<PAGE> 1
File Pursuant to Rule 424(b)(2)
Registration No. 33-61711
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 15, 1995)
$500,000,000
TRW INC.
MEDIUM-TERM NOTES, SERIES C
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Due 9 Months or More from Date of Issue
------------------------
TRW Inc. (the "Company") may offer from time to time its Medium-Term Notes,
Series C (the "Notes") for an aggregate initial public offering price of up to
U.S $500,000,000 (or the equivalent thereof if any of the Notes are denominated
in foreign currencies or currency units), subject to reduction as a result of
the sale of other Debt Securities. The Company may from time to time authorize
an increase in the aggregate principal amount of Notes to be sold, which Notes
will constitute a part of the same series as the Notes to be offered hereby. See
"Description of Notes --General" and "Plan of Distribution". Unless otherwise
specified in the applicable pricing supplement (the "Pricing Supplement") to
this Prospectus Supplement, the Interest Payment Dates for Fixed Rate Notes (as
defined below) will be April 15 and October 15 of each year. Each Note will
mature on a date 9 months or more from its date of issue as selected by the
initial purchaser and agreed to by the Company and may be subject to redemption
at the option of the Company or repayment at the option of the Holder prior to
its Stated Maturity, as specified in the applicable Pricing Supplement.
Each Note may be denominated in U.S. dollars or in a foreign currency,
European Currency Units ("ECU") or such other currency unit as may be specified
in the applicable Pricing Supplement (the "Specified Currency"). Notes
denominated in U.S. dollars will be issued in minimum denominations of U.S.
$1,000 and any integral multiple thereof. The authorized denominations of Notes
not denominated in U.S. dollars ("Foreign Currency Notes") will be set forth in
the applicable Pricing Supplement. See "Special Provisions Relating to Foreign
Currency Notes". The Notes may be issued as Indexed Notes, the principal amount
of which, or interest in respect thereof, payable at Stated Maturity, or the
applicable Interest Payment Date, is determined with reference to the exchange
rate of a Specified Currency relative to an Indexed Currency or to one or more
other indices. See "Description of Notes -- Indexed Notes".
Each Note will be issued only in fully registered form and will be
represented by either a Global Security registered in the name of a nominee of
The Depository Trust Company, as Depository (a "Book-Entry Note"), or a
certificate issued in definitive form (a "Certificated Note"), as set forth in
the applicable Pricing Supplement. Interests in Book-Entry Notes will be shown
on, and transfers thereof will be effected only through, the records maintained
by the Depository and its participants. The Company currently intends to issue
all Notes which can be so issued as Book-Entry Notes. See "Description of Notes
- -- General" and "-- Book-Entry System".
The interest rate or interest rate formula, if any, issue price, any
Interest Payment Dates, redemption or repayment provisions, if any, Stated
Maturity, Specified Currency and certain other terms with respect to each Note
will be established by the Company at the date of issuance of such Note and will
be indicated in the applicable Pricing Supplement. The Notes will bear interest
at a fixed rate (a "Fixed Rate Note"), which may be zero in the case of certain
Notes issued at a price representing a discount from the principal amount
payable at the Stated Maturity thereof (a "Zero-Coupon Note"), or at a floating
rate (a "Floating Rate Note") as set forth in the applicable Pricing Supplement,
as adjusted by a Spread and/or Spread Multiplier, if any, applicable to such
Notes. Holders of Zero-Coupon Notes will not receive periodic payments of
interest on such Notes. See "Description of Notes -- Fixed Rate Notes" and "--
Floating Rate Notes".
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY
SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(2)(3)
-------------------- --------------------------- -------------------------------
<S> <C> <C> <C>
Per Note.................... 100.000% .125% - .750% 99.875% - 99.250%
Total(4)(5)................. $500,000,000 $625,000 -$3,750,000 $499,375,000 -$486,250,000
<FN>
- ---------------
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes will
be issued at 100% of their principal amount.
(2) The Company will pay Morgan Stanley & Co. Incorporated, J.P. Morgan
Securities Inc. and Salomon Brothers Inc (the "Agents") a commission ranging
from .125% to .750% of the principal amount of any Note sold through any
such Agent. The commission payable by the Company to the Agents with respect
to Notes with maturities greater than 30 years will be negotiated at the
time the Company issues such Notes. The Company may sell Notes to any Agent
as principal for resale to investors and other purchasers at varying prices
related to prevailing market prices at the time of resale or at a fixed
public offering price, as determined by such Agent. Unless otherwise
indicated in an applicable Pricing Supplement, any Note sold to an Agent as
principal shall be purchased by such Agent at a price equal to 100% of the
principal amount thereof less a percentage equal to the commission
applicable to an agency sale of a Note of identical maturity and may be
resold by such Agent. The Company may also sell Notes directly to investors
on its own behalf, in which case no commission will be payable.
(3) Before deducting expenses payable by the Company estimated at $300,000,
including reimbursement of certain expenses of the Agents.
(4) In U.S. dollars or the equivalent thereof in foreign currencies or currency
units.
(5) Subject to reduction as a result of the sale of other Debt Securities of the
Company.
</TABLE>
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The Notes are being offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. The Company may sell Notes to any Agent acting as
principal for resale to investors and other purchasers. The Company has reserved
the right to sell Notes directly to investors from time to time on its own
behalf. Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered by this Prospectus Supplement will be sold or
that there will be a secondary market for the Notes. The Company reserves the
right to withdraw, cancel or modify the offer or solicitations of offers made
hereby without notice. The Company, or any Agent, if it solicits such offer, may
reject any offer to purchase Notes, in whole or in part. See "Plan of
Distribution".
------------------------
MORGAN STANLEY & CO.
Incorporated
J.P. MORGAN & CO.
SALOMON BROTHERS INC
March 21, 1996
LOGO
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IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
NO DEALER, AGENT, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT IN CONNECTION WITH THE OFFER
CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT.
THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND
SUCH PRICING SUPPLEMENT OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER. THE DELIVERY OF THIS
PROSPECTUS, PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THEIR RESPECTIVE DATES.
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes.................................................................. S-3
Special Provisions Relating to Foreign Currency Notes................................. S-14
Foreign Currency Risks................................................................ S-17
United States Federal Income Tax Considerations....................................... S-18
Note Warrants......................................................................... S-26
Plan of Distribution.................................................................. S-27
PROSPECTUS
Available Information................................................................. 3
Incorporation of Certain Documents by Reference....................................... 3
The Company........................................................................... 4
Use of Proceeds....................................................................... 4
Ratio of Earnings to Fixed Charges.................................................... 5
Description of Debt Securities........................................................ 5
Description of Warrants............................................................... 9
Plan of Distribution.................................................................. 10
Legal Opinions........................................................................ 11
Experts............................................................................... 11
</TABLE>
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DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
under the heading "Description of Debt Securities" in the accompanying
Prospectus, to which description reference is hereby made. Capitalized terms not
defined herein have the meanings assigned to such terms in the Prospectus or
Indenture.
GENERAL
The Notes offered hereby will be issued under the Indenture (the
"Indenture") referred to in the accompanying Prospectus with The Chase Manhattan
Bank (National Association), as successor trustee (the "Trustee") to Mellon
Bank, N.A. The Notes offered hereby constitute a single series, or a portion of
a single series, of Debt Securities for purposes of the Indenture, which places
no limit on the aggregate principal amount of Debt Securities that may be issued
as part of such series. The aggregate gross proceeds for which the Notes offered
pursuant to this Prospectus Supplement may be issued is limited to U.S.
$500,000,000 (or the equivalent thereof in foreign currencies or currency
units). Such amount may be reduced due to the sale of other Debt Securities
(other than the Notes) pursuant to the Registration Statements to which the
accompanying Prospectus relates. See "Plan of Distribution". In addition, the
Company may from time to time authorize an increase in the aggregate principal
amount of Notes to be sold, which will constitute a part of the same series as
the Notes to be offered hereby. Unless otherwise indicated in the applicable
Pricing Supplement, currency amounts in this Prospectus Supplement, the
accompanying Prospectus and any Pricing Supplement are stated in United States
dollars ("$", "dollars", "U.S. dollars", "United States dollars" or "U.S. $").
Each Note will mature on a date 9 months or more from its date of issue, as
selected by the initial purchaser and agreed to by the Company, and may be
subject to redemption at the option of the Company or repayment at the option of
the Holder prior to its Stated Maturity, as specified in the applicable Pricing
Supplement.
The Notes will be issuable only in fully registered form and, if
denominated in U.S. dollars, in minimum denominations of $1,000 and integral
multiples thereof. For a description of the denominations of Foreign Currency
Notes, see "Special Provisions Relating to Foreign Currency Notes".
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. At the present time, only Notes that are denominated and
payable in U.S. dollars may be issued as Book-Entry Notes. The Company currently
intends to issue all Notes which can be so issued as Book-Entry Notes. See
"Book-Entry System".
A Note, including any Zero-Coupon Note, is an Original Issue Discount Note
if it is issued at a price lower than the principal amount thereof and it
provides that upon redemption or acceleration of the maturity thereof an amount
less than the principal thereof shall become due and payable. In the event of
redemption or acceleration of the maturity of an Original Issue Discount Note,
the amount payable to the Holder upon such redemption or acceleration will be
determined in accordance with the terms of such Note, but will be an amount less
than the amount payable at the Stated Maturity thereof.
Unless otherwise specified in the applicable Pricing Supplement, payments
of interest on Notes (other than interest payable at Stated Maturity) will be
made, except as provided below, by check mailed to the Holders of such Notes
(or, in the case of Global Securities representing Book-Entry Notes, by wire
transfer to the Depository (as defined herein) or its nominee). Notwithstanding
the foregoing, a Holder of $10,000,000 or more in aggregate principal amount of
Certificated Notes of like tenor and terms (or the Holder of the equivalent
thereof in a Specified Currency other than U.S. dollars) shall be entitled to
receive such interest payments by wire transfer in immediately available funds,
but only if appropriate instructions have been received in writing by the Paying
Agent on or prior to the applicable Record Date for such payment of interest.
Unless otherwise indicated in the applicable Pricing Supplement, payments of
principal of (and premium, if any) and interest on any Note payable at Maturity
will be made in immediately available funds at the office of
S-3
<PAGE> 4
the Paying Agent in the Borough of Manhattan, The City of New York, provided
that payments in such funds will be made only if such Notes are presented to the
Paying Agent in time for the Paying Agent to make such payments in such funds in
accordance with its normal procedures. The Company has initially designated The
Chase Manhattan Bank (National Association), acting through its principal
corporate trust office in the Borough of Manhattan, The City of New York, as its
Paying Agent for the Notes. Beneficial owners of Book-Entry Notes are expected
to be paid in accordance with the Depository's and its Participants' (as defined
herein) procedures in effect from time to time. See "Book-Entry System".
Payments of interest to a Holder of a Foreign Currency Note that has elected to
receive such payments in the Specified Currency will be paid by a check drawn on
an account maintained at a bank outside the United States, unless other
arrangements have been made. See "Special Provisions Relating to Foreign
Currency Notes -- Payment of Principal and Interest".
"Business Day" means any day, other than a Saturday or Sunday, that meets
each of the following applicable requirements: the day is (a) not a day on which
banking institutions are authorized or required by law or regulation to be
closed in The City of New York and (b) if the Note is denominated in a Specified
Currency other than U.S. dollars, (i) not a day on which banking institutions
are authorized or required by law or regulation to close in the major financial
center of the country issuing the Specified Currency (which in the case of ECU
shall be as determined by the ECU Banking Association in Paris) and (ii) a day
on which banking institutions in such financial center are carrying out
transactions in such Specified Currency and (c) with respect to LIBOR Notes, a
London Banking Day. "London Banking Day" means any day on which dealings in
deposits in U.S. dollars are transacted in the London interbank market.
The Notes may be presented for registration of transfer or exchange at the
principal corporate trust office of the Paying Agent in the Borough of
Manhattan, The City of New York.
INTEREST
Each Note will bear interest from the date of issue or from the most recent
Interest Payment Date to which interest on such Note has been paid or duly
provided for at the fixed rate per annum, which may be zero in the case of
Zero-Coupon Notes, or at the rate per annum determined pursuant to the interest
rate formula stated therein and in the applicable Pricing Supplement until the
principal thereof is paid or made available for payment. Interest will be
payable at each Interest Payment Date and at Maturity. Interest will be payable
to the Person in whose name a Note is registered at the close of business on the
Regular Record Date next preceding each Interest Payment Date; provided,
however, that interest payable at Maturity will be payable to the Person to whom
principal shall be payable. Unless otherwise specified in the applicable Pricing
Supplement, the first payment of interest on any Note originally issued between
a Regular Record Date and an Interest Payment Date will be made on the Interest
Payment Date following the next succeeding Regular Record Date to the Person in
whose name such Note is registered at the close of business on such next
succeeding Regular Record Date. Unless otherwise indicated in the applicable
Pricing Supplement, the Regular Record Dates for any Note shall be the date 15
calendar days prior to each Interest Payment Date for such Note, whether or not
a Business Day. Holders of Zero-Coupon Notes will not receive payments of
interest on such Notes.
Interest rates, or interest rate formulas, are subject to change by the
Company from time to time, but no such change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
FIXED RATE NOTES
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Note. Unless
otherwise indicated in the applicable Pricing Supplement, the Interest Payment
Dates for Fixed Rate Notes will be April 15 and October 15 of each year and at
Maturity, and interest payments for Fixed Rate Notes shall be the amount of
interest accrued to, but excluding, the relevant Interest Payment Date. Unless
otherwise specified in the applicable Pricing Supplement, interest on Fixed Rate
Notes will be computed on the basis of a 360-day year of twelve 30-day months.
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If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, the interest payment shall be made on the next day that is a
Business Day, and no interest on such payment shall accrue for the period from
and after the Interest Payment Date. If the Maturity of any Fixed Rate Note
falls on a day that is not a Business Day, the payment of interest and principal
(and premium, if any) will be made on the next succeeding Business Day, and no
interest on such payment shall accrue for the period from and after the maturity
date (or date of redemption or repayment) and such Business Day shall be
considered to be the day such payments are due for all purposes of the Notes.
Interest payments for Fixed Rate Notes will include accrued interest from
and including the date of issue or from and including the last date in respect
of which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be. The interest rates the Company will agree to pay
on newly issued Fixed Rate Notes are subject to change without notice by the
Company from time to time, but no such change will affect any Fixed Rate Notes
theretofore issued or that the Company has agreed to issue.
FLOATING RATE NOTES
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis for such Floating Rate Note which may be
adjusted by adding or subtracting the Spread and/or multiplying by the Spread
Multiplier specified therein. Such basis may be: (a) the Commercial Paper Rate,
in which case such Note will be a "Commercial Paper Rate Note," (b) LIBOR, in
which case such Note will be a "LIBOR Note," (c) the Federal Funds Rate, in
which case such Note will be a "Federal Funds Rate Note", (d) the Prime Rate, in
which case such Note will be a "Prime Rate Note", (e) the Treasury Rate, in
which case such Note will be a "Treasury Rate Note", (f) the CMT Rate, in which
case such Note will be a "CMT Rate Note", or (g) such other interest rate
formula, index or method of calculation set forth in such Pricing Supplement. In
addition, a Floating Rate Note may also have either or both of the following:
(a) a maximum numerical interest rate limitation, or ceiling, on the rate of
interest which may accrue during any interest period ("Maximum Interest Rate")
and (b) a minimum numerical interest rate limitation, or floor, on the rate of
interest which may accrue during any interest period ("Minimum Interest Rate").
The applicable Pricing Supplement for a Floating Rate Note will specify the
Spread and/or Spread Multiplier, if any, and the Maximum or Minimum Interest
Rate, if any, applicable to each Floating Rate Note and, in addition, will
define or particularize for each such Note the following terms, if applicable:
Calculation Date, Initial Interest Rate, Regular Record Dates, Interest Payment
Dates, Index Maturity, Interest Determination Dates and Interest Reset Dates
with respect to such Note. The "Spread" is the number of basis points specified
in the applicable Pricing Supplement as being applicable to the interest rate
for such Note and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement as being applicable to the interest rate for such
Note. "Index Maturity" means, with respect to a Floating Rate Note, the period
to maturity of the instrument or obligation on which the interest rate formula
is based, as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (each an "Interest Reset Date"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Reset Date will be, in the case
of Floating Rate Notes which reset daily, each Business Day; in the case of
Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
the Tuesday of each week, except as provided below, when the normally scheduled
Treasury auction is not on a Monday; in the case of Floating Rate Notes which
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which reset semiannually, the third
Wednesday of two months of each year, as specified in the applicable Pricing
Supplement; and in the case of Floating Rate Notes which reset annually, the
third Wednesday of one month of each year, as specified in the applicable
Pricing Supplement. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day for such Floating Rate Note, the
Interest Reset Date for such Floating Rate Note shall be postponed to the next
day that is a
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Business Day for such Floating Rate Note, except that in the case of a LIBOR
Note, if such Business Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Business Day.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
which reset daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year (as
indicated in the applicable Pricing Supplement); in the case of Floating Rate
Notes which reset quarterly, on the third Wednesday of March, June, September
and December of each year; in the case of Floating Rate Notes which reset
semiannually, on the third Wednesday of the two months of each year specified in
the applicable Pricing Supplement; in the case of Floating Rate Notes which
reset annually, on the third Wednesday of the month specified in the applicable
Pricing Supplement; and in each case, at Maturity (each an "Interest Payment
Date"). If an Interest Payment Date with respect to any Floating Rate Note would
otherwise fall on a day that is not a Business Day with respect to such Note,
such Interest Payment Date will be the following day that is a Business Day with
respect to such Note, except that in the case of a LIBOR Note, if such day falls
in the next calendar month, such Interest Payment Date will be the immediately
preceding Business Day. If the maturity date or any earlier redemption or
repayment date of a Floating Rate Note would fall on a day that is not a
Business Day, the payment of principal, premium, if any, and interest will be
made on the next succeeding Business Day, and no interest on such payment shall
accrue for the period from and after such maturity, redemption or repayment
date, as the case may be.
Unless otherwise indicated in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued to, but
excluding, the Interest Payment Date.
With respect to a Floating Rate Note, accrued interest from the date of
issue or from the last date to which interest has been paid is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factors
calculated for each day from the date of issue, or from the last date to which
interest has been paid, to the date for which accrued interest is being
calculated. Unless otherwise indicated in the applicable Pricing Supplement, the
interest factor for each such day is computed by dividing the interest rate in
effect on such day by 360 or by the actual number of days in the year, in the
case of Treasury Rate Notes and CMT Rate Notes. The interest rate in effect on
each day will be: (a) if such day is an Interest Reset Date, the interest rate
with respect to the Interest Determination Date pertaining to such Interest
Reset Date or (b) if such day is not an Interest Reset Date, the interest rate
with respect to the Interest Determination Date pertaining to the next preceding
Interest Reset Date, subject in either case to any maximum or minimum interest
rate limitation referred to above and to any adjustment by a Spread and/or
Spread Multiplier referred to above; provided, however, that (i) the interest
rate in effect from the date of issue to the first Interest Reset Date with
respect to a Floating Rate Note will be the Initial Interest Rate (as set forth
in the applicable Pricing Supplement) and (ii) the interest rate in effect for
the ten days immediately prior to Maturity will be that in effect on the tenth
day preceding such Maturity, unless otherwise specified in the applicable
Pricing Supplement.
The "Interest Determination Date" pertaining to an Interest Reset Date for
Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate Notes and Prime
Rate Notes will be the second Business Day next preceding such Interest Reset
Date. The Interest Determination Date pertaining to an Interest Reset Date for a
LIBOR Note will be the second London Banking Day preceding such Interest Reset
Date. The Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note will be the day of the week in which such Interest Reset Date
falls on which Treasury bills would normally be auctioned. Treasury bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
but such auction may be held on the preceding Friday. If, as the result of a
legal holiday, an auction is so held on the preceding Friday, such Friday will
be the Interest Determination Date pertaining to the Interest Reset Date
occurring in the next succeeding week. If an auction falls on a day that is an
Interest Reset Date, such Interest Reset Date will be the next following
Business Day.
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Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date", where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest Payment
Date or maturity date, as the case may be.
In addition to any Maximum Interest Rate which may be applicable to any
Floating Rate Note pursuant to the above provisions, assuming that a court would
enforce the provisions of the Notes and the Indenture specifying New York law as
the governing law, the interest rate on the Floating Rate Notes will in no event
be higher than the maximum rate permitted by New York law, as the same may be
modified by United States law of general application. Under present New York law
the maximum rate of interest is, subject to certain exceptions, for any loan in
an amount less than $250,000 is 16% and for any loan in the amount of $250,000
or more but less than $2,500,000 is 25% per annum on a simple interest basis.
These limits do not apply to Floating Rate Notes in which an aggregate of
$2,500,000 or more has been invested.
Unless otherwise provided in the applicable Pricing Supplement, The Chase
Manhattan Bank (National Association) will be the calculation agent (the
"Calculation Agent"). Upon the request of the Holder of any Floating Rate Note,
the Calculation Agent will provide the interest rate then in effect, and, if
different, the interest rate which will become effective as a result of a
determination made on the most recent Interest Determination Date with respect
to such Floating Rate Note. Unless otherwise indicated in the applicable Pricing
Supplement, all percentages resulting from any calculation relating to the rate
of interest on a Note will be rounded, if necessary, to the nearest
one-hundred-thousandth of a percentage point, with five one-millionths of a
percentage point being rounded up, and all dollar amounts used in or resulting
from such calculation on Floating Rate Notes will be rounded to the nearest
cent, with one-half cent rounded up.
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any), and will be payable on the dates, specified on
the face of the Commercial Paper Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement as published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System under the
heading "Commercial Paper". In the event that such rate is not published by 9:00
A.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate will be the Money Market
Yield of the rate on such Interest Determination Date for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement as
published in Composite Quotations under the heading "Commercial Paper". If such
rate is not yet published in either H.15(519) or the Composite Quotations by
3:00 P.M., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, then the Commercial Paper Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
Money Market Yield of the arithmetic mean of the offered rates of three leading
dealers of commercial paper in New York City selected by the Calculation Agent
as of 11:00 A.M., New York City time, on such Interest Determination Date for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized statistical rating agency; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, the Commercial Paper Rate will be the
Commercial Paper Rate then in effect on such Interest Determination Date.
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"Money Market Yield", expressed as a percentage, means a yield calculated
in accordance with the following formula:
<TABLE>
<S> <C> <C> <C> <C>
D X 360
Money Market Yield = ---------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for the commercial paper,
quoted on a bank-discount basis and expressed as a decimal; and "M" refers to
the actual number of days in the interest period for which interest is being
calculated.
LIBOR Notes
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any), and will be
payable on the dates, specified on the face of such LIBOR Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) On each Interest Determination Date, LIBOR will be either: (a) if
"LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified Designated LIBOR
Page (as defined below) by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, that appear on the Designated
LIBOR Page as of 11:00 A.M., London time, on that Interest Determination
Date, if at least two such offered rates appear (unless, as aforesaid, only
a single rate is required) on such Designated LIBOR Page, or (b) if "LIBOR
Telerate" is specified in the applicable Pricing Supplement, the rate for
deposits in the Index Currency having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Banking Day
immediately following such Interest Determination Date, that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on that Interest
Determination Date. If fewer than two offered rates appear (if "LIBOR
Reuters" is specified in the applicable Pricing Supplement) or no rate
appears (if "LIBOR Telerate" is specified in the applicable Pricing
Supplement), LIBOR in respect of the related Interest Determination Date
will be determined as if the parties had specified the rate described in
clause (ii) below.
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement) or no rate appears (if "LIBOR Telerate" is
specified in the applicable Pricing Supplement), the Calculation Agent will
request the principal London offices of each of four major reference banks
in the London interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for deposits in
the Index Currency for the period of the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Banking Day
immediately following such Interest Determination Date, to prime banks in
the London interbank market at approximately 11:00 A.M., London time, on
such Interest Determination Date and in a principal amount of not less than
$1,000,000 (or the equivalent in the Index Currency, if the Index Currency
is not the U.S. dollar) that is representative for a single transaction in
such Index Currency in such market at such time. If at least two such
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
A.M. (or such other time specified in the applicable Pricing Supplement),
in the applicable principal financial center for the country of the Index
Currency on such Interest Determination Date, by three major banks in such
principal financial center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
designated in the applicable Pricing
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<PAGE> 9
Supplement and in a principal amount of not less than $1,000,000 commencing
on the second London Banking Day immediately following such Interest
Determination Date (or the equivalent in the Index Currency, if the Index
Currency is not the U.S. dollar) that is representative for a single
transaction in such Index Currency in such market at such time; provided,
however, that if the banks so selected by the Calculation Agent are not
quoting as mentioned in this sentence, LIBOR in effect for the applicable
period will be the same as LIBOR for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the LIBOR Notes for which LIBOR is being determined
shall be the Initial Interest Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement. LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, Page 3750) had been specified.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Federal Funds Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date, the
rate on such date for Federal funds, as published in H.15(519) under the heading
"Federal Funds (Effective)" or if not so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Federal Funds Rate will be the rate on such Interest Determination Date as
published in the Composite Quotations under the heading "Federal Funds/Effective
Rate". If such rate is not yet published in either H.15(519) or the Composite
Quotations by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal
funds, as of 9:00 A.M., New York City time, on such Interest Determination Date,
arranged by three leading brokers of Federal funds transactions in The City of
New York selected by the Calculation Agent; provided, however, that if the
brokers selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the Federal Funds Rate in effect for the applicable period will be
the same as the Federal Funds Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
payable on the Federal Funds Rate Notes for which such Federal Funds Rate is
being determined shall be the Initial Interest Rate).
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set forth
in H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate
is not yet published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be
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<PAGE> 10
the arithmetic mean of the rates of interest publicly announced by each bank
named on the Reuters Screen USPRIME1 Page (as defined below) as such bank's
prime rate or base lending rate as in effect for such Interest Determination
Date as quoted on the Reuters Screen USPRIME1 Page on such Interest
Determination Date, or, if fewer than four such rates appear on the Reuters
Screen USPRIME1 Page for such Interest Determination Date, the rate shall be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Interest
Determination Date by at least two of the three major money center banks in the
City of New York selected by the Calculation Agent from which quotations are
requested. If fewer than two quotations are provided, the Prime rate shall be
calculated by the Calculation Agent and shall be determined as the arithmetic
mean on the basis of the prime rates in the City of New York by the appropriate
number of substitute banks or trust companies organized and doing business under
the laws of the United States, or any State thereof, in each case having total
equity capital of at least U.S. $500 million and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent to
quote such rate or rates; provided, however, that if the banks or trust
companies selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the "Prime Rate" in effect for the applicable period will be the
same as the Prime Rate for the immediately preceding Interest Reset Period (or,
if there was no such Interest Reset Period, the rate of interest payable on the
Prime Rate Notes for which such Prime Rate is being determined shall be the
Initial Interest Rate). "Reuters Screen USPRIME1 Page" means the display
designated as Page "USPRIME1" on the Reuters Monitor Money Rates Services (or
such other page as may replace the USPRIME1 Page on that service for the purpose
of displaying prime rates or base lending rates of major United States banks).
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the Maximum Interest Rate, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the rate
for the auction held on such date of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement, as published in H.15(519) under the heading "Treasury
Bills -- auction average (investment)" or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination Date
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury Bills having the Index Maturity designated in the applicable Pricing
Supplement are not published or reported as provided above by 3:00 P.M., New
York City time, on such Calculation Date or if no such auction is held on such
Interest Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) calculated using the arithmetic mean of the secondary
market bid rates, as of approximately 3:30 P.M., New York City time, on such
Interest Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement; provided, however, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting bid rates as mentioned in
this sentence, the Treasury Rate for such Interest Reset Date will be the same
as the Treasury Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on the
Treasury Rate Notes for which the Treasury Rate is being determined shall be the
Initial Interest Rate).
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<PAGE> 11
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed on
the Designated CMT Telerate Page (as defined below) under the caption "...
Treasury Constant Maturities ... Federal Reserve Board Release H.15 ... Mondays
Approximately 3:45 p.m.", under the column for the Designated CMT Maturity Index
(as defined below) for (i) if the Designated CMT Telerate Page is 7055, the rate
on such Interest Determination Date and (ii) if the Designated CMT Telerate Page
is 7052, the week or the month, as applicable, ended immediately preceding the
week in which the related Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 p.m., New
York City time, on the related Calculation Date, then the CMT Rate for such
Interest Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or, if not published by 3:00 p.m., New York City
time, on the related Calculation Date, then the CMT Rate for such Interest
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the Interest Determination Date with respect
to such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 p.m., New York
City time, on the related Calculation Date, then the CMT Rate for the Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market closing
offer side prices as of approximately 3:30 p.m., New York City time, on the
Interest Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include the Agents or
their affiliates) selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent, after consultation with the Company,
and eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury notes") with an original maturity of
approximately the Designated CMT Maturity Index and remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury note quotations, the CMT
Rate for such Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity based on the arithmetic mean of the
secondary market offer side prices as of approximately 3:30 p.m., New York City
time, on the Interest Determination Date of three Reference Dealers in The City
of New York (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100,000,000. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate for such Interest Reset Date will be the same as
the CMT Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the rate of interest payable on the CMT Rate
Notes for which the CMT Rate is being determined shall be the Initial Interest
Rate). If two Treasury Notes with an original maturity as described in the third
preceding sentence have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the quotes for the Treasury Note with the shorter
remaining term to maturity will be used.
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<PAGE> 12
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in an applicable Pricing Supplement (or any other
page as may replace such page on that service), for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519). If no such page is
specified in the applicable Pricing Supplement, the Designated CMT Telerate Page
shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in an applicable Pricing Supplement with respect to which the CMT Rate
will be calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be two years.
BOOK-ENTRY SYSTEM
Upon issuance, all Book-Entry Notes having the same original issuance date,
Regular Record Dates, Interest Payment Dates, redemption or repayment
provisions, if any, Stated Maturity and, in the case of Fixed Rate Notes,
interest rate, or, in the case of Floating Rate Notes, initial interest rate,
interest rate formula, Index Maturity, Spread and/or Spread Multiplier (if any),
Minimum Interest Rate (if any), Maximum Interest Rate (if any) and Interest
Reset Dates, will be represented by a single Global Security. Each Global
Security representing Book-Entry Notes will be deposited with, or on behalf of,
The Depository Trust Company, as depository (the "Depository"), or such other
depository as is specified in the applicable Pricing Supplement, and registered
in the name of the Depository or its nominee. Book-Entry Notes will not be
exchangeable for Certificated Notes, provided that if the Depository is at any
time unwilling or unable to continue as depository and a successor depository is
not appointed by the Company within 90 days, the Company will issue Certificated
Notes in exchange for the Global Security or Securities representing Book-Entry
Notes. In addition, the Company may at any time and in its sole discretion
determine not to have Book-Entry Notes represented by Global Securities, and, in
such event, will issue Certificated Notes in exchange for all Global Securities
representing such Book-Entry Notes.
The Depository has advised the Company and the Agents as follows: the
Depository is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. The Depository was created to hold securities
for its participating organizations ("Participants") and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers (including the Agents), banks, trust companies
and clearing corporations and may include certain other organizations, some of
which (or their representatives) own the Depository. Indirect access to the
Depository's system also is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly.
Upon the issuance by the Company of Book-Entry Notes represented by a
Global Security, the Depository will credit, on its book-entry registration and
transfer system, the respective principal amounts of the Book-Entry Notes
represented by such Global Security to the accounts of Participants. The
accounts to be credited shall be designated by the Agents with respect to such
Book-Entry Notes or by the Company if such Book-Entry Notes are offered and sold
directly by the Company. Ownership of beneficial interests in a Global Security
will be limited to Participants or persons that hold interests through
Participants. Ownership of beneficial interests in Book-Entry Notes represented
by a Global Security will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the Depository (with respect to
interests of Participants in the Depository), or by Participants in the
Depository or persons that may hold interests through such Participants (with
respect to persons other than Participants in the Depository). The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer or pledge beneficial interests in a Global Security.
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<PAGE> 13
So long as the Depository or its nominee is the registered owner of a
Global Security, the Depository or its nominee, as the case may be, will be
considered the sole owner or Holder of the Book-Entry Notes represented by such
Global Security for all purposes under the Indenture. Except as provided below,
owners of beneficial interests in Book-Entry Notes represented by a Global
Security will not be entitled to have such Book-Entry Notes registered in their
names, will not receive or be entitled to receive physical delivery of
Book-Entry Notes in definitive form and will not be considered the owners or
Holders thereof under the Indenture. Unless and until it is exchanged in whole
or in part for Certificated Notes evidencing the Book-Entry Notes represented
thereby, a Global Security may not be transferred except as a whole by or to the
Depository for such Global Security or its successor, or any nominee of such
Depository or successor Depository.
Payments of principal of and interest, if any, on the Book-Entry Notes
represented by a Global Security registered in the name of the Depository or its
nominee will be made by the Company through the Paying Agent to the Depository
or its nominee, as the case may be, as the registered owner of a Global
Security.
The Company has been advised that the Depository, upon receipt of any
payment of principal or interest in respect of a Global Security, will credit
immediately the accounts of the related Participants with payments in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in such Global Security as shown on the records of the Depository. The
Company expects that payments by Participants to owners of beneficial interests
in a Global Security will be governed by standing customer instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name". Such payments will be
the responsibility of such Participants.
Neither the Company, the Trustee, any Paying Agent nor the Registrar for
the Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
REDEMPTION AND REPURCHASE
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to its Stated Maturity or that such Note will be
redeemable at the option of the Company on a date or dates specified prior to
such Stated Maturity at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of redemption. The
Company may redeem any of the Notes that are redeemable and remain outstanding
either in whole or from time to time in part, upon not less than 30 nor more
than 60 days' notice. If less than all Notes with like tenor and terms are to be
redeemed, the Notes to be redeemed shall be selected by the Trustee or the
Registrar, if other than the Trustee, by such method as the Trustee or the
Registrar shall deem fair and appropriate. Unless otherwise provided in the
applicable Pricing Supplement, the Notes will not have a sinking fund and will
be subject to the provisions of the Indenture described in the Prospectus under
"Description of Debt Securities -- Defeasance".
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may, at its discretion, be held,
resold or surrendered to the Trustee for cancellation.
REPAYMENT
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid prior to its Stated Maturity or that the Note will be
repayable at the option of the Holder on a date or dates specified prior to its
Stated Maturity at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of repayment.
In order for a Note to be repaid at other than its Stated Maturity, the
Paying Agent must receive at least 30 days but no more than 45 days prior to the
repayment date (i) the Note with the form entitled "Option to Elect Repayment"
on the reverse of the Note duly completed or (ii) a telegram, telex, facsimile
transmission or a letter from a member of a national securities exchange, the
National Association of Securities Dealers,
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Inc., the Depository (in accordance with its normal procedures), or a commercial
bank or trust company in the United States setting forth the name of the holder
of the Note, the principal amount of the Note, the principal amount of the Note
to be repaid, the certificate number or a description of the tenor and terms of
the Note, a statement that the option to elect repayment is being exercised
thereby and a guarantee that the Note to be repaid with the form entitled
"Option to Elect Repayment" on the attachment to the Note duly completed will be
received by the Paying Agent not later than five Business Days after the date of
such telegram, telex, facsimile transmission or letter and such Note and form
duly completed are received by the Paying Agent by such fifth Business Day.
Exercise of the repayment option may not be revoked. The repayment option may be
exercised by the Holder of a Note for less than the entire principal amount of
the Note, provided that the principal amount of the Note remaining outstanding
after repayment is an authorized denomination.
INDEXED NOTES
The Notes may be issued with the principal amount payable at maturity to be
determined with reference to the exchange rate of the Specified Currency set
forth in the applicable Pricing Supplement relative to the indexed currency (the
"Indexed Currency") set forth in the applicable Pricing Supplement ("Dual
Currency Notes"). Holders of such Notes may receive a principal amount at
maturity that is greater than or less than the face amount of the Note depending
upon the relative value at maturity of the Specified Currency compared to the
Indexed Currency. In addition, Notes may be issued from time to time with the
principal amount payable at Stated Maturity and/or the amount of interest
payable on any Interest Payment Date to be determined by reference to one or
more commodity prices, equity indices or other financial or non-financial
indices and on such other terms as may be set forth in the relevant Pricing
Supplement (together with the Dual Currency Notes, the "Indexed Notes").
Information as to the method for determining the principal amount payable at
maturity and/or the amount of interest payable, the relative value of the
Specified Currency compared to the applicable Indexed Currency, any exchange
controls applicable to the Specified Currency or Indexed Currency and certain
additional tax considerations will be set forth in the applicable Pricing
Supplement.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS
AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH INDEXED NOTES AND THE
SUITABILITY OF SUCH INDEXED NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
SUCH INDEXED NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS, COMMODITY PRICES,
EQUITY INDICES AND OTHER FINANCIAL OR NON-FINANCIAL INDICES.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, premium, if
any, and interest on the Notes will be made in U.S. dollars. If any of the Notes
are to be denominated in a currency or currency unit other than U.S. dollars,
the following provisions shall apply, which are in addition to, and to the
extent inconsistent therewith replace, the description of general terms and
provisions of Notes set forth in the accompanying Prospectus and elsewhere in
this Prospectus Supplement.
Foreign Currency Notes are issuable in registered form only, without
coupons. The denominations for particular Foreign Currency Notes will be
specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Foreign Currency Notes will be made in immediately
available funds.
Unless otherwise provided in the applicable Pricing Supplement, all
currency and currency unit amounts used and resulting from calculations relating
to currencies for a Foreign Currency Note will be rounded to the nearest
one-hundredth of a unit (with five one-thousandths of a unit being rounded up).
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CURRENCIES
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency. At the
present time there are limited facilities in the United States for the
conversion of U.S. dollars into foreign currencies or currency units and vice
versa, and few banks offer non-U.S. dollar checking or savings account
facilities in the United States. However, if requested on or prior to the fifth
Business Day preceding the date of delivery of the Notes, or by such other day
as determined by the Agent which presented such offer to purchase Notes to the
Company, such Agent is prepared to arrange for the conversion of U.S. dollars
into the Specified Currency set forth in the applicable Pricing Supplement to
enable the purchasers to pay for the Notes. Each such conversion will be made by
the applicable Agent on such terms and subject to such conditions, limitations
and charges as the applicable Agent may from time to time establish in
accordance with its regular foreign exchange practices. All costs of exchange
will be borne by the purchasers of the Notes.
Unless otherwise specified in the applicable Pricing Supplement, the
Foreign Currency Notes will provide that, in the event of an official
redenomination of a foreign currency or currency unit, the obligations of the
Company with respect to payments on Notes denominated in such foreign currency
or currency unit shall, in all cases, be deemed immediately following such
redenomination to provide for payment of that amount of redenominated currency
representing the amount of such obligations immediately before such
redenomination. In no event, however, shall any adjustment be made to any amount
payable under the Notes as a result of any change in the value of such foreign
currency or currency unit relative to any other currency due solely to
fluctuations in exchange rates. See "Foreign Currency Risks -- Exchange Rates
and Exchange Controls".
PAYMENT OF PRINCIPAL AND INTEREST
The principal of, premium, if any, and interest on Foreign Currency Notes
are payable by the Company in the Specified Currency. However, the agent
appointed by the Company (the "Exchange Rate Agent") will convert all payments
of principal of, premium, if any, and interest on Foreign Currency Notes to U.S.
dollars. Unless otherwise specified in the applicable Pricing Supplement, the
Holder of a Foreign Currency Note may elect to receive such payments in the
Specified Currency as described below.
Any U.S. dollar amount to be received by a Holder of a Foreign Currency
Note will be based on the highest firm bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to all Holders of Foreign Currency Notes scheduled to
receive U.S. dollar payments on such date. If such bid quotations are not
available, payments will be made in the Specified Currency. All currency
exchange costs will be borne by the Holder of the Foreign Currency Note by
deductions from such payments.
Unless otherwise specified in the applicable Pricing Supplement, a Holder
of Foreign Currency Notes may elect to receive payment of the principal of,
premium, if any, and interest on the Notes in the Specified Currency by
transmitting a written request for such payment to the principal office of the
Paying Agent in the Borough of Manhattan, The City of New York on or prior to
the Regular Record Date or at least 15 days prior to Maturity, as the case may
be. Such request may be in writing (mailed or hand delivered) or by cable, telex
or other form of facsimile transmission. A Holder of a Foreign Currency Note may
elect to receive payment in the Specified Currency for all principal, premium,
if any, and interest payments and need not file a separate election for each
payment. Such election will remain in effect until revoked by written notice to
the Paying Agent in the Borough of Manhattan, The City of New York, but written
notice of any such revocation must be received by the Paying Agent in the
Borough of Manhattan, The City of New York on or prior to the Regular Record
Date or at least 15 days prior to Maturity, as the case may be. Holders of
Foreign Currency Notes whose Foreign Currency Notes are to be held in the name
of a broker or nominee should contact such broker or nominee to determine
whether and how an election to receive payments in the Specified Currency may be
made.
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Interest on Foreign Currency Notes paid in U.S. dollars will be paid in the
manner specified in this Prospectus Supplement for interest on Notes denominated
in U.S. dollars. Interest on Foreign Currency Notes paid in the Specified
Currency will be paid by a check drawn on an account maintained at a bank
outside the United States, unless other arrangements have been made. The
principal and premium, if any, of Foreign Currency Notes, together with interest
accrued and unpaid thereon, due at Maturity will be paid in immediately
available funds against presentation of such Foreign Currency Notes at the
principal offices of The Chase Manhattan Bank (National Association) in the
Borough of Manhattan, The City of New York. Any payment of principal, premium,
if any, or interest required to be made on an Interest Payment Date or at
Maturity of a Foreign Currency Note which is not a Business Day need not be made
on such day, but may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date or at Maturity, as the
case may be, and no interest shall accrue for the period from and after such
Interest Payment Date or Maturity.
PAYMENT CURRENCY
Except as set forth below, if payment on a Foreign Currency Note is
required to be made in a Specified Currency and such currency is unavailable due
to the imposition of exchange controls or other circumstances beyond the
Company's control, or is no longer used by the government of the country issuing
such currency or for the settlement of transactions by public institutions of or
within the international banking community, then all payments due on that due
date with respect to such Foreign Currency Note shall be made in U.S. dollars.
The amount so payable on any date in such Specified Currency shall be converted
into U.S. dollars at a rate determined by the Exchange Rate Agent on the basis
of the noon buying rate in The City of New York for cable transfers in the
Specified Currency as certified for customs purposes by the Federal Reserve Bank
of New York (the "Market Exchange Rate") on the date of such payment. In the
event such Market Exchange Rate is not then available, the Company will be
entitled to make payments in U.S. dollars (i) if such Specified Currency is not
a composite currency, on the basis of the most recently available Market
Exchange Rate for such Specified Currency or (ii) if such Specified Currency is
a composite currency, in an amount determined by the Exchange Rate Agent to be
the sum of the results obtained by multiplying the number of units of each
component currency of such composite currency, as of the most recent date on
which such composite currency was used, by the Market Exchange Rate for such
component currency on the second Business Day prior to such payment date (or if
such Market Exchange Rate is not then available, by the most recently available
Market Exchange Rate for such component currency).
If payment on a Foreign Currency Note is required to be made in ECU and ECU
are unavailable due to the imposition of exchange controls or other
circumstances beyond the Company's control, or are no longer used in the
European Monetary System, all payments due on that date with respect to such
Foreign Currency Note shall be made in U.S. dollars. The amount so payable on
any date in ECU shall be converted into U.S. dollars, at a rate determined by
the Exchange Rate Agent as of the second Business Day prior to the date on which
such payment is due on the following basis. The component currencies of the ECU
for this purpose (the "Components") shall be the currency amounts that were
components of the ECU as of the last date on which ECU were used in the European
Monetary System. The equivalent of ECU in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Components. The U.S. dollar
equivalent of each of the Components shall be determined by the Exchange Rate
Agent on the basis of the most recently available Market Exchange Rate, or as
otherwise indicated in the applicable Pricing Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall have a value on
the date of division equal to the amount of the former component currency
divided by the number of currencies into which that currency was divided.
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All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion (except to the extent expressly provided herein that
any determination is subject to approval by the Company) and, in the absence of
manifest error, shall be conclusive for all purposes and binding on Holders of
the Notes and the Exchange Rate Agent shall have no liability therefor.
FOREIGN CURRENCY RISKS
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT DESCRIBE
ALL THE RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES AND THE COMPANY
DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS
THEY EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE
FROM TIME TO TIME. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND
LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN FOREIGN CURRENCY
NOTES. SUCH FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR
INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. A judgment for money damages by courts (whether state or
federal) in the United States, including a money judgment based on an obligation
expressed in a foreign currency or currency unit, will ordinarily be rendered
only in U.S. dollars. New York statutory law provides, however, that in an
action based on an obligation denominated in a currency other than U.S. dollars
a court shall render a judgment or decree in the foreign currency of the
underlying obligation and that the judgment or decree shall be converted into
U.S. dollars at the exchange rate prevailing on the date of entry of the
judgment or decree. It is not known whether the foregoing New York statutory law
could be applied (a) in any action based on an obligation denominated in a
currency unit or (b) by a federal court sitting in the State of New York.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes may entail significant risks that
are not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of significant
market changes in rates of exchange between the U.S. dollar and the various
foreign currencies resulting from official redenomination with respect to a
Specified Currency and the possibility of the imposition or modification of
foreign exchange controls by either the United States or foreign governments.
Such risks depend on factors over which the Company has no control, such as
economic and political events and on the supply of and demand for the relevant
currencies. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies have been volatile and such volatility may be
expected in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations in
the rate that may occur during the term of any Foreign Currency Note.
Depreciation of the Specified Currency of a Foreign Currency Note against the
U.S. dollar would result in a decrease in the effective yield of such Foreign
Currency Note below its coupon rate, and in certain circumstances could result
in a loss to the investor, on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency at an Interest Payment Date or at Maturity of a Foreign
Currency Note. There can be no assurance that exchange controls will not
restrict or prohibit payments of principal (and premium, if any) or interest in
any Specified Currency other than U.S. dollars. Even if there are no actual
exchange controls, it is possible that at an Interest Payment Date or a Maturity
of any particular Foreign Currency Note, the Specified Currency for such Foreign
Currency Note would not be available to the Company due to circumstances beyond
the control of the Company. In any such event, the Company will make required
payments in U.S. dollars on the basis described herein.
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars or ECU will not be
sold in or to residents of the country issuing the Specified Currency. The
information set forth in this Prospectus Supplement is directed to prospective
purchasers who are United States residents, and the Company disclaims any
responsibility to advise prospective purchasers
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who are residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal (and premium, if any) or interest on the Notes. Such persons should
consult their own counsel with regard to such matters.
Pricing Supplements relating to Foreign Currency Notes will contain
information concerning historical exchange rates for the Specified Currency
against the U.S. dollar and a description of the currency and any exchange
controls affecting such currency. The information therein concerning exchange
rates is furnished as a matter of information only and should not be regarded as
indicative of the range of or trends in fluctuations in currency exchange rates
that may occur in the future.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the principal United States federal income tax
consequences of the ownership of a Note is based on the United States federal
income tax laws and regulations in effect as of the date of this Prospectus
Supplement and as currently interpreted. It deals only with Notes held as
capital assets and does not deal with Note Warrants (as defined below) or with
special classes of Holders, such as dealers in securities or currencies, life
insurance companies, financial institutions, regulated investment companies,
persons holding Notes as a hedge or hedged against currency risks, or as part of
a straddle with other investments, or as part of a "synthetic security" or other
integrated investment (including a "conversion transaction") comprised of a Note
and one or more other investments, or United States Holders whose functional
currency is other than U.S. dollars. It does not deal with Indexed Notes. It
also does not deal with Holders other than original purchasers. The federal
income tax consequences of holding a particular Note will depend, in part, on
the particular terms of such Note as set forth in the applicable Pricing
Supplement.
Authoritative interpretations of some of the United States federal income
tax laws have not yet been issued by the United States Department of Treasury
("Treasury"), the United States Internal Revenue Service ("IRS") or the courts.
Such interpretations, when and as issued, may affect the United States federal
income tax consequences of an investment in the Notes, and any such
interpretations may be applied retroactively. Moreover, the tax treatment of an
investment in the Notes may also be affected by future legislation and IRS or
judicial interpretations thereof.
THE FEDERAL INCOME TAX SUMMARY SET FORTH HEREIN IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE, DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING
THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS (INCLUDING CHANGES IN
APPLICABLE REGULATIONS AND INTERPRETATIONS OF FEDERAL OR OTHER TAX LAWS).
UNITED STATES PERSONS
For purposes of the following discussion, "United States person" means (i)
an individual who is a citizen or resident of the United States for United
States federal income tax purposes, (ii) an estate or trust subject to United
States federal income taxation without regard to the source of its income, (iii)
a corporation, partnership or other entity created or organized in or under the
laws of the United States or any State, or (iv) any other person whose income or
gain in respect of a Note is effectively connected with the conduct of a United
States trade or business. The following discussion pertains only to a Holder of
a Note who is a United States person.
Payments of Interest on Notes
In general, interest on a Note, whether in U.S. dollars or in currency
other than U.S. dollars ("Foreign Currency"), other than certain payments on a
Discount Note (as defined and described below under "Original Issue Discount
Notes"), will be taxable to a Holder as ordinary interest income at the time it
is accrued or paid, in accordance with the Holder's method of accounting for tax
purposes.
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Purchase, Sale and Retirement of the Notes
A Holder's tax basis in a Note will generally be the U.S. dollar cost of
the Note to such Holder (which, in the case of a Note purchased with a foreign
currency will be the U.S. dollar value of the purchase price on the date of
purchase) increased by any amounts (such as original issue discount, market
discount, or acquisition discount) includable in income by the Holder with
respect to such Note (other than interest) and the amount, if any, of income
attributable to de minimus original issue discount includable in the Holder's
income with respect to the Note, and reduced by (i) any payments which are not
"qualified stated interest" payments (as defined below under "Original Issue
Discount Notes"), (ii) any amortized premium with respect to such Note, and
(iii) any principal payments received by the Holder.
Upon the sale, exchange, redemption or retirement of a Note, a Holder
generally will recognize gain or loss equal to the difference between the amount
realized on such sale, exchange, redemption or retirement (or the U.S. dollar
value of such amount on the date of disposition if it is realized in Foreign
Currency) and the Holder's tax basis in the Note. Except to the extent described
below under "Short-Term Notes", "Market Discount", or "Foreign Currency Notes",
and except to the extent attributable to accrued but unpaid interest, gain or
loss so recognized will be capital gain or loss and will be long-term capital
gain or loss if, at the time of the sale, exchange, redemption or retirement,
the Note was held for more than one year.
ORIGINAL ISSUE DISCOUNT NOTES
The following summary is a general discussion of the United States federal
income tax consequences to Holders of Notes issued with original issue discount
("Discount Notes") that are United States persons. On December 16, 1994, the
Treasury proposed new regulations regarding the tax treatment of debt
instruments that provide for one or more contingent payments. The proposed
regulations would also modify the rules relating to variable rate debt
instruments. Subsequent versions of the proposed regulations or corresponding
final regulations may adopt positions that may apply to a Note and that may be
contrary to the positions discussed below. For this reason, purchasers of
Discount Notes should carefully examine the Pricing Supplement and consult their
own tax advisors with respect to the current application of the original issue
discount rules to the Notes.
For United States federal income tax purposes, a Note is issued with
original issue discount if the excess of the stated redemption price at maturity
of a Note over its issue price equals or exceeds a de minimis amount (generally
1/4 of 1% of the Note's stated redemption price at maturity multiplied by the
number of complete years to its maturity from its issue date). The "issue price"
of an issue of Discount Notes equals the first price to the public at which a
substantial amount of such Notes has been sold (ignoring sales to bond houses,
brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). The "stated redemption price at
maturity" of a Discount Note is the sum of all payments provided by the Note
other than "qualified stated interest" payments.
The term "qualified stated interest" generally means stated interest that
is unconditionally payable in cash or property (other than debt instruments of
the Company) at least annually at a single fixed rate (or at certain floating
rates) that appropriately takes into account the length of the interval between
stated interest payments.
The applicable Pricing Supplement will state whether a particular issue of
Notes will constitute an issue of Discount Notes.
Unless the election described below in "Election to Treat All Interest as
Original Issue Discount" is made, a Discount Note with only a de minimis amount
of original issue discount will not be considered to have original issue
discount. The Holders of such Notes will include such de minimis original issue
discount in income, as capital gain, on a pro rata basis as principal payments
are made on the Note.
A Holder of a Discount Note must include original issue discount in income
as ordinary interest for United States federal income tax purposes as it accrues
under a constant yield method before the receipt of the cash payments
attributable to such income, regardless of such Holder's regular method of tax
accounting. In general, the amount of original issue discount included in income
by the initial Holder of a Discount Note
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is the sum of the daily portions of original issue discount with respect to such
Note for each day during the taxable year (or portion of the taxable year) on
which such Holder held such Note. The "daily portion" of original issue discount
on any Discount Note is determined by allocating to each day in any accrual
period a ratable portion of the original issue discount allocable to that
accrual period. An "accrual period" may be of any length and the accrual periods
may vary in length over the term of the Discount Note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day of an accrual period or on
the first day of an accrual period.
In certain cases, Notes that bear stated interest and are issued at par
(including especially Floating Rate Notes) may be deemed to bear original issue
discount for federal income tax purposes, with the result that the inclusion of
interest in income for federal income tax purposes may vary from the actual cash
payments of interest made on such Notes, generally accelerating income for cash
method taxpayers. Notice will be given in the applicable Pricing Supplement when
the Company determines that a particular Note will be a Discount Note. Unless
specified in the applicable Pricing Supplement, Floating Rate Notes will not be
Discount Notes.
The amount of original issue discount allocable to each accrual period is
generally equal to the difference between (i) the product of the Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period), and (ii) the amount of qualified stated interest
payments, if any, allocable to such accrual period. The "adjusted issue price"
of a Discount Note at the beginning of any accrual period is the sum of the
issue price of the Discount Note, plus the amount of original issue discount
allocable to all prior accrual periods, plus the amount of any qualified stated
interest on the Note that has accrued prior to the beginning of the accrual
period but is not payable until a later date, minus the amount of any prior
payments on the Discount Note that were not qualified stated interest payments.
If a payment (other than a payment of qualified stated interest) is made on the
first day of an accrual period, then the adjusted issue price at the beginning
of such accrual period is reduced by the amount of the payment. If a portion of
the initial purchase price of a Note is attributable to interest that accrued
prior to the Note's issue date, the first stated interest payment on the Note is
to be made within one year of the Note's issue date and such payment will equal
or exceed the amount of pre-issuance accrued interest, then the Holder may elect
to decrease the issue price of the Note by the amount of pre-issuance accrued
interest, in which case a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued interest and not as an
amount payable on the Note.
The original issue discount regulations contain certain special rules that
generally allow any reasonable method to be used in determining the amount of
original issue discount allocable to a short initial accrual period (if all
other accrual periods are of equal length) and require that the amount of
original issue discount allocable to the final accrual period equal the excess
of the amount payable at the maturity of the Note (other than any payment of
qualified stated interest) over the Note's adjusted issue price as of the
beginning of such final accrual period. In addition, if an interval between
payments of qualified stated interest on a Note contains more than one accrual
period, then the amount of qualified stated interest payable at the end of such
interval is allocated pro rata (on the basis of their relative lengths) between
the accrual periods contained in the interval.
Under these rules, Holders generally will have to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
Acquisition Premium
In the event that a Holder purchases a Discount Note for an amount (the
"acquisition premium") in excess of its adjusted issue price as of the purchase
date and less than its stated redemption price at maturity and does not make the
election described below under "Election to Treat All Interest as Original Issue
Discount", the amount of original issue discount which such Holder must include
in its gross income with respect to such Discount Note for any taxable year (or
portion thereof in which the Holder holds the Discount Note) will be reduced
(but not below zero) by the portion of the acquisition premium properly
allocable to the period. Alternatively, a Holder may elect to compute original
issue discount accruals as described above, treating the Holder's purchase price
as the issue price.
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Amortizable Bond Premium
If a Holder purchases a Note for an amount that is greater than its stated
redemption price at maturity, such Holder will be considered to have purchased
the Note with "amortizable bond premium" equal in amount to such excess. A
Holder may elect to amortize such premium using a constant-yield method over the
remaining term of the Note. A Holder may also offset interest otherwise required
to be included in respect of the Note during any taxable year by the amortized
amount of such excess for the taxable year. However, if the Note may be
optionally redeemed after the Holder acquires it at a price in excess of its
stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later in the
term of the Note. Any election to amortize bond premium is applicable to all
bonds (other than bonds the interest on which is excludable from gross income)
held by the Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the Holder, and may not be revoked
without the consent of the IRS. A Holder that does not elect to amortize bond
premium will generally be entitled to treat the premium as capital loss when the
Note matures. See also "Election to Treat All Interest as Original Issue
Discount" below.
Floating Rate Notes
A Note bearing interest at a floating rate (a "Floating Rate Note") will
bear qualified stated interest if the Floating Rate Note provides for stated
interest at (i) one or more qualified floating rates, (ii) a single fixed rate
and one or more qualified floating rates, (iii) a single objective rate, or (iv)
a single fixed rate and a single objective rate that is a qualified inverse
floating rate.
For this purpose, a variable interest rate is a "qualified floating rate"
if variations in the value of the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the currency
in which the debt instrument is denominated. A variable rate is not considered
to generate qualified stated interest if, among other things, the terms of the
Note provide for a maximum interest rate or a minimum interest rate that is
reasonably expected as of the issue date to cause the yield on the debt
instrument to be significantly less, in the case of a maximum rate, or
significantly more, in the case of a minimum rate, than the expected yield
determined without the maximum or minimum rate, as the case may be.
An "objective rate" is a rate that is determined using a single fixed
formula and which is based upon (i) one or more qualified floating rates, (ii)
one or more rates where each rate would be a qualified floating rate for a debt
instrument denominated in a currency other than the currency in which the
Floating Rate Note is denominated, (iii) either the yield or changes in the
price of one or more items of actively traded personal property (other than
stock or debt of the Company or a related party), or (iv) a combination of the
foregoing rates. A variable rate of interest on a debt instrument is not an
objective rate if it is reasonably expected that the average value of the rate
during the first half of the instrument's term will be either significantly less
than or significantly greater than the average value of the rate during the
final half of the debt instrument's term.
A "qualified inverse floating rate" is an objective rate where such rate is
equal to a fixed rate minus a qualified floating rate, as long as variations in
the rate can reasonably be expected to inversely reflect contemporaneous
variations in the cost of newly borrowed funds.
The applicable Pricing Supplement will specify if the stated interest on a
Floating Rate Note is not qualified stated interest and, if necessary, such
Pricing Supplement will contain a description of the rules regarding taxation of
such Notes.
Optional Redemption
If the Company has an option to redeem a Discount Note, or the Holder has
an option to cause a Discount Note to be repurchased, prior to the Discount
Note's stated maturity, such option will be presumed to be exercised if, by
utilizing any date on which such Discount Note may be redeemed or repurchased as
the maturity date and the amount payable on such date in accordance with the
terms of such Discount Note (the "redemption price") as the stated redemption
price at maturity, the yield on the Discount Note would be (i)
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in the case of an option of the Company, lower than its yield to stated
maturity, or (ii) in the case of an option of the Holder, higher than its yield
to stated maturity. If such option is not in fact exercised when presumed to be
exercised, the Note would be treated solely for original issue discount purposes
as if it were redeemed or repurchased, and a new Note were issued, on the
presumed exercise date for an amount equal to the Discount Note's adjusted issue
price on that date.
Election to Treat All Interest as Original Issue Discount
Holders may generally make an election under the Internal Revenue Code of
1986, as amended (the "Code"), to include in income all interest (including
stated interest, acquisition discount, original issue discount, de minimis
original issue discount, market discount, de minimis market discount, and
unstated interest, as adjusted by any amortizable bond premium or acquisition
premium) that accrues on a debt instrument by using the constant yield method
applicable to original issue discount, subject to certain limitations and
exceptions. This election is applicable to a specific debt instrument, or may be
made for a class or group of debt instruments. Such election may not be revoked
without the consent of the IRS.
In applying the constant yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
Holder's adjusted basis in the Note immediately after its acquisition, the issue
date of the Note will be the date of its acquisition by the electing Holder, and
no payments on the Note will be treated as payments of qualified stated
interest. If this election is made with respect to a Note with amortizable bond
premium, the electing Holder will be deemed to have elected to apply amortizable
bond premium against interest with respect to all debt instruments with
amortizable bond premium (other than debt instruments the interest on which is
excludable from gross income) held by such electing Holder as of the beginning
of the taxable year in which the Note with respect to which the election is made
is acquired or thereafter acquired. The deemed election with respect to
amortizable bond premium may not be revoked without the consent of the IRS.
If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Market Discount Note, as defined
below, then the electing Holder will be treated as having made the election
discussed below under "Market Discount" to include market discount in income
currently over the life of all debt instruments held or thereafter acquired by
such Holder.
Short-Term Notes
Different rules apply to Discount Notes having maturities of not more than
one year ("Short-Term Notes"). A Holder of a Short-Term Note who uses the cash
method of accounting is generally not required to accrue original issue discount
for United States federal income tax purposes. Such a Holder of a Short-Term
Note will be required to defer deductions for interest on borrowings allocable
to these Short-Term Notes in an amount not exceeding the original issue discount
until the Short-Term Note is sold, exchanged, redeemed or retired, unless such
Holder makes an election to include original issue discount in income as it
accrues. This election is applicable to all of the Holder's subsequently
acquired short-term obligations, and is irrevocable without the consent of the
IRS. If such an election is made, the interest deduction will not be deferred,
but such Holder will be required to include in income currently, as described
below, the discount attributable to the Short-Term Note and other
subsequently-acquired short-term obligations. In the case of a Holder not
required and not electing to include the discount in income currently, any gain
realized on the sale, exchange, redemption or retirement of such Short Term Note
will be ordinary income to the extent of the original issue discount accrued
through the date thereof.
Holders that report income for United States federal income tax purposes
under the accrual method and certain other Holders (including banks, dealers in
securities and cash method Holders that so elect) are required to include in
income currently the discount attributable to such Short-Term Notes as (i)
original issue discount under the constant yield method described above, or (ii)
pursuant to an election, as acquisition discount. "Acquisition discount" is the
excess of the stated redemption price at maturity of the Short-Term Note over
the Holder's basis for the Short-Term Note. Acquisition discount will be
included in income on a straight-line basis unless an election is made to
include such acquisition discount in income under the
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constant-yield method. The basis of any Short-Term Note in the hands of a Holder
shall be increased by the amount of original issue discount or acquisition
discount previously included in such Holder's income and reduced by any payments
previously made with respect to such Short-Term Note.
For purposes of determining the amount of original issue discount or
acquisition discount subject to these rules, the original issue discount
regulations provide that no interest payments on a Short-Term Note are qualified
stated interest, but instead such interest payments are included in the
Short-Term Note's stated redemption price at maturity.
Market Discount
If a Holder purchases a Note, other than a Discount Note, for an amount
that is less than its issue price or, in the case of a Discount Note, for an
amount that is less than its adjusted issue price as of the purchase date (a
"Market Discount Note"), the amount of the difference will be treated as "market
discount", unless such difference is less than a specified de minimis amount.
In general, any gain realized on the sale, exchange, redemption or
retirement of a Market Discount Note will be treated as ordinary income to the
extent that such gain does not exceed the accrued market discount on such Note.
Alternatively, a Holder of a Market Discount Note may elect to include market
discount in income currently over the life of the Market Discount Note. Such an
election applies to all subsequently acquired debt instruments with market
discount. Such an election is irrevocable without the consent of the IRS. Market
discount accrues on a straight-line basis unless the Holder elects to accrue
such discount on a constant yield to maturity basis. Such an election is
applicable only to the Market Discount Note with respect to which it is made and
is irrevocable without the consent of the IRS. A Holder of a Market Discount
Note that does not elect to include market discount in income currently
generally will be required to defer deductions for interest on borrowings
allocable to such Note in an amount not exceeding the accrued market discount on
such Note until the maturity or disposition of such Note.
The market discount rules do not apply to a Short-Term Note.
Refer to Pricing Supplements
Certain of the Discount Notes may contain features making them subject to
rules that differ from the general rules discussed above. Pricing Supplements
relating to Notes containing features subject to different rules will describe
the applicable United States federal income tax consequences of such features.
Reporting Obligation
The Company is required to report to the IRS the amount of original issue
discount accrued on Discount Notes held of record by United States persons other
than corporations and other exempt Holders. The amount required to be reported
by the Company may not be equal to the amount of original issue discount
required to be reported as taxable income by a Holder that purchases such
Discount Notes at a price that differs from the issue price of the Notes.
FOREIGN CURRENCY NOTES
The following summary relates to Notes the payments on which are
denominated in or determined by reference to a Foreign Currency.
Payments of Interest in a Foreign Currency
Upon receipt of an interest payment in a Foreign Currency, cash method
Holders will be required to include in income the U.S. dollar value of the
interest payment, based on the exchange rate in effect on the date of receipt,
regardless of whether the payment is in fact converted into U.S. dollars.
Upon receipt of an interest payment in a Foreign Currency, accrual method
Holders may determine the amount of income to be recognized with respect to such
interest payment in accordance with either of two
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methods. Under the first method, the amount of income recognized will be based
on the average exchange rate in effect during the accrual period (or, with
respect to an accrual period that spans two taxable years, on the average rate
for the partial period within the taxable year).
Under the second method, an accrual method Holder may elect to translate
such accrued interest income into U.S. dollars using the rate of exchange on the
last day of the accrual period (or, with respect to an accrual period that spans
two taxable years, using the rate of exchange on the last day of the taxable
year). If the last day of an accrual period is within five business days of the
date of receipt of the accrued interest, a Holder applying the second method,
may translate such interest using the rate of exchange on the date of receipt.
An election to apply the second method will apply to other debt obligations held
and subsequently acquired by the Holder and may not be changed without the
consent of the IRS.
Upon receipt of an accrued interest payment paid in Foreign Currency, a
Holder will recognize exchange gain or loss, which will be treated as ordinary
income or loss, measured by the difference in exchange rates between the time of
accrual (calculated under either of the two methods set out above) and the time
of receipt of payment.
Purchase, Sale and Retirement of Foreign Currency Notes
A Holder who purchases a Note with previously owned Foreign Currency will
recognize ordinary income or loss in an amount equal to the difference, if any,
between such Holder's tax basis in the Foreign Currency and the U.S. dollar fair
market value of the Note on the date of purchase.
Exchange gain or loss recognized upon the sale, exchange, redemption or
retirement of a Note (attributable to fluctuations in currency exchange rates)
will be ordinary income or loss which will not be treated as interest income or
expense. Exchange gain or loss will equal the difference between the U.S. dollar
value of the Foreign Currency principal amount of the Note, determined on the
date such payment is received or the Note is disposed of, and the U.S. dollar
value of the Foreign Currency principal amount of the Note, determined on the
date the Holder acquired the Note. Such exchange gain or loss will be recognized
only to the extent of the total gain or loss realized by the Holder on the sale,
exchange, redemption or retirement of the Note.
Foreign Currency Discount Notes
Original issue discount for any accrual period on a Discount Note that is
denominated in a Foreign Currency will be determined in the Foreign Currency and
then translated into U.S. dollars in the same manner as stated interest accrued
by an accrual basis Holder. Upon receipt of an amount attributable to original
issue discount (whether in connection with a payment of interest or the sale or
retirement of a Note), a Holder may recognize ordinary income or loss.
Amortizable Bond Premium and Market Discount Notes
With respect to a Note issued with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. At the time amortized bond premium offsets
interest income, a Holder should recognize exchange gain or loss taxable as
ordinary income equal to the difference between the exchange rates at that time
and at the time of the acquisition of the Note.
In the case of a Note with market discount, (i) market discount is
determined in units of the Foreign Currency, (ii) accrued market discount taken
into account upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note (other than accrued market
discount required to be taken into account currently) is translated into U.S.
dollars at the exchange rate on the date of such receipt or disposition, and no
exchange gain or loss is recognized on such accrued market discount, and (iii)
accrued market discount currently includable in income by a Holder for any
accrual period is translated into U.S. dollars on the basis of the average
exchange rate in effect during such accrual period, and exchange
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gain or loss is determined by the difference in exchange rates between the time
of accrual and the time of receipt of payment.
Exchange of Foreign Currencies
A Holder will have a tax basis in any Foreign Currency received as interest
or on the sale, exchange, redemption or retirement of a Note equal to the U.S.
dollar value of such Foreign Currency, determined at the time the interest is
received or at the time of the sale, exchange, redemption or retirement. Any
gain or loss realized by a Holder on a sale or other disposition of Foreign
Currency (including its exchange for U.S. dollars or its use to purchase Notes)
will be ordinary income or loss.
Indexed Notes
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to currency indexed Notes or
other Indexed Notes.
NON-UNITED STATES PERSONS
Subject to the discussion of "Backup Withholding" below, payments of
principal (and premium, if any) and interest, including original issue discount,
by the Company or its agent (in its capacity as such) to any Holder of a Note
that is not a United States person will not be subject to United States federal
withholding tax provided, in the case of interest, including original issue
discount, that (i) such Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote, (ii) such Holder is not a controlled foreign corporation for
United States tax purposes that is related to the Company (directly or
indirectly) through stock ownership, and (iii) the appropriate certification
requirements have been met. Appropriate certification requires a statement from
either (A) the beneficial owner of the Note that certifies to the Company or its
agent, under penalties of perjury, that it is not a United States person and
provides its name and address, or (B) a securities clearing organization, bank
or other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "financial institution") and holds the Note,
that certifies to the Company or its agent under penalties of perjury that such
statement has been received from the beneficial owner by it or by another
financial institution and furnishes the payor with a copy thereof.
If a Holder of a Note that is not a United States person is engaged in a
trade or business in the United States and interest, including original issue
discount, on the Note is effectively connected with the conduct of such trade or
business, such Holder, although exempt from the withholding tax discussed in the
preceding paragraph, may be subject to United States federal income tax on such
interest and original issue discount and gain on disposition, if any, in the
same manner as if it were a United States person. In addition, such a Holder
that is a foreign corporation may be subject to the 30% branch profits tax
(subject to adjustment pursuant to an applicable treaty) on its effectively
connected earnings and profits (including original issue discount and other
interest). Instead of the certificate described in the preceding paragraph, such
Holder must provide the Company or its agent with a properly executed IRS Form
4224 to claim exemption from United States federal withholding tax. However,
such a Holder may still be required to provide the certification described in
the preceding paragraph in order to obtain an exemption from backup withholding,
discussed below.
Any capital gain, market discount or exchange gain realized upon sale,
exchange, redemption or retirement of a Note by a Holder that is not a United
States person will not be subject to United States federal income or withholding
taxes if (i) such gain (including market discount) is not effectively connected
with a United States trade or business of the Holder, and (ii) in the case of an
individual, such Holder (A) is not present in the United States for 183 days or
more in the taxable year of the sale, exchange, redemption or retirement, or (B)
does not have a tax home (as defined in Section 911(d)(3) of the Code) in the
United States in the taxable year of the sale, exchange, retirement or other
disposition and the gain is not attributable to an office or other fixed place
of business maintained by such individual in the United States.
Notes held by an individual who is neither a citizen nor a resident of the
United States for United States federal income tax purposes at the time of such
individual's death will not be subject to United States federal
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estate tax provided that the income from the Notes was not or would not have
been effectively connected with a United States trade or business of such
individual and that such individual qualified for the exemption from United
States federal withholding tax (without regard to the certification
requirements) that is described above.
PROSPECTIVE PURCHASERS OF THE NOTES THAT ARE NOT UNITED STATES PERSONS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE CONSEQUENCES TO THEM
OF OWNERSHIP OF NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
BACKUP WITHHOLDING AND INFORMATION REPORTING
For each calendar year in which the Notes are outstanding, the Company is
required to provide the IRS with certain information, including the Holder's
name, address and taxpayer identification number (either the Holder's Social
Security number or its employer identification number, as the case may be), the
aggregate amount of principal and interest paid (including original issue
discount, if any) to that Holder during the calendar year and the amount of tax
withheld, if any. This obligation, however, does not apply with respect to
certain Holders that are United States persons, including corporations,
tax-exempt organizations, qualified pension and profit sharing trusts and
individual retirement accounts ("exempt recipients").
In the event that a Holder that is not an exempt recipient fails to supply
its correct taxpayer identification number in the manner required by applicable
law or underreports its tax liability, the Company, its agents or paying agents
or a broker may be required to "backup" withhold a tax equal to 31% of each
payment of interest (including original issue discount) and principal (and
premium, if any) on the Notes. This backup withholding is not an additional tax
and may be credited against the Holder's United States federal income tax
liability, provided that the required information is furnished to the IRS.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any other agent
thereof (in its capacity as such) to a Holder of a Note with respect to which
the Holder has provided required certification that it is not a United States
person under penalties of perjury as set forth in clause (iii) in the first
paragraph under "Non-United States Persons") or has otherwise established an
exemption, provided that neither the Company nor such agent has actual knowledge
that the Holder is a United States person or that the conditions of any other
exemption are not in fact satisfied.
Payment of the proceeds from the sale of a Note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that if the broker is (i) a United States person, (ii) a
controlled foreign corporation for United States tax purposes, or (iii) a
foreign person, 50% or more of whose gross income from all sources for the
three-year period ending on the close of its taxable year preceding the payment
was effectively connected with a United States trade or business, in which case
information reporting may apply to such payments. Payment of the proceeds from a
sale of a Note to or through the United States office of a broker is subject to
information reporting and backup withholding unless the Holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding, provided that
neither the Company nor such broker has actual knowledge that the Holder is a
United States person or that the conditions of any other exemption are not in
fact satisfied.
NOTE WARRANTS
The Company also may issue from time to time warrants to purchase Notes
("Note Warrants"). The Note Warrants may be issued together with or separately
from any Notes and, if issued together with Notes, may be attached to or
separate from such Notes. The particular terms of any issue of Note Warrants,
the terms of the Warrant Agreement under which such Note Warrants are issued,
the Notes issuable upon exercise of such Note Warrants, any initial public
offering price, any net proceeds to the Company and any other specific terms of
such issue of Note Warrants and a description of any material federal income tax
consequences to holders thereof will be set forth in a supplement to this
Prospectus Supplement respecting
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such issue of Note Warrants (a "Note Warrant Supplement"). Unless accompanied by
a Note Warrant Supplement, no Note Warrants are offered by this Prospectus
Supplement.
PLAN OF DISTRIBUTION
Under the terms of a Distribution Agreement dated March 21, 1996, the Notes
are being offered on a continuing basis by the Company through the Agents, each
of which has agreed to use its reasonable best efforts to solicit offers to
purchase the Notes. The Company will pay each Agent a commission ranging from
.125% to .750% of the principal amount of each Note sold through such Agent. The
commission payable by the Company to the Agents with respect to Notes with
maturities greater than 30 years will be negotiated at the time the Company
issues such Notes and will be disclosed in the applicable Pricing Supplement.
The Company will have the sole right to accept offers to purchase Notes and may
reject any such offer, in whole or in part. Each Agent will have the right, in
its discretion reasonably exercised, without notice to the Company, to reject
any offer to purchase Notes received by it, in whole or in part. The Company may
sell Notes to any Agent, acting as principal, at a discount or premium to be
agreed upon at the time of sale, for resale to investors and other purchasers at
varying prices related to prevailing market prices at the time of such resale or
at a fixed public offering price, as determined by such Agent. Unless otherwise
indicated in the applicable Pricing Supplement, any Note sold to an Agent as
principal shall be purchased by such Agent at a price equal to 100% of the
principal amount thereof less a percentage equal to the commission applicable to
an agency sale of a Note of identical maturity. In addition, any Agent may offer
the Notes it has purchased as principal to other dealers, or may use a selling
or dealer group, in connection with the resale of the Notes purchased, subject
to the Company's prior approval. Such Agent may sell Notes to any such approved
dealer at a discount and, unless otherwise specified in the Pricing Supplement,
such discount allowed to any dealer will not be in excess of the discount to be
received by such Agent from the Company. After the initial public offering of
any Notes, the public offering price, concession and discount for such resales
may from time to time be varied by such Agent. The Company has reserved the
right to sell Notes directly to investors from time to time on its own behalf
and on such sales no discounts will be allowed and no commissions will be paid.
In addition the Company may appoint additional agents or terminate existing
Agents.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately available
funds in The City of New York.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Act"). The Company has agreed to indemnify the
Agents against and contribute toward certain liabilities, including liabilities
under the Act. The Company has agreed to reimburse the Agents for certain
expenses.
In addition to offering Notes through the Agents as described herein, the
Company may sell other Debt Securities. Under certain circumstances, the sale of
any such Debt Securities may reduce correspondingly the maximum aggregate amount
of Notes that may be offered by this Prospectus Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be listed on any securities exchange and will not have an established
trading market when issued. Each Agent may make a market in the Notes, but such
Agent is not obligated to do so and may discontinue market-making at any time
without notice. There can be no assurance that the Notes offered by this
Prospectus Supplement will be sold or that there will be a secondary market for
the Notes.
The Agents and their affiliates may engage in transactions with and perform
services for the Company or its affiliates in the ordinary course of business.
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PROSPECTUS
LOGO
TRW INC.
Debt Securities and Warrants
TRW Inc. (the "Company") intends to issue from time to time debt securities
(the "Debt Securities") and warrants to purchase Debt Securities (the
"Warrants") from which the Company will receive proceeds of up to an aggregate
of $500,000,000 (or the equivalent in foreign denominated currency or units
consisting of multiple currencies) and which will be offered on terms to be
determined at the time of sale. The Debt Securities and Warrants may be issued
in one or more series with the same or various maturities, at par or at a
premium or with an original issue discount. The purchase price for and the
principal of and any premium and any interest on the Debt Securities and
Warrants may be payable in U.S. dollars or foreign denominated currency or
currency units.
The specific title, aggregate principal amount, designated currency or
currency units, offering price, maturity, rate (or method of calculation) and
time of any payment of interest, any right on the part of the holders of Debt
Securities to require the repurchase thereof by the Company, any redemption,
sinking fund and other terms and any securities exchange listing of Debt
Securities (the "Offered Debt Securities") and the duration, offering price,
exercise price and detachability of any Warrants (the "Offered Warrants") in
respect of which this Prospectus is being delivered are set forth in supplements
to this Prospectus (the "Prospectus Supplement") together with the terms of the
offering. The Offered Debt Securities and Offered Warrants are herein
collectively referred to as the "Offered Securities".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Company may sell the Debt Securities and Warrants offered hereby in any
one or more of the following ways: (i) directly to purchasers; (ii) through
agents; (iii) to dealers; or (iv) to underwriters. If any underwriters, agents
or dealers are involved in the sale of the Offered Securities, their names and
any applicable fee, commission or discount arrangements with them are set forth
in the Prospectus Supplement. See "Plan of Distribution". The net proceeds to
the Company from such sale are also set forth in the Prospectus Supplement.
September 15, 1995
<PAGE> 29
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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<PAGE> 30
No person has been authorized to give any information or to make any
representations not contained in this Prospectus or any Prospectus Supplement in
connection with the offer made by this Prospectus or any Prospectus Supplement
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or by any underwriter, dealer or
agent. This Prospectus and any Prospectus Supplement do not constitute an offer
to sell or a solicitation of an offer to buy any of the Debt Securities or
Warrants offered hereby in any jurisdiction in which or to any person to whom it
is unlawful to make such offer or solicitation. This Prospectus and any
Prospectus Supplement do not constitute an offer to sell or a solicitation of an
offer to buy any securities other than those to which they relate. Neither the
delivery of this Prospectus nor any Prospectus Supplement nor any sale of or
offer to sell the Debt Securities or Warrants offered hereby shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof or that the information herein is
correct as of any time subsequent to its date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. Such reports, proxy statements and other information
concerning the Company can also be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005; the Chicago
Stock Exchange, Incorporated, 440 South LaSalle Street, Chicago, Illinois 60605;
The Pacific Stock Exchange Incorporated, 301 Pine Street, San Francisco,
California 94104; and the Philadelphia Stock Exchange Inc., Stock Exchange
Building, 1900 Market Street, Philadelphia, Pennsylvania 19103.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in such
documents). Requests for such copies should be directed to Financial Services,
TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124. Telephone (216) 291-7654.
The following documents filed by the Company with the Commission (File No.
1-2384) are hereby incorporated by reference in this Prospectus:
1. Annual Report on Form 10-K for the year ended December 31, 1994;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1995;
3. Quarterly Report on Form 10-Q for the quarter ended June 30, 1995;
and
4. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since December 31, 1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities and Warrants shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents.
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Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY
GENERAL
The Company is an international company that provides advanced technology
products and services. The principal businesses of the Company and its
subsidiaries are the design, manufacture and sale of products and the
performance of systems engineering, research and technical services for industry
and the United States Government in three industry segments: Automotive; Space &
Defense; and Information Systems & Services. The Company's principal products
and services include automotive systems and components; spacecraft; software and
systems engineering support services; electronic systems, equipment and
services; and information systems and services.
The Company's Automotive segment designs, manufactures and sells a broad
range of steering, suspension, engine, safety, engineered fastening, electrical,
electronic, electromechanical and other components and systems as original
equipment for passenger cars, commercial vehicles, trucks, buses, farm machinery
and off-highway vehicles. These products include occupant safety systems such as
seat belt systems and inflatable restraint systems, manual and power steering
gears, engine valves and valve train components, suspension components,
electronic monitoring and control systems, electromechanical assemblies,
fasteners, stud welding systems and other components. The Company also
manufactures and sells, for use as aftermarket parts, a broad line of engine and
chassis parts for cars, trucks, off-highway vehicles and other miscellaneous
uses.
The Company's Space & Defense segment includes spacecraft, software and
systems engineering support services and electronic systems, equipment and
services. The Company's spacecraft activities include the design and manufacture
of spacecraft equipment, propulsion subsystems, electro-optical and instrument
systems, spacecraft payloads, high-energy lasers and laser technology and other
high-reliability components. The Company's software and systems engineering
support services are in the fields of command and control, security for defense
and nondefense applications, counterterrorism, undersea surveillance,
antisubmarine warfare and other high-technology space and defense mission
support systems, management of radioactive waste automated fingerprint matching,
upgrading of the nation's air traffic control program and other civilian
applications. The Company's electronic systems, equipment and services include
the design and manufacture of communications systems, avionics systems (such as
unmanned aerial vehicles) and other electronic technologies for space and
defense applications.
The Company's Information Systems & Services segment includes consumer
credit information services, real estate information services, direct marketing
services, imaging systems engineering and integration services and business
credit information services.
The Company was incorporated in the State of Ohio on June 17, 1916. The
principal executive offices of the Company are located at 1900 Richmond Road,
Cleveland, Ohio 44124, and the telephone number is (216) 291-7000.
USE OF PROCEEDS
Except as otherwise set forth in the Prospectus Supplement, the Company
anticipates that some or all of the net proceeds from the sale of the Debt
Securities and Warrants may be used by the Company, together with internally
generated funds and possible future borrowings, for capital expenditures,
possible future acquisitions, repayment of short-term borrowings, future
repurchases by the Company of its Common Stock, increased working capital
requirements and other corporate purposes.
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RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
The following table shows the ratio of earnings to fixed charges of the
Company and its subsidiaries. For purposes of this ratio, "earnings" consist of
earnings before income taxes adjusted for minority interests in earnings of
consolidated subsidiaries, plus fixed charges, less undistributed earnings of
affiliates less than fifty percent of which are owned by the Company. "Fixed
charges" consist of interest on borrowed funds, amortization of debt discount
and expense and one-third of rental expense which is representative of the
interest factor.
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED ------------------------------------
JUNE 30, 1995 1994 1993 1992 1991 1990
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........... 5.8x 4.2 x 2.8 x 2.4 x 0.4 x(1) 2.2 x
<FN>
- ---------------
(1) The 1991 loss before income taxes of $129.4 million includes a charge of
$343 million to cover costs associated with restructuring activities.
Excluding this charge, the ratio of earnings to fixed charges would have
been 1.7x.
</TABLE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued in one or more series under an
indenture dated as of May 1, 1986, as supplemented (the "Indenture"), between
the Company and The Chase Manhattan Bank (National Association), as successor
trustee (the "Trustee") to Mellon Bank, N.A. The following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all the provisions of the
Indenture.
GENERAL
The Indenture does not limit the amount of Debt Securities which can be
issued and provides that Debt Securities may be issued up to the aggregate
principal amount which may be authorized from time to time by the Company.
Reference is made to the Prospectus Supplement for the following terms of the
Offered Debt Securities: (i) the title, aggregate principal amount and
authorized denominations of the Offered Debt Securities; (ii) the percentage of
the principal amount at which such Offered Debt Securities will be issued; (iii)
the date on which the Offered Debt Securities will mature; (iv) the rate per
annum (which may be fixed or floating), if any, at which the Offered Debt
Securities will bear interest or the method of determining such rate; (v) the
times at which any such interest will be payable and the record dates with
respect thereto; (vi) any sinking fund or redemption terms; (vii) any right of
the holders to require the Company to repurchase the Offered Debt Securities;
(viii) the currency or currencies in which the purchase price for, the principal
of and any premium and any interest on the Offered Debt Securities may be
payable; (ix) if the currency in which the purchase price for, the principal of
and any premium and any interest on the Offered Debt Securities may be payable
is at the purchaser's election, the manner in which such an election may be
made; (x) any securities exchange on which the Offered Debt Securities will be
listed; (xi) whether the Debt Securities are to be issued in the form of one or
more global securities representing such Debt Securities (each, a "Global
Security") and, if so, the identity of a depository (the "Depository") for such
Global Securities; and (xii) any other specific terms. In the case of Offered
Debt Securities which are registered, principal, any premium, and any interest
on the Offered Debt Securities may be paid at the option of the Company by check
mailed to the address of the person entitled thereto as it appears in the
register for the Offered Debt Securities. Interest payments will be subject to
applicable withholding taxes.
The Debt Securities will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company.
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<PAGE> 33
No service charge will be made for any transfer or exchange of the Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith (Section 3.05
of the Indenture).
Debt Securities of a series may be issuable in the form of one or more
Global Securities, which will be denominated in an amount equal to the aggregate
principal amount of such Debt Securities. See "Global Securities" below.
The Debt Securities may be issued as discounted Debt Securities (bearing no
interest or interest at a rate which at the time of issuance is below market
rates) to be sold at a substantial discount below the stated principal amount.
Federal income tax consequences and other special considerations applicable to
any such discounted Debt Securities will be described in the Prospectus
Supplement relating thereto.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, the Depository identified in the Prospectus Supplement relating to such
series. Unless and until it is exchanged in whole or in part for Debt Securities
in definitive form, a Global Security may not be transferred except as a whole
by or to the Depository for such Global Security or its successor, or any
nominee of such Depository or successor Depository. (Section 2.04 of the
Indenture.)
The specific terms of the depository arrangement with respect to any series
of Debt Securities and the rights of and limitations on owners of beneficial
interests in Global Securities representing Debt Securities will be described in
the Prospectus Supplement relating to such Debt Securities.
LIMITATION ON LIENS
The Indenture provides that, so long as any of the Debt Securities remain
outstanding, the Company will not, nor will it permit any Domestic Subsidiary
(as defined) to, create or assume any mortgage, security interest, pledge or
lien ("mortgage") upon any Principal Property (as defined) or upon any shares of
capital stock or indebtedness of any Domestic Subsidiary if such mortgage
secures or is intended to secure, directly or indirectly, the payment of any
indebtedness for money borrowed evidenced by notes, bonds, debentures or other
similar evidences of indebtedness without providing that the Debt Securities
shall be secured equally and ratably by such mortgage. This restriction does not
apply to (i) mortgages on any Principal Property existing at the time of the
acquisition thereof or securing the purchase price thereof or securing the cost
of construction of or improvement on a Principal Property that are created or
assumed contemporaneously with, or within 120 days after, such acquisition or
completion of such construction or improvement; (ii) mortgages on property of a
corporation existing at the time such corporation becomes a Domestic Subsidiary
or is merged or consolidated with the Company or a Domestic Subsidiary or
existing at the time of a sale, lease or other disposition of the properties of
such corporation (or a division thereof) or other Person (as defined) as an
entirety or substantially as an entirety to the Company or a Domestic
Subsidiary; (iii) mortgages securing indebtedness of the Company or a Domestic
Subsidiary to the Company or a Wholly Owned Domestic Subsidiary (as defined);
(iv) mortgages in favor of the United States or any State or Territory or
Possession thereof, or any foreign country, or any department, agency,
instrumentality or political subdivision of any of such domestic or foreign
jurisdictions, to secure partial, progress, advance or other payments pursuant
to any contract or statute or to secure any debt incurred for the purpose of
financing all or part of the purchase price or the cost of constructing the
property subject to such mortgages; and (v) mortgages representing the
extension, renewal or replacement (or successive extensions, renewals or
replacements) of mortgages referred to in the foregoing clauses (i) through (iv)
(Section 5.05 of the Indenture). "Principal Property" is defined in the
Indenture as each manufacturing plant, engineering facility or research facility
owned or leased by the Company or a Domestic Subsidiary other than any such
plant or facility or portion thereof which the Directors reasonably determine
not to be of material importance to the Company and its Subsidiaries (as
defined) taken as a whole (Section 1.01 of the Indenture). See also "Exempted
Indebtedness".
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<PAGE> 34
LIMITATION ON SALE AND LEASEBACK
Sale and leaseback transactions by the Company or any Domestic Subsidiary
(except for transactions involving temporary leases for a term of three years or
less and except for transactions among themselves) involving any Principal
Property are prohibited unless the sale is for an amount at least equal to its
fair value and either (a) the Company or such Domestic Subsidiary would be
entitled, pursuant to clauses (i) through (v) of the foregoing Limitation on
Liens covenant, to create Debt (as defined) secured by a mortgage on the
Principal Property to be leased in an amount equal to the Attributable Debt (as
defined) with respect to such transaction without equally and ratably securing
the Debt Securities, or (b) the Company, within 120 days, applies an amount
equal to the net proceeds of the sale to the redemption of the Debt Securities
or other Consolidated Funded Debt (as defined) of the Company ranking prior to
or on a parity with the Debt Securities (or, in lieu of such redemption,
delivers Debt Securities to the Trustee for cancellation) (Section 5.06 of the
Indenture). "Attributable Debt" is defined in the Indenture to mean, as to any
particular lease under which any Person (as defined) is liable, the lesser of
(x) the fair value of the property subject to such lease (as determined by the
Directors of the Company) or (y) the total net amount of rent required to be
paid by such Person under such lease during the remaining term thereof,
discounted from the respective due dates thereof to such date at the actual
interest factor included in such rent. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
the rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water rates and similar charges. In the case of any lease
which is terminable by the lessee upon the payment of a penalty, such net amount
shall also include the amount of such penalty, but no rent shall be considered
as required to be paid under such lease subsequent to the first date upon which
it may be so terminated (Section 1.01 of the Indenture). See also "Exempted
Indebtedness".
EXEMPTED INDEBTEDNESS
Notwithstanding the limitations on mortgages and sale and leaseback
transactions outlined above, the Company or any Domestic Subsidiary is permitted
to create or assume mortgages or to enter into sale and leaseback transactions,
provided that at the time of such event, and after giving effect thereto, the
sum of (i) outstanding indebtedness incurred after the date of the Indenture and
secured by a mortgage (other than certain permitted mortgages) plus (ii) the
Attributable Debt (as defined) in respect of sale and leaseback transactions
entered into after the date of the Indenture (other than certain permitted sale
and leaseback transactions) will not exceed 15% of the Consolidated Net Tangible
Assets (as defined) of the Company (Sections 1.01, 5.05(b) and 5.06(b) of the
Indenture).
Other than the restrictions on liens and sale and leaseback transactions
described above, the Indenture and the Debt Securities do not contain any
covenants or other provisions designed to afford holders of the Debt Securities
protection in the event of a highly leveraged transaction involving the Company.
EVENTS OF DEFAULT
The Indenture defines an Event of Default with respect to any series of
Debt Securities as being any one of the following events, unless it is
inapplicable, and such other events as may be established for the Debt
Securities of a particular series: (a) failure of the Company for 60 days in any
payment of interest on any Debt Securities of such series; (b) failure of the
Company to pay principal or premium, if any, when due with respect to any Debt
Securities of such series; (c) failure of the Company for 10 days in the
satisfaction of any sinking fund obligation with respect to any Debt Securities
of such series; (d) failure of the Company for 75 days after appropriate notice
to perform any other covenant or agreement in the Indenture applicable to such
series; or (e) certain events of bankruptcy, insolvency or reorganization. No
Event of Default with respect to a particular series of Debt Securities issued
under the Indenture necessarily constitutes an Event of Default with respect to
any other series of Debt Securities issued thereunder. In case an Event of
Default shall occur and be continuing with respect to any series of Debt
Securities, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debt Securities of such series then outstanding may
declare the principal of such series (or a portion of the principal amount in
the case of certain discounted Debt Securities) to be due and payable (Section
7.01 of the Indenture). Any Event of Default with respect to a particular series
of Debt
7
<PAGE> 35
Securities, except in each case a failure with respect to such Debt Security to
pay principal, premium, if any, or interest, if any, or any sinking fund
installment, if any, may be waived by the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of such series (Section 7.06
of the Indenture).
The Indenture requires the Company to file annually with the Trustee an
Officers' Certificate (as defined) as to the existence of defaults in
performance of certain covenants in the Indenture (Section 5.08 of the
Indenture). The Indenture provides that the Trustee may withhold notice to the
holders of the Debt Securities of a particular series of any default (except in
payment of principal, premium, if any, or interest, if any, or in the making of
any sinking fund payment, if any) with respect to such series of Debt Securities
if the Trustee determines in good faith that the withholding of notice is in the
interest of the holders of such Debt Securities (Section 7.07 of the Indenture).
The holders of a majority in aggregate principal amount of all outstanding
Debt Securities will have the right, subject to certain limitations, to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee
(Section 7.06 of the Indenture). The Indenture provides that in case an Event of
Default shall occur (which shall not have been cured or waived), the Trustee
will be required to exercise such of its rights and powers under the Indenture
and to use the degree of care and skill in their exercise that a prudent man
would exercise or use in the conduct of his own affairs (Section 8.01 of the
Indenture). Subject to the provisions of Section 8.01, the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at the
request of any of the holders of the Debt Securities, unless they shall have
offered to the Trustee reasonable security or indemnity (Section 8.02 of the
Indenture).
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may consolidate with, or sell or
convey all or substantially all of its assets to, or merge into, any other
entity, if (i) the corporation formed by such consolidation or into which the
Company is merged, or the entity which acquired all or substantially all of the
Company's assets shall be organized and existing under the laws of the United
States of America or any state thereof and the resulting entity expressly
assumes the due and punctual payment of the principal of (and premium, if any)
and interest on the Debt Securities according to their tenor and the due and
punctual performance and observance of all of the covenants and conditions of
the Indenture to be performed, observed or satisfied by the Company and (ii)
immediately after such merger or consolidation, or such sale or conveyance, no
Event of Default shall have occurred or be continuing and such successor entity
shall not immediately thereafter have outstanding any secured indebtedness not
permitted by Section 5.05 of the Indenture unless such entity secures the Debt
Securities in accordance with Section 12.03 of the Indenture (Section 12.01 of
the Indenture).
DEFEASANCE
The Indenture provides that the Company, at its option, either (a) will be
discharged from any and all obligations with respect to any series of Debt
Securities (except for certain obligations to register the transfer or exchange
of the Debt Securities, replace stolen, lost or mutilated Debt Securities,
maintain paying agencies and hold moneys for payment in trust) or (b) need not
comply with certain restrictive covenants of the Indenture (as described under
"Limitation on Liens" and "Limitation on Sale and Leaseback") with respect to
any series of Debt Securities, upon the deposit with the Trustee (or, in the
case of a discharge of obligations, 91 days after such deposit), in trust, of
money or the equivalent in securities of the government that issued the currency
in which the Debt Securities are denominated or government agencies backed by
the full faith and credit of such government, or a combination thereof, which
through the payment of interest thereon and principal thereof in accordance with
their terms will provide money in an amount sufficient to pay all the principal
(including any mandatory sinking fund payments) of, and interest on, and any
repurchase obligations with respect to, such series of Debt Securities on the
dates such payments are due in accordance with the terms of the Debt Securities.
To exercise any such option, no Event of Default, or event which with notice or
lapse of time would become an Event of Default, with respect to such series of
Debt Securities shall have occurred and be continuing. The Company is required
to deliver to the Trustee an opinion of counsel to the effect that the deposit
and related defeasance would not cause the holders of the Debt Securities to
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<PAGE> 36
recognize income, gain or loss for United States federal income tax purposes
and, in the case of a discharge of obligations, accompanied by a ruling to such
effect received from or published by the Internal Revenue Service (Section 13.02
of the Indenture).
MODIFICATION OF THE INDENTURE
With certain exceptions, the Indenture, the rights and obligations of the
Company and the rights of the holders of the Debt Securities may be modified by
the Company with the consent of the holders of not less than 66 2/3% in
aggregate principal amount of the outstanding Debt Securities of each series to
be affected; but, without the consent of the holders of all outstanding Debt
Securities affected thereby, no such modifications may be made which would among
other things (i) change the maturity of any Debt Security or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of interest thereon, or change the method of computing the
amount of principal thereof on any date or (ii) reduce the above-stated
percentage of Debt Securities, the consent of the holders of which is required
to modify or alter the Indenture. A supplemental indenture which changes or
eliminates any covenant or other provision of the Indenture which has expressly
been included solely for the benefit of one or more particular series of Debt
Securities, or which modifies the rights of the holders of Debt Securities of
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under the Indenture of the holders of Debt Securities
of any other series (Section 11.02 of the Indenture).
CONCERNING THE TRUSTEE
The Trustee acts as trustee under other indentures and trust agreements to
which the Company is a party under which approximately $589,030,000 aggregate
principal amount of debentures and notes were outstanding as of June 30, 1995.
The Trustee is also a depository for funds of the Company and performs other
services and provides credit facilities for the Company and its subsidiaries in
the ordinary course of business.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Debt Securities.
Warrants may be issued independently or together with any Debt Securities
offered by any Prospectus Supplement and may be attached to or separate from
such Debt Securities. The Warrants are to be issued under Warrant Agreements to
be entered into between the Company and a bank or trust company, as Warrant
Agent (the "Warrant Agent"), all as set forth in a Prospectus Supplement
relating to the particular issue of Warrants. The Warrant Agent will act solely
as an agent of the Company in connection with warrant certificates evidencing
the Warrants (the "Warrant Certificates") and will not assume any obligation or
relationship of agency or trust for or with any holders of Warrant Certificates
or beneficial owners of Warrants. Copies of the forms of Warrant Agreements,
including the forms of Warrant Certificates representing the Warrants, are filed
as an exhibit incorporated by reference to the Registration Statement to which
this Prospectus pertains. The following summaries of certain provisions of the
form of Warrant Agreements and Warrant Certificates do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Warrant Agreements and the Warrant Certificates.
GENERAL
If Warrants are offered, the Prospectus Supplement will describe the terms
of the Offered Warrants, including the following: (i) the offering price; (ii)
the currency in which the purchase price for Offered Warrants may be payable;
(iii) the designation, aggregate principal amount, currency and terms of the
Debt Securities purchasable upon exercise of the Offered Warrants; (iv) if
applicable, the designation and terms of the Debt Securities with which the
Offered Warrants are issued and the number of Offered Warrants issued with each
such Debt Security; (v) if applicable, the date on and after which the Offered
Warrants and the related Debt Securities will be separately transferable; (vi)
the principal amount of Debt Securities purchasable upon exercise of one Offered
Warrant and the price and currency at which such principal amount of Debt
Securities may be purchased upon such exercise; (vii) the date on which the
right to exercise the
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<PAGE> 37
Offered Warrants shall commence and the date (the "Expiration Date") on which
such right shall expire; (viii) federal income tax consequences; (ix) whether
the Offered Warrants represented by the Warrant Certificates will be issued in
registered or bearer form; and (x) any other terms of the Offered Warrants.
Warrant Certificates may be exchanged for new Warrant Certificates of
different denominations, may (if in registered form) be presented for
registration of transfer and may be exercised at the corporate trust office of
the Warrant Agent or any other office indicated in the Prospectus Supplement.
Prior to the exercise of their Warrants, holders of Warrants will not have any
of the rights of holders of the Debt Securities purchasable upon such exercise,
including the right to receive payments of principal of and any premium and any
interest on the Debt Securities purchasable upon such exercise or to enforce
covenants in the Indenture.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase such principal amount of
Debt Securities at such exercise price as shall in each case be set forth in, or
calculable from, the Prospectus Supplement relating to the Warrants. Warrants
may be exercised at any time up to 5:00 P.M. New York City time on the
Expiration Date set forth in the Prospectus Supplement relating to such
Warrants. After the close of business on the Expiration Date (or such later date
to which such Expiration Date may be extended by the Company), unexercised
Warrants will become void.
Warrants may be exercised by delivery to the Warrant Agent of payment as
provided in the Prospectus Supplement of the amount required to purchase the
Debt Securities purchasable upon such exercise together with certain information
set forth on the reverse side of the Warrant Certificate. Warrants will be
deemed to have been exercised upon receipt of the exercise price by the Warrant
Agent, subject to the receipt of the Warrant Certificate evidencing such
Warrants within five business days of the date of exercise. Upon receipt of such
payment and the Warrant Certificate properly completed and duly executed at the
corporate trust office of the Warrant Agent or any other office indicated in the
Prospectus Supplement prior to the close of business on the Expiration Date, the
Company will, as soon as practicable, issue and deliver pursuant to the
Indenture the Debt Securities purchasable upon such exercise. If fewer than all
of the Warrants represented by such Warrant Certificate are exercised, a new
Warrant Certificate will be issued for the remaining amount of Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities and Warrants being offered hereby
in any one or more, or in any combination, of the following ways: (i) directly
to purchasers; (ii) through agents; (iii) to dealers; or (iv) to underwriters.
Agents or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933.
Offers to purchase Debt Securities and Warrants may be solicited directly
by the Company or by agents designated by the Company. Any such agent will be
named, and any commissions payable by the Company to such agent (or the method
by which such commissions can be determined) will be set forth, in the
Prospectus Supplement.
If underwriters or dealers are used in the sale, the Offered Securities
will be acquired by the underwriters or dealers for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price, which may be changed, or at
varying prices determined at the time of sale. The Offered Securities may be
offered to the public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more of such firms. Unless
otherwise indicated in the Prospectus Supplement, the obligations of the
underwriters to purchase such Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all of
such Offered Securities if any are purchased. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Agents, dealers and underwriters may be entitled under agreements with them
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act of 1933, or to contribution to
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<PAGE> 38
payments which may be required to be made in respect thereof. Agents, dealers or
underwriters may engage in transactions with or perform services for the Company
in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by institutions to purchase
Debt Securities and Warrants from the Company at the offering price set forth in
the Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date stated in the Prospectus
Supplement. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions but shall in all cases be subject to the approval of the Company.
Contracts will be subject to those conditions set forth in the Prospectus
Supplement. A commission indicated in the Prospectus Supplement will be paid to
underwriters and agents soliciting purchases of Debt Securities and Warrants
pursuant to Contracts accepted by the Company. The underwriters and persons
soliciting such Contracts will have no responsibility for the validity or
performance of any Contracts.
The place and time of delivery for the Offered Securities will be set forth
in the Prospectus Supplement.
LEGAL OPINIONS
The legality of the Debt Securities and Warrants to be offered hereby will
be passed upon for the Company by Martin A. Coyle, Esq., 1900 Richmond Road,
Cleveland, Ohio 44124 and for any underwriters or dealers by Cravath, Swaine &
Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019. Mr. Coyle
is Executive Vice President, General Counsel and Secretary of the Company and is
also a shareholder of the Company.
EXPERTS
The consolidated financial statements of TRW Inc. incorporated by reference
in the Company's Annual Report (Form 10-K) for the year ended December 31, 1994,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
11
