<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 3, 1995)
BARNETT BANKS, INC.
$500,000,000
MEDIUM-TERM NOTES, SERIES D
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
Barnett Banks, Inc. (the "Corporation") may offer from time to time its
Medium-Term Notes, Series D (the "Notes", which term shall include Senior Notes
and Subordinated Notes, each as defined herein), with an aggregate principal
amount of up to U.S. $500,000,000 or the equivalent thereof in other currencies,
including composite currencies such as the European Currency Unit (the
"Specified Currency"). Such aggregate offering price is subject to reduction as
a result of the sale by the Corporation of certain other Securities. See "Plan
of Distribution." Each Note will mature nine months or more from its date of
issue, as agreed upon by the Corporation and the purchaser, and may be subject
prior to maturity to redemption at the option of the Corporation or repayment at
the option of the registered holder. Each Note will bear interest either at a
fixed rate (a "Fixed Rate Note") established by the Corporation at the date of
issue of such Note, which may be zero in the case of certain Original Issue
Discount Notes, or at a floating rate (a "Floating Rate Note"), as set forth
therein and specified in the applicable Pricing Supplement. A Fixed Rate Note
may pay a level amount in respect of both interest and principal amortized over
the life of the Note (an "Amortizing Note"). The Notes may be issued as Senior
Notes or Subordinated Notes, as set forth in the applicable Pricing Supplement.
Subordinated Notes will be subordinated to all Senior Indebtedness. See
"Description of Debt Securities -- Subordinated Securities" in the accompanying
Prospectus. Payment of the principal of the Subordinated Notes may be
accelerated only in the case of certain events of bankruptcy, insolvency or
reorganization of the Corporation. See "Description of Debt Securities --
Subordinated Securities" in the accompanying Prospectus.
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Fixed Rate Note will be payable each June 1 and December 1 and at maturity.
Interest on each Floating Rate Note is payable on the dates set forth herein and
in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, Amortizing Notes will pay principal and interest
semiannually each June 1 and December 1, or quarterly each March 1, June 1,
September 1 and December 1, and at maturity. Each Fixed Rate Note will mature on
a day nine months or more from the date of issue, as set forth in the applicable
Pricing Supplement. Each Floating Rate Note will mature on an Interest Payment
Date nine months or more from the date of issue, as set forth in the applicable
Pricing Supplement. See "Description of Notes." Unless otherwise specified in
the applicable Pricing Supplement, the Notes may not be redeemed by the
Corporation or the holder prior to maturity. Notes denominated in U.S. dollars
will be issued in denominations of $1,000 or any amount in excess thereof which
is an integral multiple of $1,000. The authorized denominations of Notes not
denominated in U.S. dollars will be set forth in the applicable Pricing
Supplement. Any terms relating to Notes being denominated in foreign currencies
or composite currencies will be set forth in the applicable Pricing Supplement.
Each Note will be issued only in fully registered form and will be
represented either by a Global Security registered in the name of a nominee of
The Depository Trust Company, as Depositary (a "Book-Entry Note"), or by a
certificate issued in definitive form (a "Certificated Note"), as set forth in
the applicable Pricing Supplement. Beneficial interests in Global Securities
representing Book-Entry Notes will be shown on, and transfers thereof will be
effected through, the records maintained by the Depositary (with respect to
participants' interests) and its participants. Book-Entry Notes will not be
issuable as Certificated Notes except as described under "Description of Debt
Securities -- Global Notes" in the accompanying Prospectus.
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.
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) CORPORATION (1)(3)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
PER NOTE.............................................. 100% .125% TO .750% 99.250% TO 99.875%
$625,000 TO $496,250,000 TO
TOTAL (4)............................................. $500,000,000 $3,750,000 $499,375,000
<FN>
(1) UNLESS OTHERWISE SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT, NOTES WILL
BE SOLD AT 100% OF THEIR PRINCIPAL AMOUNT. IF THE CORPORATION ISSUES ANY
NOTE AT A DISCOUNT FROM OR AT A PREMIUM OVER ITS PRINCIPAL AMOUNT, THE
PRICE TO PUBLIC OF SUCH NOTE WILL BE SET FORTH IN THE APPLICABLE PRICING
SUPPLEMENT.
(2) THE COMMISSION PAYABLE TO AN AGENT FOR EACH NOTE SOLD THROUGH SUCH AGENT
SHALL RANGE FROM .125% TO .750% OF THE PRINCIPAL AMOUNT OF SUCH NOTE
(EXCEPT THAT WITH RESPECT TO NOTES WITH MATURITIES OF GREATER THAN 30
YEARS, THE COMMISSION WILL BE NEGOTIATED BETWEEN THE CORPORATION AND THE
RELATED AGENT AT THE TIME THE CORPORATION ISSUES SUCH NOTES). THE
CORPORATION MAY ALSO SELL NOTES TO AN AGENT, AS PRINCIPAL, AT NEGOTIATED
DISCOUNTS, FOR RESALE TO INVESTORS AND OTHER PURCHASERS. THE CORPORATION
HAS AGREED TO INDEMNIFY EACH AGENT AGAINST CERTAIN LIABILITIES, INCLUDING
LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE CORPORATION ESTIMATED TO BE
$525,000.
(4) OR THE EQUIVALENT THEREOF IN OTHER CURRENCIES INCLUDING COMPOSITE
CURRENCIES.
</TABLE>
The Notes are being offered on a continuous basis by CS First Boston
Corporation, Goldman, Sachs & Co., Lehman Brothers Inc. (including Lehman
Government Securities Inc.), Morgan Stanley & Co. Incorporated and Salomon
Brothers Inc (individually, an "Agent" and collectively, the "Agents"), on
behalf of the Corporation. The Agents have agreed to use reasonable efforts to
solicit purchases of such Notes. The Corporation may also sell Notes to an Agent
acting as principal for its own account for resale to one or more investors and
other purchasers at varying prices related to prevailing market prices at the
time of resale or otherwise, to be determined by such Agent. No termination date
for the offering of the Notes has been established. The Corporation or an Agent
may reject any order in whole or in part. The Corporation reserves the right to
withdraw, cancel or modify the offer made hereby without notice. The Notes will
not be listed on any securities exchange, and there can be no assurance that the
Notes offered hereby will be sold or that there will be a secondary market for
the Notes. See "Plan of Distribution."
CS First Boston
Goldman, Sachs & Co.
Lehman Brothers
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
MARCH 16, 1995
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE CORPORATION OR BY THE AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY SALE
MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR THE DOCUMENTS INCORPORATED THEREIN
BY REFERENCE IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE SUCH
DATES. THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY NOTES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT
<S> <C>
PAGE
---------
Description of Notes................................................................. S-3
Foreign Currency Risks............................................................... S-18
Certain United States Federal Income Tax Consequences................................ S-20
Plan of Distribution................................................................. S-27
Validity of the Notes................................................................ S-28
PROSPECTUS
Available Information................................................................ 2
Incorporation of Certain Information by Reference.................................... 2
The Corporation...................................................................... 3
Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed Charges and
Preferred Stock Dividend Requirements............................................... 3
Use of Proceeds...................................................................... 3
Regulatory Matters................................................................... 4
Description of Debt Securities....................................................... 7
Description of Preferred Stock....................................................... 18
Description of Capital Stock......................................................... 20
Plan of Distribution................................................................. 24
Legal Opinions....................................................................... 25
Experts.............................................................................. 25
</TABLE>
S-2
<PAGE>
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 REFERENCE IS HEREBY MADE. THE PARTICULAR TERMS OF THE NOTES
SOLD PURSUANT TO ANY PRICING SUPPLEMENT (A "PRICING SUPPLEMENT") WILL BE
DESCRIBED THEREIN. THE TERMS AND CONDITIONS SET FORTH IN "DESCRIPTION OF NOTES"
WILL APPLY TO EACH NOTE UNLESS OTHERWISE SPECIFIED IN THE APPLICABLE PRICING
SUPPLEMENT AND IN SUCH NOTE. CAPITALIZED TERMS NOT DEFINED HEREIN SHALL HAVE THE
SAME MEANINGS ASSIGNED TO SUCH TERMS IN THE PROSPECTUS OR THE APPLICABLE
INDENTURE. REFERENCE HEREIN TO "U.S. DOLLARS" OR "U.S.$" OR "$" ARE TO THE
CURRENCY OF THE UNITED STATES OF AMERICA.
GENERAL
The Notes offered hereby, if Senior Securities, will be issued under the
Senior Indenture, as amended or supplemented. Notes issued under the Senior
Indenture will rank PARI PASSU with all other unsecured and unsubordinated
indebtedness of the Corporation. The Notes offered hereby, if Subordinated
Securities, will be issued under the Subordinated Indenture, as amended or
supplemented. Notes issued under the Subordinated Indenture will be subordinated
in right of payment to the prior payment in full of the Senior Indebtedness of
the Corporation. See "Description of Debt Securities -- Subordinated Securities"
in the accompanying Prospectus. As of December 31, 1994, the Corporation had
approximately $242,527,000 of Senior Indebtedness outstanding.
The Notes will be offered on a continuous basis. The Notes issued under the
Applicable Indenture will constitute all or part of a single series for purposes
of such Indenture. The Notes of such series offered hereby are limited to an
aggregate initial offering price of U.S. $500,000,000 (or the equivalent thereof
in one or more Specified Currencies), subject to reduction as a result of the
sale by the Corporation of certain other Securities referred to in the
accompanying Prospectus. See "Plan of Distribution." For purposes of this
Prospectus Supplement, (i) the principal amount of any Original Issue Discount
Note (as defined below) means the Issue Price (as defined below) of such Note
and (ii) the principal amount of any Note issued in the Specified Currency means
the U.S. dollar equivalent on the date of issue of the Issue Price of such Note.
Each Note will mature nine months or more from its date of issue, as agreed
by the initial purchaser and the Corporation, and may be subject to redemption
at the option of the Corporation or repayment at the option of the holder prior
to its Stated Maturity (as defined below) as specified in the applicable Pricing
Supplement. See "Optional Redemption" and "Repayment at the Noteholders' Option"
below. Fixed Rate Notes, Amortizing Notes and Original Issue Discount Notes will
mature on any day which is nine months or more from the date of issue, as set
forth in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, Floating Rate Notes will mature on an Interest
Payment Date (as defined below) nine months or more from the date of issue, as
set forth in the applicable Pricing Supplement.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth under "Description of Debt Securities --
Global Notes" in the accompanying Prospectus, Book-Entry Notes will not be
issuable as Certificated Notes. See "Book-Entry System" below.
Unless otherwise specified 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. Except as specified
for Notes not denominated in U.S. dollars or as otherwise provided in the
applicable Pricing Supplement, the Notes will be issued only in fully registered
form in denominations of U.S. $1,000 or any amount in excess thereof which is an
integral multiple of U.S. $1,000. If any of the Notes are to be denominated in a
Specified Currency other than U.S. dollars, additional information pertaining to
the terms of such Notes and other matters relevant to the holders thereof will
be described in the applicable Pricing Supplement.
S-3
<PAGE>
The Notes may be issued as Original Issue Discount Notes (including Zero
Coupon Notes), as indicated in the applicable Pricing Supplement. An "Original
Issue Discount Note" means any Note that provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof pursuant to the Applicable Indenture. See
"United States Federal Income Taxation -- Discount Notes" below.
The Notes may be issued as Indexed Notes, as indicated in the applicable
Pricing Supplement. See "Indexed Notes" below.
The Pricing Supplement relating to each Note will specify the price
(expressed as a percentage of the aggregate principal amount thereof) at which
such Note will be issued if other than 100% (the "Issue Price"), the principal
amount, the interest rate or interest rate formula, ranking, maturity, currency
or composite currency, any redemption or repayment provisions and any other
terms on which each such Note will be issued that are not inconsistent with the
provisions of the Applicable Indenture.
Unless otherwise specified in the applicable Pricing Supplement, the Notes,
except for Amortizing Notes, will not be subject to any sinking fund.
The Notes, other than Book-Entry Notes, may be presented for registration of
transfer or exchange at the Corporate Trust Office of The First National Bank of
Chicago, or at their office used for that purpose in the Borough of Manhattan,
The City of New York, in the case of Senior Securities, and Chemical Bank in the
Borough of Manhattan, The City of New York, in the case of Subordinated
Securities. With respect to transfers of Book-Entry Notes and exchanges of
permanent Global Notes representing Book-Entry Notes, see "Book-Entry System"
below.
As used herein, "Business Day" shall mean any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are generally authorized or required by law or regulation to close in The City
of New York and (i) with respect to LIBOR Notes (as defined below), in the City
of London, (ii) with respect to Notes denominated or payable in a Specified
Currency other than European Currency Units ("ECUs"), in the financial center of
the country issuing the Specified Currency, (iii) with respect to Notes
denominated or payable in ECUs, in the financial center of each country that
issues a component currency of the ECU, and that is not a non-ECU settlement
day. "London Banking Day" shall mean any day on which dealings in deposits in
U.S. dollars are transacted in the London interbank market.
As used herein, an "Interest Payment Date" with respect to any Note shall be
a date on which, under the terms of such Note, regularly scheduled interest
shall be payable. Unless otherwise specified in the applicable Pricing
Supplement, "Record Date" with respect to any Interest Payment Date shall be the
date fifteen calendar days (whether or not such date is a Business Day) prior to
such Interest Payment Date.
PAYMENT CURRENCY AND CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for Notes denominated in a Specified Currency
in such Specified Currency, and payments of principal of, premium, if any, and
interest on such Notes will be made in such Specified Currency, unless otherwise
provided in the applicable Pricing Supplement. Currently, there are limited
facilities in the United States for the conversion of U.S. dollars into foreign
currencies and vice versa. In addition, most banks do not currently offer
non-U.S. dollar denominated checking or savings account facilities in the United
States. Accordingly, unless otherwise specified in the applicable Pricing
Supplement, or unless alternative arrangements are made, payment of principal
of, premium, if any, and interest on Notes in a Specified Currency other than
U.S. dollars will be made to an account at a bank outside the United States.
If the applicable Pricing Supplement provides for payments of principal of,
premium, if any, and interest on a non-U.S. dollar denominated Note to be made
in U.S. dollars or for payments of principal of, premium, if any, and interest
on a U.S. dollar denominated Note to be made in a Specified Currency
S-4
<PAGE>
other than U.S. dollars, the conversion of the Specified Currency into U.S.
dollars or U.S. dollars into the Specified Currency, as the case may be, will be
handled by the Exchange Rate Agent identified in the applicable Pricing
Supplement. The costs of such conversion will be borne by the holder of such
Note through deductions from such payments.
If the applicable Pricing Supplement provides for payments of principal of,
premium, if any, and interest on a non-U.S. dollar denominated Note to be made,
at the option of the holder of such Note, in U.S. dollars, conversion of the
Specified Currency into U.S. dollars will be based on the highest bid quotation
in The City of New York received by the Exchange Rate Agent at approximately
11:00 a.m., New York City time, on the second Business Day preceding the
applicable payment date from three recognized foreign exchange dealers (one of
which may be the Exchange Rate Agent unless the Exchange Rate Agent is the
applicable 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 the holders of Notes and at which
the applicable dealer commits to execute a contract. If such bid quotations are
not available, payments will be made in the Specified Currency. All currency
exchange costs will be borne by the holders of Notes by deductions from such
payments.
Except as set forth below, if the principal of, premium, if any, or interest
on a Note is payable in a Specified Currency other than U.S. dollars and such
Specified Currency is not available to the Corporation for making payments
thereof due to the imposition of exchange controls or other circumstances beyond
the control of the Corporation or is no longer used by the government of the
country issuing such currency or for the settlement of transactions by public
institutions within the international banking community, then the Corporation
will be entitled to satisfy its obligations to holders of the Notes by making
such payments in U.S. dollars on the basis of the Market Exchange Rate on the
date of such payment or, if the Market Exchange Rate is not available on such
date, as of the most recent practicable date. Any payment made under such
circumstances in U.S. dollars where the required payment is in a Specified
Currency other than U.S. dollars will not constitute an Event of Default under
the Applicable Indenture.
If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable due to the imposition of exchange controls or other circumstances
beyond the Corporation's control or are no longer used in the European Monetary
System, then all payments in respect of such Note shall be made in U.S. dollars
until ECUs are again available or so used. The amount of each payment in U.S.
dollars shall be computed on the basis of the equivalent of the ECU in U.S.
dollars, determined as described below, as of the second Business Day prior to
the date on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date shall be determined
by the Corporation or its agent 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 the ECU was used in
the European Monetary System. The equivalent of the 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
Corporation or such agent on the basis of the most recently available Market
Exchange Rates for such Components.
If the official unit of any Component 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 Components 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 appropriate amounts of the consolidated component currencies
expressed in such single currency. If any Component is divided into two or more
currencies, the amount of the original component currency shall be replaced by
the appropriate amounts of such two or more currencies, the sum of which shall
be equal to the amount of the original component currency.
S-5
<PAGE>
All determinations referred to above made by the Corporation or its agent
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; PROVIDED that the
interest payable upon maturity, redemption or repayment (whether or not the date
of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. Unless otherwise specified
in the applicable Pricing Supplement, the initial interest payment on a Note
will be made on the first Interest Payment Date falling after the date the Note
is issued; PROVIDED, HOWEVER, that payments of interest (or, in the case of an
Amortizing Note, principal and interest) on a Note issued less than 15 calendar
days before an Interest Payment Date will be paid on the next succeeding
Interest Payment Date to the holder of record on the Record Date with respect to
such succeeding Interest Payment Date, unless otherwise specified in the
applicable Pricing Supplement. See "United States Federal Income Taxation --
Payment of Interest on Notes" below.
Payments of principal of, premium, if any, and interest payable at maturity,
redemption or repayment on Notes, other than Notes payable in a Specified
Currency other than U.S. dollars, will be made in immediately available funds at
the Corporate Trust Office of The First National Bank of Chicago in the Borough
of Manhattan, The City of New York, in the case of Senior Securities, and at
Chemical Bank in the Borough of Manhattan, The City of New York, in the case of
Subordinated Securities; PROVIDED that the Note is presented to the Paying Agent
in time for the Paying Agent to make such payments in such funds in accordance
with its normal procedures. Payment of interest (other than at maturity,
redemption or repayment) may be made by check mailed to the person entitled
thereto or, at the option of the Corporation, by wire transfer to an account
maintained by such person with a bank located in the United States.
Notwithstanding the foregoing, a holder of $10,000,000 or more in aggregate
principal amount of 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 interest payments (other than at maturity, redemption or
repayment) 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 specified in the applicable Pricing Supplement or unless
alternative arrangements are made, payments of principal of, premium, if any,
and interest on a Note in a Specified Currency other than U.S. dollars will be
made by wire transfer of immediately available funds to an account maintained by
the payee with a bank located outside the United States if the holder of such
Notes provides the Paying Agent with the appropriate wire transfer instructions
not later than 15 calendar days prior to the applicable payment date. If such
wire transfer instructions are not so provided, payments of principal of,
premium, if any, and interest on such Notes will be made by check payable in
such Specified Currency mailed to the address of the person entitled thereto as
such address shall appear in the Note register.
Certain Notes, including Original Issue Discount Notes, may be considered to
be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant rate. See "United States
Federal Income Taxation -- Discount Notes" below. Unless otherwise specified in
the applicable Pricing Supplement, if the principal of any Original Issue
Discount Note is declared to be due and payable immediately as described under
"Description of Debt Securities -- Senior Securities; -- Subordinated
Securities" in the accompanying Prospectus, the amount of principal due and
payable with respect to such Note shall be limited to the aggregate principal
amount of such Note multiplied by the sum of its Issue Price (expressed as a
percentage of the aggregate principal amount) plus the original issue discount
amortized from the date of issue to the date of declaration, which amortization
shall be calculated using the "interest method" (computed
S-6
<PAGE>
in accordance with generally accepted accounting principles in effect on the
date of declaration). Special considerations applicable to any such Notes will
be set forth in the applicable Pricing Supplement.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof, except as described below under
"Extension of Maturity," until the principal thereof is paid or made available
for payment. Unless otherwise specified in the applicable Pricing Supplement,
such interest will be computed on the basis of a 360-day year of twelve 30-day
months. Unless otherwise specified in the applicable Pricing Supplement,
payments of interest on Fixed Rate Notes other than Amortizing Notes will be
made semiannually on each June 1 and December 1 and at maturity or upon any
earlier redemption or repayment. Unless otherwise specified in the applicable
Pricing Supplement, payments of principal of and interest on Amortizing Notes,
which are securities on which payments of principal and interest are made in
equal installments over the life of the security, will be made either quarterly
on each March 1, June 1, September 1 and December 1 or semiannually on each June
1 and December 1, as set forth in the applicable Pricing Supplement, and at
maturity or upon any earlier redemption or repayment. Payments with respect to
Amortizing Notes will be applied first to interest due and payable thereon and
then to the reduction of the unpaid principal amount thereof. A table setting
forth repayment information in respect of each Amortizing Note will be provided
to the original purchaser and will be available, upon request, to subsequent
holders.
If any Interest Payment Date for any Fixed Rate Note would fall on a day
that is not a Business Day, the interest payment shall be postponed to 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 date (or date
of redemption or repayment) of any Fixed Rate Note would fall on a day that is
not a Business Day, the payment of principal, premium, if any, and interest may
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).
Interest payments for Fixed Rate Notes will include accrued interest from
the date of issue or from the last date in respect of which interest has been
paid or duly provided for, 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.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate determined
by reference to an interest rate basis (the "Base Rate"), which may be adjusted
by a Spread and/or Spread Multiplier (each as defined below). The applicable
Pricing Supplement will designate one or more of the following Base Rates as
applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate Note"), (b)
the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the Federal
Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the
Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury Rate
Note"), (g) the CMT Rate (a "CMT Rate Note"), (h) the 11th District Cost of
Funds Rate (an "11th District Cost of Funds Rate Note"), (i) the J.J. Kenny Rate
(a "J.J. Kenny Rate Note") or (j) such other Base Rate as is set forth in such
Pricing Supplement and in such Floating Rate Note. The "Index Maturity" for any
Floating Rate Note is the period of maturity of the instrument or obligation
from which the Base Rate is calculated and will be specified in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added
S-7
<PAGE>
to or subtracted from the Base Rate for such Floating Rate Note, and the "Spread
Multiplier" is the percentage specified in the applicable Pricing Supplement to
be applied to the Base Rate for such Floating Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or ceiling,
on the rate of interest which may accrue during any interest period ("Maximum
Interest Rate"); and (ii) a minimum limitation, or floor, on the rate of
interest which may accrue during any interest period ("Minimum Interest Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by United States law of general application. Under
current New York law, the maximum rate of interest is 25% per annum on a simple
interest basis. This limit may not apply to loans of $2,500,000 or more.
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 (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Reset Date will be: (i) in the case of Floating Rate Notes which reset daily,
each Business Day; (ii) in the case of Floating Rate Notes (other than Treasury
Rate Notes) which reset weekly, the Wednesday of each week; (iii) in the case of
Treasury Rate Notes which reset weekly, the Tuesday of each week, except as
provided below; (iv) in the case of Floating Rate Notes which reset monthly
(other than 11th District Cost of Funds Rate Notes), the third Wednesday of each
month; (v) in the case of 11th District Cost of Funds Rate Notes which reset
monthly, the first calendar day of each month; (vi) in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of March, June, September and
December; (vii) 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 (viii) 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; PROVIDED, HOWEVER, that 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 set forth in the applicable
Pricing Supplement (the "Initial Interest Rate"). If any Interest Reset Date for
any Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Reset Date shall be postponed to the next succeeding Business Day,
except that, in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Reset Date shall be the next preceding
Business Day.
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset Date,
on the third Wednesday of each month; (ii) in the case of Floating Rate Notes
with a quarterly Interest Reset Date, on the third Wednesday of March, June,
September and December; (iii) in the case of Floating Rate Notes with a
semiannual Interest Reset Date, the third Wednesday of the two months specified
in the applicable Pricing Supplement; and (iv) in the case of Floating Rate
Notes with an annual Interest Reset Date, the third Wednesday of the month
specified in the applicable Pricing Supplement and, in each case, at maturity.
If any Interest Payment Date for any Floating Rate Note would fall on a day that
is not a Business Day with respect to such Floating Rate Note, such Interest
Payment Date will be the following day that is a Business Day with respect to
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 Payment
Date shall be the immediately preceding day that is a Business Day with respect
to such LIBOR Note. 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.
S-8
<PAGE>
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from
and including the date of issue, or from and including the last date to which
interest has been paid to or duly provided for, to but excluding the Interest
Payment Date.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes, Prime Rate Notes, 11th
District Cost of Funds Rate Notes and J.J. Kenny Rate Notes 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 any Interest Reset Date will be the
applicable rate as reset on such date. The interest rate applicable to any other
day is the interest rate from the immediately preceding Interest Reset Date (or,
if none, the Initial Interest Rate).
All percentages used in or resulting from any calculation of the rate of
interest on a Floating Rate Note will be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward, 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 upward.
Unless otherwise specified in the applicable Pricing Supplement, the
calculation agent (the "Calculation Agent") with respect to any issue of
Floating Rate Notes which are (i) Senior Securities, shall be The First National
Bank of Chicago and (ii) Subordinated Securities, shall be Chemical Bank. Upon
the request of the holder of any Floating Rate Note, the Calculation Agent will
provide the interest rate then in effect and, if determined, the interest rate
that will become effective on the next Interest Reset Date with respect to such
Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes, Prime Rate Notes and J.J. Kenny 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 an 11th District Cost of Funds Rate
Note will be the last working day of the month immediately preceding each
Interest Reset Date on which the Federal Home Loan Bank of San Francisco (the
"FHLB of San Francisco") publishes the Index (as hereinafter defined). The
Interest Determination Date pertaining to an Interest Reset Date for a Treasury
Rate Note will be the day of the week on 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.
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 the next succeeding Record Date after such Interest
Determination Date or, if either such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day preceding the applicable
Interest Payment Date or date of maturity, as the case may be.
S-9
<PAGE>
Interest rates will be determined (which determination, in the absence of
manifest error, will be conclusive for all purposes and binding on holders of
Notes) by the Calculation Agent as follows:
CD RATE NOTES
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD 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 each CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit 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 ("H.15(519)") under the heading "CDs (Secondary Market)," 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 CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 p.m. Quotations for U.S. Government Securities" (the "Composite
Quotations") under the heading "Certificates of Deposit." 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 CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 a.m., New York City time, on such
Interest Determination Date for certificates of deposit in the denomination of
$5,000,000 with a remaining maturity closest to the Index Maturity designated in
the Pricing Supplement of three leading nonbank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money center banks of the highest credit standing in the market for negotiable
certificates of deposit; PROVIDED, HOWEVER, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as set forth above, the CD
Rate in effect for the applicable period will be the same as the CD Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the CD Rate Notes for which such
CD Rate is being determined shall be the Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rate
(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) specified in each Commercial Paper Rate Note and
in the applicable Pricing Supplement.
Unless otherwise specified 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 specified in the applicable Pricing Supplement, as
such rate shall be published in H.15(519), under the heading "Commercial Paper."
In the event that such rate is not published by 9:00 a.m., New York City time,
on the Calculation Date pertaining to such Interest Determination Date, then the
Commercial Paper Rate shall be the Money Market Yield of the rate on such
Interest Determination Date for commercial paper of the specified Index Maturity
as published in Composite Quotations under the heading "Commercial Paper." If by
3:00 p.m., New York City time, on such Calculation Date such rate is not yet
available in either H.15(519) or Composite Quotations, then the Commercial Paper
Rate shall be the Money Market Yield of the arithmetic mean of the offered rates
as of 11:00 a.m., New York City time, on such Interest Determination Date of
three leading dealers of commercial paper in The City of New York selected by
the Calculation Agent for commercial paper of the specified Index Maturity,
placed for an industrial issuer whose bond rating is "AA," or the equivalent,
from a nationally
S-10
<PAGE>
recognized rating agency; PROVIDED, HOWEVER, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting offered rates as mentioned in
this sentence, the Commercial Paper Rate in effect for the applicable period
will be the same as the Commercial Paper Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest payable on the Commercial Paper Rate Notes for which such Commercial
Paper Rate is being determined shall be the Initial Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <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 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.
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 each Federal Funds Rate Note 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
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 11:00 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).
LIBOR NOTES
LIBOR Notes will bear interest at the interest rate (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) specified in
each LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Determination Date will be determined by the Calculation Agent as
follows:
(i) On each Interest Determination Date relating to a LIBOR Note, LIBOR
will be (a) where the applicable Pricing Supplement specifies LIBOR-Telerate
(as defined below) as the method for determining LIBOR, the rate for
deposits in U.S. dollars having the Index Maturity specified in the
applicable Pricing Supplement which appears on the Telerate Page 3750 (as
defined below) as of 11:00 a.m., London time, on such Interest Determination
Date ("LIBOR-Telerate") or (b) where the applicable Pricing Supplement
specifies LIBOR-Reuters (as defined below) as the method of determining
LIBOR, the arithmetic mean of the offered rates for deposits in U.S. dollars
having the Index Maturity specified in the applicable Pricing Supplement
which appear on
S-11
<PAGE>
the Reuters Screen LIBO Page (as defined below) as of 11:00 a.m., London
time, on such Interest Determination Date, provided that at least two such
offered rates appear on the Reuters Screen LIBO Page ("LIBOR-Reuters");
PROVIDED, HOWEVER, that if the method for determining LIBOR with respect to
any LIBOR Note is not specified therein or in the applicable Pricing
Supplement, "LIBOR" means LIBOR-Telerate.
(ii) If on any Interest Determination Date, (x) in any case where
LIBOR-Telerate applies, the rate for deposits in U.S. dollars having the
applicable Index Maturity does not appear on the Telerate Page 3750 as
specified in (i)(a) above, or (y) in any case where LIBOR-Reuters applies,
fewer than two offered rates for deposits in U.S. dollars having the
applicable Index Maturity appear on the Reuters Screen LIBO Page as
specified in (i)(b) above, LIBOR will be determined on the basis of the
rates at which deposits in U.S. dollars are offered by four major banks in
the London interbank market selected by the Calculation Agent at
approximately 11:00 a.m., London time, on such Interest Determination Date
to prime banks in the London interbank market having the Index Maturity
specified in the applicable Pricing Supplement and in a principal amount
equal to an amount that is representative for a single transaction in such
market at such time. The Calculation Agent will request the principal London
office of each of such banks to provide a quotation of its rate. If at least
two such quotations are provided, the rate in respect of such Interest
Determination Date will be the arithmetic mean of the quotations. If fewer
than two quotations are provided, LIBOR in respect of such Interest
Determination Date will be the arithmetic mean of the rates quoted by three
major banks in The City of New York, selected by the Calculation Agent, at
approximately 11:00 a.m., New York City time, on such Interest Determination
Date for loans in U.S. dollars to leading European banks, having the Index
Maturity specified in the applicable Pricing Supplement and in a principal
amount equal to an amount that is representative for a single transaction in
such market at such time; PROVIDED, HOWEVER, that if the banks selected as
aforesaid by the Calculation Agent are not quoting as described in this
sentence, LIBOR for such Interest Reset Period will be the same as LIBOR for
the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the LIBOR Notes for
which LIBOR is being determined shall be the Initial Interest Rate).
"Telerate Page 3750" means the display page designated as page 3750 on the
Dow Jones Telerate Service (or such other page as may replace page 3750 on that
service for the purpose of displaying London interbank offered rates).
"Reuters Screen LIBO Page" means the display page designated as page "LIBO"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London interbank
offered rates).
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 each Prime Rate Note 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 published
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 the arithmetic mean of the rates of interest publicly
announced by each bank named on the Reuters Screen NYMF 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 NYMF Page on such Interest
Determination Date, or, if fewer than four such rates appear on the Reuters
Screen NYMF 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
S-12
<PAGE>
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.
"Reuters Screen NYMF Page" means the display designated as Page "NYMF" on
the Reuters Monitor Money Rates Services (or such other page as may replace the
NYMF Page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
If in any month or two consecutive months the Prime Rate is not published in
H.15(519) and the banks or trust companies selected as aforesaid are not quoting
as mentioned in the preceding paragraph, the "Prime Rate" for such Interest
Reset 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 the Prime Rate is being
determined shall be the Initial Interest Rate). If this failure continues over
three or more consecutive months, the Prime Rate for each succeeding Interest
Determination Date until the maturity or redemption or repayment of such Prime
Rate Notes or, if earlier, until this failure ceases, shall be LIBOR determined
as if such Prime Rate Notes were LIBOR Notes, and the Spread, if any, shall be
the number of basis points specified in the applicable Pricing Supplement as the
"Alternative Rate Event Spread."
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 each Treasury Rate Note 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 the applicable period will be the same as
the Treasury Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on the
Treasury Rate Notes for which the Treasury Rate is being determined shall be the
Initial Interest Rate).
S-13
<PAGE>
J.J. KENNY RATE NOTES
J.J Kenny Rate Notes will bear interest at the interest rate (calculated
with reference to the J.J. Kenny 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 each J.J. Kenny Rate Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "J.J.
Kenny Rate" means, with respect to any Interest Determination Date, the rate in
the high-grade weekly index (the "Weekly Index") on such date made available by
Kenny Information Systems ("Kenny") to the Calculation Agent. The Weekly Index
is, and shall be, based upon 30-day yield evaluations at par of bonds, the
interest of which is exempt from Federal income taxation under the Internal
Revenue Code of 1986, as amended (the "Code"), of not less than five high-grade
component issuers selected by Kenny which shall include, without limitation,
issuers of general obligation bonds. The specific issuers included among the
component issuers may be changed from time to time by Kenny in its discretion.
The bonds on which the Weekly Index is based shall not include any bonds on
which the interest is subject to a minimum tax or similar tax under the Code,
unless all tax-exempt bonds are subject to such tax. In the event Kenny ceases
to make available such Weekly Index, a successor indexing agent will be selected
by the Calculation Agent, such index to reflect the prevailing rate for bonds
rated in the highest short-term rating category by Moody's Investors Service,
Inc. and Standard & Poor's Ratings Group in respect of issuers most closely
resembling the high-grade component issuers selected by Kenny for its Weekly
Index, the interest on which is (A) variable on a weekly basis, (B) exempt from
Federal income taxation under the Code and (C) not subject to a minimum tax or
similar tax under the Code, unless all tax-exempt bonds are subject to such tax.
If such successor indexing agent is not available, the rate for any Interest
Determination Date with respect to J.J. Kenny Notes shall be 67% of the rate
determined if the Treasury Rate option had been originally selected. The
Calculation Agent shall calculate the J.J. Kenny Rate in accordance with the
foregoing. At the request of a Holder of a Floating Rate Note bearing interest
at the J.J. Kenny Rate, the Calculation Agent will provide such Holder with the
interest rate that will become effective as of the next Interest Reset Date.
11TH DISTRICT COST OF FUNDS RATE NOTES
11th District Cost of Funds Rate Notes will bear interest at the rates
(calculated with reference to the 11th District Cost of 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 each 11th District Cost
of Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any Interest Determination
Date, the rate equal to the monthly weighted average cost of funds for the
calendar month immediately preceding the month in which such Interest
Determination Date falls, as set forth under the caption "11th District" on
Telerate Page 7058 as of 11:00 A.M., San Francisco time, on such Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related Interest Determination Date, the 11th District Cost of Funds Rate for
such Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the 11th Federal Home Loan Bank District
that was most recently announced (the "Index") by the FHLB of San Francisco as
such cost of funds for the calendar month immediately preceding the date of such
announcement. If the FHLB of San Francisco fails to announce such rate for the
calendar month immediately preceding such Interest Determination Date, then the
11th District Cost of Funds Rate determined as of such Interest Determination
Date will be the 11th District Cost of Funds Rate in effect on such Interest
Determination Date.
CMT RATE NOTES
CMT Rate Notes will bear interest at the rates (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 each
CMT Rate Note and in the applicable Pricing Supplement.
S-14
<PAGE>
Unless otherwise specified in the 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 an Agent or its
affiliates) selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest), and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury Notes") with
an original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for such 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 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; PROVIDED, HOWEVER,
that if fewer than three Reference Dealers selected by the Calculation Agent are
quoting as described herein, the CMT Rate will be the CMT Rate in effect on such
Interest Determination Date. 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.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the 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.
S-15
<PAGE>
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in
the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date and/or any premium payable will be determined by reference
to currencies, currency units, commodity prices, financial or non-financial
indices or other factors (the "Indexed Notes"), as indicated in the applicable
Pricing Supplement. Holders of Indexed Notes may receive a principal amount at
maturity that is greater than or less than the face amount of such Notes
depending upon the fluctuation of the relative value, rate or price of the
specified index. Specific information pertaining to the method for determining
the principal amount payable at maturity, a historical comparison of the
relative value, rate or price of the specified index and the face amount of the
Indexed Note and certain additional United States federal tax considerations
will be described in the applicable Pricing Supplement.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note (other than an Amortizing Note)
will indicate whether the Corporation has the option to extend the maturity of
such Note for one or more periods of one or more whole years (each an "Extension
Period") up to but not beyond the date (the "Final Maturity Date") set forth in
such Pricing Supplement. If the Corporation has such option with respect to any
such Note (an "Extendible Note"), the following procedures will apply, unless
modified as set forth in the applicable Pricing Supplement.
The Corporation may exercise such option with respect to an Extendible Note
by notifying the Paying Agent of such exercise at least 45 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has already
been extended, prior to the maturity date then in effect (an "Extended Maturity
Date"). At least 38 days prior to the Original Maturity Date or an Extended
Maturity Date, as the case may be (each, a "Maturity Date"), the Paying Agent
will mail to the holder of such Note a notice (the "Extension Notice") relating
to such Extension Period, by first class mail, postage prepaid, setting forth
(a) the election of the Corporation to extend the maturity of such Note; (b) the
new Extended Maturity Date; (c) the interest rate applicable to the Extension
Period; and (d) the provisions, if any, for redemption during the Extension
Period, including the date or dates on which, the period or periods during which
and the price or prices at which such redemption may occur during the Extension
Period. Upon the mailing by the Paying Agent of an Extension Notice to the
holder of an Extendible Note, the Maturity of such Note shall be extended
automatically, and, except as modified by the Extension Notice and as described
in the next paragraph, such Note will have the same terms it had prior to the
mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 a.m., New York City
time, on the twentieth calendar day prior to the Maturity Date then in effect
for an Extendible Note (or, if such day is not a Business Day, not later than
10:00 a.m., New York City time, on the immediately succeeding Business Day), the
Corporation may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate for the Extension Period
by causing the Paying Agent to send notice of such higher interest rate to the
holder of such Note by first class mail, postage prepaid, or by such other means
as shall be agreed between the Corporation and the Paying Agent. Such notice
shall be irrevocable. All Extendible Notes with respect to which the Maturity
Date is extended in accordance with an Extension Notice will bear such higher
interest rate for the Extension Period, whether or not tendered for repayment.
If the Corporation elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Corporation to repay
such Note on the Maturity Date then in effect
S-16
<PAGE>
at a price equal to the principal amount thereof plus any accrued and unpaid
interest to such date. In order for an Extendible Note to be repaid on such
Maturity Date, the holder thereof must follow the procedures set forth below
under "Repayment at the Noteholders' Option" for optional repayment, except that
the period for delivery of such Note or notification to the Paying Agent shall
be at least 25 but not more than 35 days prior to the Maturity Date then in
effect and except that a holder who has tendered an Extendible Note for
repayment pursuant to an Extension Notice may, by written notice to the Paying
Agent, revoke any such tender for repayment until 3:00 p.m., New York City time,
on the twentieth calendar day prior to the Maturity Date then in effect (or, if
such day is not a Business Day, until 3:00 p.m., New York City time, on the next
succeeding Business Day).
RENEWABLE NOTES
The Pricing Supplement relating to each Note (other than an Amortizing Note)
will indicate when such Note will mature unless the term of all or any portion
of such Note is renewed in accordance with the procedures described in such
Pricing Supplement (if applicable, a "Renewable Note").
BOOK-ENTRY SYSTEM
Unless otherwise indicated in the applicable Pricing Supplement, upon
issuance, all Fixed Rate Book-Entry Notes having the same Issue Date, interest
rate, if any, amortization schedule, if any, maturity date and other terms, if
any, will be represented by one or more Global Securities, and all Floating Rate
Book-Entry Notes having the same Issue Date, Initial Interest Rate, Base Rate,
Interest Reset Period, Interest Payment Dates, Index Maturity, Spread and/or
Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum Interest Rate,
if any, maturity date and other terms, if any, will be represented by one or
more Global Securities. Each Global Security representing Book-Entry Notes will
be deposited with, or on behalf of, The Depository Trust Company, New York, New
York (the "Depositary"), and registered in the name of a nominee of the
Depositary. Certificated Notes will not be exchangeable for Book-Entry Notes,
except under the circumstances described in the Prospectus under "Description of
Debt Securities --Global Notes". Book-Entry Notes will not be exchangeable for
Certificated Notes and will not otherwise be issuable as Certificated Notes.
The Depositary has advised the Corporation as follows: The Depositary is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a member of the Federal Reserve System, a "clearing corporation within
the meaning of the New York Uniform Commercial Code," and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of its participating organizations
("Participants") and to facilitate the clearance and settlement transactions
among its Participants in such securities through electronic book-entry changes
in accounts of the Participants, thereby eliminating the need for physical
movement of securities certificates. The Depositary's Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations, some of whom (and for their representatives)
own the Depositary. Access to the Depositary book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the accompanying
Prospectus under "Description of Debt Securities -- Global Notes."
OPTIONAL REDEMPTION
Unless otherwise indicated in the applicable Pricing Supplement, Notes may
not be redeemed by the Corporation prior to maturity. If so specified in the
applicable Pricing Supplement, the Notes will be redeemable prior to maturity at
the option of the Corporation on the terms specified therein. Unless otherwise
indicated in the applicable Pricing Supplement, notice of redemption will be
provided by mailing a notice of such redemption to each holder by first class
mail, postage prepaid, at least 30 days and not more than 60 days prior to the
date fixed for redemption to the respective address of each holder as that
address appears upon the books maintained by the Paying Agent.
S-17
<PAGE>
REPAYMENT AT THE NOTEHOLDERS' OPTION
Unless otherwise indicated in the applicable Pricing Supplement, Notes may
not be redeemed at the option of the holders thereof prior to maturity. If so
specified in the applicable Pricing Supplement, a Note will be repayable at the
option of the holder on a date or dates specified prior to its maturity date
and, unless otherwise specified in such Pricing Supplement, at a price equal to
100% of the principal amount thereof, together with accrued interest to the date
of repayment, unless such Notes were issued with original issue discount, in
which case the Pricing Supplement will specify the amount payable upon such
repayment.
Unless otherwise indicated in the applicable Pricing Supplement, in order
for such a Note to be repaid, the Paying Agent must receive at least 15 days but
not more than 30 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, facsimile transmission or a letter from a member of a
national securities exchange, or the National Association of Securities Dealers,
Inc. (the "NASD") 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, together with the duly completed form entitled "Option to Elect
Repayment" on the reverse of the Note, will be received by the Paying Agent not
later than the fifth Business Day after the date of such telegram, facsimile
transmission or letter, PROVIDED HOWEVER, that such telegram, facsimile
transmission or letter shall only be effective if such Note and form duly
completed are received by the Paying Agent by such fifth Business Day. Except in
the case of Extendible Notes, and unless otherwise specified in the applicable
Pricing Supplement, exercise of the repayment option by the holder of a Note
will be irrevocable. The repayment option may be exercised by the holder of a
Note for less than the entire principal amount of the Note but, in that event,
the principal amount of the Note remaining outstanding after repayment must be
an authorized denomination.
If a Note is represented by a Global Security, the Depositary's nominee will
be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different cut-off times for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a Note in
order to ascertain the cut-off time by which such an instruction must be given
in order for timely notice to be delivered to the Depositary.
REPURCHASE
The Corporation may purchase Notes at any price in the open market or
otherwise. Notes so purchased by the Corporation may, at the discretion of the
Corporation, be held or resold or surrendered to the relevant Trustee for
cancellation.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
Any investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either the
U.S. or foreign governments. Such risks generally depend on economic and
political events over which the Corporation has no control. In recent years,
rates of exchange between U.S. dollars and certain foreign currencies have been
highly volatile and such volatility may
S-18
<PAGE>
be expected to continue in the future. Fluctuations in any particular exchange
rate that have occurred in the past are not necessarily indicative, however, of
fluctuations in such rate that may occur during the term of any Note.
Depreciation against the U.S. dollar of the currency in which a Note is payable
would result in a decrease in the effective yield of such Note below its coupon
rate and, in certain circumstances, could result in a loss to the investor on a
U.S. dollar basis. In addition, depending on the specific terms of a Note
denominated in a Specified Currency, changes in exchange rates relating to any
of the currencies involved may result in a decrease in its effective yield and,
in certain circumstances, could result in a loss of all or a substantial portion
of the principal of a Note to the investor.
THIS PROSPECTUS SUPPLEMENT, THE ATTACHED PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN CURRENCY OR A
COMPOSITE CURRENCY AND THE CORPORATION DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT, THE ATTACHED PROSPECTUS AND ANY PRICING 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 NOTES DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF,
SPECIFIED CURRENCIES OTHER THAN U.S. DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE
INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN
CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Corporation
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium, if
any, and interest on the Notes. Such persons should consult their own counsel
with regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of, premium,
if any, or interest on a Note. Even if there are no actual exchange controls, it
is possible that the Specified Currency for any particular Note not denominated
in U.S. dollars would not be available when payments on such Note are due. In
that event, the Corporation would make required payments in U.S. dollars on the
basis of the Market Exchange Rate on the date of such payment, or if such rate
of exchange is not then available, on the basis of the Market Exchange Rate as
of the most recent practicable date. See "Description of Notes -- Payment
Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein shall not constitute a part of
this Prospectus Supplement and 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.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a Federal or State
court in the United States, it is likely that such court would grant judgment
relating to the Notes only in U.S. dollars. The date used to determine the rate
of conversion of a Specified Currency into U.S. dollars will depend upon various
factors, including which court renders the judgment. In the event of an action
based on Notes denominated in a Specified Currency other than U.S. dollars in a
state court in the State of New York, such court would be
S-19
<PAGE>
required to render such judgment in the Specified Currency in which the Note is
denominated, and such judgment would be converted into U.S. dollars at the
exchange rate prevailing on the date of entry of the judgment.
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the ownership of Notes as of the date hereof. Except where
noted, it deals only with Notes held as capital assets by United States Holders
and does not deal with special situations, such as those of dealers in
securities or currencies, financial institutions, life insurance companies,
persons holding Notes as a part of a hedging or conversion transaction or a
straddle or United States Holders whose "functional currency" is not the U.S.
dollar. Furthermore, the discussion below is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings
and judicial decisions thereunder as of the date hereof, and such authorities
may be repealed, revoked or modified so as to result in federal income tax
consequences different from those discussed below. Any special United States
federal income tax considerations relevant to a particular issue of the Notes
will be provided in the applicable Pricing Supplement. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.
PAYMENTS OF INTEREST
Except as set forth below, interest on a Note will generally be taxable to a
United States Holder as ordinary income from domestic sources at the time it is
paid or accrued in accordance with the United States Holder's method of
accounting for tax purposes. As used herein, a "United States Holder" of a Note
means a holder that is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source. A "Non-United States Holder" is a holder that is not a
United States Holder.
ORIGINAL ISSUE DISCOUNT
United States Holders of Notes issued with original issue discount ("OID")
will be subject to special tax accounting rules, as described in greater detail
below. United States Holders of such Notes should be aware that they generally
must include OID in gross income in advance of the receipt of cash attributable
to that income. However, United States Holders of such Notes generally will not
be required to include separately in income cash payments received on the Notes,
even if denominated as interest, to the extent such payments do not constitute
qualified stated interest (as defined below). Notes issued with OID will be
referred to as "Original Issue Discount Notes" or "Discount Securities." Notice
will be given in the applicable Pricing Supplement when the Company determines
that a particular Note will be an Original Issue Discount Note.
This summary is based upon Treasury regulations which became effective on
April 4, 1994 (the "OID Regulations"). Additional rules applicable to Original
Issue Discount Notes which are denominated in or determined by reference to a
Specified Currency other than the U.S. dollar are described under "Foreign
Currency Notes" below. The following discussion does not address Notes providing
for contingent payments other than Notes that bear qualified stated interest.
A Note with an "issue price" that is less than its stated redemption price
at maturity (the sum of all payments to be made on the Note other than
"qualified stated interest") will be issued with original issue discount if such
difference is at least 0.25 percent of the stated redemption price at maturity
multiplied by the number of complete years to maturity or, in the case of an
Amortizing Note, the weighted average maturity. The "issue price" of each Note
in a particular offering will be the
S-20
<PAGE>
first price at which a substantial amount of that particular offering is sold
(other than to an underwriter, placement agent or wholesaler). The term
"qualified stated interest" means stated interest that is unconditionally
payable in cash or in property (other than debt instruments of the issuer) at
least annually at a single fixed rate or, subject to certain conditions, based
on one or more interest indices. Interest is payable at a single fixed rate only
if the rate appropriately takes into account the length of the interval between
payments. Notice will be given in the applicable Pricing Supplement when the
Company determines that a particular Note will bear interest that is not
qualified stated interest.
In the case of a Note issued with de minimis OID (i.e., discount that is not
OID because it is less than 0.25 percent of the stated redemption price at
maturity multiplied by the number of complete years to maturity), the United
States Holder generally must include such de minimis OID in income as principal
payments on the Notes are made in proportion to the stated principal amount of
the Notes. Any amount of de minimis OID that has been included in income shall
be treated as capital gain.
Certain of the Notes may be redeemed prior to their Stated Maturity at the
option of the Company and/or at the option of the holder. Original Issue
Discount Notes containing such features may be subject to rules that differ from
the general rules discussed herein. Persons considering the purchase of Original
Issue Discount Notes with such features should carefully examine the applicable
Pricing Supplement and should consult their own tax advisors with respect to
such features since the tax consequences with respect to OID will depend, in
part, on the particular terms and features of the Notes.
United States Holders of Original Issue Discount Notes with a maturity upon
issuance of more than one year must, in general, include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includable in income by the initial United States Holder of an Original
Issue Discount Note is the sum of the "daily portions" of OID with respect to
the Note for each day during the taxable year or portion of the taxable year in
which such United States Holder held such Note ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. The "accrual period"
for an Original Issue Discount Note may be of any length and may vary in length
over the term of the Note, provided that each accrual period is no longer than
one year and each scheduled payment of principal or interest occurs on the first
day or the final day of an accrual period. The amount of OID allocable to any
accrual period is an amount equal to the excess, if any, of (a) the product of
the 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 properly adjusted for the length of the accrual period) over
(b) the sum of any qualified stated interest allocable to the accrual period.
OID allocable to a final accrual period is the difference between the amount
payable at maturity (other than a payment of qualified stated interest) and the
adjusted issue price at the beginning of the final accrual period. Special rules
will apply for calculating OID for an initial short accrual period. The
"adjusted issue price" of a Note at the beginning of any accrual period is equal
to its issue price increased by the accrued OID for each prior accrual period
(determined without regard to the amortization of any acquisition or bond
premium, as described below) and reduced by any payments made on such Note
(other than qualified stated interest) on or before the first day of the accrual
period. Under these rules, a United States Holder will have to include in income
increasingly greater amounts of OID in successive accrual periods. The Company
is required to provide information returns stating the amount of OID accrued on
Notes held of record by persons other than corporations and other exempt
holders.
In the case of an Original Issue Discount Note that is a Floating Rate Note,
both the "yield to maturity" and "qualified stated interest" will be determined
solely for purposes of calculating the accrual of OID as though the Note will
bear interest in all periods at a fixed rate generally equal to the rate that
would be applicable to interest payments on the Note on its date of issue or, in
the case of certain Floating Rate Notes, the rate that reflects the yield to
maturity that is reasonably expected for the Note. Additional rules may apply if
interest on a Floating Rate Note is based on more than one
S-21
<PAGE>
interest index. Persons considering the purchase of Floating Rate Notes should
carefully examine the applicable Pricing Supplement and should consult their own
tax advisors regarding the U.S. federal income tax consequences of the holding
and disposition of such Notes.
United States Holders may elect to treat all interest on any Note as OID and
calculate the amount includable in gross income under the constant yield method
described above. For the purposes of this election, interest includes stated
interest, acquisition discount, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. The election is to be made for the taxable year
in which the United States Holder acquired the Note, and may not be revoked
without the consent of the Internal Revenue Service (the "IRS"). UNITED STATES
HOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS ABOUT THIS ELECTION.
SHORT-TERM NOTES
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Notes"), under the OID Regulations all payments (including all
stated interest) will be included in the stated redemption price at maturity
and, thus, United States Holders will generally be taxable on the discount in
lieu of stated interest. The discount will be equal to the excess of the stated
redemption price at maturity over the issue price of a Short-Term Note, unless
the United States Holder elects to compute this discount using tax basis instead
of issue price. In general, individuals and certain other cash method United
States Holders of a Short-Term Note are not required to include accrued discount
in their income currently unless they elect to do so. United States Holders that
report income for federal income tax purposes on the accrual method and certain
other United States Holders are required to accrue discount on such Short-Term
Notes (as ordinary income) on a straight-line basis, unless an election is made
to accrue the discount according to a constant yield method based on daily
compounding. In the case of a United States Holder that is not required, and
does not elect, to include discount in income currently, any gain realized on
the sale, exchange or retirement of the Short-Term Note will be ordinary income
to the extent of the discount accrued through the date of sale, exchange or
retirement. In addition, a United States Holder that does not elect to currently
include accrued discount in income may be required to defer deductions for a
portion of the United States Holder's interest expense with respect to any
indebtedness incurred or continued to purchase or carry such Notes.
MARKET DISCOUNT
If a United States Holder purchases a Note (other than an Original Issue
Discount Note) for an amount that is less than its stated redemption price at
maturity or, in the case of an Original Issue Discount Note, its adjusted issue
price, the amount of the difference will be treated as "market discount" for
federal income tax purposes, unless such difference is less than a specified de
minimis amount. Under the market discount rules, a United States Holder will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such payment or
disposition. In addition, the United States Holder may be required to defer,
until the maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder of a Note may elect to include market discount in income currently as it
accrues (on either a ratable or constant interest method), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable year
to which the election applies and may not be revoked without the consent of the
IRS.
S-22
<PAGE>
ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a Note for an amount that is greater
than its adjusted issue price but equal to or less than the sum of all amounts
payable on the Note after the purchase date other than payments of qualified
stated interest will be considered to have purchased such Note at an
"acquisition premium." Under the acquisition premium rules, the amount of OID
which such holder must include in its gross income with respect to such Note for
any taxable year will be reduced by the portion of such acquisition premium
properly allocable to such year.
A United States Holder that purchases a Note for an amount in excess of the
sum of all amounts payable on the Note after the purchase date other than
qualified stated interest will be considered to have purchased the Note at a
"premium" and will not be required to include any OID in income. A United States
Holder generally may elect to amortize the premium over the remaining term of
the Note on a constant yield method. The amount amortized in any year will be
treated as a reduction of the United States Holder's interest income from the
Note. Bond premium on a Note held by a United States Holder that does not make
such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the Note. The election to amortize premium on a
constant yield method once made applies to all debt obligations held or
subsequently acquired by the electing United States Holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A United States Holder's tax basis in a Note will, in general, be the United
States Holder's cost therefor, increased by OID, market discount or any discount
with respect to a Short-Term Note previously included in income by the United
States Holder and reduced by any amortized premium and any cash payments on the
Note other than qualified stated interest. Upon the sale, exchange or retirement
of a Note, a United States Holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange or retirement
(less any accrued qualified stated interest, which will be taxable as such) and
the adjusted tax basis of the Note. Except as described above with respect to
certain Short-Term Notes, with respect to gain or loss attributable to changes
in exchange rates as described below with respect to certain Foreign Currency
Notes or with respect to market discount, such gain or loss will be capital gain
or loss and will be long-term capital gain or loss if at the time of sale,
exchange or retirement the Note has been held for more than one year. Under
current law, net capital gains of individuals are, under certain circumstances,
taxed at lower rates than items of ordinary income. The deductibility of capital
losses is subject to limitations.
EXTENDIBLE NOTES AND RENEWABLE NOTES
If so specified in an applicable Pricing Supplement relating to a Note, the
Company or a holder may have the option to extend the maturity of a Note. See
"Description of Notes -- Renewable Notes" and "Description of Notes -- Extension
of Maturity." The treatment of a United States Holder of Notes with respect to
which such an option has been exercised is unclear and will depend, in part, on
the terms established for such Notes by the Company pursuant to the exercise of
such option (the "Revised Terms"). Such United States Holder may be treated for
federal income tax purposes as having exchanged such Notes (the "Old Notes") for
new Notes with Revised Terms (the "New Notes"). If the exercise of the option by
the Company is not treated as an exchange of Old Notes for New Notes, no gain or
loss will be recognized by a United States Holder as a result thereof. If the
exercise of the option is treated as a taxable exchange of Old Notes for New
Notes, a United States Holder would recognize gain or loss equal to the
difference between the issue price of the New Notes and the holder's tax basis
in the Old Notes.
The presence of such options may also affect the calculation of OID, among
other things. The OID Regulations provide that, solely for purposes of the
accrual of OID, an issuer of a debt instrument having an option or combination
of options to extend the term of the debt instrument will be presumed to
exercise such option or options in a manner that minimizes the yield on the debt
instrument. Conversely, a holder having a put option, an option to extend the
term of the debt or a
S-23
<PAGE>
combination of such options will be presumed to exercise such option or options
in a manner that maximizes the yield on the debt instrument. If the exercise of
such option or options actually occurs or does not occur, contrary to the
presumption made under the OID Regulations (a "change in circumstances"), then,
solely for purposes of the accrual of OID, the debt instrument is treated as
reissued on the date of the change in circumstances for an amount equal to its
adjusted issue price on that date. Persons considering the purchase of
Extendible Notes or Renewable Notes should carefully examine the applicable
Pricing Supplement and should consult their own tax advisors regarding the U.S.
federal income tax consequences of the holding and disposition of such Notes.
FOREIGN CURRENCY NOTES
The following is a summary of the principal United States federal income tax
consequences to a United States Holder of the ownership of a Note denominated in
a Specified Currency other than the U.S. dollar (a "Foreign Currency Note"). If
interest payments are made in a Foreign Currency to a United States Holder that
is not required to accrue such interest prior to its receipt, such holder will
be required to include in income the U.S. dollar value of the amount received
(determined by translating the Foreign Currency received at the "spot rate" for
such Foreign Currency on the date such payment is received), regardless of
whether the payment is in fact converted into U.S. dollars. No exchange gain or
loss is recognized with respect to the receipt of such payment.
A United States Holder that is required to accrue interest on a Foreign
Currency Note prior to receipt of such interest will be required to include in
income for each taxable year the U.S. dollar value of the interest that has
accrued during such year, determined by translating such interest at the average
rate of exchange for the period or periods during which such interest accrued.
The average rate of exchange for an interest accrual period is the simple
average of the exchange rates for each business day of such period (or such
other average that is reasonably derived and consistently applied by the
holder). An accrual basis holder may elect to translate interest income at the
spot rate on the last day of the accrual period (or last day of the taxable year
in the case of an accrual period that straddles the holder's taxable year) or on
the date the interest payment is received if such date is within five days of
the end of the accrual period. Upon receipt of an interest payment on such Note,
such holder will recognize ordinary income or loss in an amount equal to the
difference between the U.S. dollar value of such payment (determined by
translating any Foreign Currency received at the "spot rate" for such Foreign
Currency on the date received) and the U.S. dollar value of the interest income
that such holder has previously included in income with respect to such payment.
OID on a Note that is also a Foreign Currency Note will be determined for
any accrual period in the applicable Foreign Currency and then translated into
U.S. dollars in the same manner as interest income accrued by a holder on the
accrual basis, as described above. Likewise, a United States Holder will
recognize exchange gain or loss when the OID is paid to the extent of the
difference between the U.S. dollar value of the accrued OID (determined in the
same manner as for accrued interest) and the U.S. dollar value of such payment
(determined by translating any Foreign Currency received at the spot rate for
such Foreign Currency on the date of payment). For this purpose, all receipts on
a Note will be viewed first as the receipt of any stated interest payments
called for under the terms of the Note, second as receipts of previously accrued
OID (to the extent thereof), with payments considered made for the earliest
accrual periods first, and thereafter as the receipt of principal.
The amount of market discount on Foreign Currency Notes includable in income
will generally be determined by translating the market discount determined in
the Foreign Currency into U.S. dollars at the spot rate on the date the Foreign
Currency Note is retired or otherwise disposed of. If the United States Holder
has elected to accrue market discount currently, then the amount which accrues
is determined in the Foreign Currency and then translated into U.S. dollars on
the basis of the average exchange rate in effect during such accrual period. A
United States Holder will recognize exchange gain or loss with respect to market
discount which is accrued currently using the approach applicable to the accrual
of interest income as described above.
S-24
<PAGE>
Bond premium on a Foreign Currency Note will be computed in the applicable
Foreign Currency. With respect to a United States Holder that elects to amortize
the premium, the amortizable bond premium will reduce interest income in the
applicable Foreign Currency. At the time bond premium is amortized, exchange
gain or loss (which is generally ordinary income or loss) will be realized based
on the difference between spot rates at such time and at the time of acquisition
of the Foreign Currency Note. A United States Holder that does not elect to
amortize bond premium will translate the bond premium, computed in the
applicable Foreign Currency, into U.S. dollars at the spot rate on the maturity
date and such bond premium will constitute a capital loss which may be offset or
eliminated by exchange gain.
A United States Holder's tax basis in a Foreign Currency Note will be the
U.S. dollar value of the Foreign Currency amount paid for such Foreign Currency
Note determined at the time of such purchase. A United States Holder that
purchases a Note with previously owned Foreign Currency will recognize exchange
gain or loss at the time of purchase attributable to the difference at the time
of purchase, if any, between his tax basis in such Foreign Currency and the fair
market value of the Note in U.S. dollars on the date of purchase. Such gain or
loss will be ordinary income or loss.
For purposes of determining the amount of any gain or loss recognized by a
United States Holder on the sale, exchange or retirement of a Foreign Currency
Note, the amount realized upon such sale, exchange or retirement will be the
U.S. dollar value of the amount realized in Foreign Currency (other than amounts
attributable to accrued but unpaid interest not previously included in the
holder's income), determined at the time of the sale, exchange or retirement.
A United States Holder will recognize exchange gain or loss attributable to
the movement in exchange rates between the time of purchase and the time of
disposition (including the sale, exchange or retirement) of a Foreign Currency
Note. Such gain or loss will be treated as ordinary income or loss. The
realization of such gain or loss will be limited to the amount of overall gain
or loss realized on the disposition of a Foreign Currency Note. Under proposed
Treasury Regulations issued on March 17, 1992, if a Foreign Currency Note is
denominated in one of certain hyperinflationary currencies, generally (i)
exchange gain or loss would be realized with respect to movements in the
exchange rate between the beginning and end of each taxable year (or such
shorter period) that such Note was held and (ii) such exchange gain or loss
would be treated as an addition or offset, respectively, to the accrued interest
income on (and an adjustment to the holder's tax basis in) the Foreign Currency
Note.
A United States Holder's tax basis in Foreign Currency received as interest
on (or OID with respect to), or received on the sale or retirement of, a Foreign
Currency Note will be the U.S. dollar value thereof at the spot rate at the time
the holder received such Foreign Currency. Any gain or loss recognized by a
United States Holder on a sale, exchange or other disposition of Foreign
Currency will be ordinary income or loss and will not be treated as interest
income or expense, except to the extent provided in Treasury Regulations or
administrative pronouncements of the IRS.
INDEXED NOTES
The tax treatment of a United States Holder of an Indexed Note will depend
on factors including the specific index or indices used to determine indexed
payments on the Note and the amount and timing of any noncontingent payments of
principal and interest. Persons considering the purchase of Indexed Notes should
carefully examine the applicable Pricing Supplement and should consult their own
tax advisors regarding the U.S. federal income tax consequences of the holding
and disposition of such Notes.
NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be required
with respect to the payment by the Company or any Paying Agent of principal
or interest (which for purposes of this
S-25
<PAGE>
discussion includes OID) on a Note owned by a Non-United States Holder,
provided (i) that the beneficial owner 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 within the meaning of section 871(h)(3) of
the Code and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to the Company through stock
ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on a Note is described in section 881(c)(3)(A) of the Code and (iv)
the beneficial owner satisfies the statement requirement (described
generally below) set forth in section 871(h) and section 881(c) of the Code
and the regulations thereunder;
(b) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-United States Holder
upon the sale, exchange or retirement of a Note; and
(c) a Note beneficially owned by an individual who at the time of death
is a Non-United States Holder will not be subject to United States federal
estate tax as a result of such individual's death, provided that such
individual 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 within the meaning of section 871(h)(3) of the Code and provided that
the interest payments with respect to such Note would not have been, if
received at the time of such individual's death, effectively connected with
the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner is
not a U.S. person, citizen or resident. Pursuant to current temporary Treasury
regulations, these requirements will be met if (1) the beneficial owner provides
his name and address, and certifies, under penalties of perjury, that he is not
a U.S. person, citizen or resident (which certification may be made on an
Internal Revenue Service Form W-8 (or successor form) or (2) a financial
institution holding the Debt Security on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes a paying agent with a copy thereof.
Payments to Non-United States Holders not meeting the requirements of
paragraph (a) above and thus subject to withholding of United States federal
income tax may nevertheless be exempt from such withholding if the beneficial
owner of the Note provides the Company with a properly executed (1) Internal
Revenue Service Form 1001 (or successor form) claiming an exemption from
withholding under the benefit of a tax treaty or (2) Internal Revenue Service
Form 4224 (or successor form) stating that interest paid on the Note is not
subject to withholding tax because it is effectively connected with the owner's
conduct of a trade or business in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium paid on Notes and to the
proceeds of sale of a Note made to United States Holders other than certain
exempt recipients (such as corporations). A 31% backup withholding tax will
apply to such payments if the United States Holder fails to provide a taxpayer
identification number or certification of foreign or other exempt status or
fails to report in full dividend and interest income.
No information reporting or backup withholding will be required with respect
to payments made by the Company or any paying agent to Non-United States Holders
if a statement described in (a)(iv) under "Non- United States Holders" has been
received and the payor does not have actual knowledge that the beneficial owner
is a United States person.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, OID or premium on a Note are paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of the beneficial owner of such Note, or if a foreign office of a broker
(as defined in applicable Treasury regulations) pays the proceeds of the sale of
a Note to the
S-26
<PAGE>
owner thereof. If, however, such nominee, custodian, agent or broker is, for
United States federal income tax purposes, a U.S. person, a controlled foreign
corporation or a foreign person that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States,
such payments will not be subject to backup withholding but will be subject to
information reporting, unless (1) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a U.S.
person and certain other conditions are met or (2) the beneficial owner
otherwise establishes an exemption. Temporary Treasury regulations provide that
the Treasury is considering whether backup withholding will apply with respect
to such payments of principal, interest or the proceeds of a sale that are not
subject to backup withholding under the current regulations. Under proposed
Treasury regulations not currently in effect backup withholding will not apply
to such payments absent actual knowledge that the payee is a United States
person.
Payments of principal, interest, OID and premium on a Note paid to the
beneficial owner of a Note by a United States office of a custodian, nominee or
agent, or the payment by the United States office of a broker of the proceeds of
sale of a Note, will be subject to both backup withholding and information
reporting unless the beneficial owner provides the statement referred to in
(a)(iv) above and the payor does not have actual knowledge that the beneficial
owner is a United states person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Corporation through
the Agents, who have agreed to use reasonable efforts to solicit offers to
purchase Notes. The Corporation will have the sole right to accept offers to
purchase Notes and may reject any offer to purchase Notes in whole or in part.
An Agent will have the right to reject any offer to purchase Notes solicited by
it in whole or in part. Payment of the purchase price of the Notes will be
required to be made in immediately available funds. The Corporation will pay an
Agent, in connection with sales of Notes resulting from a solicitation made or
an offer to purchase received by such Agent, a commission ranging from .125% to
.750% of the principal amount of Notes to be sold (or, with respect to Notes
with maturities of greater than 30 years, such commission as shall be negotiated
between the Corporation and the related Agent at the time the Corporation issues
such Notes). The Corporation also reserves the right to sell Notes directly to
investors on its behalf in those jurisdictions where it is authorized to do so.
In addition, the Corporation reserves the right to (i) solicit and accept offers
to purchase Notes through additional agents and may appoint additional agents
for the purpose of soliciting offers to purchase Notes, in either case upon
prior notice to, and with the prior consent of, each existing Agent and on
substantially the same terms and conditions (including commission rates)
applicable to the Agents and thereafter, the term Agent shall also refer to such
additional agent or agents or (ii) accept a specific offer to purchase Notes
solicited by an agent other than the Agents (without obtaining the prior consent
of the Agents) on substantially the same terms and conditions (including
commission rates) applicable to the Agents.
The Corporation may also sell Notes to an Agent as principal for its own
account at discounts to be agreed upon at the time of sale. Such Notes may be
resold to investors and other purchasers at prevailing market prices, or prices
related thereto at the time of such resale or otherwise, as determined by the
Agent. In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer will not be in excess of the discount to be
received by such Agent from the Corporation. After the initial public offering
of Notes to be resold to investors and other purchasers on a fixed public
offering price basis, the public offering price, concession and discount may be
changed.
S-27
<PAGE>
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Corporation and
the Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
made in respect thereof. The Corporation has also agreed to reimburse the Agents
for certain expenses, including the fees and expenses of counsel.
The Corporation does not intend to apply for the listing of the Notes on a
national securities exchange, but has been advised by the Agents that the Agents
intend to make a market in the Notes, as permitted by applicable laws and
regulations. The Agents are not obligated to do so, however, and the Agents may
discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
Concurrently with the offering of Notes through the Agents as described
herein, the Corporation may issue other Securities as described in the
accompanying Prospectus.
In the ordinary course of their respective businesses, certain of the Agents
and their affiliates have engaged, and may in the future engage, in investment
banking and commercial banking transactions with the Corporation and certain of
its affiliates.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for the Corporation by Mahoney
Adams & Criser, P.A. (a professional corporation), Jacksonville, Florida,
counsel for the Corporation, and for the Agents by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.
Mahoney Adams & Criser, P.A. will rely as to all matters of New York law upon
the opinion of Simpson Thacher & Bartlett. Simpson Thacher & Bartlett will rely
as to all matters of Florida law upon the opinion of Mahoney Adams & Criser,
P.A.
The opinions of Mahoney Adams & Criser, P.A. and Simpson Thacher & Bartlett
will be conditioned upon, and subject to certain assumptions regarding, future
action required to be taken by the Corporation and the Senior Trustee and
Subordinated Trustee in connection with the issuance and sale of any particular
Note, the specific terms of Notes and other matters which may affect the
validity of Notes but which cannot be ascertained on the date of such opinions.
Marshall M. Criser, a director of the Corporation, is a member of the firm of
Mahoney Adams & Criser, P.A.
S-28
