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P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated January 6, 1994)
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U.S. $100,000,000
Carpenter Technology Corporation
Medium-Term Notes, Series A
Due from Nine Months to 30 Years from Date of Issue
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Carpenter Technology Corporation (the "Company") may offer from time to time its
Medium-Term Notes, Series A (the "Notes") in an aggregate principal amount not
to exceed U.S. $100,000,000 (or, if any Notes are to be Original Issue
Discount Notes, Foreign Currency Notes or Indexed Notes (as each such term is
defined under "Description of Notes"), such principal amount as shall result
in an initial aggregate offering price equivalent to no more than U.S.
$100,000,000), subject to reduction as a result of the sale of other
Debt Securities; provided, however, that the Company may increase the
foregoing maximum principal amount if in the future it determines that
it may wish to sell additional Notes. See "Description of Notes" and
"Plan of Distribution of Notes". Each Note will mature from nine
months to 30 years from its date of original issuance ( "Issue
Date"), as selected by the initial purchaser and agreed to by the
Company. The Notes may be subject to optional redemption, or
obligate the Company to redeem or purchase the Notes pursuant to
sinking fund or analogous provisions or at the option of the
Holder thereof, in each case as indicated in the applicable
Pricing Supplement. Unless otherwise indicated in the applicable
Pricing Supplement, the Notes will be issued in fully registered
form in denominations of U.S. $100,000 and integral multiples
of U.S. $1,000 in excess thereof or, in the case of Foreign
Currency Notes, in such minimum denominations not less than
the equivalent of U.S. $100,000 and such other denomination
or denominations in excess thereof as shall be set forth in
the applicable Pricing Supplement. See "Special Provisions
Relating to Foreign Currency Notes".
The interest rate or interest rate formula, if any, currency or currency unit,
issue price, Stated Maturity, redemption provisions, if any, and other terms
for each Note will be established by the Company at the date of issuance of
such Note and will be indicated in a Pricing Supplement. Each interest-
bearing Note will bear interest at either (a) a fixed rate (a "Fixed Rate
Note") or (b) a variable rate determined by reference to an interest rate
formula (a "Floating Rate Note"), which may be adjusted by adding or
subtracting the Spread or multiplying by the Spread Multiplier, unless
otherwise indicated in the applicable Pricing Supplement. Unless
otherwise indicated in the applicable Pricing Supplement, the
interest rate formula will be the Commercial Paper Rate, the Prime
Rate, the CD Rate, the Federal Funds Rate, LIBOR or the Treasury
Rate. A Fixed Rate Note may pay a level amount in respect of both
principal and interest amortized over the life of such Note (an
"Amortizing Note"). Interest rates, or interest rate formulas, are
subject to change by the Company from time to time, but no such
change will affect any Note already issued or as to which an offer
to purchase has been accepted by the Company.
Notes may be represented either by a certificate issued in definitive form
( "Certificated Note") or by a permanent global Security or Securities,
registered in the name of The Depository Trust Company, as Depositary, or a
nominee of the Depositary (a "Book-Entry Note"), as specified in the
applicable Pricing Supplement. Beneficial interests in Book-Entry
Notes will only be evidenced by, and transfers thereof will only
be effected through, records maintained by the Depositary and
its participants. Except as described under "Description of
Notes -- Book-Entry Notes", owners of beneficial
interests in a Book-Entry Note will not be entitled to
receive physical delivery of Notes in definitive
form and will not be considered the Holders
thereof.
Unless otherwise indicated in the applicable Pricing Supplement, a Foreign
Currency Note will not be sold in, or to a resident of, the country of the
Specified Currency in which such Note is denominated. See
"Special Provisions Relating to Foreign Currency Notes".
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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Price to Distributors' Commissions Proceeds
Public(1) or Discounts(2) to Company(2)(3)
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<S> <C> <C> <C>
Per Note 100% .125% - .750% 99.250% - 99.875%
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Total(4) U.S. $100,000,000 U.S. $125,000 - U.S. $750,000 U.S. $99,250,000 - U.S. $99,875,000
- ------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Unless otherwise indicated in the applicable Pricing Supplement, each Note
will be issued at 100% of its principal amount. If so indicated in the
applicable Pricing Supplement, Notes may be resold by the Distributors,
acting as principals at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices.
(2) Unless otherwise specified in the applicable Pricing Supplement, the Company
will pay a commission (or grant a discount) to CS First Boston Corporation
and J.P. Morgan Securities Inc. (the "Distributors") of .125% to .750% of
the principal amount of any Note, depending on its Stated Maturity, sold
through any such Distributor, acting as agent (or sold to such Distributor
as principal in circumstances in which no other discount is agreed).
(3) Before deducting other expenses payable by the Company estimated at U.S.
$215,000.00.
(4) Or the equivalent thereof in other currencies or currency units.
------------------
The Notes are being offered on a continuing basis by the Company through the
Distributors, each of which has agreed to use reasonable efforts to solicit
offers to purchase the Notes. The Company also may sell Notes to any Distributor
on its own behalf at negotiated discounts. The Company reserves the right to
sell Notes directly on its own behalf or to additional distributors and to
appoint additional agents for the purpose of soliciting offers to purchase
Notes. The Company also reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company or any Distributor may reject any
offer to purchase Notes, in whole or in part. The Notes will not be listed on
any securities exchange, unless otherwise indicated in the applicable Pricing
Supplement, and there can be no assurance that the Notes offered by this
Prospectus Supplement will be sold or that there will be a secondary market for
the Notes. See "Plan of Distribution of Notes."
CS First Boston J.P. Morgan Securities Inc.
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The date of this Prospectus Supplement is January 12, 1994.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE DISTRIBUTORS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
IMPORTANT CURRENCY EXCHANGE INFORMATION
Unless otherwise indicated in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the currency or currency unit
specified in the applicable Pricing Supplement (the "Specified Currency"). At
the present time there are limited facilities in the United States for the
conversion of U.S. dollars into foreign currencies or currency units and vice
versa, and banks do not generally offer non-U.S. dollar checking or savings
account facilities in the United States. If requested on or prior to the fifth
Market Day preceding the date of delivery of the Notes, or by such other day as
determined by the Distributor who presented such offer to purchase Notes to the
Company, such Agent is prepared to arrange for the conversion of U.S. dollars
into the Specified Currency to enable the purchasers to pay for the Notes. Each
such conversion will be made by such Agent on such terms and subject to such
conditions, limitations and charges as such Agent may from time to time
establish in accordance with its regular foreign exchange practices. All costs
of exchange will be borne by the purchasers of the Foreign Currency Notes.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements the description of the general terms and conditions of Debt
Securities set forth under the heading "Description of Debt Securities" in the
Prospectus, to which description reference is hereby made. Capitalized terms not
defined under this heading or in the Glossary contained in this Prospectus
Supplement have the meanings assigned to them in the Prospectus or the
Indenture.
GENERAL
The Notes offered hereby will be issued under the Indenture referred to in
the accompanying Prospectus between the Company and Morgan Guaranty Trust
Company of New York, as Trustee (the "Trustee"). The Notes constitute a single
series for purposes of the Indenture, limited to an aggregate principal amount
not to exceed $100,000,000 (or, if any Notes are to be Original Issue Discount
Notes or are to be denominated in one or more foreign currencies or currency
units ("Foreign Currency Notes") or with amounts payable in respect of principal
of or any premium or interest on the Notes to be determined by reference to the
value, rate or price of one or more specified indices ("Indexed Notes"), such
principal amount as shall result in an aggregate initial offering price
equivalent to no more than $100,000,000). The foregoing limit may be increased
by the Company if in the future it determines that it may wish to sell
additional Notes. The Notes offered hereby may be reduced by an amount equal to
the aggregate initial offering price of any other Debt Securities (as defined in
the accompanying Prospectus) sold by the Company (including any other series of
medium-term notes). See "Plan of Distribution of Notes". For a description of
the rights attaching to different series of Securities (including the Notes)
under the Indenture, see "Description of Debt Securities" in the Prospectus.
Each Note will mature from nine months to 30 years from its Issue Date, as
selected by the initial purchaser and agreed to by the Company.
The Notes will be issuable only in fully registered form and, unless
otherwise indicated in the applicable Pricing Supplement, only in denominations
of $100,000 and integral multiples of $1,000 in excess thereof, or, in the case
of Foreign Currency Notes, in such minimum denomination not less than the
equivalent of $100,000 and such other denomination or denominations in excess
thereof as shall be set forth in the applicable Pricing Supplement. See "Special
Provisions Relating to Foreign Currency Notes".
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Notes will initially be represented either by a Certificated Note or by a
Book-Entry Note, as indicated in the applicable Pricing Supplement. See
"Description of Notes -- Book-Entry Notes" below.
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of and any premium
and interest on the Notes will be made in U.S. dollars in the manner indicated
in the accompanying Prospectus and this Prospectus Supplement. If any of the
Notes are to be denominated in one or more currencies or currency units other
than U.S. dollars, additional information pertaining to the terms of such Notes
and other matters relevant to the Holders thereof will be described in the
applicable Pricing Supplement. See "Payment Currency" and "Special Provisions
Relating to Foreign Currency Notes" below.
In addition, Notes may be issued as Original Issue Discount Notes, as
Indexed Notes or as Amortizing Notes. See "Original Issue Discount Notes",
"Indexed Notes" and "Amortizing Notes" below.
The applicable Pricing Supplement will indicate either that a Note cannot
be redeemed prior to its Stated Maturity or that a Note will be redeemable at
the option of the Company on or after a specified date prior to its Stated
Maturity at a specified price or prices (which may include a premium), together
with accrued interest to the date of redemption. In addition, the applicable
Pricing Supplement will indicate either that the Company will not be obligated
to redeem a Note pursuant to any sinking fund or analogous provisions or at the
option of the Holder thereof or that the Company will be so obligated. If the
Company will be so obligated, the applicable Pricing Supplement will indicate
the period or periods within which and the price or prices at which the
applicable Notes will be redeemed, in whole or in part, pursuant to such
obligation and the other detailed terms and provisions of such obligation.
Payments of principal of, and any premium and interest on, Book-Entry Notes
will be made to the Depositary, or its nominee, as Holder thereof, in accordance
with arrangements then in effect between the Trustee and the Depositary. Unless
otherwise indicated in an applicable Pricing Supplement, payments of principal
of, and any premium and interest on, Certificated Notes denominated and payable
in U.S. dollars will be made in immediately available funds at the Corporate
Trust Office of Morgan Guaranty Trust Company of New York in the Borough of
Manhattan, The City of New York, if the Note is presented to the Paying Agent in
time for the Paying Agent to make such payments in such funds in accordance with
its normal procedures; except that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register or by wire
transfer to an account maintained by such Holder with a bank located in the
United States, provided such Holder shall have provided in writing to the
Trustee, on or prior to the relevant Regular Record Date, appropriate payment
instructions. Notwithstanding the foregoing, the Holder of $10,000,000 or more
in aggregate principal amount of Certificated Notes denominated and payable in
U.S. dollars and having the same Interest Payment Date shall be entitled to
receive such payments by wire transfer of immediately payable funds to an
account maintained by such Holder with a bank located in the United States, if
the Holder shall have provided in writing to the Trustee, on or prior to the
relevant Regular Record Date, appropriate payment instructions. With respect to
payments on Foreign Currency Notes, see "Payment Currency".
Certificated Notes may be presented for registration of transfer or
exchange at the Corporate Trust Office of Morgan Guaranty Trust Company of New
York in the Borough of Manhattan, The City of New York. No service charge will
be made for any registration of transfer or exchange of Certificated Notes, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. With respect to
registration of transfer and exchange of Book-Entry Notes see "Description of
Notes -- Book-Entry Notes" below and "Description of Debt Securities -- Global
Securities" in the accompanying Prospectus.
Interest rates, interest rate bases and various other variable terms of the
Notes described herein are subject to change by the Company from time to time,
but no such change will affect any Note already issued or as to which an offer
to purchase has been accepted by the Company.
Unless otherwise indicated in the applicable Pricing Supplement, Fixed Rate
Notes denominated and payable in U.S. dollars will be subject to the provisions
of the Indenture described in the Prospectus under "Description of Debt
Securities -- Defeasance and Covenant Defeasance".
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<PAGE> 4
PAYMENT CURRENCY
The Company is obligated to make payments of principal of and any premium
and interest on Foreign Currency Notes in the Specified Currency (or, if such
Specified Currency is not at the time of such payment legal tender for the
payment of public and private debts, in such other coin or currency of the
country which issued such Specified Currency as at the time of such payment is
legal tender for the payment of such debts). Any such amounts paid by the
Company will, unless otherwise specified in the applicable Pricing Supplement,
be converted by the Exchange Rate Agent to U.S. dollars for payment to Holders.
Principal of, and any premium and interest on, a Foreign Currency Note paid in
U.S. dollars will be paid in the manner specified in the accompanying Prospectus
and this Prospectus Supplement for interest on Notes denominated and payable in
U.S. dollars.
Unless otherwise specified in the applicable Pricing Supplement, any U.S.
dollar amount to be received by a Holder of a Foreign Currency Note will be
based on the highest bid quotation in The City of New York received by the
Exchange Rate Agent at approximately 11:00 A.M., New York City time, on the
second Market Day preceding the applicable payment date from three recognized
foreign exchange dealers (one of which may be the Exchange Rate Agent) selected
by the Exchange Rate Agent and approved by the Company for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on such
payment date in the aggregate amount of the Specified Currency payable to all
Holders of Foreign Currency Notes scheduled to receive U.S. dollar payments and
at which the applicable dealer commits to execute a contract. If three such bid
quotations are not available, payments will be made in the Specified Currency.
All currency exchange costs will be borne by the Holder of the Foreign Currency
Note by deductions from such payments.
Notwithstanding the foregoing, unless otherwise specified in the applicable
Pricing Supplement, a Holder of a Foreign Currency Note may elect to receive
payment of the principal of and any premium and interest on such Note in the
Specified Currency by transmitting a written request for such payment to the
Trustee at its Corporate Trust Office in the Borough of Manhattan, The City of
New York on or prior to the Regular Record Date or at least sixteen days prior
to Maturity, as the case may be. Such request may be in writing (mailed or hand
delivered) or by cable, telex or other form of facsimile transmission. A Holder
of a Foreign Currency Note may elect to receive payment in the Specified
Currency for all principal and any premium and interest payments and need not
file a separate election for each payment. Such election will remain in effect
until revoked by written notice to the Trustee, but written notice of any such
revocation must be received by the Trustee on or prior to the relevant Regular
Record Date or at least sixteen days prior to Maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of Book-Entry 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 Depositary's nominee
("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 of such election
on or prior to the third Market Day after such record date. The Depositary will
notify the Paying Agent of such election on or prior to the fifth Market 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.
Interest on a Foreign Currency Note paid in the Specified Currency will be
paid by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register. All checks payable in a Specified
Currency will be drawn on a bank located outside the United States. Payments at
Maturity of principal of and any premium and interest on Foreign Currency Notes
in the Specified Currency will be made
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<PAGE> 5
by wire transfer to an account with a bank located in the country of the
Specified Currency (or, in the case of European Currency Units ("ECUs"),
Brussels), as shall have been designated at least fifteen days prior to Maturity
by the Holder, provided that the Note is presented at the Corporate Trust Office
of the Trustee in the Borough of Manhattan, The City of New York in time for
such Paying Agent to make such payments in such funds in accordance with its
normal procedures.
If a Specified Currency is not available for the payment of principal or
any premium or interest with respect to a Foreign Currency Note due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, the Company will be entitled to satisfy its obligations to Holders of
Foreign Currency Notes by making such payment in U.S. dollars on the basis of
the Market Exchange Rate on the last date prior to the relevant payment date
that such Specified Currency was available (the "Conversion Date"). Any payment
made under such circumstances in U.S. dollars where the required payment is in
other than U.S. dollars will not constitute an Event of Default under the
Indenture.
If payment in respect of a Note is required to be made in any currency unit
(e.g., ECU), and such currency unit is unavailable due to the imposition of
exchange controls or other circumstances beyond the Company's control, then the
Company will be entitled, but not required, to make any payments in respect of
such Note in U.S. dollars until such currency unit is again available. The
amount of each payment in U.S. dollars shall be computed on the basis of the
equivalent of the currency unit in U.S. dollars, which shall be determined by
the Company or its agent on the following basis. The component currencies of the
currency unit for the purpose (the "Component Currencies" or, individually, a
"Component Currency") shall be the currency amounts that were components of the
currency unit as of the last day on which the currency unit was used. The
equivalent of the currency unit in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Component Currencies. The U.S.
dollar equivalent of each of the Component Currencies shall be determined by the
Company or such agent on the basis of the most recently available Market
Exchange Rate for each such Component Currency, or as otherwise indicated in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above made by the Company or its agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the Holders of Notes.
INTEREST
Each interest-bearing Note will bear interest from and including its Issue
Date or from and including the most recent Interest Payment Date with respect to
which interest on such Note (or any predecessor Note) has been paid or duly
provided for to, but excluding, the relevant Interest Payment Date at the fixed
rate per annum, or at the rate per annum determined pursuant to the interest
rate formula, stated therein and in the applicable Pricing Supplement until the
principal thereof is paid or made available for payment. Interest payments, if
any, will be in the amount of interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including the date of issue, if no interest has
been paid with respect to such Note) to, but excluding, the applicable Interest
Payment Date. However, unless otherwise specified in the applicable Pricing
Supplement, in the case of Floating Rate Notes on which the interest rate is
reset daily or weekly, the interest payments (other than interest payments on
any date on which principal is payable) will include interest accrued from, but
excluding, the second preceding Regular Record Date (or from and including the
date of issue, if no interest has been
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<PAGE> 6
paid with respect to such Note), through, and including, the Regular Record Date
next preceding the applicable Interest Payment Date, except that interest paid
at Maturity will include interest accrued to, but excluding, such date.
Interest, if any, will be payable on each Interest Payment Date and at
Maturity; see "Description of Notes -- General". Interest will be payable
generally to the person (which, in the case of a Book-Entry Note, shall be the
Depositary) in whose name a Note (or any predecessor Note) is registered at the
close of business on the Regular Record Date next preceding each Interest
Payment Date; provided, however, that interest payable at Maturity will be
payable to the person (which, in the case of a Book-Entry Note, shall be the
Depositary) to whom principal shall be payable. Unless otherwise indicated in
the applicable Pricing Supplement, the first payment of interest on any Note
originally issued between a Regular Record Date and an Interest Payment Date
will be made on the second Interest Payment Date following the Issue date of
issue of such Note to the registered owner on the Regular Record Date
immediately preceding such Interest Payment Date. With respect to payments of
interest on Book-Entry Notes, see "Description of Notes -- Book-Entry Notes".
FIXED RATE NOTES
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Note. Unless
otherwise indicated in the applicable Pricing Supplement, the Interest Payment
Dates with respect to Fixed Rate Notes other than Amortizing Notes shall be
January 15 and July 15 of each year and at Maturity and the Regular Record Dates
for such Notes shall be the January 1 and July 1 next preceding the relevant
Interest Payment Dates. Unless otherwise indicated in the applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity of a Fixed Rate Note falls on
a day that is not a Market Day, the related payment of principal, premium, if
any, or interest will be made on the next succeeding Market Day as if made on
the date such payment was due, and no interest will accrue on the amount so
payable for the period from and after such Interest Payment Date or Maturity, as
the case may be.
FLOATING RATE NOTES
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis for such Floating Rate Note. Such basis may be:
(a) the Commercial Paper Rate, in which case such Note will be a Commercial
Paper Rate Note, (b) the Prime Rate, in which case such Note will be a Prime
Rate Note, (c) the CD Rate, in which case such Note will be a CD Rate Note, (d)
the Federal Funds Rate, in which case such Note will be a Federal Funds Rate
Note, (e) LIBOR, in which case such Note will be a LIBOR Note, (f) the Treasury
Rate, in which case such Note will be a Treasury Rate Note, or (g) such other
interest rate basis or formula as may be agreed to between the Company and the
purchaser and set forth in the applicable Pricing Supplement. In addition, a
Floating Rate Note may bear interest at the lowest or highest or average of two
or more interest rate formulae. The applicable Pricing Supplement for a Floating
Rate Note also will specify the Spread or Spread Multiplier, if any, and the
maximum or minimum interest rate limitation, if any, applicable to each Note. In
addition, such Pricing Supplement will define or particularize for each Floating
Rate Note the following terms, if applicable: Calculation Agent, Calculation
Dates, Initial Interest Rate, Interest Payment Dates, Regular Record Dates,
Index Maturity, Interest Determination Dates and Interest Reset Dates with
respect to such Note. See "Glossary" for definitions of certain terms used in
this Prospectus Supplement.
The rate of interest on a Floating Rate Note in effect on any day will be
(a) if such day is an Interest Reset Date with respect to such Floating Rate
Note, the interest rate on such Floating Rate Note determined as of the Interest
Determination Date pertaining to such Interest Reset Date, or (b) if such day is
not an Interest Reset Date with respect to such Floating Rate Note, the interest
rate on such Floating Rate Note determined as of the Interest Determination Date
pertaining to the immediately preceding Interest Reset Date with respect to such
Floating Rate Note; provided, however, that (i) the interest rate in effect from
the Issue
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Date of a Floating Rate Note (or that of a predecessor Note) to but excluding
the first Interest Reset Date with respect to such Floating Rate Note will be
the Initial Interest Rate (as set forth in the applicable Pricing Supplement),
and (ii) the interest rate in effect for the ten days immediately prior to
Maturity of a Floating Rate Note will be that in effect on the tenth day
preceding such Maturity. Subject to applicable provisions of law and except as
described herein, the rate of interest on a Floating Rate Note on any Interest
Reset Date with respect thereto will be the rate of interest determined with
respect to the Interest Determination Date pertaining to such Interest Reset
Date as determined in accordance with the applicable provisions described below.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (each an "Interest Reset
Date"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, the Interest Reset Date will be,
in the case of Floating Rate Notes which reset daily, each Market Day; in the
case of Floating Rate Notes (other than Treasury Rate Notes) which reset weekly,
the Wednesday of each week; in the case of Treasury Rate Notes which reset
weekly, except as provided in the following paragraph, the Tuesday of each week;
in the case of Floating Rate Notes which reset monthly, the third Wednesday of
each month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes which reset semi-annually, the third Wednesday of two months of each year,
as indicated 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 indicated in the applicable Pricing Supplement. If any Interest Reset Date
for any Floating Rate Note would otherwise be a day that is not a Market Day
with respect to such Note, such Interest Reset Date shall be the next succeeding
Market Day with respect to such Note, except that if such Note is a LIBOR Note
and the next succeeding Market Day falls in the next succeeding calendar month,
such Interest Reset Date shall be the immediately preceding Market Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
a Prime Rate Note (the "Prime Rate Interest Determination Date"), a CD Rate Note
(the "CD Rate Interest Determination Date") or a Federal Funds Rate Note (the
"Federal Funds Interest Determination Date") will be the second Market Day
preceding the Interest Reset Date with respect to such Note. The Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note (the
"LIBOR Interest Determination Date") will be the second London Market Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day on which Treasury bills are auctioned for
the week in which such Interest Reset Date falls, or if no auction is held for
such week, the Monday of such week (or if Monday is a legal holiday, the next
succeeding Market Day) and the Interest Reset Date will be the Market Day
immediately following such Treasury Interest Determination Date. Treasury bills
are usually sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the following Tuesday,
except that such auction may be held on the preceding Friday. If an auction for
such week is held on Monday or the preceding Friday, such Monday or preceding
Friday shall be the Treasury Interest Determination Date for such week, and the
Interest Reset Date for such week shall be the Tuesday of such week (or, if such
Tuesday is not a Market Day, the next succeeding Market Day). If the auction for
such week is held on any day of such week other than Monday, then such day shall
be the Treasury Interest Determination Date and the Interest Reset Date for such
week shall be the next succeeding Market Day.
A Floating Rate Note may have either or both of the following: (a) a
maximum numerical interest rate limitation, or ceiling, on the rate of interest
which may accrue during any interest period; and (b) a minimum numerical
interest rate limitation, or floor, on the rate of interest which may accrue
during any interest period. In addition to any maximum interest rate which may
be applicable to any Floating Rate Note, the interest rate on such Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by United States law of general application. Under
present New York law the maximum rate of interest, with certain exceptions, is
25% per annum on a simple interest basis. The limit may not apply to Notes in
which $2,500,000 or more has been invested.
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<PAGE> 8
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, the Interest Payment Date will be, in the case of Floating
Rate Notes which reset daily, weekly or monthly, the third Wednesday of each
month or on the third Wednesday of March, June, September and December of each
year (as indicated in the applicable Pricing Supplement); in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December of each year; in the case of Floating Rate Notes which
reset semi-annually, the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement; and in the case of Floating Rate
Notes which reset annually, the third Wednesday of the month specified in the
applicable Pricing Supplement. If, pursuant to the preceding sentence, an
Interest Payment Date with respect to any Floating Rate Note (other than an
Interest Payment Date at Maturity) would otherwise be a day that is not a Market
Day with respect to such Note, such Interest Payment Date shall be the next
succeeding Market Day with respect to such Note, except that if such Note is a
LIBOR Note and the next succeeding Market Day falls in the next succeeding
calendar month, such Interest Payment Date shall be the immediately preceding
Market Day. If the Maturity of a Floating Rate Note falls on a day that is not a
Market Day, the payment of principal, premium, if any, and interest will be made
on the next succeeding Market Day, and no interest on such payment shall accrue
from and after such Maturity. Unless otherwise indicated in the applicable
Pricing Supplement, the Regular Record Date with respect to Floating Rate Notes
shall be the date 15 calendar days prior to each Interest Payment Date, whether
or not such date shall be a Market Day.
Unless otherwise specified in the applicable Pricing Supplement, the
interest accrued from and including the date of issue, or from and including the
last date to which interest has been paid or duly provided for, is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day in such period from and including the date of issue, or
from and including the last date to which interest has been paid or duly
provided for, to but excluding the date for which accrued interest is being
calculated. Unless otherwise specified in the Note and the applicable Pricing
Supplement, the interest factor (expressed as a decimal rounded upwards, if
necessary, as described below) for each such day is computed by dividing the
interest rate (expressed as a decimal rounded upwards, if necessary, as
described below) applicable to such date by 360, (or, in the case of Treasury
Rate Notes, by the actual number of days in the year). The interest factor for
Notes for which two or more interest rate formulae are applicable will be
calculated in each period in the same manner as if only the lowest, highest or
average of, as the case may be, such interest rate formulae applied.
Unless otherwise specified in a Pricing Supplement, all percentages
resulting from any calculation on Floating Rate Notes will be rounded, upwards
if necessary, to the nearest one-hundred thousandth of a percentage point, with
five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544)
being rounded to 9.87654% (or .0987654)), and all dollar amounts used in or
resulting from such calculation on Floating Rate Notes will be rounded to the
nearest cent or, in the case of Foreign Currency Notes, the nearest unit (with
one-half cent or five one-thousandths of a unit being rounded upwards).
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 which will become effective as a result of a determination made on
the most recent Interest Determination Date with respect to such Floating Rate
Note.
Commercial Paper Rate Notes. Each Commercial Paper Rate Note will bear
interest at the interest rate (calculated with reference to the Commercial Paper
Rate and the Spread or Spread Multiplier, if any) specified on the face of such
Commercial Paper Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) of
the rate on such date for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15(519) under the heading
"Commercial Paper". In the event that such rate is not published prior to 3:00
P.M. New York City time, on the Calculation Date pertaining to such Commercial
Paper Interest Determination Date, then the Commercial Paper Rate shall be the
Money Market Yield of the rate on such Commercial Paper Interest Determination
Date for commercial
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<PAGE> 9
paper having the Index Maturity specified in the applicable Pricing Supplement
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
published in either H.15(519) or Composite Quotations, the Commercial Paper Rate
for that Commercial Paper Interest Determination Date shall be the Money Market
Yield of the arithmetic mean, as calculated by the Calculation Agent on such
Calculation Date, of the offered rates, as of 11:00 A.M., New York City time, on
that Commercial Paper Interest Determination Date, of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent
(which may include one or more of the Distributors or their affiliates) for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency; provided, however, that
if fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Commercial Paper Rate will be the
Commercial Paper Rate in effect on such Commercial Paper Interest Determination
Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded
upwards, if necessary, to the next higher one-hundred thousandth of a percentage
point) calculated in accordance with the following formula:
<TABLE>
<S> <C> <C>
Money Market Yield = D X 360 X 100
360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
Prime Rate Notes. Each Prime Rate Note will bear interest at the interest
rate (calculated with reference to the Prime Rate and the Spread or Spread
Multiplier, if any) specified on the face of such Prime Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Interest Determination Date, the
arithmetic mean of the announced 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
Prime Rate Interest Determination Date by three major money center banks in The
City of New York selected by the Calculation Agent. If fewer than three such
quotations are provided, the Prime Rate shall be determined on the basis of the
announced prime rates quoted on the basis of the actual number of days in the
year divided by 360 in The City of New York by three substitute banks or trust
companies organized and doing business under the laws of the United States, or
any state thereof, having total equity capital of at least $500 million and
being subject to supervision or examination by Federal or state authority,
selected by the Calculation Agent to provide such rate or rates; provided,
however, that if the banks or trust companies selected as aforesaid are not
quoting as mentioned in this sentence, the Prime Rate will be the Prime Rate
then in effect on such Prime Rate Interest Determination Date.
CD Rate Notes. Each CD Rate Note will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread or Spread Multiplier,
if any) specified on the face of such CD Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Rate Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15(519) under the heading
"Cds (Secondary Market)". In the event that such rate is not published prior to
3:00 P.M., New York City time, on the Calculation Date pertaining to such CD
Rate Interest Determination Date, then the CD Rate shall be the rate on such CD
Rate Interest Determination Date for negotiable certificates of deposit having
the Index Maturity specified in the applicable Pricing Supplement as published
in Composite Quotations under the heading "Certificates of Deposit". If by 3:00
P.M., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, the CD Rate for that CD
Interest Determination Date shall be calculated by the Calculation Agent and
shall be the arithmetic mean (rounded
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<PAGE> 10
upwards, if necessary, to the next higher one-hundred thousandth of a percentage
point) of the secondary market offered rates, as of 10:00 A.M., New York City
time, on that CD Rate Interest Determination Date, of three leading nonbank
dealers of negotiable U.S. dollar certificates of deposit in The City of New
York selected by the Calculation Agent (which may include one or more of the
Distributors or their affiliates) for negotiable certificates of deposit of
major United States money market banks with a remaining maturity closest to the
Index Maturity specified in the applicable Pricing Supplement in a denomination
of $5,000,000; provided, however, that if fewer than three dealers selected as
aforesaid by the Calculation Agent are quoting as mentioned in this sentence,
the CD Rate will be the CD Rate in effect on such CD Rate Interest Determination
Date.
Federal Funds Rate Notes. Each Federal Funds Rate Note will bear interest
at the interest rate (calculated with reference to the Federal Funds Rate and
the Spread or Spread Multiplier, if any) specified on the face of such Federal
Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Federal Funds (Effective)". In the event that such rate is not
published prior to 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Federal Funds Interest Determination Date, then the Federal
Funds Rate will be the rate on such Federal Funds Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate". If by 3:00 P.M., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, the Federal
Funds Rate for that Federal Funds Interest Determination Date shall be the
arithmetic mean, as calculated by the Calculation Agent on such Calculation
Date, of the rates, prior to 9:00 A.M., New York City time, on that Federal
Funds Interest Determination Date, for the last transaction in overnight Federal
Funds arranged by three leading brokers of Federal Funds transactions in The
City of New York (which may include one or more of the Distributors or their
affiliates) selected by the Calculation Agent; provided, however, that if fewer
than three brokers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the Federal Funds Rate will be the Federal Funds
Rate in effect on such Federal Funds Interest Determination Date.
LIBOR Notes. Each LIBOR Note will bear interest at the interest rate
(calculated with reference to LIBOR and the Spread or Spread Multiplier, if any)
specified on the face of such LIBOR Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions: On each LIBOR Interest Determination Date, LIBOR will be determined
on the basis of the offered rate for deposits in U.S. dollars having the Index
Maturity specified in the applicable Pricing Supplement, commencing on the
second London Market Day immediately following such LIBOR Interest Determination
Date, which appears on the Telerate Page 3750 as of 11:00 A.M., London time, on
that LIBOR Interest Determination Date. If such rate does not so appear on the
Telerate Page 3750, the rate in respect of such LIBOR Interest Determination
Date will be determined on the basis of the rates at which deposits in U.S.
dollars are offered by four major banks in the London interbank market (selected
by the Calculation Agent) at approximately 11:00 A.M., London Time, on the LIBOR
Interest Determination Date next preceding the relevant Interest Reset Date to
prime banks in the London interbank market for a period of the Index Maturity
commencing on that Interest Reset Date and in a principal amount equal to an
amount not less than $1,000,000 that is representative for a single transaction
in such market at such time. In such case, the Calculation Agent will request
the principal London office of each of the aforesaid major banks to provide a
quotation of such rate. If at least two such quotations are provided in respect
of such LIBOR Interest Determination Date, the rate for that Interest Reset Date
will be the arithmetic mean of the quotations, and, if fewer than two quotations
are provided as requested in respect of such LIBOR Interest Determination Date,
the rate for that Interest Reset Date will be the arithmetic mean of the rates
quoted by three major banks in The City of New York, selected by the Calculation
Agent (which may include one or more of the Distributors or their affiliates),
at approximately 11:00 A.M. New York City time on that LIBOR Interest
Determination Date for loans in U.S. dollars to leading European banks for a
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<PAGE> 11
period of the Index Maturity commencing on that Interest Reset Date and in a
principal amount equal to an amount not less than $1,000,000 that is
representative for a single transaction in such market at such time; provided,
however, if the aforesaid rate cannot be determined by the Calculation Agent,
LIBOR in respect of such LIBOR Interest Determination Date will be LIBOR then in
effect on such LIBOR Interest Determination Date.
Treasury Rate Notes. Each Treasury Rate Note will bear interest at the
interest rate (calculated with reference to the Treasury Rate and the Spread or
Spread Multiplier, if any) specified on the face of such Treasury Rate Note and
in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the heading, "U.S. Government
Securities/Treasury Bills -- Auction Average (Investment)" or, if not so
published by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Treasury Interest Determination Date, the auction average rate
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) for such auction as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury bills having the Index Maturity specified in
the applicable Pricing Supplement are not published or reported as provided
above by 3:00 P.M., New York City time, on such date, or if no such auction is
held in a particular week, then the Treasury Rate shall be the rate as published
in H.15(519) under the heading "U.S. Government Securities/Treasury
Bills/Secondary Market." In the event that such rate is not so published by 3:00
P.M., New York City time, on its Calculation 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) of the arithmetic mean, as calculated
by the Calculation Agent on such Calculation Date, of the secondary market bid
rates as of approximately 3:30 P.M., New York City time, on such Treasury
Interest Determination Date, of three leading primary United States government
securities dealers in The City of New York selected by the Calculation Agent
(which may include one or more of the Distributors or their affiliates), for the
issue of Treasury bills with a remaining maturity closest to the specified Index
Maturity; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate will be the Treasury Rate in effect on such Treasury Interest Determination
Date.
ORIGINAL ISSUE DISCOUNT NOTES
Notes may be issued as Original Issue Discount Notes. An Original Issue
Discount Note is a Note which is issued at a price lower than the principal
amount thereof and which provides that upon redemption or acceleration of the
Maturity thereof an amount less than the principal thereof shall become due and
payable. In the event of redemption or acceleration of the Maturity of an
Original Issue Discount Note, the amount payable to the Holder of such Note upon
such redemption or acceleration will be determined in accordance with the terms
of the Note, but will be an amount less than the amount payable at the Stated
Maturity of such Note. In addition, a Note issued at a discount may, for United
States federal income tax purposes, be considered an original issue discount
note, regardless of the amount payable upon redemption or acceleration of
Maturity of such Note. See "United States Taxation -- Original Issue Discount".
INDEXED NOTES
Notes may be issued as 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 tax considerations will be described in the
applicable Pricing Supplement.
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<PAGE> 12
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing Note
will be computed on the basis of a 360-day year of twelve 30-day months.
Payments of principal and interest on Amortizing Notes, which are securities for
which payments of principal and interest are made in equal installments over the
life of the security, will be made either quarterly on each January 15, April
15, July 15 and October 15 or semiannually on each January 15 and July 15, and
on the Stated Maturity, unless otherwise specified in an applicable Pricing
Supplement. 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. Further information concerning additional terms and
conditions of any issue of Amortizing Notes will be provided in the applicable
Pricing Supplement. A table setting forth repayment information in respect of
each Amortizing Note will be included in the applicable Pricing Supplement and
set forth in such Notes.
REDEMPTION
Redemption (Option of Company). If one or more Redemption Dates (or range
of Redemption Dates) is specified in the applicable Pricing Supplement, the
Notes described therein will be subject to redemption, in whole or in part, as
specified in such Pricing Supplement, on any such date (or during any such range
of dates) at the option of the Company upon not less than 30 days' or more than
60 days' notice, at the Redemption Price or Prices specified in the applicable
Pricing Supplement, together with interest accrued to the Redemption Date;
provided, however, that interest installments due prior to the date fixed for
redemption will be payable to the Holder of record at the close of business on
the Regular Record Date. If less than the entire principal amount of a Note is
redeemed, the principal amount of such Note that remains outstanding after such
redemption shall be an authorized denomination (which shall not be less than the
minimum authorized denomination) for the Notes. If less than all Notes of like
tenor are to be redeemed, the Notes to be redeemed shall be selected by the
Trustee by such method as the Trustee shall deem fair and appropriate.
Redemption (Option of Holder). If one or more Redemption Dates (Option of
Holder) (or range of such dates) is specified in the applicable Pricing
Supplement, the Notes described therein will be subject to redemption, in whole,
or from time to time in part, as specified in such Pricing Supplement, on any
such date (or during any such range) or, if such date is not a Market Day, on
the first Market Day following such date, at the election of the Holder at the
Redemption Price determined as set forth in the applicable Pricing Supplement,
together with interest accrued to the Redemption Date; provided, however, that
interest installments due on or prior to the date fixed for redemption will be
payable to the Holder of record at the close of business on the Regular Record
Date.
Unless otherwise specified in the applicable Pricing Supplement, in order
to exercise such an election, a Holder must, unless a different notice period is
specified in the applicable Pricing Supplement, give to the Trustee not less
than 30 days' nor more than 60 days' notice. Unless otherwise specified in the
applicable Pricing Supplement, any such notice shall consist of either (i) the
Note with the form entitled "Option to Elect Redemption" duly completed, or (ii)
a telegram, facsimile transmission or a letter from a member of a national
securities exchange, or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company in the United States, setting forth the
name of the Holder, the principal amount of the Note, the principal amount of
the Note to be redeemed, the certificate number or a description of the tenor
and terms of the Note, a statement that the option to elect redemption is being
exercised thereby and a guarantee that such Note, together with the duly
completed form entitled "Option to Elect Redemption", will be received by the
Trustee not later than the fifth Business Day after the date of such telegram,
facsimile transmission or letter; provided, however, that such telegram,
facsimile transmission or letter shall only be effective if such Note and such
form, duly completed, are received by the Trustee by such fifth Business Day.
Unless otherwise specified in the applicable Pricing Supplement, exercise
of a redemption option by a Holder will be irrevocable. Such option may be
exercised with respect to less than the entire principal amount of a Note,
provided that the portion remaining Outstanding after such redemption is an
authorized denomination.
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<PAGE> 13
If a Note is represented by a Book-Entry Note the Depositary's nominee will
be the Holder thereof entitled to exercise a right to redemption. 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 an interest in such
Note must instruct the broker or other direct or indirect participant through
which it holds an interest in such Note to notify the Depositary of its desire
to exercise a right to repayment. Different firms have different cut-off times
for accepting instructions from their customers and, accordingly, each such
beneficial owner should consult the broker or other direct or indirect
participant through which it holds an interest in a Book-Entry Note in order to
ascertain the cut-off time by which such an instruction must be given in order
for timely notice to be delivered to the Depositary.
REPURCHASE
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may, at its discretion, be held,
resold or surrendered to the Trustee for cancellation.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same Issue
Date will be represented by one or more fully registered securities in permanent
global form (each a "Global Note"). See "Description of Securities -- Global
Securities" in the Prospectus. Each Global Note representing Book-Entry Notes
will be deposited with, or on behalf of, The Depository Trust Company, as
Depositary (the "Depositary"), located in the Borough of Manhattan, The City of
New York, and will be registered in the name of the Depositary or a nominee of
the Depositary. Unless otherwise indicated in the applicable Pricing Supplement,
the Depositary will only accept the deposit of a Global Note denominated in U.S.
dollars.
Ownership of beneficial interests in a Global Note representing Book-Entry
Notes will be limited to institutions that have accounts with the Depositary or
its nominee ("participants") or person that may hold interests through
participants. The Company has been advised by the Depositary that upon the
issuance of a Global Note representing Book-Entry Notes, and the deposit of such
Global Note with the Depositary, the Depositary will immediately credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Book-Entry Notes represented by such Global Note to the accounts of
participants. The accounts to be credited shall be designated by the soliciting
Agent or, to the extent that the Book-Entry Notes are offered and sold directly,
by the Company.
The Company has been advised by the Depositary that upon receipt of any
payment of principal of or any premium or interest in respect of a Global Note,
the Depositary will immediately credit, on its book-entry registration and
transfer system, accounts of participants with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Note as shown on the records of the Depositary. Payments by participants to
owners of beneficial interests in a Global Note held through such participants
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in "street
name", and will be the sole responsibility of such participants.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among its participants in such
securities through electronic computerized book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (including the Distributors), banks, trust companies, clearing
corporations, and certain other organizations, some of whom (and/or their
representatives) own the Depositary. Access to the Depositary's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
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<PAGE> 14
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
The following provisions, which apply to Foreign Currency Notes, supplement
the description of general terms and conditions of (a) Debt Securities set forth
under the heading "Description of Debt Securities" in the accompanying
Prospectus and (b) Notes set forth above under the heading "Description of
Notes" in this Prospectus Supplement.
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES
THAT RESULT FROM SUCH NOTES BEING DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY
UNIT EITHER AS SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS
SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT
THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED IN AN INVESTMENT
IN FOREIGN CURRENCY NOTES AND AS TO ANY MATTERS THAT MAY AFFECT THE PURCHASE OR
HOLDING OF A FOREIGN CURRENCY NOTE OR THE RECEIPT OF PAYMENTS OF PRINCIPAL OF
AND ANY PREMIUM AND INTEREST ON A FOREIGN CURRENCY NOTE IN A SPECIFIED CURRENCY.
FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Unless otherwise indicated in the applicable Pricing Supplement, a Foreign
Currency Note will not be sold in, or to a resident of, the country of the
Specified Currency in which such Note is denominated.
The authorized denominations of Foreign Currency Notes will be indicated in
the applicable Pricing Supplement.
Specific information pertaining to the foreign currency or currency unit in
which a particular Foreign Currency Note is denominated, including historical
exchange rates and a description of the currency and any exchange controls, will
be described in the applicable Pricing Supplement. Such information contained
therein shall be 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.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of significant
changes in the rate of exchange between the U.S. dollar and the Specified
Currency and the possibility of the imposition or modification of foreign
exchange controls by either the United States or foreign governments. Such risks
generally depend on economic and political events and the supply of and demand
for the relevant currencies over which the Company has no control. In recent
years, rates of exchange between the U.S. dollar and certain foreign currencies
have been highly volatile and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Foreign Currency Note. Depreciation of the Specified
Currency applicable to a Foreign Currency Note against the U.S. dollar would
result in a decrease in the U.S. dollar-equivalent yield of such Note, in the
U.S. dollar-equivalent value of the principal repayable at Maturity of such Note
and, generally, in the U.S. dollar-equivalent market value of such Note.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to a Foreign Currency
Note's Maturity. Even if there are not exchange controls, it is possible that
the Specified Currency for any particular Foreign Currency Note would not be
available at such Note's Maturity due to other circumstances beyond the control
of the Company.
JUDGMENTS
In the event an action based on Foreign Currency Notes were commenced in a
court of the United States, it is likely that such court would grant judgment
relating to such Notes only in U.S. dollars. It is not clear,
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however, whether, in granting such judgment, the rate of conversion into U.S.
dollars would be determined with reference to the date of default, the date
judgment is rendered or some other date. Holders of Foreign Currency Notes would
bear the risk of exchange rate fluctuations between the time the amount of the
judgment is calculated and the time the Trustee converts U.S. dollars to the
Specified Currency for payment of the judgment.
UNITED STATES TAXATION
The following is a summary of the principal United States federal income
tax consequences of the ownership of Notes. It deals only with Notes held as
capital assets by initial purchasers, and not with special classes of holders,
such as dealers in securities or currencies, life insurance companies, persons
holding Notes as a hedge or hedged against currency risks or as part of a
straddle, or persons whose functional currency is not the U.S. dollar.
The discussion of Notes issued with original issue discount ("Discount
Notes") is based in part on regulations (the "Proposed Regulations") proposed,
but not yet effective, under the original issue discount provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), which are proposed to be
effective for debt instruments issued sixty or more days after final regulations
are issued. Given such deferred effective date, there can be no assurance that
the Internal Revenue Service (the "IRS") will not challenge the application of
provisions that are contained in the Proposed Regulations, but not in the Code,
to Discount Notes issued prior thereto. Subsequent versions of the Proposed
Regulations or corresponding final regulations may adopt positions that would
apply to a Discount Note and may be contrary to the positions discussed below.
Because of the uncertainty as to what regulations, if any, will apply to
Discount Notes, and the provisions of any such regulations, purchasers of
Discount Notes should carefully examine the applicable Pricing Supplement and
consult their own tax advisors with respect to the current application of the
OID rules (and the laws of any other taxing jurisdiction) to such Notes.
UNITED STATES HOLDERS
Payments of Interest
Interest on a Note, whether payable in U.S. dollars or a foreign currency,
other than original issue discount on a Discount Note, will be taxable to a
beneficial owner who or which is (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity organized in the United States
or (iii) otherwise subject to United States federal income taxation on a net
income basis in respect of the Note (a "United States Holder") as ordinary
income at the time it is received or accrued, depending on the holder's method
of accounting for tax purposes.
If an interest payment is denominated in or determined by reference to a
foreign currency, the amount of interest income recognized by a cash basis
United States Holder will be the U.S. dollar value of the interest payment,
based on the exchange rate in effect on the date of receipt, regardless of
whether the payment is in fact converted into U.S. dollars. Accrual basis United
States Holders may determine the amount of income recognized with respect to
such interest payments in accordance with either of two methods.
Under the first method, the amount of interest income recognized during any
accrual period will be determined by translating the Specified Currency into
U.S. Dollars at the average rate of exchange during the interest 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). Upon receipt of an
interest payment so accrued (including a payment attributable to accrued but
unpaid interest upon the sale or retirement of a Note), an accrual basis United
States Holder will recognize ordinary income or loss attributable to the
difference, if any between such average exchange rate and the exchange rate in
effect on the date of receipt, regardless of whether the payment is in fact
converted into U.S. dollars. Under the second method, an accrual basis United
States Holder may elect to translate interest income into U.S. dollars at the
exchange rate in effect on the last day of the accrual period or, in the case of
an accrual period that spans two taxable years, at the exchange rate in effect
on the last day of the partial period within the taxable year. Additionally, if
a payment of interest is actually received within 5 business days of the last
day of the accrual period or taxable year, an electing accrual basis United
States Holder may instead translate such accrued interest into U.S. dollars at
the exchange rate in effect on the day of actual receipt. Any such election will
apply to all debt instruments held
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by the United States Holder at beginning of the first taxable year to which the
election applies or thereafter acquired by the United States Holder, and will be
irrevocable without the consent of the Service.
Original Issue Discount
General. A Note will generally be treated as a Discount Note if the excess
of the Note's "stated redemption price at maturity" over its "issue price"
equals or exceeds 1/4 of 1 percent of such Note's stated redemption price at
maturity multiplied by the number of complete years to its maturity. The
Proposed Regulations generally provide that, in the case of a Note that provides
for payments other than "qualified stated interest" (as described below), the
weighted average maturity of the payments under the Note (other than payments of
qualified stated interest) is used instead of complete years to maturity for
this purpose. Generally, the issue price of a Note will be the initial offering
price to the public at which a substantial amount of the Notes are sold. Under
the Code, the "stated redemption price at maturity" of a Note is the total of
all payments provided by the Note (whether denominated as principal or interest)
other than payments of interest based on a fixed rate payable unconditionally at
fixed periodic intervals of one year or less during the entire term of the Note
("fixed periodic interest"). Under the Proposed Regulations, the "stated
redemption price at maturity" of a Note is the total of all payments provided by
the Note that are not payments of "qualified stated interest". Under the
Proposed Regulations, a "qualified stated interest" payment is generally any one
of a series of stated interest payments on a Note that are unconditionally
payable at least annually at a single fixed rate and, for this purpose, interest
is considered payable at a fixed rate only if the rate appropriately takes into
account the length of the interval between stated interest payments. The
Proposed Regulations provide special rules for Variable Rate Notes, which are
described below under "Original Issue Discount -- Variable Rate Notes."
If the excess, if any, of a Note's stated redemption price at maturity over
its issue price is not sufficient, under the rules described above, to cause the
Note to be a Discount Note, then such excess, if any, constitutes "de minimis
original issue discount". Under the Proposed Regulations, unless the election
described below under "Election to Treat All Interest as Original Issue
Discount" is made, a United States Holder of a Note with de minimis original
issue discount must include such de minimis original issue discount in income as
stated principal payments on the Note are made. The includible amount with
respect to each such payment will equal the product of the total amount of the
Note's de minimis original issue discount and a fraction, the numerator of which
is the amount of the principal payment made and the denominator of which is the
stated principal amount of the Note.
The Code provides rules that require United States Holders of Discount
Notes having a maturity of more than one year from their date of issue to
include original issue discount in income before the receipt of cash
attributable to such income, regardless of the holder's method of accounting.
The amount of original issue discount so includible is the sum of the daily
portions of original issue discount with respect to the Discount Note for each
day during the taxable year or portion of the taxable year in which the United
States Holder holds such Discount Note ("accrued original issue discount").
Subject to special rules described below for variable rate debt instruments, the
daily portion is determined by allocating to each day in any "accrual period" a
ratable portion of the original issue discount allocable to that accrual period.
Under the Code, until final or temporary regulations become effective, an
accrual period is any six-month period (or shorter period from the issue date of
such Note) that ends on a day in the calendar year corresponding to the maturity
date of the Note or the date six months before such date. The Proposed
Regulations would allow the accrual periods with respect to a Note to be any set
of periods (which may be of varying lengths) selected by the United States
Holder as long as (i) no accrual period is longer than one year and (ii) each
scheduled payment of interest or principal on the Note occurs at the end of an
accrual period. The amount of original issue discount allocable to an accrual
period equals the excess, if any, of (a) the product of the Discount Note's
adjusted issue price at the beginning of the accrual period and such Note's
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the sum, under the Code, of the payments of fixed periodic interest, if any,
made on the Note during (under the Proposed Regulations, of qualified stated
interest on the Note allocable to) the accrual period. Under the Code, the
"adjusted issue price" of a Discount Note at the beginning of an accrual period
is the
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issue price of the Note increased by the amount of original issue discount
allocable to prior accrual periods and decreased by all payments made in prior
accrual periods which were not fixed payments of periodic interest. The Proposed
Regulations provide that the "adjusted issue price" of a Discount Note at the
beginning of any accrual period is (x) the sum of the issue price of such Note,
the accrued original issue discount for each prior accrual period, and the
amount of any qualified stated interest on such Note that has accrued prior to
the beginning of the accrual period but is not payable until a later date, less
(y) any prior payments on the Note that were not qualified stated interest
payments, and clarify that, for purposes of determining the amount of original
issue discount allocable to an accrual period, if an interval between payments
of qualified stated interest on the Note contains more than one accrual period,
then the amount of qualified stated interest payable at the end of such interval
shall be allocated pro rata (on the basis of their relative lengths) between the
accrual periods contained in the interval.
The Code provides no specific guidance on the method to be used in
determining the amount of original issue discount allocable to a short initial
accrual period. The Proposed Regulations contain rules that generally allow any
reasonable method to be used in determining the amount of original issue
discount allocable to a short initial accrual period (if all other accrual
periods are of equal length) and require that the amount of original issue
discount allocable to the final accrual period equal the excess of the amount
payable at the maturity of the Note (other than any payment of qualified stated
interest) over the Note's adjusted issue price as of the beginning of such
accrual period.
Under the Code and the Proposed Regulations, United States Holders
generally will have to include in income increasingly greater amounts of
original issue discount over the life of a Discount Note.
Acquisition Premium. Under the Proposed Regulations, a United States
Holder that purchases a Note for an amount in excess of its adjusted issue price
(any such excess being "acquisition premium") and that does not make the
election described below under "Election to Treat All Interest as Original Issue
Discount" is permitted to reduce the daily portions of original issue discount
by a fraction, the numerator of which is the excess of the United States
Holder's adjusted basis in the Note immediately after its purchase over the
adjusted issue price of the Note, and the denominator of which is the excess of
the sum of all amounts payable on the Note after the purchase date, other than
payments of qualified stated interest, over the Note's adjusted issue price.
Market Discount. Under the Code, a Note, other than a Note that matures
one year or less from the date of its issuance, will be treated as purchased at
a market discount (a "Market Discount Note") if (i) the amount for which a
United States Holder purchased the Note is less than the Note's issue price (as
determined above under "Original Issue Discount -- General") and (ii) the Note's
stated redemption price at maturity or, in the case of a Discount Note, the
Note's "revised issue price," exceeds the amount for which the United States
Holder purchased the Note by at least 1/4 of 1 percent of such Note's stated
redemption price at maturity or revised issue price, respectively, multiplied by
the number of complete years to the Note's maturity. If the excess, if any,
referred to in the preceding sentence is not sufficient to cause the Note to be
a Market Discount Note, then such excess constitutes "de minimis market
discount". For these purposes, the revised issue price of a Note equals its
issue price, increased by the amount of any original issue discount that has
accrued on the Note (and probably reduced by payments other than qualified
stated interest, although proposed regulations have not been issued under the
market discount rules).
Any gain recognized on the maturity or disposition of a Market Discount
Note will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively, a United States
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Note. Such an election shall apply to all debt
instruments with market discount acquired by the electing United States Holder
on or after the first day of the first taxable year to which the election
applies. This election may not be revoked without the consent of the Service.
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on a
constant yield to maturity basis. Such an election shall apply only to the Note
with respect to which it is made and may not be revoked without the consent of
the Service. A United States Holder of a Market Discount Note who does not elect
to include market discount in
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income currently generally will be required to defer deductions for interest on
borrowings allocable to such Note in an amount not exceeding the accrued market
discount on such Note until the maturity or disposition of such Note.
Pre-Issuance Accrued Interest. The Proposed Regulations provide that if
(i) a portion of the initial purchase price of a Note is attributable to
pre-issuance accrued interest, (ii) the first stated interest payment on the
Note is to be made within one year of the Note's issue date and (iii) such
payment will equal or exceed the amount of pre-issuance accrued interest, then
the United States Holder may elect to decrease the issue price of the Note by
the amount of pre-issuance accrued interest, in which case a portion of the
first stated interest payment will be treated as a return of the excluded
pre-issuance accrued interest and not as an amount payable on the Note.
Optional Redemption. Under the Proposed Regulations, if the Company has an
option to redeem a Note or the holder has an option to cause a Note to be
repurchased, prior to the Note's stated maturity, such option will be presumed
to be exercised if, by utilizing any date on which such Note may be redeemed or
repurchased as the maturity date and the amount payable on such date in
accordance with the terms of such Note as the principal amount payable at
maturity, the yield on the Note would be (i) in the case of an option of the
Company, lower than its yield to stated maturity or (ii) in the case of an
option of the holder, higher than its yield to stated maturity. If such option
is not in fact exercised when presumed to be exercised, the Note will be treated
solely for original issue discount purposes as if it were redeemed or
repurchased, and a new Note were issued, on the presumed exercise date for an
amount equal to the Note's adjusted issue price on that date.
Election to Treat All Interest as Original Issue Discount. Under the
Proposed Regulations, an accrual basis United States Holder may elect to include
in gross income all interest that accrues on a Note using the constant yield
method described above under the heading "Original Issue Discount -- General,"
with the modifications described below. For purposes of this election, interest
includes stated interest, original issue discount, de minimis original issue
discount, market discount, de minimis market discount and unstated interest, as
adjusted by any amortizable bond premium (described below under "Notes Purchased
at a Premium") or acquisition premium. It is not clear, however, whether such an
election may be made for Notes issued before the effective date of the Proposed
Regulations.
In applying the constant yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
United States Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition by
the electing United States Holder, and no payments on the Note will be treated
as payments of qualified stated interest. This election will generally apply
only to the Note with respect to which it is made and may not be revoked without
the consent of the Service. If this election is made with respect to a Note with
amortizable bond premium, then the electing United States Holder will be deemed
to have elected to apply amortizable bond premium against interest with respect
to all debt instruments with amortizable bond premium (other than debt
instruments the interest on which is excludible from gross income) held by such
electing United States Holder as of the beginning of the taxable year in which
the Note with respect to which the election is made is acquired or thereafter
acquired. The deemed election with respect to amortizable bond premium may not
be revoked without the consent of the Service.
If the election to apply the constant yield method to all interest on a
Note is made with respect to a Market Discount Note, then the electing United
States Holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
Variable Rate Notes. Under the Proposed Regulations, a "variable rate debt
instrument" is a debt instrument that provides for (i) total noncontingent
payments that equal or exceed its issue price and (ii) stated interest,
compounded or paid at least annually, at (w) a single qualified floating rate,
(x) a qualified floating rate followed by another qualified floating rate, (y) a
fixed rate followed by a qualified floating rate, or (z) a single objective
rate, where any such qualified floating or objective rate in effect during an
accrual period will be set at a current value of such rate. A floating rate is a
"qualified floating rate" if variations in such rate
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can reasonably be expected to measure contemporaneous fluctuations in the cost
of newly borrowed funds. An objective rate is a rate (other than a qualified
floating rate) the formula for which is fixed throughout the term of the Note
and which is based on the price of actively traded property (other than
nonfunctional currency), an index of the price of such property, or one or more
qualified floating rates. Under these rules, Commercial Paper Rate Notes, Prime
Rate Notes, CD Rate Notes, Federal Funds Notes, LIBOR Notes and Treasury Rate
Notes, other than certain Notes subject to interest rate caps or floors, should
generally be treated as variable rate debt instruments.
Under the Proposed Regulations, stated interest on a Variable Rate Note is
qualified stated interest if such interest is unconditionally payable at least
annually. Where a Variable Rate Note provides for a fixed rate followed by a
floating rate or a floating rate followed by another floating rate and the fair
market value of the Note would not be approximately equal to its current fair
market value if the latter rate were in effect throughout the term of the Note,
then some portion of the interest on the Note will be treated as either
accelerated or deferred interest and such accelerated or deferred interest will
not be treated as qualified stated interest. If the substitution described in
the preceding sentence would decrease the fair market value of the Note, then
the interest for the initial interval (the interval in which the initial rate is
in effect) that is attributable to the portion of the stated interest for such
interval that is in excess of the hypothetical initial rate that would make the
substitution have approximately no effect on the fair market value of the Note
will be accelerated interest. If the substitution would increase the fair market
value of the Note, then the interest for the later interval that is attributable
to the portion of the stated interest for such interval that is in excess of the
hypothetical latter rate that would make the substitution have approximately no
effect on the fair market value of the Note is deferred interest.
Under the Proposed Regulations, the original issue discount for an accrual
period on a Variable Rate Note that arises from stated interest that is not
unconditionally payable at least annually (other than accelerated or deferred
interest) is the amount of stated interest that actually accrues under the terms
of the Note during the accrual period. The original issue discount on a Variable
Rate Note that arises from (i) an excess of the Note's stated principal amount
over its issue price ("true discount"), (ii) accelerated interest, or (iii)
deferred interest must be allocated to an accrual period in accordance with a
reasonable application of the constant yield method described above under
"Original Issue Discount -- General."
The Code delegates to the Treasury Department the authority to prescribe
special rules relating to the tax treatment, under the original issue discount
provisions of the Code, of Notes that satisfy the definition of Variable Rate
Notes. Because the Proposed Regulations are not yet effective, United States
Holders should discuss with their tax advisors the treatment of such Notes under
the Code and, if applicable, the Proposed Regulations that describe the
application of the original issue discount provisions of the Code to debt
instruments with contingent payments.
Amortizing Notes. The Proposed Regulations would apply different rules for
determining whether original issue discount is de minimis with respect to
Amortizing Notes. Purchasers of any such Notes should examine the Pricing
Supplement for a discussion of the applicable rules.
Short-Term Notes. Under the Code, special rules apply with respect to
original issue discount on a Note that matures one year or less from the date of
its original issuance (a "short-term Note"). In general, an individual or other
cash basis United States Holder of a short-term Note is not required to accrue
original issue discount for United States federal income tax purposes unless it
elects to do so. Accrual basis United States Holders and certain other United
States Holders, including banks, regulated investment companies, dealers in
securities and cash basis United States Holders who so elect, are required to
accrue original issue discount on short-term Notes on either a straight-line
basis or under the constant yield method (based on daily compounding), at the
election of the United States Holder. In the case of a United States Holder not
required and not electing to include original issue discount in income
currently, any gain realized on the sale, exchange, retirement or other
disposition of the short-term Note will be ordinary income to the extent of the
original issue discount accrued on a straight-line basis (unless an election is
made to accrue the original issue discount under the constant yield method)
through the date of such sale, exchange, retirement or other disposition. United
States Holders who are not required and do not elect to accrue original issue
discount on short-term
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Notes will be required to defer deductions for interest on borrowings allocable
to short-term Notes in an amount not exceeding the deferred income until the
deferred income is realized.
For purposes of determining the amount of original issue discount subject
to these rules, the Proposed Regulations provide that all interest payments on a
short-term Note, including payments that otherwise would be qualified stated
interest, are included in the short-term Note's stated redemption price at
maturity.
Foreign Currency Discount Notes. Original issue discount for any accrual
period on a Discount Note that is denominated in a foreign currency will be
determined in such foreign currency and then translated into U.S. dollars in the
same manner as stated interest accrued by an accrual basis United States Holder,
as described above under "Payments of Interest." Upon receipt of an amount
attributable to original issue discount (whether in connection with a payment of
interest or the sale or retirement of a Note), a United States Holder will
recognize ordinary income or loss attributable to the difference, if any,
between the exchange rate used to accrue the original issue discount and the
exchange rate in effect on the date of receipt.
Notes Purchased at a Premium
Under the Code, a United States Holder that purchases a Note for an amount
in excess of its principal amount may elect to treat such excess as "amortizable
bond premium", in which case the amount required to be included in the United
States Holder's income each year with respect to interest on the Note will be
reduced by the amount of amortizable bond premium allocable (based on the Note's
yield to maturity) to such year. In the case of a Note that is denominated in a
foreign currency, bond premium will be computed in units of foreign currency,
and amortizable bond premium will reduce interest income in units of the foreign
currency. At the time amortized bond premium offsets interest income, exchange
gain or loss (taxable as ordinary income or loss, but generally not as interest
income or expense) is realized measured by the difference between exchange rates
at that time and at the time of the acquisition of the Notes. Any election to
amortize bond premium shall apply to all bonds (other than bonds the interest on
which is excludible from gross income) held by the United States Holder at the
beginning of the first taxable year to which the election applies or thereafter
acquired by the United States Holder, and is irrevocable without the consent of
the Internal Revenue Service. See also "Original Issue Discount -- Election to
Treat All Interest as Original Issue Discount".
Purchase, Sale and Retirement of the Notes
A United States Holder's tax basis in a Note, including a Discount Note,
will generally be its U.S. dollar cost (which, in the case of a Note purchased
with a foreign currency, will be the U.S. dollar value of the purchase price on
the date of purchase), increased by the amount of any original issue discount or
market discount included in the United States Holder's income with respect to
the Note and, under the Proposed Regulations, the amount, if any, of income
attributable to de minimis original issue discount included in the United States
Holder's income with respect to the Note, and reduced by (i) the amount of any
payments other than payments of fixed periodic interest (or, under the Proposed
Regulations, the amount of any payments that are not qualified stated interest
payments), and (ii) by the amount of any amortizable bond premium applied to
reduce interest on the Note. A United States Holder will generally recognize
gain or loss on the sale, exchange, retirement or other disposition of a Note
equal to the difference between the amount realized on such sale, exchange,
retirement or other disposition and the tax basis of the Note. The amount
realized on a sale, exchange, retirement or other disposition for an amount in
foreign currency will be the U.S. dollar value of such amount on the date of
such sale, exchange, retirement or other disposition. Except to the extent
described above under "Original Issue Discount -- Short Term Notes" or "Original
Issue Discount -- Market Discount", described in the next succeeding paragraph
or attributable to accrued but unpaid interest, gain or loss recognized on the
sale or retirement of a Note will be capital gain or loss and will be long-term
capital gain or loss if the Note was held for more than one year.
Gain or loss recognized by a United States Holder on the sale, exchange,
retirement or other disposition of a Note that is attributable to changes in
exchange rates will be treated as ordinary income or loss. However, exchange
gain or loss is taken into account only to the extent of total gain or loss
realized on the transaction.
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Exchange of Amounts in Other Than U.S. Dollars
Foreign currency received as interest on a Note or on the sale, exchange,
retirement or other disposition of a Note will have a tax basis equal to its
U.S. dollar value at the time such interest is received or at the time of such
sale, exchange, retirement or other disposition. Foreign currency that is
purchased will generally have a tax basis equal to the U.S. dollar value of the
foreign currency on the date of purchase. Any gain or loss recognized on a sale
or other disposition of a foreign currency (including its use to purchase Notes
or upon exchange for U.S. dollars) will be ordinary income or loss.
Indexed Notes and Notes with Other Special Features
The Company may decide to issue Notes linked to commodity prices, equity
indices, the rate of exchange between the Specified Currency and any other
currency or composite currency or other factors including Notes issued with
contingent principal or contingent interest. The Company may also decide to
issue Notes with other special features. Notes with any such features may be
subject to different rules than those set forth in the preceding discussion.
Purchasers of such Notes should carefully examine the applicable Pricing
Supplement and should consult their own tax advisors with respect to the United
States Federal income tax consequences of purchasing, holding and disposing of
such Notes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder who or which is not a United States Holder.
Under present United States federal income and estate tax law and subject
to the discussion of backup withholding below:
(i) payments of principal, premium (if any) and interest (including
original issue discount) other than contingent interest (if any) by the Company
or any of its paying agents to any holder of a Note who or which is a United
States Alien Holder will not be subject to United States federal withholding
tax; provided, that in the case of interest or original issue discount, (a) the
beneficial owner does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (b) the beneficial owner is not a controlled foreign corporation that is
related to the Company (directly or indirectly) through stock ownership, and (c)
either (A) the beneficial owner of the Note on behalf of a beneficial owner
certifies to the Company or its agent, under penalties of perjury, that it is
not a United States Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Note on behalf of a beneficial owner certifies to
the Company or its agent under penalties of perjury that such statement has been
received from the beneficial owner by it or by a financial institution between
it and the beneficial owner and furnishes the payor with a copy thereof;
(ii) a United States Alien Holder of a Note will not be subject to United
States federal withholding tax on any gain realized on the sale, exchange,
retirement or other disposition of a Note if (i) such gain is not effectively
connected with a U.S. trade or business of the holder and (ii) in the case of an
individual, such holder (A) is not present in the United States for 183 days or
more in the taxable year of the sale, exchange, retirement or other disposition
or (B) does not have a tax home (as defined in Section 911(d)(3) of the Code) in
the United States in the taxable year of the sale, exchange, retirement or other
disposition and the gain is not attributable to an office or other fixed place
of business maintained by such individual in the United States; and
(iii) a Note or coupon (except to the extent that the value thereof is
attributable to contingent interest, if any) held by an individual who at the
time of death is not a citizen or resident of the United States and who
qualified for the exemption from United States federal withholding tax discussed
above will not be subject to United States federal estate tax as a result of
such individual's death if the individual does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company
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entitled to vote and the income on the Note would not have been effectively
connected with a U.S. trade or business of the individual.
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Holders
In general, information reporting requirements will apply to payments of
principal, any premium and interest made on a Note and the proceeds of the sale
of a Note before maturity within the United States to, and to the accrual of
original issue discount on a Discount Note with respect to, non-corporate United
States Holders, and "backup withholding" at a rate of 31% will apply to such
payments and to payments of original issue discount if the United States Holder
fails to provide an accurate taxpayer identification number or fails to report
all interest and dividends required to be shown on its federal income tax
returns.
United States Alien Holders
Information reporting and backup withholding will not apply to payments of
principal, premium (if any) and interest (including original issue discount)
made by the Company or a paying agent to a United States Alien Holder on a Note
if the certification described in clause (i)(c) under "United States Alien
Holders" above is received or if the holder otherwise establishes an exemption,
provided that the payor does not have actual knowledge that the holder is a
United States person or that the conditions of any exemption are not in fact
satisfied.
Payments of the proceeds from the sale by a United States Alien Holder of a
Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Note to or through the United States office of a
broker is subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
PLAN OF DISTRIBUTION OF NOTES
Under the terms of a Distribution Agreement, dated January 12, 1994 (the
"Distribution Agreement"), the Notes are offered on a continuing basis by the
Company through the Distributors, each of which has agreed to use reasonable
efforts to solicit purchases of the Notes. Unless otherwise disclosed in the
applicable pricing supplement, the Company will pay a commission, or grant a
discount, to the Distributors. The Company will pay each Distributor a
commission of from .125% to .750% of the principal amount of each Note,
depending on its Stated Maturity, sold through such Distributor, as agent. The
Company will have the sole right to accept offers to purchase Notes and may
reject any such offer, in whole or in part. Each Distributor shall have the
right, in its discretion reasonably exercised, without notice to the Company, to
reject any offer to purchase Notes received by it, in whole or in part.
The Company also may sell Notes to any Distributor, acting as principal, at
a discount to be agreed upon at the time of sale or, if no other discount is
agreed, the Distributors may receive from the Company a discount or commission
equivalent to that set forth on the cover page of this Prospectus Supplement.
Such Notes may be resold at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices, as
determined by such Distributor. Such Notes may also be resold to certain
securities dealers who may resell to investors at the public offering price set
forth on the cover page of the applicable Pricing Supplement. Such dealers also
may receive compensation in the form of discounts, concessions or commissions
from the Distributors and/or commissions from the purchasers for whom they may
act as agents. Unless otherwise specified in the applicable pricing supplement,
any concession allowed by any Distributor to any such dealer shall not be in
excess of the commission or discount received by such
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Distributor from the Company. The offering price and other selling terms for
such resales may from time to time be varied by such Distributor.
The Distributors, whether acting as agents or as principals for their own
accounts, may also receive commissions from purchasers of Notes for whom they
may act as agents.
The Company has reserved the right to sell Notes directly on its own behalf
and to accept (but not solicit) offers to purchase Notes through additional
distributors on substantially the same terms and conditions (including
commission rates) as would apply to purchases of Notes pursuant to the
Distribution Agreement. Such additional distributors or agents, as the case may
be, will be named in the applicable Pricing Supplement. No commission will be
payable on any Notes sold directly by the Company.
The Distributors and any dealers to whom the Distributors may sell Notes
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933 (the "Act"). The Company has agreed to indemnify the Distributors against
certain liabilities, including civil liabilities under the Securities Act of
1933, or contribute to payments which the Distributors may be required to make
in respect thereof. The Company has agreed to reimburse the Distributors for
certain expenses.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes, other than Foreign Currency Notes, will be required
to be made in funds immediately available in The City of New York. With respect
to payment of the purchase price of Foreign Currency Notes, see "Important
Currency Exchange Information" herein.
In the ordinary course of their respective businesses, each of the
Distributors and certain of their respective affiliates have engaged in
transactions with and provided, and may in the future provide, investment
banking and/or commercial banking services for the Company. J.P. Morgan
Securities Inc., a Distributor, is an affiliate of Morgan Guaranty Trust Company
of New York, the Trustee under the Indenture.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Dechert
Price & Rhoads, Philadelphia, Pennsylvania, and for the Distributors by Cravath,
Swaine & Moore, New York, New York. The opinions of Dechert Price & Rhoads and
Cravath, Swaine & Moore will be conditioned upon, and subject to certain
assumptions regarding future action required to be taken by the Company and the
Trustee in connection with the issuance and sale of any particular Note, the
specific terms of Notes and other matters which may affect the validity of Notes
but which cannot be ascertained on the date of such opinions.
GLOSSARY
Set forth below are definitions, or the locations elsewhere of definitions,
of some of the terms used in this Prospectus Supplement.
"Calculation Agent" means the agent appointed by the Company to calculate
interest rates for Floating Rate Notes. Unless otherwise provided in a Pricing
Supplement, the Calculation Agent will be Morgan Guaranty Trust Company of New
York.
"Calculation Date" means the date on which the Calculation Agent is to
calculate an interest rate for a Floating Rate Note, which is the applicable
date set forth below, unless otherwise indicated in the applicable Pricing
Supplement:
Prime Rate -- The Prime Rate Interest Determination Date.
CD Rate -- The earlier of (i) the tenth day after the related CD Rate
Interest Determination Date or, if such day is not a Market Day, the next
succeeding Market Day; and (ii) the Market Day next preceding the relevant
Interest Payment Date or date of Maturity, as the case may be.
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<PAGE> 24
Commercial Paper Rate -- The earlier of (i) the tenth day after the
related Commercial Paper Interest Determination Date or, if such day is not
a Market Day, the next succeeding Market Day; and (ii) the Market Day next
preceding the relevant Interest Payment Date or date of Maturity, as the
case may be.
LIBOR -- The LIBOR Interest Determination Date.
Treasury Rate -- The earlier of (i) the tenth day after the related
Treasury Interest Determination Date or, if such day is not a Market Day,
the next succeeding Market Day; and (ii) the Market Day next preceding the
relevant Interest Payment Date or date of Maturity, as the case may be.
Federal Funds Rate -- The earlier of (i) the tenth day after the
related Federal Funds Effective Interest Determination Date or, if such day
is not a Market Day, the next succeeding Market Day; and (ii) the Market
Day next preceding the relevant Interest Payment Date or date of Maturity,
as the case may be.
"CD Rate" means the rate calculated as set forth under the heading
"Description of Notes -- Floating Rate Notes -- CD Rate Notes", unless otherwise
indicated in the applicable Pricing Supplement.
"Commercial Paper Rate" means the rate calculated as set forth under the
heading "Description of Notes -- Floating Rate Notes -- Commercial Paper Rate
Notes", unless otherwise indicated in the applicable Pricing Supplement.
"Composite Quotations" means the daily statistical release entitled
"Composite 3:30 P.M. Quotations for U.S. Government Securities", or any
successor publication, published by the Federal Reserve Bank of New York.
"Exchange Rate Agent" means the agent appointed by the Company to convert
principal and any premium and interest payments in respect of Foreign Currency
Notes into U.S. dollars. Unless otherwise provided in a Pricing Supplement, the
Exchange Rate Agent will be Morgan Guaranty Trust Company of New York.
"Federal Funds Rate" means the rate calculated as set forth under the
heading "Description of Notes -- Floating Rate Notes -- Federal Funds Rate
Notes", unless otherwise indicated in the applicable Pricing Supplement.
"Fixed Rate Note" shall have the meaning set forth under the heading
"Description of Notes -- Interest".
"Floating Rate Notes" shall have the meaning set forth under the heading
"Description of Notes -- Interest".
"H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15(519), Selected Interest Rates", or any successor publication,
published by the Board of Governors of the Federal Reserve System.
"Index Maturity" means, with respect to a Floating Rate Note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as indicated in the applicable Pricing Supplement.
"Initial Interest Rate" means the rate at which Floating Rate Note will
bear interest from its Issue Date (or that of a predecessor Note) to the first
Reset Date, as indicated in the applicable Pricing Supplement.
"Interest Determination Date" means the date as of which the interest rate
for a Floating Rate Note is to be calculated, to be effective as of the
following Reset Date and calculated on the related Calculation Date (except in
the case of Prime Rate and LIBOR, which are calculated on the related Prime Rate
Interest Determination Date and LIBOR Interest Determination Date,
respectively). See the fourth paragraph under the heading "Description of
Notes -- Floating Rate Notes" for the Interest Determination Dates for Floating
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<PAGE> 25
Rate Notes. The Interest Determination Dates for any Floating Rate Note will
also be indicated in the applicable Pricing Supplement.
"Interest Reset Date" means the date on which a Floating Rate Note will
begin to bear interest at the variable interest rate determined as of any
Interest Determination Date. See the third paragraph under the heading "Floating
Rate Notes" for the applicable Reset Dates for such Notes. The Reset Dates with
respect to any Floating Rate Note will also be set forth in the applicable
Pricing Supplement and in such Note.
"LIBOR" means the rate calculated as set forth under the heading
"Description of Notes -- Floating Rate Notes -- LIBOR Notes", unless otherwise
indicated in the applicable Pricing Supplement.
"London Market Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Market Day" means (a) with respect to any Note, any day that is not a
Saturday or Sunday and that, in The City of New York, is not a day on which
banking institutions generally are authorized or obligated by law or executive
order to close, and (b) with respect to LIBOR Notes only, any such day on which
dealings in deposits in U.S. dollars are transacted in the London interbank
market, (c) with respect to Foreign Currency Notes (other than Foreign Currency
Notes denominated in European Currency Units ("ECUs")) only, any such day that
is not a Saturday or Sunday and that, in the principal financial center of the
country of the Specified Currency is not a day on which banking institutions
generally are authorized or obligated by law or executive order to close and (d)
with respect to Foreign Currency Notes denominated in ECU, any day that is
designated as an ECU settlement day by the ECU Banking Association in Paris or
otherwise generally regarded in the ECU interbank market as a day in which
payments in ECU are made.
"Market Exchange Rate" for any Specified Currency means the noon buying
rate in The City of New York for cable transfers for such Specified Currency as
certified for customs purposes by (or if not so certified as otherwise
determined by) the Federal Reserve Bank of New York.
"Prime Rate" means the rate calculated as set forth under the heading
"Description of Notes -- Floating Rate Notes -- Prime Rate Notes", unless
otherwise indicated in the applicable Pricing Supplement.
"Specified Currency" shall have the meaning set forth under the heading
"Important Currency Exchange Information".
"Spread " means the number of basis points specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
"Spread Multiplier" means the percentage specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
"Telerate Page 3750" means the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service,
or such other service as may be nominated as the information vendor, for the
purpose of displaying rates or prices relating to LIBOR).
"Treasury Rate" means the interest rate calculated as set forth under the
heading "Description of Notes -- Floating Rate Notes -- Treasury Rate Notes",
unless otherwise indicated in the applicable Pricing Supplement.
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<PAGE> 26
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NO DEALER, AGENT, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND ANY PRICING SUPPLEMENT IN
CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY DISTRIBUTOR. THIS PROSPECTUS, PROSPECTUS SUPPLEMENT AND
ANY PRICING SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS, PROSPECTUS SUPPLEMENT OR ANY PRICING SUPPLEMENT OR AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS, PROSPECTUS SUPPLEMENT OR ANY PRICING SUPPLEMENT NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Important Currency Exchange
Information......................... S- 2
Description of Notes.................. S- 2
Special Provisions Relating to Foreign
Currency Notes...................... S-14
United States Taxation................ S-15
Plan of Distribution of Notes......... S-22
Validity of Notes..................... S-23
Glossary.............................. S-23
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Selected Consolidated Financial
Data................................ 6
Use of Proceeds....................... 7
Capitalization........................ 7
Description of Debt Securities........ 8
Plan of Distribution.................. 17
Validity of Offered Debt Securities... 18
Experts............................... 18
</TABLE>
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[Car Tech Logo]
CARPENTER TECHNOLOGY
CORPORATION
U.S. $100,000,000
MEDIUM-TERM NOTES,
SERIES A
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PROSPECTUS SUPPLEMENT
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CS First Boston
J.P. Morgan Securities Inc.
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