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Rule 424(b)(3)
FILE NO. 33-53937
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PROSPECTUS SUPPLEMENT
(To Prospectus dated April 8, 1994)
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$750,000,000
USX Corporation
Medium-Term Notes, Series C
Due nine months or more from Date of Issue
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USX Corporation ("USX" or the "Company") may offer from time to time its
Medium-Term Notes, Series C (the "Notes") in an aggregate principal amount not
to exceed $750,000,000 (or, if any Notes are to be Original Issue Discount
Notes, Foreign Currency Notes or Indexed Notes (as each such term is defined
under "DESCRIPTION OF NOTES"), such principal amount as shall result in an
aggregate initial offering price equivalent to no more than $750,000,000),
subject to reduction as a result of the sale of other Debt Securities under
the Prospectus to which this Prospectus Supplement relates. The foregoing
limit may be increased by the Company if in the future it wishes to sell
additional Notes. The interest rates and interest rate formulas on the
Notes will be established by USX from time to time and will be set forth
in an accompanying pricing supplement (a "Pricing Supplement") to this
Prospectus Supplement. Any change in the interest rates or interest rate
formulas will not affect the interest rate or interest rate formulas on
any Note theretofore issued or which USX has theretofore agreed to sell
prior to the effective date of the change. The Notes will bear
interest at a fixed rate (the "Fixed Rate Notes") or at a rate or
rates determined by reference to the Commercial Paper Rate, the Prime
Rate, the CD Rate, the Federal Funds Rate, LIBOR or the Treasury Rate,
as adjusted by the Spread or Spread Multiplier (as such terms are
hereinafter defined), if any, applicable to such Notes
(the "Floating Rate Notes"), all as specified (or
otherwise set forth) in the applicable Pricing Supplement.
The Notes will mature nine months or more from the date of issue, as indicated
in the accompanying Pricing Supplement. The Notes may be subject to redemption
at the option of USX or repayment at the option of the Holder thereof
prior to Stated Maturity, as specified in the applicable Pricing
Supplement. Each Note will be denominated in U.S. dollars or in a
foreign currency, European Currency Units ("ECU") or such other
currency unit as may be specified in the applicable Pricing
Supplement (the "Specified Currency"). The Notes denominated in
U.S. dollars will be issued in denominations of $100,000 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. See "DESCRIPTION OF NOTES."
Each Note will be issued only in fully registered form and will be represented
by either a Global Security registered in the name of a nominee of The
Depository Trust Company, as Depositary (a "Book-Entry Note"), or a
certificate issued in definitive form (a "Certificated Note"), as set
forth in the applicable Pricing Supplement. Beneficial interests in
Book-Entry Notes will be shown on, and transfers thereof will be
effected only through, the records maintained by the Depositary
and its participants. See "DESCRIPTION OF NOTES--General" and
"--Book-Entry Notes." Except as described in "DESCRIPTION OF
NOTES--Book-Entry Notes," owners of beneficial interests
in Global Securities will not be entitled to receive
Notes in definitive form and will not be considered
the Holders thereof.
The interest rate or interest rate formula, if any, issue price, Interest
Payment Dates, redemption or repayment provisions, if any, Stated Maturity,
Specified Currency and certain other terms with respect to each Note will
be established by USX at the date of issuance of such Note and will be
indicated in the applicable Pricing Supplement. Interest on Fixed
Rate Notes will be payable on October 15 and April 15, unless
otherwise indicated in the applicable Pricing Supplement,
and at Maturity. Interest on Floating Rate Notes will be
payable on the dates indicated herein and
in the applicable Pricing Supplement.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
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<CAPTION>
Price to Distributors' Proceeds to
Public(1) Commissions(2) Company(2)(3)
<S> <C> <C> <C>
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Per Note 100% .125% - .750% 99.250% - 99.875%
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Total (4) $750,000,000 $937,500 - $5,625,000 $744,375,000 - $749,062,500
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</TABLE>
(1) Unless otherwise indicated in a Pricing Supplement, Notes will be issued at
100% of their principal amount. If USX issues any Note at a discount from or
a premium over its principal amount, the Price to the Public will be set
forth in the applicable Pricing Supplement.
(2) Unless otherwise specified in the applicable Pricing Supplement, USX will
pay a commission (or grant a discount) to the Distributor of .125% to .750%
of the principal amount of any Note, depending upon its Stated Maturity,
sold through any such Distributor acting as agent (or sold to such
Distributor in circumstances in which no other discount is agreed).
Commissions on any Notes with maturities in excess of thirty (30) years may
be higher and will be set forth in the applicable Pricing Supplement. No
commission will be payable on any sales made directly to investors by USX.
USX has agreed to indemnify the Distributors against, and contribute toward,
certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
(3) Assuming Notes are issued at 100% of principal amount and before deduction
of estimated expenses of the Notes being offered hereby of $150,000.
(4) In U.S. dollars or the equivalent thereof in foreign currencies or currency
units.
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The Notes are offered on a continuing basis by USX through CS First Boston
Corporation, Goldman, Sachs & Co., J.P. Morgan Securities Inc., Morgan Stanley &
Co. Incorporated, Salomon Brothers Inc and Lehman Brothers, Lehman Brothers Inc.
(including its affiliate, Lehman Special Securities Inc.) (the "Distributors"),
each of which has agreed to use all reasonable efforts to solicit offers to
purchase the Notes. USX also may sell Notes to any Distributor acting as
principal for resale to one or more investors. USX reserves the right to sell
Notes directly to investors on its own behalf in those jurisdictions where it is
authorized to do so and to or through other distributors or dealers. The Notes
will not be listed on any securities exchange, and there can be no assurance
that the Notes offered by this Prospectus Supplement will be sold or that there
will be a secondary market for the Notes. USX reserves the right to withdraw,
cancel or modify the offer made hereby without notice. USX or any Distributor,
if it solicits such offer, may reject any offer to purchase Notes, in whole or
in part. See "PLAN OF DISTRIBUTION."
CS FIRST BOSTON GOLDMAN, SACHS & CO.
LEHMAN BROTHERS J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO. SALOMON BROTHERS INC
INCORPORATED
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The date of this Prospectus Supplement is April 26, 1994.
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IN CONNECTION WITH THIS OFFERING, THE DISTRIBUTORS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
NORTH CAROLINA
The Commissioner of Insurance of the State of North Carolina has not
approved or disapproved this offering nor has the Commissioner passed upon the
accuracy or adequacy of this Prospectus Supplement or the Prospectus.
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RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1993 1992 1991 1990 1989
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<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........... (a) (a) (a) 2.80 2.57
==== ==== ==== ==== ====
</TABLE>
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(a) Earnings did not cover fixed charges by $281 million for 1993, by $197
million for 1992 and by $681 million for 1991.
RECENT DEVELOPMENTS
RECENT FINANCINGS
In February 1994, USX issued $300 million of 7.20% Notes Due 2004 and $150
million of LIBOR-based Floating Rate Notes Due 1996.
In February 1994, USX sold 5,000,000 shares of USX-U.S. Steel Group Common
Stock to the public for net proceeds of $201 million. In March 1994, USX Capital
LLC, a wholly owned subsidiary of USX, sold $250 million of 8 3/4% Cumulative
Monthly Income Preferred Shares.
On March 1, 1994, Marathon Oil Company, a wholly-owned subsidiary of USX,
issued $57 million aggregate principal amount of its 7% Monthly Interest
Guaranteed Notes Due 2002 in exchange for a like amount of its 9 1/2% Guaranteed
Notes Due 1994 that were tendered pursuant to an exchange offer. The balance of
the 9 1/2% Guaranteed Notes of $642 million was paid on March 1, 1994, the
maturity date.
USE OF PROCEEDS
USX intends to use the net proceeds from the sale of the Notes for general
corporate purposes, the refunding of outstanding long-term indebtedness and
other financial obligations, rate management and leveling of its debt maturity
schedule.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements the description of the general terms and conditions of Debt
Securities set forth under the heading "DESCRIPTION OF THE DEBT SECURITIES" in
the Prospectus, to which description reference is hereby made.
GENERAL
The terms and conditions hereinafter set forth will apply to each Note
unless otherwise specified in an applicable Pricing Supplement. Initially
capitalized terms used herein and not defined herein shall bear the meanings
ascribed thereto in the Indenture dated as of March 15, 1993 (the "Indenture")
between the Company and PNC Bank, N.A., as Trustee (the "Trustee") as described
in the Prospectus.
The Notes offered hereby will be issued under the Indenture and constitute
a single series for purposes of the Indenture, limited to an aggregate principal
amount not to exceed $750,000,000 (or, if any Notes are to be Original Issue
Discount Notes (as hereinafter defined) or are to be denominated in one or more
currencies or currency units other than U.S. dollars ("Foreign Currency Notes")
or with amounts payable in respect of principal of or any premium or interest on
the Notes to be determined by reference to the value, rate or price of one or
more specified indices ("Indexed Notes"), such principal amount as shall result
in an aggregate initial offering price equivalent to no more than $750,000,000),
subject to reduction as a result of the sale of other Debt Securities under the
Prospectus to which this Prospectus Supplement relates. The foregoing limit may
be increased by the Company if in the future it wishes to sell additional Notes.
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The Notes will be offered on a continuing basis and each will mature nine
months or more from its date of issue, as selected by the initial purchaser and
agreed to by the Company. Floating Rate Notes will each mature on an Interest
Payment Date (as hereinafter defined) unless otherwise agreed upon by the
Company and the purchaser of each such Floating Rate Note.
The Notes will be issuable only in fully registered form and, if
denominated in U.S. dollars, in denominations of $100,000 and integral multiples
of $1,000 in excess thereof, or, in the case of Foreign Currency Notes, in such
minimum denomination not less than the equivalent of $100,000 and such other
denomination or denominations in excess thereof as shall be set forth in the
applicable Pricing Supplement. Unless otherwise indicated in the applicable
Pricing Supplement, currency amounts in this Prospectus Supplement, the
accompanying Prospectus and any Pricing Supplement are stated in United States
dollars ("$", "dollars", "U.S. dollars" or "U.S. $").
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. See "Book-Entry Notes."
The Company has initially designated The First National Bank of Boston (the
"Issuing and Paying Agent") as the Issuing Agent, Paying Agent and Debt Security
registrar for the Notes. Unless otherwise indicated in an applicable Pricing
Supplement, payments of principal and any premium and interest, other than with
respect to Book-Entry Notes and Foreign Currency Notes, will be made in
immediately available funds at the offices of BancBoston Trust Company of New
York in the Borough of Manhattan, The City of New York, provided that the Note
is presented to the Issuing and Paying Agent in time for the Issuing and Paying
Agent to make such payments in such funds in accordance with its normal
procedures; except that at the option of the Company, payments of interest
(other than interest payable at Maturity) may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the Debt
Security register at the close of business on the applicable Regular Record
Dates. With respect to payments on Book-Entry Notes and Foreign Currency Notes,
see "Book-Entry Notes" and "Special Provisions Relating to Foreign Currency
Notes," respectively. The Regular Record Dates for all Notes (whether Fixed Rate
Notes or Floating Rate Notes) will be the fifteenth calendar day next preceding
each Interest Payment Date (whether or not a Market Day).
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of and any premium
and interest on the Notes will be made in U.S. dollars in the manner indicated
in the accompanying Prospectus and this Prospectus Supplement. If any of the
Notes (each, a "Foreign Currency Note") are to be denominated in one or more
currencies or currency units other than U.S. dollars (each, a "Specified
Currency") 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. See "SPECIAL PROVISIONS RELATING TO FOREIGN
CURRENCY NOTES."
The Notes may be issued as Original Issue Discount Notes. An Original Issue
Discount Note is a Note, including any Zero-Coupon Note, which is issued at a
price lower than the amount payable at the Stated Maturity thereof and which
provides that upon redemption or acceleration of the Maturity thereof an amount
less than the principal amount payable at the Stated Maturity thereof and
determined in accordance with the terms thereof shall become due and payable.
Original Issue Discount Notes, as well as certain other Notes offered hereunder,
may, for United States federal income tax purposes, be considered "Discount
Notes." The principal United States federal income tax consequences of the
ownership of Discount Notes are described under "UNITED STATES TAXATION--United
States Holders--Original Issue Discount." A Zero-Coupon Note is a Note that does
not bear interest prior to Maturity. See "UNITED STATES TAXATION--Payments of
Interest" and "--Original Issue Discount."
The Notes may be issued as Indexed Notes, of which the principal amount
payable at Maturity and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to one or more currencies,
currency units, commodity prices, financial or non-financial indices or other
factors, 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
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determining the principal amount payable at Maturity, a historical comparison of
the relative value, rate or price of the specified index and the face amount of
the Indexed Note and certain additional tax considerations will be described in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, Fixed Rate
Notes denominated and payable in U.S. dollars will be subject to the provisions
of the Indenture described in the Prospectus under "DESCRIPTION OF THE DEBT
SECURITIES--Satisfaction and Discharge; Defeasance and Covenant Defeasance". Any
such defeasance would be likely to have a taxable effect on Holders of the
Notes.
With respect to the Notes offered hereby, for purposes of Section 11.01 of
the Indenture, "substantially all of its assets" means, at any date, a portion
of the Company's non-current assets reflected in the Company's consolidated
balance sheet as of the end of the most recent quarterly period that represents
at least 66 2/3% of the total reported value of such assets.
"Market Day" means (a) with respect to any Note (unless otherwise provided
in this definition), any Business Day, (b) with respect to LIBOR Notes only, any
Business Day that is also a London Banking Day ("London Banking Day" means any
day on which dealings in deposits in U.S. dollars are transacted in the London
interbank market), (c) with respect to Foreign Currency Notes (other than
Foreign Currency Notes denominated in European Currency Units ("ECUs")) only,
any Business Day that, in the principal financial center of the country of the
Specified Currency, is not a day on which banking institutions generally are
authorized or obligated by law or executive order to close and (d) with respect
to Foreign Currency Notes denominated in ECUs, any Business Day that is also
designated as an ECU settlement day by the ECU Banking Association in Paris or
otherwise generally regarded in the ECU interbank market as a day in which
payments in ECUs are made.
The Notes constitute a single series of the Debt Securities referred to in
the Prospectus. See "DESCRIPTION OF THE DEBT SECURITIES" in the Prospectus for
additional information concerning the Notes and the Indenture under which they
are issued. In the event of any disparity between the description of the Notes
contained herein and the description of the Debt Securities contained in the
Prospectus, and subject to the Indenture, the description of the Notes contained
herein shall be deemed to be controlling.
INTEREST AND INTEREST RATES
Each interest-bearing Note will bear interest from its date of issue or
from the most recent Interest Payment Date (or, in the case of Floating Rate
Notes with daily or weekly Interest Reset Dates, from the day following the
Regular Record Date) to which interest on such Note has been paid or duly
provided for at the fixed rate per annum, or at a rate per annum determined
pursuant to an interest rate formula, stated therein and in the applicable
Pricing Supplement, until the principal thereof is paid or duly made available
for payment. Interest will be payable on each Interest Payment Date and at
Maturity. Interest will be payable generally to the Person in whose name a Note
(or any predecessor Note) is registered at the close of business on the Regular
Record Date next preceding the Interest Payment Date; provided, however, that if
the date of issue of any Note is after a Regular Record Date and before the next
succeeding Interest Payment Date, the first payment of interest on such Note
shall be payable on the second Interest Payment Date following such date of
issue to the Person in whose name such Note is registered at the close of
business on the Regular Record Date immediately preceding such Interest Payment
Date; provided, further however, that interest payable at Maturity will be
payable to the Person to whom principal shall be payable. Interest rates and
interest rate formulas are subject to change by the Company from time to time
but no such change will affect any Note theretofore issued or which the Company
has theretofore agreed to sell. The Maturity of a Fixed Rate Note will not
necessarily be a Interest Payment Date. Unless otherwise indicated in the
applicable Pricing Supplement, the Interest Payment Dates for Fixed Rate Notes
shall be as hereinafter described under "Fixed Rate Notes." The Interest Payment
Dates for Floating Rate Notes shall be as indicated in the applicable Pricing
Supplement.
Each interest-bearing Note will bear interest at either (a) a fixed rate
(the "Fixed Rate Notes") or (b) a floating rate (the "Floating Rate Notes")
determined by reference to an interest rate formula which may be adjusted by a
Spread or Spread Multiplier (each as hereinafter described). Any Floating Rate
Note may also
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have either or both of the following: (i) a maximum numerical interest rate
limitation, or ceiling, on the rate of interest which may accrue during any
interest period; and (ii) a minimum numerical interest rate limitation, or
floor, on the rate of interest which may accrue during any interest period. In
addition to any maximum interest rate which may be applicable to any Floating
Rate Note, the interest rate on such Floating Rate Note will in no event be
higher than the maximum rate permitted by New York law, as the same may be
modified by United States law of general application. Under present New York law
the maximum rate of interest, with certain exceptions, is twenty five percent
(25%) per annum on a simple interest basis. The limit may not apply to Notes in
which $2,500,000 or more has been invested.
The applicable Pricing Supplement will designate one of the following as
applicable to each Note: (a) a fixed rate per annum, or (b) one of the following
interest rate bases: (i) the Commercial Paper Rate (as hereinafter defined under
"Commercial Paper Rate Notes") in which case such Note will be a "Commercial
Paper Rate Note", (ii) the Prime Rate (hereinafter defined under "Prime Rate
Notes") in which case such Note will be a "Prime Rate Note", (iii) the CD Rate
(hereinafter defined under "CD Rate Notes") in which case such Note will be a
"CD Rate Note", (iv) the Federal Funds Rate (hereinafter defined under "Federal
Funds Rate Notes") in which case such Note will be a Federal Funds Rate Note,
(v) LIBOR (hereinafter defined under "LIBOR Notes") in which case such Note will
be a "LIBOR Note", (vi) the Treasury Rate (hereinafter defined under "Treasury
Rate Notes") in which case such Note will be a "Treasury Rate Note" or (vii)
such other interest rate basis as is set forth in such Pricing Supplement.
The interest rate on each Floating Rate Note will initially be equal to the
Initial Interest Rate (as hereinafter defined) and thereafter will be equal to
either (i) the interest rate determined by reference to the specified interest
rate formula (as specified in the applicable Pricing Supplement) plus or minus
the Spread, if any, or (ii) the interest rate calculated by reference to the
specified interest rate formula multiplied by the Spread Multiplier, if any. The
"Spread" is the number of basis points specified in the applicable Pricing
Supplement as being applicable to such Floating Rate Note, and the "Spread
Multiplier" is the percentage specified in the applicable Pricing Supplement as
being applicable to such Floating Rate Note.
Except as hereinafter provided or in the applicable Pricing Supplement,
interest on Floating Rate Notes will be payable in the case of Floating Rate
Notes with a daily, weekly or monthly Interest Reset Date (as hereinafter
defined), on the third Wednesday of each month as specified in the applicable
Pricing Supplement; in the case of Floating Rate Notes with a quarterly Interest
Reset Date, on the third Wednesday of March, June, September and December of
each year; in the case of Floating Rate Notes with a semiannual Interest Reset
Date, on the third Wednesday of two months of each year, as specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes with an
annual Interest Reset Date, on the third Wednesday of the month specified in the
applicable Pricing Supplement. If any Interest Payment Date for any Floating
Rate Note (other than an Interest Payment Date at Maturity) would otherwise be a
day that is not a Market Day for such Floating Rate Note, the Interest Payment
Date for such Floating Rate Note shall be postponed to the next day that is a
Market Day for such Floating Rate Note, except that in the case of a LIBOR Note,
if such Market Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding Market Day. If the Maturity of a
Floating Rate Note falls on a day that is not a Market Day, the payment of
principal, premium, if any, and interest will be made on the next succeeding
Market Day, and no interest or such payment shall accrue from and after such
Maturity.
The applicable Pricing Supplement will specify the interest rate basis and
the Spread or Spread Multiplier, if any, and the maximum or minimum interest
rate limitation, if any, applicable to each Floating Rate Note. In addition,
such Pricing Supplement will define or particularize for each Note the following
terms, if applicable: the period to maturity of the instrument or obligation on
which the interest rate formula is based (the "Index Maturity"), Initial
Interest Rate, Interest Payment Dates, Regular Record Dates and Interest Reset
Dates (as hereinafter defined) with respect to such Note.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semiannually or annually (each an "Interest Reset
Date"), as specified in the applicable Pricing Supplement, based on certain
facts and circumstances hereinafter set forth occurring on a specified date
(each an "Interest Determination Date") shortly prior thereto. Except as
hereinafter provided or in the applicable Pricing
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Supplement, the Interest Reset Date will be, in the case of Floating Rate Notes
which reset daily, each Market Day; in the case of Floating Rate Notes other
than Treasury Rate Notes which reset weekly, the Wednesday of each week; in the
case of Treasury Rate Notes which reset weekly, the Tuesday of each week; in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each year,
as specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of one month of each year,
as specified in the applicable Pricing Supplement; 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" (as set
forth in the applicable Pricing Supplement). If any Interest Reset Date for any
Floating Rate Note would otherwise be a day that is not a Market Day for such
Floating Rate Note, the Interest Reset Date for such Floating Rate Note shall be
postponed to the next day that is a Market Day for such Floating Rate Note,
except that in the case of a LIBOR Note, if such Market Day is in the next
succeeding calendar month, such Interest Reset Date shall be the immediately
preceding Market Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
a Prime Rate Note (the "Prime Rate Interest Determination Date"), a CD Rate Note
(the "CD Rate Interest Determination Date") or a Federal Funds Rate Note (the
"Federal Funds Interest Determination Date") will be the second Market Day next
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for a LIBOR Note (the "LIBOR Interest Determination
Date") will be the second London Banking Day preceding such Interest Reset Date.
The Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note (the "Treasury Interest Determination Date") will be the day
on which Treasury bills are auctioned for the week in which such Interest Reset
Date falls, or if no auction is held for such week, the Monday of such week (or
if Monday is a legal holiday, the next succeeding Market Day) and the Interest
Reset Date will be the Market Day immediately following such Treasury Interest
Determination Date. Treasury bills are usually sold at auction on Monday of each
week, unless that day is a legal holiday, in which case the auction is usually
held on the following Tuesday, except that such auction may be held on the
preceding Friday. If an auction for such week is held on Monday or the preceding
Friday, such Monday or preceding Friday shall be the Treasury Interest
Determination Date for such week, and the Interest Reset Date for such week
shall be the Tuesday of such week (or, if such Tuesday is not a Market Day, the
next succeeding Market Day). If the auction for such week is held on any day of
such week other than Monday, then such day shall be the Treasury Interest
Determination Date and the Interest Reset Date for such week shall be the next
succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, interest
payments on an Interest Payment Date for Floating Rate Notes will include
interest accrued from and including the next preceding Interest Payment Date in
respect of which interest has been paid or duly provided for (or from and
including the date of issue if no interest has been paid with respect to such
Note) to, but excluding, such Interest Payment Date.
The interest accrued for any period is calculated by multiplying the face
amount of such Floating Rate Note by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in such period. Unless otherwise specified in the Note and the applicable
Pricing Supplement, the interest factor (expressed as a decimal rounded upwards,
if necessary, as hereinafter described) for each such day is computed by
dividing the interest rate (expressed as a decimal rounded upwards, if
necessary, as hereinafter described) applicable to such date by 360, in the case
of Commercial Paper Rate Notes, Prime Rate Notes, CD Rate Notes, Federal Funds
Effective Rate Notes or LIBOR Notes, by the actual number of days in the year in
the case of Treasury Rate Notes, or by the number of days in the Computation
Period specified in the applicable Pricing Supplement.
Unless otherwise specified in a Pricing Supplement, all percentages
resulting from any calculation on Floating Rate Notes will be rounded, if
necessary, to the nearest one-hundred thousandth of a percentage point, with
five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) being
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rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544) being rounded to
9.87654% (or .0987654)), and all dollar amounts and all amounts in Specified
Currencies used in or resulting from such calculation on Floating Rate Notes
will be rounded to the nearest cent, or, if the Floating Rate Note is
denominated in a Specified Currency, the nearest unit (with one-half cent or
unit being rounded upwards).
The Calculation Agent will compute the interest payable on Floating Rate
Notes and will, upon the request of the Holder of any Floating Rate Note,
provide the interest rate then in effect and, if determined, the interest rate
which will become effective as a result of a determination made on the most
recent Interest Determination Date with respect to such Note. Unless otherwise
specified in the applicable Pricing Supplement, the "Calculation Date"
pertaining to a Interest Determination Date will be the earlier of (i) the tenth
day after such Interest Determination Date, or, if any such day is not a Market
Day, the next succeeding Market Day and (ii) the Market Day next preceding the
relevant Interest Payment Date or date of Maturity, as the case may be;
provided, however, that in the case of Prime Rate Notes and LIBOR Notes the
Calculation Date shall be such Prime Rate Interest Determination Date or such
LIBOR Interest Determination Date, as the case may be. For purposes of
calculating the rate of interest payable on Floating Rate Notes, the Company
will enter into an agreement with the Calculation Agent. The First National Bank
of Boston will initially act as Calculation Agent for any Floating Rate Notes.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its date of issue at the
annual rate stated on the face thereof and in the applicable Pricing Supplement.
Unless otherwise indicated in the Pricing Supplement, the Interest Payment Dates
for the Fixed Rate Notes will be October 15 and April 15 of each year and at
Maturity. If any Interest Payment Date or the Maturity of a Fixed Rate Note
falls on a day that is not a Market Day, the related payment of principal,
premium, if any, or interest will be made on the next succeeding Market Day as
if made on the date such payment was due, and no interest will accrue on the
amount so payable for the period from and after such Interest Payment Date or
Maturity, as the case may be. Unless otherwise specified in the applicable
Pricing Supplement, interest on Fixed Rate Notes will be computed and paid on
the basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified in the Commercial Paper Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as hereinafter described)
of the rate on that date for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement as such rate is 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
"Commercial Paper." In the event that such rate is not published by 3:00 p.m.,
New York City time, on the Calculation Date pertaining to such Commercial Paper
Interest Determination Date, then the Commercial Paper Rate shall be the Money
Market Yield of the rate on that Commercial Paper Interest Determination Date
for commercial paper having 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" ("Composite Quotations") under the heading "Commercial Paper." If by
3:00 p.m., New York City time, on such Calculation Date such rate is not yet
published in Composite Quotations, the Commercial Paper Rate for that Commercial
Paper Interest Determination Date shall be calculated by the Calculation Agent
and shall be the Money Market Yield of the arithmetic mean of the offered rates
of three leading dealers of commercial paper in The City of New York (which may
include one or more Distributors or their affiliates) selected by the
Calculation Agent as of 11:00 a.m., New York City time, on that Commercial Paper
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<PAGE> 9
Interest Determination Date, for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement placed for an industrial issuer
whose bond rating is "AA," or the equivalent, from a nationally recognized
securities rating agency; provided, however, that if at least two of the dealers
selected as aforesaid by the Calculation Agent are not quoting rates as
mentioned in this sentence, the Commercial Paper Rate with respect to such
Commercial Paper Interest Determination Date will be the Commercial Paper Rate
in effect on such Commercial Paper Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded to
the nearest one hundred-thousandth of a percentage point) 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 per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal; and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified on the face of such Prime Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Interest Determination Date, the
rate set forth on such date in H.15(519) under the heading "Bank Prime Loan." In
the event that such rate is not published prior to 9:00 a.m., New York City
time, on the Calculation Date pertaining to such Prime Rate Interest
Determination Date, then the Prime Rate will be the arithmetic mean of the rates
of interest publicly announced by each bank that appears on the Reuters Screen
NYMF Page as such bank's prime rate or base lending rate as in effect for that
Prime Rate Interest Determination Date. If fewer than four such rates but more
than one such rate appear on the Reuters Screen NYMF Page for that Prime Rate
Interest Determination Date, the Prime Rate will be the arithmetic mean (each as
rounded to the nearest one-hundred thousandth of a percentage point), as
calculated by the Calculation Agent on such Calculation Date, of the prime rates
quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two quotations are provided,
the Prime Rate shall be determined on the basis of the rates furnished in the
City of New York by the appropriate number of substitute banks or trust
companies organized and doing business under the laws of the United States, or
any State thereof, having total equity capital of at least $500 million and
being subject to supervision or examination by Federal or State authority,
selected by the Calculation Agent to provide such rate or rates; provided,
however, if the banks selected as aforesaid are not quoting as mentioned in this
sentence, the Prime Rate will be the Prime Rate in effect on such Prime Rate
Interest Determination Date.
CD Rate Notes
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) specified
on the face of such CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Rate Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15(519) under the heading
"CDs (Secondary Market)." In the event that such rate is not published prior to
3:00 p.m., New York City time, on the Calculation Date pertaining to such CD
Rate Interest Determination Date, then the CD Rate shall be the rate on such CD
Rate Interest Determination Date for negotiable certificates of deposit having
the Index Maturity specified in the applicable Pricing Supplement as published
in Composite Quotations under
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<PAGE> 10
the heading "Certificates of Deposit." If by 3:00 p.m., New York City time, on
such Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, the CD Rate for that CD Rate Interest Determination Date
shall be calculated by the Calculation Agent and shall be the arithmetic mean of
the secondary market offered rates, as of 10:00. a.m., New York City time, on
that CD Rate Interest Determination Date, of three leading nonbank dealers of
negotiable U.S. dollar certificates of deposit in The City of New York selected
by the Calculation Agent (which may include one or more of the Distributors or
their affiliates) for negotiable certificates of deposit of major United States
money market banks with a remaining maturity closest to the Index Maturity
specified in the applicable Pricing Supplement in a denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the CD Rate will be the CD
Rate in effect on such CD Rate Interest Determination Date.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any) specified on the face of such Federal Funds Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Federal Funds (Effective)." In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Federal Funds Interest Determination Date, the Federal Funds
Rate will be the rate on such Federal Funds Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate." If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, the Federal
Funds Effective Rate for that Federal Funds Interest Determination Date shall be
the arithmetic mean, as calculated by the Calculation Agent on such Calculation
Date, of the rates, as of 11:00 a.m., New York City time, on that Federal Funds
Interest Determination Date, for the last transaction in overnight Federal Funds
arranged by three leading brokers of Federal Funds transactions in the City of
New York selected by The Calculation Agent; provided, however, that if the
brokers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Effective Rate will be the Federal
Funds Effective Rate in effect on such Federal Funds Interest Determination
Date.
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR as hereinafter described, and the Spread and/or Spread
Multiplier, if any) specified in such LIBOR Note and in the applicable Pricing
Supplement. Unless specified in the applicable Pricing Supplement, the
"Calculation Date" with respect to a LIBOR Interest Determination Date will be
such LIBOR Interest Determination Date.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
means the rate as determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to a LIBOR Interest Determination Date, either, as
specified in the applicable Pricing Supplement: (a) the arithmetic mean of
the offered rates for deposits in U.S. dollars for the period of the Index
Maturity specified in the applicable Pricing Supplement, on the second
London Banking Day immediately following such Interest Determination Date,
which appear on the Reuters Screen LIBO Page as of 11:00 a.m. London time,
on the LIBOR Interest Determination Date, if at least two such offered
rates appear on the Reuters Screen LIBO page ("LIBOR Reuters"), or (b) the
rate for deposits in U.S. dollars of not less than $1,000,000,000 having
the Index Maturity designated in the applicable Pricing Supplement, on the
second London Banking Day immediately following that Interest Determination
Date, that appears on the Telerate Page 3750 as of 11:00 a.m., London time,
on that Interest Determination Date ("LIBOR Telerate"). Unless otherwise
indicated in the applicable Pricing Supplement "Reuters Screen LIBO Page"
means the display designated as Page "LIBO" on the Reuters
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<PAGE> 11
Monitor Money Rate Service (or such other page as may replace the LIBO page
on that service for the purpose of displaying London interbank offered
rates of major banks). "Telerate Page "3750" means the display designated
as page "3750" on the Telerate Service (or such other page as may replace
the 3750 page on that service or such other service or services as may be
nominated by the British Bankers' Association for the purpose of displaying
London interbank offered rates for U.S. dollar deposits). If neither LIBOR
Reuters nor LIBOR Telerate is specified in the applicable Pricing
Supplement, LIBOR will be determined as if LIBOR Telerate had been
specified. In the case where (a) above applies, if fewer than two offered
rates appear on the Reuters Screen LIBO Page, or, in the case where (b)
above applies if no rate appears on the Telerate Page 3750, as applicable,
LIBOR in respect of that Interest Determination Date will be determined as
if the parties had specified the rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which this
provision applies, LIBOR will be determined on the basis of the rates at
which deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement are offered at approximately 11:00 a.m.,
London time, on such Interest Determination Date by four major banks
("Reference Banks") in the London interbank market selected by the
Calculation Agent (after consultation with the Company) to prime banks in
the London interbank market on the second London Banking Day immediately
following such Interest Determination Date and in a principal amount of not
less than U.S. $1,000,000 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 the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, LIBOR
for such Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR for such
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 a.m., New York City time, on such Interest
Determination Date by three major banks (which may include the
Distributors) in The City of New York selected by the Calculation Agent
(after consultation with the Company) for loans in U.S. dollars to leading
European banks, having the Index Maturity designated in the applicable
Pricing Supplement commencing on the second London Banking Day immediately
following such Interest Determination Date and in a principal amount equal
to an amount of not less than U.S. $1,000,000 that is representative for a
single transaction in such market at such time; provided, however, that if
at the banks selected as aforesaid by the Calculation Agent are not quoting
as mentioned in this sentence, LIBOR will be LIBOR then in effect on such
Interest Determination Date.
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified in the Treasury Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity designated in the applicable
Pricing Supplement as published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills--auction average (investment)" or, if not so published
by 9:00 a.m., New York City time, on the Calculation Date pertaining to such
Treasury Interest Determination Date, the auction average rate (expressed as a
bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) for such auction as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury bills having the Index Maturity designated in the applicable Pricing
Supplement are not otherwise reported as provided above by 3:00 p.m., New York
City time, on such Calculation Date or no such auction is held in a particular
week, then the Treasury Rate shall be calculated by the Calculation Agent on
such Calculation Date 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) of the arithmetic mean of the secondary market bid rates, as
of 3:30 p.m., New York City time, on such Treasury Interest Determination Date,
of three leading primary United States government securities dealers (which may
include one or more of the Distributors or their affiliates) selected by the
Calculation Agent, for the issue of Treasury bills with a remaining maturity
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<PAGE> 12
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if at least two of the dealers selected as aforesaid by
the Calculation Agent are not quoting rates mentioned in this sentence, the
Treasury Rate with respect to such Treasury Interest Determination Date will be
the Treasury Rate in effect on such Treasury Interest Determination Date.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes having the same original issuance date,
Interest Payment Date, redemption or repayment provisions, if any, original
issue discount provisions, if any, Stated Maturity and, in the case of Fixed
Rate Notes, interest rate, or, in the case of Floating Rate Notes, Initial
Interest Rate, interest rate formula, Index Maturity, Spread or Spread
Multiplier (if any), minimum interest rate limitation (if any), maximum interest
rate limitation (if any) and Interest Reset Dates, will be represented by a
single Global Security. Each Global Security representing Book-Entry Notes will
be deposited with, or on behalf of, The Depository Trust Company, as Depositary
(the "Depositary"), and registered in the name of a nominee of the Depositary.
Unless and until it is exchanged in whole or in part for Certificated Notes, a
Global Security may not be transferred except as a whole by the Depositary to a
nominee of the Depositary for such Global Security or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary. (Section
2.04 of the Indenture.) Book-Entry Notes will not be exchangeable for
Certificated Notes, provided that if the Depositary is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within ninety days, the Company will issue Certificated Notes in
exchange for all of the Global Security or Securities representing Book-Entry
Notes. In addition, the Company may at any time and in its sole discretion
determine not to have one or more Book-Entry Notes represented by Global
Securities, and, in such event, will issue Certificated Notes in exchange for
all Global Securities representing such Book-Entry Notes. See "DESCRIPTION OF
THE DEBT SECURITIES--Book-Entry Securities" in the accompanying Prospectus.
REDEMPTION AND REPURCHASE
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to its Stated Maturity or that such Note will be
redeemable at the option of the Company on a date or dates specified prior to
such Stated Maturity at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of redemption. The
Company may redeem any of the Notes that are redeemable and remain outstanding
either in whole or from time to time in part, upon not less than thirty nor more
than sixty days notice. If less than all Notes of a specified tenor are to be
redeemed, the Notes to be redeemed shall be selected by the Trustee by such
method as the Trustee shall deem fair and appropriate. If all Notes of a
specified tenor are to be redeemed, such Notes of such specified tenor to be
redeemed shall be selected by the Company.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may, at its discretion, be held,
resold or surrendered to the Trustee for cancellation.
REPAYMENT AT OPTION OF HOLDER
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid prior to its Stated Maturity or that the Note will be
repayable at the option of the Holder on a date or dates specified prior to its
Stated Maturity at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of repayment.
In order for a Note which by its terms is repayable at other than its
Stated Maturity to be so repaid, the Issuing and Paying Agent must receive at
least thirty days but not more than forty-five days prior to the repayment date
(i) the Note with the form entitled "Option to Elect Repayment" on the reverse
of the Note duly completed or (ii) a telegram, telex, facsimile transmission or
a letter from a member of a national securities exchange, the National
Association of Securities Dealers, Inc., the Depositary (in accordance with its
normal procedures) or a commercial bank or trust company in the United States
setting forth the name of the Holder of the Note, the principal amount of the
Note, the principal amount of the Note to be repaid, the
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<PAGE> 13
certificate number or a description of the tenor of the Note, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
the Note to be repaid with the form entitled "Option to Elect Repayment" on the
reverse of the Note duly completed will be received by the Issuing and Paying
Agent not later than five Business Days after the date of such telegram, telex,
facsimile transmission or letter and such Note and form duly completed must be
received by the Issuing and Paying Agent by such fifth Business Day. The
repayment option may be exercised by the Holder of the Note for less than the
entire principal amount of the Note, provided that the principal amount of the
Note remaining outstanding after repayment is an authorized denomination.
UNITED STATES TAXATION
The following is a summary of the principal United States federal income
tax consequences of the ownership of Notes. It deals only with Notes held as
capital assets by initial purchasers, and not with special classes of holders,
such as dealers in securities or currencies, life insurance companies, persons
holding Notes as a hedge or hedged against currency risks or as part of a
straddle or conversion transaction, and United States Holders whose functional
currency is not the U.S. dollar. Moreover, the summary deals only with the tax
treatment of Notes that are due to mature 30 years or less from the date on
which they are issued. The United States federal income tax consequences of
ownership of Notes that are due to mature more than 30 years from their date of
issue will be discussed in an applicable Pricing Supplement.
The discussion of original issue discount is based in part on regulations
recently issued under the Internal Revenue Code of 1986, as amended (the "Code")
(the "Regulations") and effective as of April 4, 1994.
This summary does not discuss all aspects of federal income taxation that
may be relevant to a particular investor in light of his or her specific
circumstances. Prospective purchasers of Notes should, accordingly, consult
their own tax advisors concerning the United States federal income tax
consequences in their particular situations, as well as any consequences under
the laws of any other taxing jurisdiction.
UNITED STATES HOLDERS
Payments of Interest
Interest on a Note, whether payable in U.S. dollars or a currency,
composite currency or basket of currencies other than U.S. dollars (a "foreign
currency"), other than interest on a Discount Note (hereinafter defined under
"Original Issue Discount") that is not a "qualified stated interest" payment (as
hereinafter defined under "Original Issue Discount"), will be taxable to a
holder who or which is (i) a citizen or resident of the United States, (ii) a
domestic corporation or (iii) otherwise subject to United States federal income
taxation on a net income basis in respect of the Note (a "United States Holder"
or "U.S. Holder") as ordinary income at the time it is received or accrued,
depending on the holder's method of accounting for tax purposes. If payment is
in a foreign currency, the amount of income will be the U.S. dollar value of the
interest based on the exchange rate in effect on the date of receipt or, in the
case of an accrual basis United States Holder, based on the average exchange
rate in effect during the interest accrual period (or, with respect to an
accrual period that spans two taxable years, the partial period within the
taxable year), in either case regardless of whether the payment is in fact
converted into U.S. dollars. Upon receipt of an interest payment (including a
payment attributable to accrued but unpaid interest upon the sale or retirement
of a Note) in a foreign currency an accrual basis United States Holder will
recognize ordinary income or loss measured by the difference between such
average exchange rate and the exchange rate in effect on the date of receipt.
Accrual basis United States Holders may determine the U.S. dollar value of any
interest income accrued in a foreign currency under an alternative method, as
hereinafter described under the heading "Spot Rate Convention Election."
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<PAGE> 14
Original Issue Discount
Discount Notes Generally
The following summary is a general discussion of the U.S. Federal income
tax consequences to U.S. Holders of Notes issued with original issue discount
("Discount Notes"). The basic rules for reporting original issue discount
("OID") are contained in the Code.
Under the Code, the excess of the "stated redemption price at maturity" of
a Note over its "issue price" is considered to be OID.
For this purpose, the "issue price" is generally the initial offering price
at which a substantial amount of the Discount Notes are sold to the public.
Under the Regulations, if a portion of the initial purchase price of a Note is
allocable to interest accrued prior to the issue date (defined as the first
settlement date for the sale to the public of a substantial amount of Notes in
the issue), and the Note provides for a payment of stated interest on the first
payment date within one year of the issue date that equals or exceeds the amount
of the pre-issuance accrued interest, then a U.S. Holder of the Note may elect
to reduce the issue price of the Note (as otherwise computed) by the amount of
the pre-issuance accrued interest, in which case a portion of the first stated
interest payment must be treated as a return of the excluded pre-issuance
accrued interest (which would not be treated as income) rather than as an amount
payable on the debt instrument.
The "stated redemption price at maturity" is defined in the Code to include
interest and other amounts payable at maturity, except for interest based on a
fixed rate and payable unconditionally at fixed periodic intervals of one year
or less during the entire term of the Note. The Regulations define "stated
redemption price at maturity" to mean generally the sum of all amounts payable
over the life of the Discount Note (whether denominated as principal or
interest) other than qualified stated interest. However, under the Regulations,
a Note's stated redemption price at maturity excludes "qualified stated
interest", or 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, as hereinafter discussed, at certain variable rates or
certain combinations of rates.
If the OID otherwise determined for a Note is less than one-fourth of one
percent (0.25%) of the stated redemption price at maturity, multiplied by the
number of complete years to maturity (referred to as "de minimis OID"), then the
Note is treated as having no OID. Under the Regulations, the holder of such a
Note includes the de minimis OID in income as each principal payment is
received, in proportion to the amount that each principal payment bears to the
stated principal amount of the Discount Note; such de minimis OID is treated as
an amount received on retirement of the Note, and gain attributable thereto is
capital gain.
For U.S. Federal income tax purposes, a U.S. Holder of a Discount Note must
report OID as it accrues economically on a constant-yield basis (subject to an
exception, hereinafter discussed, for notes having maturities of one year or
less ("Short-Term Notes")), regardless of the U.S. Holder's regular method of
accounting and prior to the receipt of cash attributable to such income. Under
the rules hereinafter described, a U.S. Holder will generally have to include in
taxable income increasingly larger amounts of OID in successive accrual periods.
In addition, qualified stated interest is included in income under the U.S.
Holder's regular method of accounting.
The amount of OID includible in taxable income in any taxable year by the
initial U.S. Holder of a Discount Note purchased at the issue price (and,
subject to an adjustment, by any other holder), is the sum of the daily portions
of the OID with respect to the Discount Note for each day during the taxable
year on which the U.S. Holder holds such Discount Note ("accrued OID"). Subject
to special rules hereinafter discussed for variable rate debt instruments, the
daily portion is determined by allocating to each day in any "accrual period" a
pro rata portion of the OID allocable to the accrual period. The OID allocable
to an accrual period is the excess (if any) of (a) the adjusted issue price of
the Discount Note as of the beginning of the accrual period, multiplied by the
yield to maturity (determined on the basis of compounding at the end of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the amount of any qualified stated interest on such Discount Note allocable
to such accrual period. Under the Regulations, if an interval
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between qualified stated interest payments includes more than one accrual
period, the qualified stated interest payable at the end of the interval is
allocated on a pro rata basis to each such accrual period.
Except as otherwise provided in regulations, the term "accrual period"
means a six-month period (or shorter period from the date of original issue of a
Discount Note) that ends on a day in the calendar year corresponding to the
maturity date or the date six months before the maturity date. The Regulations
permit a U.S. Holder to choose an accrual period of any length of time, which
may vary over the term of the Discount Note, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs on either the first or final day of an accrual period.
The adjusted issue price of a Discount Note at the start of the first
accrual period is the issue price. Thereafter, the adjusted issue price at the
beginning of any accrual period is the issue price (i) increased by the amount
of OID previously includible in the gross income of any U.S. Holder (determined
without regard to the amortization of any acquisition or bond premium, as
discussed herein), (ii) increased by the amount of any qualified stated interest
that has accrued prior to the beginning of the accrual period but is not yet
payable and (iii) decreased by the amount of any payments previously made on the
debt instrument other than a payment of qualified stated interest.
OID on a Discount Note that is a Foreign Currency Note will be determined
for any accrual period in that foreign currency and then translated into U.S.
dollars in the same manner as stated interest accrued by an accrual method
holder before receipt, as hereinbefore described under "Payments of Interest."
Likewise, as described therein, exchange gain or loss (includible in income as
ordinary income or loss) will generally be recognized when the OID is paid. For
this purpose, all payments on a Note (other than payments of qualified stated
interest) will first be viewed as payments of previously accrued OID (to the
extent thereof), with payments considered made for the earliest accrual periods
first.
In general, a Floating Rate Note should qualify as a "variable rate debt
instrument" under the Regulations. The Regulations define a "variable rate debt
instrument" as a debt instrument that provides for total noncontingent payments
in an amount at least equal to the instrument's issue price reduced by the
lesser of (i) .015 multiplied by the product of the total noncontingent
principal payments and the number of complete years to maturity from the issue
date or, (ii) 15 percent of the total noncontingent principal payments and
provides for stated interest (compounded or paid at least annually) during each
accrual period at a current value of one or more qualified floating rates, a
single objective rate (each as defined in the Regulations), or certain other
variable rates. In general, such stated interest is qualified stated interest if
it is payable at least annually.
The Regulations set forth rules for determining the accrual of OID and the
amount of qualified stated interest on a variable rate debt instrument. In
general, these rules convert the debt instrument into an equivalent fixed debt
instrument and then apply the general OID rules to the debt instrument. In
certain cases, appropriate adjustments are made to these amounts in each accrual
period if the interest actually accrued or paid during the accrual period is
greater than or less than the interest assumed to be accrued or paid under the
equivalent fixed rate debt instrument. The tax consequences of the ownership of
Floating Rate Notes including any Floating Rate Notes not treated as variable
rate debt instruments under the Regulations will be described more fully when
appropriate in the applicable Pricing Supplement.
The Regulations also allow a U.S. Holder to elect to include in gross
income all interest (including stated interest, acquisition discount, OID, de
minimis OID, market discount, de minimis market discount, and unstated interest)
which accrues on a debt instrument by using a constant-yield method similar to
the method used for accruing OID, but treating the instrument as issued on the
U.S. Holder's acquisition date at a price equal to such holder's initial
adjusted basis with no interest payments being qualified stated interest. Such
an election with respect to a bond having amortizable bond premium or a market
discount obligation would constitute, respectively, an election to amortize bond
premium or accrue market discount income with respect to all other bond premium
obligations or market discount obligations held by the electing U.S. holder as
of the beginning of the taxable year in which the note with respect to which the
election is made is acquired, or thereafter acquired.
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In general, if a Note provides for an alternative payment schedule or
schedules applicable upon the occurrence of a contingency or contingencies and
the timing and amounts of the payments that comprise each payment schedule are
known as of the issue date, the yield and maturity of the Note are determined by
assuming that the payments will be made according to the Note's stated payment
schedule. If, however, based on all the facts and circumstances as of the issue
date, it is more likely than not that the Note's stated payment schedule will
not occur, then, in general, the yield and maturity of the Note are computed
based on the payment schedule most likely to occur.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company has an unconditional
option or options to redeem a Note, or the Holder has an unconditional option or
options to cause a Note to be repurchased prior to the Note's stated maturity,
then (i) in the case of an option or options of the Company, the Company will be
deemed to exercise or not exercise an option or combination of options in the
manner that minimizes the yield on the Note and (ii) in the case of an option or
options of the Holder, the Holder will be deemed to exercise or not exercise an
option or combination of options in the manner that maximizes the yield on the
Note. For purposes of those calculations, the yield on the Note is determined by
using any date on which the Note may be redeemed or repurchased as the maturity
date and the amount payable on such date in accordance with the terms of the
Note as the principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the Note
is repaid as a result of a change in circumstances and solely for purposes of
the accrual of OID, the yield and maturity of the Note are redetermined by
treating the Note as reissued on the date of the change in circumstances for an
amount equal to the Note's adjusted issue price on that date.
A subsequent U.S. Holder of a Discount Note (or an original U.S. Holder
that purchases a Discount Note at a price other than the issue price) is
generally subject to the rules for accruing OID hereinbefore described. However,
if such U.S. Holder purchases the Discount Note for an amount in excess of the
adjusted issue price but less than the stated redemption price at maturity, this
excess (referred to as "acquisition premium") is offset ratably against the
amount of OID otherwise includible in such Holder's taxable income. In lieu of
such offset, the Regulations allow the U.S. Holder of a debt instrument
purchased at an acquisition premium to compute OID accruals by treating the
purchase as a purchase at original issue and applying the constant yield method.
If a U.S. Holder purchases the Discount Note at a premium (defined under the
Regulations as an amount paid in excess of all amounts payable on the instrument
after the purchase other than qualified stated interest), the U.S. Holder does
not include any OID in income and is subject to the "bond premium" rules of the
Code discussed above (treating all amounts so payable other than qualified
stated interest as principal on the Note). For purposes of calculating OID
accruals, acquisition premium, or market discount, a subsequent holder
determines adjusted issue price in any manner consistent with the Regulations.
If a U.S. Holder has a tax basis in a Discount Note that is less than the
adjusted issue price, the difference will be subject to the market discount
provisions of Code.
Short-Term Notes
The rules hereinbefore set forth will also generally apply to Notes having
maturities of not more than one year ("Short-Term Notes"), but with certain
modifications.
First, special OID rules apply to Short-Term Notes that are Discount Notes
("Short-Term Discount Notes"). Under the Regulations, none of the interest on a
Short-Term Note is qualified stated interest but instead all such interest is
part of the Short-Term Note's stated redemption price at maturity. Thus, all
Short-Term notes are treated as Short-Term Discount Notes. U.S. Holders of
Short-Term Discount Notes using the accrual method of tax accounting, and
certain cash method Holders (including banks, securities dealers, regulated
investment companies, common trust funds, U.S. Holders who hold Notes as part of
certain identified hedging transactions and certain pass-thru entities), will
generally be required to include OID on a
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Short-Term Discount Note in income on a current basis. OID on a Short-Term
Discount Note will be treated as accruing on a ratable basis or, at the election
of the U.S. Holder, on a constant interest basis. Other cash method U.S. Holders
of Short-Term Discount Notes will generally not be required, but may elect under
Section 1282(b)(2) of the Code, to include OID in income on a current basis;
however, unless such Holder so elects, such Holder may not be allowed to deduct
all of the interest paid or accrued on any indebtedness incurred or maintained
to purchase or carry such Short-Term Discount Note until the maturity of the
Note or its earlier disposition in a taxable transaction. In addition, a
non-electing cash method U.S. Holder will be required to treat any gain realized
on a sale, exchange, retirement or other disposition of the Short-Term Discount
Note as ordinary income to the extent such gain does not exceed the OID accrued
with respect to the Note during the period the holder held the Short-Term
Discount Note.
Second, any U.S. Holder of a Short-Term Discount Note can elect to apply
the rules in the preceding paragraph taking into account the amount of
"acquisition discount," if any, with respect to the Note (rather than the OID
with respect to such Note). Acquisition discount is the excess of the remaining
stated redemption price at maturity of the Short-Term Discount Note over the
U.S. Holder's tax basis in the Short-Term Discount Note at the time of
acquisition. Acquisition discount will be treated as accruing on a ratable basis
or, at the election of the U.S. Holder, on a constant basis.
Third, the market discount rules will not apply to a Short-Term Note.
Finally, a U.S. Holder's tax basis for a Short-Term Note will be the U.S.
Holder's purchase price for the Note, increased by the amount of OID or
acquisition discount, if any, previously included in the U.S. Holder's income
with respect to the Note, and decreased by the amount of any bond premium
previously amortized by the U.S. Holder with respect to the Note and all
payments previously received with respect to the Note (other than state interest
in the case of a cash method U.S. Holder that does not accrue interest or OID
into income currently).
As hereinbefore described, certain of the Notes may be subject to special
redemption, interest rate reset or Maturity extension features. These features
may affect the determination of whether a Note (including a Discount Note) has a
maturity of not more than one year and is thus a Short-Term Note (or Short-Term
Discount Note, as the case may be). However, under the Regulations, a Note is
not a Short-Term Note if it can possibly be outstanding for more than one year.
Spot Rate Convention Election
A United States Holder may elect to translate OID (and, in the case of an
accrual basis United States Holder, accrued interest) into U.S. dollars at the
exchange rate in effect on the last day of an accrual period for the OID or
interest, or in the case of an accrual period that spans two taxable years, at
the exchange rate in effect on the last day of the partial period within the
taxable year. Additionally, if a payment of accrued interest is actually
received within five business days of the last day of the accrual period or
taxable year, an electing United States Holder may instead translate such
accrued interest into U.S. dollars at the exchange rate in effect on the day of
actual receipt. Any such election will apply to all debt instruments held by the
United States Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the United States Holder, and will be
irrevocable without the consent of the Internal Revenue Service.
Notes Purchased at a Premium
A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium,"
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the Note's yield to
maturity) to such year. In the case of a Foreign Currency Note, bond premium
will be computed in units of foreign currency, and amortizable bond premium will
reduce interest income in units of foreign currency. At the time amortized bond
premium offsets interest income, exchange gain or loss (taxable as ordinary
income or loss) is realized, measured by the difference between exchange rates
at that time and at the time of the acquisition of the Note. Any such
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election shall apply to all bonds (other than bonds the interest on which is
excludible from gross income) held by the United States Holder at the beginning
of the first taxable year to which the election applies or thereafter acquired
by the United States Holder, and is irrevocable without the consent of the
Internal Revenue Service.
Purchase, Sale and Retirement of the Notes
A United States Holder's tax basis in a Note will be its U.S. dollar cost
(which, in the case of a Note purchased with a foreign currency, will be the
U.S. dollar value of the purchase price on the date of purchase, or, in the case
of Notes that are traded on an "established securities market" within the
meaning of the applicable Treasury Regulations and that are purchased by a cash
method or electing accrual method U.S. Holder, on the settlement date of the
purchase), increased by the amount of any OID or de minimis OID included in the
United States Holder's income with respect to a Discount Note and reduced by the
amount of any interest payments on a Discount Note that are not qualified stated
interest payments and by the amount of any amortizable bond premium applied to
reduce interest on the Note. A United States Holder will generally recognize
gain or loss on the sale or retirement of a Note equal to the difference between
the amount realized on the sale or retirement and the tax basis of the Note. The
amount realized on a sale or retirement for an amount in foreign currency will
be the U.S. dollar value of such amount on the date of sale or retirement (or,
in the case of Notes that are traded on an "established securities market"
within the meaning of the applicable Treasury Regulations and that are purchased
by a cash method or electing accrual method U.S. Holder, on the settlement date
of the purchase). Except to the extent hereinbefore described under "Original
Issue Discount--Short-Term Notes" or in the two succeeding paragraphs and except
to the extent attributable to accrued but unpaid interest, gain or loss
recognized on the sale or retirement of a Note will be capital gain or loss and
will be long-term capital gain or loss if the Note was held for more than one
year.
Gain or loss recognized by a United States Holder on the sale or retirement
of a Note that is attributable to changes in exchange rates will be treated as
ordinary income or loss, but will be taken into account only to the extent of
the total gain or loss realized on the transaction.
While the Internal Revenue Service may take the position that sinking fund
requirements evidence an intention to call the Notes before maturity (with the
result that gain realized on a sale or redemption of a Discount Note would be
ordinary income to the extent of OID not previously included in income), the
Company does not believe that any sinking fund requirements should be regarded
as evidence of such an intention.
Exchange of Amounts in Other Than U.S. Dollars
Foreign currency received as interest on a Note or on the sale or
retirement of a Note will have a tax basis equal to its U.S. dollar value at the
time such interest is received or at the time of such sale or retirement.
Foreign currency that is purchased will generally have a tax basis equal to the
U.S. dollar value of the foreign currency on the date of purchase. Any gain or
loss recognized on a sale or other disposition of a foreign currency (including
its use to purchase Notes or upon exchange for U.S. dollars) will be ordinary
income or loss.
Indexed Notes
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Notes, other than Notes
subject to the rules governing variable rate debt instruments, payments on which
are determined by reference to any index.
Defeasance and Covenant Defeasance
Under current United States federal income tax law, defeasance would likely
be treated as a taxable exchange of Notes to be defeased for interests in the
defeasance trust. As a consequence, a Holder would recognize gain or loss equal
to the difference between the Holder's cost or other tax basis for such Notes
and the value of the Holder's interest in the defeasance trust, and thereafter
would be required to include in
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income a share of the income, gain and loss of the defeasance trust. Covenant
defeasance will ordinarily not be treated as a taxable exchange of Notes.
UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law and subject
to the discussion of backup withholding below:
(i) payments of principal and any premium and interest (including OID) by
the Company or any of its paying agents to any holder of a Note who or
which is not a United States Holder (a "United States Alien Holder") will
not be subject to United States federal withholding tax, provided that in
the case of interest or OID, (a) the United States Alien Holder does not
actually or constructively own ten percent (10%) or more of the total
combined voting power of all classes of stock of the Company entitled to
vote, (b) the United States Alien Holder is not a controlled foreign
corporation that is related to the Company through stock ownership, and (c)
either (A) the beneficial owner of the Note certifies to the Company or its
agent, under penalties of perjury, that it is not a United States Holder
and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Note certifies to the Company or its agent
under penalties of perjury that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof;
(ii) a United States Alien Holder of a Note will not be subject to United
States federal withholding tax on any gain realized on the sale or exchange
of a Note; and
(iii) a Note or coupon held by an individual who at the time of death is
not a citizen or resident of the United States will not be subject to
United States federal estate tax as a result of such individual's death if
the individual does not actually or constructively own ten percent (10%) or
more of the total combined voting power of all classes of stock of the
Company entitled to vote and the income on the Note would not have been
effectively connected with a U.S. trade or business of the individual.
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Holders
In general, information reporting requirements will apply to payments of
principal and any premium and interest made on a Note and the proceeds of the
sale of a Note before maturity within the United States to, and to the accrual
of OID on a Discount Note with respect to, non-corporate United States Holders,
and a thirty-one percent (31%) "backup withholding" will apply to such payments
if the United States Holder fails to provide an accurate taxpayer identification
number or to report all interest and dividends required to be shown on its
federal income tax returns. The amount of OID required to be reported by the
Company may not be equal to the amount of OID required to be reported as taxable
income by a United States Holder of a Discount Note.
United States Alien Holders
Information reporting and backup withholding will not apply to payments of
principal and any premium and interest (including OID) made outside the United
States by the Company or a paying agent to a United States Alien Holder on a
Note if the certification hereinbefore described in clause (i)(c) under "United
States Alien Holders" is received, provided that the payor does not have actual
knowledge that the holder is a United States person.
Payments of the proceeds from the sale by a United States Alien Holder of a
Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person fifty percent (50%) or more of whose gross income
is effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payments. Payment of
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the proceeds from the sale of a Note to or through the United States office of a
broker is subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
The following provisions, which apply to Foreign Currency Notes, supplement
the description of general terms and conditions of (a) Debt Securities set forth
under "DESCRIPTION OF THE DEBT SECURITIES" in the Prospectus and (b) Notes
hereinbefore set forth under "DESCRIPTION OF NOTES" in this Prospectus
Supplement.
THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT DO NOT DESCRIBE ALL RISKS OF
AN INVESTMENT IN FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING
DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY UNIT EITHER AS SUCH RISKS EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO
TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED IN AN INVESTMENT IN FOREIGN CURRENCY NOTES AND
AS TO ANY MATTERS THAT MAY AFFECT THE PURCHASE OR HOLDING OF A FOREIGN CURRENCY
NOTE OR THE RECEIPT OF PAYMENTS OF PRINCIPAL OF AND ANY PREMIUM AND INTEREST ON
A FOREIGN CURRENCY NOTE IN A SPECIFIED CURRENCY. FOREIGN CURRENCY NOTES ARE NOT
AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO
FOREIGN CURRENCY TRANSACTIONS.
Unless otherwise indicated in the applicable Pricing Supplement, a Foreign
Currency Note will not be sold in, or to a resident of, the country of the
Specified Currency (hereinafter defined) in which such Note is denominated.
The authorized denominations of Foreign Currency Notes will be indicated in
the applicable Pricing Supplement.
Specific information pertaining to the foreign currency or currency unit in
which a particular Foreign Currency Note is denominated, including historical
exchange rates and a description of the currency and any exchange controls, will
be described in the applicable Pricing Supplement.
PURCHASE
Unless otherwise indicated in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the applicable Specified
Currency. At the present time there are limited facilities in the United States
for the conversion of U.S. dollars into foreign currencies or currency units and
vice versa, and banks do not generally offer non-U.S. dollar checking or savings
account facilities in the United States. If requested on or prior to the fifth
Market Day preceding the date of delivery of the Notes, or by such other day as
determined by the Distributor who presented such offer to purchase Notes to the
Company, such Distributor is prepared to arrange for the conversion of U.S.
dollars into the Specified Currency to enable the purchasers to pay for the
Notes. Each such conversion will be made by such Distributor on such terms and
subject to such conditions, limitations and charges as such Distributor may from
time to time establish in accordance with its regular foreign exchange
practices. All costs of exchange will be borne by the purchasers of the Foreign
Currency Notes.
PAYMENT OF PRINCIPAL AND ANY PREMIUM AND INTEREST
The Company is obligated to make payments of principal of and any premium
and interest on Foreign Currency Notes in the Specified Currency (or, if such
Specified Currency is not at the time of such payment
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legal tender for the payment of public and private debts, in such other coin or
currency of the country which issued such Specified Currency as at the time of
such payment is legal tender for the payment of such debts). Any such amounts
paid by the Company will, unless otherwise specified in the applicable Pricing
Supplement, be converted by the "Exchange Rate Agent" named in the applicable
Pricing Supplement to U.S. dollars for payment of Holders. However, unless
otherwise indicated in the applicable Pricing Supplement, the Holder of a
Foreign Currency Note may elect to receive such payments in the Specified
Currency as hereinafter described.
Any U.S. dollar amount to be received by a Holder of a Foreign Currency
Note will be based on the highest bid quotation in the City of New York received
by the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on
the second Market Day preceding the applicable payment date from three (3)
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by the Company for the
purchase by the quoting dealer of the Specified Currency for U.S. dollars for
settlement on such payment date in the aggregate amount of the Specified
Currency payable to all Holders of Foreign Currency Notes scheduled to receive
U.S. dollar payments and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, payments will be made in the
Specified Currency. All currency exchange costs will be borne by the Holder of
the Foreign Currency Note by deductions from such payments.
Unless otherwise specified in the applicable Pricing Supplement, a Holder
of a Foreign Currency Note may elect to receive payment of the principal of and
any premium and interest on such Note in the Specified Currency by submitting a
written request for such payment to the Issuing and Paying Agent at its
principal corporate trust office in Boston, Massachusetts on or prior to the
Regular Record Date or at least sixteen (16) days prior to Maturity, as the case
may be. Such written request may be mailed or hand delivered or sent by cable,
telex or other form of facsimile transmission. A Holder of a Foreign Currency
Note may elect to receive payment in the Specified Currency for all principal
and any premium and interest payments and need not file a separate election for
each payment. Such election will remain in effect until revoked by written
notice to the Issuing and Paying Agent, but written notice of any such
revocation must be received by the Issuing and Paying Agent on or prior to the
relevant Regular Record Date or at least the sixteenth calendar day prior to
Maturity, as the case may be. Holders of Foreign Currency Notes whose Notes are
to be held in the name of a broker or nominee should contact such broker or
nominee to determine whether and how an election to receive payments in the
Specified Currency may be made.
Principal of, and any premium and interest on, a Foreign Currency Note paid
in U.S. dollars will be paid in the manner specified in the Prospectus and this
Prospectus Supplement for interest on Notes denominated in U.S. dollars.
Interest on a Foreign Currency Note paid in the Specified Currency will be paid
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register for the Notes. All checks payable in a
Specified Currency will be drawn on a bank office located outside the United
States. Payments of principal of and any premium and interest on Foreign
Currency Notes paid in the Specified Currency at Maturity will be made by wire
transfer of immediately available funds to an account with a bank located in the
country of the Specified Currency, as shall have been designated at least
sixteen (16) days prior to Maturity by the Holder, provided that the Note is
presented at the principal corporate trust office of the Issuing and Paying
Agent in Boston, Massachusetts in time for the Issuing and Paying Agent to make
such payments in such funds in accordance with its normal procedures.
PAYMENT CURRENCY
If a Specified Currency is not available for the payment of principal or
any premium or interest with respect to a Foreign Currency Note due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, the Company will be entitled to satisfy its obligations to Holders of
Foreign Currency Notes by making such payment in U.S. dollars on the basis of
the Market Exchange Rate on the second Market Day prior to such payment, or if
such Market Exchange Rate is not then available, on the basis of the most
recently available Market Exchange Rate or as otherwise indicated in the
applicable Pricing Supplement. The Market Exchange Rate for any Specified
Currency means the noon buying rate in The City of New York for cable transfers
of such Specified Currency as certified for customs purposes by (or if not so
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certified, as otherwise determined by) the Federal Reserve Bank of New York. Any
payment made under such circumstances in U.S. dollars where the required payment
is in other than U.S. dollars will not constitute an Event of Default under the
Indenture.
If payment in respect of a Note is required to be made in any currency unit
(e.g., ECU), and such currency unit is unavailable due to the imposition of
exchange controls or other circumstances beyond the Company's control, then the
Company will be entitled, but not required, to make any payments in respect of
such Note in U.S. dollars until such currency unit is again available. The
amount of each payment in U.S. dollars shall be computed on the basis of the
equivalent of the currency unit in U.S. dollars, which shall be determined by
the Company or its agent on the following basis. The component currencies of the
currency unit for the purpose (the "Component Currencies" or, individually, a
"Component Currency") shall be the currency amounts that were components of the
currency unit as of the last day on which the currency unit was used. The
equivalent of the currency unit in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Component Currencies. The U.S.
dollars equivalent of each of the Component Currencies shall be determined by
the Company or such agent on the basis of the most recently available Market
Exchange Rate for each such Component Currency, or as otherwise indicated in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above made by the Company or its agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the Holders of Notes.
PLAN OF DISTRIBUTION
Under the provisions of a Distribution Agreement, dated April 26, 1994 (the
"Distribution Agreement"), the Notes are offered on a continuing basis by USX
through CS First Boston Corporation, Goldman, Sachs & Co., J.P. Morgan
Securities Inc., Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and
Lehman Brothers, Lehman Brothers Inc. (including its affiliate Lehman Special
Securities Inc.), as distributors (the "Distributors"), each of which has agreed
to use all reasonable efforts to solicit purchases of the Notes. Unless
otherwise disclosed in the applicable Pricing Supplement, USX will pay a
commission, or grant a discount to each distributor or dealer (including the
Distributors). Such commission will range from .125% to .750% of the principal
amount of Notes sold through such Distributor as agent depending upon the
maturity of such Notes. Commissions on any Notes with maturities in excess of
thirty years may be higher, and will be set forth in the applicable Pricing
Supplement. USX also may sell Notes to the Distributors, as principals, at a
discount to be agreed upon at the time of sale or, if no other discount is
agreed, the Distributors may receive from USX a discount or commission
equivalent to that set forth on the cover page of this Prospectus Supplement.
Such Notes may be resold at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices as
determined by such Distributor. Such Notes may be resold to certain securities
dealers who may resell them to investors at the public offering price set forth
on the cover page of the applicable Pricing Supplement. Such dealers may also
receive compensation in the form of discounts, concessions or commissions from
the Distributors and/or commissions from the purchasers for whom they may act as
agents. No commission will be payable on any sales made directly to investors by
USX.
Unless otherwise specified in the applicable Pricing Supplement, any
concession allowed by any Distributor to any such dealer shall not be in excess
of the commission or discount received by such Distributor from USX. The
offering price and other selling terms for such resales may from time to time be
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varied by such Distributor. USX reserves the right to sell Notes directly to
investors on its own behalf in those jurisdictions where it is authorized to do
so and to or through other distributors or dealers in accordance with the
Distribution Agreement. USX will have the sole right to accept offers to
purchase Notes and may reject any proposed purchase of Notes in whole or in
part. Each Distributor will have the right, in its discretion reasonably
exercised, without notice to USX, to reject any proposed purchase of Notes
through it in whole or in part. Payment of the purchase price of Notes will be
required to be made in immediately available funds in The City of New York.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes, other than Foreign Currency Notes, will be required
to be made in funds immediately available in The City of New York. With respect
to payment of the purchase price of Foreign Currency Notes, see "SPECIAL
PROVISIONS RELATING TO FOREIGN CURRENCY NOTES--Purchase."
Each Distributor may be deemed to be an "underwriter" within the meaning of
the Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify each Distributor against and contribute toward certain liabilities,
including civil liabilities under the Act, and will reimburse the Distributors
for certain expenses.
The Notes will not be listed on any securities exchange and will not have
an established trading market when issued. Each Distributor may make a market in
the Notes, but is not obligated to do so and may discontinue market-making at
any time without notice. There can be no assurance that the Notes offered by
this Prospectus Supplement will be sold or that there will be a secondary market
for the Notes.
The Distributors and certain of their affiliates engage in transactions
with and perform services for the Company and/or its affiliates from time to
time in the ordinary course of business.
ISSUING AND PAYING AGENT
The First National Bank of Boston has been appointed the Issuing and Paying
Agent for the Notes as well as the Calculation Agent for any Floating Rate
Notes. USX and its affiliates maintain various banking relationships with The
First National Bank of Boston.
LEGAL OPINIONS
The validity of the Notes offered will be passed on for the Company by Dan
D. Sandman, Esq., General Counsel of the Company, or by J.A. Hammerschmidt,
Esq., Assistant General Counsel--Corporate of the Company, or their successors
in office, and for the Distributors by Sullivan & Cromwell. With respect to all
matters of Pennsylvania law, Sullivan & Cromwell may rely upon such opinion of
Dan D. Sandman or J.A. Hammerschmidt. Sullivan & Cromwell has from time to time
acted as New York counsel for the Company and its affiliates. The opinions of
Mr. Sandman, Mr. Hammerschmidt (or their successors in office) and Sullivan &
Cromwell will be conditioned upon and subject to certain assumptions regarding
future action required to be taken by the Company, the Trustee and the Issuing
and Paying Agent in connection with the issue and sale of any particular Note,
the specific terms of Notes and other matters that may affect the validity of
the Notes but can not be ascertained on the dates of such opinions.
S-23
<PAGE> 24
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<PAGE> 25
$750,000,000
USX CORPORATION
DEBT SECURITIES
-----------------------
USX Corporation ("USX") proposes to issue and offer from time to time
unsecured debt securities (the "Debt Securities") in an aggregate principal
amount or initial public offering price of up to $750,000,000 or the equivalent
thereof in foreign denominated currency (or units based on or related thereto),
which may be issued in one or more separate series on terms to be determined at
the time of sale.
The specific terms of the Debt Securities, including the designation of
each separate series and the aggregate principal amount, maturity, interest
rate, if any, whether fixed or variable (or the manner of calculation thereof),
redemption and sinking fund provisions or other repayment obligations, currency
in which denominated, amounts determined by reference to an index, purchase
price and any listing on a securities exchange, in each case with respect to
each series, will be set forth in the accompanying Prospectus Supplement.
The Debt Securities may be sold by USX to or through underwriters or
directly to other purchasers or through agents or through and to brokers or
dealers acting as underwriters who will be named in the accompanying Prospectus
Supplement along with terms of the public offering, including the offering
price, the principal amounts, if any, to be purchased by underwriters, the
commission or discount to the underwriters and the amount of other expenses
attributable to the issuance and distribution of the Debt Securities.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
THE DATE OF THIS PROSPECTUS IS APRIL 8, 1994.
<PAGE> 26
AVAILABLE INFORMATION
USX Corporation ("USX") is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by USX can be inspected and copied at the
Public Reference Room of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the public reference facilities maintained
by the Commission at 7 World Trade Center, Suite 1300, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Documents filed by USX can also be inspected at the offices of
the New York Stock Exchange, Inc., the Chicago Stock Exchange and the Pacific
Stock Exchange.
USX has filed a Registration Statement on Form S-3 (the "Registration
Statement") with the Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), covering a maximum of $750,000,000 in aggregate
principal amount or initial public offering price of Debt Securities. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits thereto, to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by USX with the Commission (file
no. 1-5153) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1993.
(b) Current Reports on Form 8-K dated January 21, January 24, February
2, February 14 and February 24, 1994.
All reports and other documents filed by USX pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Debt Securities shall be
deemed to be incorporated by reference herein. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
USX undertakes to provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the information incorporated by reference in this Prospectus,
other than exhibits to such information (unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be directed to the Office of the
Corporate Secretary, USX Corporation, 600 Grant Street, Pittsburgh, Pennsylvania
15219-4776 (telephone: 412-433-2885).
USX CORPORATION
USX is a diversified company which is principally engaged in the energy
business through its Marathon Group, in the steel business through its U.S.
Steel Group and in the gas gathering and processing business through its Delhi
Group.
USX has three classes of common stock, USX--Marathon Group Common Stock
("Marathon Stock"), USX--U.S. Steel Group Common Stock ("Steel Stock") and
USX--Delhi Group Common Stock ("Delhi Stock"). Each class of common stock is
intended to provide the stockholders of such class with a separate security
reflecting the performance of the related group.
The Marathon Group is engaged in worldwide exploration, production,
transportation and marketing of crude oil and natural gas; and domestic
refining, marketing and transportation of petroleum products.
2
<PAGE> 27
The U.S. Steel Group includes U.S. Steel, one of the largest integrated
steel producers in the United States, which is primarily engaged in the
production and sale of a wide range of steel mill products, coke, and taconite
pellets. The U.S. Steel Group also includes the management of mineral resources,
domestic coal mining, engineering and consulting services and technology
licensing. Other businesses that are part of the U.S. Steel Group include real
estate development and management, fencing products, leasing and financing
activities, and a majority interest in a titanium metal products company.
The Delhi Group is engaged in the purchasing, gathering, processing,
transporting and marketing of natural gas. Data with respect to the Delhi Group
for periods prior to October 2, 1992, represent the historical financial data of
the businesses included in the Delhi Group. Such data for periods prior to that
date are included in the Marathon Group.
GROUP HIGHLIGHTS
The following is a three-year summary of financial highlights for the
groups:
<TABLE>
<CAPTION>
OPERATING
INCOME ASSETS
SALES (LOSS)(A) (AT YEAR-END)
------- --------- -------------
(MILLIONS)
<S> <C> <C> <C>
Marathon Group (b)
1993...................................... $11,962 $ 169 $10,806
1992...................................... 12,782 304 11,141
1991...................................... 13,975 358 11,644
U.S. Steel Group
1993...................................... $ 5,612 $ (149) $ 6,616
1992...................................... 4,919 (241) 6,251
1991...................................... 4,864 (617) 5,627
Delhi Group (c)
1993...................................... $ 535 $ 36 $ 580
1992...................................... 458 33 565
1991...................................... 423 31 584
Eliminations
1993...................................... $ (45) $ -- $ (628)
1992...................................... (346) (26) (705)
1991...................................... (437) (31) (816)
Total USX Corporation
1993...................................... $18,064 $ 56 $17,374
1992...................................... 17,813 70 17,252
1991...................................... 18,825 (259) 17,039
</TABLE>
- ---------
(a) Includes the following: a $342 million charge related to the Lower Lake Erie
Iron Ore Antitrust Litigation against a former USX subsidiary, the Bessemer
& Lake Erie Railroad, for the U.S. Steel Group in 1993; restructuring
charges of $42 million, $10 million and $402 million for the U.S. Steel
Group in 1993, 1992 and 1991, respectively; restructuring charges of $115
million and $24 million for the Marathon Group in 1992 and 1991,
respectively; and inventory market valuation charges (credits) for the
Marathon Group of $241 million, $(62) million and $260 million in 1993, 1992
and 1991, respectively.
(b) Includes sales and operating income for the businesses comprising the Delhi
Group for periods prior to October 2, 1992, and assets related to the
businesses comprising the Delhi Group at year-end 1991.
(c) Includes historic sales, operating income and assets for the businesses
included in the Delhi Group which, prior to October 2, 1992, were included
in the Marathon Group.
USX continues to include consolidated financial information in its periodic
reports required by the Exchange Act, in its annual shareholder reports and in
other financial communications. The consolidated financial statements are
supplemented with separate financial statements of the Marathon Group, the U.S.
3
<PAGE> 28
Steel Group and the Delhi Group, together with the related Management's
Discussion and Analyses, descriptions of business and other financial and
business information to the extent such information is required to be presented
in the report being filed. The financial information of the Marathon Group, the
U.S. Steel Group and the Delhi Group, taken together, includes all accounts
which comprise the corresponding consolidated financial information of USX.
For consolidated financial reporting purposes, USX's reportable industry
segments correspond with its three groups. The attribution of assets,
liabilities (including contingent liabilities) and stockholders' equity among
the Marathon Group, the U.S. Steel Group and the Delhi Group for the purpose of
preparing their respective financial statements does not affect legal title to
such assets or responsibility for such liabilities. Holders of Marathon Stock,
Steel Stock and Delhi Stock are holders of common stock of USX and continue to
be subject to all of the risks associated with an investment in USX and all of
its businesses and liabilities. Financial impacts arising from any of the groups
which affect the overall cost of USX's capital could affect the results of
operations and financial condition of all groups. Accordingly, the USX
consolidated financial information should be read in connection with the
Marathon Group, the U.S. Steel Group and the Delhi Group financial information.
USX was incorporated in 1901 and is a Delaware corporation. Its executive
offices are located at 600 Grant St., Pittsburgh, PA 15219-4776 (tel: (412)
433-1121). The term "USX" when used herein refers to USX Corporation or USX
Corporation and its subsidiaries, as required by the context.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.................. (a) (a) (a) 2.80 2.57
=== === === ==== ====
</TABLE>
- ---------
(a) Earnings did not cover fixed charges by $281 million for 1993, by $197
million for 1992 and by $681 million for 1991.
USE OF PROCEEDS
USX intends to use the net proceeds from the sale of the Debt Securities
for general corporate purposes, the refunding of outstanding long-term
indebtedness and other financial obligations, rate management and leveling of
its debt maturity schedule.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities will be general unsecured obligations of USX and will
rank pari passu with the other general unsecured obligations of USX. The Debt
Securities will be issued under an Indenture dated March 15, 1993 between PNC
Bank, National Association (the "Trustee") and USX (the "Indenture"). A copy of
the Indenture is filed as an exhibit to the Registration Statement. The
following summaries of certain provisions of the Indenture do not purport to be
complete and are qualified in their entirety by reference to the provisions of
the Indenture, which are incorporated by reference herein. Certain capitalized
terms used herein are defined in the Indenture. The Section numbers referred to
in the following summaries are references to relevant sections of the Indenture.
GENERAL
The Indenture does not limit the principal amount of Debt Securities or
other indebtedness which may be issued by USX.
4
<PAGE> 29
The Debt Securities of any Series may be issued in definitive form or, if
provided in the Prospectus Supplement relating thereto, may be represented in
whole or in part by a Global Security or Securities, registered in the name of a
Depositary designated by USX. Each Debt Security represented by a Global
Security is referred to herein as a "Book-Entry Security."
Debt Securities may be issued from time to time in an aggregate principal
amount or initial public offering price of up to $750,000,000 or the equivalent
thereof in foreign denominated currency or units based on or relating to foreign
denominated currencies, including European Currency Units ("ECU"), and will be
offered independently or together on terms determined by market conditions at
the time of sale. The Debt Securities may be issued in one or more series with
the same or various maturities and may be sold at par, a premium or an original
issue discount. Debt Securities sold at an original issue discount may bear no
interest or interest at a rate which is below market rates.
Reference is made to the Prospectus Supplement for the specific terms of
the Debt Securities offered hereby, including the following (to the extent
applicable to a particular series of Debt Securities): (i) designation,
aggregate principal amount, purchase price (expressed as a percentage of the
principal amount thereof), and denomination; (ii) date of maturity; (iii) if
other than currency of the United States, the currency or units based on or
relating to currencies for which Debt Securities may be purchased and in which
principal and any premium or interest will or may be payable; (iv) interest rate
or rates (or the manner of calculation thereof), if any; (v) the times at which
any such interest will be payable; (vi) the place or places where principal and
any premium and interest will be payable; (vii) any redemption or sinking fund
provisions or other repayment obligations and any remarketing arrangements
related thereto; (viii) any index used to determine the amount of payment of
principal of and any premium and interest on the Debt Securities; (ix) the
application, if any, of the defeasance provisions to the Debt Securities; (x) if
other than the principal amount thereof, the portion of the principal amount of
the Debt Securities which shall be payable upon declaration of acceleration of
the maturity thereof; (xi) if other than 100% of the principal amount thereof
plus accrued interest, the Change in Control Purchase Price or Prices applicable
to purchases of Debt Securities upon the occurrence of a Change in Control;
(xii) whether the Debt Securities will be issued in whole or in part in the form
of one or more Global Securities and, in such case, the Depositary for such
Global Securities; and (xiii) any other specific terms of the Debt Securities,
including any terms which may be required by or advisable under United States
laws or regulations.
Except with respect to Book-Entry Securities, Debt Securities may be
presented for exchange or registration of transfer, in the manner, at the places
and subject to the restrictions set forth in the Debt Securities and the
Prospectus Supplement. Such services will be provided without charge, other than
any tax or other governmental charge payable in connection therewith, but
subject to the limitations provided in the Indenture. For a description of
payments of principal of and any premium and interest on, and transfer of,
Book-Entry Securities, and exchanges of Global Securities representing
Book-Entry Securities, see "Book-Entry Securities."
CERTAIN COVENANTS OF USX
Creation of Certain Liens
If USX or any Subsidiary of USX shall mortgage, pledge, encumber or subject
to a lien, (hereinafter to "Mortgage" or a "Mortgage," as the context may
require) as security for any indebtedness for money borrowed (i) any blast
furnace facility or raw steel producing facility, or rolling mills which are a
part of a plant which includes such a facility, or (ii) any property capable of
producing oil or gas; and which, in either case, is located in the United States
and is determined to be a principal property by the Board of Directors of USX in
its discretion, USX will secure or will cause such Subsidiary to secure each
Series of the Debt Securities equally and ratably with all indebtedness or
obligations secured by the Mortgage then being given and with any other
indebtedness of USX or such Subsidiary then entitled thereto; provided, however,
that this covenant shall not apply in the case of: (a) any Mortgage existing on
the date of the Indenture (whether or not such Mortgage includes an
after-acquired property provision); (b) any Mortgage, including a purchase money
Mortgage, incurred in connection with the acquisition of any property (any
Mortgage incurred within 180 days
5
<PAGE> 30
after such acquisition or the completion of construction shall be deemed to be
in connection with such acquisition), the assumption of any Mortgage previously
existing on such acquired property or any Mortgage existing on the property of
any corporation when it becomes a Subsidiary of USX; (c) any Mortgage on such
property in favor of the United States, or any State, or instrumentality of
either, to secure partial, progress or advance payments to USX or any Subsidiary
of USX pursuant to the provisions of any contract or any statute; (d) any
Mortgage on such property in favor of the United States, any State, or
instrumentality of either, to secure borrowings for the purchase or construction
of the property Mortgaged; (e) any Mortgage in connection with a sale or other
transfer of oil or gas in place for a period of time or in an amount such that
the purchaser will realize therefrom a specified amount of money or specified
amount of minerals or any interest in property of the character commonly
referred to as an "oil payment" or "production payment"; (f) any Mortgage on any
property arising in connection with or to secure all or any part of the cost of
the repair, construction, improvement, alteration, exploration, development or
drilling of such property or any portion thereof; (g) any Mortgage on any
pipeline, gathering system, pumping or compressor station, pipeline storage
facility, other pipeline facility, drilling equipment, drilling platform,
drilling barge, any movable railway, marine or automotive equipment, gas plant,
office building, storage tank, or warehouse facility, any of which is located on
any property included under clause (ii) above; (h) any Mortgage on any equipment
or other personal property used in connection with any property included under
clause (ii) above; (i) any Mortgage on any property included under clause (ii)
above arising in connection with the sale of accounts receivable resulting from
the sale of oil or gas at the wellhead; or (j) any renewal of or substitution
for any Mortgage permitted under the preceding clauses. Notwithstanding the
foregoing, USX may and may permit its Subsidiaries to grant Mortgages or incur
liens on property covered by the restriction described above so long as the net
book value of the property so encumbered, together with all property subject to
the restriction on certain sale and leasebacks described below, does not at the
time such Mortgage or lien is granted exceed five percent (5%) of Consolidated
Net Tangible Assets, (as such term is defined in the Indenture). (Section 4.03)
"Consolidated Net Tangible Assets" means the aggregate value of all assets
of USX and its subsidiaries after deducting therefrom (a) all current
liabilities (excluding all long-term debt due within one year), (b) all
investments in unconsolidated subsidiaries and all investments accounted for on
the equity basis and (c) all goodwill, patent and trademarks, unamortized debt
discount and other similar intangibles (all determined in conformity with
generally accepted accounting principles and calculated on a basis consistent
with USX's most recent audited consolidated financial statements). (Section
1.01)
As of the date of this Prospectus, neither USX nor any subsidiary of USX
has any property referred to in either clause (i) or (ii) above and under
"Limitations on Certain Sales and Leasebacks" below that has been determined by
the Board of Directors of USX to be a principal property.
Limitations on Certain Sale and Leasebacks
USX will not, nor will it permit any Subsidiary to, sell or transfer (i)
any blast furnace facility or raw steel producing facility, or rolling mills
which are a part of a plant which includes such a facility or (ii) any property
capable of producing oil or gas; and which, in either case, is located in the
United States, and is determined to be a principal property by the Board of
Directors of USX in its discretion with the intention of taking back a lease,
thereof, provided, however, this covenant shall not apply if (a) the lease is to
a Subsidiary (or to USX in the case of a Subsidiary); (b) the lease is for a
temporary period by the end of which it is intended that the use of the property
by the lessee will be discontinued; (c) USX or a Subsidiary could, in accordance
with Section 4.03, described above, Mortgage such property without equally and
ratably securing the Debt Securities; (d) the transfer is incident to or
necessary to effect any operating, farm out, farm in, unitization, acreage
exchange, acreage contributions, bottom hole or dry hole arrangements or pooling
agreement or any other agreement of the same general nature relating to the
acquisition, exploration, maintenance, development and operation of oil and gas
properties in the ordinary course of business or as required by regulatory
agencies having jurisdiction over the property; or (e) USX promptly informs the
Trustee of such sale, the net proceeds of such sale are at least equal to the
fair value (as determined by resolution adopted by the Board of Directors of
USX) of such property and USX within 180 days after such sale applies an amount
equal to such net proceeds (subject to reduction by reason of credits to which
USX is entitled, under the conditions specified in
6
<PAGE> 31
the Indenture) to the retirement or in substance defeasance of funded debt of
USX or a Subsidiary. (Section 4.04)
Merger and Consolidation
USX will not merge or consolidate with any other corporation or sell or
convey all or substantially all of its assets to any person, firm or
corporation, except that USX may merge or consolidate with, or sell or convey
all or substantially all of its assets to, any other corporation, provided that
(i) USX shall be the continuing corporation or the successor corporation (if
other than USX, as the case may be) shall be a corporation organized and
existing under the laws of the United States of America or a State thereof and
such corporation shall expressly assume the due and punctual payment of the
principal of and any premium and interest on all the Debt Securities, according
to their tenor, and the due and punctual performance and observance of all of
the covenants and conditions of the Indenture to be performed by USX and (ii)
USX or such successor corporation, as the case may be, shall not, immediately
after such merger, consolidation, sale or conveyance, be in default in the
performance of any such covenant or condition and no event which with the lapse
of time, the giving of notice or both would constitute an Event of Default shall
have occurred and be continuing. (Section 11.01)
If upon any consolidation or merger of USX with or into any other
corporation, or upon any sale or conveyance of substantially all of the
properties of USX, or upon any acquisition by USX of all or any part of the
property of another corporation, any property owned immediately prior thereto
would thereupon become subject to any mortgage, lien, pledge, charge or
encumbrance, USX, prior to such event, will secure the Debt Securities (equally
and ratably with any other indebtedness of USX secured thereby) by a lien on all
of such property of USX, prior to all liens, charges and encumbrances other than
any theretofore existing thereon. (Section 11.03)
PURCHASE OF DEBT SECURITIES UPON A CHANGE IN CONTROL
In the event of any Change in Control (as defined below) of USX, each
holder of Debt Securities will have the right, at that holder's option, subject
to the terms and conditions of the Indenture, to require USX to become obligated
to purchase all of that holder's Debt Securities on the date that is 35 Business
Days after the occurrence of such Change in Control (the "Change in Control
Purchase Date") at a cash price equal to (i) unless otherwise specified in the
terms of such Debt Securities, 100% of the principal amount thereof, together
with accrued interest to such Change in Control Purchase Date (except that
interest installments due prior to such Change in Control Purchase Date will be
payable to the holders of such Debt Securities of record at the close of
business on the relevant record dates according to their terms and the
provisions of the Indenture), or (ii) such other price or prices as may be
specified in the terms of such Debt Securities (the "Change in Control Purchase
Price"). (Section 4.07)
Within 15 Business Days after a Change in Control, USX is obligated to mail
to the Trustee and to all holders of Debt Securities of any Series at their
addresses shown in the Debt Security register (and to beneficial owners as
required by applicable law) a notice regarding the Change in Control, stating,
among other things: (i) the last date on which the Change in Control purchase
right may be exercised, (ii) the Change in Control Purchase Price, (iii) the
Change in Control Purchase Date, (iv) the name and address of the Paying Agent,
and (v) the procedures that holders must follow to exercise these rights. USX
will cause a copy of such notice to be published in a daily newspaper of
national circulation. (Section 4.07)
To exercise this right, a holder of Debt Securities of any Series must
deliver a Change in Control Purchase Notice to the Paying Agent for that Series
at its address set forth in USX's notice regarding the Change in Control at any
time prior to the close of business on the Change in Control Purchase Date. The
Change in Control Purchase Notice shall state (i) the certificate numbers of the
Debt Securities to be delivered by the holder thereof for purchase by USX and
(ii) that such Debt Securities are to be purchased by USX pursuant to the
applicable provisions of the Debt Securities and USX's notice regarding the
Change in Control. (Section 4.07)
7
<PAGE> 32
Upon receipt by USX of the Change in Control Purchase Notice, the holder of
the Debt Security in respect of which such notice was given shall (unless such
notice is withdrawn as specified in the Indenture) thereafter be entitled to
receive solely the Change in Control Purchase Price with respect to such Debt
Security. Any Change in Control Purchase Notice may be withdrawn by the holder
of Debt Securities of any Series by a written notice of withdrawal delivered to
the Paying Agent for that Series at any time prior to the close of business on
the Change in Control Purchase Date. The notice of withdrawal shall state the
certificate numbers of the Debt Securities as to which the withdrawal notice
relates. (Section 4.08)
Payment of the Change in Control Purchase Price for a Debt Security of any
Series for which a Change in Control Purchase Notice has been delivered and not
withdrawn is conditioned upon delivery of such Debt Security (together with
necessary endorsements) to the Paying Agent for that Series at its address set
forth in USX's notice regarding the Change in Control, at any time (whether
prior to, on or after the Change in Control Purchase Date) after the delivery of
such Change in Control Purchase Notice. (Section 4.07) Payment of the Change in
Control Purchase Price for such Debt Security will be made promptly following
the later of the Change in Control Purchase Date or the time of delivery of such
Debt Security. (Section 4.08)
Under the Indenture, a "Change in Control" of USX is deemed to have
occurred at such time as (i) any "person" or "group" of persons (excluding USX,
any Subsidiary, any employee stock ownership plan or any other employee benefit
plan of USX) shall have acquired "beneficial ownership" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act and the applicable rules and
regulations thereunder) of shares of Voting Stock representing at least 35% of
the outstanding Voting Power of USX, (ii) during any period of twenty-five
consecutive months, commencing before or after the date of the Indenture,
individuals who at the beginning of such twenty-five month period were directors
of USX (together with any replacement or additional directors whose election was
recommended by incumbent management of USX or who were elected by a majority of
directors then in office) cease to constitute a majority of the board of
directors of USX, or (iii) any person or group of related persons shall acquire
all or substantially all of the assets of USX; provided, that a Change in
Control shall not be deemed to have occurred pursuant to clause (iii) above if
USX shall have merged or consolidated with or transferred all or substantially
all of its assets to another corporation in compliance with the provisions of
Section 11.01 of the Indenture (relating to when USX may merge or transfer
assets) and the surviving or successor or transferee corporation is no more
leveraged than was USX immediately prior to such event. For purposes of this
definition, the term "leveraged" when used with respect to any corporation shall
mean the percentage represented by the total assets of that corporation divided
by its stockholders' equity, in each case determined and as would be shown in a
consolidated balance sheet of such corporation prepared in accordance with
generally accepted accounting principles in the United States of America. The
term "substantially all" in clause (iii) above has not been quantified for
purposes of defining Change in Control and, depending upon the factual
circumstances, there may be uncertainty as to when a Change in Control has
occurred for purposes of determining the rights of holders of Debt Securities
pursuant to this provision.
Notwithstanding the foregoing, a Change in Control will not be deemed to
have occurred by virtue of (i) USX, any Subsidiary of USX, any employee stock
ownership plan or any other employee benefit plan of USX or any such Subsidiary,
or any Person holding Voting Stock for or pursuant to the terms of any such
employee benefit plan, acquiring beneficial ownership of shares of Voting Stock,
whether representing 35% or more of the outstanding Voting Power of USX or
otherwise or (ii) any Person whose ownership of shares of Voting Stock
representing 35% or more of the outstanding Voting Power of USX results solely
from USX's calculation from time to time of the relative voting rights of
Marathon Stock, Steel Stock and Delhi Stock.
"Voting Stock" means stock of USX of any class or classes (however
designated) having ordinary voting power for the election of the directors of
USX, other than stock having such power only by reason of the happening of a
contingency. "Voting Power" means the total voting power represented by all
outstanding shares of all classes of Voting Stock. (Section 4.07)
In the event a Change in Control occurs, USX intends to comply with any
applicable securities laws or regulations, including any applicable requirements
of Rule 14e-1 under the Exchange Act. The Change in Control purchase feature of
the Debt Securities may in certain circumstances make more difficult or
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<PAGE> 33
discourage a takeover of USX. The Change in Control purchase feature, however,
is not the result of management's knowledge of any specific effort to accumulate
shares of Common Stock or to obtain control of USX by means of a merger, tender
offer, solicitation or otherwise, or part of a plan by management to adopt a
series of anti-takeover provisions. The Change in Control purchase feature is
similar to that contained in other debt offerings of USX as a result of
negotiations between USX and the underwriters thereof.
Except as described above, the Change in Control purchase feature does not
afford holders of the Debt Securities protection against possible adverse
effects of a reorganization, restructuring, merger or similar transaction
involving USX.
Although USX's existing indebtedness does not limit USX's ability to
purchase Debt Securities, USX's ability to purchase Debt Securities in the
future may be limited by the terms of any then existing borrowing arrangements
and by its financial resources.
EVENTS OF DEFAULT
An Event of Default with respect to Debt Securities of any Series is
defined in the Indenture as being: (i) default in the payment of the principal
of or premium, if any, on any of the Debt Securities of such Series when due and
payable; (ii) default in the payment of interest on the Debt Securities of such
Series when due, continuing for 30 days; (iii) default in the payment of the
Change in Control Purchase Price of any of the Debt Securities of such Series as
and when the same shall become due and payable; (iv) default in the deposit of
any sinking fund payment with respect to any Debt Security of such Series when
due; (v) failure by USX in the performance of any other covenant or agreement in
the Debt Securities of such Series or in the Indenture continued for a period of
90 days after notice of such failure as provided in the Indenture; (vi) certain
events of bankruptcy, insolvency, or reorganization with respect to USX; or
(vii) any other Event of Default provided with respect to Debt Securities of
that Series. (Section 6.01)
USX is required annually to deliver to the Trustee officers' certificates
stating whether or not the signers have any knowledge of any default in the
performance by USX of certain covenants. (Section 4.06)
In case an Event of Default shall occur and be continuing with respect to
any Series, the Trustee or the holders of not less than 25% in principal amount
of the Debt Securities of such Series then outstanding may declare the Debt
Securities of such Series to be due and payable. (Section 6.01) The Trustee is
required to give holders of the Debt Securities of any Series written notice of
a default with respect to such Series as and to the extent provided by the Trust
Indenture Act. (Section 6.07)
If, however, at any time after the Debt Securities of such Series have been
declared due and payable, and before any judgment or decree for the moneys due
has been obtained or entered, USX shall pay or deposit with the Trustee amounts
sufficient to pay all matured installments of interest upon the Debt Securities
of such Series and the principal of all Debt Securities of such Series which
shall have become due, otherwise than by acceleration, together with interest on
such principal and, to the extent legally enforceable, on such overdue
installments of interest and all other amounts due under the Indenture shall
have been paid, and any and all defaults with respect to such Series under the
Indenture shall have been remedied, then the holders of a majority in aggregate
principal amount of the Debt Securities of such Series then outstanding, by
written notice to USX and the Trustee, may waive all defaults with respect to
such Series and rescind and annul the declaration that the Debt Securities of
such Series are due and payable. (Section 6.01) In addition, prior to any such
declaration that the Debt Securities of such Series are due and payable, the
holders of a majority in aggregate principal amount of the Debt Securities of
such Series may waive any past default and its consequences with respect to such
Series, except a default in the payment of the principal of or any premium or
interest on any Debt Securities of such Series. (Section 6.06)
The Trustee is under no obligation to exercise any of the rights or powers
under the Indenture at the request, order or direction of any of the holders of
Debt Securities, unless such holders shall have offered to the Trustee
reasonable security or indemnity. (Section 7.02) Subject to such provisions for
the indemnification of the Trustee and certain limitations contained in the
Indenture, the holders of a majority in aggregate principal amount of the Debt
Securities of each Series at the time outstanding shall have the right to direct
the
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time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of such Series. (Section 6.06)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting USX and the Trustee to modify
the Indenture or enter into or modify any supplemental indenture without the
consent of the holders of the Debt Securities in regard to matters as shall not
adversely affect the interests of the holders of the Debt Securities, including,
without limitation, the following: (a) to evidence the succession of another
corporation to USX; (b) to add to the covenants of USX further covenants,
restrictions, conditions or provisions for the benefit or protection of the
holders of any or all Series of Debt Securities or to surrender any right or
power conferred upon USX by the Indenture; (c) to cure any ambiguity or to
correct or supplement any provision of the Indenture (or supplements) which may
be defective or inconsistent with any other provision in the Indenture (or
supplements); to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee; or to make such other provisions in regard to matters or
questions arising under the Indenture as shall not adversely affect the
interests of the holders of the Debt Securities then outstanding; (d) to add to,
change or eliminate any of the provisions of the Indenture in respect of one or
more Series of Debt Securities thereunder, under certain conditions specified
therein; (e) to evidence the appointment of a successor trustee and to add to or
change provisions of the Indenture necessary to provide for or facilitate the
administration of the trusts under the Indenture by more than one trustee; (f)
to set forth the form and any terms of any Series of Debt Securities which USX
and the Trustee deem necessary or desirable to include in a supplemental
indenture; and (g) to add to or change any of the provisions of the Indenture to
such extent as shall be necessary or desirable to permit or facilitate the
issuance of Debt Securities in bearer form, registrable or not registrable as to
principal, and with or without interest coupons. USX and the Trustee may
otherwise modify the Indenture or any supplemental indenture with the consent of
the holders of not less than 66 2/3% in aggregate principal amount of each
Series of Debt Securities affected thereby at the time outstanding, except that
no such modifications shall (i) extend the fixed maturity of any Debt
Securities, or reduce the principal amount thereof or reduce the rate or extend
the time of payment of any premium or interest thereon, or change the currency
in which the Debt Securities are payable, without the consent of the holder of
each Debt Security so affected, or (ii) reduce the aforesaid percentage of Debt
Securities of any Series, the consent of the holders of which is required for
any such modifications or supplemental indenture, without the consent of the
holders of all Debt Securities affected thereby then outstanding. (Article Ten)
SATISFACTION AND DISCHARGE; DEFEASANCE AND COVENANT DEFEASANCE
The Indenture shall be satisfied and discharged if (i) USX shall deliver to
the Trustee all Debt Securities then outstanding for cancellation or (ii) all
Debt Securities shall have become due and payable or are to become due and
payable within one year and USX shall deposit an amount sufficient to pay the
principal, premium, if any, and interest to the date of maturity, provided that
in either case USX shall have paid all other sums payable under the Indenture.
(Section 12.01)
The Indenture provides, if such provision is made applicable to the Debt
Securities of a Series, that USX may elect either (A) to defease and be
discharged from any and all obligations with respect to any Debt Security of
such Series (except for the obligations to register the transfer or exchange of
such Debt Security, to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities, to maintain an office or agency in respect of the Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (B) to be
released from its obligations with respect to such Debt Security under Sections
4.03, 4.04, 4.07, 4.09, 11.01 and 11.03 of the Indenture (being the restrictions
described above under "Certain Covenants of USX" and USX's obligations described
under "Purchase of Debt Securities upon a Change in Control") and (ii) that
Sections 6.01(d), 6.01(e) (as to Sections 4.03, 4,04, 4.07, 4.09, 11.01 and
11.03) and 6.01(h), as described in clauses (iv), (v) and (vii) under "Events of
Default" above, shall not be deemed to be Events of Default under the Indenture
with respect to such Series ("covenant defeasance"), upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money
and/or Government Obligations (as defined) which through the payment of
principal and interest in accordance with their terms will provide money, in an
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<PAGE> 35
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Security, on the scheduled due dates therefor. In the case of
defeasance, the holders of such Debt Securities are entitled to receive payments
in respect of such Debt Securities solely from such Trust. Such a trust may only
be established if, among other things, USX has delivered to the Trustee an
Opinion of Counsel (as specified in the Indenture) to the effect that the
holders of the Debt Securities affected thereby will not recognize income, gain
or loss for Federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred. Such Opinion of
Counsel, in the case of defeasance under clause (A) above, must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
Federal income tax law occurring after the date of the Indenture. (Section
12.02)
RECORD DATES
The Indenture provides that in certain circumstances USX or the Trustee may
establish a record date for determining the holders of outstanding Debt
Securities of a Series entitled to join in the giving of notice or the taking of
other action under the Indenture by the holders of the Debt Securities of such
Series.
BOOK-ENTRY SECURITIES
The following description of Book-Entry Securities will apply to any Series
of Debt Securities issued in whole or in part in the form of a Global Security
or Securities except as otherwise provided in the Prospectus Supplement relating
thereto.
Upon issuance, all Book-Entry Securities of like tenor and having the same
date of original issue will be represented by a single Global Security. Each
Global Security representing Book-Entry Securities will be deposited with, or on
behalf of, the Depositary, which will be a clearing agent registered under the
Exchange Act. The Global Security will be registered in the name of the
Depositary or a nominee of the Depositary.
Ownership of beneficial interest in a Global Security representing
Book-Entry Securities will be limited to institutions that have accounts with
the Depositary or its nominee ("participants") or persons that may hold
interests through participants. In addition, ownership of beneficial interests
by participants in such a Global Security will only be evidenced by, and the
transfer of that ownership interest will only be effected through, records
maintained by the Depositary or its nominee for such Global Security. Ownership
of beneficial interest in such a Global Security by persons that hold through
participants will only be evidenced by, and the transfer of that ownership
interest within such participant will only be effected through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair this ability to transfer beneficial
interests in such a Global Security.
Payment of principal of and any premium and interest on Book-Entry
Securities represented by any Global Security registered in the name of or held
by the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owners and holder of the Global Security
representing such Book-Entry Securities. None of USX, the Trustee or any agent
of USX or the Trustee will have any responsibility or liability for any aspect
of the Depositary's records or any participant's records relating to or payments
made on account of beneficial ownership interests in a Global Security
representing such Book-Entry Securities or for maintaining, supervising or
reviewing any of the Depositary's records or any participant's records relating
to such beneficial ownership interests. Payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by the Depositary's procedures, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the sole
responsibility of such participants.
No Global Security may be transferred except as a whole by the Depositary
for such Global Security to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary.
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A Global Security representing Book-Entry Securities of any Series is
exchangeable for definitive Debt Securities of such Series in registered form,
of like tenor and of an equal aggregate principal amount, only if (a) the
Depositary notifies USX that it is unwilling or unable to continue as Depositary
for such Global Security or the Depositary ceases to be a clearing agency
registered under the Exchange Act, (b) USX in its sole discretion determines
that such Global Security shall be exchangeable for definitive Debt Securities
in registered form, or (c) there shall have occurred and be continuing an Event
of Default with respect to the Debt Securities of that Series. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable in whole for definitive Debt Securities in registered form, of like
tenor and of an equal aggregate principal amount, and in the authorized
denominations for that Series. Such definitive Debt Securities shall be
registered in the name or names of such person or persons as the Depositary
shall instruct the Trustee. It is expected that such instructions may be based
upon directions received by the Depositary from its participants with respect to
ownership of beneficial interests in such Global Security.
Except as provided above, owners of beneficial interests in such Global
Security will not be entitled to receive physical delivery of Debt Securities in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Book-Entry Securities
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee.
Accordingly, each person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the Indenture. USX
understands that under existing industry practices, in the event that USX
requests any action of holders or an owner of a beneficial interest in such
Global Security desires to give or take any action that a holder is entitled to
give or take under the Indenture, the Depositary would authorize the
participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participant to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
CONCERNING THE TRUSTEE
PNC Bank, National Association is also trustee for Marathon Oil Company's
9 3/4% Guaranteed Notes due 1999 and 7% Monthly Interest Guaranteed Noted due
2002, both of which are guaranteed by USX, for eighteen series of obligations
issued by various governmental authorities relating to environmental projects at
various Company facilities and for an aggregate principal amount of
$2,550,000,000 of debt securities issued by USX under Indentures between USX and
the Trustee dated July 1, 1991 and March 15, 1993. USX and its subsidiaries
maintain ordinary banking relationships, including loans and deposit accounts,
with PNC Bank, National Association and anticipate that they will continue to do
so.
PLAN OF DISTRIBUTION
USX may sell the Debt Securities to or through underwriters or directly to
purchasers, agents or dealers or through brokers.
Offers to purchase Debt Securities may be solicited directly by USX or
brokers or dealers designated by USX from time to time. Any such broker or
dealer may be deemed to be an underwriter as that term is defined in the
Securities Act, and will be named in the Prospectus Supplement, together with
the compensation payable thereto by USX in connection with the sale of the Debt
Securities.
Underwriters, agents, brokers and dealers may be entitled under agreements
which may be entered into with USX to indemnification by USX against certain
civil liabilities, including liabilities under the Securities Act. Such
underwriters, agents, brokers and dealers may engage in transactions with, or
perform services for, USX in the ordinary course of business.
The place and time of delivery for the Debt Securities in respect of which
this Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
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VALIDITY OF SECURITIES
The validity of the issuance of the Debt Securities will be passed upon for
USX by D. D. Sandman, Esq., General Counsel and Secretary of USX or by Mr. J. A.
Hammerschmidt, Assistant General Counsel and Assistant Secretary of USX. Messrs.
Sandman and Hammerschmidt, in their capacities as General Counsel and Secretary
and Assistant General Counsel and Assistant Secretary, are paid salaries by USX
and participate in various employee benefit plans offered to officers of USX
generally.
EXPERTS
The consolidated financial statements of USX, the financial statements of
the Marathon Group, the financial statements of the U.S. Steel Group and the
financial statements of the Delhi Group as of December 31, 1993 and 1992 and for
each of the three years in the period ended December 31, 1993, incorporated in
this Prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 1993, have been so incorporated in reliance on the reports
(the report pertaining to the U.S. Steel Group financial statements contains an
explanatory paragraph referring to the U.S. Steel Group's involvement in certain
contingencies as described in Note 26 to the U.S. Steel Group financial
statements) of Price Waterhouse, independent accountants, given on the authority
of such firm as experts in auditing and accounting.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY DISTRIBUTOR. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Ratio of Earnings to Fixed Charges... S-3
Recent Developments.................. S-3
Use of Proceeds...................... S-3
Description of Notes................. S-3
United States Taxation............... S-13
Special Provisions Relating to
Foreign Currency Notes............. S-20
Plan of Distribution................. S-22
Issuing and Paying Agent............. S-23
Legal Opinions....................... S-23
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents
by Reference....................... 2
USX Corporation...................... 2
Ratio of Earnings to Fixed Charges... 4
Use of Proceeds...................... 4
Description of the Debt Securities... 4
Plan of Distribution................. 12
Validity of Securities............... 12
Experts.............................. 12
</TABLE>
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USX Corporation
$750,000,000
Medium-Term Notes,
Series C
----------------------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------------------
CS First Boston
Goldman, Sachs & Co.
Lehman Brothers
J.P. Morgan Securities Inc.
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
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