Eaton Corp. 424(b)(3)
The information in this preliminary
prospectus supplement is not complete and may be changed. This
preliminary prospectus supplement and the accompanying
prospectus are not an offer to sell nor soliciting an offer to
buy the securities in any jurisdiction where the offering is not
permitted.
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Filed Pursuant To Rule 424(b)(3)
Registration No. 333-130318
SUBJECT TO COMPLETION, AUGUST 7,
2006
Prospectus Supplement
August , 2006
(To Prospectus dated December 14, 2005)
$
Eaton
Corporation
Floating Rate Notes due 2009
The notes will bear interest at a floating rate per year.
Interest on the notes is payable quarterly in arrears
on , , ,
and of
each year, beginning
on ,
2006. The notes will mature
on ,
2009. Interest on the notes will accrue from
August , 2006. The notes are
not redeemable prior to maturity.
The notes will be unsecured obligations of our company and will
rank equally with all of our other unsecured senior indebtedness
from time to time outstanding.
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Per Note | |
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Total | |
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Public offering price(1)
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% |
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$ |
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Underwriting discount
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% |
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$ |
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Proceeds to Eaton (before expenses)
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$ |
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(1) |
Plus accrued interest, if any, from
August , 2006, if settlement
occurs after such date. |
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The notes will be delivered to investors in book-entry form only
through the facilities of The Depository Trust Company on or
about August , 2006.
Banc of America Securities LLC
You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. We have not, and Banc of America
Securities LLC has not, authorized any other person to provide
you with different information. If anyone provides you with
different or inconsistent information, you should not rely on
it. We are not, and Banc of America Securities LLC is not,
making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement, the
accompanying prospectus and the documents incorporated by
reference is accurate only as of their respective dates. Our
business, financial condition, results of operations and
prospects may have changed since those dates.
TABLE OF CONTENTS
Prospectus Supplement
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Page | |
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Where You Can Find More Information
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S-3 |
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Special Note Regarding Forward-Looking Statements
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S-3 |
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Summary
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S-4 |
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Use of Proceeds
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S-5 |
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Capitalization
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S-5 |
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Ratio of Earnings to Fixed Charges
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S-6 |
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Description of Notes
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S-7 |
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Underwriting
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S-10 |
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Legal Opinions
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S-11 |
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Experts
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S-11 |
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Prospectus |
Where You Can Find More Information
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2 |
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The Company
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3 |
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Use of Proceeds
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3 |
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Ratio of Earnings to Fixed Charges
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3 |
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Prospectus
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3 |
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Prospectus Supplement
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4 |
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Description of Debt Securities
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4 |
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Description of Debt Warrants
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20 |
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Description of Preferred Shares
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22 |
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Description of Common Shares
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25 |
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Plan of Distribution
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28 |
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Legal Opinions
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29 |
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Experts
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29 |
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S-2
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other
information with the Securities and Exchange Commission. You may
read and copy any document we file at the SECs Public
Reference Room at 100 F Street, N.E., Washington D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further
information on its public reference rooms. Our SEC filings are
also available to the public from the SECs web site at
http://www.sec.gov. Our common shares are listed on the New York
Stock Exchange, the Chicago Stock Exchange, the Pacific Exchange
and the London Stock Exchange, and information about us also is
available there.
This prospectus supplement is part of a registration statement
that we have filed with the SEC. The SEC allows us to
incorporate by reference the information we file
with it, which means that we can disclose important information
to you by referring you to other documents that we identify as
part of this prospectus supplement. Our subsequent filings of
similar documents with the SEC will automatically update and
supersede this information. We incorporate by reference the
documents listed below and any future filings we make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the offering of our common
shares has been completed.
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Annual Report on
Form 10-K for the
year ended December 31, 2005. |
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Quarterly Report on
Form 10-Q for the
quarter ended March 31, 2006. |
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Quarterly Report on
Form 10-Q for the
quarter ended June 30, 2006. |
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Current Reports on
Form 8-K filed on
February 10, 2006, February 27, 2006, May 12,
2006 and June 14, 2006. |
You may obtain a copy of these filings at no cost by writing to
or telephoning us at the following address:
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Eaton Corporation |
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Eaton Center |
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1111 Superior Avenue |
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Cleveland, Ohio 44114-2584 |
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(216) 523-5000 |
You should rely only on the information incorporated by
reference or provided in this prospectus supplement. We have not
authorized anyone else to provide you with different
information. This prospectus supplement is an offer to sell or
buy only the securities described in this document, but only
under circumstances and in jurisdictions where it is lawful to
do so. The information contained in this prospectus supplement
is current only as of the date of this prospectus supplement.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements included or incorporated by reference in
the accompanying prospectus or this prospectus supplement
constitute forward-looking statements within the
meaning of the Securities Litigation Reform Act of 1995. Words
such as expects, intends,
plans, projects, believes,
estimates, anticipates and variations of
these and similar expressions are used to identify these
forward-looking statements. These forward-looking statements
refer to, among other things, our plans, strategies and
prospects, both business and financial. Although we believe that
our plans, intentions and expectations reflected in or suggested
by these forward-looking statements are reasonable, we can give
no assurance that we will achieve or realize these plans,
intentions or expectations. Forward-looking statements are
inherently subject to risks, uncertainties and assumptions.
Important factors that could cause actual results to differ
materially from the forward-looking statements we make in those
documents are set forth in those documents. All forward-looking
statements attributable to us or persons acting on our behalf
are expressly qualified by those cautionary statements. We will
not update these forward-looking statements even though our
situation will change in the future.
S-3
SUMMARY
This summary may not contain all the information that may be
important to you. You should read the entire prospectus
supplement and the accompanying prospectus, as well as the
documents incorporated by reference in them, before making an
investment decision.
The Company
We are a global leader in the design, manufacture, marketing and
servicing of electrical systems and components for power
quality, distribution and control; fluid power systems and
services for industrial, mobile and aircraft equipment;
intelligent truck drivetrain systems for safety and fuel
economy; and automotive engine air management systems,
powertrain solutions and specialty controls for performance,
fuel economy and safety. Headquartered in Cleveland, Ohio, Eaton
had 59,000 employees at year-end 2005 and sells products in more
than 125 countries.
Our operations are categorized into these four business segments:
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Electrical |
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Fluid Power |
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Truck |
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Automotive |
Our principal executive office is located at Eaton Center, 1111
Superior Avenue, Cleveland, Ohio 44114-2584, and our telephone
number is (216) 523-5000.
The Offering
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Issuer |
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Eaton Corporation |
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Securities Offered |
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$ aggregate
principal amount of Floating Rate Notes due 2009 |
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Maturity |
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,
2009 |
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Interest Rate |
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Three-month USD LIBOR
plus basis
points |
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Interest Payment and Reset Dates |
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Quarterly
on , , and ,
commencing ,
2006. Interest on the notes being offered by this prospectus
supplement will accrue from
August , 2006. |
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Ranking |
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The notes will be our unsecured senior obligations and will rank
equally with our other unsecured senior indebtedness from time
to time outstanding. The notes will be effectively subordinated
to any existing or future debt or other liabilities of any of
our subsidiaries. |
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Authorized Denominations |
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Minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof |
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Use of Proceeds |
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We expect the net proceeds from the notes to be approximately
$ million.
We will use these proceeds to repay $86 million of
8% Debentures due 2006, $100 million of 8.90%
Debentures due 2006 and the remaining balance to repay
commercial paper. See Use of Proceeds. |
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Trustee, Registrar and Paying Agent |
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JPMorgan Chase Bank, N.A. |
S-4
USE OF PROCEEDS
We expect the net proceeds from the sale of the notes offered by
this prospectus supplement to be approximately
$ million.
We will use these proceeds to repay $86.0 million of 8%
Debentures due 2006, $100.0 million of 8.9% Debentures due
2006 and the remaining balance to repay commercial paper having
an average maturity of 18.6 days and bearing an average
annual rate of interest of 4.24% as of August 4, 2006.
CAPITALIZATION
The following table sets forth the capitalization of Eaton and
its consolidated subsidiaries at June 30, 2006. The
As Adjusted capitalization set forth below gives
effect to the issuance of the Floating Rate Notes offered herein.
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As of June 30, 2006 | |
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Unaudited | |
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Historical | |
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As Adjusted | |
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Millions | |
Short-term debt
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$ |
431 |
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$ |
367 |
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Current portion of long-term debt
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477 |
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291 |
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Total short-term debt & current portion of long-term
debt
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908 |
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658 |
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Long-term debt
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6.75% Notes due 2007
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25 |
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25 |
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Euro 100 million floating rate notes due 2008
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127 |
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127 |
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7.40% Notes due 2009
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15 |
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15 |
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5.75% Notes due 2012
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300 |
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300 |
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7.58% Notes due 2012
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12 |
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12 |
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5.80% Notes due 2013
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7 |
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7 |
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12.5% Debentures due 2014
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11 |
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11 |
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4.65% Notes due 2015
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100 |
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100 |
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7.09% Notes due 2018
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25 |
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25 |
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6.89% Notes due 2018
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6 |
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6 |
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7.07% Notes due 2018
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2 |
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2 |
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6.875% Notes due 2018
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3 |
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3 |
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87/8
% Debentures due 2019
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38 |
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38 |
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8.10% Debentures due 2022
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100 |
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100 |
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75/8
% Debentures due 2024
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66 |
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66 |
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61/2
% Debentures due 2025
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145 |
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145 |
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7.875% Debentures due 2026
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72 |
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72 |
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7.65% Debentures due 2029
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200 |
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200 |
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5.45% Debentures due 2034
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150 |
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150 |
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5.25% Notes due 2035
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90 |
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90 |
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250 million floating rate notes offered hereby
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250 |
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Other
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20 |
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20 |
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Total long-term debt
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1,514 |
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1,764 |
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Shareholders equity
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Common Shares
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75 |
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75 |
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Capital in excess of par value
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2,124 |
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2,124 |
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Retained earnings
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2,681 |
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2,681 |
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Accumulated other comprehensive loss
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(603 |
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(603 |
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Deferred compensation plans
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(28 |
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(28 |
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Total shareholders equity
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4,249 |
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4,249 |
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Total capitalization (long-term debt and shareholders
equity)
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$ |
5,763 |
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$ |
6,013 |
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S-5
Eatons authorized capital as of June 30, 2006
consisted of common shares, par value $0.50 (300 million
shares authorized, 150 million shares outstanding).
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our ratio of earnings to fixed charges
for the six months ended June 30, 2006 and for each of the
five years in the period ended December 31.
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For the Six | |
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For the Years | |
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Months Ended | |
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Ended December 31, | |
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June 30, 2006 | |
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(Unaudited) | |
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2005 | |
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2004 | |
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2003 | |
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2002 | |
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2001 | |
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Ratio of Earnings to Fixed Charges
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6.70 |
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7.20 |
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6.98 |
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4.73 |
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3.71 |
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2.44 |
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For the purpose of computing the ratio of earnings to fixed
charges, earnings consist of consolidated pretax
income before adjustment for minority interests in consolidated
subsidiaries and income (loss) of equity investees, plus
(1) amortization of capitalized interest,
(2) distributed income of equity investees and
(3) fixed charges described below, excluding interest
capitalized. Fixed charges consist of
(1) interest expensed, (2) interest capitalized,
(3) amortization of debt issue costs and (4) that
portion of rent expense estimated to represent interest. Because
we have not had any preferred shares outstanding during the last
five years and have, therefore, not paid any dividends on
preferred shares, our ratio of earnings to combined fixed
charges and preferred share dividends has been the same as the
ratio of earnings to fixed charges for each of the above periods.
S-6
DESCRIPTION OF NOTES
General
The following description of the particular terms of the notes
offered by this prospectus supplement supplements the
description of the general terms and provisions of debt
securities under the heading Description of Debt
Securities in the accompanying prospectus. Capitalized
terms used in this section of this prospectus supplement that
are otherwise not defined have the meanings given to them in the
accompanying prospectus.
The notes will be unsecured senior debt issued under the
Indenture dated as of April 1, 1994, as supplemented from
time to time (the Senior Indenture), which we
entered into with JPMorgan Chase Bank, N.A. (formerly Chemical
Bank), as Senior Trustee. The notes will rank equally with all
our other unsecured senior indebtedness from time to time
outstanding.
We will issue the notes in the aggregate principal amount of
$ million.
The notes will mature on
August , 2009. We will issue
the notes only in book-entry form, in denominations of $1,000
and integral multiples of $1,000. The notes will not be subject
to any sinking fund and will not be convertible into or
exchangeable for any of our equity interests.
We may, without the consent of the holders of the notes, issue
additional debt securities having the same ranking and the same
interest rate, maturity and other terms as the notes. Any such
additional debt securities and the notes will constitute a
single series under the Senior Indenture. None of these
additional notes may be issued if an Event of Default has
occurred and is continuing with respect to the notes.
Principal and Interest
The notes will mature
on ,
2009. The notes will bear interest from
August , 2006, and will be
payable quarterly in arrears
on , , and (each
such date, an Interest Payment Date),
commencing ,
2006, to the holders in whose names the notes are registered at
the close of business on the 15th calendar day preceding such
Interest Payment Date (whether or not a Business Day), each such
date a Record Date. If any Interest Payment Date
other than the Stated Maturity Date falls on a day that is not a
Business Day, the Interest Payment Date will be postponed to the
next succeeding Business Day, except if that Business Day is in
the next succeeding calendar month, then such Interest Payment
Date will be the immediately preceding Business Day. If the
Stated Maturity Date with respect to the notes falls on a day
that is not a Business Day, the required payment of principal
and interest will be made on the next succeeding Business Day,
and no interest will accrue on such payment for the period from
and after the Stated Maturity Date to the date of such payment
on the next succeeding Business Day. Certain capitalized terms
related to the notes are defined below.
The applicable interest rate for the notes will be calculated by
a calculation agent. The calculation agent for the notes will be
JPMorgan Chase Bank, N.A., (or such other person as we may
appoint from time to time), which is referred to as the
Calculation Agent. Upon the request of the holder in
whose name any note is registered, the Calculation Agent will
provide the interest rate then in effect and, if determined, the
interest rate that will become effective on the next Interest
Period. The notes will bear interest for each quarterly Interest
Period at a per annum rate determined by the Calculation Agent,
subject to the maximum interest rate permitted by New York or
other applicable state law, as such law may be modified by
United States law of general application. The interest rate
applicable during each quarterly Interest Period will be equal
to LIBOR on the Interest Determination Date for such Interest
Period
plus %;
provided, however, that in certain circumstances
described below, the interest rate will be determined without
reference to LIBOR. Promptly upon each such determination, the
Calculation Agent will notify us and the Trustee, if the Trustee
is not then serving as the Calculation Agent, of the interest
rate for the new Interest Period. The interest rate determined
by the Calculation Agent, absent manifest error, will be binding
and conclusive upon the beneficial owners of and holders in
whose name the notes are registered, the Company and the Trustee.
S-7
If the following circumstances exist on any Interest
Determination Date, the Calculation Agent will determine the
interest rate for the notes as follows:
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(1) In the event no Reported Rate appears on Telerate Page
3750 as of approximately 11:00 a.m., London time, on an
Interest Determination Date, the Calculation Agent will request
the principal London offices of each of four major banks in the
London interbank market selected by the Calculation Agent (after
consultation with us), to provide a quotation of the rate (the
Rate Quotation), at which three-month deposits in
amounts of not less than $1,000,000 are offered by it to prime
banks in the London interbank market, as of approximately
11:00 a.m., London time, on such Interest Determination
Date, that is representative of single transactions at such time
(the Representative Amounts). If at least two Rate
Quotations are provided, the interest rate will be the
arithmetic mean of the Rate Quotations obtained by the
Calculation Agent,
plus %. |
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(2) In the event no Reported Rate appears on Telerate Page
3750 as of approximately 11:00 a.m., London time, on an
Interest Determination Date and there are fewer than two Rate
Quotations, the interest rate will be the arithmetic mean of
rates quoted at approximately 11:00 a.m., New York City
time, on such Interest Determination Date, by three major banks
in New York City selected by the Calculation Agent (after
consultation with us), for loans in Representative Amounts in
U.S. dollars to leading European banks, having an index maturity
of three months for a period commencing on the second London
Business Day immediately following such Interest Determination
Date,
plus %;
provided, however, that if fewer than three banks
selected by the Calculation Agent are quoting such rates, the
interest rate for the applicable Interest Period will be the
same as the interest rate in effect for the immediately
preceding Interest Period. |
All percentages resulting from any calculation on the notes will
be rounded to the nearest one hundred-thousandth of a percentage
point with five one-millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would be rounded to
9.87655% (or .0987655)), and all Dollar amounts used in or
resulting from such calculation on the notes will be rounded to
the nearest cent (with one-half cent being rounded upward).
The following definitions apply to the notes:
Business Day means a day which is not, in
London or New York City, a Saturday, Sunday, a legal holiday or
a day on which banking institutions are authorized or obligated
by law or executive order to close.
Interest Determination Date means the second
London Business Day immediately preceding the first day of the
relevant Interest Period.
Interest Period means the period commencing
on an Interest Payment Date for the notes (or, with respect to
the initial Interest Period only, commencing on
August , 2006) and ending on
the day before the next succeeding Interest Payment Date.
LIBOR, for any Interest Determination Date,
will be the offered rate for deposits in U.S. dollars having an
index maturity of three months for a period commencing on the
second London Business Day immediately following the Interest
Determination Date in amounts of not less than $1,000,000, as
such rate appears on Telerate Page 3750 or a successor
reporter of such rates selected by the Calculation Agent and
acceptable to us, at approximately 11:00 a.m., London time,
on the Interest Determination Date (the Reported
Rate).
London Business Day means a day that is a
Business Day and a day on which dealings in deposits in U.S.
dollars are transacted, or with respect to any future date are
expected to be transacted, in the London interbank market.
Telerate Page 3750 means the display
designated on page 3750 on Moneyline Telerate, Inc. (or
such other page as may replace the 3750 page on that service or
such other service as may be nominated by the British
Bankers Association for the purpose of displaying London
interbank offered rates for U.S. dollar deposits).
S-8
Defeasance and Covenant Defeasance
In some circumstances, we may elect to discharge our obligations
on the notes through defeasance or covenant defeasance. See
Description of Debt Securities Defeasance and
Covenant Defeasance in the accompanying prospectus for
more information about how we may do this.
Book-Entry System
We will issue the senior debentures in the form of one or more
fully registered global securities, as described in
Description of Debt Securities Book-Entry Debt
Securities in the accompanying prospectus. We will deposit
these global securities with, or on behalf of, The Depository
Trust Company, New York, New York, known as DTC, and register
these securities in the name of DTCs nominee.
S-9
UNDERWRITING
Subject to the terms and conditions stated in the underwriting
agreement dated the date of this prospectus supplement, Banc of
America Securities LLC has agreed to purchase, and we have
agreed to sell to Banc of America Securities LLC,
$ aggregate
principal amount of notes.
The underwriting agreement provides that the obligations of Banc
of America Securities LLC to purchase the notes included in this
offering are subject to approval of legal matters by counsel and
to other conditions. Banc of America Securities LLC is obligated
to purchase all the notes if they purchase any of the notes.
Banc of America Securities LLC proposes to offer some of the
notes directly to the public at the public offering price set
forth on the cover page of this prospectus supplement and some
of the notes to dealers at the public offering price less a
concession not to
exceed %
of the principal amount of the notes. The underwriter may allow,
and dealers may reallow, a concession not to
exceed %
of the principal amount of the notes on sales to other dealers.
After the initial offering of the notes to the public, Banc of
America Securities LLC may change the offering price and other
selling terms.
The notes are a new issue of securities with no established
trading market. The notes will not be listed on any securities
exchange or on any automated dealer quotation system. Banc of
America Securities LLC may make a market in the notes after
completion of the offering, but will not be obligated to do so
and may discontinue any market-making activities at any time
without notice. No assurance can be given as to the liquidity of
the trading market for the notes or that an active public market
for the notes will develop. If an active public trading market
for the notes does not develop, the market price and liquidity
of the notes may be adversely affected.
In connection with the offering, Banc of America Securities LLC,
may purchase and sell the notes in the open market. These
transactions may include over-allotment, syndicate covering
transactions and stabilizing transactions. Over-allotment
involves syndicate sales of the notes in excess of the principal
amount of the notes to be purchased by Banc of America
Securities LLC in the offering, which creates a syndicate short
position. Syndicate covering transactions involve purchases of
the notes in the open market after the distribution has been
completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of
the notes made for the purpose of preventing or retarding a
decline in the market price of the notes while the offering is
in progress.
Banc of America Securities LLC also may impose a penalty bid.
Penalty bids permit Banc of America Securities LLC to reclaim a
selling concession from a syndicate member when, in covering
syndicate short positions or making stabilizing purchases, it
repurchases notes originally sold by that syndicate member.
Any of these activities may have the effect of preventing or
retarding a decline in the market price of the notes. They may
also cause the price of the notes to be higher than the price
that otherwise would exist in the open market in the absence of
these transactions. Banc of America Securities LLC may conduct
these transactions in the over-the-counter market or otherwise.
If Banc of America Securities LLC commences any of these
transactions, it may discontinue them at any time.
We estimate that our expenses for this offering will be
$ .
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments the underwriters may be
required to make because of any of those liabilities.
In the ordinary course of its business, Banc of America
Securities LLC and its affiliates have engaged, and may in the
future engage, in commercial banking and/or investment banking
transactions with us. They have received customary fees and
commissions for these transactions.
S-10
LEGAL OPINIONS
The validity of the senior debentures will be passed upon for
our company by Mark Hennessey, our Deputy General Counsel, and
for the underwriters by Shearman & Sterling LLP, New York,
New York. Mr. Hennessey is paid a salary by our company and
participates in various employee benefit plans offered to
officers of our company generally.
EXPERTS
Ernst & Young LLP, independent registered public accounting
firm, has audited our consolidated financial statements included
in our Annual Report on Form 10-K for the year ended December
31, 2005, and managements assessment of the effectiveness
of our internal control over financial reporting as of December
31, 2005, as set forth in their reports, which are incorporated
by reference in this prospectus supplement and elsewhere in the
registration statement. Our financial statements and
managements assessment are incorporated by reference in
reliance on Ernst & Young LLPs reports, given on their
authority as experts in accounting and auditing.
S-11
Eaton Corporation
By this prospectus, we offer
an unspecified amount of the following:
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Senior Debt Securities
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Debt Warrants with |
Subordinated Debt Securities
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Debt Securities as Units |
Preferred Shares
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Debt Warrants with |
Common Shares
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Preferred Shares as Units |
Debt Warrants
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The Company from time to time may offer to sell senior or
subordinated debt securities, preferred shares, common shares
and warrants, as well as units that include any of these
securities or securities of other entities. The debt securities,
preferred shares and warrants may be convertible into or
exercisable or exchangeable for common or preferred shares or
other securities of the Company or debt or equity securities of
one or more other entities. The common stock of the Company is
listed on the NYSE and trades under the ticker symbol
ETN.
The Company may offer and sell these securities to or through
one or more underwriters, dealers and agents, or directly to
purchasers, on a continuous or delayed basis.
This prospectus describes some of the general terms that may
apply to these securities. The specific terms of any securities
to be offered as well as the public offering prices of these
securities will be described in a supplement to this prospectus.
This prospectus may not be used to sell securities unless
accompanied by a prospectus supplement. You should read this
prospectus and the prospectus supplements carefully before you
invest.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is December 14, 2005.
TABLE OF CONTENTS
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WHERE YOU CAN FIND MORE INFORMATION
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THE COMPANY
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USE OF PROCEEDS
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RATIO OF EARNINGS TO FIXED CHARGES
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PROSPECTUS
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PROSPECTUS SUPPLEMENT
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DESCRIPTION OF DEBT SECURITIES
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DESCRIPTION OF DEBT WARRANTS
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DESCRIPTION OF PREFERRED SHARES
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DESCRIPTION OF COMMON SHARES
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PLAN OF DISTRIBUTION
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LEGAL OPINIONS
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EXPERTS
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange
Commission. You may read and copy any document we file at the
SECs public reference room at 450 Fifth Street, N.W.,
Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on its public reference room. Our SEC
filings are also available to the public from the SECs web
site at http://www.sec.gov. Our common shares are listed
on the New York Stock Exchange, the Chicago Stock Exchange and
the Pacific Exchange and information about us also is available
there.
This prospectus is part of a registration statement that we have
filed with the SEC. The SEC allows us to incorporate by
reference the information we file with it, which means
that we can disclose important information to you by referring
you to other documents that we identify as part of this
prospectus. Our subsequent filings of similar documents with the
SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any
future filings we make with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934
(1) after the date of the filing of this registration
statement and before its effectiveness and (2) until our
offering of securities has been completed.
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Annual Report on Form 10-K for the year ended
December 31, 2004 |
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Quarterly Report on Form 10-Q for the quarter ended
March 31, 2005 |
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Quarterly Report on Form 10-Q for the quarter ended
June 30, 2005 |
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Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005 |
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Current Report on Form 8-K filed February 25, 2005 |
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Current Report on Form 8-K filed April 18, 2005 |
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Current Report on Form 8-K filed April 29, 2005 |
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Current Report on Form 8-K filed June 14, 2005 |
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Current Report on Form 8-K filed July 18, 2005 |
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Current Report on Form 8-K filed October 12, 2005 |
You may obtain a copy of these filings, at no cost, by writing
to or telephoning us at the following address:
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Eaton Corporation |
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Eaton Center |
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1111 Superior Avenue |
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Cleveland, Ohio 44114-2584 |
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Attn: Shareholder Relations |
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(216) 523-5000 |
You should rely only on the information incorporated by
reference or provided in this prospectus or any supplement. We
have not authorized anyone else to provide you with different
information. This prospectus is an offer to sell or buy only the
securities described in this document, but only under
circumstances and in jurisdictions where it is lawful to do so.
The information contained in this prospectus is current only as
of the date of this prospectus.
2
THE COMPANY
We are a global diversified industrial manufacturer,
incorporated in Ohio in 1916 as a successor to a New Jersey
company that was incorporated in 1911. We are a global leader in
electrical systems and components for power quality,
distribution and control; fluid power systems and services for
industrial, mobile and aircraft equipment; intelligent truck
drivetrain systems for safety and fuel economy; and automotive
engine air management systems, powertrain solutions and
specialty controls for performance, fuel economy and safety. We
have 58,000 employees and sell products to customers in more
than 125 countries.
Our operations are categorized into these four business segments:
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Electrical |
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Fluid Power |
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Truck |
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Automotive |
Our principal executive office is located at Eaton Center, 1111
Superior Avenue, Cleveland, Ohio 44114-2584, and our telephone
number is (216) 523-5000.
USE OF PROCEEDS
Except as may be described otherwise in a prospectus supplement,
we will use the net proceeds from the sale of the securities
under this prospectus for general corporate purposes, which may
include additions to working capital, acquisitions, or the
retirement of existing indebtedness via repayment, redemption or
exchange.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our ratio of earnings to fixed charges
for the nine months ended September 30, 2005 and for each
of the five years in the period ended December 31, 2004.
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Year Ended December 31, | |
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Ratio of Earnings to Fixed Charges
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7.40 |
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6.98 |
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4.73 |
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3.71 |
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2.44 |
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3.25 |
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For the purpose of computing the ratio of earnings to fixed
charges, earnings consist of consolidated pretax
income before adjustment for minority interests in consolidated
subsidiaries or income (loss) of equity investees, plus
(1) amortization of capitalized interest,
(2) distributed income of equity investees and
(3) fixed charges described below, excluding capitalized
interest. Fixed charges consist of (1) interest
expensed, (2) interest capitalized, (3) amortization
of debt issue costs and (4) that portion of rent expense
estimated to represent interest. Because we have not had any
Preferred Shares outstanding during the last five years and
have, therefore, not paid any dividends on Preferred Shares, our
ratio of earnings to combined fixed charges and Preferred Share
dividends has been the same as the ratio of earnings to fixed
charges for each of the above periods.
PROSPECTUS
This prospectus is part of a registration statement that we
filed with the SEC utilizing a shelf registration
process. Under this shelf process, we may sell any combination
of debt securities, warrants to purchase debt securities,
preferred shares and common shares with a par value of
$.50 per share.
3
PROSPECTUS SUPPLEMENT
This prospectus provides you with a general description of the
debt securities, debt warrants, preferred shares and common
shares we may offer. Each time we sell securities, we will
provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus
supplement may also add to or change information contained in
this prospectus. If so, the prospectus supplement should be read
as superseding this prospectus. You should read both this
prospectus and any prospectus supplement, together with
additional information described under the heading Where
You Can Find More Information.
The prospectus supplement to be attached to the front of this
prospectus will describe:
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the terms of any debt securities that we offer, including the
terms under the caption Provisions Applicable to Both the
Senior and Subordinated IndenturesGeneral; |
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the terms of any debt warrants that we offer, including the
exercise price, detachability, expiration date and other terms; |
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the terms of any preferred shares that we offer, including the
specific designations and dividend, redemption, liquidation,
voting and other rights not described in this prospectus and any
terms for conversion or exchange; |
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the terms of any common shares that we offer; and |
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any initial public offering price, the purchase price and net
proceeds to our company and the other specific terms related to
our offering of such securities. |
For more details on the terms of the securities, you should read
the exhibits filed with our registration statements.
DESCRIPTION OF DEBT SECURITIES
We may issue debt securities from time to time in one or more
distinct series. This section summarizes the material terms of
the debt securities that are common to all series. Most of the
financial and other terms of any series of debt securities that
we offer will be described in a prospectus supplement to be
attached to the front of this prospectus. Since the terms of
specific debt securities may differ from the general information
we have provided below, you should rely on information in the
prospectus supplement that is inconsistent with the information
below. As used in this section, we, us,
our and our company refer to Eaton
Corporation and not to its subsidiaries, unless the context
otherwise requires.
The debt securities are governed by a document called an
Indenture. An Indenture is a contract between us and
a financial institution acting as Trustee on your behalf. The
Trustee has two main roles. First, the Trustee can enforce your
rights against us if we default. There are some limitations on
the extent to which the Trustee acts on your behalf. Second, the
Trustee performs certain administrative duties for us.
Senior securities will be issued under an Indenture dated as of
April 1, 1994, as supplemented from time to time (the
Senior Indenture), which we entered into with
Chemical Bank, as trustee (the Senior Trustee), and
subordinated securities will be issued under a separate
indenture (the Subordinated Indenture), which we
will enter into with a trustee (the Subordinated
Trustee) if we decide to issue any subordinated
securities. JPMorgan Chase Bank, N.A. (formerly known as
Chemical Bank) is acting as Senior Trustee. The term
Trustee refers to either the Senior Trustee or the
Subordinated Trustee, as appropriate. We will refer to the
Senior Indenture and the Subordinated Indenture, as executed,
together as the Indentures and each, as an
Indenture. The Indentures are subject to and
governed by the Trust Indenture Act of 1939.
4
The Indentures and associated documents contain the full legal
text of the matters described in this section. We have filed the
form of each Indenture as an exhibit to a registration statement
that we have filed with the SEC. See Where You Can Find
More Information on page 2 of this prospectus for
information on how to obtain copies of the Indentures.
Because this section is a summary of the material terms of the
Indentures, it does not describe every aspect of the debt
securities. This summary is qualified in its entirety by the
provisions of the Indentures, including definitions of certain
terms used in the Indentures. For example, in this section, we
use capitalized words to signify terms that are specifically
defined in the Indentures. Some of the definitions are repeated
in this prospectus, but for the rest you will need to read the
Indentures. We also include references in parentheses to certain
sections of the Indentures or the Trust Indenture Act. Whenever
we refer to particular sections or defined terms of the
Indentures, those sections or defined terms are incorporated by
reference in this prospectus or in the prospectus supplement.
Unless otherwise noted, the section numbers refer to the
applicable section for both Indentures.
Provisions Applicable to Both the Senior and Subordinated
Indentures
General
The debt securities will be our unsecured obligations. The
senior securities will rank equally with all of our other
unsecured and unsubordinated indebtedness. The subordinated
securities will be subordinated in right of payment to the prior
payment in full of our Senior Indebtedness as described below
under Subordinated Indenture
ProvisionsSubordination.
Under the Indentures, we may issue any debt securities offered
under this prospectus and the attached prospectus supplement and
any debt securities issuable upon the exercise of debt warrants
or upon conversion or exchange of other offered securities, as
well as other unsecured debt securities.
With respect to the offered debt securities and any underlying
debt securities, you should read the prospectus supplement for
the following and other terms, which will be established by
authority of our Board of Directors before the issuance of the
debt securities:
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the title of the debt securities and whether they will be senior
securities or subordinated securities, including whether
subordinated securities are convertible subordinated securities; |
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the total principal amount of the debt securities and any limit
on the total principal amount of debt securities of each series; |
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the date or dates when the principal of the debt securities will
be payable or how those dates will be determined; |
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the interest rate or rates which the debt securities will bear,
if any, or how such rate or rates will be determined, the date
or dates from which interest will accrue, if any, or how such
date or dates will be determined, the interest payment dates,
the record dates for such payments, if any, or how such date or
dates will be determined and the basis upon which interest will
be calculated, if other than that of a 360-day year or twelve
30-day months; |
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whether the amount of payments of principal of (or premium, if
any), or interest on, the debt securities will be determined
with reference to an index, formula or other method (which could
be based on one or more Currencies, commodities, equity indices
or other indices) and how such amounts will be determined; |
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any optional redemption provisions; |
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any sinking fund or other provisions that would obligate us to
repurchase or redeem the debt securities; |
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if other than U.S. dollars, the Currency or Currencies of
the debt securities; |
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if other than denominations of $1,000 in the case of Registered
Securities, the denominations in which the offered debt
securities will be issued; |
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if not the principal amount of the debt securities, the portion
of the principal amount at which the debt securities will be
issued and, if not the principal amount of the debt securities,
the portion of the principal amount payable upon acceleration of
the maturity of the debt securities or how that portion will be
determined; |
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the form of the debt securities, if other than a registered
global note, including whether the debt securities are to be
issuable in permanent or temporary global form, as Registered
Securities, Bearer Securities or both, any restrictions on the
offer, sale or delivery of Bearer Securities, and the terms, if
any, upon which you may exchange Bearer Securities for
Registered Securities and vice versa (if permitted by applicable
laws and regulations); |
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any modifications or additions to the provisions of Article
Fourteen of the applicable Indenture described below under
Defeasance and Covenant Defeasance if that Article
is applicable to the debt securities; |
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any changes or additions to the Events of Default or our
covenants with respect to the debt securities; |
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the place or places, if any, other than or in addition to The
City of New York, of payment, transfer, conversion and/or
exchange of the debt securities, and where notices or demands to
or upon us in respect of the debt securities may be served; |
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whether we or a holder may elect payment of the principal or
interest in one or more Currencies other than that in which such
debt securities are stated to be payable, and the period or
periods within which, and the terms and conditions upon which,
that election may be made, and the time and manner of
determining the exchange rate between the Currency or Currencies
in which they are stated to be payable and the Currency or
Currencies in which they are to be so payable; |
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if other than the Trustee, the identity of each Security
Registrar and/or Paying Agent; |
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the designation of the Exchange Rate Agent, if applicable; |
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the Person to whom any interest on any Registered Security of
the series will be payable, if other than the registered holder
at the close of business on the record date, the manner in
which, or the Person to whom, any interest on any Bearer
Security of the series will be payable, if not upon presentation
and surrender of the coupons relating to the Bearer Security as
they mature, 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 not in the manner provided
in the applicable Indenture; |
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whether and under what circumstances we will pay additional
amounts as contemplated by Section 1005 of the applicable
Indenture (Additional Amounts) in respect of any
tax, assessment or governmental charge and, if so, whether we
will have the option to redeem the debt securities rather than
pay the Additional Amounts (and the terms of any such option); |
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any provisions granting special rights to the holders of the
debt securities upon the occurrence of specified events; |
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in the case of subordinated securities, any terms modifying the
subordination provisions; |
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in the case of convertible subordinated securities, any terms by
which they may be convertible into common shares; |
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if we issue the debt securities in definitive form, the terms
and conditions under which definitive securities will be issued; |
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if we issue the debt securities upon the exercise of debt
warrants, the time, manner and place for them to be
authenticated and delivered; |
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the manner for paying principal and interest and the manner for
transferring the debt securities; and |
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any other terms of the debt securities that are consistent with
the requirements of the Trust Indenture Act. |
For purposes of this prospectus, any reference to the payment of
principal of (or premium, if any), or interest on, or interest
on debt securities will include Additional Amounts if required
by the terms of the debt securities.
The Indentures do not limit the amount of debt securities that
we are authorized to issue from time to time. (Section 301)
When a single Trustee is acting for all debt securities issued
under an Indenture, those Securities are called the
Indenture Securities. Each Indenture also provides
that there may be more than one Trustee thereunder, each for a
series of Indenture Securities. See Resignation of
Trustee on page 16 of this prospectus. At a time when
two or more Trustees are acting under either Indenture, each
with respect to only certain series, the term Indenture
Securities means the series of debt securities for which
each respective Trustee is acting. If there is more than one
Trustee under either Indenture, the powers and trust obligations
of each Trustee will apply only to the Indenture Securities for
which it is Trustee. If two or more Trustees are acting under
either Indenture, then the Indenture Securities for which each
Trustee is acting would be treated as if issued under separate
indentures.
We may issue Indenture Securities with terms different from
those of Indenture Securities already issued. Without the
consent of the holders thereof, we may reopen a previous issue
of a series of Indenture Securities and issue additional
Indenture Securities of that series unless the reopening was
restricted when that series was created.
If any series of debt securities are sold for, payable in or
denominated in one or more foreign Currencies, we will specify
applicable restrictions, elections, tax consequences, specific
terms and other information in the applicable prospectus
supplement.
There is no requirement that we issue debt securities in the
future under the Indentures, and we may use other indentures or
documentation containing different provisions in connection with
future issues of such other debt securities.
We may issue the debt securities as original issue
discount securities, which are debt securities, including
any zero-coupon debt securities, that are issued and sold at a
discount from their stated principal amount. Original issue
discount securities provide that, upon acceleration of their
maturity, an amount less than their principal amount will become
due and payable. We will describe United States federal income
tax consequences and other considerations applicable to original
issue discount securities in any prospectus supplement relating
to them.
Conversion and Exchange
If you may convert or exchange debt securities for other
Securities, the prospectus supplement will explain the terms and
conditions of such conversion or exchange, including:
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the conversion price or exchange ratio (or the calculation
method); |
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the conversion or exchange period (or how such period will be
determined); |
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if conversion or exchange will be mandatory, at your option or
at our option; |
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provisions for adjustment of the conversion price or the
exchange ratio; and |
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provisions affecting conversion or exchange in the event of the
redemption of the debt securities. |
The terms may also include provisions under which the number or
amount of other Securities to be received by the holders of such
debt securities upon conversion or exchange would be calculated
according to the market price of such other Securities as of a
time stated in the prospectus supplement.
Additional Mechanics
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Form, Exchange and Transfer |
We may issue debt securities as follows:
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as Registered Securities; |
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as Bearer Securities (with interest coupons attached unless
otherwise stated in the prospectus supplement)
(Section 201); |
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as both Registered Securities and Bearer Securities; |
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in denominations that are even multiples of $1,000 for
Registered Securities and even multiples of $5,000 for Bearer
Securities (Section 302); or |
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in global form. See Book-Entry Debt Securities. |
You may have your Registered Securities separated into smaller
denominations or combined into larger denominations, as long as
the total principal amount is not changed. (Section 305)
This is called an exchange. If provided in the
prospectus supplement, you may exchange your Bearer Securities
with all unmatured coupons, except as provided below, and all
matured coupons which are in default for Registered Securities
of the same series as long as the total principal amount is not
changed. Bearer Securities surrendered in exchange for
Registered Securities between a Regular Record Date or a Special
Record Date and the relevant interest payment dates will be
surrendered without the coupon relating to such interest payment
dates. Interest will not be payable in respect of the Registered
Security issued in exchange for that Bearer Security, but will
be payable only to the holder of such coupon when due in
accordance with the terms of the applicable Indenture. Unless we
specify otherwise in the prospectus supplement, we will not
issue Bearer Securities in exchange for Registered Securities.
(Section 305)
You may transfer Registered Securities of a series and you may
exchange debt securities of a series at the office of the
Trustee. The Trustee will act as our agent for registering
Registered Securities in the names of holders and transferring
debt securities. We may designate someone else to perform this
function. Whoever maintains the list of registered holders is
called the Security Registrar. The Security
Registrar also will perform transfers. (Section 305)
You will not be required to pay a service charge to transfer or
exchange debt securities, but you may be required to pay for any
tax or other governmental charge associated with the exchange or
transfer. The transfer or exchange will be made only if the
Security Registrar is satisfied with your proof of ownership.
(Section 305)
If we designate additional transfer agents, we will name them in
the accompanying prospectus supplement. We may cancel the
designation of any particular transfer agent. We may also
approve a change in the office through which any transfer agent
acts.
If we redeem less than all of the Securities of a redeemable
series, we may block the transfer or exchange of Securities
during the period beginning 15 days before the day we mail
the notice of redemption or publish the notice (in the case of
Bearer Securities) and ending on the day of that mailing or
publication, as the case may be, in order to freeze the list of
holders to prepare the mailing. We may also decline to register
transfers or exchanges of debt securities selected for
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redemption, except that we will continue to permit transfers and
exchanges of the unredeemed portion of any debt security being
partially redeemed. (Section 305)
If the offered debt securities are redeemable, we will describe
the procedures for redemption in the accompanying prospectus
supplement.
In this Additional Mechanics section of this
prospectus, you means direct holders and not
indirect holders of debt securities.
Payment and Paying Agents
We will pay interest to you, if you are listed in the
Trustees records as the owner of your debt security at the
close of business on a particular day in advance of each due
date for interest on your debt security. Interest will be paid
to you if you are listed as the owner even if you no longer own
the debt security on the interest due date. That particular day,
usually about two weeks in advance of the interest due date, is
called the Regular Record Date and is defined in the
prospectus supplement. Persons who are listed in the
Trustees records as the owners of debt securities at the
close of business on a particular day are referred to as
holders. (Section 307) Holders buying and
selling debt securities must work out between themselves the
appropriate purchase price since we will pay all the interest
for an interest period to the holders on the Regular Record
Date. The most common manner is to adjust the sales price of the
debt securities to prorate interest fairly between buyer and
seller based on their respective ownership periods within the
particular interest period.
We will deposit interest, principal and any other money due on
the debt securities with the Paying Agent that we name in the
prospectus supplement.
If you plan to have a bank or brokerage firm hold your
securities, you should ask them for information on how you will
receive payments. (Section 305)
If we issue Bearer Securities, unless we provide otherwise in
the prospectus supplement, we will maintain an office or agency
outside the United States for the payment of all amounts due on
the Bearer Securities. If we list the debt securities on any
stock exchange located outside the United States, we will
maintain an office or agency for those debt securities in any
city located outside the United States required by that stock
exchange. (Section 1002) We will specify the initial
locations of such offices and agencies in the prospectus
supplement. Unless otherwise provided in the prospectus
supplement, we will make payment of interest on any Bearer
Securities on or before Maturity only against surrender of
coupons for such interest installments as they mature.
(Section 1001) Unless otherwise provided in the prospectus
supplement, we will not make payment with respect to any Bearer
Security at any of our offices or agencies 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, we will make
payments of principal of (and premium, if any) and interest on
Bearer Securities payable in U.S. dollars at the office of
our Paying Agent in The City of New York if (but only if)
payment of the full amount in U.S. dollars at all offices
or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions.
(Section 1002)
We may from time to time designate additional offices or
agencies, approve a change in the location of any office or
agency and, except as provided above, rescind the designation of
any office or agency. (Section 1002)
Events of Default
You will have special rights if an Event of Default occurs as to
the debt securities of your series which is not cured, as
described later in this subsection. (Section 501) Please
refer to the prospectus supplement for information about any
changes to the Events of Default or our covenants that are
described below, including any addition of a covenant or other
provision providing event risk or similar protection.
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What Is an Event of Default? The term Event of
Default as to the debt securities of your series means any
of the following:
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we do not pay the principal of (or premium, if any) on a debt
security of such series on its due date; |
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we do not pay interest on a debt security of such series within
30 days of its due date; |
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we do not make or satisfy any sinking fund payment in respect of
debt securities of such series within 30 days of its due
date; |
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we remain in breach of a covenant in respect of debt securities
of such series for 60 days after we receive a written
notice of default stating we are in breach. The notice must be
sent by either the Trustee or holders of 25% of the principal
amount of debt securities of such series; |
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we file for bankruptcy, or certain other events in bankruptcy,
insolvency or reorganization occur; or |
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there occurs any other Event of Default as to debt securities of
the series described in the prospectus supplement.
(Section 501) |
An Event of Default for a particular series of debt securities
does not necessarily constitute an Event of Default for any
other series of debt securities issued under an Indenture.
The Trustee may withhold notice to the holders of debt
securities of a particular series of any default if it considers
its withholding of notice to be in the interest of the holders
of that series, except that the Trustee may not withhold notice
if the default is in the payment of principal of (or premium, if
any), or interest on, the debt securities. (Section 601)
Remedies if an Event of Default Occurs. If an Event of
Default has occurred and we have not cured it, the Trustee or
the holders of 25% in principal amount of the debt securities of
the affected series may declare the entire principal amount of
all the debt securities of that series to be due and immediately
payable by notifying us (or the Trustee, if the holders give
notice) in writing. This is called a declaration of acceleration
of maturity. A declaration of acceleration of maturity may be
canceled by the holders of at least a majority in principal
amount of the debt securities of the affected series by
notifying us (or the Trustee, if the holders give notice) in
writing. (Section 502)
Except in cases of default, where the Trustee has some special
duties, the Trustee is not required to take any action under the
Indenture at the request of any holders unless the holders offer
the Trustee reasonable protection from expenses and liability
(called an indemnity). (Section 602 and
Trust Indenture Act Section 315) If reasonable
indemnity is provided, the holders of a majority in principal
amount of the Outstanding debt securities of the relevant series
may direct the time, method and place of conducting any lawsuit
or other formal legal action seeking any remedy available to the
Trustee. The Trustee may refuse to follow those directions in
certain circumstances. (Section 512) No delay or omission
in exercising any right or remedy will be treated as a waiver of
that right, remedy or Event of Default. (Section 511)
Before you are allowed to bypass the Trustee and bring your own
lawsuit or other formal legal action or take other steps to
enforce your rights or protect your interest relating to the
debt securities, the following must occur:
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you must give the Trustee written notice that an Event of
Default has occurred and remains uncured (Section 507); |
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the holders of 25% in principal amount of all of the debt
securities of the relevant series must make a written request
that the Trustee take action because of the default
(Section 507) and must offer reasonable indemnity to the
Trustee against the cost and other liabilities of taking that
action (Section 602); |
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the Trustee must not have instituted a proceeding for
60 days after receipt of the above notice and offer of
indemnity (Section 507); and |
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the holders of a majority in principal amount of the debt
securities must not have given the Trustee a direction
inconsistent with the above notice during such 60-day period.
(Section 507). |
However, you are entitled at any time to bring a lawsuit for the
payment of money due on your debt securities on or after the due
date. (Section 508)
Holders of a majority in principal amount of the debt securities
of the affected series may waive any past defaults other than
the following:
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the payment of principal of, any premium, interest or Additional
Amounts on any debt security or related coupon; or |
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in respect of a covenant that under Article Ten of the
applicable Indenture cannot be modified or amended without the
consent of each holder. (Section 513) |
If your securities are held for you by a bank or brokerage
firm, you should consult them for information on how to give
notice or direction to the Trustee or make a request of the
Trustee and how to make or cancel a declaration of
acceleration.
Each year, we will furnish the Trustee with a written statement
of certain of our officers certifying that, to their knowledge,
we are in compliance with the Indenture and the debt securities,
or else specifying any default. (Section 1004)
Merger, Consolidation or Sale of Assets
Under the terms of the Indentures, we are generally permitted to
consolidate or merge with another firm. We are also permitted to
sell or transfer our assets substantially as an entirety to
another firm. (Section 801) However, we may not take any of
these actions unless all of the following conditions are met:
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where we merge or consolidate out of existence or sell or
transfer our assets substantially as an entirety, the resulting
firm must agree to be legally responsible for all obligations
under the debt securities and the applicable Indenture
(Section 801); |
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the merger, consolidation or sale or transfer of assets
substantially as an entirety must not cause a default on the
debt securities. For purposes of this no-default test, a default
would include an Event of Default that has occurred and not been
cured, as described on page 10 of this prospectus under
What Is an Event of Default?
(Section 801); |
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where we merge or consolidate out of existence or sell or
transfer our assets substantially as an entirety, the resulting
firm (if a corporation) must be a corporation organized under
the laws of the United States or any state thereof or the
District of Columbia (Section 801); |
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under the Senior Indenture, we may not merge, consolidate or
sell or transfer our assets substantially as an entirety if, as
a result, any of our property or assets or any property or
assets of a Restricted Subsidiary (as defined) would become
subject to any mortgage, lien or other encumbrance unless either: |
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the mortgage, lien or other encumbrance could be created
pursuant to Section 1009 of such Indenture (see
Senior Indenture ProvisionsLimitation on
Liens on page 17) without equally and ratably
securing the Indenture Securities or |
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the Indenture Securities are secured equally and ratably with or
prior to the debt secured by the mortgage, lien or other
encumbrance (Section 803); |
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we must deliver certain certificates and documents to the
Trustee (Section 801); and |
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we must satisfy any other requirements specified in the
prospectus supplement. |
Modification or Waiver
There are three types of changes that we can make to the
Indentures and the debt securities.
Changes Requiring Your Approval. First, there are
changes that cannot be made to your debt securities without your
specific approval. (Section 902) Following is a list of
those types of changes:
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a change of the Stated Maturity of the principal of or interest
on a debt security; |
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a reduction of any amounts due on a debt security; |
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a reduction of the amount of principal payable upon acceleration
of the Maturity of a Security following a default; |
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an adverse effect on any right of repayment at your option; |
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a change of the place (except as otherwise described in this
prospectus) or Currency of payment on a debt security; |
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impairment of your right to sue for payment; |
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with respect to debt securities issued under the Subordinated
Indenture, an adverse effect on the right to convert any debt
securities as provided in Article 15 of the Subordinated
Indenture; |
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a modification of the subordination provisions in the
Subordinated Indenture in a manner that is adverse to you as a
holder of the Subordinated Securities; |
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a reduction of the percentage of holders of debt securities
whose consent is needed to modify or amend the Indenture; |
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a reduction of the percentage of holders of debt securities
whose consent is needed to waive compliance with certain
provisions of the Indenture or to waive certain defaults; |
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a modification of any other aspect of the provisions of the
Indenture dealing with modification and waiver of past defaults
(Section 513), the quorum or voting requirements of the
debt securities (Section 1504 of the Senior Indenture and
Section 1704 of the Subordinated Indenture) or provisions
relating to the waiver of certain covenants (Section 1011
of the Senior Indenture and Section 1008 of the
Subordinated Indenture), except to increase any percentage of
consents required to amend an Indenture or for any waiver or to
add certain provisions that cannot be modified without the
approval of each holder under Section 902; or |
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a change of any of our obligations to pay Additional Amounts. |
Changes Requiring a Majority Vote. The second type
of change to the Indenture and the outstanding debt securities
is the kind that requires a vote in favor by holders of
Outstanding debt securities owning a majority of the principal
amount of the particular series affected. Most changes fall into
this category, except for clarifying changes and certain other
changes that would not adversely affect holders of the
Outstanding debt securities in any material respect. The same
vote would be required for us to obtain a waiver of all or part
of certain covenants in the applicable Indenture
(Section 1011 of the Senior Indenture and Section 1008
of the Subordinated Indenture) or a waiver of a past default.
However, we cannot obtain a waiver of a payment default or any
other aspect of the Indentures or the Outstanding debt
securities listed in the first category described above under
Changes Requiring Your Approval unless we
obtain your individual consent to the waiver. (Section 902)
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Changes Not Requiring Approval. The third type of
change does not require any vote by you as holders of
Outstanding debt securities. This type is limited to
clarifications and certain other changes that would not
adversely affect holders of the Outstanding debt securities in
any material respect. (Section 901)
Further Details Concerning Voting. When taking a
vote, we will use the following rules to decide how much
principal amount to attribute to a debt security:
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for original issue discount securities, we will use the
principal amount that would be due and payable on the voting
date if the Maturity of the debt securities were accelerated to
that date because of a default; |
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for debt securities whose principal amount is not known (for
example, because it is based on an index), we will use a special
rule for that debt security described in the prospectus
supplement; and |
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for debt securities denominated in one or more foreign
Currencies or Currency units, we will use the U.S. dollar
equivalent. |
Debt securities will not be considered Outstanding, and
therefore not eligible to vote, if we have deposited or set
aside in trust for you money for their payment or redemption.
Debt securities will also not be eligible to vote if they have
been fully defeased as described later under Defeasance
and Covenant Defeasance. (Section 101)
We will generally be entitled to set any day as a record date
for the purpose of determining the holders of debt securities
that are entitled to vote or take other action under the
applicable Indenture. If we set a record date for a vote or
other action to be taken by holders of a particular series, that
vote or action may be taken only by persons who are holders of
debt securities of that series on the record date.
(Section 104)
If your securities are held by a bank or brokerage firm, you
should consult them for information on how approval may be
granted or denied if we seek to change the applicable Indenture
or the debt securities or request a waiver.
Each Indenture contains provisions for convening meetings of the
holders of debt securities issued as Bearer Securities.
(Section 1501 of the Senior Indenture and Section 1701
of the Subordinated Indenture) A meeting may be called at any
time by the applicable Trustee, and also, upon request, by us or
by the holders of at least 10% in principal amount of the
Outstanding debt securities of that series, upon notice given as
provided in the applicable Indenture. (Section 1502 of the
Senior Indenture and Section 1702 of the Subordinated
Indenture)
Except for any consent that must be given by the holder of each
debt security affected thereby, as described above, the holders
of a majority in principal amount of the Outstanding debt
securities of a series may adopt any resolution presented at a
meeting at which a quorum is present. However, any resolution
with respect to any action which the Indenture expressly
provides may be taken by a specified percentage less than a
majority in principal amount of the Outstanding debt securities
of a series may be adopted at a meeting at which a quorum is
present by vote of that specified percentage. Any resolution
passed or decision taken at any meeting of holders of debt
securities of a series in accordance with the applicable
Indenture will be binding on all holders of debt securities of
that series and any related coupons. The quorum at any meeting
called to adopt a resolution will be persons holding or
representing a majority in principal amount of the Outstanding
debt securities of a series, except that if any action is to be
taken at such meeting which may be given by the holders of not
less than a specified percentage in principal amount of the
Outstanding debt securities of a series, the persons holding or
representing such specified percentage in principal amount of
the Outstanding debt securities of that series will constitute a
quorum. (Section 1504 of the Senior Indenture and
Section 1704 of the Subordinated Indenture)
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Notwithstanding the above, if any action is to be taken at a
meeting of holders of debt securities of a series that the
applicable Indenture expressly provides may be taken by the
holders of a specified percentage in principal amount of all
Outstanding debt securities affected thereby or of the holders
of such series and one or more additional series:
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there will be no minimum quorum requirement for that meeting; and |
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the principal amount of the Outstanding debt securities of that
series that vote in favor of such action will be taken into
account in determining whether that action has been taken under
such Indenture. (Section 1504 of the Senior Indenture and
Section 1704 of the Subordinated Indenture) |
Defeasance and Covenant Defeasance
The following discussion of defeasance and covenant defeasance
will be applicable to your series of debt securities only if we
choose to have them apply to that series. If we do so choose, we
will specify the choice in the prospectus supplement.
(Section 1401)
Defeasance. If there is a change in U.S. federal tax
law, as described below, we can legally release ourselves from
all payment and other obligations on the debt securities (called
defeasance) if we put in place the following other
arrangements for you to be repaid:
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We must deposit in trust for your benefit and the benefit of all
other direct holders of the debt securities a combination of
money and U.S. government or U.S. government agency
obligations that will generate enough cash to make interest,
principal and any other payments on the debt securities on their
various due dates. |
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We must deliver to the Trustee a legal opinion confirming that
there has been a change in current U.S. federal tax law or
an IRS ruling that lets us make the above deposit without
causing you to be taxed on the debt securities any differently
than if we did not make the deposit and just repaid the debt
securities ourselves. (Sections 1402 and 1404) Under
current U.S. federal tax law, the deposit and our legal
release from the debt securities would be treated as though we
paid you your share of the cash and notes or bonds at the time
the cash and notes or bonds are deposited in trust in exchange
for your debt securities, and you would recognize gain or loss
on the debt securities at the time of the deposit. |
If we ever accomplish defeasance, as described above, you would
have to rely solely on the trust deposit for repayment of the
debt securities. You could not look to us for repayment in the
event of any shortfall. Conversely, the trust deposit would most
likely be protected from claims of our lenders and other
creditors if we ever become bankrupt or insolvent. You would
also be released from the subordination provisions on the
subordinated debt securities described later under
Subordination on page 18 of this prospectus. If
we accomplish a defeasance, we would retain only the obligations
to register the transfer or exchange of the debt securities, to
maintain an office or agency in respect of the debt securities
and to hold monies for payment in trust.
Covenant Defeasance. Under current U.S. federal tax
law, we can make the same type of deposit described above and be
released from some of the restrictive covenants in the
Indentures. These covenants relate to Limitation on
Liens and Limitation on Sale and Leaseback
Transactions described in Sections 1009 and 1010,
respectively, of the Senior Indenture and are summarized
beginning on page 16 of this prospectus. We can also be
released from any other covenant in the Indentures which may be
specified in the prospectus supplement if we make the same type
of deposit described above. This is called covenant
defeasance. In that event, you would lose the protection
of those covenants but would gain the protection of having money
and debt securities set aside in trust to repay the debt
securities. You also would be released from the
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subordination provisions on the subordinated securities
described under Subordination on page 18 of
this prospectus. In order to achieve covenant defeasance, we
must do the following:
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deposit in trust for your benefit and the benefit of all other
direct holders of the debt securities a combination of money and
U.S. government or U.S. government agency obligations
that will generate enough cash to make interest, principal and
any other payments on the debt securities on their various due
dates; and |
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deliver to the Trustee a legal opinion of our counsel confirming
that, under current U.S. federal income tax law, we may
make the above deposit without causing you to be taxed on the
debt securities any differently than if we did not make the
deposit and just repaid the debt securities ourselves. |
If we accomplish covenant defeasance, you can still look to us
for repayment of the debt securities if there were a shortfall
in the trust deposit or the Trustee were prevented from making
payment. In fact, if one of the remaining Events of Default
occurred, such as our bankruptcy, and the debt securities become
immediately due and payable, there may be such a shortfall.
Depending on the event causing the default, you may not be able
to obtain payment of the shortfall.
Book-Entry Debt Securities
We may issue debt securities of a series in whole or in part in
global form that we will deposit with, or on behalf of, a
depositary that we identify in a prospectus supplement. Global
securities may be issued in either registered or bearer form and
in either temporary or permanent form (each, a Global
Security). Global Securities will be registered in the
name of a financial institution we select, and the debt
securities included in the Global Securities may not be
transferred to the name of any other direct holder unless the
special circumstances described below occur. The financial
institution that acts as the sole direct holder of the Global
Security is called the Depositary. Any person
wishing to own a debt security must do so indirectly by virtue
of an account with a broker, bank or other financial institution
that, in turn, has an account with the Depositary.
Special Investor Considerations for Global Securities.
Our obligations, as well as the obligations of the Trustee and
those of any third parties employed by us or the Trustee, run
only to Persons who are registered as holders of debt
securities. For example, once we make payment to the registered
holder, we have no further responsibility for the payment even
if that holder is legally required to pass the payment along to
you but does not do so. As an indirect holder, your rights
relating to a Global Security will be governed by the account
rules of your financial institution and of the Depositary, as
well as general laws relating to debt securities transfers.
You should be aware that when we issue debt securities in the
form of Global Securities:
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you cannot get debt securities registered in your own name; |
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you cannot receive physical certificates for your interest in
the debt securities; |
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you must look to your own bank or brokerage firm for payments on
the debt securities and protection of your legal rights relating
to the debt securities; |
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you may not be able to sell interests in the debt securities to
some insurance companies and other institutions that are
required by law to hold the physical certificates of debt
securities that they own; |
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the Depositarys policies will govern payments, transfers,
exchanges and other matters relating to your interest in the
Global Security. We and the Trustee have no responsibility for
any aspect of the Depositarys actions or for its records
of ownership interests in the Global Security. We and the
Trustee also do not supervise the Depositary in any way; and |
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the Depositary will usually require that interests in a Global
Security be purchased or sold within its system using same-day
funds. |
Special Situations When Global Security Will Be
Terminated. In a few special situations described below, a
Global Security will terminate and interests in it will be
exchanged for physical certificates representing debt
securities. After that exchange, the choice of whether to hold
debt securities directly or indirectly through an account at
your bank or brokerage firm will be up to you. You must consult
your own bank or broker to find out how to have interests in
debt securities transferred to your own name, so that you will
hold them directly.
The special situations for termination of a Global Security are:
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when the Depositary notifies us that it is unwilling, unable or
no longer qualified to continue as Depositary (unless a
replacement Depositary is named); when an Event of Default on
the debt securities has occurred and has not been cured; and |
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when and if we decide to terminate a Global Security, subject to
the procedures of the Depositary. |
The prospectus supplement may list situations for terminating a
Global Security that would apply only to the particular series
of debt securities covered by the prospectus supplement. When a
Global Security terminates, the Depositary (and neither we nor
the Trustee) is responsible for deciding the names of the
institutions that will be the initial direct holders.
(Section 302) Unless otherwise provided in the prospectus
supplement, debt securities that are represented by a Global
Security will be issued in denominations of $1,000 and any
integral multiple thereof and will be issued in registered form
only, without coupons.
Resignation of Trustee
Each Trustee may resign or be removed with respect to one or
more series of Indenture Securities, and a successor Trustee may
be appointed to act with respect to such series.
(Section 608) In the event that two or more persons are
acting as Trustee with respect to different series of Indenture
Securities under one of the Indentures, each such Trustee will
be a Trustee of a trust separate and apart from the trust
administered by any other such Trustee (Section 609), and
any action described herein to be taken by the
Trustee may then be taken by each such Trustee with
respect to, and only with respect to, the one or more series of
Indenture Securities for which it is Trustee.
Senior Indenture Provisions
Limitation on Sale and Leaseback Transactions
Under the terms of the Senior Indenture, we will not, and will
not permit any Restricted Subsidiary (as defined) to, sell or
transfer any manufacturing plant owned by us or any Restricted
Subsidiary with the intention of taking back a lease on such
property unless:
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the sale or transfer of property is made within 120 days
after the later of the date of |
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the acquisition of such property, |
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the completion of construction of such property, or |
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the commencement of full operation thereof; |
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such lease has a term, including permitted extensions and
renewals, of not more than three years, and it is intended that
the use by us or the Restricted Subsidiary of the manufacturing
plant covered by such lease will be discontinued on or before
the expiration of such term; |
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the amount that we realize from such sale or transfer, together
with the value (as defined) of then outstanding Sale and
Leaseback Transactions not otherwise permitted by the Senior
Indenture and the outstanding aggregate principal amount of
mortgage, pledge or lien indebtedness not otherwise permitted by
the Senior Indenture, will not exceed 10% of our Consolidated
Net Tangible Assets (as defined); or |
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we cause an amount equal to the value (as defined) of the
manufacturing plant to be sold or transferred and leased to be
applied to the retirement (other than any mandatory retirement)
within 120 days of the effective date of such Sale and
Leaseback Transaction of either the Indenture Securities or
other funded indebtedness which is equal in rank to the
Indenture Securities, or both. (Section 1010 of the Senior
Indenture) |
These provisions are intended to preserve our assets and to
limit our ability to incur leases which effectively constitute
indebtedness.
Limitation on Liens
Under the terms of the Senior Indenture, with certain
exceptions, we will not, directly or indirectly, and we will not
permit any Restricted Subsidiary to, create or assume any
mortgage, pledge or other lien of or upon any of our or their
assets unless all of the outstanding Indenture Securities of
each series are secured by such mortgage, pledge or lien equally
and ratably with any and all other obligations and indebtedness
thereby secured for so long as any such other obligations and
indebtedness will be so secured. Among the exceptions are:
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the creation of any mortgage or other lien on any of our
property or property of any Restricted Subsidiary to secure
indebtedness incurred prior to, at the time of, or within
120 days after the later of, the acquisition, the
completion of construction or the commencement of full operation
of such property; and |
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mortgages or liens on any property that we or any Restricted
Subsidiary acquire after the date of the Senior Indenture
existing at the time of such acquisition; provided that we incur
the secured indebtedness for the purpose of financing all or any
part of the acquisition or construction of any such property. |
In addition, we or any Restricted Subsidiary may create or
assume any mortgage, pledge or other lien not otherwise
permitted by the Senior Indenture for the purpose of securing
indebtedness or other obligations so long as the aggregate of
all such indebtedness and other obligations then outstanding,
together with the value of all outstanding Sale and Leaseback
Transactions not otherwise permitted, will not exceed 10% of
Consolidated Net Tangible Assets. (Section 1009 of the
Senior Indenture)
Definitions
The Senior Indenture defines the term Consolidated Net
Tangible Assets as our total assets and those of our
consolidated subsidiaries, including the investment in (at
equity) and the net amount of advances to and accounts
receivable from corporations which are not consolidated
subsidiaries, less the following:
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our current liabilities and those of our consolidated
subsidiaries, including an amount equal to indebtedness required
to be redeemed by reason of any sinking fund payment due in
12 months or less from the date as of which current
liabilities are to be determined; |
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all of our other liabilities and those of our consolidated
subsidiaries other than Funded Debt (as defined), deferred
income taxes and liabilities for employee post-retirement health
plans recognized in accordance with Statement of Financial
Accounting Standards No. 106; |
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all of our and our consolidated subsidiaries depreciation
and valuation reserves and all other reserves (except for
reserves for contingencies which have not been allocated to any
particular purpose); |
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the book amount of all our and our consolidated
subsidiaries segregated intangible assets, including, but
without limitation, such items as goodwill, trademarks, trade
names, patents and unamortized debt discount and expense, less
unamortized debt premium; and |
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appropriate adjustments on account of minority interests of
other persons holding stock in subsidiaries. |
Consolidated Net Tangible Assets is to be determined on a
consolidated basis in accordance with generally accepted
accounting principles and as provided in the Senior Indenture.
(Section 101 of the Senior Indenture)
The Senior Indenture defines the term Restricted
Subsidiary as any of our subsidiaries except:
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any subsidiary substantially all the assets of which are
located, or substantially all of the business of which is
carried on, outside of the United States and Canada, or any
subsidiary substantially all the assets of which consist of
stock or other securities of such a subsidiary; |
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any subsidiary principally engaged in the business of financing
notes and accounts receivable and any subsidiary substantially
all the assets of which consist of the stock or other securities
of such subsidiary; or |
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any subsidiary acquired or organized after the date of the
Indenture, unless our Board of Directors has designated it as a
Restricted Subsidiary and such designation will not result in
the breach of any covenant or agreement in the Senior Indenture.
(Section 101 of the Senior Indenture) |
The Senior Indenture defines the term Funded Debt as
indebtedness for borrowed money owed or guaranteed by us or any
of our consolidated subsidiaries, and any other indebtedness
which under generally accepted accounting principles would
appear as debt on the balance sheet of such corporation, which
matures by its terms more than twelve months from the date as of
which Funded Debt is to be determined or is extendible or
renewable at the option of the obligor to a date more than
twelve months from the date as of which Funded Debt is to be
determined. (Section 101 of the Senior Indenture)
For purposes of Limitation on Liens and Limitation on Sale and
Leaseback Transactions, the Senior Indenture defines the term
value with respect to a manufacturing plant as the
amount equal to the greater of:
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the net proceeds of the sale or transfer of such manufacturing
plant; or |
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the fair value of such manufacturing plant at the time of
entering into such Sale and Leaseback Transaction, as determined
by our Board of Directors. |
This amount is divided first by the number of full years of the
term of the lease and then multiplied by the number of full
years of such term remaining at the time of determination,
without regard to renewal or extension options contained in such
lease. (Section 1010 of the Senior Indenture)
Subordinated Indenture Provisions
Subordination
Article 16 of the Subordinated Indenture provides that the
payment of principal of (and premium, if any), and interest on,
subordinated securities will be subordinated in right of payment
to the prior
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payment in full of Senior Indebtedness. We may make no payment
with respect to subordinated securities while a default exists
with respect to our Senior Indebtedness.
The Subordinated Indenture defines Senior
Indebtedness as:
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indebtedness of our company, whether outstanding on the date of
the Subordinated Indenture or thereafter created, incurred,
assumed or guaranteed for money borrowed from banks or other
lending institutions and any other indebtedness or obligations
of our company evidenced by a bond, debenture, note or other
similar instrument, including without limitation, overdrafts,
letters of credit issued for our account and commercial paper; |
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any other indebtedness that constitutes purchase money
indebtedness for payment of which we are directly or
contingently liable (excluding trade accounts payable); |
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any direct or contingent indebtedness or obligation represented
by guarantees or instruments having a similar effect that we
enter into (whether prior to the date of the Subordinated
Indenture or thereafter) with reference to lease or purchase
money obligations of a subsidiary or affiliate of our company or
any other corporation in which we hold or have an option to
purchase 50% or more of the outstanding capital
stock; and |
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renewals, extensions and refundings of any indebtedness
described in the three bullet points above, unless in any case
the terms of the instrument creating or evidencing such
indebtedness provide that the indebtedness is on a parity with
or is junior to the Subordinated Indebtedness. |
Any indebtedness that becomes indebtedness of our company by
operation of merger, consolidation or other acquisition will
constitute Senior Indebtedness if that indebtedness would have
been Senior Indebtedness had it been issued by us. By reason of
this subordination, in the event that we become insolvent,
holders of our Senior Indebtedness may receive more, ratably,
and holders of Subordinated Indebtedness may receive less,
ratably, than our other creditors. The Subordinated Indenture
does not limit our ability to issue Senior Indebtedness.
If this prospectus is being delivered in connection with a
series of subordinated debt, the accompanying prospectus
supplement or the information incorporated by reference will set
forth the approximate amount of Senior Indebtedness outstanding
as of a recent date.
The Trustees Under the Indentures
JPMorgan Chase Bank, N.A. is the Trustee under the Senior
Indenture. We may appoint JPMorgan Chase Bank, N.A. as trustee
under the Subordinated Indenture. JPMorgan Chase Bank, N.A. is
among the banks with which we maintain ordinary banking
relationships. JPMorgan Chase Bank, N.A. also serves as trustee
under other indentures under which our 5.25% Notes due 2035
(5.25% Notes), 5.45% Senior Debentures due
2034 (5.45% Debentures), 7.65% Debentures
due 2029 (7.65% Debentures),
7.875% Debentures due 2026
(7.875% Debentures),
61/2% Debentures
due 2025
(61/2% Debentures),
75/8% Debentures
due 2024
(75/8% Debentures),
4.65% Notes due 2015 (4.65% Notes),
5.75% Notes due 2012 (5.75% Notes), and
8% Debentures due 2006 (8% Debentures) are
outstanding.
In the event that a default occurs under either Indenture or
under the indentures which govern the 5.25% Notes, the
5.45% Debentures, the 7.65% Debentures, the
7.875% Debentures, the
61/2% Debentures,
the
75/8% Debentures,
the 4.65% Notes, the 5.75% Notes, or the
8% Debentures at a time when Indenture Securities are
outstanding under the Subordinated Indenture, unless the default
is cured or waived within 90 days, the provisions of the
Trust Indenture Act require that, if JPMorgan Chase Bank, N.A.
is Subordinated Trustee, it must resign as Trustee under either
the Subordinated Indenture or each of the Senior Indenture, the
5.25% Notes indenture, the
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5.45% Debentures indenture, the 7.65% Debentures
indenture, the
61/2% Debentures
indenture, the
75/8% Debentures
indenture, the 4.65% Notes indenture, the 5.75% Notes
indenture and the 8% Debentures indenture. In such
circumstance, we expect that JPMorgan Chase Bank, N.A. would
resign as Trustee under the Subordinated Indenture.
Foreign Currency RisksFluctuations and Controls
Debt securities denominated or payable in foreign currencies may
entail significant risks. For example, the value of the
currencies, in comparison to U.S. dollars, may decline, or
foreign governments may impose or modify controls regarding the
payment of foreign currency obligations. These events may cause
the value of debt securities denominated or payable in those
foreign currencies to fall substantially. These risks will vary
depending upon the foreign currency or currencies involved and
will be more fully described in the applicable prospectus
supplement.
DESCRIPTION OF DEBT WARRANTS
We may issue, either together with other debt securities or
preferred shares or separately, debt warrants to purchase
underlying debt securities. We will issue debt warrants, if any,
under warrant agreements (each, a debt warrant
agreement) that would be between us and a bank or trust
company, as warrant agent (the debt warrant agent),
that we will describe in a prospectus supplement. The form of
the debt warrant agreement is contained in a registration
statement that we have filed with the SEC. See Where You
Can Find More Information on page 2 of this
prospectus for information on how to obtain a copy of the debt
warrant agreement. The following is a summary of the material
terms of the debt warrant agreement. This summary is not
complete and is qualified in its entirety by reference to all
the provisions of the debt warrant agreement and the
accompanying debt warrant certificates, including the
definitions therein of certain terms.
General
You should read the prospectus supplement for the terms of the
offered debt warrants, including the following:
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the initial offering price; |
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the title and aggregate number of such debt warrants; |
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the designation, aggregate principal amount and other terms of
the senior securities purchasable upon exercise of the debt
warrants; |
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if applicable, the designation and terms of the debt securities
or preferred shares with which the debt warrants are issued and
the number of debt warrants issued with each debt security or
preferred share; |
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if applicable, the date on and after which the debt warrants and
the related debt securities or preferred shares will be
separately transferable; |
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the principal amount of senior securities purchasable upon
exercise of one debt warrant and the price at which such
principal amount of senior securities may be purchased upon such
exercise; |
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the date on which the right to exercise the debt warrants will
commence and the date on which such right will expire; |
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if applicable, a discussion of U.S. federal income tax
consequences applicable to the exercise of the debt warrants and
to the senior securities purchasable upon the exercise of the
debt warrants; |
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the identity of the debt warrant agent; |
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whether the debt warrants represented by the debt warrant
certificates will be issued in registered or bearer form, and,
if registered, where they may be transferred or
registered; and |
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any other terms of the debt warrants. |
Debt warrant certificates may be exchanged for new debt warrant
certificates of different denominations and, if in registered
form, may be presented for registration of transfer, and may be
exercised at the corporate trust office of the debt warrant
agent or any other office indicated in the prospectus supplement
relating thereto. (Section 3.01 of the debt warrant
agreement)
Exercise of Debt Warrants
Each offered debt warrant will entitle the holder thereof to
purchase such amount of underlying debt securities at the
exercise price set forth in, or calculable from, the prospectus
supplement relating to such offered debt warrants. After the
close of business on the expiration date, unexercised debt
warrants will become void.
You may exercise debt warrants by payment to the debt warrant
agent of the applicable exercise price and by delivery to the
debt warrant agent of the related debt warrant certificate,
properly completed. Debt warrants will be deemed to have been
exercised upon receipt of the exercise price, subject to the
receipt by the debt warrant agent, within five business days
thereafter, of the debt warrant certificate or certificates
evidencing the debt warrants. Upon receipt of such payment and
the properly completed debt warrant certificates at the
corporate trust office of the debt warrant agent or any other
office indicated in the prospectus supplement, we will, as soon
as practicable, deliver the amount of the underlying debt
securities purchased upon such exercise. If fewer than all of
the debt warrants represented by any debt warrant certificate
are exercised, a new debt warrant certificate will be issued for
the unexercised debt warrants. If you hold a debt warrant, you
must pay any tax or other governmental charge that may be
imposed in connection with any transfer involved in the issuance
of underlying debt securities purchased upon such exercise.
Modifications
There are three types of changes we can make to the debt warrant
agreement and the offered debt warrants.
Changes Requiring Your Approval. First, there are changes
that cannot be made to your debt warrants without your specific
approval. Those types of changes include modifications and
amendments that:
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accelerate the expiration date; |
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increase the exercise price; |
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reduce the number of outstanding debt warrants, the consent of
the holders of which is required for any such modification or
amendment; or |
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otherwise materially and adversely affect the rights of the
holders of the debt warrants. |
Changes Requiring a Majority Vote. The second type of
change to the debt warrant agreement and the offered debt
warrants is the kind that requires a vote in favor by holders of
debt warrants owning a majority of the principal amount of the
particular series affected. Most changes fall into this category.
Changes Not Requiring Approval. The third type of change
does not require any vote by holders of debt warrants. This type
of change is limited to clarifications and other changes that
would not adversely affect holders of the debt warrants.
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No Rights as Holders of Underlying Debt Securities
Before you exercise the warrants, you are not entitled to
payments of principal of (or premium, if any), or interest on,
the related underlying debt securities or to exercise any other
rights whatsoever as a holder of the underlying debt securities.
DESCRIPTION OF PREFERRED SHARES
The following description sets forth the general terms and
provisions of the preferred shares. If we offer preferred
shares, we will describe the specific designation and rights in
a prospectus supplement, and we will file a description with the
SEC.
General
Our Board of Directors is authorized without further shareholder
action to issue one or more series of up to 14,106,394 preferred
shares. The Board of Directors can also determine the number of
shares, dividend rates, dividend payment dates and dates from
which dividends will be cumulative, redemption rights or prices,
sinking fund provisions, liquidation prices, conversion rights
and restrictions on the issuance of shares of the same series or
any other class or series. As of the date of this prospectus, no
preferred shares are issued or outstanding.
The preferred shares will have the dividend, liquidation,
redemption, voting rights and conversion rights set forth below
unless otherwise provided in the prospectus supplement relating
to a particular series of offered preferred shares.
We will set forth the following terms of the offered preferred
shares in the prospectus supplement:
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the title and stated value of the offered preferred shares, the
liquidation preference per share and the number of shares
offered; |
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the price at which we will issue the offered preferred shares; |
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the dividend rates and dates on which dividends will be payable,
as well as the dates from which dividends will commence to
cumulate or the method(s) of calculation thereof; |
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the period or periods within which, the price or prices at
which, and the terms and conditions upon which the offered
preferred shares may be redeemed, in whole or in part, at our
option, if we are to have that option; |
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our obligation, if any, to redeem or purchase the offered
preferred shares pursuant to any sinking fund or analogous
provisions or at the option of a holder thereof, and the period
or periods within which, the price or prices at which, and the
terms and conditions upon which the offered preferred shares
will be redeemed or purchased in whole or in part pursuant to
such obligation; |
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any rights on the part of the holder to convert the offered
preferred shares into our common shares; |
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any additional dividend, liquidation, redemption, sinking fund,
voting and other rights, preferences, privileges, limitations
and restrictions; |
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the terms of any debt warrants that we will offer together with
or separately from the offered preferred shares; |
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the national securities exchanges, if any, upon which the
offered preferred shares will be listed; |
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the procedures for any auction or remarketing, if any, of the
offered preferred shares; and |
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any other terms of the offered preferred shares. |
The preferred shares will be fully paid and nonassessable, and
for each share issued, a sum equal to the stated value will be
credited to our preferred stock account.
We are subject to certain provisions of Ohio law, each of which
may have the effect of delaying, deferring or preventing a
change in control of our company. See Description of
Common Shares Certain Ohio Statutes.
Dividends
As a holder of offered preferred shares, you will be entitled to
receive cash dividends, when and as declared by the Board of
Directors out of our assets legally available for payment, at
such rate and on such quarterly dates as will be set forth in
the applicable prospectus supplement. Each dividend will be
payable to holders of record as they appear on our stock books
on the record dates fixed by the Board of Directors. Dividends
will be cumulative from and after the date set forth in the
applicable prospectus supplement.
If we have not paid or declared and set apart for payment full
cumulative dividends on any preferred shares for any dividend
period or we are in default with respect to the redemption of
preferred shares or any sinking fund for any preferred shares,
we may not do the following:
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declare any dividends (except a dividend payable in shares
ranking senior to the preferred shares) on, or make any
distribution (except as aforesaid) on, the common shares or any
of our other shares; or |
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make any payment on account of the purchase, redemption or other
retirement of our common shares or any of our other shares
except out of the proceeds of the sale of common shares or any
other shares ranking junior to the preferred shares. |
If dividends on preferred shares are in arrears, and there will
be outstanding shares of any other series of preferred shares
ranking on a parity as to dividends with the preferred shares,
we, in making any dividend payment on account of such arrears,
are required to make payments ratably upon all outstanding
preferred shares and such other series of preferred shares in
proportion to the respective amounts of dividends in arrears on
such preferred shares and shares of such other series.
Liquidation Rights
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of our company, the holders of the
offered preferred shares will be entitled to receive liquidating
distributions in the amount set forth in the applicable
prospectus supplement plus all accrued and unpaid dividends.
This distribution will be made out of our assets available for
distribution to shareholders and will be made before any
distribution is made to holders of our common shares. If, upon
any voluntary or involuntary liquidation, dissolution or winding
up of our company, the amounts payable with respect to the
preferred shares and any of our other shares ranking on a parity
with the preferred shares are not paid in full, the holders of
those shares will share ratably in any such distribution of our
assets in proportion to the full respective preferential amounts
to which they are entitled. After payment of the full amount of
the liquidating distribution to which they are entitled, the
holders of preferred shares will not be entitled to any further
participation in any distribution of our assets. A consolidation
or merger of our company with or into any other corporation or
corporations or a sale of all or substantially all of our assets
will not be deemed to be a liquidation, dissolution or winding
up of our company.
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Redemption
The offered preferred shares will be redeemable in whole or in
part at our option, at the times and at the redemption prices
that we set forth in the applicable prospectus supplement.
We may not redeem less than all the outstanding shares of any
series of preferred shares unless full cumulative dividends have
been paid or declared and set apart for payment upon all
outstanding shares of such series of preferred shares for all
past dividend periods. In addition, all of our matured
obligations with respect to all sinking funds, retirement funds
or purchase funds for all series of preferred shares then
outstanding must have been met.
Voting Rights
The holders of the offered preferred shares are entitled to one
vote per share on all matters presented to our shareholders.
If the equivalent of six quarterly dividends payable on any
series of preferred shares are in default, whether or not
declared or consecutive, the holders of all outstanding series
of preferred shares, voting as a single class without regard to
series, will be entitled to elect two directors until all
dividends in default have been paid or declared and set apart
for payment. The holders of preferred shares will not have or
exercise such special class voting rights except at meetings of
the shareholders for the election of directors at which the
holders of not less than a majority of the outstanding preferred
shares of all series are present in person or by proxy.
The affirmative vote of the holders of at least two-thirds of
the outstanding preferred shares, voting as a single class
without regard to series, will be required for any amendment of
our Amended Articles of Incorporation or Amended Regulations
that will adversely affect the preferences, rights or voting
powers of the preferred shares. If not all series of preferred
shares would be affected as to their preferences, rights or
voting powers, only the consent of holders of at least
two-thirds of the shares of each series that would be affected,
voting separately as a class, will be required. A two-thirds
vote is also required to issue any class of stock that will have
preference as to dividends or distribution of assets over any
outstanding series of preferred shares.
The affirmative vote of the holders of a majority of the
outstanding preferred shares will be necessary to increase the
authorized number of preferred shares or to authorize any shares
ranking on a parity with the preferred shares. The Regulations
may be amended to increase the number of directors, without the
vote of the holders of outstanding preferred shares.
Conversion Rights
We will state in the prospectus supplement for any series of
offered preferred shares whether shares in that series are
convertible into common shares. Unless otherwise provided in the
applicable prospectus supplement, if a series of preferred
shares is convertible into common shares, holders of convertible
preferred shares of that series will have the right, at their
option and at any time, to convert any of those convertible
preferred shares in accordance with their terms. However, if
that series of convertible preferred shares is called for
redemption, the conversion rights pertaining to such series will
terminate at the close of business on the date before the
redemption date.
Unless we specify otherwise in the applicable prospectus
supplement, the conversion rate is subject to adjustment in
certain events, including the following:
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the issuance of common shares or capital shares of any other
class as a dividend or distribution on the common shares; |
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subdivisions and combinations of the common shares; |
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the issuance of certain rights or warrants to all holders of
common shares entitling those holders to subscribe for or
purchase common shares, or securities convertible into |
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common shares, within the period specified in the prospectus
supplement at less than the current market price as defined in
the Certificate of Designations for such series of convertible
preferred shares; and |
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the distribution of evidences of indebtedness or assets or
rights or warrants to all holders of common shares (excluding
cash dividends, distributions, rights or warrants, referred to
above). |
No adjustments in the conversion rate will be made as a result
of regular quarterly or other periodic or recurrent cash
dividends or distributions or for cash dividends or
distributions to the extent paid from retained earnings. No
adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the
conversion price then in effect or a period of three years will
have elapsed from the date of occurrence of any event requiring
any such adjustment; provided that any adjustment that would
otherwise be required to be made will be carried forward and
taken into account in any subsequent adjustment. We reserve the
right to make such increases in the conversion rate in addition
to those required in the foregoing provisions as we, in our
discretion, determine to be advisable in order that certain
stock-related distributions or subdivisions of the common shares
hereafter made by us to our shareholders will not be taxable.
Except as stated above, the conversion rate will not be adjusted
for the issuance of common shares or any securities convertible
into or exchangeable for common shares, or securities carrying
the right to purchase any of the foregoing.
In the case of:
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any reclassification or change of the common shares, |
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a consolidation or merger involving our company, or |
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a sale or conveyance to another corporation of the property and
assets of our company as an entirety or substantially as an
entirety, |
as a result of which holders of common shares will be entitled
to receive stock, securities, or other property or assets,
including cash, with respect to or in exchange for such common
shares, the holders of the convertible preferred shares then
outstanding will be entitled thereafter to convert those
convertible preferred shares into the kind and amount of shares
and other securities or property which they would have received
upon such reclassification, change, consolidation, merger,
combination, sale or conveyance had those convertible preferred
shares been converted into common shares immediately prior to
the reclassification, change, consolidation, merger,
combination, sale or conveyance.
In the event of a taxable distribution to holders of common
shares or other transaction which results in any adjustment of
the conversion rate, the holders of convertible preferred shares
may, in certain circumstances, be deemed to have received a
distribution subject to United States federal income tax as a
dividend; in certain other circumstances, the absence of such an
adjustment may result in a taxable dividend to the holders of
common shares or the convertible preferred shares.
DESCRIPTION OF COMMON SHARES
The following is a summary of the material provisions concerning
the common shares contained in our Amended Articles of
Incorporation (Articles) and our Amended Regulations
(Regulations), as affected by debt agreements.
Reference is made to such Articles and Regulations, which we
have filed with the SEC. See Where You Can Find More
Information on page 2 of this prospectus for
information on how to obtain a copy of the Articles and
Regulations. Our common shares are listed on the New York Stock
Exchange, the Chicago Stock Exchange, and the Pacific Exchange.
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Authorized Number
The Articles authorize the issuance of up to 300,000,000 common
shares. Common shares issued and outstanding totaled 148,106,000
on October 31, 2005. The outstanding common shares are
fully paid and non-assessable, and shareholders are not subject
to any liability for calls and assessments. The Articles also
authorize the issuance of up to 14,106,394 preferred shares.
Currently, there are no preferred shares issued and outstanding.
Dividends
Holders of common shares may receive dividends that our Board of
Directors declares.
Voting Rights
Each common share entitles the holder to one vote. Directors are
elected by cumulative voting, which means that each common share
entitles the holder to the number of votes equal to the number
of directors to be elected. All votes in respect of such common
share may be cast for one or more of the directors to be
elected. Cumulative voting may have the effect of increasing
minority shareholders representation on the Board of
Directors.
The Articles provide that action may be taken by the vote of the
holders of shares entitling them to exercise a majority of the
voting power of the Company, except in each case as is otherwise
provided in the Articles or Regulations. The Articles and
Regulations provide for a voting proportion, which is different
from that provided by statutory law, in order for shareholders
to take action in certain circumstances, including the following:
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(1) two-thirds vote required to fix or change the number of
directors; |
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(2) two-thirds vote required for removal of directors; |
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(3) fifty percent of the outstanding shares required to
call a special meeting of shareholders; |
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(4) two-thirds vote required to amend the Regulations
without a meeting; |
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(5) two-thirds vote required to amend the provisions
described in items (1) and (4) above and this
provision, unless such action is recommended by two-thirds of
the members of the Board of Directors; |
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(6) two-thirds vote required to approve certain
transactions, such as the sale, exchange, lease, transfer or
other disposition by the Company of all, or substantially all,
of its assets or business, or the consolidation of the Company
or its merger into another corporation, or certain other mergers
and majority share acquisitions; and |
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(7) two-thirds vote required to amend the provisions
described in item (6) above, or this provision. |
The requirement of a two-thirds vote in certain circumstances
may have the effect of delaying, deferring or preventing a
change in control of our Company.
Liquidation Rights
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of our company, after the payment or
provision for payment of our debts and other liabilities and the
preferential amounts to which holders of our preferred shares
are entitled, if any such preferred shares are then outstanding,
the holders of the common shares are entitled to share pro rata
in our assets remaining for distribution to shareholders.
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Miscellaneous Rights, Listing and Transfer Agents
Our common shares have no preemptive or conversion rights and
there are no redemption or sinking fund provisions applicable
thereto.
Our outstanding common shares are listed on the New York Stock
Exchange, the Chicago Stock Exchange and the Pacific Exchange.
Equiserve Trust Company N.A. is the transfer agent and registrar
for our common shares.
Classification of Board of Directors
Our Board of Directors is divided into three approximately equal
classes, having staggered terms of office of three years each.
The effect of a classified board of directors, where cumulative
voting is in effect, is to require the votes of more shares to
elect one or more members of the Board of Directors than would
be required if the Board of Directors were not classified.
Additionally, the effect of a classified board of directors may
be to make it more difficult to acquire control of our company.
Certain Ohio Statutes
Various laws may affect the legal or practical ability of
shareholders to dispose of shares of our company. Such laws
include the Ohio statutory provisions described below.
Chapter 1704 of the Ohio Revised Code prohibits an
interested shareholder (defined as a beneficial owner, directly
or indirectly, of ten percent (10%) or more of the voting power
of any issuing public Ohio corporation) or any affiliate or
associate of an interested shareholder (as defined in
Section 1704.01 of the Ohio Revised Code) from engaging in
certain transactions with the corporation during the three-year
period after the interested shareholders share acquisition
date.
The prohibited transactions include mergers, consolidations,
majority share acquisitions, certain asset sales, loans, certain
sales of shares, dissolution, and certain reclassifications,
recapitalizations, or other transactions that would increase the
proportion of shares held by the interested shareholder.
After expiration of the three-year period, the corporation may
participate in such a transaction with an interested shareholder
only if, among other things:
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the transaction receives the approval of the holders of
two-thirds of all the voting shares and the approval of the
holders of a majority of the disinterested voting shares (shares
not held by the interested shareholder); or |
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the transaction meets certain criteria designed to ensure that
the remaining shareholders receive fair consideration for their
shares. |
The prohibitions do not apply if, before the interested
shareholder becomes an interested shareholder, the board of
directors of the corporation approves either the interested
shareholders acquisition of shares or the otherwise
prohibited transaction. The restrictions also do not apply if a
person inadvertently becomes an interested shareholder or was an
interested shareholder prior to the adoption of the statute on
April 11, 1990, unless, subject to certain exceptions, the
interested shareholder increases his, her or its proportionate
share interest on or after April 11, 1990.
Pursuant to Ohio Revised Code Section 1707.043, a public
corporation formed in Ohio may recover profits that a
shareholder makes from the sale of the corporations
securities within eighteen (18) months after making a
proposal to acquire control or publicly disclosing the
possibility of a proposal to acquire control. The corporation
may not, however, recover from a person who proves in a court of
competent jurisdiction either of the following:
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that his, her or its sole purpose in making the proposal was to
succeed in acquiring control of the corporation and there were
reasonable grounds to believe that such person would acquire
control of the corporation; or |
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such persons purpose was not to increase any profit or
decrease any loss in the stock, and the proposal did not have a
material effect on the market price or trading volume of the
stock. |
Also, before the corporation may obtain any recovery, the
aggregate amount of the profit realized by such person must
exceed $250,000. Any shareholder may bring an action on behalf
of the corporation if a corporation fails or refuses to bring an
action to recover these profits within sixty (60) days of a
written request. The party bringing such an action may recover
attorneys fees if the court having jurisdiction over such
action orders recovery of any profits.
Control Share Acquisition Act
We are also subject to Ohios Control Share Acquisition Act
(Ohio Revised Code 1701.831). The Control Share Acquisition Act
provides that, with certain exceptions, a person may acquire
beneficial ownership of shares in certain ranges (one-fifth or
more but less than one-third, one-third or more but less than a
majority, or a majority or more) of the voting power of the
outstanding shares of an Ohio corporation meeting certain
criteria, which our company meets, only if such person has
submitted an acquiring person statement and the
proposed acquisition has been approved by the vote of a majority
of the shares of the corporation represented at a special
meeting called for such purpose and by a majority of such shares
of the corporation excluding interested shares, as
defined in Section 1701.01 of the Ohio Revised Code.
PLAN OF DISTRIBUTION
We may sell the offered securities as follows:
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through agents; |
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to or through underwriters; or |
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directly to other purchasers. |
We will identify any underwriters or agents and describe their
compensation in a prospectus supplement.
We, directly or through agents, may sell, and the underwriters
may resell, the offered securities in one or more transactions,
including negotiated transactions. These transactions may be:
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at a fixed public offering price or prices, which may be changed; |
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at market prices prevailing at the time of sale; |
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at prices related to such prevailing market prices; or |
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at negotiated prices. |
In connection with the sale of offered securities, the
underwriters or agents may receive compensation from us or from
purchasers of the offered securities for whom they may act as
agents. The underwriters may sell offered securities to or
through dealers, who may also receive compensation from
purchasers of the offered securities for whom they may act as
agents. Compensation may be in the form of discounts,
concessions or commissions. Underwriters, dealers and agents
that participate in the distribution of the offered securities
may be underwriters as defined in the Securities Act of 1933,
and any discounts or commissions received by them from us and
any profit on the resale of the offered securities by them may
be treated as underwriting discounts and commissions under the
Securities Act of 1933.
We will indemnify the underwriters and agents against certain
civil liabilities, including liabilities under the Securities
Act of 1933.
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Underwriters, dealers and agents may engage in transactions
with, or perform services for, us or our affiliates in the
ordinary course of their business.
If we indicate in the prospectus supplement relating to a
particular series or issue of offered securities, we will
authorize underwriters, dealers or agents to solicit offers by
certain institutions to purchase such offered securities from us
pursuant to delayed delivery contracts providing for payment and
delivery at a future date. Such contracts will be subject only
to those conditions that we specify in the prospectus
supplement, and we will specify in the prospectus supplement the
commission payable for solicitation of such contracts.
LEGAL OPINIONS
The validity of the offered securities will be passed upon for
us by Mark Hennessey, Deputy General Counsel, and for any
underwriters, dealers or agents by Shearman & Sterling
LLP, 599 Lexington Avenue, New York, New York 10022.
Mr. Hennessey is paid a salary by our company and
participates in various employee benefit plans offered by us,
including equity based plans.
EXPERTS
Ernst & Young LLP, independent registered public
accounting firm, has audited our consolidated financial
statements included in our Annual Report on Form 10-K for
the year ended December 31, 2004, and managements
assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2004, as set forth
in their reports, which are incorporated by reference in this
prospectus and elsewhere in the registration statement. Our
financial statements and managements assessment are
incorporated by reference in reliance on Ernst & Young
LLPs reports, given on their authority as experts in
accounting and auditing.
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$
Eaton
Corporation
Floating Rate Notes due 2009
PROSPECTUS SUPPLEMENT
August , 2006
Banc of America Securities LLC