<PAGE> 1
Filed pursuant to Rule 424(b)(2)
PROSPECTUS SUPPLEMENT
(To Prospectus dated August 19, 1998)
$220,000,000
Brown-Forman Corporation
MEDIUM-TERM NOTES
------------------------
Due More Than Nine Months From Date of Issue
------------------------
Brown-Forman Corporation (the "Company") may offer from time to time its
Medium-Term Notes, which are issuable in one or more series. The Medium-Term
Notes offered by this Prospectus Supplement are offered at an aggregate initial
public offering price of up to $220,000,000, or the equivalent thereof in other
currencies, including composite currencies such as the European Currency Unit
(the "Specified Currency"). See "Important Currency Exchange Information." Such
aggregate offering price is subject to reduction as a result of the sale by the
Company of certain other Debt Securities. See "Plan of Distribution." The
interest rate on each Note will be either a fixed rate established by the
Company at the date of issue of such Note, which may be zero in the case of
certain Original Issue Discount Securities, or a floating rate as set forth
therein and specified in the applicable Pricing Supplement. A Fixed Rate Note
may pay a level amount in respect of both interest and principal amortized over
the life of the Note (an "Amortizing Note").
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Fixed Rate Note is payable each May 1 and November 1 and at maturity or
upon earlier redemption or repayment. Interest on each Floating Rate Note is
payable on the date set forth herein and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Amortizing
Notes will pay principal and interest semiannually each May 1 and November 1, or
quarterly each May 1, August 1, November 1 and February 1, and at maturity or
upon earlier redemption or repayment. Each Note will mature on any day more than
nine months from the date of issue, as set forth in the applicable Pricing
Supplement. See "Description of Notes." Unless otherwise specified in the
applicable Pricing Supplement, the Notes may not be redeemed by the Company or
the holder prior to maturity and will be issued in fully registered form in
denominations of $1,000 (or, in the case of Notes not denominated in U.S.
dollars, the equivalent thereof in the Specified Currency, rounded to the
nearest 1,000 units of the Specified Currency) or any amount in excess thereof
which is an integral multiple of $1,000 (or, in the case of Notes not
denominated in U.S. dollars, 1,000 units of the Specified Currency). Any terms
relating to Notes being denominated in foreign currencies or composite
currencies will be as set forth in the applicable Pricing Supplement. Each Note
will be represented either by a Global Security registered in the name of a
nominee of The Depository Trust Company, as Depositary (a "Global Note"), or by
a certificate issued in definitive form (a "Definitive Note"), as set forth in
the applicable Pricing Supplement. Interests in Global Securities representing
Global Notes will be shown on, and transfers thereof will be effected only
through records maintained by the Depositary (with respect to participants'
interests) and its participants. Global Notes will not be issuable as Definitive
Notes except under the circumstances described in the Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY SUPPLEMENT HERETO
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
Price to Agents' Proceeds to
Public(1) Commissions(2) Company(2)(3)
-------------- ----------------------- ----------------------------
<S> <C> <C> <C>
Per Note........................................ 100% .125%-.750% 99.875%-99.250%
Total(4)........................................ $220,000,000 $275,000-$1,650,000 $219,725,000-$218,350,000
</TABLE>
- ------------
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Company issues
any Note at a discount from or at a premium over its principal amount,
the Price to Public of any Note issued at a discount or premium will be
set forth in the applicable Pricing Supplement.
(2) The commission payable to an Agent for each Note sold through such Agent
shall range from .125% to .750% of the principal amount of such Note,
provided, however, that commissions with respect to Notes maturing in
thirty years or greater will be negotiated. The Company may also sell
Notes to an Agent, as principal at negotiated discounts, for resale to
investors and other purchasers.
(3) Before deducting expenses payable by the Company estimated at $75,000.
(4) Or the equivalent thereof in other currencies including composite
currencies.
------------------------
Offers to purchase the Notes are being solicited from time to time by Morgan
Stanley & Co. Incorporated, Goldman, Sachs & Co., Lehman Brothers Inc. and J.P.
Morgan Securities Inc. (individually, an "Agent," and collectively, the
"Agents"), on behalf of the Company. The Agents have agreed to use reasonable
efforts to solicit purchases of such Notes. The Company may also sell Notes to
an Agent acting as principal for its own account or otherwise, to be determined
by such Agent. No termination date for the offering of the Notes has been
established. The Company or an Agent may reject any order in whole or in part.
The Notes will not be listed on any securities exchange, and there can be no
assurance that the Notes offered hereby will be sold or that there will be a
secondary market for the Notes. See "Plan of Distribution."
------------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
J.P. MORGAN & CO.
August 27, 1998
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY
BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in U.S. dollars, and payments
of principal, premium, if any, and interest on the Notes will also be made in
U.S. dollars, unless the applicable Pricing Supplement provides that purchasers
are instead required to pay for the Notes in a Specified Currency, and/or that
payments of principal, premium, if any, and interest on such Notes will be made
in a Specified Currency. Currently, there are limited facilities in the United
States for the conversion of U.S. dollars into foreign currencies and vice
versa. In addition, most banks do not currently offer non-U.S. dollar
denominated checking or savings account facilities in the United States.
Accordingly, unless otherwise specified in a Pricing Supplement or unless
alternative arrangements are made, payment of principal, premium, if any, and
interest on Notes in a Specified Currency other than U.S. dollars will be made
to an account at a bank outside the United States. See "Description of Notes"
and "Foreign Currency Risks."
If the applicable Pricing Supplement provides for payments of principal of
and interest on a non-U.S. dollar denominated Note to be made in U.S. dollars or
for payments of principal of and interest on a U.S. dollar denominated Note to
be made in a Specified Currency other than U.S. dollars, the conversion of the
Specified Currency into U.S. dollars or U.S. dollars into the Specified
Currency, as the case may be, will be handled by the Exchange Rate Agent
identified in the Pricing Supplement (as defined below). Any Agent may act, from
time to time, as Exchange Rate Agent. The costs of such conversion will be borne
by the holder of a Note through deductions from such payments.
References herein to "U.S. dollars" or "U.S. $" or "$" are to the currency
of the United States of America.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
in the Prospectus, to which reference is hereby made. The particular terms of
the Notes sold pursuant to any pricing supplement (a "Pricing Supplement") will
be described therein. The terms and conditions set forth in "Description of
Notes" will apply to each Note unless otherwise specified in the applicable
Pricing Supplement and in such Note.
If any Note is not to be denominated in U.S. dollars, the applicable
Pricing Supplement will specify the currency or currencies, including composite
currencies such as the European Currency Unit ("ECU"), in which the principal,
premium, if any, and interest, if any, with respect to such Note are to be paid,
along with any other terms relating to the non-U.S. dollar denomination,
including exchange rates for the Specified Currency as against the U.S. dollar
at selected times during the last five years, and any exchange controls
affecting such Specified Currency. See "Foreign Currency Risks."
GENERAL
The Notes will be issued under the Indenture dated as of March 1, 1994 (the
"Indenture") between the Company and The First National Bank of Chicago, as
trustee (the "Trustee"). The Notes issued under the Indenture will constitute
one or more series under such Indenture. The Notes will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. The Notes may be
issued from time to time in an aggregate principal amount of up to $250,000,000
or the equivalent thereof in one or more foreign or composite currencies,
subject to reduction as a result of the sale by the Company of other Debt
Securities referred to in the accompanying Prospectus. Prior to the date of this
Prospectus Supplement, the Company issued $30,000,000 aggregate principal amount
of Notes. For the purpose of this Prospectus Supplement, (i)
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the principal amount of any Original Issue Discount Security (as defined below)
means the Issue Price (as defined below) of such Security and (ii) the principal
amount of any Note issued in a foreign currency or composite currency means the
U.S. dollar equivalent on the date of issue of the Issue Price of such Security.
The Notes will mature on any day more than nine months from the date of
issue, as set forth in the applicable Pricing Supplement. Except as may be
provided in the applicable Pricing Supplement, the Notes will be issued only in
fully registered form. Unless otherwise provided in the applicable Pricing
Supplement, Notes will be denominated in Authorized Denominations (as defined
below).
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a Global Note or a Definitive Note. Except as set
forth in the Prospectus under "Description of Debt Securities -- Book Entry Debt
Securities," Global Notes will not be issuable as Definitive Notes. The laws of
some states may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to own, transfer or pledge beneficial interests in Global
Securities. See "Book-Entry System" below.
The Notes may be presented for payment of principal and interest, transfer
of the Notes will be registrable and the Notes will be exchangeable at the
agency in The City of New York, maintained by the Company for such purpose;
provided that Global Notes will be exchangeable only in the manner and to the
extent set forth in the Prospectus under "Description of Debt
Securities -- Book-Entry Debt Securities." On the date hereof, the agent for the
payment, transfer and exchange of the Notes (the "Paying Agent") is First
Chicago Trust Company of New York, acting through its office at 14 Wall Street,
New York, NY 10005.
The applicable Pricing Supplement will specify the price (the "Issue
Price") of each Note to be sold pursuant thereto (unless such Note is to be sold
at 100% of its principal amount), the interest rate or interest rate formula,
maturity, currency or composite currency and principal amount and any other
terms on which each Note will be issued.
As used herein, the following terms shall have the meanings set forth
below:
"Authorized Denominations" means, unless otherwise provided in the
applicable Pricing Supplement, (i) with respect to Notes denominated in
U.S. dollars, $1,000 or any amount in excess thereof which is an integral
multiple of $1,000 and (ii) with respect to Notes denominated in a
Specified Currency, the equivalent of $1,000 (rounded to an integral
multiple of 1,000 units of such Specified Currency), or any amount in
excess thereof which is an integral multiple of 1,000 units of such
Specified Currency, as determined by reference to the noon dollar buying
rate in New York City for cable transfers of such Specified Currency
published by the Federal Reserve Bank of New York (the "Market Exchange
Rate") on the Business Day (as defined below) immediately preceding the
date of issuance; provided, however, that in the case of ECUs, the Market
Exchange Rate shall be the rate of exchange determined by the Commission of
the European Communities (or any successor thereto) as published in the
Official Journal of the European Communities, or any successor publication,
on the Business Day immediately preceding the date of issuance.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New
York and (i) with respect to LIBOR Notes (as defined below), is also a
London Banking Day, (ii) with respect to Notes denominated in a Specified
Currency other than U.S. dollars, Australian dollars, euros or ECUs, in the
principal financial center of the country of the Specified Currency, (iii)
with respect to Notes denominated in Australian dollars, in Sydney, (iv)
with respect to Notes denominated in ECUs, that is not a non-ECU clearing
day, as determined by the ECU Banking Association in Paris, and (v) with
respect to Notes denominated in euros, a day on which the Trans-European
Automated Real-Time Gross Settlement Express Transfer System ("TARGET") is
operating.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
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"London Banking Day" means any day on which dealings in deposits in
the Index Currency are transacted in the London interbank market.
"Original Issue Discount Security" means any Note that provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to the
Indenture.
The "Record Date" with respect to any Interest Payment Date, unless
otherwise indicated in the applicable Pricing Supplement, (i) for Fixed
Rate Notes, shall be the April 15 or October 15 directly preceding such
Interest Payment Date and (ii) for Floating Rate Notes, shall be the date
15 calendar days prior to such Interest Payment Date, whether or not such
date shall be a Business Day.
PAYMENT CURRENCY
If the applicable Pricing Supplement provides for payments of interest and
principal on a non-U.S. dollar denominated Note to be made, at the option of the
holder of such Note, in U.S. dollars, conversion of the Specified Currency into
U.S. dollars will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to the holders of Notes and at which the applicable
dealer commits to execute a contract. If such bid quotations are not available,
payments will be made in the Specified Currency. All currency exchange costs
will be borne by the holders of Notes by deductions from such payments.
Except as set forth below, if the principal of, premium, if any, or
interest on, any Note is payable in a Specified Currency other than U.S. dollars
and such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances beyond
the control of the Company or is no longer used by the government of the country
issuing such currency or for the settlement of transactions by public
institutions within the international banking community, then the Company will
be entitled to satisfy its obligations to holders of the Notes by making such
payments in U.S. dollars on the basis of the Market Exchange Rate on the date of
such payment or, if the Market Exchange Rate is not available on such date, as
of the most recent practicable date. Any payment made under such circumstances
in U.S. dollars where the required payment is in a Specified Currency other than
U.S. dollars will not constitute an Event of Default.
If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or are no longer used in the European Monetary
System (unless replaced by the euro), then all payments in respect of such Note
shall be made in U.S. dollars until ECUs are again available or so used. The
amount of each payment in U.S. dollars shall be computed on the basis of the
equivalent of the ECU in U.S. dollars, determined as described below, as of the
second Business Day prior to the date on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date shall be
determined by the Company or the Exchange Rate Agent on the following basis. The
component currencies of the ECU for this purpose (the "Components") shall be the
currency amounts that were components of the ECU as of the last date on which
the ECU was used in the European Monetary System. The equivalent of the ECU in
U.S. dollars shall be calculated by aggregating the U.S. dollar equivalents of
the Components. The U.S. dollar equivalent of each of the Components shall be
determined by the Company or the Exchange Rate Agent on the basis of the most
recently available Market Exchange Rates for such Components.
If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that currency as a Component shall be
divided or multiplied in the same proportion. If two or more Components are
consolidated into a single currency, the amounts of those currencies as
Components shall be replaced by an amount in such single currency equal to the
sum of the appropriate amounts of the consolidated component currencies
expressed in such single currency. If any Component is divided into two or more
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currencies, the amount of the original component currency shall be replaced by
the appropriate amounts of such two or more currencies, the sum of which shall
be equal to the amount of the original component currency.
All determinations referred to above made by the Company or its agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
EUROPEAN MONETARY UNION
Special Provisions Relating to Notes Denominated in ECU
The value of the ECU, in which the Notes may be denominated or may be
payable, is equal to the value of the ECU that is from time to time used as the
unit of account of the European Community (the "EC") and which is at the date
hereof valued on the basis of specified amounts of the currencies of 12 of the
15 member states of the EC. Under Article 109G of the Treaty, the currency
composition of the ECU may not be changed. Other changes to the ECU may be made
by the EC in conformity with EC law, in which event the ECU will change
accordingly. The Treaty contemplates that European economic and monetary union
("EMU") will occur in three stages. The Treaty provides that the third stage of
EMU will start on January 1, 1999, and on that date the value of the ECU as
against the currencies of member states participating in the third stage will be
irrevocably fixed and the ECU will become a currency in its own right. On June
17, 1997, the EC adopted Council Regulation (EC) No. 1103/97, which recites that
the name of that currency will be the euro and provides that, in accordance with
the Treaty, references to the ECU will be replaced by references to the euro at
the rate of one euro for one ECU. The euro will be divided into one hundred
cents and references in this section to the "euro" and the "cent" are to such
new currency adopted pursuant to the Treaty. From the start of the third stage
of EMU, all payments in respect of the Notes denominated or payable in ECU will
be payable in euro at the rate of one euro for one ECU. In such circumstances,
the following provisions for payment in a component currency will not apply.
On May 2, 1998 the Council of the EU decided that Austria, Belgium,
Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal
and Spain will adopt the euro on January 1, 1999 (the first day of the Third
Stage of EMU). Bilateral conversion rates between currencies of such countries
were also announced by the EU governments and central banks. Each of the
relevant central banks has committed to ensure, by appropriate market action,
that the market exchange rates on December 31, 1998 will be equal to the
announced rates, which will be used to fix the conversion rates into the euro on
that same date. After December 31, 1998, there will be a three-year transition
period during which currencies of EMU member states will continue to exist, but
as subdivisions of the euro. On January 1, 2002, euro banknotes and coins will
be introduced. Thereafter, the members' banknotes and coins will cease to be
legal tender.
Alternative Calculations for Payment of Notes Denominated in ECU or in a
Chosen Currency
With respect to each due date for the payment of principal of, or interest
on, the Notes on or after the first business day in Brussels on which the ECU
ceases to be used as the unit of account of the EC and has not been replaced by
the euro, the Company shall choose a substitute currency (the "Chosen
Currency"), which may be any currency which was, on the last day on which the
ECU was used as the unit of account of the EC, a component currency of the ECU
or U.S. dollars, in which all payments due on or after that date with respect to
the Notes and coupons shall be made. Notice of the Chosen Currency so selected
shall, where practicable, be published in the manner described in "Optional
Redemption" below. The amount of each payment in such Chosen Currency shall be
computed on the basis of the equivalent of the ECU in that currency, determined
as described below, as of the fourth business day in Brussels prior to the date
on which such payment is due.
On the first business day in Brussels on which the ECU ceases to be used as
the unit of account of the EC and has not been replaced by the euro, the Company
shall select a Chosen Currency in which all payments with respect to Notes and
coupons having a due date prior thereto but not yet presented for payment are to
be made. Notice of the Chosen Currency so selected shall, where practicable, be
published in the manner described in "Optional Redemption" below. The amount of
each payment in such Chosen Currency shall be
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computed on the basis of the equivalent of the ECU in that currency, determined
as described below, as of such first business day.
The equivalent of the ECU in the relevant Chosen Currency as of any date
(the "Day of Valuation") shall be determined by, or on behalf of, the Exchange
Rate Agent on the following basis. The amounts and components composing the ECU
for this purpose (the "Components") shall be the amounts and components that
composed the ECU as of the last date on which the ECU was used as the unit of
account of the EC. The equivalent of the ECU in the Chosen Currency shall be
calculated by, first, aggregating the U.S. dollar equivalents of the Components,
and then, in the case of a Chosen Currency other than U.S. dollars, using the
rate used for determining the U.S. dollar equivalent of the Components in the
Chosen Currency as set forth below, calculating the equivalent in the Chosen
Currency of such aggregate amount in U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be determined
by, or on behalf of, the Exchange Rate Agent on the basis of the middle spot
delivery quotations prevailing at 2:30 P.M., Brussels time, on the Day of
Valuation, as obtained by, or on behalf of, the Exchange Rate Agent from one or
more major banks, as selected by the Company, in the country of issue of the
component currency in question.
If for any reason no direct quotations are available for a Component as of
a Day of Valuation from any of the banks selected for this purpose, in computing
the U.S. dollar equivalent of such Component, the Exchange Rate Agent shall
(except as provided below) use the most recent direct quotations for such
Component obtained by it or on its behalf, provided that such quotations were
prevailing in the country of issue not more than two Business Days before such
Day of Valuation. If such most recent quotations were so prevailing in the
country of issue more than two Business Days before such Day of Valuation, the
Exchange Rate Agent shall determine the U.S. dollar equivalent of such Component
on the basis of cross rates derived from the middle spot delivery quotations for
such component currency and for the U.S. dollar prevailing at 2:30 P.M.,
Brussels time, on such Day of Valuation, as obtained by, or on behalf of, the
Exchange Rate Agent from one or more major banks, as selected by the Company, in
a country other than the country of issue of such component currency.
Notwithstanding the foregoing, the Exchange Rate Agent shall determine the U.S.
dollar equivalent of such Component on the basis of such cross rates if the
Company or such agent judges that the equivalent so calculated is more
representative than the U.S. dollar equivalent calculated as provided in the
first sentence of this paragraph. Unless otherwise specified by the Company, if
there is more than one market for dealing in any Component currency by reason of
foreign exchange regulations or for any other reason, the market to be referred
to in respect of such currency shall be that upon which a nonresident issuer of
securities denominated in such currency would purchase such currency in order to
make payments in respect of such securities.
Payments in the Chosen Currency will be made at the specified office of a
Paying Agent in the country of the Chosen Currency or, if none, or at the option
of the holder, at the specified office of any Paying Agent either by a check
drawn on, or by transfer to an account maintained by the holder with, a bank in
the principal financial center of the country of the Chosen Currency.
All determinations referred to above made by, or on behalf of, the Company,
or by, or on behalf of, the Exchange Rate Agent shall be at such entity's sole
discretion and shall, in the absence of manifest error, be conclusive for all
purposes and binding on holders of Notes and coupons.
Special Provisions Relating to the Payments on Notes Denominated in the
Currencies of EC Member States
If, pursuant to the Treaty, the euro is substituted for all or some of the
currencies of the member countries of the EC, the Company may at its option (or
shall, if so required by applicable law) without the consent of the holders of
the affected Notes effect the payment of principal of, premium, if any, or
interest on, the Notes denominated in such currencies in euro in conformity with
legally applicable measures taken pursuant to, or by virtue of, the Treaty.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether
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or not the date of maturity, redemption or repayment is an Interest Payment
Date) will be payable to the person to whom principal is payable. The initial
interest payment on a Note will be made on the first Interest Payment Date
falling after the date the Note is issued; provided, however, that payments of
interest (or, in the case of an Amortizing Note, principal and interest) on a
Note issued less than 15 calendar days before an Interest Payment Date will be
paid on the next succeeding Interest Payment Date to the holder of record on the
Record Date with respect to such succeeding Interest Payment Date, unless
otherwise specified in the applicable Pricing Supplement.
U.S. dollar payments of interest, other than interest payable at maturity
(or on the date of redemption or repayment, if a Note is redeemed or repaid by
the Company prior to maturity), will be made by check mailed to the address of
the person entitled thereto as shown on the Note register. U.S. dollar payment
of principal, premium, if any, and interest upon maturity, redemption or
repayment will be made in immediately available funds against presentation and
surrender of the Note. Notwithstanding the foregoing, (a) the Depositary, as
holder of Global Notes, shall be entitled to receive payments of interest by
wire transfer of immediately available funds and (b) a holder of $10,000,000 (or
the equivalent) or more in aggregate principal amount of Definitive Notes having
the same Interest Payment Date shall be entitled to receive payments of interest
by wire transfer of immediately available funds upon written request to the
Paying Agent, provided such request is received not later than 15 calendar days
prior to the applicable Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of Global Notes denominated in a Specified Currency electing to
receive payments of principal or any premium or interest in a currency other
than U.S. dollars must notify the participant through which its interest is held
on or prior to the applicable Record Date, in the case of a payment of interest,
and on or prior to the sixteenth day prior to maturity, in the case of principal
or premium of such beneficial owner's election to receive all or a portion of
such payment in a Specified Currency. Such participant must notify the
Depositary (as defined below) of such election on or prior to the third Business
Day after such Record Date. The Depositary will notify the Paying Agent of such
election on or prior to the fifth Business Day after such Record Date. If
complete instructions are received by the participant and forwarded by the
participant to the Depositary, and by the Depositary to the Paying Agent, on or
prior to such dates, the beneficial owner will receive payments in the Specified
Currency by wire transfer of immediately available funds to an account
maintained by the payee with a bank located outside the United States; otherwise
the beneficial owner will receive payments in U.S. dollars.
Certain Notes, including Original Issue Discount Securities, may be
considered to be issued with original issue discount, which must be included in
income for United States federal income tax purposes at a constant rate. See
"United States Taxation -- Tax Consequences to Holders -- Discount Notes" below.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Security is declared to be due and
payable immediately as described under "Description of Debt Securities -- Events
of Default" in the Prospectus, the amount of principal due and payable with
respect to such Note shall be limited to the aggregate principal amount of such
Note multiplied by the sum of its Issue Price (expressed as a percentage of the
aggregate principal amount) plus the original issue discount amortized from the
date of issue to the date of declaration, which amortization shall be calculated
using the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of declaration). Special
considerations applicable to any such Notes will be set forth in the applicable
Pricing Supplement.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof, except as described below under
"Extension of Maturity," until the principal thereof is paid or made available
for payment. Unless otherwise specified in the applicable Pricing Supplement,
such interest will be computed on the basis of a 360-day year of twelve 30-day
months. Unless otherwise specified in the applicable Pricing Supplement,
payments of interest on Fixed Rate Notes other than Amortizing Notes will be
made semiannually on each May 1 and November 1 and at maturity or upon any
earlier redemption or repayment. Unless otherwise specified in the applicable
Pricing Supplement, payments of principal and interest on Amortizing Notes,
which are securities on which payments of principal and interest are made in
equal installments over the life of the security, will be made either quarterly
on each May 1, August 1, November 1
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and February 1 or semiannually on each May 1 and November 1, as set forth in the
applicable Pricing Supplement, and at maturity or upon any earlier redemption or
repayment. Payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in respect
of each Amortizing Note will be provided to the original purchaser and will be
available, upon request, to subsequent holders.
If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, the interest payment shall be made on the next day that is a
Business Day, and no interest on such payment shall accrue for the period from
and after the Interest Payment Date. If the maturity (or date of redemption or
repayment) of any Fixed Rate Note falls on a day that is not a Business Day, the
payment of interest and principal (and premium, if any) will be made on the next
succeeding Business Day, and no interest on such payment shall accrue for the
period from and after the maturity date (or date of redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from
and including the date of issue or from and including the last date in respect
of which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be. The interest rates the Company will agree to pay
on newly issued Fixed Rate Notes are subject to change without notice by the
Company from time to time, but no such change will affect any Fixed Rate Notes
theretofore issued or that the Company has agreed to issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate determined
by reference to an interest rate basis or formula (the "Base Rate"), which may
be adjusted by a Spread and/or Spread Multiplier (each as defined below). The
applicable Pricing Supplement will designate one or more of the following Base
Rates as applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate
Note"), (b) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the
Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"),
(e) the Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury
Rate Note"), (g) the CMT Rate (a "CMT Rate Note") or (h) such other Base Rate or
interest rate formula as is set forth in such Pricing Supplement and in such
Floating Rate Note. The "Index Maturity" for any Floating Rate Note is the
period of maturity of the instrument or obligation from which the Base Rate is
calculated and will be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate for such Floating
Rate Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or ceiling,
on the rate of interest which may accrue during any interest period ("Maximum
Interest Rate"); and (ii) a minimum limitation, or floor, on the rate of
interest which may accrue during any interest period ("Minimum Interest Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by United States law of general application. Under
current New York law, the maximum rate of interest, subject to certain
exceptions, for any loan in an amount less than $250,000 is 16% and for any loan
in the amount of $250,000 or more but less than $2,500,000 is 25% per annum on a
simple interest basis. These limits do not apply to loans of $2,500,000 or more.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
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Supplement, the Interest Reset Date will be, in the case of Floating Rate Notes
which reset daily, each Business Day; in the case of Floating Rate Notes (other
than Treasury Rate Notes) which reset weekly, the Wednesday of each week; in the
case of Treasury Rate Notes which reset weekly, the Tuesday of each week, except
as provided below; 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 (a) the interest rate in effect from the date of issue to the
first Interest Reset Date with respect to a Floating Rate Note will be the
initial interest rate set forth in the applicable Pricing Supplement (the
"Initial Interest Rate") and (b) unless otherwise specified in the applicable
Pricing Supplement, the interest rate in effect for the ten calendar days
immediately prior to maturity, redemption or repayment will be that in effect on
the tenth calendar day preceding such maturity, redemption or repayment date. If
any Interest Reset Date for any Floating Rate Note would otherwise be a day that
is not a Business Day, such Interest Reset Date shall be postponed to the next
succeeding Business Day, except that in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Business Day.
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset Date,
on the third Wednesday of each month or on the third Wednesday of March, June,
September and December, as specified in the applicable Pricing Supplement; (ii)
in the case of Floating Rate Notes with a quarterly Interest Reset Date, on the
third Wednesday of March, June, September and December; (iii) in the case of
Floating Rate Notes with a semiannual Interest Reset Date, on the third
Wednesday of the two months specified in the applicable Pricing Supplement; and
(iv) in the case of Floating Rate Notes with an annual Interest Reset Date, on
the third Wednesday of the month specified in the applicable Pricing Supplement.
If any Interest Payment Date for any Floating Rate Note would fall on a day that
is not a Business Day with respect to such Floating Rate Note, such Interest
Payment Date will be postponed to the following day that is a Business Day with
respect to such Floating Rate Note, except that, in the case of a LIBOR Note, if
such Business Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding day that is a Business Day with
respect to such LIBOR Note. If the maturity date or any earlier redemptions or
repayment date of a Floating Rate Note would fall on a day that is not a
Business Day, the payment of principal, premium, if any, and interest will be
made on the next succeeding Business Day, and no interest on such payment shall
accrue for the period from and after such maturity, redemption or repayment
date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes (except Floating Rate Notes on which interest
is reset daily or weekly) shall be the amount of interest accrued from and
including the date of issue or from and including the last date to which
interest has been paid to, but excluding, the Interest Payment Date or maturity
date or date of redemption or repayment. In the case of a Floating Rate Note on
which interest is reset daily or weekly, interest payments shall be, unless
otherwise specified in the applicable Pricing Supplement, the amount of interest
accrued from and including the date of issue or from but excluding the last
Record Date to which interest has been paid, as the case may be, to and
including the Record Date immediately preceding such Interest Payment Date,
except that at maturity or earlier redemption or repayment, the interest payable
will include interest accrued to, but excluding, the maturity, redemption or
repayment date, as the case may be.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate Notes or by the
actual number of days in the year, in the case of Treasury Rate Notes and CMT
Rate Notes. All percentages
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used in or resulting from any calculation of the rate of interest on a Floating
Rate Note will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward, and all dollar amounts used in or resulting from such calculation on
Floating Rate Notes will be rounded to the nearest cent, with one-half cent
rounded upward. The interest rate in effect on any Interest Reset Date will be
the applicable rate as reset on such date. The interest rate applicable to any
other day is the interest rate from the immediately preceding Interest Reset
Date (or, if none, the Initial Interest Rate).
Unless otherwise stated in the applicable Pricing Supplement, the
calculation agent (the "Calculation Agent") with respect to any issue of
Floating Rate Notes shall be The First National Bank of Chicago. Upon the
request of the holder of any Floating Rate Note, the Calculation Agent will
provide the interest rate then in effect and, if determined, the interest rate
that will become effective on the next Interest Reset Date with respect to such
Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Rate for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes and Prime Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note will be the day of the week in which such
Interest Reset Date falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, but such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Interest Determination Date pertaining to the Interest
Reset Date occurring in the next succeeding week. If an auction falls on a day
that is an Interest Reset Date, such Interest Reset Date will be the next
following Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest Payment
Date or Maturity Date, as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)," or, if
not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" (the "Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date for certificates of deposit in the denomination of
$5,000,000 with a remaining maturity closest to the Index Maturity designated in
the Pricing Supplement of three leading
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nonbank dealers in negotiable U.S. dollar certificates of deposit in The City of
New York selected by the Calculation Agent for negotiable certificates of
deposit of major United States money center banks; provided however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the CD Rate in effect for the applicable period will be the same as
the CD Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the rate of interest payable on the CD Rate
Notes for which such CD Rate is being determined shall be the Initial Interest
Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement, as such rate shall be published in H.15(519), under the heading
"Commercial Paper -- Nonfinancial." In the event that such rate is not published
by 9:00 A.M., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, then the Commercial Paper Rate shall be the Money
Market Yield of the rate on such Interest Determination Date for commercial
paper of the specified Index Maturity as published in Composite Quotations under
the heading "Commercial Paper." If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet available in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate shall be the Money Market Yield of
the arithmetic mean of the offered rates as of 11:00 A.M., New York City time,
on such Interest Determination Date of three leading dealers of commercial paper
in The City of New York selected by the Calculation Agent for commercial paper
of the specified Index Maturity, placed for an industrial issuer whose bond
rating is "AA", or the equivalent, from a nationally recognized rating agency;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting offered rates as mentioned in this sentence, the
Commercial Paper Rate in effect for the applicable period will be the same as
the Commercial Paper Rate for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the rate of interest payable on
the Commercial Paper Rate Notes for which such Commercial Paper Rate is being
determined shall be the Initial Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<C> <C> <S>
D X 360
Money Market Yield = -------------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Index Maturity.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Federal Funds Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date, the
rate on such date for Federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)," or, if not so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Federal Funds Rate will be the rate on such Interest Determination Date as
published in the Composite Quotations under the heading "Federal Funds/Effective
Rate." If such rate is not yet published in either H.15(519) or the Composite
Quotations by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the
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Federal Funds Rate for such Interest Determination Date will be calculated by
the Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight Federal funds, as of 9:00 A.M., New York City time, on
such Interest Determination Date, arranged by three leading brokers of Federal
funds transactions in The City of New York selected by the Calculation Agent;
provided, however, that if the brokers selected as aforesaid by the Calculation
Agent are not quoting as set forth above, the Federal Funds Rate in effect for
the applicable period will be the same as the Federal Funds Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of Interest payable on the Federal Funds Rate Notes for
which such Federal Funds Rate is being determined shall be the Initial Interest
Rate).
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
for each Interest Determination Date will be determined by the Calculation Agent
as follows:
(i) As of the Interest Determination Date, LIBOR will be either: (a)
if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified Designated LIBOR
Page (as defined below) by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on such Interest Determination Date, that appear on
the Designated LIBOR Page as of 11:00 A.M., London time, on that Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement, the rate for deposits in the Index Currency having the Index
Maturity designated in the applicable Pricing Supplement, commencing on
such Interest Determination Date, that appears on the Designated LIBOR Page
as of 11:00 A.M., London time, on that Interest Determination Date. If
fewer than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement) or no rate appears (if "LIBOR Telerate" is
specified in the applicable Pricing Supplement), LIBOR in respect of the
related Interest Determination Date will be determined as if the parties
had specified the rate described in clause (ii) below.
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement) or no rate appears (if "LIBOR Telerate" is
specified in the applicable Pricing Supplement), the Calculation Agent will
request the principal London offices of each of four major reference banks
in the London interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for deposits in
the Index Currency for the period of the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Banking Day
immediately following such Interest Determination Date, to prime banks in
the London interbank market at approximately 11:00 A.M., London time, on
such Interest Determination Date and in a principal amount of not less than
$1,000,000 (or the equivalent in the Index Currency, if the Index Currency
is not the U.S. dollar) that is representative for a single transaction in
such Index Currency in such market at such time. If at least two such
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
A.M. (or such other time specified in the applicable Pricing Supplement),
in the applicable principal financial center for the country of the Index
Currency on such Interest Determination Date, by three major banks in such
principal financial center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
designated in the applicable Pricing Supplement and in a principal amount
of not less than $1,000,000 commencing on the second London Banking Day
immediately following such Interest Determination Date (or the equivalent
in the
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Index Currency, if the Index Currency is not the U.S. dollar) that is
representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
in effect for the applicable period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the LIBOR Notes for
which such LIBOR is being determined shall be the Initial Interest Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, Page 3750) had been specified.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set forth
in H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate
is not yet published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be the arithmetic mean of the rates of interest publicly
announced by each bank named on the Reuters Screen USPRIME1 Page (as defined
below) as such bank's prime rate or base lending rate as in effect for such
Interest Determination Date as quoted on the Reuters Screen USPRIME1 Page on
such Interest Determination Date, or, if fewer than four such rates appear on
the Reuters Screen USPRIME1 Page for such Interest Determination Date, the rate
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business on
such Interest Determination Date by at least two of the three major money center
banks in The City of New York selected by the Calculation Agent from which
quotations are requested. If fewer than two quotations are provided, the Prime
Rate shall be calculated by the Calculation Agent and shall be determined as the
arithmetic mean on the basis of the prime rates in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any State thereof, in each case
having total equity capital of at least $500 million and being subject to
supervision or examination by federal or state authority, selected by the
Calculation Agent to quote such rate or rates; provided, however, that if the
banks or trust companies selected as aforesaid by the Calculation Agent are not
quoting rates as set forth above, the "Prime Rate" in effect for such Interest
Reset Period will be the same as the Prime Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest payable on the Prime Rate Notes for which such Prime Rate is being
determined shall be the Initial Interest Rate). "Reuters Screen USPRIME1 Page"
means the display designated as Page "USPRIME1" on the Reuters Monitor Money
Rates Service (or such other page as may replace the USPRIME1 Page on that
service for the purpose of displaying prime rates or base lending rates of major
United States banks).
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the
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Maximum Interest Rate, if any) specified in the Treasury Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the rate
for the auction held on such date of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement, as published in H.15(519) under the heading "Treasury
Bills -- auction average (investment)" or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination Date
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury Bills having the Index Maturity designated in the applicable Pricing
Supplement are not published or reported as provided above by 3:00 P.M., New
York City time, on such Calculation Date or if no such auction is held on such
Interest Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) calculated using the arithmetic mean of the secondary
market bid rates, as of approximately 3:30 P.M., New York City time, on such
Interest Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement; provided, however, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting bid rates as mentioned in
this sentence, the Treasury Rate for such Interest Reset Date will be the same
as the Treasury Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on the
Treasury Rate Notes for which the Treasury Rate is being determined shall be the
Initial Interest Rate).
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed for
the Index Maturity designated in such CMT Rate Note on the designated CMT
Telerate Page (as defined below) under the caption "Treasury Constant
Maturities -- Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 p.m." under the column for the Designated CMT Maturity Index (as defined
below) for (i) if the Designated CMT Telerate Page is 7055, the rate on such
Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the week or the month, as applicable, ended immediately preceding the week
in which the related Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 P.M., New
York City time, on the related Calculation Date, the CMT Rate for such Interest
Determination Date will be such Treasury Constant Maturity rate of the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or if not published by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for such Interest
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the Interest Determination Date with respect
to the related Interest Reset Period as may then be published by either the
Board of Governors of the Federal Reserve System or the United States Department
of the Treasury that the Calculation Agent determines to be comparable to the
rate formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for the Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market closing
offer prices as of approximately 3:30 P.M., New York City time, on the Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a "Reference
Dealer") in The City of New York (which may include the Agent or its
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affiliates) selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent, after consultation with the Company, and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury notes quotations, the CMT
Rate for such Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity based on the arithmetic mean of the
secondary market offer prices as of approximately 3:30 P.M., New York City time,
on the Interest Determination Date of three Reference Dealers in The City of New
York (from five such Reference Dealers selected by the Calculation Agent, after
consultation with the Company, and eliminating the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest), for Treasury notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100,000,000. If three or four (and
not five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated; provided,
however, that if fewer than three Reference Dealers selected by the Calculation
Agent are quoting as described herein, the CMT Rate for such Interest Reset Date
will be the same as the CMT Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of the interest
payable on the CMT Rate Notes for which the CMT Rate is being determined shall
be the Initial Interest Rate). If two Treasury notes with an original maturity
as described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the Treasury
note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in an applicable Pricing Supplement (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519)). If no such page is
specified in the applicable Pricing Supplement, the Designated CMT Telerate Page
shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in an applicable Pricing Supplement with respect to which the CMT Rate
will be calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be two years.
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate (calculated
with reference to a Base Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Renewable Notes and in the applicable Pricing Supplement.
The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates in
May and November in each year (unless different Interest Payment Dates are
specified in the applicable Pricing Supplement) (each such Interest Payment
Date, an "Election Date"), the maturity of the Renewable Notes will be extended
to the Interest Payment Date occurring twelve months after such Election Date,
unless the holder thereof elects to terminate the automatic extension of the
maturity of the Renewable Notes or of any portion thereof having a principal
amount of $1,000 or any multiple of $1,000 in excess thereof by delivering a
notice of such effect to the Paying Agent not less than nor more than a number
of days to be specified in the applicable Pricing Supplement prior to such
Election Date. Such Option may be exercised with respect to less than the entire
principal amount of the Renewable Notes; provided that the principal amount for
which such Option is not exercised is at least $1,000 or any larger amount that
is an integral
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multiple of $1,000. Notwithstanding the foregoing, the maturity of the Renewable
Notes may not be extended beyond the Final Maturity Date, as specified in the
applicable Pricing Supplement (the "Final Maturity Date"). If the holder elects
to terminate the automatic extension of the maturity of any portion of the
principal amount of the Renewable Notes and such election is not revoked as
described below, such portion will become due and payable on the Interest
Payment Date falling six months (unless another period is specified in the
applicable Pricing Supplement) after the Election Date prior to which the holder
made such election.
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $1,000 or
any multiple of $1,000 in excess thereof by delivering a notice to such effect
to the Paying Agent on any day following the effective date of the election to
terminate the automatic extension of maturity and prior to the date 15 days
before the date on which such portion would otherwise mature. Such a revocation
may be made for less than the entire principal amount of the Renewable Notes for
which the automatic extension of maturity has been terminated; provided that the
principal amount of the Renewable Notes for which the automatic extension of
maturity has been terminated and for which such a revocation has not been made
is at least $1,000 or any larger amount that is an integral multiple of $1,000.
Notwithstanding the foregoing, a revocation may not be made during the period
from and including a Record Date to but excluding the immediately succeeding
Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent holder.
The Renewable Notes may be redeemed in whole or in part at the option of
the Company on the Interest Payment Dates in each year specified in the
applicable Pricing Supplement, commencing with the Interest Payment Date
specified in the applicable Pricing Supplement, at a redemption price as stated
in the applicable Pricing Supplement, together with accrued and unpaid interest
to the date of redemption. Notwithstanding anything to the contrary in this
Prospectus Supplement, notice of redemption will be provided by mailing a notice
of such redemption to each holder by first class mail, postage prepaid, at least
180 days prior to the date fixed for redemption.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors
(the "Indexed Notes"), as indicated in the applicable Pricing Supplement.
Holders of Indexed Notes may receive a principal amount at maturity that is
greater than or less than the face amount of such Notes depending upon the
fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value, rate
or price of the specified index and the face amount of the Indexed Note and
certain additional United States federal tax considerations will be described in
the applicable Pricing Supplement.
EXTENSION OF MATURITY
The Pricing relating to each Note (other than an Amortizing Note) will
indicate whether the Company has the Option to extend the maturity of such Note
for one or more periods of one or more whole years (each an "Extension Period")
up to but not beyond the date (the "Final Maturity Date") set forth in such
Pricing Supplement. If the Company has such option with respect to any such Note
(an "Extendible Note"), the following procedures will apply, unless modified as
set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to an Extendible Note by
notifying the Paying Agent of such exercise at least 45 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has already
been extended, prior to the maturity date then in effect (an "Extended Maturity
Date"). No later than 38 days
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prior to the Original Maturity Date or an Extended Maturity Date, as the case
may be (each, a "Maturity Date"), the Paying Agent will mail to the holder of
such Note a notice (the "Extension Notice") relating to such Extension Period,
by first class mail, postage prepaid, setting forth (a) the election of the
Company to extend the maturity of such Note; (b) the new Extended Maturity Date;
(c) the interest rate applicable to the Extension Period (which, in the case of
a Floating Rate Note, will be calculated with reference to a Base Rate and the
Spread and/or Spread Multiplier, if any); and (d) the provisions, if any, for
redemption during the Extension Period, including the date or dates on which,
the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing by the Paying
Agent of an Extension Notice to the holder of an Extendible Note, the maturity
of such Note shall be extended automatically, and, except as modified by the
Extension Notice and as described in the next paragraph, such Note will have the
same terms it had prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 A.M., New York City
time, on the thirtieth calendar day prior to the Maturity Date then in effect
for an Extendible Note (or, if such day is not a Business Day, not later than
10:00 A.M., New York City time, on the immediately succeeding Business Day), the
Company may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period by causing the Paying Agent to send notice of such higher
interest rate (or, in the case of a Floating Rate Note, a higher Spread and/or
Spread Multiplier, if any) to the holder of such Note by first class mail,
postage prepaid, or by such other means as shall be agreed between the Company
and the Paying Agent. Such notice shall be irrevocable. All Extendible Notes
with respect to which the Maturity Date is extended in accordance with an
Extension Notice will bear such higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period, whether or not tendered for repayment.
If the Company elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Company to repay such
Note on the Maturity Date then in effect at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date. In order for
an Extendible Note to be repaid on such Maturity Date, the holder thereof must
follow the procedures set forth below under "Repayment at the Noteholders'
Option; Repurchase" for optional repayment, except that the period for delivery
of such Note or notification to the Paying Agent shall be at least 25 but not
more than 35 days prior to the Maturity Date then in effect and except that a
holder who has tendered an Extendible Note for repayment pursuant to an
Extension Notice may, by written notice to the Paying Agent, revoke any such
tender for repayment until 3:00 P.M., New York City time, on the twentieth
calendar day prior to the Maturity Date then in effect (or, if such day is not a
Business Day, until 3:00 P.M., New York City time, on the immediately succeeding
Business Day).
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Global Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, Maturity Date and other
terms, if any, will be represented by one or more Global Securities, and all
Floating Rate Global Notes having the same Issue Date, Initial Interest Rate,
Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity, Spread
and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, maturity date and other terms, if any, will be
represented by one or more Global Securities. Each Global Security representing
Global Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York (the "Depositary"), and registered in the name of a
nominee of the Depositary. Global Notes will not be exchangeable for Definitive
Notes, except under the circumstances described in the Prospectus under
"Description of Debt Securities -- Book-Entry Debt Securities." Definitive Notes
will not be exchangeable for Global Notes and will not otherwise be issuable as
Global Notes.
A further description of the Depositary's procedures with respect to Global
Securities representing Global Notes is set forth in the Prospectus under
"Description of Debt Securities -- Book-Entry Debt Securities." The Depositary
has confirmed to the Company, each Agent and the Trustee that it intends to
follow such procedures.
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OPTIONAL REDEMPTIONS
The Pricing Supplement will indicate that the Notes cannot be redeemed
prior to maturity or will indicate the terms on which the Notes will be
redeemable at the option of the Company. Notice of redemption will be provided
by mailing a notice of such redemption to each holder by first class mail,
postage prepaid, at least 30 days and not more than 60 days prior to the date
fixed for redemption to the respective address of each holder as that address
appears upon the books maintained by the Paying Agent. Unless otherwise provided
in the applicable Pricing Supplement, the Notes, except for Amortizing Notes,
will not be subject to any sinking fund.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof;
together with accrued interest to the date of repayment, unless such Note was
issued with original issue discount, in which case the Pricing Supplement will
specify the amount payable upon such repayment.
In order for such a Note to be repaid, the Paying Agent must receive at
least 30 days but not more than 60 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, or the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States setting forth the name of the holder of the Note, the
principal amount of the Note, the principal amount of the Note to be repaid, the
certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Note, will be
received by the Paying Agent not later than the fifth Business Day after the
date of such telegram, telex, facsimile transmission or letter, provided,
however, that such telegram, telex, facsimile transmission or letter shall only
be effective if such Note and form duly completed are received by the Paying
Agent by such fifth Business Day. Except in the case of Renewable Notes or
Extendible Notes, and unless otherwise specified in the applicable Pricing
Supplement, exercise of the repayment option by the holder of a Note will be
irrevocable. The repayment option may be exercised by the holder of a Note for
less than the entire principal amount of the Note but, in that event, the
principal amount of the Note remaining outstanding after repayment must be an
Authorized Denomination.
If a Note is represented by a Global Security, the Depositary's nominee
will be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different deadlines for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other direct or
indirect participant through which it holds an interest in a Note in order to
ascertain the deadline by which such an instruction must be given in order for
timely notice to be delivered to the Depositary.
The Company may purchase Notes at any price in the open market or
otherwise. Notes so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the relevant Trustee for
cancellation.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
Any investment in Notes that are denominated in, or the payment of which is
related to the value of, a specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar
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investment in a security denominated in U.S. dollars. Such risks include,
without limitation, the possibility of significant changes in rates of exchange
between the U.S. dollar and the various foreign currencies (or composite
currencies) and the possibility of the imposition or modification of exchange
controls by either the U.S. or a foreign government. Such risks generally depend
on economic and political events over which the Company has no control. In
recent years, rates of exchange between U.S. dollars and certain foreign
currencies have been highly volatile and such volatility may be expected to
continue in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations in
such rate that may occur during the term of any Note. Depreciation against the
U.S. dollar of the currency in which a Note is payable would result in a
decrease in the effective yield of such Note below its coupon rate and, in
certain circumstances, could result in a loss to the investor on a U.S. dollar
basis. In addition, depending on the specific terms of a currency linked Note,
changes in exchange rates relating to any of the currencies involved may result
in a decrease in its effective yield and, in certain circumstances, could result
in a loss of all or a substantial portion of the principal of a Note to the
investor.
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN CURRENCY OR A
COMPOSITE CURRENCY AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE
INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN, OR THE PAYMENT OF WHICH IS
RELATED TO THE VALUE OF, SPECIFIED CURRENCIES OTHER THAN U.S. DOLLARS. SUCH
NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED
WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium, if
any, and interest on the Notes. Such persons should consult their own counsel
with regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of, premium,
if any, or interest on a Note. Even if there are no actual exchange controls, it
is possible that the Specified Currency for any particular Note not denominated
in U.S. dollars would not be available when payments on such Note are due. In
that event, the Company would make required payments in U.S. dollars on the
basis of the Market Exchange Rate on the date of such payment, or if such rate
of exchange is not then available, on the basis of the Market Exchange Rate as
of the most recent practicable date. See "Description of Notes -- Payment
Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein shall constitute a part of this
Prospectus Supplement and is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in fluctuations
in currency exchange rates that may occur in the future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. In the event an action based on Notes denominated in a
Specified Currency were commenced in a United States court, it is likely that
such court would grant judgment relating to such Notes only in U.S. dollars. It
is not clear, however, whether, in granting such judgment, the rate of
conversion into U.S. dollars would be
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determined with reference to the date of default, the date judgment is rendered
or some other date. A state court in the State of New York rendering a judgment
on Notes denominated in a Specified Currency would be required under Section 27
of the New York Judiciary Law to render such judgment in the foreign currency in
which such Note is denominated, and such judgment would be converted into United
States dollars at the exchange rate prevailing on the date of entry of the
judgment.
UNITED STATES TAXATION
In the opinion of Davis Polk & Wardwell, special tax counsel to the
Company, the following summary accurately describes the principal United States
federal income tax consequences of ownership and disposition of the Notes to
initial holders purchasing Notes at the "issue price" (as defined below). This
summary is based on the Internal Revenue Code of 1986, as amended to the date
hereof (the "Code"), administrative pronouncements, judicial decisions and
existing and proposed Treasury Regulations, including regulations concerning the
treatment of debt instruments issued with original issue discount (the "OID
Regulations"), changes to any of which subsequent to the date of this Prospectus
Supplement may affect the tax consequences described herein. This summary
discusses only Notes held as capital assets within the meaning of Section 1221
of the Code. It does not discuss all of the tax consequences that may be
relevant to holders in light of their particular circumstances or to holders
subject to special rules, such as certain financial institutions, insurance
companies, dealers in securities or foreign currencies, persons holding Notes as
a hedge against, or which are hedged against, currency risks, holders who hold
the Notes as part of a "conversion" or other integrated transaction or holders
whose functional currency (as defined in Code Section 985) is not the U.S.
dollar. Finally, this summary does not discuss Discount Notes (as defined below)
which qualify as "applicable high-yield discount obligations" under Section
163(i) of the Code. Holders of Discount Notes which are "applicable high-yield
discount obligations" may be subject to special rules. Persons considering the
purchase of Notes should consult their tax advisors with regard to the
application of the United States federal income tax laws to their particular
situations as well as any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction.
As used herein, the term "Holder" means an owner of a Note that is (i) for
United States federal income tax purposes a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision thereof,
or (iii) an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
TAX CONSEQUENCES TO HOLDERS
Payments of Interest
Interest paid on a Note will generally be taxable to a Holder as ordinary
interest income at the time it accrues or is received in accordance with the
Holder's method of accounting for federal income tax purposes. Under the OID
Regulations, all payments of interest on a Note that matures one year or less
from its date of issuance will be included in the stated redemption price at
maturity of the Notes and will be taxed in the manner described below under
"Discount Notes." Special rules governing the treatment of interest paid with
respect to Discount Notes, including certain Floating Rate Notes, Foreign
Currency Notes and Indexed Notes are discussed below.
Discount Notes
A Note which is issued for an amount less than its stated redemption price
at maturity will generally be considered to have been issued at an original
issue discount for federal income tax purposes (a "Discount Note"). The "issue
price" of a Note will equal the first price to the public (not including bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers) at which a substantial amount of
the Notes is sold. The stated redemption price at maturity of a Note will equal
the sum of all payments required under the Note other than payments of
"qualified stated interest." "Qualified stated interest" is stated interest
unconditionally payable as a series of payments in cash or property (other than
debt instruments of the issuer) at least annually during the entire term of the
Note and equal to the
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outstanding principal balance of the Note multiplied by a single fixed rate or
certain variable rates of interest, or certain combinations thereof. Special tax
considerations (including possible original issue discount) may arise with
respect to Floating Rate Notes providing for (i) one Base Rate followed by one
or more Base Rates, (ii) a single fixed rate followed by a floating rate or
(iii) a Spread Multiplier. Purchasers of Floating Rate Notes with any of such
features should carefully examine the applicable Pricing Supplement and should
consult their tax advisors with respect to such a feature since the tax
consequences will depend, in part, on the particular terms of the purchased
Note. Special rules may also apply if a Floating Rate Note is subject to a cap,
floor, governor or similar restriction that is not fixed throughout the term of
the Note and is reasonably expected as of the issue date to cause the yield on
the Note to be significantly less or more than the expected yield determined
without the restriction.
If the difference between a Note's stated redemption price at maturity and
its issue price is a de minimis amount, i.e., less than 1/4 of 1 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, then the Note will not be considered to have original issue
discount. Holders of Notes with a de minimis amount of original issue discount
will generally include such original issue discount in income, as capital gain,
on a pro rata basis as principal payments are made on the Note.
A Holder of Discount Notes will be required to include any qualified stated
interest payments in income in accordance with the Holder's method of accounting
for federal income tax purposes. Holders of Discount Notes that mature more than
one year from their date of issuance will be required to include original issue
discount in income for federal income tax purposes as it accrues, in accordance
with a constant yield method based on a compounding of interest, before the
receipt of cash payments attributable to such income. Under this method, Holders
of Discount Notes generally will be required to include in income increasingly
greater amounts of original issue discount in successive accrual periods.
Under the OID Regulations, a Note that matures one year or less from its
date of issuance will be treated as a "short-term Discount Note". In general, a
cash method Holder of a short-term Discount Note is not required to accrue
original issue discount for United States federal income tax purposes unless it
elects to do so. Holders who make such an election, Holders who report income
for federal income tax purposes on the accrual method and certain other Holders,
including banks and dealers in securities, are required to include original
issue discount in income on such short-term Discount Notes as it accrues on a
straight-line basis, unless an election is made to accrue the original issue
discount according to a constant yield method based on daily compounding. In the
case of a Holder who is not required and who does not elect to include original
issue discount in income currently, any gain realized on the sale, exchange or
retirement of the short-term Discount Note will be ordinary income to the extent
of the original issue discount accrued on a straight-line basis (or, if elected,
according to a constant yield method based on daily compounding), reduced by any
interest received, through the date of sale, exchange or retirement. In
addition, such Holders will be required to defer deductions for any interest
paid on indebtedness incurred to purchase or carry short-term Discount Notes in
an amount not exceeding the deferred interest income, until such deferred
interest income is recognized.
A Holder who purchases a Discount Note for an amount that is greater than
its adjusted issue price but less than its stated redemption price at maturity
will be considered to have purchased such Note at an "acquisition premium."
Under the acquisition premium rules of the Code, the amount of original issue
discount which such Holder must include in its gross income with respect to such
Note will be reduced by the portion of such acquisition premium properly
allocable to such year.
Under the OID Regulations, a Holder may make an election (the "Constant
Yield Election") to include in gross income all interest that accrues on a Note
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) in accordance with a constant yield method based on the
compounding of interest.
Certain of the Discount Notes may be redeemed prior to maturity. Discount
Notes containing such a feature may be subject to rules that differ from the
general rules discussed above. Purchasers of Discount Notes with such a feature
should carefully examine the applicable Pricing Supplement.
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<PAGE> 22
The OID Regulations contain aggregation rules stating that, in certain
circumstances, if more than one type of Note is issued as part of the same
issuance of securities to a single Holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price, maturity
date, yield to maturity and stated redemption price at maturity for purposes of
calculating and accruing any original issue discount. Unless otherwise provided
in the related Pricing Supplement, the Company does not expect to treat any of
the Notes as being subject to the aggregation rules for purposes of computing
original issue discount.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement and such Holder's adjusted tax basis in the Note.
For these purposes, the amount realized does not include any amount attributable
to unpaid qualified stated interest accrued between interest payment dates on
the Note which will be includable in income as interest as described under
"Payments of Interest" above, in accordance with the Holder's method of
accounting for federal income tax purposes as described therein. A Holder's
adjusted tax basis in a Note will generally equal the cost of the Note to such
Holder, increased by the amount of any original issue discount previously
includible in income by the Holder with respect to such Note and reduced by any
amortized premium and any principal payments received by the Holder and, in the
case of a Discount Note, by the amounts of any other payments that do not
constitute qualified stated interest (as defined above).
Subject to the discussion under "Foreign Currency Notes" below, gain or
loss realized on the sale, exchange or retirement of a Note will be capital gain
or loss (except in the case of a short-term Discount Note, to the extent of any
original issue discount not previously included in the Holder's taxable income).
See "Discount Notes" above. Prospective investors should consult their tax
advisors regarding the treatment of capital gains (which may be taxed at lower
rates than ordinary income for taxpayers who are individuals and have held their
Notes more than one year) and losses (the deductibility of which is subject to
limitations).
If a Holder purchases a Note for an amount that is greater than the amount
payable at maturity, such Holder will be considered to have purchased such Note
with "amortizable bond premium" equal in amount to such excess, and may elect
(in accordance with applicable Code provisions) to amortize such premium, using
a constant yield method, over the remaining term of the Note (where such Note is
not optionally redeemable prior to its maturity date). If such Note may be
optionally redeemed prior to maturity after the Holder has acquired it, the
amount of amortizable bond premium is determined with reference to the amount
payable on maturity or, if it results in a smaller premium attributable to the
period of earlier redemption date, with reference to the amount payable on the
earlier redemption date. A Holder who elects to amortize bond premium must
reduce his tax basis in the Note by the amount of the premium amortized in any
year. An election to amortize bond premium applies to all taxable debt
obligations then owned and thereafter acquired by the taxpayer and may be
revoked only with the consent of the Internal Revenue Service.
If a Holder makes a Constant Yield Election for a Note with amortizable
bond premium, such election will result in a deemed election to amortize bond
premium for all of the Holder's debt instruments with amortizable bond premium
and may be revoked only with the permission of the Internal Revenue Service with
respect to debt instruments acquired after revocation.
Foreign Currency Notes
The following summary relates to Notes that are denominated in a currency
or currency unit other than the U.S. dollar ("Foreign Currency Notes").
A Holder who uses the cash method of accounting and who receives a payment
of qualified stated interest in a foreign currency with respect to a Foreign
Currency Note will be required to include in income the U.S. dollar value of the
foreign currency payment (determined on the date such payment is received),
regardless of whether the payment is in fact converted to U.S. dollars at that
time, and such U.S. dollar value will be the Holder's tax basis in the foreign
currency. A cash method Holder who receives such a payment in U.S. dollars
pursuant to an option available under such Note will be required to include the
amount of such payment in income upon receipt.
S-22
<PAGE> 23
In the case of accrual method taxpayers and Holders of Discount Notes, a
Holder will be required to include in income the U.S. dollar value of the amount
of interest income (including original issue discount, but reduced by
amortizable bond premium to the extent applicable) that is required to be
accrued with respect to a Foreign Currency Note during an accrual period. The
U.S. dollar value of such accrued income will be determined by translating such
income at the average rate of exchange for the accrual period or, with respect
to an accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. Such Holder will recognize ordinary
income or loss with respect to accrued interest income on the date such income
is actually received. The amount of ordinary income or loss recognized will
equal the difference between the U.S. dollar value of the foreign currency
payment received (determined on the date such payment is received) in respect of
such accrual period (or, where a Holder receives U.S. dollars, the amount of
such payment in respect of such accrual period) and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above). A Holder may, regardless of its general accounting method, elect to
translate interest income (including original issue discount) into U.S. dollars
at the spot rate on the last day of the interest accrual period (or, in the case
of a partial accrual period, the spot rate on the last date of the taxable year)
or, alternatively, if the date of receipt is within five business days of the
last day of the interest accrual period, the spot rate on the date of receipt. A
Holder that makes such an election must apply it consistently to all debt
instruments from year to year and cannot change the election without the consent
of the Internal Revenue Service.
Original issue discount and amortizable bond premium on a Foreign Currency
Note are to be determined in the relevant foreign currency.
Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a Holder who has not elected to amortize
such premium will be a capital loss to the extent of such bond premium. If such
an election is made, amortizable bond premium taken into account on a current
basis shall reduce interest income in units of the relevant foreign currency.
Exchange gain or loss is realized on such amortized bond premium with respect to
any period by treating the bond premium amortized in such period as a return of
principal.
A Holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustment to such Holder's tax basis, will be the U.S. dollar value
of the foreign currency amount paid for such Foreign Currency Note, or of the
foreign currency amount of the adjustment, determined on the date of such
purchase or adjustment. A Holder who purchases a Foreign Currency Note with
previously owned foreign currency will recognize ordinary income or loss in an
amount equal to the difference, if any, between such Holder's tax basis in the
foreign currency and the U.S. dollar fair market value of the Foreign Currency
Note on date of purchase.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between (i) the U.S. dollar value of the foreign currency
principal amount of such Note, and, for original issue discount or accrual basis
Holders, any payment with respect to accrued interest, determined on the date
such payment is received or such Note is disposed of, and (ii) the U.S. dollar
value of the foreign currency principal amount of such Note, determined on the
date such Holder acquired such Note, and, for original issue discount or accrual
basis Holders, the U.S. dollar value of the accrued interest received,
determined by translating such interest at the average exchange rate (or at a
spot rate elected as described above) for the accrual period. Such foreign
currency gain or loss will be recognized only to the extent of the total gain or
loss realized by a Holder on the sale, exchange or retirement of the Foreign
Currency Note. The source of such foreign currency gain or loss will be
determined by reference to the residence of the Holder or the "qualified
business unit" of the Holder on whose books the Note is properly reflected. Any
gain or loss realized by such a Holder in excess of such foreign currency gain
or loss will be capital gain or loss (except in the case of a short-term
Original Issue Discount Note, to the extent of any original issue discount not
previously included in the Holder's income).
S-23
<PAGE> 24
A Holder will have a tax basis in any foreign currency received on the
sale, exchange or retirement of a Foreign Currency Note equal to the U.S. dollar
value of such foreign currency, determined at the time of such sale, exchange or
retirement. Regulations issued under Section 988 of the Code provide a special
rule for purchases and sales of publicly traded Foreign Currency Notes by a cash
method taxpayer under which units of foreign currency paid or received are
translated into U.S. dollars at the spot rate on the settlement date of the
purchase or sale. Accordingly, no exchange gain or loss will result from
currency fluctuations between the trade date and the settlement of such a
purchase or sale. An accrual method taxpayer may elect the same treatment
required of cash-method taxpayers with respect to the purchase and sale of
publicly traded Foreign Currency Notes provided the election is applied
consistently. Such election cannot be changed without the consent of the
Internal Revenue Service. Any gain or loss realized by a Holder on a sale or
other disposition of foreign currency (including its exchange for U.S. dollars
or its use to purchase Foreign Currency Notes) will be ordinary income or loss.
Indexed Notes
Indexed Notes are subject to special rules not described herein. Purchasers
of Indexed Notes should consult the applicable Pricing Supplement for a
discussion of the United States federal income tax considerations applicable to
the ownership and disposition of Indexed Notes.
Extension of Maturity
The extension of the maturity of a Note pursuant to its original terms
should be viewed as a taxable exchange due to the Holder's ability to put the
Note to the Company.
Backup Withholding and Information Reporting
Certain noncorporate Holders may be subject to backup withholding at a rate
of 31% on payments of principal, premium and interest (including the accrual of
original issue discount, if any) on, and the proceeds of disposition of, a Note.
Backup withholding will apply only if the Holder (i) fails to furnish its
Taxpayer Identification Number ("TIN") which, for an individual, would be his or
her Social Security number, (ii) furnishes an incorrect TIN, (iii) is notified
by the Internal Revenue Service that it has failed to properly report payments
of interest or dividends or (iv) under certain circumstances, fails to certify,
under penalty of perjury, that it has furnished a correct TIN and has not been
notified by the Internal Revenue Service that it is subject to backup
withholding for failure to report interest or dividend payments. Holders should
consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption if
applicable.
The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's United States federal income tax
liability and may entitle such Holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through
the Agents, who have agreed to use reasonable efforts to solicit offers to
purchase Notes. The Company will have the sole right to accept offers to
purchase Notes and may reject any offer to purchase Notes in whole or in part.
An Agent will have the right to reject any offer to purchase Notes solicited by
it in whole or in part. Payment of the purchase price of the Notes will be
required to be made in immediately available funds. The Company will pay an
Agent, in connection with sales of Notes resulting from a solicitation made or
an offer to purchase received by such Agent, a commission ranging from .125% to
.750% of the principal amount of Notes to be sold, provided, however, that
commissions with respect to Notes maturing in thirty years or greater will be
negotiated.
The Company may also sell Notes to an Agent as principal for its own
account at discounts to be agreed upon at the time of sale. Such Notes may be
resold to investors and other purchasers at prevailing market prices, or prices
related thereto at the time of such resale, as determined by the Agent or, if so
agreed, at a
S-24
<PAGE> 25
fixed public offering price. In addition, the Agents may offer the Notes they
have purchased as principal to other dealers. The Agents may sell Notes to any
dealer at a discount and, unless otherwise specified in the applicable Pricing
Supplement, such discount allowed to any dealer will not be in excess of the
discount to be received by such Agent from the Company. After the initial public
offering of Notes to be resold to investors and other purchasers, the public
offering price (in the case of Notes to be resold at a fixed public offering
price), concession and discount may be changed.
In order to facilitate the offering of the Notes, the Agents may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Agents may overallot in connection with the offering,
creating a short position in the Notes for their own account. In addition, to
cover overallotments or to stabilize the price of the Notes, the Agents may bid
for, and purchase, the Notes in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the Notes in the offering, if the syndicate repurchases
previously distributed Notes in transactions to cover syndicate short positions,
in stabilization transactions or otherwise. Any of these activities may
stabilize or maintain the market price of the Notes above independent market
levels. The Agents are not required to engage in these activities, and may end
any of these activities at any time.
The Company has reserved the right to sell the Notes directly to investors,
and may solicit and accept offers to purchase Notes directly from investors from
time to time on its own behalf. The Company may accept (but not solicit) offers
to purchase Notes through additional agents and may appoint additional agents
for the purpose of soliciting offers to purchase Notes, in either case on terms
substantially identical to the terms contained in the Distribution Agreement
between the Company and the Agents. Such other agents, if any, will be named in
the applicable Pricing Supplement.
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company and the
Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
made in respect thereof. The Company has also agreed to reimburse the Agents for
certain expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange. The Company has been advised by the Agents that
the Agents intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Agents are not obligated to do so, however, and the Agents
may discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Debt Securities pursuant to the Indenture
referred to herein.
The Agents and/or certain of their affiliates may engage in investment
banking and/or commercial banking transactions with and perform services for the
Company and certain of its affiliates in the ordinary course of business.
LEGAL MATTERS
Certain matters relating to the legality of the Notes offered hereby will
be passed upon for the Company by Ogden Newell & Welch, Louisville, Kentucky,
and for any purchasers, agents, dealers, or underwriters by Davis Polk &
Wardwell, New York, New York. James S. Welch is a partner in the law firm of
Ogden Newell & Welch and is a director of the Company.
The Company is advised that as of August 1, 1998 members of Ogden Newell &
Welch owned 5,565 shares of Class A Common Stock and 2,585 shares of Class B
Common Stock of the Company.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended April
30, 1998, have been so incorporated in reliance on the
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<PAGE> 26
reports of Coopers & Lybrand, L.L.P., independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements similarly incorporated in this Prospectus by
reference to all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act (before the filing of a
post-effective amendment which deregisters all securities then remaining unsold)
are or will be so incorporated in reliance upon the reports of
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand, L.L.P.) and any other
independent accountants, relating to such financial statements and upon the
authority of such independent accountants as experts in auditing and accounting
in giving such reports to the extent that the particular firm has examined such
financial statements and consented to the use of their reports thereon.
S-26
<PAGE> 27
PROSPECTUS
$220,000,000
Brown-Forman Corporation
DEBT SECURITIES
------------------------
Brown-Forman Corporation (the "Company") may offer from time to time, in
one or more series, debt securities ("Debt Securities") with an initial
aggregate offering price not to exceed $220,000,000 (or the equivalent in
foreign denominated currency or units based on or relating to currencies,
including European Currency Units). The Company will offer Debt Securities to
the public on terms determined by market conditions. Debt Securities may be sold
for U.S. dollars, foreign denominated currency, or currency units; principal of
and any interest on Debt Securities may likewise be payable in U.S. dollars,
foreign denominated currency, or currency units -- in each case, as the Company
specifically designates.
The accompanying Prospectus Supplement (the "Prospectus Supplement") sets
forth the specific designation, aggregate principal amount, designated currency
(or currency unit), purchase price, maturity, interest rate (or manner of
calculation thereof), time of payment of interest (if any), listing (if any) on
a securities exchange, and any other specific terms of the Debt Securities and
the name of and compensation to each dealer, underwriter, or agent (if any)
involved in the sale of 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 REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Company may offer Debt Securities to or through dealers, underwriters,
or agents designated from time to time, as set forth in the Prospectus
Supplement. Net proceeds to the Company will be the purchase price in the case
of a purchaser or dealer, the public offering price less discount in the case of
an underwriter, or the purchase price less commission in the case of an
agent -- in each case, less other expenses attributable to issuance and
distribution. See "Plan of Distribution" for possible indemnification
arrangements for dealers, underwriters, and agents.
------------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
J.P. MORGAN & CO.
August 19, 1998
<PAGE> 28
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR IN THE PROSPECTUS SUPPLEMENT IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS OR IN THE PROSPECTUS
SUPPLEMENT. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY BROWN-FORMAN CORPORATION, OR BY ANY
UNDERWRITER, DEALER, OR AGENT. THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT
SHALL 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 OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY
OF THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME AFTER THE DATE HEREOF.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY
BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION".
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
Brown-Forman Corporation.................................... 3
Ratios of Earnings to Fixed Charges......................... 4
Use of Proceeds............................................. 4
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 11
Legal Matters............................................... 12
Experts..................................................... 12
</TABLE>
------------------------
AVAILABLE INFORMATION
The Company is required by the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to file reports, proxy statements, and other information
("reports") with the Securities and Exchange Commission (the "Commission").
These reports can be inspected and copied at the Commission, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices at 7
World Trade Center, Suite 1300, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511. These
reports can also be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005, on which the Company's equity securities
are listed. Copies may also be obtained from the Commission's Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding the Company at http://www.sec.gov.
This Prospectus does not contain all information set forth in the Registration
Statement, of which this Prospectus is a part, and Exhibits thereto which the
Company has filed with the Commission under the Securities Act of 1933 (the
"Act") and to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference into this Prospectus the following
report, filed with the Commission under the Exchange Act:
(a) its Annual Report on Form 10-K for the year ended April 30, 1998
(which incorporates by reference certain portions of the 1998 Annual Report
to Shareholders and the Proxy Statement for the Annual Meeting of
Shareholders held on July 23, 1998).
2
<PAGE> 29
In addition, all documents filed by the Company pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act after the date of this Prospectus and
before the termination of the offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part of it from the date such documents
are filed. Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for the purposes of this Prospectus to the extent that a statement
contained in a subsequently filed document incorporated or deemed to be
incorporated by reference modifies or supersedes such statement. Any statements
so modified or superseded, except as so modified or superseded, shall not be
deemed to be a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED (INCLUDING ANY BENEFICIAL OWNER), ON WRITTEN OR ORAL
REQUEST, A COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED IN THIS PROSPECTUS
BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS. REQUESTS SHOULD BE MADE TO
BROWN-FORMAN CORPORATION, SHAREHOLDER RELATIONS, P.O. BOX 1080, LOUISVILLE,
KENTUCKY 40201-1080, TELEPHONE (502) 585-1100.
BROWN-FORMAN CORPORATION
The Company was incorporated in Delaware in 1933, as successor to a
business founded in 1870 as a partnership and subsequently incorporated in
Kentucky in 1901. Its principal executive offices are located at 850 Dixie
Highway, Louisville, Kentucky 40210-1091 (mailing address: P.O. Box 1080,
Louisville, Kentucky 40201-1080), and its telephone number is (502) 585-1100.
The Company and its subsidiaries manufacture and market high quality,
consumer branded products in two business segments: wines and spirits and
consumer durables. These segments are summarized below.
WINES AND SPIRITS
The Company was founded as a spirits company more than a century ago, and
its principal business remains wines and spirits. Through its Brown-Forman
Beverages Worldwide division, the Company produces, imports, exports and markets
a wide variety of alcoholic beverage brands. Major brands include Jack Daniel's
Tennessee whiskey, Southern Comfort liqueur, Canadian Mist Canadian whisky,
Early Times Kentucky whisky, Jack Daniel's Country Cocktails, Fetzer Vineyards
California wines, Korbel California champagnes, and Bolla Italian wines.
Statistics based on case sales, published annually by a leading trade
publication, rank Jack Daniel's as the largest selling Tennessee whiskey in the
United States, Canadian Mist as the largest selling Canadian whisky in the
United States, and Southern Comfort as the largest selling domestic proprietary
liqueur in the United States.
In addition to having a large presence in the United States wines and
spirits market, the Company has established a growing overseas business. Jack
Daniel's Tennessee whiskey and Southern Comfort liqueur are the Company's
principal products exported by this segment.
CONSUMER DURABLES
The Company's consumer durables segment includes the manufacturing and/or
marketing of Lenox china and crystal; Lenox Collectibles; Dansk contemporary
tabletop, housewares and giftware; Gorham silver, stainless steel flatware and
crystal, and Hartmann luggage, business cases and personal leather goods.
The Company believes that it is the largest domestic manufacturer and
marketer of fine china dinnerware and the only significant domestic manufacturer
of fine quality china giftware. The Company is also a leading manufacturer and
distributor of fine quality luggage, business cases and personal leather
accessories.
3
<PAGE> 30
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratios of Earnings to Fixed Charges..................... 13.7 11.4 10.1 9.2 11.7
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
earnings equals income before income taxes and the cumulative effect of changes
in accounting principles, plus fixed charges. Fixed charges consist of interest
on all indebtedness and a portion of rental expense determined to be
representative of interest.
USE OF PROCEEDS
The Company expects to use the net proceeds from the sale of Debt
Securities for general corporate purposes. Further details relating to the use
of the net proceeds may be set forth in the applicable Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES
Debt Securities will be unsecured obligations issued under an Indenture
(the "Indenture") dated as of March 1, 1994, between the Company and The First
National Bank of Chicago, as trustee (the "Trustee"). The following summaries
are incomplete and are subject to the detailed provisions of the Indenture, a
copy of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Wherever statements below refer to particular Indenture
provisions, such provisions are incorporated by reference as part of the
statements made, and such statements are qualified in their entirety by such
reference. Capitalized terms used below and not otherwise defined are used as
defined in the Indenture. Section references in italics are to sections of the
Indenture.
GENERAL
Debt Securities will rank equally with all other unsecured and
unsubordinated debt of the Company. Except as described in "Certain Covenants of
the Company -- Negative Pledge" below, the Indenture does not limit the amount
of debt, either secured or unsecured, which the Company may issue under the
Indenture or otherwise.
Under the Indenture, the Company may issue Debt Securities from time to
time with an aggregate initial offering price not to exceed $250,000,000 or the
equivalent thereof in foreign denominated currency or units based on or relating
to foreign currencies, including European Currency Units. Prior to the date of
this Prospectus, the Company issued $30,000,000 aggregate principal amount of
Notes. The Company will offer Debt Securities to the public on terms determined
by then prevailing market conditions. The Company may issue Debt Securities in
one or more series with the same or various maturities and may sell them at par,
at a premium, or at 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 following terms of
Debt Securities offered hereby (to the extent such terms apply to such Debt
Securities): (1) designation, aggregate principal amount, denomination, and
currency or currency unit; (2) the price or prices (generally expressed as a
percentage of the aggregate principal amount thereof) at which the Debt
Securities will be issued; (3) maturity date; (4) currency, currencies, or units
based on or relating to currencies for which Debt Securities may be purchased
and in which principal of, premium (if any) and any interest will or may be
payable; (5) interest rate(s) (or their manner of calculation); (6) the times at
which any such interest will be payable; (7) the place(s) where the principal of
and interest (if any) on Debt Securities will be payable; (8) redemption or
sinking fund provisions or analogous provisions; (9) whether Debt Securities
will be issuable in registered form or bearer form or both and, if in bearer
form, restrictions on the exchange of one form for another and on the offer,
sale, and delivery of Debt Securities in bearer form; (10) whether and under
what circumstances the
4
<PAGE> 31
Company will pay additional amounts on Debt Securities held by a person who is
not a U.S. person (as defined below) in respect of any tax, assessment, or
government charge withheld or deducted and, if so, whether the Company will have
the option to redeem such Debt Securities rather than pay such additional
amounts; (11) federal income tax consequences; and (12) any other specific
terms, including any terms which may be required by or advisable under United
States laws or regulations.
For purposes of this Prospectus, "U.S. person" means a citizen, national,
or resident of the United States of America, its territories, possessions, and
all areas subject to its jurisdiction (the "United States"), a corporation,
partnership, or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust the
income of which is subject to United States federal income tax regardless of its
source.
Debt Securities may be presented for exchange, and registered Debt
Securities may be presented for transfer, in the manner, at the place(s), and
subject to the restrictions set forth in 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. Debt Securities in bearer form and their
coupons, if any, will be transferable by delivery.
Unless otherwise set forth in the Prospectus Supplement, the Debt
Securities will not contain any provisions which may afford holders of the Debt
Securities protection in the event of a change in control of the Company or in
the event of a highly leveraged transaction (whether or not such transaction
results in a change in control of the Company).
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued as book-entry debt in the
form of one or more fully registered global securities (a "Registered Global
Security") that will be deposited with a depositary ("Depositary") or its
nominee identified in the Prospectus Supplement relating to such series and
registered in the name of the Depositary or its nominee. In such case, one or
more Registered Global Securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal amount of
outstanding Debt Securities of the series to be represented by such Registered
Global Security or Securities. Unless and until it is exchanged in whole or in
part for Debt Securities in definitive registered form, a Registered Global
Security may not be transferred except as a whole by the Depositary for such
Registered Global Security to a nominee of such Depositary, or by a nominee of
such Depositary to such Depositary or to another nominee of such Depositary, or
by such Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such series.
The Company anticipates that the following provisions will apply to all
depositary arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons holding interests through
participants. Upon the issuance of a Registered Global Security, the Depositary
for such Registered Global Security will credit, on its book-entry registration
and transfer system, the participants' accounts with the respective principal
amounts of the Debt Securities represented by such Registered Global Security
beneficially owned by such participants. The accounts to be credited shall be
designated by any dealers, underwriters, or agents participating in the
distribution of such Debt Securities. Ownership of beneficial interests in such
Registered Global Security will be shown on, and the transfer of such ownership
interests will be effected only through, records maintained by the Depositary
for such Registered Global Security (with respect to interests of participants)
and on the records of participants (with respect to interests of persons holding
through participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to own, transfer or
pledge beneficial interests in Registered Global Securities.
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So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in a Registered Global Security will not be entitled to have the Debt
Securities represented by such Registered Global Security registered in their
names, will not receive or be entitled to receive physical delivery of such Debt
Securities in definitive form and will not be considered the owners or holders
thereof under the Indenture. Accordingly, each person owning a beneficial
interest in a Registered Global Security must rely on the procedures of the
Depositary for such Registered Global Security and, if such person is not a
participant, on the procedures of the participant through whom such person owns
its interest, to exercise any rights of a holder under the Indenture. The
Company understands that under existing industry practices, if the Company
requests any action of holders or if an owner of a beneficial interest in a
Registered Global Security desires to give or take any action which a holder is
entitled to give or take under the Indenture, the Depositary for such Registered
Global Security would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners holding
through them.
Payments of principal, premium, if any, and interest on Debt Securities
represented by a Registered Global Security registered in the name of a
Depositary or its nominee will be made to such Depositary or its nominee, as the
case may be, as the registered owner of such Registered Global Security. Neither
the Company, the Trustee, nor any other agent of the Company or agent of the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
such Registered Global Security or for maintaining, supervising, or reviewing
any records relating to such beneficial ownership interests.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium, if any, or interest in respect of such Registered Global Security, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in such Registered Global Security as
shown on the records of such Depositary. The Company also expects that payments
by participants to owners of beneficial interests in such Registered Global
Security held through such participants will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
If the Depositary for any Debt Securities represented by a Registered
Global Security is at any time unwilling or unable to continue as Depositary or
ceases to be a clearing agency registered under the Exchange Act, and a
successor Depositary registered as a clearing agency under the Exchange Act is
not appointed by the Company within 90 days, the Company will issue such Debt
Securities in definitive form in exchange for such Registered Global Security.
In addition, the Company may at any time and in its sole discretion determine
not to have any of the Debt Securities of a series represented by one or more
Registered Global Securities and, in such event, will issue Debt Securities of
such series in definitive form in exchange for all of the Registered Global
Security or Securities representing such Debt Securities. Any Debt Securities
issued in definitive form in exchange for a Registered Global Security will be
registered in such name or names as the Depositary shall instruct the Trustee.
It is expected that such instructions will be based upon directions received by
the Depositary from participants with respect to ownership of beneficial
interests in such Registered Global Security.
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CERTAIN COVENANTS OF THE COMPANY
Negative Pledge. If the Company or any Subsidiary (as defined below) shall
incur, issue, assume or guarantee any debt secured by a Mortgage on any
Principal Property (as defined below) of the Company or any Subsidiary or on any
shares of capital stock or debt of any Subsidiary, the Company will secure, or
cause such Subsidiary to secure, the outstanding Debt Securities equally and
ratably with such secured debt, unless after giving effect thereto the aggregate
amount of all such secured debt together with all Attributable Debt (as defined
below) of the Company and its Subsidiaries in respect of sale and lease-back
transactions involving Principal Properties would constitute less than 10% of
the Consolidated Net Assets (as defined below) of the Company and its
consolidated Subsidiaries. This restriction will not apply in the case of:
(1) Mortgages affecting property of any corporation existing at the
time such corporation becomes a Subsidiary or at the time it is acquired by
the Company or a Subsidiary or arising thereafter pursuant to contractual
commitments entered into prior to and not in contemplation of such
corporation's becoming a Subsidiary;
(2) Mortgages existing at the time of acquisition of the property
affected thereby, or Mortgages incurred to secure payment of all or part of
the purchase price of such property or to secure debt incurred prior to, at
the time of, or within 180 days after, the acquisition of such property for
the purpose of financing all or part of the purchase price thereof
(provided such Mortgages are limited to such property and improvements
thereto);
(3) Mortgages placed into effect prior to, at the time of, or within
180 days of completion of construction of new facilities (or any
improvements to existing facilities) to secure all or part of the cost of
construction (or improvement) of such facilities, or to secure debt
incurred to provide funds for any such purpose (provided such Mortgages are
limited to the property or portion thereof upon which the construction
being so financed occurred and improvements the cost of construction of
which is being so financed);
(4) Mortgages which secure only debt owing by a Subsidiary to the
Company or to a wholly-owned Subsidiary;
(5) Mortgages required by any contract or statute in order to permit
the Company or a Subsidiary to perform any contract or subcontract made by
it with or at the request of the United States of America or any State, or
any department, agency, instrumentality or political subdivision of any of
the foregoing, and Mortgages in favor of such entities on property owned or
leased by the Company or a Subsidiary (a) to secure any debt incurred for
the purpose of financing (including any industrial development bond
financing) all or any part of the purchase price or the cost of
constructing, expanding or improving the property subject thereto (provided
such Mortgages are limited to the property or portion thereof upon which
the construction being so financed occurred and the improvements the cost
of construction of which is being so financed), or (b) required to permit
the attachment or removal of any equipment designed primarily for the
purpose of air or water pollution control, provided that such Mortgages
shall not extend to other property or assets of the Company or any
Subsidiary; and
(6) certain extensions, renewals or replacements of Mortgages referred
to in the foregoing clauses. (Section 3.6(a))
Restrictions on Sale and Lease-Back Transactions. Neither the Company nor
any Subsidiary may, after the effective date of the Indenture, enter into any
Sale and Lease-Back Transaction involving any Principal Property, acquired or
placed into service more than 180 days prior to such transaction, whereby such
property has been or is to be sold or transferred by the Company or any
Subsidiary, unless:
(1) the Company or such Subsidiary would at the time of entering into
such transaction be entitled to create debt secured by a Mortgage on such
property as described in "Certain Covenants of the Company -- Negative
Pledge" above in an amount equal to the Attributable Debt with respect to
the Sale and Lease-Back Transaction without equally and ratably securing
the outstanding Debt Securities; or
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(2) the Company applies to the retirement (other than any mandatory
retirement) of Funded Debt of the Company (as defined below) an amount
equal to the net proceeds from the sale of the Principal Property so leased
within 90 days of the effective date of any such Sale and Lease-Back
Transaction, provided that the amount to be applied to the retirement of
Funded Debt of the Company shall be reduced by (a) the principal amount of
any Debt Securities delivered by the Company to the Trustee within 90 days
after such Sale and Lease-Back Transaction for retirement and cancellation,
and (b) the principal amount of Funded Debt, other than Debt Securities
voluntarily retired by the Company within 90 days following such Sale and
Lease-Back Transaction. This restriction will not apply to any Sale and
Lease-Back Transaction (i) involving the taking back of a lease for a
period of three years or less; (ii) involving industrial development or
pollution control financing; or (iii) between the Company and a Subsidiary
or between Subsidiaries. (Section 3.6(b))
"Attributable Debt" means, with respect to any Sale and Lease-Back
Transaction, as of any particular time, the present value discounted at the rate
of interest implicit in the terms of the lease of the obligations of the lessee
under such lease for net rental payments during the remaining term of the lease
(including any period for which such lease has been extended or may, at the
option of the Company, be extended). (Section 1.1.)
"Consolidated Net Assets" means the aggregate amount of assets (less
applicable reserves and other properly deductible items) after deducting
therefrom all current liabilities (excluding any portion thereof constituting
Funded Debt by reason of being renewable or extendable), all as set forth on the
most recent balance sheet of the Person for which such determination is being
made and computed in accordance with generally accepted accounting principles.
(Section 1.1.)
"Funded Debt" means all indebtedness for money borrowed classified as
long-term debt on the most recent audited balance sheet (or if incurred
subsequent to the date of such balance sheet, would have been so classified) of
the Person for which the determination is being made. (Section 1.1.)
"Principal Property" means all property and equipment located within the
United States of America directly engaged in the manufacturing activities of the
Company and its Subsidiaries, including manufacturing and processing facilities,
except any such property and equipment which the Board of Directors of the
Company declares is not material to the business of the Company and its
Subsidiaries taken as a whole. (Section 1.1.)
"Subsidiary" means any corporation, partnership or other entity of which at
the time of determination the Company owns or controls directly or indirectly
more than 50% of the outstanding shares of voting stock or equivalent interest.
(Section 1.1.)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not merge or consolidate with any other Person or sell,
lease or convey all or substantially all of its assets to any other Person,
unless: (1) either the Company is the continuing corporation or the successor
corporation or the Person which acquires by sale, lease or conveyance
substantially all the assets of the Company is a corporation organized under the
laws of the United States, any State thereof, or the District of Columbia, and
expressly assumes the Company's obligations under the Debt Securities and the
Indenture by supplemental indenture satisfactory to the Trustee, executed and
delivered to the Trustee by such corporation; and (2) the Company, such
successor corporation, or such Person shall not, immediately after giving effect
to the transaction, be in default in the performance of any such covenant or
condition. (Section 9.1.) Upon any such consolidation, merger, sale, lease or
conveyance and following such assumption by the successor corporation, such
successor corporation shall succeed to and be substituted for the Company under
the Indenture and under the Debt Securities. (Section 9.2.)
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the Indenture with respect to Debt Securities of any series: (1) failure to pay
any interest on any Debt Security of that series when due and
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continuance of such default for 30 days; (2) failure to pay principal of or any
premium on any Debt Security of that series when due, either at maturity, upon
any redemption, by declaration, or otherwise; (3) failure to observe or perform
any other of the covenants or agreements of the Company in the Indenture (other
than a covenant the default or breach of which is otherwise specifically dealt
with in the Indenture) continued for 60 days after written notice as provided in
the Indenture; (4) certain events of bankruptcy, insolvency, or reorganization
of the Company; or (5) any other Event of Default provided in a supplemental
indenture with respect to Debt Securities of that series. (Section 5.1.)
If any Event of Default with respect to the Debt Securities of any series
occurs and is continuing, either the Trustee or the holders of at least 25% in
aggregate principal amount of the outstanding Debt Securities of each such
affected series, by written notice to the Company (and to the Trustee if given
by such holders of Debt Securities), may declare the principal amount (or, if
the Debt Securities of that series are Original Issue Discount Debt Securities,
such portion of the principal amount as may be specified in the Prospectus
Supplement relating to such series) and accrued interest of all the Debt
Securities of all such affected series to be due and payable immediately. At any
time after a declaration of acceleration with respect to Debt Securities of any
series has been made, but before a judgment or decree based on such acceleration
has been obtained, the holders of a majority in aggregate principal amount of
outstanding Debt Securities of each such series may, under certain
circumstances, rescind and annul such acceleration. (Section 5.1.)
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default with respect to the Debt Securities of any series, give
to the holders of the Debt Securities of that series notice of all defaults
known to it unless such default shall have been cured; except that in the case
of a default in payment of the principal of the Debt Securities of such series,
or in the payment of any sinking fund installment of such series, the Trustee
may withhold the notice if and so long as it in good faith determines that
withholding such notice is in the interests of the holders of the Debt
Securities of such series. (Section 5.11.)
The Indenture provides that the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series affected
(with all such series voting as a single class) may direct the time, method, and
place of conducting any proceeding for any remedy available to the Trustee for
such series, or exercising any trust or power conferred on such Trustee.
(Section 5.9.)
The holders of a majority in aggregate principal amount outstanding of any
series of Debt Securities by notice to the Trustee may waive, on behalf of the
holders of all Debt Securities of such series, any past default or Event of
Default with respect to such series and its consequences except in respect of a
covenant or provision of the Indenture, which cannot be modified or amended
without the consent of the holders of 100% of Debt Securities of all series
affected. (Section 5.10.)
The Indenture includes a covenant that the Company will file annually with
the Trustee a certificate as to the Company's compliance with all conditions and
covenants of the Indenture. (Section 3.5.)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee to
enter into one or more supplemental indentures without the consent of the
holders of any of the Debt Securities in order to: (1) transfer or pledge any
property to the Trustee as security for the Debt Securities of any series; (2)
evidence the succession of another corporation to the Company and the assumption
of the covenants, agreements and obligations of the Company by a successor to
the Company; (3) add to the covenants of the Company such further covenants or
provisions so as to further protect the holders of Debt Securities; (4) cure any
ambiguity or correct or supplement any defective or inconsistent provisions or
to make any other provisions as the Company deems necessary or desirable,
provided such action does not materially adversely affect the interests of the
holders of Debt Securities of any series; (5) establish the form or terms of
Debt Securities; or (6) evidence and provide for a successor trustee. (Section
8.1.)
The Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the outstanding Debt Securities affected by such supplemental
indenture (voting as one class), to execute supplemental indentures adding any
provisions to or
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changing or eliminating any of the provisions of the Indenture or any
supplemental indenture or modifying the rights of the holders of Debt Securities
of each such series, except that no such supplemental indenture may, without the
consent of the holders of 100% of Debt Securities of all series affected: (a) as
to any Debt Security, (i) extend its final maturity; (ii) reduce its principal
amount; (iii) reduce its rate or extend the time of payment of interest on it;
(iv) reduce its redemption premium; (v) change the currency or currency unit in
which it or any premium or interest is payable; (vi) reduce the amount of
principal payable upon acceleration of the maturity of any Original Issue
Discount Security; (vii) alter the provisions of Section 11.11 or 11.12 of the
Indenture; (viii) affect the right to institute suit for the enforcement of any
payment on or with respect to it or any right of repayment at the option of the
holder of it; or (b) reduce below a majority the percentage in principal amount
of the outstanding Debt Securities the consent of the holders of which is
required for any such supplemental indenture. (Section 8.2.)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company can discharge or defease its obligations under the Indenture
while Debt Securities remain Outstanding under three sets of circumstances:
(1) Outstanding Debt Securities Due within One Year. Paragraph (A)(c)
of Section 10.1 allows the Company, under terms satisfactory to the
Trustee, to discharge certain obligations (except for certain obligations
to register the transfer or exchange of such Debt Securities; to replace
temporary, mutilated, destroyed, lost, or stolen Debt Securities; or to
maintain an office or agency in respect of the Debt Securities) to holders
of Debt Securities not already delivered to the Trustee for cancellation
which have either become due and payable or are by their terms due and
payable within one year or scheduled for redemption within one year by
depositing irrevocably with the Trustee cash, U.S. Government Obligations,
or a combination thereof as trust funds in an amount certified to be
sufficient to pay at maturity or upon redemption the principal of, premium
(if any), and interest on such Debt Securities (and related unmatured
Coupons).
(2) Defeasance. Defeasance under paragraph (B) of Section 10.1 would
discharge the Company from any and all of its obligations to holders of any
series of Debt Securities under the Indenture (except for certain
obligations to register the transfer or exchange of such Debt Securities;
to replace temporary, mutilated, destroyed, lost, or stolen Debt
Securities; or to maintain an office or agency in respect of the Debt
Securities) by depositing irrevocably with the Trustee cash, U.S.
Government Obligations, or a combination thereof as trust funds in an
amount certified to be sufficient to pay at maturity or upon redemption the
principal of, premium (if any), and interest on such Debt Securities (and
related unmatured Coupons). A trust to effect defeasance under this
paragraph may be established only if, among other things, the Company
delivers to the Trustee an opinion of counsel to the effect that the
holders of such Debt Securities will not recognize income, gain, or loss
for Federal income tax purposes as a result of such defeasance and that
defeasance will not otherwise alter such holders' tax treatment of
principal, premium (if any), and interest payments on the Debt Securities;
such opinion must be based on a ruling of the Internal Revenue Service or a
change in Federal income tax law occurring after the Indenture's date, as
such a result would not occur under current tax law.
(3) Covenant Defeasance. Paragraph (C) of Section 10.1 allows the
Company, under terms satisfactory to the Trustee, to be released from its
obligations with respect to all Outstanding Debt Securities restricted by
Sections 3.6 and 9.1 of the Indenture (which contain the covenants limiting
liens, sale and lease-back transactions, and consolidations, mergers, and
asset sales described above), and to omit to comply with such sections
without creating an Event of Default, by depositing irrevocably with the
Trustee cash, U.S. Government Obligations, or a combination thereof as
trust funds in an amount certified to be sufficient to pay at maturity or
upon redemption the principal of, premium (if any), and interest on all
Outstanding Debt Securities (and related unmatured Coupons) ("covenant
defeasance"). A trust to effect covenant defeasance may be established only
if, among other things, the Company delivers to the Trustee an opinion of
counsel to the effect that the holders of such Debt Securities will not
recognize income, gain, or loss for Federal income tax purposes as a result
of such covenant defeasance and that covenant defeasance will not otherwise
alter such holders' tax treatment of principal, premium (if any), and
interest payments on the Debt Securities.
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THE TRUSTEE
The First National Bank of Chicago is the Trustee under the Indenture. The
Company maintains banking and other commercial relationships with the Trustee in
the ordinary course of business.
The Indenture provides that in the event a corporation succeeds to the
corporate trust business of the Trustee, the Company may elect to remove such
successor to the Trustee. (Section 6.12.)
PLAN OF DISTRIBUTION
The Company may sell Debt Securities being offered by this Prospectus: (1)
directly to purchasers; (2) to or through agents; (3) to or through dealers; (4)
to or through underwriters; or (5) through a combination of such methods. Any
such agents, dealers, or underwriters may include Morgan Stanley & Co.,
Incorporated, Goldman, Sachs & Co., Lehman Brothers Inc. and J.P. Morgan
Securities Inc. (collectively, the "Underwriters").
The Company or designated agents may solicit offers to purchase Debt
Securities from time to time. The applicable Prospectus Supplement will set
forth the name of and commission payable to any such agent (which may be deemed
to be an "underwriter" as that term is defined in the Act) involved in the offer
or sale of Debt Securities. Unless the Prospectus Supplement indicates
otherwise, any such agent will be acting on a best efforts basis for the period
of its appointment.
If the Company uses a dealer to sell Debt Securities, the Company will sell
them to such dealer as principal. The dealer may then resell such Debt
Securities to the public at prices it determines at the time of resale. Any such
dealer may be deemed to be an "underwriter" as that term is defined in the Act.
The applicable Prospectus Supplement will set forth the name of any such dealer,
the amount of Debt Securities purchased, and the price paid.
If the Company uses one or more underwriters to sell Debt Securities, the
Company will enter into an underwriting agreement with such underwriters at the
time of sale to them. The applicable Prospectus Supplement will set forth any
such underwriter's name and the transaction's terms. The underwriter(s) will use
the Prospectus Supplement to make resales of Debt Securities.
Agents, dealers, or underwriters may enter into agreements with the Company
which require the Company to indemnify them against certain civil liabilities,
including liabilities under the Act. Such agents, dealers, or underwriters and
certain of their affiliates may engage in investment banking, commercial banking
or other transactions with, and perform services for, the Company and certain of
its affiliates in the ordinary course of business.
The Company may authorize agents and underwriters to solicit offers by
certain institutions to purchase Debt Securities from the Company pursuant to
Delayed Delivery Contracts ("Contracts") providing for payment and delivery on
the date stated in the Prospectus Supplement. Each Contract will be for an
amount not less than, and (unless the Company agrees otherwise) the aggregate
principal amount of Debt Securities sold pursuant to Contracts shall equal, the
respective amounts stated in the Prospectus Supplement. Contracts may be made
with commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions, but shall in all cases be subject to Company approval. Contracts
will be unconditional, except that any related sale of Debt Securities must at
the time of delivery be permitted under the laws of any jurisdiction in the
United States to which such institution is subject. The Prospectus Supplement
sets forth the commissions payable to underwriters and agents soliciting
purchases of Debt Securities pursuant to such Contracts.
The Company does not intend to list Debt Securities on any stock exchange.
The Company has, however, been advised by the Underwriters that they currently
intend to make a market in Debt Securities. No assurance can be given, however,
that the Underwriters will make such a market in Debt Securities or as to Debt
Securities' liquidity.
The accompanying Prospectus Supplement sets forth the place and time of
delivery for Debt Securities.
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LEGAL MATTERS
Certain matters relating to the legality of Debt Securities offered hereby
will be passed upon for the Company by Ogden Newell & Welch, Louisville,
Kentucky, and for any purchasers, agents, dealers, or underwriters by Davis Polk
& Wardwell, New York, New York. James S. Welch is a partner in the law firm of
Ogden Newell & Welch and is a director of the Company.
The Company is advised that as of August 1, 1998, members of Ogden Newell &
Welch owned 5,565 shares of Class A Common Stock and 2,585 shares of Class B
Common Stock of the Company.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended April
30, 1998, have been so incorporated in reliance on the reports of Coopers &
Lybrand, L.L.P., independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The financial statements similarly incorporated in this Prospectus by
reference to all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act (before the filing of a
post-effective amendment which deregisters all securities then remaining unsold)
are or will be so incorporated in reliance upon the reports of
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand, L.L.P.) and any other
independent accountants, relating to such financial statements and upon the
authority of such independent accountants as experts in auditing and accounting
in giving such reports to the extent that the particular firm has examined such
financial statements and consented to the use of their reports thereon.
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