers of Securities are urged to consult their own
tax advisors prior to any acquisition of Securities.
PLAN OF DISTRIBUTION
The Company may sell the Securities being offered hereby through agents,
through underwriters and through dealers, and Securities may be sold to other
purchasers directly or through agents. The distribution of the Securities may be
effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
Offers to purchase Securities may be solicited by agents designated by the
Company from time to time. Any such agent involved in the offer or sale of the
Securities in respect of which this Prospectus is delivered will be named, and
any commissions payable by the Company to such agent set forth, in the
applicable Prospectus Supplement. Agents may be entitled under agreements that
may be entered into with the Company to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, and such
agents or their affiliates may be customers of, extend credit to or engage in
transactions with or perform services for the Company in the ordinary course of
business.
If any underwriters are utilized in the sale, the Company will enter into
an underwriting agreement with such underwriters at the time of sale to them and
the names of the underwriters and the terms of the transaction will be set forth
in the applicable Prospectus Supplement that will be used by the underwriters to
make resales of the Securities in respect of which this Prospectus is delivered
to the public. The underwriters may be entitled, under the relevant underwriting
agreement, to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, and such underwriters or their
affiliates may be customers of, extend credit to or engage in transactions with
or perform services for the Company in the ordinary course of business.
If dealers are utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to such
dealers, as principal. The dealers may then resell such Securities to the public
at varying prices to be determined by such dealers at the time of resale.
Dealers may be entitled to indemnification by the Company against certain
liabilities, including liabilities under the
18
Securities Act, and such dealers or their affiliates may be customers of, extend
credit to or engage in transactions with or perform services for the Company in
the ordinary course of business.
In connection with the sale of Securities, underwriters, dealers or agents
may receive compensation from the Company or from purchasers of Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of 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 Securities by them, may be deemed to be underwriting discounts and
commissions under the Securities Act.
In connection with an offering of Securities, the underwriters may purchase
and sell such Securities in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the underwriters in connection with the offering.
Stabilizing transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the securities; and
short positions created by the underwriters involve the sale by the underwriters
of a greater number of Securities than they are required to purchase from the
Company in the offering. The underwriters also may impose a penalty bid, whereby
selling concessions allowed to broker-dealers in respect of the Securities sold
in the offering may be reclaimed by the underwriters if such Securities are
repurchased by the underwriters in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Securities, which may be higher than the price that might otherwise prevail in
the open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
The Preferred Stock and Debt Securities will be new issues of securities
with no established trading market. If so indicated in the applicable Prospectus
Supplement, any underwriters, dealers or agents to or through whom such
Securities are sold by the Company for public offering and sale may make a
market in such Securities, but such underwriters and agents will not be
obligated to do so and may discontinue any market-making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
any such Securities.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company by
Harold L. Henderson, Senior Vice President and General Counsel of the Company,
and for the Underwriters by Sullivan & Cromwell, New York, New York. As of
August 28, 1998, Mr. Henderson held 914 shares of the Company's Common Stock, as
well as options to purchase 50,000 shares of the Company's Common Stock under a
Company stock option plan.
EXPERTS
The consolidated financial statements incorporated in the Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
1997, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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