-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XcfyHuVijAkdh7MtjXjZSAQwz1kcWj8QsHdiOoH3fXFjShtJLw8tRPcK58kaSN8h wK4m+Qfi08kV2FrJb7ZUZQ== 0000912057-94-001802.txt : 19940519 0000912057-94-001802.hdr.sgml : 19940519 ACCESSION NUMBER: 0000912057-94-001802 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL PAPER CO /NEW/ CENTRAL INDEX KEY: 0000051434 STANDARD INDUSTRIAL CLASSIFICATION: 2631 IRS NUMBER: 130872805 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-52945 FILM NUMBER: 94529294 BUSINESS ADDRESS: STREET 1: TWO MANHATTANVILLE RD CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9143971500 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL PAPER & POWER CORP DATE OF NAME CHANGE: 19710527 424B2 1 424B2 - -------------------------------------------------------------------------------- PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED APRIL 13, 1994) - -------------------------------------------------------------------------------- U.S. $400,000,000 International Paper Company Medium-Term Notes, Series E DUE 9 MONTHS OR MORE FROM DATE OF ISSUE ---------------- INTERNATIONAL PAPER COMPANY (THE "COMPANY") MAY OFFER FROM TIME TO TIME ITS MEDIUM-TERM NOTES WHICH ARE ISSUABLE IN ONE OR MORE SERIES AND MAY BE OFFERED AND SOLD EITHER IN THE UNITED STATES OR OUTSIDE THE UNITED STATES OR BOTH SIMULTANEOUSLY. THE MEDIUM-TERM NOTES, SERIES E (THE "NOTES", WHICH TERM SHALL INCLUDE FOREIGN CURRENCY NOTES (AS DEFINED BELOW UNLESS OTHERWISE INDICATED)), OFFERED BY THIS PROSPECTUS SUPPLEMENT ARE OFFERED IN THE UNITED STATES AND MAY BE DENOMINATED IN SUCH FOREIGN CURRENCIES OR CURRENCY UNITS AS MAY BE DESIGNATED BY THE COMPANY AT THE TIME OF OFFERING (THE "FOREIGN CURRENCY NOTES"). THE NOTES ARE OFFERED IN AN AGGREGATE OFFERING PRICE OF UP TO U.S. $400,000,000 OR THE EQUIVALENT, AT THE MARKET EXCHANGE RATE ON THE APPLICABLE TRADE DATES, IN ONE OR MORE FOREIGN CURRENCIES OR CURRENCY UNITS IN THE CASE OF FOREIGN CURRENCY NOTES, AND IN ANY CASE SUBJECT TO REDUCTION AS A RESULT OF THE SALE OF OTHER DEBT SECURITIES (AS DEFINED BELOW) OF THE COMPANY. SEE "DESCRIPTION OF NOTES" AND "PLAN OF DISTRIBUTION OF NOTES". EACH NOTE WILL MATURE ON A BUSINESS DAY 9 MONTHS OR MORE FROM ITS DATE OF ISSUE, AS SELECTED BY THE INITIAL PURCHASER AND AGREED TO BY THE COMPANY. THE NOTES MAY BE SUBJECT TO REDEMPTION AT THE OPTION OF THE COMPANY OR, UPON THE OCCURRENCE OF CERTAIN EVENTS, AT THE OPTION OF THE HOLDERS THEREOF, PRIOR TO THEIR STATED MATURITY, AS DESCRIBED HEREIN AND IN THE PROSPECTUS OR AS SET FORTH IN AN ACCOMPANYING PRICING SUPPLEMENT TO THIS PROSPECTUS SUPPLEMENT (THE "PRICING SUPPLEMENT"). UNLESS OTHERWISE INDICATED IN THE APPLICABLE PRICING SUPPLEMENT, THE INTEREST PAYMENT DATES FOR EACH FIXED RATE NOTE, OTHER THAN ZERO-COUPON NOTES, WILL BE APRIL 1 AND OCTOBER 1 OF EACH YEAR. THE NOTES WILL BE ISSUED IN FULLY REGISTERED FORM IN DENOMINATIONS OF U.S. $100,000 AND INTEGRAL MULTIPLES OF U.S. $1,000 IN EXCESS THEREOF, OR, IN THE CASE OF FOREIGN CURRENCY NOTES, IN THE DENOMINATIONS INDICATED IN THE APPLICABLE PRICING SUPPLEMENT. SEE "SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES." EACH NOTE WILL BE REPRESENTED BY EITHER A PERMANENT GLOBAL SECURITY (A "GLOBAL NOTE") REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY, AS DEPOSITARY (THE "DEPOSITORY"), OR A NOMINEE OF THE DEPOSITORY (EACH SUCH NOTE REPRESENTED BY A GLOBAL NOTE BEING REFERRED TO HEREIN AS A "BOOK-ENTRY NOTE"), OR A CERTIFICATE ISSUED IN DEFINITIVE FORM (A "CERTIFICATED NOTE"), AS SET FORTH IN THE APPLICABLE PRICING SUPPLEMENT. BENEFICIAL INTERESTS IN BOOK-ENTRY NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY THE DEPOSITORY (WITH RESPECT TO ITS PARTICIPANTS' INTERESTS) AND ITS PARTICIPANTS. EXCEPT AS DESCRIBED BELOW UNDER "DESCRIPTION OF NOTES -- BOOK-ENTRY NOTES," OWNERS OF BENEFICIAL INTERESTS IN A GLOBAL NOTE WILL NOT BE ENTITLED TO RECEIVE PHYSICAL DELIVERY OF NOTES IN DEFINITIVE FORM AND WILL NOT BE CONSIDERED THE HOLDERS THEREOF. THE INTEREST RATE OR INTEREST RATE FORMULA, IF ANY, ISSUE PRICE, STATED MATURITY, INTEREST PAYMENT DATES, CURRENCY DENOMINATIONS AND REDEMPTION PROVISIONS, IF ANY, FOR EACH NOTE WILL BE ESTABLISHED BY THE COMPANY AT THE TIME OF ISSUANCE OF SUCH NOTE AND WILL BE INDICATED IN A PRICING SUPPLEMENT. UNLESS OTHERWISE INDICATED IN THE APPLICABLE PRICING SUPPLEMENT, THE NOTES, EXCEPT ZERO-COUPON NOTES, WILL BEAR INTEREST AT A FIXED RATE OR A RATE OR RATES DETERMINED BY REFERENCE TO LIBOR, THE TREASURY RATE, THE COMMERCIAL PAPER RATE, THE PRIME RATE, THE CD RATE, THE FEDERAL FUNDS RATE, OR OTHER RATE FORMULA, AS INDICATED IN THE APPLICABLE PRICING SUPPLEMENT, AS ADJUSTED BY A SPREAD OR SPREAD MULTIPLIER, IF ANY IS APPLICABLE TO SUCH NOTES. ZERO-COUPON NOTES WILL BE ISSUED AT A DISCOUNT FROM THE PRINCIPAL AMOUNT PAYABLE AT MATURITY THEREOF, BUT HOLDERS OF ZERO-COUPON NOTES WILL NOT RECEIVE PERIODIC PAYMENTS OF INTEREST ON SUCH NOTES. INTEREST RATES AND INTEREST RATE FORMULAS ARE SUBJECT TO CHANGE BY THE COMPANY, BUT NO SUCH CHANGE WILL AFFECT THE INTEREST RATE ON ANY NOTE THERETOFORE ISSUED OR WHICH THE COMPANY HAS AGREED TO SELL. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PRICE TO AGENTS' PROCEEDS PUBLIC (1) COMMISSIONS (2) TO COMPANY (2)(3) PER NOTE 100% .125%-.75% 99.25%-99.875% TOTAL (4) $400,000,000 $500,000-$3,000,000 $397,000,000-$399,500,000 (1) UNLESS OTHERWISE INDICATED IN A PRICING SUPPLEMENT, NOTES WILL BE ISSUED AT 100% OF THEIR PRINCIPAL AMOUNT. (2) THE COMPANY WILL PAY CS FIRST BOSTON CORPORATION AND KIDDER, PEABODY & CO. INCORPORATED (THE "AGENTS"), AS AGENTS, A COMMISSION RANGING FROM .125% TO .75% OF THE PRINCIPAL AMOUNT OF ANY NOTE, DEPENDING ON ITS STATED MATURITY, SOLD THROUGH ANY SUCH AGENTS. THIS COMMISSION SCALE APPLIES TO NOTES THAT MATURE BETWEEN NINE MONTHS AND THIRTY YEARS (INCLUSIVE) FROM THEIR DATE OF ISSUE. THE COMMISSION APPLICABLE TO THE SALE OF ANY NOTE THAT MATURES MORE THAN THIRTY YEARS FROM ITS DATE OF ISSUE WILL BE DETERMINED BY THE RELEVANT AGENT AND THE COMPANY AT THE TIME OF SUCH SALE AND DISCLOSED IN THE APPLICABLE PRICING SUPPLEMENT. THE COMPANY ALSO MAY SELL NOTES TO ANY AGENT AT A DISCOUNT FOR RESALE TO ONE OR MORE INVESTORS AT VARYING PRICES RELATED TO PREVAILING MARKET PRICES AT THE TIME OF RESALE, AS DETERMINED BY SUCH AGENT. (3) BEFORE DEDUCTING OTHER EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $50,000. (4) OR THE EQUIVALENT THEREOF IN OTHER CURRENCIES, INCLUDING COMPOSITE CURRENCIES.
---------------- THE NOTES MAY BE OFFERED ON A CONTINUING BASIS BY THE COMPANY THROUGH THE AGENTS, EACH OF WHICH HAS AGREED TO USE REASONABLE EFFORTS TO SOLICIT OFFERS TO PURCHASE THE NOTES. THE COMPANY ALSO MAY SELL NOTES TO ANY AGENT ACTING AS PRINCIPAL FOR RESALE TO ONE OR MORE INVESTORS. THE COMPANY HAS RESERVED THE RIGHT TO SELL NOTES DIRECTLY OR INDIRECTLY TO INVESTORS ON ITS OWN BEHALF. THERE CAN BE NO ASSURANCE THAT THE NOTES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL BE SOLD OR THAT THERE WILL BE A SECONDARY MARKET FOR THE NOTES. THE COMPANY RESERVES THE RIGHT TO WITHDRAW, CANCEL OR MODIFY THE OFFER MADE HEREBY WITHOUT NOTICE. THE COMPANY OR ANY AGENT MAY REJECT ANY OFFER TO PURCHASE NOTES, IN WHOLE OR IN PART. SEE "PLAN OF DISTRIBUTION OF NOTES." CS First Boston Kidder, Peabody P Co. Incorporated - -------------------------------------------------------------------------------- THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MAY 2, 1994. IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR DEFINITIONS OF CERTAIN TERMS USED IN THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS, SEE "GLOSSARY" ON PAGE S-19 OF THIS PROSPECTUS SUPPLEMENT. DESCRIPTION OF NOTES THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED HEREBY (REFERRED TO IN THE PROSPECTUS AS "SENIOR DEBT SECURITIES") SUPPLEMENTS, AND TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF SENIOR DEBT SECURITIES SET FORTH UNDER THE HEADING "DESCRIPTION OF DEBT SECURITIES" IN THE ACCOMPANYING PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS HEREBY MADE. CAPITALIZED TERMS NOT DEFINED HEREIN HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE PROSPECTUS. SECTION REFERENCES HEREIN ARE TO SECTIONS OF THE INDENTURE, DATED AS OF MAY 22, 1992, BETWEEN THE COMPANY AND THE BANK OF NEW YORK, AS TRUSTEE, AS AMENDED BY THE FIRST SUPPLEMENTAL INDENTURE, DATED AS OF JUNE 26, 1992 (THE "INDENTURE") OR, WHERE SO INDICATED, TO THE OFFICERS' CERTIFICATE ESTABLISHING CERTAIN TERMS OF THE NOTES PURSUANT TO SECTION 301 OF THE INDENTURE (THE "OFFICERS' CERTIFICATE"). The Notes constitute a single series for purposes of the Indenture and are limited to an aggregate offering price of U.S. $400,000,000 or the equivalent, in the case of Foreign Currency Notes, at the Market Exchange Rate on the applicable trade date, in one or more foreign currencies or currency units, and in any case subject to reduction by action of the Company's board of directors. Unless previously redeemed, each Note will mature on a business day 9 months or more from its date of issue, as selected by the initial purchaser and agreed to by the Company. The Notes, other than Foreign Currency Notes, will be issuable only in fully registered form in denominations of U.S. $100,000 and integral multiples of U.S. $1,000 in excess thereof. For a description of the denominations of Foreign Currency Notes, see "Special Provisions Relating to Foreign Currency Notes." Each Note will be issued initially as either a Book-Entry Note or a Certificated Note. Except as set forth below under "Book-Entry Notes," Book-Entry Notes will not be issuable in definitive form. The Notes may be issued as Original Issue Discount Notes. An Original Issue Discount Note is a Note, including any Zero-Coupon Note, which is issued at a price lower than the amount payable at the Stated Maturity thereof and which provides that upon redemption or acceleration of the maturity thereof an amount less than the amount payable at the Stated Maturity thereof and determined in accordance with the terms thereof shall become due and payable. Original Issue Discount Notes, as well as certain other Notes offered hereunder, may, for United States federal income tax purposes, be considered Discount Securities. The principal United States federal income tax consequences of the ownership of a Discount Security are described under "United States Taxation -- Original Issue Discount and Acquisition Discount on Short-Term Notes." The Notes may be issued as Indexed Notes. An Indexed Note is a Note that may receive a principal amount at Maturity that is either greater than or less than the face amount of such Note, depending upon the fluctuation of the relative value, rate or price of the specified index. Specific information pertaining to the method for determining the principal amount payable at Maturity, a historical comparison of the relative value, rate or price of the specified index and the face amount of the Indexed Note and certain additional tax considerations will be described in the applicable Pricing Supplement. S-2 Unless otherwise indicated in the applicable Pricing Supplement, the Notes will be denominated in U.S. dollars and payments of principal of, premium, if any, and interest on the Notes will be made in U.S. dollars. If any of the Notes are to be denominated in a currency other than U.S. dollars, or if the principal of, premium, if any, and interest on any of the Notes is to be payable at the option of the Holder or the Company in a currency other than that in which such Note is denominated, the applicable Pricing Supplement will provide additional information pertaining to the terms of such Notes and other matters of interest to the Holders thereof. Payments of principal of, premium, if any, and interest payable at Maturity or upon acceleration or redemption, if any, on a Certificated Note will be made in immediately available funds at the offices of The Bank of New York, in the Borough of Manhattan, The City of New York, as Paying Agent, provided that the Note is presented to the Paying Agent in time for the Paying Agent to make such payments in such funds in accordance with its normal procedures. The total amount of any principal, premium, if any, and/or interest due on any Global Note representing one or more Book-Entry Notes on any Interest Payment Date or at the Stated Maturity will be made available to the Trustee on such date. As soon as possible thereafter, the Trustee will make such payments to the Depository, in accordance with existing arrangements between the Trustee and the Depository. The Depository will allocate such payments to each Book-Entry Note represented by such Global Note and make payments to the owners or holders thereof in accordance with its existing operating procedures. Neither the Company nor the Trustee shall have any responsibility or liability for such payments by the Depository. So long as the Depository or its nominee is the registered owner of any Global Note, the Depository or its nominee, as the case may be, will be considered the sole owner or holder of the Book-Entry Note or Notes represented by such Global Note for all purposes under the Indenture. The Company understands, however, that under existing industry practice, the Depository will authorize the persons on whose behalf it holds a Global Note to exercise certain rights of holders of Notes. See "Description of Notes -- Book-Entry Notes." Certificated Notes may be presented for registration of transfer or exchange at the principal corporate trust office of The Bank of New York (the "Trustee"), in the Borough of Manhattan, The City of New York. With respect to transfers of Book-Entry Notes and exchanges of Global Notes representing Book-Entry Notes, see "Description of Notes -- Book-Entry Notes." The applicable Pricing Supplement will indicate either that the Notes cannot be redeemed at the option of the Company prior to their Stated Maturity or that the Notes may be redeemable at the option of the Company on or after a specified date prior to their Stated Maturity at specified prices (which may include a premium), together with accrued interest to the date of redemption. Unless otherwise indicated in the applicable Pricing Supplement, the Notes will be subject to redemption at the option of Holders of the Notes upon the occurrence of certain events. For a description of terms of redemption at the option of Holders, see "Description of Debt Securities -- Redemption at the Option of Holders Upon Change of Control" in the Prospectus. The Notes will not be subject to any sinking fund. The Notes will not be convertible into or exchangeable for the Company's common stock or other securities of the Company. The Indenture provisions relating to legal and covenant defeasance which are described in the accompanying Prospectus under "Description of Debt Securities - -- Defeasance" will apply to the Notes. The Indenture contains certain covenants substantially similar to those contained in the Senior Note Indenture, dated as of April 1, 1994, between the Company and The Chase Manhattan Bank, N.A., as trustee, as set forth under the heading "Description of Debt Securities -- Certain Covenants of the Company" in the accompanying Prospectus, except that (i) the restrictions relating to the incurrence of additional Debt (as defined therein) by the Company or any Subsidiary shall not, in addition to the other exceptions and subject to the conditions set forth therein, apply to mortgages on any property acquired, constructed or improved by the Company or any Subsidiary after May 22, 1992 to secure or provide for the S-3 payment of the purchase price or cost thereof or existing mortgages on property acquired (or, in each case, any extension, renewal or replacement, in whole or in part, thereof) and (ii) the term "Forestlands," as used therein, is defined as "Timberlands" under the Indenture. INTEREST Each Note, except a Zero-Coupon Note, will bear interest from and including the date of issue or from and including the most recent Interest Payment Date to which interest on such Note has been paid or duly provided for to, but excluding, the relevant Interest Payment Date at the fixed rate per annum, or at the rate per annum determined pursuant to the interest rate formula stated therein and in the applicable Pricing Supplement, until the principal thereof is paid or made available for payment. Interest payments, if any, will be in the amount of interest accrued from and including the next preceding Interest Payment Date in respect of which interest has been paid or duly provided for (or from and including the date of issue, if no interest has been paid with respect to such Note) to, but excluding, the applicable Interest Payment Date. Interest, if any, will be payable on each Interest Payment Date and at Maturity; provided, however, if a Note is issued between a Regular Record Date and an Interest Payment Date, the interest so payable for the period from the date of issue to such Interest Payment Date shall be paid on the next succeeding Interest Payment Date to the Registered Holder thereof on the related Regular Record Date. Interest will be payable to the person (which in the case of a Global Note representing Book-Entry Notes shall be the Depositary) in whose name an interest-bearing Note is registered at the close of business on the Regular Record Date next preceding each Interest Payment Date; PROVIDED, HOWEVER, that interest payable at Maturity or, if applicable, upon redemption, will be payable to the person to whom principal shall be payable. Unless otherwise indicated in the applicable Pricing Supplement, the Regular Record Date with respect to Floating Rate Notes shall be the date 15 calendar days prior to each Interest Payment Date, whether or not such date shall be a Business Day, and the Regular Record Dates with respect to Fixed Rate Notes shall be the March 15 and September 15 next preceding the April 1 and October 1 Interest Payment Dates. Each Note, except a Zero-Coupon Note, will bear interest at either (a) a fixed rate or rates (a "Fixed Rate Note") or (b) a variable rate determined by reference to an interest rate formula (a "Floating Rate Note"), which may be adjusted by adding or subtracting the Spread or multiplying by the Spread Multiplier, unless otherwise specified therein and in the applicable Pricing Supplement. Holders of Zero-Coupon Notes will receive no periodic payments of interest on such Notes. Interest rates are subject to change by the Company from time to time, but no such change will affect any Note already issued or as to which an offer to purchase has been accepted by the Company. FIXED RATE NOTES The applicable Pricing Supplement relating to a Fixed Rate Note will designate a fixed rate of interest per annum payable on such Note. Unless otherwise indicated in the applicable Pricing Supplement, the Interest Payment Dates for Fixed Rate Notes will be April 1 and October 1 of each year and at Maturity, and, if applicable, upon redemption. Unless otherwise indicated in the applicable Pricing Supplement, interest payments for Fixed Rate Notes shall be the amount of interest accrued to but excluding the relevant Interest Payment Date. Interest on such Note will be computed on the basis of a 360-day year of twelve 30-day months. FLOATING RATE NOTES The applicable Pricing Supplement relating to a Floating Rate Note will designate an interest rate basis for such Floating Rate Note. Such basis may be: (a) the Commercial Paper Rate, in which case such Note will be a Commercial Paper Rate Note, (b) the Prime Rate, in which case such Note will be a Prime Rate Note, (c) the CD Rate, in which case such Note will be a CD Rate Note, (d) the Federal Funds Rate, in which case such Note will be a Federal Funds Rate Note, (e) LIBOR, in which case such Note will be a LIBOR Note, (f) the Treasury Rate, in which case such Note will be a Treasury Rate Note, or (g) such other interest rate formula as may be agreed to between the Company and the purchaser and set forth in such Pricing Supplement. In addition, a Floating Rate Note may bear interest at the lowest or highest or average of two or more interest rate formulae. The applicable Pricing Supplement for a Floating Rate Note also will specify S-4 the Spread or Spread Multiplier, if any, and the maximum or minimum interest rate limitation, if any, applicable to each Note. In addition, such Pricing Supplement will define or particularize for each Floating Rate Note the following terms, if applicable: Calculation Agent; Calculation Dates; Initial Interest Rate (which rate shall be determined on the same basis as that subsequently applicable to such Note); Interest Payment Dates; Regular Record Dates; Index Maturity; Interest Determination Dates; Interest Reset Dates; Redemption Prices; and Redemption Dates with respect to such Note. See "Glossary" for definitions of certain terms used in this Prospectus Supplement. The rate of interest on a Floating Rate Note in effect on any date will be (a) if such day is an Interest Reset Date with respect to such Floating Rate Note, the interest rate on such Floating Rate Note determined as of the Interest Determination Date pertaining to such Interest Reset Date, or (b) if such day is not an Interest Reset Date with respect to such Floating Rate Note, the interest rate on such Floating Rate Note determined as of the Interest Determination Date pertaining to the immediately preceding Interest Reset Date with respect to such Floating Rate Note; PROVIDED, HOWEVER, that the interest rate in effect from the Issue Date of a Floating Rate Note (or that of a predecessor Note) to but excluding the first Interest Reset Date with respect to such Floating Rate Note will be the Initial Interest Rate (as set forth in the applicable Pricing Supplement). Subject to applicable provisions of law and except as described herein, the rate of interest on a Floating Rate Note on any Interest Reset Date with respect thereto will be the rate of interest determined with respect to the Interest Determination Date pertaining to such Interest Reset Date as determined in accordance with the applicable provisions described below. The rate of interest on each Floating Rate Note will be reset daily, weekly, monthly, quarterly, semiannually or annually (each an "Interest Reset Date"), as specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, the Interest Reset Date will be, in the case of Floating Rate Notes which reset daily, each Business Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes which reset weekly, except as provided in the following paragraph, the Tuesday of each week; in the case of Floating Rate Notes which reset monthly, the third Wednesday of each month; in the case of Floating Rate Notes which reset quarterly, the third Wednesday of March, June, September and December; in the case of Floating Rate Notes which reset semiannually, the third Wednesday of two months of each year, as indicated in the applicable Pricing Supplement; and in the case of Floating Rate Notes which reset annually, the third Wednesday of one month of each year, as indicated in the applicable Pricing Supplement. If any Interest Reset Date for any Floating Rate Note would otherwise be a day that is not a Business Day with respect to such Note, such Interest Reset Date shall be the next succeeding Business Day with respect to such Note, except that if such Note is a LIBOR Note and the next succeeding Business Day falls in the next succeeding calendar month, such Interest Reset Date shall be the immediately preceding Business Day. The Interest Determination Date pertaining to an Interest Reset Date for a Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"), a Prime Rate Note (the "Prime Rate Interest Determination Date"), a CD Rate Note (the "CD Rate Interest Determination Date") or a Federal Funds Rate Note (the "Federal Funds Interest Determination Date") will be the second Business Day preceding the Interest Reset Date with respect to such Note. The Interest Determination Date pertaining to an Interest Reset Date for a LIBOR Note (the "LIBOR Interest Determination Date") will be the second London Business Day preceding such Interest Reset Date. The Interest Determination Date pertaining to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest Determination Date") will be the day on which Treasury bills are auctioned for the week in which such Interest Reset Date falls, or if no auction is held for such week, the Monday of such week (or if Monday is a legal holiday, the next succeeding Business Day) and the Interest Reset Date will be the Business Day immediately following such Treasury Interest Determination Date. Treasury bills are usually sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday, except that such auction may be held on the preceding Friday. If an auction for such week is held on Monday or the preceding Friday, such Monday or preceding Friday shall be the Treasury Interest Determination Date for such week, and the Interest Reset Date for such week shall be the Tuesday of such week (or, if such Tuesday is not a S-5 Business Day, the next succeeding Business Day). If the auction for such week is held on any day of such week other than Monday, then such day shall be the Treasury Interest Determination Date and the Interest Reset Date for such week shall be the next succeeding Business Day. A Floating Rate Note may have either or both of the following: (a) a maximum numerical interest rate limitation, or ceiling, on the rate of interest which may accrue during any interest period; and (b) a minimum numerical interest rate limitation, or floor, on the rate of interest which may accrue during any interest period. In addition to any maximum interest rate which may be applicable to any Floating Rate Note, the interest rate on such Floating Rate Note will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. Under present New York law the maximum rate of interest, with certain exceptions, is 25% per annum on a simple interest basis. The limit may not apply to Notes in which $2,500,000 or more has been invested. Unless otherwise indicated in the applicable Pricing Supplement and except as provided below, the Interest Payment Date will be, in the case of Floating Rate Notes which reset daily, weekly or monthly, the third Wednesday of each month or the third Wednesday of March, June, September and December of each year (as indicated in the applicable Pricing Supplement); in the case of Floating Rate Notes which reset quarterly, the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which reset semiannually, the third Wednesday of the two months of each year specified in the applicable Pricing Supplement; and in the case of Floating Rate Notes which reset annually, the third Wednesday of the month specified in the applicable Pricing Supplement. If, pursuant to the preceding sentence, an Interest Payment Date with respect to any Floating Rate Note (other than an Interest Payment Date at Maturity) would otherwise be a day that is not a Business Day with respect to such Note, such Interest Payment Date shall be the next succeeding Business Day with respect to such Note, except that if such Note is a LIBOR Note and the next succeeding Business Day falls in the next succeeding calendar month, such Interest Payment Date shall be the immediately preceeding Business Day. If the Maturity of a Floating Rate Note falls on a day that is not a Business Day, the payment of principal, premium, if any, and interest will be made on the next succeeding Business Day, and no interest on such payment shall accrue from and after such Maturity. Unless otherwise indicated in the applicable Pricing Supplement the Regular Record Date with respect to Floating Rate Notes shall be the date 15 calendar days prior to each Interest Payment Date, whether or not such date shall be a Business Day. Unless otherwise specified in the applicable Pricing Supplement, the interest accrued from and including the date of issue, or from and including the last date to which interest has been paid or duly provided for, is calculated by multiplying the face amount of such Floating Rate Note by an accrued interest factor. Such accrued interest factor is computed by adding the interest factor calculated for each day in such period from and including the date of issue, or from and including the last date to which interest has been paid or duly provided for, to but excluding the date for which accrued interest is being calculated. Unless otherwise specified in the Note and the applicable Pricing Supplement, the interest factor (expressed as a decimal rounded upwards, if necessary, as described below) for each such day is computed by dividing the interest rate (expressed as a decimal rounded upwards, if necessary, as described below) applicable to such date by 360, (or, in the case of the Treasury Rate Notes, by the actual number of days in the year). The interest factor for Notes for which two or more interest rate formulae are applicable will be calculated in each period in the same manner as if only the lowest, highest or average of, as the case may be, such interest rate formulae applied. Unless otherwise specified in the applicable Pricing Supplement, all percentages resulting from any calculation on Floating Rate Notes will be rounded, upwards if necessary, to the next higher one-hundred thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts used in or resulting from such calculation on Floating Rate Notes will be rounded to the nearest cent or, in the case of Foreign Currency Notes, the nearest unit (with one-half cent or five one-thousandths of a unit being rounded upwards). S-6 Upon the request of the Holder of any Floating Rate Note, the Calculation Agent will provide the interest rate then in effect, and, if different, the interest rate which will become effective as a result of a determination made on the most recent Interest Determination Date with respect to such Floating Rate Note. COMMERCIAL PAPER RATE NOTES Each Commercial Paper Rate Note will bear interest at the interest rate (calculated with reference to the Commercial Paper Rate and the Spread or Spread Multiplier, if any), and will be payable on the dates, specified on the face of such Note and in the applicable Pricing Supplement. Unless otherwise indicated in the applicable Pricing Supplement, "Commercial Paper Rate" means, with respect to any Commercial Paper Interest Determination Date, the Money Market Yield (calculated as described below) of the rate on such date for commercial paper having the Index Maturity specified in the applicable Pricing Supplement as published by the Board of Governors of the Federal Reserve System in "Statistical Release H.15 (519), Selected Interest Rates" ("H.15 (519)"), or any successor publication of the Board of Governors of the Federal Reserve System, under the heading "Commercial Paper." In the event that such rate is not published prior to 3:00 p.m., New York City time, on the Calculation Date pertaining to such Commercial Paper Interest Determination Date, then the Commercial Paper Rate shall be the Money Market Yield of the rate on such Commercial Paper Interest Determination Date for commercial paper having the Index Maturity specified in the applicable Pricing Supplement as published by the Federal Reserve Bank of New York in its daily statistical release, "Composite 3:30 p.m. Quotations for U.S. Government Securities" ("Composite Quotations") under the heading "Commercial Paper." If by 3:00 p.m., New York City time, on such Calculation Date such rate is not yet published in either H.15(519) or Composite Quotations, the Commercial Paper Rate for that Commercial Paper Interest Determination Date shall be the Money Market Yield of the arithmetic mean, as calculated by the Calculation Agent on such Calculation Date, of the offered rates, as of 11:00 a.m., New York City time, on that Commercial Paper Interest Determination Date, of three leading dealers of commercial paper in The City of New York selected by the Calculation Agent for commercial paper having the Index Maturity specified in the applicable Pricing Supplement placed for an industrial issuer whose bond rating is "AA," or the equivalent, from a nationally recognized rating agency; PROVIDED, HOWEVER, that if fewer than three dealers selected as aforesaid by the Calculation Agent are quoting as mentioned in this sentence, the Commercial Paper Rate will be the Commercial Paper Rate in effect on such Commercial Paper Interest Determination Date. "Money Market Yield" shall be a yield (expressed as a percentage rounded upwards, if necessary, to the next higher one hundred thousandth of a percentage point) calculated in accordance with the following formula: D X 360 Money Market Yield = -------------- = 100 360 - (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal; and "M" refers to the actual number of days in the interest period for which interest is being calculated. PRIME RATE NOTES Each Prime Rate Note will bear interest at the interest rate (calculated with reference to the Prime Rate and the Spread or Spread Multiplier, if any) specified on the face of such Prime Rate Note and in the applicable Pricing Supplement. Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate" means, with respect to any Prime Rate Interest Determination Date, the rate set forth on such date in H.15(519) under the heading "Bank Prime Loan." In the event that such rate is not published prior to 3:00 p.m., New York City time, on such Prime Rate Interest Determination Date, then the Prime Rate will be determined by the Calculation Agent and will be the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen NYMF Page as such bank's prime rate or base lending rate as in effect for that Prime S-7 Rate Interest Determination Date. If fewer than four such rates appear on the Reuters Screen NYMF Page for the Prime Rate Interest Determination Date, the Prime Rate will be the arithmetic mean of the announced prime rates quoted on the basis of the actual number of days in the year divided by 360 as of the close of business on such Prime Rate Interest Determination Date by at least two of three major money center banks in The City of New York selected by the Calculation Agent. If fewer than two such quotations are provided, the Prime Rate shall be determined on the basis of the rates furnished in The City of New York by the appropriate number of substitute banks or trust companies organized and doing business under the laws of the United States, or any state thereof, having total equity capital of at least $500 million and being subject to supervision or examination by federal or state authority, selected by the Calculation Agent to provide such rate or rates; PROVIDED, HOWEVER, that if the banks or trust companies selected as aforesaid are not quoting as mentioned in this sentence, the Prime Rate will be the Prime Rate then in effect on such Prime Rate Interest Determination Date. CD RATE NOTES Each CD Rate Note will bear interest at the interest rate (calculated with reference to the CD Rate and the Spread or Spread Multiplier, if any) specified on the face of such CD Rate Note and in the applicable Pricing Supplement. Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate" means, with respect to any CD Rate Interest Determination Date, the rate on such date for negotiable certificates of deposit having the Index Maturity specified in the applicable Pricing Supplement as published in H.15(519) under the heading "CDs (Secondary Market)." In the event that such rate is not published prior to 3:00 p.m., New York City time, on the Calculation Date pertaining to such CD Rate Interest Determination Date, then the CD Rate shall be the rate on such CD Rate Interest Determination Date for negotiable certificates of deposit having the Index Maturity specified in the applicable Pricing Supplement as published in Composite Quotations under the heading "Certificates of Deposit." If by 3:00 p.m., New York City time, on such Calculation Date such rate is not yet published in either H.15(519) or Composite Quotations, the CD Rate for that CD Interest Determination Date shall be calculated by the Calculation Agent and shall be the arithmetic mean (rounded upwards, if necessary, to the next higher one-hundred thousandth of a percentage point) of the secondary market offered rates, as of 10:00 a.m., New York City time, on that CD Rate Interest Determination Date, of three leading nonbank dealers of negotiable U.S. dollar certificates of deposit in The City of New York selected by the Calculation Agent for negotiable certificates of deposit of major United States money market banks with a remaining maturity closest to the Index Maturity specified in the applicable Pricing Supplement in a denomination of $5,000,000; PROVIDED, HOWEVER, that if fewer than three dealers selected as aforesaid by the Calculation Agent are quoting as mentioned in this sentence, the CD Rate will be the CD Rate in effect on such CD Rate Interest Determination Date. FEDERAL FUNDS RATE NOTES Each Federal Funds Rate Note will bear interest at the interest rate (calculated with reference to the Federal Funds Rate and the Spread or Spread Multiplier, if any) specified on the face of such Federal Funds Rate Note and in the applicable Pricing Supplement. Unless otherwise indicated in the applicable Pricing Supplement, "Federal Funds Rate" means, with respect to any Federal Funds Interest Determination Date, the rate on such date for Federal Funds having the Index Maturity specified in the applicable Pricing Supplement as published in H.15(519) under the heading "Federal Funds (Effective)." In the event that such rate is not published prior to 3:00 p.m., New York City time, on the Calculation Date pertaining to such Federal Funds Interest Determination Date, then the Federal Funds Rate will be the rate on such Federal Funds Interest Determination Date as published in Composite Quotations under the heading "Federal Funds/Effective Rate." If by 3:00 p.m., New York City time, on such Calculation Date such rate is not yet published in either H.15(519) or Composite Quotations, the Federal Funds Rate for that Federal Funds Interest Determination Date shall be the arithmetic mean, as calculated by the Calculation Agent on such Calculation Date, of the rates, prior to 9:00 a.m., New York City time, on that Federal Funds Interest Determination Date, for the last transaction in overnight Federal Funds arranged by three leading brokers of Federal Funds transactions in The City of New York selected by the S-8 Calculation Agent; PROVIDED, HOWEVER, that if fewer than three brokers selected as aforesaid by the Calculation Agent are quoting as mentioned in this sentence, the Federal Funds Rate will be the Federal Funds Rate in effect on such Federal Funds Interest Determination Date. LIBOR NOTES Each LIBOR Note will bear interest at the interest rate (calculated with reference to LIBOR and the Spread or Spread Multiplier, if any) specified on the face of such LIBOR Note and in the applicable Pricing Supplement. Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will be determined by the Calculation Agent in accordance with the following provisions: On each LIBOR Interest Determination Date, LIBOR will be determined on the basis of the offered rate for deposits in U.S. dollars having the Index Maturity specified in the applicable Pricing Supplement, commencing on the second London Business Day immediately following such LIBOR Interest Determination Date, which appears on the Telerate Page 3750 as of 11:00 a.m., London time, on that LIBOR Interest Determination Date. If such rate does not so appear on the Telerate Page 3750, the rate in respect of such LIBOR Interest Determination Date will be determined on the basis of the rates at which deposits in U.S. dollars are offered by four major banks in the London interbank market (selected by the Calculation Agent) at approximately 11:00 a.m., London time, on the LIBOR Interest Determination Date next preceding the relevant Interest Reset Date to prime banks in the London interbank market for a period of the Index Maturity commencing on that Interest Reset Date and in a principal amount equal to an amount not less than $1,000,000 that is representative for a single transaction in such market at such time. In such case, the Calculation Agent will request the principal London office of each of the aforesaid major banks to provide a quotation of such rate. If at least two such quotations are provided in respect of such LIBOR Interest Determination Date, the rate for that Interest Rate Date will be the arithmetic mean of the quotations, and, if fewer than two quotations are provided as requested in respect of such LIBOR Interest Determination Date, the rate for that Interest Reset Date will be the arithmetic mean of the rates quoted by three major banks in The City of New York, selected by the Calculation Agent, at approximately 11:00 a.m., New York City time, on that LIBOR Interest Determination Date for loans in U.S. dollars to leading European banks for a period of the Index Maturity commencing on that Interest Reset Date and in a principal amount equal to an amount not less than $1,000,000 that is representative for a single transaction in such market at such time; PROVIDED, HOWEVER, if the aforesaid rate cannot be determined by the Calculation Agent, LIBOR in respect of such LIBOR Interest Determination Date will be LIBOR then in effect on such LIBOR Interest Determination Date. TREASURY RATE NOTES Each Treasury Rate Note will bear interest at the interest rate (calculated with reference to the Treasury Rate and the Spread or Spread Multiplier, if any), and will be payable on the dates, specified on the face of such Note and in the applicable Pricing Supplement. Unless otherwise indicated in the applicable Pricing Supplement, "Treasury Rate" means, with respect to any Treasury Interest Determination Date, the rate for the most recent auction of direct obligations of the United States ("Treasury bills") having the Index Maturity specified in the applicable Pricing Supplement as published in H.15(519) under the heading, "U.S. Government Securities/Treasury bills -- Auction Average (Investment)" or, if not so published by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Treasury Interest Determination Date, the auction average rate (expressed as a bond equivalent, rounded, upwards if necessary, to the next higher one hundred thousandth of a percentage point, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) for such auction as otherwise announced by the United States Department of the Treasury. In the event that the results of the auction of Treasury bills having the Index Maturity specified in the applicable Pricing Supplement are not published or reported as provided above by 3:00 p.m., New York City time, on such Calculation Date, or if no such auction is held in a particular week, then the Treasury Rate shall be the rate as published in H.15(519) under the heading "U.S. Government Securities/Treasury Bills/Secondary Market." In the event that such rate is not so published by 3:00 p.m., New York City time, on such Calculation Date, then the Treasury Rate shall be S-9 calculated by the Calculation Agent and shall be a yield to maturity (expressed as a bond equivalent rounded, upwards if necessary, to the next higher one hundred thousandth of a percentage point, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean, as calculated by the Calculation Agent on such Calculation Date, of the secondary market bid rates as of approximately 3:30 p.m., New York City time, on such Treasury Interest Determination Date, of three leading primary United States government securities dealers in The City of New York selected by the Calculation Agent, for the issue of Treasury bills with a remaining maturity closest to the specified Index Maturity; PROVIDED, HOWEVER, that if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Treasury Rate will be the Treasury Rate in effect on such Treasury Interest Determination Date. BOOK-ENTRY NOTES Upon issuance, all Book-Entry Notes of like tenor having the same original issuance date, interest rate, redemption provisions, if any, and Stated Maturity, will be represented by a single Global Note. Each Global Note representing Book-Entry Notes will be deposited with, or on behalf of, the Depository, located in the Borough of Manhattan, The City of New York, and registered in the name of a nominee of the Depository. Ownership of beneficial interests in a Global Note representing Book-Entry Notes will be limited to institutions that have accounts with the Depository or its nominee ("participants") or persons that may hold interests through participants. In addition, ownership of beneficial interests by participants in such a Global Note will only be evidenced by, and the transfer of that ownership interest will only be effected through, records maintained by the Depository or its nominee for such Global Note. Ownership of beneficial interests in such a Global Note by persons that hold through participants will only be evidenced by, and the transfer of that ownership interest will only be effected through, records maintained by such participant. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in such a Global Note. The Company has been advised by the Depository that upon the issuance of a Global Note representing Book-Entry Notes, and the deposit of such Global Note with the Depository, the Depository will immediately credit, on its book-entry registration and transfer systems, the respective principal amounts of the Book-Entry Notes represented by such Global Note to the accounts of participants. The accounts to be credited shall be designated by the Agents or, to the extent that the Book-Entry Notes are offered and sold directly, by the Company. Payment of principal of, premium, if any, and interest on Book-Entry Notes represented by any Global Note registered in the name of or held by the Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the registered owner and Holder of the Global Note representing such Book-Entry Notes. None of the Company, the Trustee or any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the Depository's records or any participant's records relating to, or payments made on account of, beneficial ownership interests in a Global Note representing such Book-Entry Notes or for maintaining, supervising or reviewing any of the Depository's records or any participant's records relating to such beneficial ownership interests. The Company has been advised by the Depository that upon receipt of any payment of principal of, premium, if any, or interest in respect of a Global Note, the Depository will immediately credit, on its book-entry registration and transfer system, accounts of participants with payments in amounts proportionate to their respective beneficial interest in the principal amount of such Global Note as shown on the records of the Depository. Payments by participants to owners of beneficial interests in a Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in "street name," and will be the sole responsibility of such participants. No Global Note described above may be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to another nominee of the Depository. S-10 A Global Note representing Book-Entry Notes is exchangeable for definitive Notes in registered form, of like tenor and of an equal aggregate principal amount, only if (x) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Note or if at any time the Depository ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (y) the Company in its sole discretion determines that such Global Note shall be exchangeable for definitive Notes in registered form or (z) any event shall have happened and be continuing which, after notice or lapse of time, or both, would be an Event of Default with respect to the Notes. Any Global Note that is exchangeable pursuant to the preceding sentence shall be exchangeable in whole for definitive Notes in registered form, of like tenor and of an equal aggregate principal amount, in denominations of $100,000 and integral multiples of $1,000 in excess thereof. Such definitive Notes shall be registered in the name or names of such person or persons as the Depository shall instruct the Trustee. It is expected that such instructions may be based upon directions received by the Depository from its participants with respect to ownership of beneficial interests in such Global Note. Except as provided above, owners of beneficial interests in such Global Note 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, and no Global Note representing Book-Entry Notes shall be exchangeable, except for another Global Note of like denomination and tenor to be registered in the name of the Depository or its nominee. Accordingly, each person owning a beneficial interest in such Global Note must rely on the procedures of the Depository 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 allows the Depository, as a Holder, to appoint agents 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. The Company understands that under existing industry practices, in the event that the Company requests any action of Holders or an owner of a beneficial interest in such permanent Global Note desires to give or take any action that a Holder is entitled to give or take under the Indenture, the Depository would authorize the participants holding the relevant beneficial interests to give or take such action, and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instructions of beneficial owners owning through them. The Depository has advised the Company and the Agents as follows: The Depository is a limited-purpose trust company organized under the laws of the State of New York, 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 Exchange Act. The Depository was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depository's participants include securities brokers and dealers (including the Agents), banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own the Depository. Access to the Depository's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES GENERAL Unless otherwise indicated in the applicable Pricing Supplement, the Notes will be denominated in U.S. dollars and payments of principal of, premium, if any, and interest on the Notes will be made in U.S. dollars. If any of the Notes are to be denominated in a currency or currency unit other than U.S. dollars, the following provisions shall apply, which are in addition to, and to the extent inconsistent therewith replace, the description of general terms and provisions of Notes set forth in the accompanying Prospectus and elsewhere in this Prospectus Supplement. For a description of certain risks associated with Foreign Currency Notes, see "Foreign Currency Risks." S-11 THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING SUPPLEMENT DO NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY UNIT EITHER AS SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED IN AN INVESTMENT IN FOREIGN CURRENCY NOTES AND AS TO ANY MATTERS THAT MAY AFFECT THE PURCHASE OR HOLDING OF A FOREIGN CURRENCY NOTE OR THE RECEIPT OF PAYMENTS OF PRINCIPAL OF AND ANY PREMIUM AND INTEREST ON A FOREIGN CURRENCY NOTE IN A SPECIFIED CURRENCY. FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS. Unless otherwise indicated in the applicable Pricing Supplement, a Foreign Currency Note will not be sold in, or to a resident of, the country of the Specified Currency in which such Note is denominated. Foreign Currency Notes are issuable in registered form only, without coupons. The denominations for particular Foreign Currency Notes will be specified in the applicable Pricing Supplement. Unless otherwise provided in the applicable Pricing Supplement, payment of the purchase price of Foreign Currency Notes will be made in immediately available funds. The information set forth in this Prospectus Supplement is directed to prospective purchasers of Notes who are United States residents, and the Company disclaims any responsibility to advise prospective purchasers who are residents of countries other than the United States with respect to any matters that may affect the purchase or holding of, or receipt of payments of principal, premium or interest in respect of, Notes. Such persons should consult their own advisors with regard to such matters. CURRENCIES Unless otherwise specified in the applicable Pricing Supplement, purchasers are required to pay for Foreign Currency Notes in the currency or currency unit specified in the applicable Pricing Supplement (the "Specified Currency"). At the present time there are limited facilities in the United States for the conversion of U.S. dollars into the Specified Currencies and vice versa, and banks do not offer non--U.S. dollar checking or savings account facilities in the United States. However, if requested on or prior to the fifth Business Day preceding the date of delivery of the Notes, or by such other day as determined by the Agent who presented such offer to purchase Notes to the Company, such Agent is prepared to arrange for the conversion of U.S. dollars into the Specified Currency set forth in the applicable Pricing Supplement to enable the purchasers to pay for the Notes. Each such conversion will be made by the applicable Agent on such terms and subject to such conditions, limitations and charges as the applicable Agent may from time to time establish in accordance with its regular foreign exchange practices. All costs of exchange will be borne by the purchasers of the Notes. Specific information about the foreign currency or currency units in which a particular Foreign Currency Note is denominated, including historical exchange rates and a description of the currency and any exchange controls, will be contained in the applicable Pricing Supplement. Such information contained therein shall be furnished as a matter of information only and should not be regarded as indicative of the range of or trends in fluctuations in currency exchange rates that may occur in the future. See "Foreign Currency Risks -- Exchange Rates and Exchange Controls." PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST The principal of, premium, if any, and interest on Foreign Currency Notes are payable by the Company in the Specified Currency. Unless otherwise specified in the applicable Pricing Supplement, since banks do not now have non-U.S. dollar bank accounts in their offices in the United States, the Exchange Rate Agent will convert all payments of principal of and interest on Foreign Currency Notes to U.S. dollars. However, unless otherwise specified in the applicable Pricing Supplement, the Holder of a Foreign Currency Note may elect to receive such payments in the Specified Currency as described below. S-12 Any U.S. dollar amount to be received by a Holder of a Foreign Currency Note will be based on the highest bid quotation in The City of New York received by the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the second Business Day preceding the applicable payment date from three recognized foreign exchange dealers (one of which may be the Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the Company for the purchase by the quoting dealer of the Specified Currency for U.S. dollars for settlement on such payment date in the aggregate amount of the Specified Currency payable to all Holders of Foreign Currency Notes scheduled to receive U.S. dollar payments and at which the applicable dealer commits to execute a contract. If such bid quotations are not available, payments will be made in the Specified Currency. All currency exchange costs will be borne by the Holder of the Foreign Currency Note by deductions from such payments. Notwithstanding the foregoing, unless otherwise specified in the applicable Pricing Supplement, a Holder of Foreign Currency Notes may elect to receive payment of the principal of, premium, if any, and interest on the Notes in the Specified Currency by transmitting a written request for such payment to the principal offices of The Bank of New York in the Borough of Manhattan, The City of New York, as Paying Agent, on or prior to the Regular Record Date or at least sixteen days prior to maturity, as the case may be. Such request may be in writing (mailed or hand delivered) or by cable, telex or other form of facsimile transmission. A Holder of a Foreign Currency Note may elect to receive payment in the Specified Currency for all principal, premium, if any, and interest payments and need not file a separate election for each payment. Such election will remain in effect until revoked by written notice to The Bank of New York in the Borough of Manhattan, The City of New York, but written notice of any such revocation must be received by The Bank of New York in the Borough of Manhattan, The City of New York on or prior to the relevant Regular Record Date or at least sixteen days prior to the maturity date, as the case may be. Holders of Foreign Currency Notes whose Foreign Currency Notes are to be held in the name of a broker or nominee should contact such broker or nominee to determine whether and how an election to receive payments in the Specified Currency may be made. Unless otherwise specified in the applicable Pricing Supplement, a beneficial owner of Book-Entry Notes denominated in a Specified Currency electing to receive payments of principal or any premium or interest in the Specified Currency must notify the participant through which its interest is held on or prior to the applicable Regular Record Date or at least sixteen days prior to maturity, as the case may be, of such beneficial owner's election to receive all or a portion of such payment in a Specified Currency. Such participant must notify the Depository of such election on or prior to the third Business Day after such Regular Record Date. The Depository will notify the Paying Agent of such election on or prior to the fifth Business Day after such Regular Record Date. If complete instructions are received by the participant and forwarded by the participant to the Depository, and by the Depository to the Paying Agent, on or prior to such dates, the beneficial owner will receive payments in the Specified Currency. Interest on Foreign Currency Notes paid in U.S. dollars will be paid in the manner specified in the accompanying Prospectus and this Prospectus Supplement for interest on Notes denominated in U.S. dollars. Interest on Foreign Currency Notes paid in the Specified Currency will be paid by a check drawn on account maintained at a bank outside the United States, unless other arrangements have been made. The principal of Foreign Currency Notes, together with interest accrued and unpaid thereon, due at maturity will be paid in immediately available funds against presentation of such Foreign Currency Notes at the principal offices of The Bank of New York in the Borough of Manhattan, The City of New York, as Paying Agent. Any payment of principal or interest required to be made on an Interest Payment Date or at maturity of a Foreign Currency Note which is not a Business Day need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or at maturity, as the case may be, and no interest shall accrue for the period from and after such Interest Payment Date or maturity. PAYMENT CURRENCY If a Specified Currency is not available for the payment of principal, premium, if any, or interest with respect to a Foreign Currency Note due to the imposition of exchange controls or other circumstances S-13 beyond the control of the Company, the Company will be entitled to satisfy its obligations to Holders of Foreign Currency Notes by making such payment in U.S. dollars on the basis of the Market Exchange Rate on the date of such payment, or if such Market Exchange Rate is not then available, on the basis of the most recently available Market Exchange Rate. See "Foreign Currency Risks -- Exchange Rates and Exchange Controls." FOREIGN CURRENCY RISKS GENERAL EXCHANGE RATES AND EXCHANGE CONTROLS An investment in Foreign Currency Notes entails significant risks that are not associated with a similar investment in a security denominated in U.S. dollars. Such risks include, without limitation, the possibility of significant changes in the rate of exchange between the U.S. dollar and the Specified Currency and the possibility of the imposition or modification of foreign exchange controls by either the United States or foreign governments. Such risks generally depend on economic and political events over which the Company has no control. In recent years, rates of exchange between the U.S. dollar and certain foreign currencies have been highly volatile and such volatility may be expected in the future. Fluctuations in any particular exchange rate that have occurred in the past are not necessarily indicative, however, of fluctuations in the rate that may occur during the term of any Foreign Currency Note. Depreciation of the Specified Currency applicable to a Foreign Currency Note against the U.S. dollar would result in a decrease in the U.S. dollar-equivalent yield of such Note, in the U.S. dollar-equivalent value of the principal repayable at maturity of such Note and, generally, in the U.S. dollar-equivalent market value of such Note. JUDGMENTS In the event an action based on Foreign Currency Notes were commenced in a court of the United States, it is likely that such court would grant judgment relating to such Notes only in U.S. dollars. It is not clear, however, whether, in granting such judgment, the rate of conversion into U.S. dollars would be determined with reference to the date of default, the date judgment is rendered or some other date. EXCHANGE CONTROLS, ETC. Governments have imposed from time to time exchange controls and may in the future impose or revise exchange controls at or prior to a Note's maturity. Even if there are not exchange controls, it is possible that the Specified Currency for any particular Foreign Currency Note would not be available at such Note's maturity. In that event, the Company will pay in U.S. dollars on the basis of the Market Exchange Rate on the date of such payment, or if such Market Exchange Rate is not then available, on the basis of the most recently available Market Exchange Rate. UNITED STATES TAXATION GENERAL The following is a summary of certain United States federal income tax consequences to initial purchasers of the Notes. The summary does not discuss all aspects of federal income taxation which may be relevant to particular investors in light of their specific investment circumstances, nor does it discuss any foreign, state or local income or other tax considerations. The summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), and on regulations, rulings and decisions that are in effect as of the date of this Prospectus, all of which are subject to change. The summary assumes that the Notes are held as "capital assets" (generally, property held for investment purposes) within the meaning of Section 1221 of the Code. Except to the extent discussed below under "Holders Who are United States Aliens," this summary may not be applicable to non-United States persons not subject to United States federal income tax on their worldwide income. "United States Alien" means any person who, for federal income tax purposes, is a foreign corporation, a non-resident alien individual, a non- S-14 resident alien fiduciary of a foreign estate or trust, or a foreign partnership one or more of the members of which is, for federal income tax purposes, a foreign corporation, a non-resident alien individual or a non-resident alien fiduciary of a foreign estate or trust. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES. STATED INTEREST In general, interest payments on a Note calculated on the basis of a single fixed rate of interest, or a variable rate tied to a single objective index of market interest rates, that is actually and unconditionally payable at fixed periodic intervals of one year or less over the entire term of the Note (including short periods) will be includable in the Holder's gross income as ordinary interest income in accordance with such Holder's method of tax accounting. ORIGINAL ISSUE DISCOUNT Notes with a term greater than one year may be issued with original issue discount for federal income tax purposes. Original issue discount will arise if the stated principal amount at maturity of a Note exceeds its issue price by more than a DE MINIMIS amount, or if a Note has certain interest payment characteristics (e.g., interest holidays, interest payable in additional Note, stepped rates or rates based on multiple indices). If a Notes is issued with original issue discount, the holder of the Note will be required to include amounts in gross income for federal income tax purposes in advance of the receipt of the cash payment to which such income is attributable. The amount of original issue discount to be included in income in any tax period will be determined using a constant yield to maturity method. Any amounts included in income as original issue discount will, however, increase a holder's tax basis in the Note. Any Note issued with original issue discount will bear a legend setting forth the total amount of original issue discount with respect to such Note, and the Company will report annually to the Internal Revenue Service (the "IRS") and to each holder of such Note the original issue discount accrued with respect to the Note. Prospective holders are advised to consult their tax advisors with respect to the particular original issue discount characteristics of the Note that is being purchased. ACQUISITION DISCOUNT ON SHORT-TERM NOTES Notes that have a fixed maturity of one year or less may be issued with acquisition discount. Acquisition discount will arise under the circumstances set forth above with respect to original issue discount. Accrual basis taxpayers making an appropriate election under the Code and taxpayers in certain specified classes would be required to include acquisition discount in income currently in an amount and manner similar to that applicable to original issue discount. A cash basis holder who makes such an election cannot revoke such election without the consent of the IRS, and such election applies to all short-term obligations acquired by the holder in the taxable year in which the election is made and in all subsequent taxable years. Individuals and other cash basis taxpayers holding Notes with acquisition discount are not required to include accrued acquisition discount in income until the cash payments attributable to such amounts are received, which amounts will be treated as ordinary income. A U.S. Holder who does not recognize acquisition discount currently may also be subject to limitations on the deductibility of interest on indebtedness incurred to purchase or, in certain circumstances, carry such a Note. DISPOSITION OF NOTES In general, and subject to the foregoing discussion of acquisition discount, an initial holder of a Note will recognize capital gain or loss on the sale, redemption, exchange or other disposition of the Note measured by the difference between the amount of cash received (except to the extent attributable to accrued interest) and the holder's adjusted tax basis in the Note. FOREIGN CURRENCY NOTES For purposes of the following discussion, it is assumed that the functional currency of a United States Holder (a Holder who is not a United States Alien) is the U.S. dollar. S-15 INTEREST PAYMENTS AND ORIGINAL ISSUE DISCOUNT In general, interest on a Foreign Currency Note (whether received in the Specified Currency or U.S. dollars) will be taxable to a United States Holder as ordinary interest income at the time it is accrued or received in accordance with such Holder's method of accounting for tax purposes. Regardless of whether an interest payment is in fact converted to U.S. dollars, the amount of interest income (including any original issue discount) required to be included in income (the "Includible Amount") will generally be (i) in the case of a cash basis taxpayer, the U.S. dollar value of the foreign currency interest payment based on the exchange rate in effect on the date of receipt or payment plus the amount of any accrued original issue discount and (ii) in the case of an accrual basis taxpayer, the U.S. dollar value of the accrued amounts based on (x) the average exchange rate in effect during the interest accrual period or (y) if an election is made under Treasury Regulation Section 1.988-2(b)(2)(iii) (the "Section 988 Election"), the exchange rate on the last day of the interest accrual period or on the date of the receipt of the interest payment (if such date is within five business days of the last day of the interest accrual period). The amount of original issue discount on a Foreign Currency Note required to be included in income for a cash basis taxpayer will be computed for any accrual period in the relevant foreign currency and then translated into a U.S. dollar value based on (i) the average exchange rate in effect during such accrual period or (ii) the exchange rate on the last day of the interest accrual period if a Section 988 Election is made. The Section 988 Election is made by filing a statement with the Holder's first return for a taxable year in which the Section 988 Election is effective. The Section 988 Election must be applied consistently to all debt instruments held by the Holder and cannot be changed without the consent of Commissioner of the IRS. Until a Section 988 Election is effective, an accrual basis taxpayer will be required to recognize gain or loss upon the receipt of interest payments on a Foreign Currency Note attributable to fluctuations in currency exchange rates ("Foreign Currency Exchange Gain or Loss") between the dates of accrual and receipt, equal to the difference, if any, between (i) the U.S. dollar value of the Specified Currency interest payment based on the exchange rate in effect on the date of receipt and (ii) the Includible Amount. Any such Foreign Currency Exchange Gain or Loss will be ordinary income or loss. Rules similar to those described above with respect to accrual basis taxpayers apply to both cash and accrual basis Holders of Foreign Currency Notes that are issued with original issue discount. PURCHASE, SALE AND RETIREMENT OF FOREIGN CURRENCY NOTES A United States Holder's tax basis in a Foreign Currency Note will be (i) the U.S. dollar value of the Specified Currency amount paid for such Foreign Currency Note based on the exchange rate in effect on the date of purchase of the Foreign Currency Note plus (ii) the U.S. dollar value of any accrued original issue discount on the Foreign Currency Note which the Holder has reported in gross income. A Holder who converts U.S. dollars to a foreign currency and immediately uses that currency to purchase a Foreign Currency Note denominated in the same currency will ordinarily not recognize Foreign Currency Exchange Gain or Loss in connection with such conversion and purchase. If a Holder purchases a Foreign Currency Note with previously owned foreign currency, the Holder will recognize Foreign Currency Exchange Gain or Loss in an amount equal to the difference, if any, between the Holder's U.S. dollar tax basis in such foreign currency and the U.S. dollar fair market value of the Foreign Currency Note based on the exchange rate in effect on the date of purchase. Gain or loss will be recognized upon the sale, exchange or retirement of a Foreign Currency Note equal to the U.S. dollar value of the foreign currency received upon such disposition less the U.S. dollar tax basis in the Foreign Currency Note. Such gain or loss will be ordinary income or loss to the extent it is treated as Foreign Currency Exchange Gain or Loss. Any gain or loss that is recognized in excess of Foreign Currency Exchange Gain or Loss will be capital gain or loss. EXCHANGE OF FOREIGN CURRENCY Foreign currency received as interest on a Foreign Currency Note or on the sale or retirement of a Foreign Currency Note will have a tax basis equal to its U.S. dollar value determined at the time such interest is received or at the time of sale or retirement. Any gain or loss recognized on a sale or other disposition of the foreign currency will be ordinary income or loss. S-16 HOLDERS WHO ARE UNITED STATES ALIENS Under present United States federal income and estate tax law and subject to the discussion of backup withholding below: (a) payments of interest (including any original issue discount, if any) on the Notes to any United States Alien Holder will not be subject to federal income or withholding tax, provided that (1) the Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote, (2) the Holder is not (i) a bank receiving interest pursuant to a loan agreement entered into in the ordinary course of its trade or business or (ii) a controlled foreign corporation that is related to the Company through stock ownership, (3) such interest payments are not effectively connected with a United States trade or business of the Holder and (4) either (i) the Holder certifies to the Company or its agent, under penalties of perjury, that it is not a United States person and provides its name and address or (ii) a securities clearing organization, bank or other financial institution which holds the Note and customers' securities in the ordinary course of its trade or business (a "financial institution") certifies to the Company or its agent under penalties of perjury that such statement has been received from the Holder by it (or by a financial institution between it and the Holder) and furnishes the payor with a copy thereof; (b) a United States Alien Holder will not be subject to federal income tax on gain realized on the sale, exchange, retirement or other disposition of a Note, unless (1) the Holder is an individual who is present in the United States for 183 days or more during the taxable year and certain requirements are met or (2) the gain is effectively connected with a United States trade or business of the Holder; and (c) a Note held by an individual who at the time of death is not a citizen or resident of the United States for federal estate tax purposes will not be subject to federal estate tax as a result of such individual's death unless (1) the income from the Note is effectively connected with a United States trade or business of the Holder or (2) the individual actually or constructively owns 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote. BACKUP WITHHOLDING AND INFORMATION REPORTING Interest paid with respect to a Note, and payment of the proceeds for a sale of a Note to or through the United States office of a broker, received by a United States Alien will not be subject to information reporting and backup withholding if the payor has received the appropriate certification statement. The appropriate certification procedures require that the Holder certify as to its status as a United States Alien and provide its name and address. In addition, payments of the proceeds from the sale of a Note to or through a foreign office of a broker or the foreign office of a custodian, nominee or other agent acting on behalf of the beneficial owner of a Note will not be subject to information reporting or backup withholding; however, if the broker, custodian, nominee or other agent is a United States person, a controlled foreign corporation for federal income tax purposes or a foreign person 50% or more of whose gross income, over a specified three-year period, is from a United States trade or business, information reporting may be required with respect to such payments. Any amounts withheld under the backup withholding rules from a payment to a Holder would be allowed as a refund or a credit against such Holder's federal income tax liability, provided that the required information is furnished to the IRS. PLAN OF DISTRIBUTION OF NOTES Under the terms of an Agency Agreement, dated July 20, 1992, as amended by an Amendment to Agency Agreement, dated April 29, 1994 (the "Agency Agreement"), the Notes may be offered on a continuing basis by the Company through the Agents, each of which has agreed to use reasonable efforts to solicit purchases of the Notes. The Company will pay each Agent a commission from .125% to .75% of the principal amount of each Note, depending on its Stated Maturity, sold through such Agent. This commission scale applies to Notes that mature between nine months and thirty years (inclusive) from their date of issue. The commission applicable to the sale of any Note that matures more than thirty years from its date of issue S-17 will be determined by the relevant Agent and the Company at the time of such sale and disclosed in the applicable Pricing Supplement. The Company has reserved the right to sell Notes directly or indirectly to investors on its own behalf. The Company may accept offers to purchase Notes through additional agents on substantially the same terms and conditions (including commission rates) as would apply to purchases under the Agency Agreement. Such other agents, if any, will be named in the applicable Pricing Supplement. The Company will have the sole right to accept offers to purchase Notes and may reject any such offer, in whole or in part. Each Agent shall have the right, in its discretion reasonably exercised, without notice to the Company, to reject any offer to purchase Notes received by it, in whole or in part. The Company also may sell Notes to an Agent, acting as principal, at a discount to be agreed upon at the time of sale, for resale to one or more investors at varying prices related to prevailing market prices at the time of such resale, as determined by such Agent, or for resale to certain securities dealers at the offering price set forth on the cover page of the applicable Pricing Supplement, less the applicable concession, of the principal amount of the Notes. The offering price and other selling terms for such resales may from time to time be varied by such Agent. Unless otherwise indicated in the applicable Pricing Supplement, payment of the purchase price of Notes will be required to be made in funds immediately available in The City of New York. The Agents may be deemed to be "underwriters" within the meaning of the Securities Act of 1933 (the "Act"). The Company has agreed to indemnify the Agents against and contribute toward certain liabilities, including liabilities under the Act. The Company has agreed to reimburse the Agents for certain expenses. In addition to offering Notes through the Agents as described herein, senior debt securities which are medium-term notes and may have terms substantially similar to the terms of the Notes offered hereby (but constituting one or more separate series of senior debt securities for purposes of the Indenture) may be offered, concurrently with the offering of the Notes, on a continuing basis outside the United States (as defined under "Limitations on Issuance of Bearer Securities" in the Prospectus) by the Company pursuant to a placement agency agreement. The terms of the placement agency agreement are expected to be substantially similar to the terms of the Agency Agreement, except that such placement agency agreement will contain certain selling restrictions. CS First Boston Corporation and Kidder, Peabody & Co. Incorporated each engage in transactions with and perform services for the Company in the ordinary course of business. VALIDITY OF THE NOTES The validity of the Notes offered hereby will be passed upon for the Company by James W. Guedry, Esquire, Associate General Counsel and Secretary of the Company, and for the Agents by Skadden, Arps, Slate, Meagher & Flom, New York, New York. The opinions of James W. Guedry and Skadden, Arps, Slate, Meagher & Flom will be conditioned upon, and subject to certain assumptions regarding, future action required to be taken by the Company and the Trustee at the request of the Company in connection with the issuance and sale of any particular Note, the specific terms of Notes and other matters which may affect the validity of Notes but which cannot be ascertained on the date of such opinions. Mr. Guedry does not own a material or significant amount of the outstanding shares of the Company's common stock. He participates in the Company's Stock Option Plan and its Salaried Savings Plan, having an interest in a fund under that plan which invests in the Company's common stock. S-18 GLOSSARY SET FORTH BELOW ARE DEFINITIONS, OR THE LOCATIONS ELSEWHERE OF DEFINITIONS, OF SOME OF THE TERMS USED IN THIS PROSPECTUS SUPPLEMENT. "BUSINESS DAY" means (a) with respect to any Note (unless otherwise provided in this definition), any day that is a Business Day in The City of New York, (b) with respect to LIBOR Notes only, any Business Day in The City of New York that is also a London Business Day, (c) with respect to Foreign Currency Notes (other than Foreign Currency Notes denominated in European Currency Units ("ECUs")) only, any day that is a Business Day both in The City of New York and in the principal financial center of the country of the Specified Currency and (d) with respect to Foreign Currency Notes denominated in ECU, any Business Day in The City of New York that is also designated as an ECU settlement day by the ECU Banking Association in Paris or otherwise generally regarded in the ECU interbank market as a day in which payments in EUC are made. "CALCULATION AGENT" means the agent appointed by the Company to calculate interest rates for Floating Rate Notes. Unless otherwise provided in a Pricing Supplement, the Calculation Agent will be The Bank of New York. "CALCULATION DATE" means the date on which the Calculation Agent is to calculate an interest rate for a Floating Rate Note, which is the applicable date set forth below, unless otherwise specified in the applicable Pricing Supplement: CD RATE -- The earlier of (i) the tenth day after the related CD Rate Interest Determination Date or, if such day is not a Business Day, the next succeeding Business Day; and (ii) the Business Day next preceding the relevant Interest Payment Date or date of Stated Maturity, as the case may be. COMMERCIAL PAPER RATE -- The earlier of (i) the tenth day after the related Commercial Paper Interest Determination Date or, if such day is not a Business Day, the next succeeding Business Day; and (ii) the Business Day next preceding the relevant Interest Payment Date or date of Stated Maturity, as the case may be. FEDERAL FUNDS RATE -- The earlier of (i) the tenth day after the related Federal Funds Interest Determination Date or, if such day is not a Business Day, the next succeeding Business Day; and (ii) the Business Day next preceding the relevant Interest Payment Date or date of Stated Maturity, as the case may be. LIBOR -- The LIBOR Interest Determination Date. PRIME RATE -- The Prime Rate Interest Determination Date. TREASURY RATE -- The earlier of (i) the tenth day after the related Treasury Interest Determination Date or, if such day is not a Business Day, the next succeeding Business Day; and (ii) the Business Day next preceding the relevant Interest Payment Date or date of Stated Maturity, as the case may be. "CD RATE" means the rate calculated as set forth under the heading "Description of Notes -- Floating Rate Notes -- CD Rate Notes," unless otherwise indicated in the applicable Pricing Supplement. "COMMERCIAL PAPER RATE" means the rate calculated as set forth under the heading "Description of Notes -- Floating Rate Notes -- Commercial Paper Rate Notes," unless otherwise indicated in the applicable Pricing Supplement. "COMPOSITE QUOTATIONS" means the daily statistical release entitled "Composite 3:30 P.M. Quotations for U.S. Government Securities," or any successor publication, published by the Federal Reserve Bank of New York. "EXCHANGE RATE AGENT" means the agent appointed by the Company to convert principal and any premium and interest payments in respect of Foreign Currency Notes to U.S. dollars. Unless otherwise provided in a Pricing Supplement, the Exchange Rate Agent will be The Bank of New York. S-19 "FEDERAL FUNDS RATE" means the rate calculated as set forth under the heading "Description of Notes -- Floating Rate Notes -- Federal Funds Rate Notes," unless otherwise indicated in the applicable Pricing Supplement. "FIXED RATE NOTE" shall have the meaning set forth under the heading "Description of Notes -- Fixed Rate Notes." "FLOATING RATE NOTES" shall have the meaning set forth under the heading "Description of Notes -- Floating Rate Notes." "FOREIGN CURRENCY EXCHANGE GAIN OR LOSS" shall have the meaning set forth under the heading "United States Taxation -- Foreign Currency Notes -- Interest Payments and Original Issue Discount." "H.15(519)" means the weekly statistical release entitled "Statistical Release H.15(519), Selected Interest Rates," or any successor publication, published by the Board of Governors of the Federal Reserve System. "INDEX MATURITY" means, with respect to a Floating Rate Note, the period to maturity of the instrument or obligation on which the interest rate formula is based, as specified in the applicable Pricing Supplement. "INITIAL INTEREST RATE" means the rate at which an interest--bearing Note other than a Fixed Rate Note will bear interest from the date of issue to the first Reset Date, as set forth in the applicable Pricing Supplement. "INTEREST DETERMINATION DATE" means the date as of which the interest rate for a Floating Rate Note is to be calculated, to be effective as of the following Reset Date and calculated on the related Calculation Date (except in the case of Prime Rate and LIBOR, which are calculated on the related Prime Rate Interest Determination Date and LIBOR Interest Determination Date, respectively). See the fourth paragraph under the heading "Description of Notes - -- Floating Rate Notes" for the Interest Determination Dates for Floating Rate Notes. The Interest Determination Dates for any Floating Rate Note will also be set forth in the applicable Pricing Supplement and in such Note. "INTEREST RESET DATE" means the date on which a Floating Rate Note will begin to bear interest at the variable interest rate determined as of any Interest Determination Date. See the third paragraph under the heading "Description of Notes -- Floating Rate Notes" for the applicable Reset Dates for such Notes. The Reset Dates with respect to any interest-bearing Note will also be set forth in the applicable Pricing Supplement and on such Note. "LIBOR" means the rate calculated as set forth under the heading "Description of Notes -- Floating Rate Notes -- LIBOR Notes," unless otherwise indicated in the applicable Prospectus Supplement. "LONDON BUSINESS DAY" means any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. "MARKET EXCHANGE RATE" for any Specified Currency means the noon buying rate in The City of New York for cable transfers for such Specified Currency as certified for customs purposes by (or if not so certified as otherwise determined by) the Federal Reserve Bank of New York. "PRIME RATE" means the rate calculated as set forth under the heading "Description of Notes -- Floating Rate Notes -- Prime Rate Notes," unless otherwise indicated in the applicable Pricing Supplement. "REGULAR RECORD DATE" shall have the meaning set forth under the heading "Description of Notes -- Interest." "REUTERS SCREEN NYMF PAGE" means the display designated as page "NYMF" on the Reuters Monitor Money Rates Service (or such other page as may replace the NYMF page on that service for the purpose of displaying the prime rate or base lending rate of major United States banks). "SECTION 988 ELECTION" shall have the meaning set forth under the heading "United States Taxation -- Foreign Currency Notes -- Interest Payments and Original Issue Discount." S-20 "SPECIFIED CURRENCY" shall have the meaning set forth in the first paragraph under the heading "Special Provisions Relating to Foreign Currency Notes -- Currencies." "SPREAD" means the number of basis points specified in the Note and the applicable Pricing Supplement as being applicable to the Interest Rate for a particular Floating Rate Note. "SPREAD MULTIPLIER" means the percentage specified in the applicable Pricing Supplement as being applicable to the interest rate for a particular Floating Rate Note. "TELERATE PAGE 3750" means the display page so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service or such other service as may be nominated as the information vendor, for the purpose of displaying rates or pricing relating to LIBOR). "TREASURY RATE" means the interest rate calculated as set forth under the heading "Description of Notes -- Floating Rate Notes -- Treasury Rate Notes," unless otherwise indicated in the applicable Pricing Supplement. "ZERO-COUPON NOTE" means a Note which does not bear interest prior to Maturity. S-21 - -------------------------------------------------------------------------------- PROSPECTUS --------------------------------------------------------------- INTERNATIONAL PAPER DEBT SECURITIES, PREFERRED STOCK, COMMON STOCK AND WARRANTS -------------- International Paper Company (the "Company") may offer from time to time, together or separately, its (i) debt securities (the "Debt Securities"), which may be either senior debt securities (the "Senior Debt Securities") or subordinated debt securities (the "Subordinated Debt Securities"), consisting of notes, debentures or other unsecured evidences of indebtedness in one or more series, (ii) shares of its serial preferred stock, par value $1.00 per share (the "Preferred Stock"), which, for any or all series of Preferred Stock, may be issued in the form of depositary shares evidenced by depositary receipts (the "Depositary Shares"); (iii) shares of its common stock, par value $1.00 per share (the "Common Stock"), including Common Share Purchase Rights to purchase Common Stock, and (iv) warrants to purchase Debt Securities, Preferred Stock, Depositary Shares or Common Stock, or any combination thereof, as shall be designated by the Company at the time of the offering (the "Warrants") in amounts, at prices and on terms to be determined at the time of the offering. The Debt Securities, Preferred Stock, Depositary Shares, Common Stock and Warrants are collectively called the "Securities." The Securities may be offered as separate series or issuances at an aggregate initial offering price not to exceed $2,400,000,000 or, if applicable, the equivalent thereof in one or more foreign currencies, currency units, composite currencies or in amounts determined by reference to an index as shall be designated by the Company, in amounts, at prices and on terms to be determined in light of market conditions at the time of sale and set forth in a Prospectus Supplement or Prospectus Supplements. Unless otherwise specified in a Prospectus Supplement, the Senior Debt Securities, when issued, will be unsecured and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt Securities, when issued, will be subordinated in right of payment to all Senior Indebtedness of the Company. Certain specific terms of the particular Securities in respect of which this Prospectus is being delivered are set forth in the Prospectus Supplement, including, where applicable, (i) in the case of Debt Securities, the title, aggregate principal amount, denominations, maturity, any interest rate (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 terms for conversion or exchange into other Securities, currency or currencies of denomination and payment, if other than U.S. dollars, any listing on a securities exchange and any other terms in connection with the offering and sale of the Debt Securities in respect of which this Prospectus is delivered, as well as the initial public offering price; (ii) in the case of Preferred Stock, the specific title, the aggregate amount, any dividend (including the method of calculating payment of dividends), seniority, liquidation, redemption, voting and other rights, any terms for any conversion or exchange into other Securities, any listing on a securities exchange, the initial public offering price and any other terms; (iii) in the case of Common Stock, the number of shares of Common Stock and the terms of offering thereof; and (iv) in the case of Warrants, the designation and number, the exercise price, any listing of the Warrants or the underlying Securities on a securities exchange and any other terms in connection with the offering, sale and exercise of the Warrants. The Debt Securities may be issued in registered form or, subject to certain limitations set forth herein, bearer form with coupons, or both. In addition, all or a portion of the Debt Securities of a series may be issuable in temporary or permanent global form and may be issued in the name of a depository institution as book-entry securities. Subject to certain exceptions, Debt Securities in bearer form may not be offered or sold to persons within the United States or its possessions or to United States persons. See "Limitations on Issuance of Bearer Securities." The Company's Common Stock is listed on the New York Stock Exchange under the trading symbol "IP." Any Common Stock sold pursuant to a Prospectus Supplement will be listed on such exchange, subject to official notice of issuance. -------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------- The Securities may be sold directly, through agents, underwriters or dealers as designated from time to time, or through a combination of such methods. See "Plan of Distribution." If agents of the Company or any dealers or underwriters are involved in the sale of the Securities in respect of which this Prospectus is being delivered, the names of such agents, dealers or underwriters and any applicable commissions or discounts will be set forth in or may be calculated from the Prospectus Supplement with respect to such Securities. The net proceeds to the Company from such sale also will be set forth in a Prospectus Supplement. -------------- The date of this Prospectus is April 13, 1994 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE ACCOMPANYING PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS OR PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. AVAILABLE INFORMATION The Company is subject to the informational requirements of the United States Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith file reports and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements, and other information filed by the Company can be inspected and copied at the public reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of the Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material may also be obtained from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Certain securities of the Company are listed on, and reports, proxy statements and other information concerning the Company can be inspected at the offices of, the New York Stock Exchange, Inc. ("New York Stock Exchange"), 20 Broad Street, New York, New York 10005. The Company has filed with the Commission a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Securities offered hereby (the "Registration Statement"). This Prospectus does not contain all information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. Reference is made to the Registration Statement and to the exhibits relating thereto for further information with respect to the Company and the Securities offered hereby. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission pursuant to the Exchange Act (File No. 1-3157) are incorporated in this Prospectus by reference: (a) Annual Report on Form 10-K for the year ended December 31, 1993; (b) the description of the Company's capital stock which is contained in the Company's registration statement on Form 8-A, dated July 20, 1976, as amended, and the Company's registration statements on Form S-3, filed January 8, 1992 (No. 33-44855) and December 23, 1993 (No. 33-51447); and (c) the Company's registration statement on Form 8-A, dated April 17, 1987, as amended December 14, 1989 (relating to the Common Share Purchase Rights) and the related Current Report on Form 8-K, dated April 17, 1987. All documents filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the filing of a post-effective amendment which indicates the termination of the offering of the Securities made by this Prospectus shall be deemed to be incorporated by reference in this Prospectus and to be a part of this Prospectus from the date of filing of such document. Any statement contained in a document, all or a portion of which is incorporated or deemed to be incorporated by reference herein, or contained in this Prospectus, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any 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 this Prospectus. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, on the written or oral request of such person, a copy of any or all of the documents referred to above which have been or may be incorporated by reference in this Prospectus (without exhibits to such documents other than exhibits specifically incorporated by reference into such documents). Such written or oral request should be directed to International Paper Company, Two Manhattanville Road, Purchase, New York 10577, Attention: Investor Relations Department ((914) 397-1632). -------------- Unless otherwise indicated, currency amounts in this Prospectus and any Prospectus Supplement are stated in United States dollars ("$," "dollars," "U.S. dollars" or "U.S.$"). 2 THE COMPANY The Company, a New York corporation incorporated in 1941 as the successor to the New York corporation of the same name organized in 1898, is a worldwide producer of printing and writing papers, paperboard and packaging, and wood products and distributes paper and office supply products in both the United States and Europe. It also produces pulp, laminated products, and specialty products, including photosensitive films and papers, nonwovens, chemicals and minerals. In the United States, the Company operates 26 pulp and paper mills, 54 converting and packaging plants, 43 wood products facilities, 15 specialty panels and laminated products plants, six nonwoven products facilities and seven envelope manufacturing plants. Production facilities in Europe, Asia, Latin America and Canada include 14 pulp and paper mills, 32 converting and packaging plants, three wood products facilities, three specialty panels and laminated products plants and five nonwoven products facilities. The Company distributes fine paper, printing and industrial products and building materials, primarily manufactured by other companies, through about 255 distribution branches located principally in the United States. In addition, the Company produces photosensitive films and papers and photographic equipment (three United States and six international locations) and specialty chemicals (seven United States and two international locations), and engages in domestic oil and gas and real estate activities. In March 1994, the Company, through a subsidiary, acquired approximately one-half of Brierley Investments Limited's ("Brierley") holdings in Carter Holt Harvey Limited ("Carter Holt"), a major New Zealand forest products and paper company with substantial assets in Chile. The purchase increased the Company's ownership of Carter Holt to 24% and leaves Brierley with 8%. In April 1993, the Company acquired certain assets of the Los Angeles-based Ingram Paper Company, a distributor of industrial and fine printing papers. In December, JB Papers Inc., a paper distribution company located in Union, New Jersey, was purchased. Also in December, the assets of the Monsanto Company's Kentucky-based Fome-Cor division, a manufacturer of polystyrene foam products, were acquired. In the first quarter of 1992, the operating assets of Western Paper Company (Western Pacific), a printing and industrial paper distribution business based in Portland, Oregon, were purchased. In the second quarter, the Company acquired an equity interest in Scitex Corporation Ltd., an Israel-based world leader in color electronic prepress systems for the graphic design, printing and publishing industries. In the third quarter, Zaklady Celulozowa-Papierniecze S.A. w Kwidzynie ("Kwidzyn") was acquired from the Government of the Republic of Poland. Kwidzyn is Poland's largest white paper manufacturer and the only integrated bleached pulp and paper company in Poland. In the fourth quarter, certain assets of the chemical division of Norway-based M. Peterson & Son AS were acquired. In the first quarter of 1991, the Company purchased certain packaging and sheeting facilities located in France (the Rhone Valley packaging business) from the Georgia-Pacific Corporation. In April 1991, the packaging equipment division of United Dominion Industries, Ltd. (Evergreen Packaging Equipment) was purchased. Also in April, the Company acquired the common stock of Dillard Paper Company, a wholesale distributor of printing and industrial papers, packaging equipment and supplies based in the southern United States. In August 1991, the Company completed a merger with Leslie Paper Co., a paper distribution firm headquartered in Minneapolis, Minnesota, using the pooling-of-interests method of accounting. In November 1991, the Company entered into a joint venture agreement with Brierley to control 32% of Carter Holt. In December 1991, the common stock of Scaldia Papier BV, a paper distribution company based in Nijmegen, Netherlands, was purchased. All of the 1993, 1992 and 1991 acquisitions, except the merger with Leslie Paper Co., were accounted for using the purchase method. The effects of these mergers and acquisitions, individually or in the aggregate, were not significant to the Company's financial statements. 3 From 1989 through 1993, the Company's capital expenditures approximated $5.7 billion, excluding mergers and acquisitions. These expenditures reflect continuing efforts to improve product quality, environmental performance, lower costs, expand production capacity, and acquire and improve forestlands. Capital spending in 1993 was $954 million and is expected to exceed $1.1 billion in 1994. The Company, which owns a majority interest in IP Timberlands, Ltd., a Texas limited partnership ("IPT"), controlled approximately 6.2 million acres of forestlands in the United States at December 31, 1993. IPT was formed to succeed to substantially all of the Company's forest products business for the period 1985 through 2035, unless earlier terminated. SUPPLEMENTAL INFORMATION In November 1992, the Company recorded pretax charges of $370 million to establish a productivity improvement reserve and $28 million for environmental remediation and clean-up. Of the total productivity improvement charge, $126 million was related to plant shutdowns, $138 million was for plant consolidations and other asset write-offs, $64 million was for employee relocation and severance and $42 million was for legal, warranty and miscellaneous items. Approximately $250 million of the productivity improvement charge was for non-cash items, primarily the write-down of fixed assets. The remaining $120 million consisted of cash expenditures. Approximately 40% has been expended in 1993 and, except for legal costs, the Company expects the remainder to be spent about equally in 1994 and 1995. The Company originally projected that annual savings would approach $75 million by the end of 1994. The Company realized 45% of that level in 1993, and expects to reach 85% by the end of 1994 and to exceed $75 million when actions are completed in 1995. The savings result primarily from lower personnel costs and depreciation, as well as the elimination of operating losses. No overall adjustment to the reserve balances are anticipated as of the date of this Prospectus. RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (UNAUDITED) The following table sets forth the Company's ratio of earnings to fixed charges and ratio of earnings to combined fixed charges and preferred stock dividends for the periods indicated.
YEARS ENDED DECEMBER 31, --------------------------------- 1989 1990 1991 1992 1993 ----- ----- ----- ----- ----- Ratio of Earnings to Fixed Charges........................... 6.34 3.53 2.44 1.42 2.26 Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends......................... 5.67 3.53 2.44 1.42 2.26
For purposes of computing the ratio of earnings to fixed charges, earnings include pre-tax earnings before an extraordinary charge and the cumulative effect of an accounting change, interest expense and the estimated interest factor in rent expense (which, in the opinion of the Company, approximates one-third of rent expense), and adjustments for undistributed equity earnings and the amortization of capitalized interest. Fixed charges include interest incurred (including amounts capitalized) and the estimated interest factor in rent expense. Dividends on the Company's $4 Preferred Stock ($4 per share per annum) are insignificant and, as a result, for the years ended December 31, 1990 through 1993, the ratios of earnings to combined fixed charges and preferred stock dividends were the same as the ratios of earnings to fixed charges. USE OF PROCEEDS Except as otherwise described in an accompanying Prospectus Supplement, the net proceeds to be received from the sale of the Securities offered hereby will be used for general corporate purposes. The 4 Company may also apply proceeds to expenditures for plant and equipment, and possibly for acquisitions of the stock or assets of other companies, for the repurchase of shares of the Company's Common Stock or to retire other short-term or long-term indebtedness. The Company expects that it will continue to incur indebtedness from time to time. DESCRIPTION OF DEBT SECURITIES The following description sets forth certain general terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Debt Securities offered by any Prospectus Supplement and the extent, if any, to which such general provisions may not apply to the Debt Securities so offered will be described in the Prospectus Supplement relating to such Debt Securities. The Senior Debt Securities will be issued under an Indenture (the "Senior Indenture"), to be entered into between the Company and The Chase Manhattan Bank, N.A., as trustee. The Subordinated Debt Securities will be issued under a separate Indenture (the "Subordinated Indenture"), to be entered into between the Company and The Chase Manhattan Bank, N.A., as trustee. The Senior Indenture and the Subordinated Indenture are sometimes referred to collectively as the "Indentures." Copies of the Senior Indenture and the Subordinated Indenture have been filed as exhibits to the Registration Statement. The Chase Manhattan Bank, N.A., as trustee under the Senior Indenture and under the Subordinated Indenture, is referred to herein as the "Trustee." The following summaries of certain provisions of the Senior Debt Securities, the Subordinated Debt Securities and the Indentures do not purport to be complete and are subject to, and qualified in their entirety by reference to, all the provisions of the Indenture applicable to a particular series of Debt Securities, including the definitions therein of certain terms. Wherever particular Sections, Articles or defined terms of the Indentures are referred to herein or in a Prospectus Supplement, it is intended that such Sections, Articles or defined terms shall be incorporated by reference herein or therein, as the case may be. Section and Article references used herein are references to the applicable Indenture. Except as otherwise indicated, the terms of the Senior Indenture and the Subordinated Indenture are identical. Capitalized terms not otherwise defined herein shall have the meanings given to them in the applicable Indenture. GENERAL The Indentures will not limit the aggregate principal amount of Debt Securities which may be issued thereunder, and each Indenture provides that Debt Securities may be issued thereunder from time to time in one or more series up to the aggregate amount from time to time authorized by the Company for each series. Unless otherwise specified in the Prospectus Supplement, the Senior Debt Securities when issued will be unsecured and unsubordinated obligations of the Company and will rank equally and ratably with all other unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt Securities when issued will be subordinated in right of payment to the prior payment in full of all Senior Indebtedness (as defined in the Subordinated Indenture) of the Company as described in the Prospectus Supplement applicable to the offering of Subordinated Debt Securities. Reference is made to the Prospectus Supplement relating to the particular series of Debt Securities offered thereby for a description of the following terms or additional provisions of the Debt Securities: (1) the title of the Debt Securities; (2) whether the Debt Securities are Senior Debt Securities or Subordinated Debt Securities; (3) any limit on the aggregate principal amount of the Debt Securities; (4) whether the Debt Securities are to be issuable as Registered Securities or Bearer Securities or both, whether any of the Debt Securities shall be issuable in whole or in part in temporary or permanent global form or in the form of Book-Entry Securities and, if so, the circumstances under which any such global security or global securities or Book-Entry Securities may be exchanged for Debt Securities registered in the name of, and any transfer of such global or Book-Entry Securities may be registered to, a Person other than the depository for such temporary or permanent global securities or Book-Entry Securities or its nominee; (5) the price or prices (expressed as a 5 percentage of the aggregate principal amount thereof) at which the Debt Securities will be issued; (6) the date or dates on which the Debt Securities will mature; (7) the rate or rates per annum at which the Debt Securities will bear interest, if any, and the date from which any such interest will accrue; (8) the Interest Payment Dates on which any such interest on the Debt Securities will be payable, the Regular Record Date for any interest payable on any Debt Securities which are Registered Securities on any Interest Payment Date and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid if other than in the manner described under "Temporary Global Securities" below; (9) any mandatory or optional sinking fund or analogous provisions; (10) each office or agency where, subject to the terms of the applicable Indenture as described below under "Payment and Paying Agents," the principal of and any premium and interest on the Debt Securities will be payable and each office or agency where, subject to the terms of the applicable Indenture as described below under "Form, Exchange, Registration and Transfer," the Debt Securities may be presented for registration of transfer or exchange; (11) the date, if any, after which and the price or prices at which the Debt Securities may, pursuant to any optional or mandatory redemption provisions, be redeemed, in whole or in part, and the other detailed terms and provisions of any such optional or mandatory redemption provisions, which may include with respect to a particular series or particular Debt Securities within a series, a redemption option of Holders upon certain conditions, as defined in the applicable Indenture; (12) the denominations in which any Debt Securities which are Registered Securities will be issuable, if other than denominations of $1,000 and any integral multiple thereof, and the denomination or denominations in which any Debt Securities which are Bearer Securities will be issuable, if other than the denomination of $5,000; (13) the currency or currency units of payment of principal of and any premium and interest on the Debt Securities; (14) any index used to determine the amount of payments of principal of and any premium and interest on the Debt Securities and the manner in which such amounts shall be determined; (15) the terms and conditions, if any, pursuant to which such Debt Securities are convertible or exchangeable into a security or securities of the Company; and (16) any other terms of the Debt Securities not inconsistent with the provisions of the applicable Indenture. (Section 3.1) Any such Prospectus Supplement will also describe any special provisions for the payment of additional amounts with respect to the Debt Securities. Debt Securities may also be issued under the Indenture upon the exercise of Warrants. See "Description of Warrants." Debt Securities may be issued as Original Issue Discount Securities. An Original Issue Discount Security is a Debt Security, including any Zero-Coupon Security, which is issued at a price lower than the amount payable upon the Stated Maturity thereof and which provides that upon redemption or acceleration of the maturity, an amount less than the amount payable upon the Stated Maturity, determined in accordance with the terms of such Debt Security, shall become due and payable. Certain special United States federal income tax considerations applicable to Debt Securities sold at an original issue discount will be described in the Prospectus Supplement relating thereto. In addition, certain special United States federal income tax or other considerations applicable to any Debt Securities which are denominated in a currency or currency unit other than United States dollars may be described in the applicable Prospectus Supplement relating thereto. FORM, EXCHANGE, REGISTRATION AND TRANSFER Debt Securities of a series may be issuable in definitive form solely as Registered Securities, solely as Bearer Securities or as both Registered Securities and Bearer Securities. Unless otherwise indicated in an applicable Prospectus Supplement, Bearer Securities will have interest coupons attached. (Section 2.1) The Indentures also will provide that Debt Securities of a series may be issuable in temporary or permanent global form and may be issued as Book-Entry Securities that will be deposited with, or on behalf of, The Depository Trust Company (the "Depository") or another depository named by the Company and identified in a Prospectus Supplement with respect to such series. (Sections 2.1 and 2.4) See "Global and Book-Entry Debt Securities." 6 In connection with its original issuance, no Bearer Security (including a Debt Security exchangeable for a Bearer Security or a Debt Security in global form that is either a Bearer Security or exchangeable for Bearer Securities) shall be mailed or otherwise delivered to any location in the United States (as defined under "Limitations on Issuance of Bearer Securities") and a Bearer Security may be delivered in connection with its original issuance only if the Person entitled to receive such Bearer Security furnishes written certification of the beneficial ownership of the Bearer Security as required by Treasury Regulation Section 1.163-5(c)(2)(i)(D)(3). In the case of a Bearer Security in permanent global form, such certification must be given in connection with notation of a beneficial owner's interest therein in connection with the original issuance of such Debt Security. (Section 3.3) See "Global and Book-Entry Securities" and "Limitations on Issuance of Bearer Securities." Registered Securities of any series will be exchangeable for other Registered Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations. In addition, if Debt Securities of any series are issuable as both Registered Securities and Bearer Securities, at the option of the Holder upon request confirmed in writing, and subject to the terms of the applicable Indenture, Bearer Securities (with all unmatured coupons, except as provided below, and all matured coupons in default) of such series will be exchangeable into Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor. Bearer Securities surrendered in exchange for Registered Securities between a Regular Record Date or a Special Record Date and the relevant date for payment of interest shall be surrendered without the coupon relating to such date for payment of interest and interest accrued as of such date will not be payable in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the terms of the applicable Indenture. Bearer Securities will not be issued in exchange for Registered Securities. (Section 3.5) Each Bearer Security, and any coupon attached thereto, other than a temporary global Bearer Security will bear the following legend: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the United States Internal Revenue Code." A Book-Entry Security may not be registered for transfer or exchange (other than as a whole by the Depository to a nominee or by such nominee to such Depository) unless the Depository or such nominee notifies the Company that it is unwilling or unable to continue as Depository or the Depository ceases to be qualified as required by the applicable Indenture or the Company instructs the Trustee in accordance with the applicable Indenture that such Book-Entry Securities shall be so registerable and exchangeable or there shall have occurred and be continuing an Event of Default with respect to the Debt Securities evidenced by such Book-Entry Securities or there shall exist such other circumstances, if any, as may be specified in the applicable Prospectus Supplement. (Section 3.5) Debt Securities may be presented for exchange as provided above, and Registered Securities may be presented for registration of transfer (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 with respect to any series of Debt Securities and referred to in an applicable Prospectus Supplement, without service charge and upon payment of any taxes and other governmental charges as described in the applicable Indenture. Such transfer or exchange will be effected upon the Security Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Company has appointed the Trustee as Security Registrar. (Section 3.5) If a Prospectus Supplement refers to any transfer agents (in addition to the Security Registrar) initially designated by the Company with respect to any series of Debt Securities, the Company may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except that, if Debt Securities of a series are issuable solely as Registered Securities, the Company will be required to maintain a transfer agent in each Place of Payment for such series and, if Debt Securities of a series are issuable as Bearer Securities, the Company will be required to maintain (in addition to the Security Registrar) a transfer 7 agent in a Place of Payment for such series located outside the United States. The Company may at any time designate additional transfer agents with respect to any series of Debt Securities. (Section 10.2) In the event of any redemption in part, the Company shall not be required to (i) issue, register the transfer of or exchange Debt Securities of any series during a period beginning at the opening of business 15 days before any selection of Debt Securities of that series to be redeemed and ending at the close of business on (A) if Debt Securities of the series are issuable only as Registered Securities, the day of mailing of the relevant notice of redemption and (B) if Debt Securities of the series are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption or, if Debt Securities of the series are also issuable as Registered Securities and there is no publication, the mailing of the relevant notice of redemption; (ii) register the transfer of or exchange any Registered Security, or portion thereof, called for redemption, except the unredeemed portion of any Registered Security being redeemed in part; or (iii) exchange any Bearer Security called for redemption, except to exchange such Bearer Security for a Registered Security of that series and like tenor which is immediately surrendered for redemption. (Section 3.5) PAYMENT AND PAYING AGENTS Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of, premium, if any, and interest on Bearer Securities will be payable, subject to any applicable laws and regulations, at the offices of such Paying Agents outside the United States as the Company may designate from time to time, at the option of the Holder, by check or by transfer to an account maintained by the payee with a bank located outside the United States. Unless otherwise indicated in an applicable Prospectus Supplement, payment of interest on Bearer Securities on any Interest Payment Date will be made only against surrender to the Paying Agent of such coupon relating to such Interest Payment Date. (Section 10.1) No payment with respect to any Bearer Security will be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States. Notwithstanding the foregoing, payments of principal of, and premium, if any, and interest on Bearer Securities denominated and payable in U.S. dollars will be made at the office of the Company's Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment of the full amount thereof in U.S. dollars at all offices or agencies outside the Untied States is illegal or effectively precluded by exchange controls or other similar restrictions. (Section 10.2) Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of, premium, if any, and interest on Registered Securities will be made at the office of such Paying Agent or Paying Agents as the Company may designate from time to time, except that at the option of the Company payment of any interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Security Register. Unless otherwise indicated in an applicable Prospectus Supplement, payment of any instalment of interest on Registered Securities will be made to the Person in whose name such Registered Security is registered at the close of business on the Regular Record Date for such interest. (Section 3.7) Unless otherwise indicated in an applicable Prospectus Supplement, the Corporate Trust Office of the Trustee in The City of New York will be designated as a Paying Agent for the Company for payments with respect to Debt Securities which are issuable solely as Registered Securities and the Company will maintain a Paying Agent outside of the United States for payments with respect to Debt Securities (subject to the limitations described above in the case of Bearer Securities) which are issuable solely as Bearer Securities or as both Registered Securities and Bearer Securities. Any Paying Agents outside the United States and any other Paying Agent in the United States initially designated by the Company for the Debt Securities will be named in an 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, if Debt Securities of a series are issuable solely as Registered Securities, the Company will be required to 8 maintain a Paying Agent in each Place of Payment for such series and, if Debt Securities of a series are issuable as Bearer Securities, the Company will be required to maintain (i) a Paying Agent in the Borough of Manhattan, The City of New York for payments with respect to any Registered Securities of the series (and for payments with respect to Bearer Securities of the series in the circumstances described above, but not otherwise), and (ii) a Paying Agent in a Place of Payment located outside the United States where Debt Securities of such series and any coupons appertaining thereto may be presented and surrendered for payment; provided that if the Debt Securities of such series are listed on The Stock Exchange of the United Kingdom and the Republic of Ireland or the Luxembourg Stock Exchange or any other stock exchange located outside the United States and such stock exchange shall so require, the Company will maintain a Paying Agent in London or Luxembourg or any other required city located outside the United States, as the case may be, for the Debt Securities of such series. (Section 10.2) Payments of principal of, premium, if any, and interest on Book-Entry Securities registered in the name of any Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the registered owner of the global security representing such Book-Entry Securities. The Company expects that the Depository, upon receipt of any payment of principal, premium or interest, will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests as shown on the records of such Depository or its nominee. Neither the Company, the Trustee, any Paying Agent nor the Securities Registrar for such Debt Securities will have any responsibility or liability for any aspects of the records relating to, or payments made on account of, such beneficial ownership interests in the Book-Entry Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. All moneys paid by the Company to a Paying Agent for the payment of principal of, premium, if any, or interest on any Debt Securities which remain unclaimed at the end of two years after such principal, premium or interest shall have become due and payable will be repaid to the Company and the Holder of such Debt Security or any coupon will thereafter look only to the Company for payment thereof. (Section 10.3) GLOBAL AND BOOK-ENTRY DEBT SECURITIES If so specified in an applicable Prospectus Supplement, the portion of the Debt Securities of a series which are issuable as Bearer Securities will initially be represented by one or more temporary or permanent global Debt Securities, without interest coupons, to be deposited with a common depositary in London for the Euro-clear System ("Euro-clear") and CEDEL S.A. ("CEDEL") for credit to the designated accounts. Unless otherwise indicated by an applicable Prospectus Supplement, on or after 40 days following its issuance, each such temporary global Debt Security will be exchangeable for definitive Bearer Securities, definitive Registered Securities or all or a portion of a permanent global Debt Security, or any combination thereof, as specified in an applicable Prospectus Supplement, only upon written certification in the form and to the effect described under "Form, Exchange, Registration and Transfer." No Bearer Security (including a Debt Security in permanent global form) delivered in exchange for a portion of a temporary or permanent global Debt Security shall be mailed or otherwise delivered to any location in the United States in connection with such exchange. (Sections 3.4 and 3.5) A Person having a beneficial interest in a permanent global Debt Security will, except with respect to payment of principal of, premium, if any, and interest on such permanent global Debt Security, be treated as a Holder of such principal amount of Outstanding Debt Securities represented by such permanent global Debt Security as shall be specified in a written statement of the Holder of such permanent global Debt Security or, in the case of a permanent global Debt Security in bearer form, of the operator of Euro-clear or CEDEL which is provided to the Trustee by such Person. (Section 2.3) If Debt Securities to be sold in the United States are designated by the Company in a Prospectus Supplement as Book-Entry Securities, a global security representing the Book-Entry Securities will be 9 deposited in the name of Cede & Co., as nominee for the Depository representing the Debt Securities to be sold in the United States. Upon such deposit of the Book-Entry Securities, the Depository shall credit an account maintained or designated by an institution to be named by the Company or any purchaser of the Debt Securities represented by the Book-Entry Securities with an aggregate amount of Debt Securities equal to the total number of Debt Securities that have been so purchased. The specific terms of any depository arrangement with respect to any portion of a series of Debt Securities to be represented by one or more global securities will be described in the applicable Prospectus Supplement. Beneficial interests in such Debt Securities will only be evidenced by, and transfers thereof will only be effected through, records maintained by the Depository and the institutions that are Depository participants. CERTAIN COVENANTS OF THE COMPANY The Company will covenant that it will not, nor will it permit any Subsidiary (as hereinafter defined), to issue, assume or guarantee any debt for money borrowed ("Debt") if such Debt is secured by a mortgage, pledge, security interest or lien (a "mortgage" or "mortgages") upon any Forestlands or Principal Manufacturing Facility (as hereinafter defined), now owned or hereafter acquired, without in any such case effectively providing that the Senior Debt Securities shall be secured equally and ratably with (or prior to) such Debt, except that the foregoing restrictions shall not apply to (a) mortgages on any property acquired, constructed or improved by the Company or any Subsidiary after April 1, 1994 which are created within 180 days after such acquisition (or in the case of property constructed or improved, after the completion and commencement of commercial operation of such property, whichever is later) to secure or provide for the payment of the purchase price or cost thereof, or existing mortgages on property acquired, provided such mortgages shall not apply to any property theretofore owned by the Company or any Subsidiary other than theretofore unimproved real property, (b) mortgages on any property acquired from a corporation which is merged with or into the Company or a Subsidiary or mortgages outstanding at the time any corporation becomes a Subsidiary, (c) mortgages in favor of the Company or any Subsidiary, or (d) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any mortgage referred to in the foregoing clauses (a), (b) or (c); and except that the following types of transactions, among others, shall not be deemed to create Debt secured by a mortgage: (x) the sale, mortgage or other transfer of timber in connection with an arrangement under which the Company or a Subsidiary is obligated to cut such timber or a portion thereof in order to provide the transferee with a specified amount of money however determined and (y) mortgages in favor of governmental bodies of the United States to secure advance, progress or other payments pursuant to any contract or statute or to secure indebtedness incurred to finance the purchase price or cost of constructing or improving the property subject to such mortgages. (Section 10.7 of Senior Indenture) Notwithstanding the foregoing, the Company and any Subsidiary may, without securing the Senior Debt Securities, issue, assume or guarantee secured Debt (which would otherwise be subject to the foregoing restrictions) in an aggregate amount which, together with all other such Debt and the Attributable Debt (as hereinafter defined) in respect of Sale and Lease-Back Transactions (as hereinafter defined) of the Company and its Subsidiaries existing at such time (other than Sale or Lease-Back Transactions the proceeds of which have been applied to the retirement of Funded Debt (as hereinafter defined)), does not at the time exceed 10% of the net tangible assets of the Company and its consolidated Subsidiaries as of the latest fiscal year. (Section 10.7 of Senior Indenture) "Net tangible assets" is defined as the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities and (b) all goodwill, tradenames, trademarks, patents, unamortized debt discount and expense (to the extent included in said aggregate amount of assets) and other like intangibles, all as set forth on the most recent consolidated balance sheet of the Company and its consolidated Subsidiaries and computed in accordance with generally accepted accounting principles. The Company will not, nor will it permit any Subsidiary to, enter into any arrangement with any person providing for the leasing to the Company or a Subsidiary of any Forestlands or any Principal 10 Manufacturing Facility (except for temporary leases for a term of not more than three years), which property has been owned and, in the case of any such Principal Manufacturing Facility, has been placed in commercial operation more than 180 days by the Company or such Subsidiary and has been or is said to be sold or transferred by the Company or such Subsidiary to such person (herein referred to as a "Sale and Lease-Back Transaction"), unless either (a) the Company or such Subsidiary would be entitled to incur Debt secured by a mortgage on the property to be leased in an amount equal to the Attributable Debt with respect to such Sale and Lease-Back Transaction without equally and ratably securing the Senior Debt Securities or (b) the Company shall, and in any such case the Company will covenant that it will, apply an amount equal to the fair value (as determined by its Board of Directors) of the property so leased to the retirement, within 180 days of the effective date of any such Sale and Lease-Back Transaction, of Debt Securities or of Funded Debt of the Company which ranks on a parity with the Senior Debt Securities. (Section 10.8 of Senior Indenture) The term "Forestlands" shall mean at any time property in the United States which contains standing timber which is, or upon completion of a growth cycle then in process is expected to become, of a commercial quantity and of merchantable quality, excluding from the term "Forestlands," however, any land which at the time is held by, or has been or is after the date of this Prospectus transferred to, a Subsidiary primarily for development and/or sale, and not primarily for the production of any lumber or other timber products. (Section 1.1 of Senior Indenture) The term "Principal Manufacturing Facility" shall mean any paperboard, paper or pulp mill or any paper converting plant of the Company or any Subsidiary which is located within the United States other than any such mill or plant or portion thereof (i) which is financed by obligations issued by a State, a Territory, or a possession of the United States, or any political subdivision of any of the foregoing, or the District of Columbia, the interest on which is excludable from gross income of the holders thereof pursuant to the provisions of Section 103(a) of the Internal Revenue Code (or any successor to such provision) as in effect at the time of issuance of such obligations, or (ii) which, in the opinion 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. (Section 1.1 of Senior Indenture) The term "Subsidiary" shall mean any corporation of which at least a majority of the outstanding stock having by the terms thereof ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by the Company, or by any one or more Subsidiaries, or by the Company and one or more Subsidiaries. (Section 1.1 of Senior Indenture) The term "Attributable Debt" shall mean, at the time of determination, the present value (discounted at the interest rate, compounded semiannually, equal to the weighted average Yield to Maturity of the Senior Debt Securities then Outstanding, such average being weighted by the principal amount of the Senior Debt Securities of each series or, in the case of Original Issue Discount Securities, such amount to be determined as provided in the definition of "Outstanding" in the Senior Indenture) of the obligation of a lessee for net rental payments during the remaining term of any lease (including any period for which such lease has been extended) entered into in connection with a sale and leaseback transaction. (Section 1.1 of Senior Indenture) The term "Funded Debt" shall mean Debt which by its terms matures at, or is extendible or renewable at the option of the obligor to, a date more than twelve months after the date of the creation of such Debt. (Section 1.1 of Senior Indenture) SUBORDINATION OF SUBORDINATED DEBT SECURITIES Unless otherwise indicated in the Prospectus Supplement, the following provisions will apply to the Subordinated Debt Securities. The Subordinated Debt Securities will, to the extent set forth in the Subordinated Indenture, be subordinate in right of payment to the prior payment in full of all Senior Indebtedness. Upon any 11 payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceeding of the Company, the Holders of Senior Indebtedness will first be entitled to receive payment in full of principal of, and premium, if any, and interest, if any, on such Senior Indebtedness before the Holders of the Subordinated Debt Securities will be entitled to receive or retain any payment in respect of the principal of, and premium, if any, or interest, if any, on the Subordinated Debt Securities. (Section 16.2 of Subordinated Indenture) By reason of such subordination, in the event of liquidation or insolvency, creditors of the Company may recover less, ratably, than Holders of Senior Indebtedness and may recover more, ratably, than the Holders of the Subordinated Debt Securities. In the event of the acceleration of the maturity of any Subordinated Debt Securities, the Holders of all Senior Indebtedness outstanding at the time of such acceleration will first be entitled to receive payment in full of all amounts due thereon before the Holders of the Subordinated Debt Securities will be entitled to receive any payment upon the principal of (or premium, if any) or interest, if any, on the Subordinated Debt Securities. (Section 16.3 of Subordinated Indenture) No payments on account of principal, or premium, if any, or interest, if any, in respect of the Subordinated Debt Securities may be made if there shall have occurred and be continuing a default in any payment with respect to Senior Indebtedness, or an event of default with respect to any Senior Indebtedness resulting in the acceleration of the maturity thereof, or if any judicial proceeding shall be pending with respect to any such default. (Section 16.4 of Subordinated Indenture) For purposes of the subordination provisions, the payment, issuance and delivery of cash, property or securities (other than stock and certain subordinated securities of the Company) upon conversion of a Subordinated Debt Security will be deemed to constitute payment on account of the principal of such Subordinated Debt Security. The Subordinated Indenture does not limit or prohibit the incurrence of additional Senior Indebtedness, which may include indebtedness that is senior to the Subordinated Debt Securities, but subordinate to other obligations of the Company. The Senior Debt Securities constitute Senior Indebtedness under the Subordinated Indenture. "Senior Indebtedness" is defined to include all amounts due on and obligations in connection with any of the following, whether outstanding at the date of execution of the Subordinated Indenture or thereafter incurred or created: (a) indebtedness, obligations and other liabilities (contingent or otherwise) of the Company for money borrowed, or evidenced by bonds, debentures, notes or similar instruments; (b) reimbursement obligations and other liabilities (contingent or otherwise) of the Company with respect to letters of credit, bankers' acceptances issued for the account of the Company or with respect to interest rate protection agreements or currency exchange or purchase agreements; (c) obligations and liabilities (contingent or otherwise) in respect of leases by the Company as lessee which, in conformity with generally accepted accounting principles, are accounted for as capitalized lease obligations on the balance sheet of the Company; (d) all direct or indirect guarantees or similar agreements in respect of, and obligations or liabilities (contingent or otherwise) to purchase or otherwise acquire or otherwise to assure a creditor against loss of the Company in respect of, indebtedness, obligations or liabilities of another Person described in clauses (a) through (c); (e) any indebtedness described in clauses (a) through (d) secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by the Company, regardless of whether the indebtedness secured thereby shall have been assumed by the Company; and (f) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability of the kind described in clauses (a) through (e); unless in any case in the instrument creating or evidencing such indebtedness, obligation, liability, guaranty, assumption, deferral, renewal, extension or refunding, it is provided that such indebtedness, obligation, liability, 12 guaranty, assumption, deferral, renewal, extension or refunding involved is not senior in right of payment to the Subordinated Debt Securities or that such indebtedness is PARI PASSU with or junior to the Subordinated Debt Securities. (Section 1.1 of Subordinated Indenture) The Prospectus Supplement may further describe the provisions, if any, applicable to the subordination of the Subordinated Debt Securities of a particular series. CONVERSION RIGHTS The terms on which Debt Securities of any series are convertible into or exchangeable for Common Stock or other securities of the Company will be set forth in the Prospectus Supplement relating thereto. Such terms will include provisions as to whether conversion or exchange is mandatory, at the option of the Holder or at the option of the Company, and may include provisions pursuant to which the number of shares of Common Stock or other securities of the Company to be received by the Holders of Debt Securities would be subject to adjustment. EVENTS OF DEFAULT Any one of the following events will constitute an Event of Default under the applicable Indenture with respect to Debt Securities of any series: (a) failure to pay any interest on any Debt Security of that series when due, continued for 30 days (in the case of the Subordinated Indenture, whether or not such payment is prohibited by the subordination provisions); (b) failure to pay principal of or premium, if any, on any Debt Security of that series when due (in the case of the Subordinated Indenture, whether or not such payment is prohibited by the subordination provisions); (c) failure to deposit any sinking fund payment, when due, in respect of any Debt Security of that series (in the case of the Subordinated Indenture, whether or not such deposit is prohibited by the subordination provisions); (d) failure to perform any other covenant of the Company in the applicable Indenture or such Debt Security (other than a covenant included in the applicable Indenture solely for the benefit of a series of Debt Securities other than that series), continued for 60 days after written notice has been given as provided in the applicable Indenture; (e) certain events in bankruptcy, insolvency or reorganization involving the Company; and (f) any other Event of Default provided with respect to the Debt Securities of that series. (Section 5.1) If an Event of Default with respect to the Debt Securities of any series at the time Outstanding occurs and is continuing, either the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Debt Securities of that series by notice as provided in the applicable Indenture may declare the principal amount of the Debt Securities of that series (or, in the case of any Debt Security that is an Original Issue Discount Security or the principal amount of which is not then determinable, such portion of the principal amount of such Debt Security, or such other amount in lieu of such principal amount, as may be specified in the terms of such Debt Security) to be due and payable immediately. At any time after a declaration of acceleration with respect to Debt Securities of any series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee, the Holders of a majority in aggregate principal amount of the Outstanding Debt Securities of that series may, under certain circumstances, rescind and annul such acceleration. (Section 5.2) The Indentures will provide that, subject to the duty of the Trustee during default to act with the required standard of care, the Trustee will be under no obligation to exercise any of its rights or powers under the applicable Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable indemnity. (Sections 6.1, 6.3) 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 5.12) The Company will be required to furnish to the applicable Trustee annually a statement as to the performance of certain of its obligations under the applicable Indenture and as to any default in such performance. (Section 10.9) 13 DEFEASANCE If so specified with respect to any particular series of Debt Securities, the Company may discharge its indebtedness and its obligations or certain of its obligations under the applicable Indenture with respect to such series by depositing funds or obligations issued or guaranteed by the United States of America with the applicable Trustee. DEFEASANCE AND DISCHARGE The Indentures will provide that, if so specified with respect to the Debt Securities of any series, the Company will be discharged from any and all obligations in respect of the Debt Securities of such series (including, in the case of Subordinated Debt Securities, the subordination provisions described under "Subordination of Subordinated Debt Securities" herein and except for certain obligations relating to temporary Debt Securities and exchange of Debt Securities, registration of transfer or exchange of Debt Securities of such series, replacement of stolen, lost or mutilated Debt Securities of such series, maintenance of paying agencies, to hold monies for payment in trust and payment of additional amounts, if any, required in consequence of United States withholding taxes imposed on payments to non-United States persons) upon the deposit with the applicable Trustee, in trust, of money and/or U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any), each instalment of interest on, and any sinking fund payments on, the Debt Securities of such series on the Stated Maturity of such payments in accordance with the terms of the applicable Indenture and the Debt Securities of such series. Such a trust may only be established if, among other things, (a) the Company has delivered to the applicable Trustee an Opinion of Counsel to the effect that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of the applicable Indenture there has been a change in applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of Debt Securities of such series will not recognize income, 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 amounts and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; (b) the Debt Securities of such series, if then listed on any domestic or foreign securities exchange, will not be delisted as a result of such deposit, defeasance and discharge; and (c) in the case of the Subordinated Debt Securities, (x) no default in the payment of principal of, or premium, if any, or any interest on any Senior Indebtedness beyond any applicable grace period shall have occurred and be continuing, or (y) no other default with respect to any Senior Indebtedness shall have occurred and be continuing and shall have resulted in the acceleration of such Senior Indebtedness. (Section 4.3) In the event of any such defeasance and discharge of Debt Securities of such series, Holders of Debt Securities of such series would be able to look only to such trust fund for payment of principal of and any premium and any interest on their Debt Securities until Maturity. DEFEASANCE OF CERTAIN OBLIGATIONS The Senior Indenture will provide that, if so specified with respect to the Senior Debt Securities of any series, the Company may omit to comply with the restrictive covenants described under "Certain Covenants of the Company" above and any other covenants applicable to such Senior Debt Securities which are subject to covenant defeasance and any such omission shall not be an Event of Default with respect to the Debt Securities of such series, upon the deposit with the Trustee, in trust, of money and/ or U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any), each instalment of interest on and any sinking fund payments on the Senior Debt Securities of such series on the Stated Maturity of such payments in accordance with the terms of the Senior Indenture and the Senior Debt Securities of such series. The obligations of the Company under the Senior Indenture and the Senior Debt Securities of such series other than with respect to such covenant shall remain in full force and effect. Such a trust may be established only if, among other things, the Company has delivered to the Trustee an Opinion of Counsel to the effect that (i) the 14 Holders of the Senior Debt Securities of such series will not recognize income, 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 amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance has not occurred and (ii) the Senior Debt Securities of such series, if then listed on any domestic or foreign securities exchange, will not be delisted as a result of such deposit and defeasance. (Section 10.11 of Senior Indenture) In the event the Company exercises its option to omit compliance with the covenants described under "Certain Covenants of the Company" above with respect to the Senior Debt Securities of any series as described above and the Senior Debt Securities of such series are declared due and payable because of the occurrence of any Event of Default, then the amount of money and U.S. Government Obligations on deposit with the Trustee will be sufficient to pay amounts due on the Senior Debt Securities of such series at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Senior Debt Securities of such series at the time of the acceleration resulting from such Default. The Company shall in any event remain liable for such payments as provided in the Senior Indenture. MEETINGS, MODIFICATION AND WAIVER Modifications and amendments of the Indentures may be made by the Company and the Trustee under the applicable Indenture only with the consent of the Holders of not less than 66 2/3% aggregate principal amount of the Outstanding Debt Securities issued under the applicable Indenture and affected by such modification or amendment unless a greater percentage of such aggregate principal amount is specified in the applicable Prospectus Supplement; provided, however, that no such modification or amendment may, without the consent of each Holder of such Outstanding Debt Security affected thereby, (a) change the Stated Maturity of the principal of, or any instalment of principal of or interest on, any such Debt Security, (b) reduce the principal amount of, or any premium or interest on, any such Debt Security, (c) change any obligation of the Company to pay additional amounts, (d) reduce the amount of principal of an Original Issue Discount Security or any other Debt Security payable upon acceleration of the maturity thereof, (e) change the coin or currency in which any Debt Security or any premium or interest thereon is payable, (f) impair the right to institute suit for the enforcement of any payment on or with respect to any such Debt Security, (g) adversely change the right to convert or exchange, including decreasing the conversion rate or increasing the conversion price of, such Debt Security (if applicable), (h) in the case of the Subordinated Indenture, modify the subordination provisions in a manner adverse to the Holders of the Subordinated Debt Securities, (i) reduce the percentage in principal amount of Outstanding Debt Securities of any series, the consent of whose Holders is required for modification or amendment of the applicable Indenture or for waiver of compliance with certain provisions of the applicable Indenture or for waiver of certain defaults, (j) reduce the requirements contained in the applicable Indenture for quorum or voting, (k) change any obligations of the Company to maintain an office or agency in the places and for the purposes required by the Indentures, or (l) modify any of the above provisions. (Section 9.2) The Holders of at least 66 2/3% in aggregate principal amount of the Outstanding Debt Securities of each series may, on behalf of the Holders of all the Debt Securities of that series, waive, insofar as that series is concerned, compliance by the Company with certain restrictive provisions of the applicable Indenture and, if applicable, such Debt Securities, unless a greater percentage of such aggregate principal amount is specified in the applicable Prospectus Supplement. (Section 10.10) The Holders of not less than a majority in aggregate principal amount of the Outstanding Debt Securities of each series may, on behalf of all Holders of Debt Securities of that series and any coupons pertaining thereto, waive any past default under the applicable Indenture, except a default (a) in the payment of principal of, or premium, if any, or any interest on any Debt Security of such series, and (b) in respect of a covenant or provision of the applicable Indenture and, if applicable, such Debt Securities which cannot be modified or amended without the consent of the Holder of each Outstanding Debt Security of such series affected. (Section 5.13) 15 The applicable Indenture will provide that in determining whether the Holders of the requisite principal amount of the Outstanding Debt Securities have given any request, demand, authorization, direction, notice, consent or waiver thereunder or are present at a meeting of Holders of Debt Securities for quorum purposes, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof, and (ii) the principal amount of a Debt Security denominated in a foreign currency or currency units shall be the U.S. dollar equivalent, determined on the date of original issuance of such Debt Security, of the principal amount of such Debt Security or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent, determined on the date of original issuance of such Debt Security, of the amount determined as provided in (i) above. (Section 1.1) The applicable Indenture will contain provisions for convening meetings of the Holders of Debt Securities of a series if Debt Securities of that series are issuable as Bearer Securities. (Section 13.1) A meeting may be called at any time by the Trustee, and also, upon request, by the Company or the Holders of at least 10% in principal amount of the Outstanding Debt Securities of such series, in any such case upon notice given in accordance with "Notices" below. (Section 13.2) Except for any consent which must be given by the Holder of each Outstanding Debt Security affected thereby, as described above, any resolution presented at a meeting or adjourned meeting at which a quorum is present may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Debt Securities of that series; provided, however, that, except for any consent which must be given by the Holder of each Outstanding Debt Security affected thereby, as described above, any resolution with respect to any consent or waiver which may be given by the Holders of not less than 66 2/3% in principal amount of the Outstanding Debt Securities of a series may be adopted at a meeting or an adjourned meeting at which a quorum is present only by the affirmative vote of 66 2/3% in principal amount of the Outstanding Debt Securities of that series; and provided, further, that, except for any consent which must be given by the Holder of each Outstanding Debt Security affected thereby, as described above, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Debt Securities of a series may be adopted at a meeting or adjourned meeting duly reconvened at which a quorum is present by the affirmative vote of the Holders of such specified percentage in the principal amount of the Outstanding Debt Securities of that series. Any resolution passed or decision taken at any meeting of Holders of Debt Securities of any series duly held in accordance with the applicable Indenture will be binding on all Holders of Debt Securities of that series and the related coupons. The quorum at any meeting called to adopt a resolution, and at any reconvened meeting, will be persons holding or representing a majority in principal amount of the Outstanding Debt Securities of a series; provided, however, that if any action is to be taken at such meeting with respect to a consent or waiver which may be given by the Holders of not less than 66 2/3% in principal amount of the Outstanding Debt Securities of a series, the persons holding or representing 66 2/3% in principal amount of the Outstanding Debt Securities of such series will constitute a quorum. (Section 13.4) CONSOLIDATION, MERGER AND SALE OF ASSETS The Company, without the consent of the Holders of any of the Outstanding Debt Securities under the applicable Indenture, may consolidate or merge with or into, sell, lease, transfer or otherwise dispose of its assets substantially as an entirety to, any Person which is a corporation, partnership or trust organized and validly existing under the laws of any domestic jurisdiction, or may permit any such Person to consolidate or merge with or into the Company or sell, lease, transfer or otherwise dispose of its assets substantially as an entirety to the Company, provided that any successor Person assumes the Company's obligations on the Debt Securities and under the applicable Indenture, that after giving effect to the transaction no Event of Default, and no event which, after notice or lapse of time, would become an Event of Default, shall have occurred and be continuing, and that certain other conditions are met. (Section 8.1) 16 REDEMPTION AT THE OPTION OF HOLDERS UPON CHANGE IN CONTROL In the event of any Change in Control (as hereinafter defined) of the Company, prior to maturity of the Debt Securities, that has not been approved by the Continuing Directors (as hereinafter defined) of the Company, Debt Securities may be submitted for redemption, on and after the Exchange Date in the case of Debt Securities of any series issuable as Bearer Securities or at any time in the case of all other Debt Securities, at the option of the Holders, unless, prior to the expiration of ten days following such Change in Control, the Company, if permitted to do so by the terms of the Debt Securities of a series, shall have called all of the Debt Securities of such series for redemption. Bearer Securities may be so redeemed only in whole and Registered Securities in whole or in part in increments of $1,000. Any Debt Securities to be so submitted must be submitted during a period (the "Exercise Period") commencing on the date of the Company's notice described below to Holders of such Change in Control and expiring on the 20th business day after such notice is given. Debt Securities submitted for redemption will be redeemed on a Redemption Date that will be the 15th day after expiration of the Exercise Period, at a redemption price of 100% of the principal amount of the Debt Security, plus accrued interest to the Redemption Date. Exercise of this redemption option by the Holder of a Debt Security will be irrevocable. On or before the tenth day after a Change in Control, the Company is obligated, unless the Continuing Directors have approved such Change in Control prior to such date, to give notice to Holders as set forth under "Notices" below, and written notice to the Trustee, regarding the Change in Control, the date of expiration of the Exercise Period, the applicable Redemption Date, the redemption price and the procedure which the Holder must follow to exercise this option. To exercise this option, the Holder must deliver on or before the expiration of the Exercise Period to one of the Paying Agents referred to below written notice of the Holder's exercise of such option, together with the Debt Securities with respect to which the option is being exercised, duly endorsed (in the case of Registered Securities) for transfer. Each Bearer Security delivered for redemption must be delivered with all coupons maturing after the Redemption Date. If the Redemption Date falls between any Regular Record Date and the next succeeding Payment Date, Registered Securities must be accompanied by payment of an amount equal to the interest thereon which the registered Holder is to receive on such Interest Payment Date. As used herein, a "Change in Control" of the Company shall be deemed to have occurred at such time or times as (a) the Company determines that any person or related group of persons is the beneficial owner, directly or indirectly, of 20% or more of the outstanding Common Stock or (b) individuals who constitute the Continuing Directors cease for any reason to constitute at least a majority of the Company's directors. "Continuing Director" means any director who is a director on the date hereof and any director who is nominated or elected by a majority of Continuing Directors who are then directors. The Company could, in the future, enter into certain transactions, including certain recapitalizations or leveraged transactions of the Company, that would not constitute a Change in Control or would constitute a Change of Control but would not trigger the Change of Control purchase feature of the Debt Securities if approved by the Continuing Directors and would increase the amount of the Company's indebtedness outstanding at such time. However, the Senior Indenture contains covenants of the Company limiting its ability to mortgage or sell Principal Manufacturing Facilities or Forestlands. If a Change in Control were to occur, there can be no assurance that the Company would have sufficient funds to pay the Change in Control purchase price for all Debt Securities tendered by the Holders thereof. In addition, the Company's ability to purchase Debt Securities with cash may be limited by the terms of its then-existing borrowing agreements. A default by the Company on its obligation to pay the Change in Control purchase price or a breach of its covenant would result in an Event of Default and could result in acceleration of the maturity of other indebtedness of the Company at the time outstanding pursuant to cross-default provisions. The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act 17 which may then be applicable and will file a Schedule 13E-4 or any other schedule required thereunder and will otherwise comply with all federal or state securities laws, as required, in connection with any of the Debt Securities providing for redemption at the option of Holders. NOTICES Except as otherwise provided in the applicable Indenture, notices to Holders of Bearer Securities will be given by publication at least twice in a daily newspaper in The City of New York and in such other city or cities as may be specified in such Debt Securities. Notices to Holders of Registered Securities will be given by mail to the address of such Holders as they appear in the Security Register. (Sections 1.1, 1.6) TITLE Title to any temporary global Debt Security, any Bearer Securities (including Bearer Securities in permanent global form) and any coupons appertaining thereto will pass by delivery. The Company, the Trustee and any agent of the Company or the Trustee may treat the bearer of any Bearer Security and the bearer of any coupon and the registered owner of any Registered Security as the absolute owner thereof (whether or not such Debt Security or coupon shall be overdue and notwithstanding any notice to the contrary) for the purpose of making payment and for all other purposes. (Section 3.8) REPLACEMENT OF DEBT SECURITIES AND COUPONS Any mutilated Debt Security or a Debt Security with a mutilated coupon appertaining thereto will be replaced by the Company at the expense of the Holder upon surrender of such Debt Security to the Trustee. Debt Securities or coupons that became destroyed, stolen or lost will be replaced by the Company at the expense of the Holder upon delivery of the Trustee of the Debt Security and coupons or evidence of the destruction, loss or theft thereof satisfactory to the Company and the Trustee; in the case of any coupon which becomes destroyed, stolen or lost, such coupon will be replaced by issuance of a new Debt Security in exchange for the Debt Security to which such coupon appertains. In the case of a destroyed, lost or stolen Debt Security or coupon, an indemnity satisfactory to the Trustee and the Company may be required at the expense of the Holder of such Debt Security or coupon before a replacement Debt Security will be issued. (Section 3.6) GOVERNING LAW The Indentures, the Debt Securities and the coupons will be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. (Section 1.13) REGARDING THE TRUSTEE The Indentures contain limitations on the right of the Trustee, as a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. In addition, the Trustee may be deemed to have a conflicting interest and may be required to resign as Trustee if at the time of a default under one of the Indentures it is a creditor of the Company. The Chase Manhattan Bank, N.A. also acts as trustee under various indentures and the Company and certain subsidiaries from time to time maintain deposit accounts and conduct their banking transactions with The Chase Manhattan Bank, N.A. in the ordinary course of their business. MEDIUM-TERM NOTES The Company may offer from time to time up to $400,000,000 aggregate principal amount of its medium-term notes (the "Medium-Term Notes"). The particular terms and provisions of the Medium-Term Notes will be described in the Prospectus Supplement relating to such Medium-Term Notes. The Medium-Term Notes will be issued as a series of Senior Debt Securities under an Indenture, dated as of May 22, 1992, as supplemented by the First Supplemental Indenture, dated as of June 26, 1992 (the "Medium-Term Note Indenture"), between the Company and The Bank of New York, as trustee. The terms and provisions of the Medium-Term Note Indenture are substantially 18 similar to those to be contained in the Senior Note Indenture. The Medium-Term Note Indenture is incorporated by reference as an exhibit to the Registration Statement of which this Prospectus is a part. DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of (i) 400,000,000 shares of common stock, $1.00 par value per share (the "Common Stock"), (ii) 400,000 shares of cumulative $4 preferred stock, without par value (the "$4 Preferred Stock"), and (iii) 8,750,000 shares of serial preferred stock, $1.00 par value per share (the "Preferred Stock"). At February 28, 1994, there were outstanding (a) 124,465,467 shares of Common Stock (as well as the same number of Common Share Purchase Rights to purchase Common Stock pursuant to the Rights Agreement), (b) employee stock options to purchase an aggregate of approximately 4,650,000 shares of Common Stock, (c) 16,017 shares of $4 Preferred Stock and (d) no shares of any series of Preferred Stock. In addition, approximately 2,900,000 shares of Common Stock were reserved for issuance upon conversion of the Company's convertible subordinated debentures. DESCRIPTION OF PREFERRED STOCK The following summary contains a description of certain general terms of the Company's Preferred Stock to which any Prospectus Supplement may relate. Certain terms of any series of Preferred Stock offered by any Prospectus Supplement will be described in the Prospectus Supplement relating thereto. If so indicated in the Prospectus Supplement, the terms of any series may differ from the terms set forth below. The description of certain provisions of the Company's Preferred Stock does not purport to be complete and is subject to and qualified in its entirety by reference to the provisions of the Company's Restated Certificate of Incorporation (the "Restated Certificate of Incorporation"), and the Certificate of Designation (the "Certificate of Designation") relating to each particular series of Preferred Stock which will be filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement of which this Prospectus is a part at or prior to the time of the issuance of such Preferred Stock. GENERAL Under the Company's Restated Certificate of Incorporation, the Board of Directors of the Company is authorized, without further stockholder action, to provide for the issuance of up to 8,750,000 shares of Preferred Stock. The Preferred Stock may be issued in one or more series, with such designations of titles; dividend rates; any redemption provisions; special or relative rights in the event of liquidation, dissolution, distribution or winding up of the Company; any sinking fund provisions; any conversion provisions; any voting rights thereof; and any other preferences, privileges, powers, rights, qualifications, limitations and restrictions, as shall be set forth as and when established by the Board of Directors of the Company. The shares of any series of Preferred Stock will be, when issued, fully paid and non-assessable and holders thereof will have no preemptive rights in connection therewith. So long as any shares of $4 Preferred Stock are outstanding, the preferences, privileges and voting powers, if any, of the shares of Preferred Stock of any series, and the restrictions or qualifications thereof, shall be subject to the preferences, privileges and voting powers, if any, of the shares of $4 Preferred Stock and the restrictions and qualifications thereof. RANK Any series of Preferred Stock will, with respect to rights on liquidation, winding up and dissolution, rank (i) senior to all classes of Common Stock and to all equity securities issued by the Company, the terms of which specifically provide that such equity securities will rank junior to such series of Preferred Stock (the "Junior Liquidation Securities"); (ii) on a parity with all equity securities issued by the Company, the terms of which specifically provide that such equity securities will rank on a 19 parity with such series of Preferred Stock ("Parity Liquidation Securities"); and (iii) junior to all equity securities issued by the Company, the terms of which specifically provide that such equity securities will rank senior to such series of Preferred Stock, including the $4 Preferred Stock (the "Senior Liquidation Securities"). In addition, any series of Preferred Stock will, with respect to dividend rights, rank (i) senior to all equity securities issued by the Company, the terms of which specifically provide that such equity securities will rank junior to such series of Preferred Stock and, to the extent provided in the applicable Certificate of Designation, to Common Stock, (ii) on a parity with all equity securities issued by the Company, the terms of which specifically provide that such equity securities will rank on a parity with such series of Preferred Stock and, to the extent provided in the applicable Certificate of Designation, to Common Stock ("Parity Dividend Securities") and (iii) junior to all equity securities issued by the Company, the terms of which specifically provide that such equity securities will rank senior to such series of Preferred Stock, including the $4 Preferred Stock. As used in any Certificate of Designation for these purposes, the term "equity securities" will not include debt securities convertible into or exchangeable for equity securities. DIVIDENDS Holders of each series of Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors of the Company out of funds legally available therefor, cash dividends at such rates and on such dates as are set forth in the Prospectus Supplement relating to such series of Preferred Stock. Dividends will be payable to holders of record of Preferred Stock as they appear on the books of the Company (or, if applicable, the records of the Depositary referred to below under "Description of Depositary Shares") on such record dates as shall be fixed by the Board of Directors. Dividends on any series of Preferred Stock may be cumulative or non-cumulative. No full dividends may be declared or paid on funds set apart for the payment of dividends on any series of Preferred Stock unless dividends shall have been paid or set apart for such payment on the Parity Dividend Securities. If full dividends are not so paid, such series of Preferred Stock shall share dividends pro rata with the Parity Dividend Securities. CONVERSION AND EXCHANGE The Prospectus Supplement for any series of Preferred Stock will state the terms, if any, on which shares of that series are convertible into shares of another series of Preferred Stock or Common Stock or exchangeable for another series of Preferred Stock, Common Stock or Debt Securities of the Company. The Common Stock of the Company is described below under "Description of Common Stock." REDEMPTION A series of Preferred Stock may be redeemable at any time, in whole or in part, at the option of the Company or the holder thereof and may be subject to mandatory redemption pursuant to a sinking fund or otherwise upon terms and at the redemption prices set forth in the Prospectus Supplement relating to such series. In the event of partial redemptions of Preferred Stock, whether by mandatory or optional redemption, the shares to be redeemed will be determined by lot or pro rata, as may be determined by the Board of Directors of the Company, or by any other method determined to be equitable by the Board of Directors. On and after a redemption date, unless the Company defaults in the payment of the redemption price, dividends will cease to accrue on shares of Preferred Stock called for redemption and all rights of holders of such shares will terminate except for the right to receive the redemption price. LIQUIDATION PREFERENCE Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of each series of Preferred Stock that ranks senior to the Junior Liquidation Securities will be entitled to receive out of assets of the Company available for distribution to shareholders, before any 20 distribution is made on any Junior Liquidation Securities, including Common Stock, distributions upon liquidation in the amount set forth in the Prospectus Supplement relating to such series of Preferred Stock, plus an amount equal to any accrued and unpaid dividends. If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts payable with respect to the Preferred Stock of any series and any other Parity Liquidation Securities are not paid in full, the holders of the Preferred Stock of such series and the Parity Liquidation Securities will share ratably in any such distribution of assets of the Company in proportion to the full liquidation preferences to which each is entitled. After payment of the full amount of the liquidation preference to which they are entitled, the holders of such series of Preferred Stock will not be entitled to any further participation in any distribution of assets of the Company. VOTING RIGHTS Except as indicated below or in the Prospectus Supplement relating to a particular series of Preferred Stock or except as expressly required by applicable law, the holders of shares of Preferred Stock will have no voting rights. PREFERRED STOCK OUTSTANDING As of February 28, 1994, the Company had issued and outstanding 16,017 shares without par value of $4 Preferred Stock, which is senior to the Common Stock and the Preferred Stock as to the payment of dividends and distributions of assets on liquidation, dissolution or winding up of the Company. The $4 Preferred Stock bears a dividend of $4.00 per share per annum from the surplus or net profits of the Company, but only when and as declared by the Board of Directors. Dividends on the $4 Preferred Stock are cumulative. Such dividends are payable quarterly in each year on such dates as from time to time may be fixed by the Board of Directors. Accumulation of dividends do not bear interest. If dividends in full on all outstanding shares of the $4 Preferred Stock for all past quarterly dividend periods and for the then current quarterly period have not been paid or declared and set apart for payment, no dividends (other than dividends payable in stock ranking junior to the $4 Preferred Stock) will be declared or paid or set apart for payment on, nor will any distribution be made to, any class of stock ranking junior to the $4 Preferred Stock. Holders of the $4 Preferred Stock have no general voting rights but have the right to vote in certain specified circumstances. If at the time of any annual meeting of shareholders, dividends have not been paid on the shares of the $4 Preferred Stock in an aggregate amount equal to four full quarterly dividends (whether consecutive or not), then at such annual meeting, the holders of the $4 Preferred Stock will have the sole right, to the exclusion of all other classes of stock, to vote for and elect one-third (or the nearest whole number thereto) of the total number of directors to be elected at the meeting and thereafter at all meetings for the election of directors until all arrearages of dividends accumulated on the $4 Preferred Stock for all preceding dividend periods shall have been paid or declared and set apart for payment. Whenever all arrearages of dividends have been paid or declared and set apart for payment, all powers of the holders of the $4 Preferred Stock to vote for directors will terminate, and the tenure of all Directors elected by them will automatically end. So long as any shares of the $4 Preferred Stock are outstanding, the Company, without first obtaining a majority vote of the holders of the outstanding shares of the $4 Preferred Stock, may not (i) increase the authorized number of $4 Preferred Stock, (ii) authorize, create or issue stock of any class ranking, as to the payment of dividends or distributions upon dissolution, liquidation or winding up, on a parity with the $4 Preferred Stock, or (iii) sell, lease or otherwise dispose of all or substantially all of the assets of the Company, otherwise than by merger or consolidation. 21 In addition, so long as any shares of $4 Preferred Stock are outstanding, the Company may not, without first obtaining the vote of holders of at least two-thirds of the outstanding shares of $4 Preferred Stock, authorize, create or issue stock of any class ranking, as to the payment of dividends or distribution upon dissolution, liquidation or winding up, senior to the $4 Preferred Stock. The Company's Restated Certificate of Incorporation provides that for so long as any shares of Preferred Stock are outstanding, the Company will not issue any shares of the $4 Preferred Stock without first obtaining the affirmative vote of the holders of at least a majority of the outstanding shares of Preferred Stock. Upon the dissolution, liquidation or winding up of the Company, the holders of the $4 Preferred Stock will be entitled to receive out of the net assets of the Company (whether represented by capital or surplus), (i) if such dissolution, liquidation or winding up is voluntary, cash in an amount per share of $105, and (ii) if such dissolution, liquidation or winding up is involuntary, cash in the amount of $100 per share. In addition, such holders will be entitled to receive, in each case, an amount equal to all dividends accrued and unpaid on such share up to and including the date fixed for distribution, whether or not earned or declared and, in either case, before any distribution of the assets to be distributed is made to the holders of stock ranking junior to the $4 Preferred Stock. DESCRIPTION OF DEPOSITARY SHARES The description set forth below of certain provisions of the Deposit Agreement (as defined below) and of the Depositary Shares and Depositary Receipts (as defined below) does not purport to be complete and is subject to and qualified in its entirety by reference to the forms of Deposit Agreement and Deposit Receipt relating to the Preferred Stock, included as exhibits to the Registration Statement of which this Prospectus is a part. GENERAL The Company may, at its option, elect to offer fractional shares of Preferred Stock, rather than full shares of Preferred Stock. In the event such option is exercised, the Company will issue receipts for Depositary Shares, each of which will represent a fraction (to be set forth in the Prospectus Supplement relating to a particular series of Preferred Stock) of a share of a particular series of Preferred Stock as described below. The shares of any series of Preferred Stock represented by Depositary Shares will be deposited under a Deposit Agreement (the "Deposit Agreement") between the Company and a bank or trust company selected by the Company having its principal office in the United States and having a combined capital and surplus of at least $50,000,000 (the "Depositary"). Subject to the terms of the Deposit Agreement, each owner of a Depositary Share will be entitled, in proportion to the applicable fraction of a share of Preferred Stock represented by such Depositary Share, to all the rights and preferences of the Preferred Stock represented thereby (including dividend, voting, redemption, conversion and liquidation rights). The Depositary Shares will be evidenced by depositary receipts issued pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary Receipts will be distributed to those persons purchasing the fractional shares of Preferred Stock in accordance with the terms of the offering. Pending the preparation of definitive Depositary Receipts, the Depositary may, upon the written order of the Company or any holder of deposited Preferred Stock, execute and deliver temporary Depositary Receipts which are substantially identical to, and entitle the holders thereof to all the rights pertaining to, the definitive Depositary Receipts. Depositary Receipts will be prepared thereafter without unreasonable delay, and temporary Depositary Receipts will be exchangeable for definitive Depositary Receipts at the Company's expense. 22 DIVIDENDS AND OTHER DISTRIBUTIONS The Depositary will distribute all cash dividends or other cash distributions received in respect of the deposited Preferred Stock to the record holders of Depositary Shares relating to such Preferred Stock in proportion to the numbers of such Depositary Shares owned by such holders. In the event of a distribution other than in cash, the Depositary will distribute property received by it to the record holders of Depositary Shares entitled thereto. If the Depositary determines that it is not feasible to make such distribution, it may, with the approval of the Company, sell such property and distribute the net proceeds from such sale to such holders. REDEMPTION OF STOCK If a series of Preferred Stock represented by Depositary Shares is to be redeemed, the Depositary Shares will be redeemed from the proceeds received by the Depositary resulting from the redemption, in whole or in part, of such series of Preferred Stock held by the Depositary. The Depositary Shares will be redeemed by the Depositary at a price per Depositary Share equal to the applicable fraction of the redemption price per share payable in respect of the shares of Preferred Stock so redeemed. Whenever the Company redeems shares of Preferred Stock held by the Depositary, the Depositary will redeem as of the same date the number of Depositary Shares representing shares of Preferred Stock so redeemed. If fewer than all the Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will be selected by the Depositary by lot or pro rata or by any other equitable method as may be determined by the Depositary. WITHDRAWAL OF STOCK Any holder of Depositary Shares may, upon surrender of the Depositary Receipts at the corporate trust office of the Depositary (unless the related Depositary Shares have previously been called for redemption), receive the number of whole shares of the related series of Preferred Stock and any money or other property represented by such Depositary Receipts. Holders of Depositary Shares making such withdrawals will be entitled to receive whole shares of Preferred Stock on the basis set forth in the related Prospectus Supplement for such series of Preferred Stock, but holders of such whole shares of Preferred Stock will not thereafter be entitled to deposit such Preferred Stock under the Deposit Agreement or to receive Depositary Receipts therefor. If the Depositary Shares surrendered by the holder in connection with such withdrawal exceed the number of Depositary Shares that represent the number of whole shares of Preferred Stock to be withdrawn, the Depositary will deliver to such holder at the same time a new Depositary Receipt evidencing such excess number of Depositary Shares. VOTING DEPOSITED PREFERRED STOCK Upon receipt of notice of any meeting at which the holders of any series of deposited Preferred Stock are entitled to vote, the Depositary will mail the information contained in such notice of meeting to the record holders of the Depositary Shares relating to such series of Preferred Stock. Each record holder of such Depositary Shares on the record date (which will be the same date as the record date for the relevant series of Preferred Stock) will be entitled to instruct the Depositary as to the exercise of the voting rights pertaining to the amount of the Preferred Stock represented by such holder's Depositary Shares. The Depositary will endeavor, insofar as practicable, to vote the amount of such series of Preferred Stock represented by such Depositary Shares in accordance with such instructions, and the Company will agree to take all reasonable actions that may be deemed necessary by the Depositary in order to enable the Depositary to do so. The Depositary will abstain from voting shares of the Preferred Stock to the extent it does not receive specific instructions from the holder of Depositary Shares representing such Preferred Stock. AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT The form of Depositary Receipt evidencing the Depositary Shares and any provision of the Deposit Agreement may at any time be amended by agreement between the Company and the Depositary. However, any amendment which materially and adversely alters the rights of the holders 23 of the Depositary Shares representing Preferred Stock of any series will not be effective unless such amendment has been approved by the holders of at least the amount of the Depositary Shares then outstanding representing the minimum amount of Preferred Stock of such series necessary to approve any amendment that would materially and adversely affect the rights of the holders of the Preferred Stock of such series. Every holder of an outstanding Depositary Receipt at the time any such amendment becomes effective, or any transferee of such holder, shall be deemed, by continuing to hold such Depositary Receipt, or by reason of the acquisition thereof, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. The Deposit Agreement automatically terminates if (i) all outstanding Depositary Shares have been redeemed; or (ii) each share of Preferred Stock has been converted into other preferred stock or Common Stock or has been exchanged for debt securities; or (iii) there has been a final distribution in respect of the Preferred Stock in connection with any liquidation, dissolution or winding up of the Company and such distribution has been distributed to the holders of Depositary Shares. CHARGES OF DEPOSITARY The Company will pay all transfer and other taxes and governmental charges arising solely from the existence of the depositary arrangements. The Company will pay all charges of the Depositary in connection with the initial deposit of the relevant series of Preferred Stock and any redemption of such Preferred Stock. Holders of Depositary Receipts will pay other transfer and other taxes and governmental charges and such other charges or expenses as are expressly provided in the Deposit Agreement to be for their accounts. RESIGNATION AND REMOVAL OF DEPOSITARY The Depositary may resign at any time by delivering to the Company notice of its election to do so, and the Company may at any time remove the Depositary, any such resignation or removal to take effect upon the appointment of a successor Depositary and its acceptance of such appointment. Such successor Depositary must be appointed within 60 days after delivery of the notice of resignation or removal and must be a bank or trust company having its principal office in the United States and having a combined capital and surplus of at least $50,000,000. MISCELLANEOUS The Depositary will forward all reports and communications from the Company which are delivered to the Depositary and which the Company is required to furnish to the holders of the deposited Preferred Stock. Neither the Depositary nor the Company will be liable if it is prevented or delayed by law or any circumstances beyond its control in performing its obligations under the Deposit Agreement. The obligations of the Company and the Depositary under the Deposit Agreement will be limited to performance in good faith of their duties thereunder and they will not be obligated to prosecute or defend any legal proceeding in respect of any Depositary Shares, Depositary Receipts or shares of Preferred Stock unless satisfactory indemnity is furnished. They may rely upon written advice of counsel or accountants, or upon information provided by holders of Depositary Receipts or other persons believed to be competent and on documents believed to be genuine. DESCRIPTION OF COMMON STOCK GENERAL Subject to the rights of the Holders of any shares of the Company's Preferred Stock or $4 Preferred Stock which may at the time be outstanding, holders of Common Stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors out of funds legally available therefor. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of shareholders and do not have cumulative voting rights. Holders of Common Stock are entitled to receive, upon any liquidation of the Company, all remaining assets available for distribution to 24 shareholders after satisfaction of the Company's liabilities and the preferential rights of any preferred stock that may then be issued and outstanding. The outstanding shares of Common Stock are, and the shares offered hereby will be, fully paid and nonassessable. The holders of Common Stock have no preemptive, conversion or redemption rights. The Common Stock is listed on the New York Stock Exchange. The registrar and transfer agent for the Common Stock is Chemical Bank. CERTAIN PROVISIONS The Company's Restated Certificate of Incorporation contains provisions which: (1) divide the Board of Directors into three classes of as nearly equal size as possible, with Directors in each class being elected for terms of three years; (2) require the affirmative vote of 80% of the outstanding shares of voting stock to remove any Director except for cause; (3) require the affirmative vote of (a) 80% of the outstanding shares of voting stock and (b) a majority of the voting stock not owned by an Interested Stockholder (an owner of 10% or more of voting power) to approve any Business Combination (as such term is defined in the Company's Restated Certificate of Incorporation) with an Interested Stockholder unless (x) the Business Combination shall have been approved by the Board of Directors at a time when Disinterested Directors (those directors unaffiliated with an Interested Stockholder who were either on the Board of Directors prior to the time the Interested Stockholder became an Interested Stockholder or succeeded a Disinterested Director and were recommended for a nomination or election by a majority of the Disinterested Directors) constitute a majority of the entire Board of Directors or (y) in the case of a Business Combination involving the payment of consideration to holders of capital stock, certain conditions concerning the adequacy of the consideration are met; (4) require the affirmative vote of 80% of the outstanding shares of voting stock to amend or repeal those provisions of the Company's Restated Certificate of Incorporation described in clauses (1) and (2) above; and (5) require the affirmative vote of (x) 80% of the outstanding shares of voting stock and (y) a majority of the voting stock not owned by an Interested Stockholder, to approve any proposal made by such Interested Stockholder to amend or repeal those provisions of the Company's Restated Certificate of Incorporation described in clause (3) above, unless such proposal is recommended by the Board of Directors at a time when Disinterested Directors constitute a majority of the entire Board of Directors. The overall effect of these provisions may be to deter or discourage hostile takeover attempts by making it more difficult for a person who has gained a substantial equity interest in the Company effectively to exercise control. COMMON SHARE PURCHASE RIGHTS In April 1987, the Company's Board of Directors authorized the distribution of one Common Share Purchase Right (a "Right") for each outstanding share of Common Stock. Pursuant to the terms of the Rights Agreement (as hereinafter defined), each share of Common Stock issued subsequent to the effective date of such Agreement and prior to the Distribution Date (as hereinafter defined), has been and will be accompanied by one Right. Each Right entitles the registered holder to purchase from the Company one share of Common Stock at an exercise price of $155, subject to adjustment as provided below (the "Purchase Price"). As distributed, the Rights trade together with the Common Stock. They may be exercised or traded separately only after the earlier to occur of: (i) the tenth business day after the commencement of, or first public disclosure of an intention to commence, a tender or exchange offer by a person or group other than the Company if, upon consummation of the offer, such person or group has acquired beneficial ownership of 20% or more of the outstanding Common Stock, or (ii) the tenth day after the first public announcement that an Acquiring Person (as such term is defined in the Rights Agreement) has acquired the beneficial ownership of 20% or more of the shares of Common Stock outstanding (the earlier of such dates being called the "Distribution Date"). 25 The Rights will expire on April 29, 1997 (the "Final Expiration Date"), unless earlier redeemed by the Company as provided below. Until a Right is exercised, the holder thereof will have no additional rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends on shares of Common Stock subject to the Rights. In the event that, following the Distribution Date, the Company (i) engages in a merger or other business combination transaction with a Principal Party (as such term is defined in the Rights Agreement) in which the shares of Common Stock are changed into, or exchanged for, stock or other securities of any other person or cash or other property, or (ii) sells or transfers 50% or more of its assets or earnings power to a Principal Party, each holder of a Right (except as provided below) shall thereafter have the right to receive, upon exercise thereof at the Purchase Price, Common Stock of such Principal Party having a value of twice such Purchase Price. In the event that (i) an Acquiring Person shall acquire beneficial ownership of 20% or more of the shares of Common Stock outstanding, other than pursuant to an offer for all outstanding shares of Common Stock which the Continuing Directors (as such term is defined in the Rights Agreement), determine to be in the best interests of the Company and its shareholders, (ii) the Company merges with an Acquiring Person and the Company is the surviving corporation and all shares of Common Stock remain outstanding and unchanged or (iii) an Acquiring Person engages in one or more "self-dealing" transactions with the Company, each holder of a Right will be entitled to purchase, at the Purchase Price, (A) shares of Common Stock of the Company having a value of twice the Purchase Price or (B) in certain circumstances as determined by the Continuing Directors, any combination of cash, property, shares of Common Stock or other securities equal to twice the Purchase Price (any of the events described in this paragraph being called "Triggering Events"). Any rights that are or were at any time on or after the earlier of the Distribution Date or the Stock Acquisition Date (as such term is defined in the Rights Agreement), beneficially owned by an Acquiring Person will become null and void upon the occurrence of a Triggering Event and any holder of any such Right will be unable to exercise such Right after the occurrence of a Triggering Event. At any time prior to the earlier of (i) the tenth day following the Stock Acquisition Date or (ii) the Final Expiration Date, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of $.05 per Right. The Purchase Price payable, and the number of shares of Common Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Common Stock, (ii) upon the grant to holders of Common Stock of certain rights or warrants to subscribe for shares of Common Stock or convertible securities at less than the current market price of the Common Stock or (iii) upon the distribution to holders of Common Stock of evidences of indebtedness, securities, cash or assets (excluding regular periodic dividends) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in the Purchase Price. The Rights have certain antitakeover effects. The Rights may cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Board of Directors of the Company. The Rights should not interfere with any merger or other business combination approved by the Board of Directors of the Company since the Rights may be redeemed at a price of $.05 per Right prior to the time that a person or group has acquired beneficial ownership of 20% or more of the outstanding Common Stock. The Rights Agreement (the "Rights Agreement") dated as of April 14, 1987, as amended December 14, 1989, between the Company and Chemical Bank (successor to Manufacturers Hanover Trust Company), as Rights Agent, specifies the terms of the Rights. The foregoing description of the Rights 26 is qualified in its entirety by reference to such Rights Agreement, which is an exhibit to the Company's registration statement on Form 8-A, dated April 17, 1987, as amended, incorporated by reference herein. DESCRIPTION OF WARRANTS The Company may issue Warrants, including Warrants to purchase Debt Securities ("Debt Warrants"), Preferred Stock, including Preferred Stock represented by Depositary Shares ("Preferred Stock Warrants"), Common Stock ("Common Stock Warrants"), or any combination thereof. Warrants may be issued independently or together with any Securities and may be attached to or separate from such Securities. The Warrants are to be issued under warrant agreements (each a "Warrant Agreement") to be entered into between the Company and a bank or trust company, as warrant agent (the "Warrant Agent"), all as shall be set forth in the Prospectus Supplement relating to Warrants being offered pursuant thereto. DEBT WARRANTS The applicable Prospectus Supplement will describe the terms of Debt Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants and the certificates representing such Debt Warrants, including the following: (1) the title of such Debt Warrants; (2) the aggregate number of such Debt Warrants; (3) the price or prices at which such Debt Warrants will be issued; (4) the currency or currencies, including composite currencies or currency units, in which the price of such Debt Warrants may be payable; (5) the designation, aggregate principal amount and terms of the Debt Securities purchasable upon exercise of such Debt Warrants, and the procedures and conditions relating to the exercise of such Debt Warrants; (6) the designation and terms of any related Debt Securities with which such Debt Warrants are issued, and the number of such Debt Warrants issued with each such Debt Security; (7) the currency or currencies, including composite currencies or currency units, in which the principal of or any premium or interest on the Debt Securities purchasable upon exercise of such Debt Warrants will be payable; (8) the date, if any, on and after which such Debt Warrants and the related Debt Securities will be separately transferable; (9) the principal amount of Debt Securities purchasable upon exercise of each Debt Warrant, and the price at which and the currency or currencies, including composite currencies or currency units, in which such principal amount of Debt Securities may be purchased upon such exercise; (10) the date on which the right to exercise such Debt Warrants will commence, and the date on which such right will expire; (11) the maximum or minimum number of such Debt Warrants which may be exercised at any time; (12) a discussion of any material federal income tax considerations; and (13) any other terms of such Debt Warrants and terms, procedures and limitations relating to the exercise of such Debt Warrants. Certificates representing Debt Warrants will be exchangeable for new certificates representing Debt Warrants of different denominations, and Debt Warrants may be exercised at the corporate trust office of the Warrant Agent or any other office indicated in the Prospectus Supplement. Prior to the exercise of their Debt Warrants, holders of Debt Warrants will not have any of the rights as holders of the Debt Securities purchasable upon such exercise and will not be entitled to payment of principal of or any premium or interest on the Debt Securities purchasable upon such exercise. PREFERRED STOCK WARRANTS The applicable Prospectus Supplement will describe the terms of Preferred Stock Warrants offered thereby, the Warrant Agreement relating to such Preferred Stock Warrants and the certificates representing such Preferred Stock Warrants, including the following: (1) the title of such Preferred Stock Warrants; (2) the aggregate number of such Preferred Stock Warrants; (3) the price or prices at which such Preferred Stock Warrants will be issued; (4) the currency or currencies, including composite currencies or currency units, in which the price of such Preferred Stock Warrants may be payable; (5) the designation, number of shares and terms (including, among others, dividend, liquidation, redemption and voting rights) of the Preferred Stock (including Preferred Stock represented by 27 Depositary Shares) purchasable upon exercise of such Preferred Stock Warrants, and the procedures and conditions relating to the exercise of such Preferred Stock Warrants; (6) the designation and terms of any related Securities of the Company with which such Warrants are issued, and the number of such Preferred Stock Warrants issued with each such Security; (7) the date, if any, on and after which such Preferred Stock Warrants and the related Securities will be separately transferable; (8) the maximum or minimum number of Preferred Stock Warrants which may be exercised at any time; (9) if applicable, a discussion of any material federal income tax considerations; and (10) any other terms of such Preferred Stock Warrants, including terms, procedures and limitations relating to the exchange and exercise of such Preferred Stock Warrants. Certificates representing Preferred Stock Warrants will be exchangeable for new certificates representing Preferred Stock Warrants of different denominations, and Preferred Stock Warrants may be exercised at the corporate trust office of the Warrant Agent or any office indicated in the Prospectus Supplement. Prior to the exercise of their Preferred Stock Warrants, holders of such Preferred Stock Warrants will not have any of the rights as holders of the Preferred Stock purchaseable upon such exercise and will not be entitled to any dividend payments, liquidation premiums or voting rights of the Preferred Stock (including Preferred Stock represented by Depositary Shares) purchasable upon such exercise. COMMON STOCK WARRANTS The applicable Prospectus Supplement will describe the terms of any Common Stock Warrants, the Warrant Agreement relating to such Common Stock Warrants and the certificates representing such Common Stock Warrants in respect of which this Prospectus is being delivered which may include: (1) the title of such Common Stock Warrants; (2) the aggregate number of such Common Stock Warrants; (3) the price or prices at which such Common Stock Warrants will be issued; (4) the currency or currencies, including composite currencies or currency units, in which the price of such Common Stock Warrants may be payable; (5) if applicable, the designation and terms of any related Security with which such Common Stock Warrants are issued, and the number of such Common Stock Warrants issued with each such related Security; (6) if applicable, the date on and after which such Common Stock Warrants and the related Security will be separately transferable; (7) the date on which the right to exercise such Common Stock Warrants will commerce, and the date on which such right will expire, (8) the maximum or minimum number of such Common Stock Warrants which may be exercised at any time; (9) if applicable, a discussion of any material federal income tax considerations; and (10) any other terms of such Common Stock Warrants, including terms, procedures and limitations relating to the exchange and exercise of such Common Stock Warrants. Certificates representing Common Stock Warrants will be exchangeable for new certificates representing Common Stock Warrants of different denominations, and Common Stock Warrants may be exercised at the corporate trust office of the Warrant Agent or any other office indicated in the Prospectus Supplement. Prior to the exercise of their Common Stock Warrants, holders of Common Stock Warrants will not have any of the rights as holders of Common Stock purchasable upon such exercise and will not be entitled to dividend payments, if any, or voting rights of the Common Stock purchasable upon such exercise. EXERCISE OF WARRANTS Each Warrant will entitle the holder to purchase for cash such principal amount of Debt Securities or number of shares of Preferred Stock or Common Stock at such exercise price as shall in each case be set forth in, or be determinable as set forth in, the Prospectus Supplement relating to the Warrants offered thereby. Warrants may be exercised at any time up to the close of business on the expiration date set forth in the Prospectus Supplement relating to the Warrants offered thereby. After the close of business on the expiration date, unexercised Warrants will become void. 28 Warrants may be exercised as set forth in the Prospectus Supplement relating to the Warrants offered thereby. Upon receipt of payment and the certificate representing the Warrant properly completed and duly executed at the corporate trust office of the Warrant Agent or any other office indicated in the Prospectus Supplement, the Company will, as soon as practicable, forward the Securities purchasable upon such exercise. If less than all of the Warrants represented by such certificate are exercised, a new certificate will be issued for the remaining Warrants. LIMITATIONS ON ISSUANCE OF BEARER SECURITIES In compliance with United States federal tax laws and regulations, Bearer Securities (including Debt Securities that are exchangeable for Bearer Securities and Debt Securities in permanent global form that are either Bearer Securities or exchangeable for Bearer Securities) may not be offered, sold, resold or delivered in connection with their original issuance in the United States or to United States persons (each as defined below) except as otherwise permitted by Treasury Regulation Section 1.163-5(c)(2)(i)(D) including offers and sales to offices located outside the United States of United States financial institutions (as defined in Treasury Regulation Section 1.165-12(c)(1)(v)) which agree in writing to comply with the requirements of Section 165(j)(3)(A),(B) or (C) of the Code, as defined below, and the regulations thereunder, and any underwriters, agents and dealers participating in the offering of Debt Securities must agree in writing that they will not offer, sell or resell any Bearer Securities to persons within the United States or to United States persons (except as described above) nor deliver Bearer Securities within the United States. In addition, any such underwriters, agents and dealers must represent in writing that they have in effect, in connection with the offer and sale of the Debt Securities, procedures reasonably designed to ensure that their employees or agents who are directly engaged in selling the Debt Securities are aware that Bearer Securities cannot be offered or sold to a person who is within the United States or is a United States person except as otherwise permitted by Treasury Regulation Section 1.163-5(c)(2)(i)(D). Furthermore, the owner of the obligation (or the financial institution or clearing organization through which the owner holds the obligation) must certify to the Company that the owner is not a United States Person. Bearer Securities and any coupons attached hereto will bear the following legend: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the United States Internal Revenue Code." Purchasers of Bearer Securities may be affected by certain limitations under United States tax laws. The applicable Prospectus Supplement or Prospectus Supplements will describe such limitations for any Bearer Securities relating thereto. As used herein, "United States person" means (i) an individual who is, for United States federal income tax purposes, a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or of any political subdivision thereof, or (iii) an estate or trust the income of which is subject to United States federal income taxation regardless of its source, and "United States" means the United States of America (including the States and the District of Columbia), its territories and its possessions. PLAN OF DISTRIBUTION The Company may sell Securities to or through underwriters or dealers and also may sell Securities directly to other purchasers or through agents. Any such underwriter or agent involved in the offer and sale of the Securities will be named in an applicable Prospectus Supplement. Underwriters may offer and sell the Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Company also may, from time to time, authorize underwriters acting as the Company's agents to offer and sell the Securities upon the terms and conditions as 29 shall be set forth in any Prospectus Supplement. In connection with the sale of Securities, underwriters may be deemed to have received compensation from the Company in the form of underwriting discounts or commissions from purchasers of Securities for whom they may act as agent. 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 (which may be changed from time to time) from the purchasers for whom they may act as agent. Any underwriting compensation paid by the Company to underwriters or agents in connection with the offering of Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable Prospectus Supplement. Underwriters, dealers and agents participating in the distribution of the Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Securities may be deemed to be underwriting discounts and commissions, under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements with the Company, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by the Company for certain expenses. If so indicated in an applicable Prospectus Supplement, the Company will authorize dealers acting as the Company's agents to solicit offers by certain institutions to purchase Debt Securities or Preferred Stock from the Company at the public offering price set forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and delivery on the date or dates stated in such Prospectus Supplement. Each Contract will be for an amount specified in the applicable Prospectus Supplement. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and other institutions, but will in all cases be subject to the approval of the Company. Contracts will not be subject to any conditions except (i) the purchase by an institution of the Securities covered by its Contracts shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject, and (ii) if the Securities are being sold to underwriters, the Company shall have sold to such underwriters the amount specified in the applicable Prospectus Supplement. Agents and underwriters will have no responsibility in respect of the delivery or performance of Contracts. A commission as indicated in the applicable Prospectus Supplement will be paid to underwriters and agents soliciting purchases of Securities pursuant to Contracts accepted by the Company. Each underwriter, dealer and agent participating in the distribution of any Debt Securities which are issuable in bearer form will agree that it will not offer, sell or deliver, directly or indirectly, Debt Securities in bearer form in the United States or to United States persons except as otherwise permitted by Treasury Regulation Section 1.163-5(c)(2)(i)(D). See "Limitations on Issuance of Bearer Securities." The Securities may not be offered or sold directly or indirectly in Great Britain other than to persons whose ordinary business it is to buy or sell shares or debentures (except in circumstances which do not constitute an offer to the public within the meaning of the Companies Act of 1985), and this Prospectus and any Prospectus Supplement or any other offering material relating to the Securities may not be distributed in or from Great Britain other than to persons whose business involves the acquisition and disposal, or the holding, of securities whether as principal or as agent. Each series of Securities will be a new issue with no established trading market, other than the Common Stock which is listed on the New York Stock Exchange. Any Common Stock sold pursuant to a Prospectus Supplement will be listed on the New York Stock Exchange, subject to official notice of issuance. Any underwriters to whom Securities are sold by the Company for public offering and sale may make a market in such Securities, but such underwriters 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 Securities. 30 Certain of the underwriters or agents and their associates may be customers of, engage in transactions with and perform services for, the Company in the ordinary course of business. VALIDITY OF SECURITIES The validity of the Securities will be passed upon for the Company by James W. Guedry, Esq., Associate General Counsel and Secretary of the Company, and certain matters will be passed upon for any underwriters or agents, by Skadden, Arps, Slate, Meagher & Flom. Mr. Guedry does not own a material or significant amount of the outstanding shares of the Company's Common Stock. He participates in the Company's Stock Option Plan and in its Salaried Savings Plan, having an interest in a fund under that plan which invests in the Company's Common Stock. EXPERTS The financial statements and schedules incorporated by reference in this prospectus and elsewhere in the registration statement, to the extent and for the periods indicated in their reports, have been audited by Arthur Andersen & Co., independent public accountants, and are incorporated by reference herein in reliance upon the authority of said firm as experts in giving said reports. 31 - ------------------------------------------- - ------------------------------------------- - ------------------------------------------- - ------------------------------------------- NO DEALER, AGENT, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT. THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND SUCH PRICING SUPPLEMENT OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES. ------------- TABLE OF CONTENTS
PAGE --------- PROSPECTUS SUPPLEMENT Description of Notes............................ S-2 Special Provisions Relating to Foreign Currency Notes.......................................... S-11 Foreign Currency Risks.......................... S-14 United States Taxation.......................... S-14 Plan of Distribution of Notes................... S-17 Validity of the Notes........................... S-18 Glossary........................................ S-19 PROSPECTUS Available Information........................... 2 Incorporation of Certain Documents by Reference...................................... 2 The Company..................................... 3 Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends...................... 4 Use of Proceeds................................. 4 Description of Debt Securities.................. 5 Description of Capital Sotck.................... 19 Description of Preferred Stock.................. 19 Description of Depositary Shares................ 22 Description of Common Stock..................... 24 Description of Warrants......................... 27 Limitations on Issuance of Bearer Securities.... 29 Plan of Distribution............................ 29 Validity of Debt Securities..................... 31 Experts......................................... 31
[LOGO] $400,000,000 Medium-Term Notes, Series E --------------------------------- P R O S P E C T U S S U P P L E M E N T --------------------------------------- CS First Boston Kidder, Peabody P Co. Incorporated - ------------------------------------------- - ------------------------------------------- - ------------------------------------------- - ------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----