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Filed Pursuant to Rule 424(b)(5)
Registration File Nos. 33-61223 and 333-65217
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 21, 1998)
[CENTEX LOGO]
$135,000,000
SENIOR MEDIUM-TERM NOTES, SERIES A
SUBORDINATED MEDIUM-TERM NOTES, SERIES A
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
CENTEX CORPORATION
2728 North Harwood Street
Dallas, Texas 75201
(214) 981-5000
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THE ISSUER: Centex Corporation is a Nevada corporation.
TERMS: We plan to offer and sell Senior and/or Subordinated Notes with
various terms, including the following:
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o Ranking as senior or subordinated indebtedness o Interest at fixed or floating rates. The floating
of Centex interest rate may be based on one or more of the
following indices plus or minus a spread or spread
o Stated maturities of nine months or more multiplier:
o CD rate
o Redemption and/or repayment provisions, if o CMT rate
applicable, whether mandatory or at the option of o Commercial paper rate
Centex or Noteholders o Eleventh district cost of funds rate
o Federal funds rate
o Minimum denominations of $1,000 except for o LIBOR
Remarketed Notes which will be issued in o Prime rate
minimum denominations of $100,000 o Treasury rate
o Interest payments on fixed rate Notes on each o Book-entry or certificated form
March 1 and September 1
o Interest on Remarketed Notes at the initial interest rate for
o Interest payments on floating rate Notes on a the initial interest rate period specified in the pricing
monthly, quarterly, semiannual or annual basis supplement and thereafter at rates established as described
herein
o Issuance at discounts to par, which may be
significant. Discount Notes may not bear any
interest
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The final terms for each Note, which may be different from the terms
described in this Prospectus Supplement, will be specified in the applicable
pricing supplement.
Investing in the Notes involves certain risks. See "Risk Factors" on
page S-3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus Supplement or the accompanying
Prospectus. Any representation to the contrary is a criminal offense.
We may sell Notes to the Agents as principal for resale at varying or
fixed offering prices or through the Agents as agent using their reasonable
efforts on our behalf. If we sell all the Notes, we expect to receive proceeds
of between $133,987,500 and $134,831,250, after paying the Agent's discounts and
commissions of between $168,750 and $1,012,500. We may also sell Notes without
the assistance of the Agents (whether acting as principal or as agent).
------------------------------
First Chicago Capital Markets, Inc.
Credit Suisse First Boston
Morgan Stanley Dean Witter
NationsBanc Montgomery Securities LLC
Warburg Dillon Read LLC
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November 13, 1998
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TABLE OF CONTENTS
Page
PROSPECTUS SUPPLEMENT
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THE COMPANY.......................................................................................................3
RISK FACTORS......................................................................................................3
Structure Risks..........................................................................................3
Tax Risks................................................................................................4
Credit Ratings...........................................................................................4
DESCRIPTION OF NOTES..............................................................................................4
General ................................................................................................5
Redemption at the Option of the Company..................................................................6
Repayment at the Option of the Holder....................................................................7
Certain Covenants of the Company.........................................................................8
Defeasance Provisions....................................................................................8
Interest ................................................................................................9
Other/Additional Provisions; Addendum...................................................................18
Discount Notes..........................................................................................18
Indexed Notes...........................................................................................18
Amortizing Notes........................................................................................19
Book-Entry Notes........................................................................................19
Multi-Currency and Indexed Notes........................................................................21
Special Provisions Relating to Remarketed Notes.........................................................22
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..........................................................30
U.S. Holders............................................................................................31
Non-U.S. Holders........................................................................................35
Backup Withholding......................................................................................36
PLAN OF DISTRIBUTION.............................................................................................36
LEGAL OPINIONS...................................................................................................38
PROSPECTUS
ABOUT THIS PROSPECTUS.............................................................................................2
WHERE YOU CAN FIND MORE INFORMATION...............................................................................2
A WARNING ABOUT FORWARD-LOOKING STATEMENTS........................................................................2
THE COMPANY.......................................................................................................3
USE OF PROCEEDS...................................................................................................3
RATIO OF EARNINGS TO FIXED CHARGES................................................................................3
SUMMARY OF SELECTED FINANCIAL DATA................................................................................4
DESCRIPTION OF DEBT SECURITIES....................................................................................5
General ................................................................................................5
Covenants................................................................................................6
Payment and Transfer.....................................................................................6
Senior Debt Securities...................................................................................6
Subordinated Debt Securities.............................................................................7
Global Certificates......................................................................................7
Events of Default........................................................................................8
Defeasance...............................................................................................9
Consolidation, Merger or Sale...........................................................................10
Modification of the Indentures..........................................................................10
Certificates and Opinions to be Furnished to Trustee....................................................10
Report to Holders of Debt Securities....................................................................10
The Trustee.............................................................................................10
PLAN OF DISTRIBUTION.............................................................................................11
By Agents...............................................................................................11
By Underwriters.........................................................................................11
Direct Sales............................................................................................11
General Information.....................................................................................11
LEGAL OPINIONS...................................................................................................12
EXPERTS..........................................................................................................12
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THE COMPANY
Centex Corporation (the "Company") is one of the nation's largest home
builders, mortgage lenders and general building contractors. We currently
operate in five principal business segments: Home Building, Investment Real
Estate, Financial Services, Construction Products and Contracting and
Construction Services. The Home Building business has expanded to include both
Conventional Homes and Manufactured Homes. The Conventional Homes operations
currently involve the construction and sale of single-family homes, town homes
and low-rise condominiums and also include the purchase and development of land.
In March 1997, we entered into the Manufactured Homes business when we acquired
approximately 80% of the common stock of Cavco Industries, Inc. Manufactured
Homes operations include the manufacture of quality residential and park model
homes and their sale through company-owned retail outlets and a network of
independent dealers. Investment Real Estate operations involve the acquisition,
development and sale of land, the development of industrial, office, retail and
other commercial projects and apartment complexes. Through our Financial
Services operations, we offer financing of conventional and manufactured homes,
home equity and sub-prime lending and the sale of title and other insurance
coverages. These activities include mortgage origination and other related
services for homes sold by our subsidiaries and by others. We also manufacture
cement, gypsum wallboard and ready-mix concrete for distribution and sale
through our Construction Products operations. Contracting and Construction
Services activities involve the construction of buildings for both private and
government interests, including office, commercial and industrial buildings,
hospitals, hotels, museums, libraries, airport facilities and educational
facilities. In April 1994, our construction products subsidiary, Centex
Construction Products, Inc. ("CXP"), completed an initial public offering of 51%
of its common stock. Principally as a result of stock repurchases by CXP, our
ownership interest in CXP was 56.4% as of June 30, 1998.
Our principal executive office is located at 2728 N. Harwood Street,
Dallas, Texas 75201, and our telephone number is (214) 981-5000.
RISK FACTORS
Your investment in the Notes will include certain risks. In
consultation with your own financial and legal advisers, you should carefully
consider, among other matters, the following discussion of risks before deciding
whether an investment in the Notes is suitable for you. Notes are not an
appropriate investment for you if you are unsophisticated with respect to the
significant components of such Notes.
STRUCTURE RISKS
General
If you invest in Notes (as defined below) indexed to one or more
interest rate, currency or other indices or formulas, there will be significant
risks not associated with a conventional fixed rate or floating rate debt
security. Such risks include fluctuation of the indices or formulas and the
possibility that you will receive a lower (or no) amount of premium or interest
and at different times than you expected. We have no control over a number of
matters, including economic, financial and political events, that are important
in determining the existence, magnitude and longevity of such risks and their
results. In addition, if an index or formula used to determine any amounts
payable in respect of the Notes contains a multiplier or leverage factor, the
effect of any change in such index or formula will be magnified. In recent
years, values of certain indices and formulas have been volatile and volatility
in those and other indices and formulas may be expected in the future. However,
past experience is not necessarily indicative of what may occur in the future.
Redemption
If your Notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may (in the case of optional redemption) or must (in
the case of mandatory redemption) choose to redeem such Notes at times
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when prevailing interest rates may be relatively low. Accordingly, you generally
will not be able to reinvest the redemption proceeds in a comparable security at
an effective interest rate as high as that of the Notes.
Uncertain Trading Markets
We cannot assure you that a trading market for your Notes will ever
develop or be maintained. Many factors independent of our creditworthiness
affect the trading market. These factors include:
o complexity and volatility of the index or formula applicable
to the Notes,
o method of calculating the principal, premium and interest in
respect of the Notes,
o time remaining to the maturity of the Notes,
o outstanding amount of the Notes,
o redemption features of the Notes,
o amount of other debt securities linked to the index or
formula applicable to the Notes, and
o level, direction and volatility of market interest rates
generally.
In addition, certain Notes have a more limited trading market and
experience more price volatility because they were designed for specific
investment objectives or strategies. There may be a limited number of buyers
when you decide to sell such Notes. This may affect the price you receive for
your Notes or your ability to sell your Notes at all. You should not purchase
Notes unless you understand and know you can bear the foregoing investment
risks.
TAX RISKS
Some of the Notes will be issued at a significant discount from their
aggregate principal amount at maturity. Consequently, the purchasers of such
Notes generally will be required to include amounts in gross income for federal
income tax purposes in advance of receipt of any cash payment on the Notes to
which the income is attributable. See "Certain United States Federal Income Tax
Considerations" for a more detailed discussion of the Federal income tax
consequences to the holders of the Notes of the purchase, ownership, and
disposition of the Notes.
CREDIT RATINGS
The credit ratings of our medium-term note program may not reflect the
potential impact of all risks related to structure and other factors on the
value of your Notes. In addition, real or anticipated changes in our credit
ratings will generally affect the market value of your Notes.
DESCRIPTION OF NOTES
The Notes will be issued as one or more series of Debt Securities, and
will be either Senior Debt Securities or Subordinated Debt Securities of the
Company. Whether an offering of Notes will constitute Senior Debt Securities
("Senior Notes") or Subordinated Debt Securities ("Subordinated Notes" and,
together with the Senior Notes, the "Notes") of the Company will be set forth in
a Pricing Supplement hereto for such offering. The Senior Notes are to be issued
under an Indenture, dated as of October 1, 1998, as amended or modified from
time to time (the "Senior Indentures"), between the Company and Chase Bank of
Texas, National Association, as trustee (the "Trustee"), and the Subordinated
Notes are to be issued under an Indenture, dated as of March 12, 1987, as
amended or modified from time to time (the "Subordinated Indenture" and,
together with the Senior Indenture, the "Indenture"), between the Company and
the Trustee (successor to Texas Commerce Bank, National Association). The
Indentures are subject to, and governed by, the Trust Indenture Act of 1939, as
amended. The following summary of certain provisions of the Notes and the
Indentures does not purport to be complete and is qualified in its entirety by
reference to the actual provisions of the Notes and the Indentures. Capitalized
terms used but not defined herein shall have the meanings given to them in the
accompanying Prospectus, the Notes or the Indentures, as the case may be. The
term "Debt Securities," as used in this Prospectus Supplement, refers to all
debt securities, including the Notes, issued and issuable from time to time
under the Indentures. The following description of Notes will apply to each Note
offered hereby unless otherwise specified in the applicable Pricing Supplement.
The Company has previously sold, through the Agents, $65,000,000
aggregate principal amount of Notes constituting Senior Debt Securities (the
"Existing Notes") pursuant to a prospectus and prospectus supplement dated
October 21, 1998 and related pricing supplements. The offering of Notes
pursuant to this Prospectus Supplement represents a continuation of such
offering. The Existing Notes were issued in accordance with, and are subject
to, all the terms, provisions and conditions applicable to the Notes described
herein and in the accompanying Prospectus.
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GENERAL
All Senior Debt Securities, including the Senior Notes, issued and to
be issued under the Senior Indenture will be unsecured general obligations of
the Company and will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company from time to time outstanding.
All Subordinated Debt Securities, including the Subordinated Notes,
issued and to be issued under the Subordinated Indenture will be unsecured and
will be subordinated as set forth under "Description of Debt
Securities--Subordinated Debt Securities" in the attached Prospectus. As of
September 30, 1998, the Company had approximately $552.4 million principal
amount of senior debt outstanding to third party creditors.
Because the Company conducts its business through subsidiaries, the
Company's rights and the rights of its creditors, including the holders of
Notes, to participate in the assets of any subsidiary upon the latter's
liquidation or recapitalization will be subject to the prior claims of the
subsidiary's creditors, except to the extent that the Company may itself be a
creditor with recognized claims against the subsidiary. Moreover, the ability of
the Company to pay principal of and interest on the Notes is, to a large extent,
dependent upon the payment to it of dividends, interest or other amounts by
subsidiaries of the Company. As of June 30, 1998, subsidiaries of the Company
had approximately $1.3 billion principal amount of debt outstanding to third
party creditors, of which $971.2 million was secured by subsidiary assets,
including approximately $957.3 million related to the Company's financial
services operations. The Indentures do not contain any limitation on the ability
of the Company to incur additional debt or on the ability of the Company's
subsidiaries to incur additional debt to the Company or to unaffiliated third
parties. In addition, in connection with managing the working capital needs of
the Company and its subsidiaries, from time to time the Company borrows funds
and lends funds to its subsidiaries. The Company's indebtedness to its
subsidiaries will rank pari passu in right of payment to the Senior Notes and
will rank senior in right of payment to the Subordinated Notes.
The Indentures do not limit the aggregate initial offering price of
Debt Securities that may be issued thereunder and Debt Securities may be issued
thereunder from time to time in one or more series up to the aggregate initial
offering price from time to time authorized by the Company for each series. The
Company may, from time to time, without the consent of the Holders of the Notes,
provide for the issuance of Notes or other Debt Securities under the Indentures
in addition to the $200,000,000 aggregate initial offering price of Notes
(including the Existing Notes) authorized as of the date of this Prospectus
Supplement.
The Senior Indenture contains certain restrictive covenants with
respect to liens and the sale or lease of the Company's assets. See "Certain
Covenants of the Company." The Subordinated Indenture does not contain similar
covenants.
The Notes are currently limited to up to $200,000,000 (including the
Existing Notes) aggregate initial offering price, or the equivalent thereof in
one or more foreign or composite currencies. Each Note will mature on any day
nine months or more from its date of issue (the "Stated Maturity Date"), as
specified in the applicable Pricing Supplement, unless the principal thereof (or
any installment of principal thereof) becomes due and payable prior to the
Stated Maturity Date, whether by the declaration of acceleration of maturity,
notice of redemption at the option of the Company, notice of the Holder's option
to elect repayment or otherwise (the Stated Maturity Date or such prior date, as
the case may be, is herein referred to as the "Maturity Date" with respect to
the principal of such Note repayable on such date). Unless otherwise specified
in the applicable Pricing Supplement, interest-bearing Notes will either be
Fixed Rate Notes or Floating Rate Notes, as specified in the applicable Pricing
Supplement. The Company may also issue Discount Notes, Indexed Notes and
Amortizing Notes (as such terms are hereinafter defined).
The Notes may be issued as Notes which will initially bear interest at
a fixed rate or floating rate as set forth in the applicable Pricing Supplement
through the date set forth in the applicable Pricing Supplement (the "Initial
Interest Rate") and for each interest rate period (each an "Interest Rate
Period") thereafter. Remarketed Notes will bear interest at a fixed or floating
rate as described under "Special Provisions Relating to Remarketed Notes"
("Remarketed Notes"). Unless otherwise specified in the applicable Pricing
Supplement, Remarketed Notes will not be subject to optional redemption by the
Company or repayment at the option of the Holders thereof prior to the
expiration of the applicable Initial Interest Rate Period. After the Initial
Interest Rate Period, Remarketed Notes may bear interest for any Interest Rate
Period in the Short Term Mode or the Long Term Mode as determined by the
Company. See "Special Provisions Relating to Remarketed Notes."
Unless otherwise specified in the applicable Pricing Supplement, the
Notes will be denominated in, and payments of principal, premium, if any, and/or
interest, if any, in respect thereof will be made in, United States dollars.
References herein to "United States dollars," "U.S. dollars" or "$" are to the
lawful currency of the United States of America (the "United States").
Interest rates offered by the Company with respect to the Notes may
differ depending upon, among other factors, the aggregate principal amount of
Notes purchased in any single transaction. Notes with different variable terms
other than interest rates may also be offered concurrently to different
investors. Interest rates or formulas and
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other terms of Notes are subject to change by the Company from time to time, but
no such change will affect any Note previously issued or as to which an offer to
purchase has been accepted by the Company.
Except as provided below in this paragraph concerning Remarketed Notes,
each Note will be issued as a Book-Entry Note represented by one or more fully
registered Global Securities or as a fully registered Certificated Note. The
minimum denominations of each Note other than a Remarketed Note will be $1,000
and integral multiples thereof, unless otherwise specified in the applicable
Pricing Supplement. Remarketed Notes will be issued only as Book-Entry Notes in
denominations of $100,000 and integral multiples of $1,000 in excess thereof.
Payments of principal of, and premium, if any, and interest, if any,
on, Book-Entry Notes will be made by the Company through the Trustee to the
Depositary. See "--Book-Entry Notes." In the case of Certificated Notes, payment
of principal and premium, if any, due on the Maturity Date will be made in
immediately available funds upon presentation and surrender thereof (and, in the
case of any repayment on an Optional Repayment Date, upon submission of a duly
completed election form in accordance with the provisions described below) at
the office or agency maintained by the Company for such purpose in the Borough
of Manhattan, The City of New York, currently the corporate trust office of the
Trustee located at Chase Global Trust, 450 W. 33rd, 15th Floor, New York, New
York 10001. Payment of interest, if any, due on the Maturity Date of a
Certificated Note will be made to the person to whom payment of the principal
thereof and premium, if any, thereon shall be made. Payment of interest, if any,
due on a Certificated Note on any Interest Payment Date (as hereinafter defined)
other than the Maturity Date will be made by check mailed to the address of the
Holder entitled thereto as such address shall appear in the Security Register of
the Company. Notwithstanding the foregoing, a Holder of $10,000,000 or more in
aggregate principal amount of Certificated Notes (whether having identical or
different terms and provisions) will be entitled to receive interest payments,
if any, on any Interest Payment Date other than the Maturity Date by wire
transfer of immediately available funds if appropriate wire transfer
instructions have been received in writing by the Trustee not less than 15 days
prior to such Interest Payment Date. Any such wire transfer instructions
received by the Trustee shall remain in effect until revoked by such Holder.
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in The
City of New York or the City of Dallas; provided, however, that, with respect to
Notes as to which LIBOR is an applicable Interest Rate Basis, such day is also a
London Business Day. "London Business Day" means a day on which dealings in the
Designated LIBOR Currency (as hereinafter defined) are transacted in the London
interbank market.
"Principal Financial Center" means the capital city of the country to
which the Designated LIBOR Currency relates (or, in the case of the ECU,
Luxembourg), except that with respect to United States dollars, Australian
dollars, Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos,
South African rand and Swiss francs, the "Principal Financial Center" shall be
The City of New York, Sydney, Toronto, Frankfurt, Amsterdam, London,
Johannesburg and Zurich, respectively.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "--Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency maintained by the
Company for such purpose in the Borough of Manhattan, The City of New York,
currently the corporate trust office of the Trustee located at Chase Global
Trust, 450 W. 33rd, 15th Floor, New York, New York 10001. No service charge will
be made by the Company or the Trustee for any such registration of transfer or
exchange of 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 (other than exchanges pursuant to the applicable Indenture not
involving any transfer).
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be subject to any sinking fund. The Notes will be redeemable at
the option of the Company prior to the Stated Maturity Date only if an Initial
Redemption Date is specified in the applicable Pricing Supplement. If so
specified, the Notes will be subject to
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redemption at the option of the Company on any date on and after the applicable
Initial Redemption Date in whole or from time to time in part in increments of
$1,000 or any other integral multiple of an authorized denomination specified in
such Pricing Supplement (provided that any remaining principal amount thereof
shall be at least $1,000 or such other minimum authorized denomination
applicable thereto), at the applicable Redemption Price (as hereinafter
defined), together with unpaid interest accrued thereon to the date of
redemption, on written notice given to the Holders thereof not more than 60 nor
less than 20 calendar days prior to the date of redemption and in accordance
with the provisions of the applicable Indenture. "Redemption Price," with
respect to a Note, means an amount equal to the Initial Redemption Percentage
specified in the applicable Pricing Supplement (as adjusted by the Annual
Redemption Percentage Reduction, if applicable) multiplied by the unpaid
principal amount to be redeemed. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial Redemption
Date by an amount equal to the applicable Annual Redemption Percentage
Reduction, if any, until the Redemption Price is equal to 100% of the unpaid
principal amount to be redeemed. Remarketed Notes may be redeemable at the
option of the Company as set forth under "Special Provisions Relating to
Remarketed Notes." For a discussion of the redemption of Discount Notes, see
"--Discount Notes."
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Company at the option of the Holders
thereof prior to the Stated Maturity Date only if one or more Optional Repayment
Dates are specified in the applicable Pricing Supplement. If so specified, the
Notes will be subject to repayment at the option of the Holders thereof on any
Optional Repayment Date in whole or from time to time in part in increments of
$1,000 or any other integral multiple of an authorized denomination specified in
the applicable Pricing Supplement (provided that any remaining principal amount
thereof shall be at least $1,000 or such other minimum authorized denomination
applicable thereto), at a repayment price equal to 100% of the unpaid principal
amount to be repaid, together with unpaid interest accrued thereon to the date
of repayment. For any Note to be repaid, such Note must be received, together
with the form thereon entitled "Option to Elect Repayment" duly completed, by
the Trustee at its office maintained for such purpose in the Borough of
Manhattan, The City of New York, currently the corporate trust office of the
Trustee located at Chase Global Trust, 450 W. 33rd, 15th Floor, New York, New
York 10001, not more than 60 nor less than 30 calendar days prior to the date of
repayment. Exercise of such repayment option by the Holder will be irrevocable.
Remarketed Notes may be repayable by the Company at the option of the Holders
thereof as set forth under "Special Provisions Relating to Remarketed Notes."
For a discussion of the repayment of Discount Notes, see "--Discount Notes."
Only the Depositary may exercise the repayment option in respect of
Global Securities representing Book- Entry Notes. Accordingly, Beneficial Owners
(as hereinafter defined) of Global Securities that desire to have all or any
portion of the Book-Entry Notes represented by such Global Securities repaid
must instruct the Participant (as hereinafter defined) through which they own
their interest to direct the Depositary to exercise the repayment option on
their behalf by delivering the related Global Security and duly completed
election form to the Trustee as aforesaid. In order to ensure that such Global
Security and election form are received by the Trustee on a particular day, the
applicable Beneficial Owner must so instruct the Participant through which it
owns its interest before such Participant's deadline for accepting instructions
for that day. Different firms may have different deadlines for accepting
instructions from their customers. Accordingly, Beneficial Owners should consult
the Participants through which they own their interest for the respective
deadlines for such Participants. All instructions given to Participants from
Beneficial Owners of Global Securities relating to the option to elect repayment
shall be irrevocable. In addition, at the time such instructions are given, each
such Beneficial Owner shall cause the Participant through which it owns its
interest to transfer such Beneficial Owner's interest in the Global Security or
Securities representing the related Book-Entry Notes, on the Depositary's
records, to the Trustee. See "--Book-Entry Notes."
If applicable, the Company will comply with the requirements of Section
14(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules promulgated thereunder, and any other securities laws or
regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in
the open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
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CERTAIN COVENANTS OF THE COMPANY
The following covenants apply only to the Senior Notes as a series of
securities under the Senior Indenture.
Limitation on Liens. The Company will not and will not permit any
subsidiary (other than Centex Financial Services, Inc. and its subsidiaries) to
issue, assume or guarantee any indebtedness for borrowed money if such borrowed
money is secured by a mortgage, pledge, security interest, lien or other
encumbrance (a "Lien") upon or with respect to any of the properties or assets
of the Company or any such subsidiary or on any shares of capital stock or
other equity interests of any subsidiary that owns property or assets (other
than Centex Financial Services, Inc. and its subsidiaries), whether, in each
case, owned at the date of the Senior Indenture or thereafter acquired, unless
(a) the Company makes effective provision whereby the Senior Notes of that
series shall be secured equally and ratably with any and all borrowed money
thereby secured, or (b) the aggregate amount of all such secured borrowings of
the Company and its subsidiaries, together with all Attributable Debt (as
defined in the Indenture) in respect of Sale and Lease-Back Transactions
existing at such time (with the exception of transactions which are not subject
to the limitation described in "Limitation on Sale and Lease- Back Transactions"
below), would not exceed 20% of the Consolidated Net Tangible Assets (as defined
in the Senior Indenture) of the Company and its subsidiaries, as shown on the
audited consolidated balance sheet contained in the latest annual report to
stockholders of the Company.
Such limitation will not apply to (a) any Lien existing on any of the
Company's properties or assets or shares of capital stock or other equity
interests at the date of the Senior Indenture, (b) any Lien created by a
subsidiary in favor of the Company or any wholly-owned subsidiary, (c) any Lien
existing on any asset of any corporation or other entity (or on any accession
or improvement to such asset or any proceeds thereof) at the time such
corporation or other entity becomes a subsidiary or at the time such
corporation is merged or consolidated with or into the Company or a subsidiary,
(d) any Lien on any asset existing at the time of acquisition thereof (or on
any accession or improvement to such asset or any proceeds thereof), (e) any
Lien on any asset (or on any accession or improvement to such asset or any
proceeds thereof) securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring or improving such asset, if
such Lien attaches to such asset concurrently with or within 180 days after the
acquisition or improvement thereof, (f) any Lien incurred in connection with
pollution control, industrial revenue or any similar financing, (g) any
refinancing, extension, renewal or replacement of any of the Liens described in
this paragraph if the principal amount of the Indebtedness secured thereby is
not increased and is not secured by any additional assets, or (h) any Lien
imposed by law.
Limitation on Sale and Lease-Back Transactions. Neither the Company
nor any subsidiary may enter into any arrangement with any person (other than
the Company) providing for the leasing by the Company or a subsidiary of any of
its properties or assets (except for temporary leases for a term of not more
than three years and except for sales and leases of model homes), which
property has been or is to be sold or transferred by the Company or a
subsidiary to such person (herein referred to as a "Sale and Lease-Back
Transaction").
Such limitation will not apply to any Sale and Lease-Back Transaction
if (a) the net proceeds to the Company or such subsidiary from the sale or
transfer are equal to or exceed the fair value (as determined by the Board of
Directors, the Chairman of the Board, the Vice Chairman, the President or the
principal financial officer of the Company) of the property so leased, (b) the
Company or such subsidiary would be entitled to incur indebtedness secured by a
Lien on the property to be leased as described in "Limitation on Liens" above,
(c) the Company, within 180 days of the effective date of any such Sale and
Lease-Back Transaction, applies an amount equal to the fair value (as so
determined) of the property so leased to the retirement of Funded Indebtedness
(as defined in the Senior Indenture) of the Company, (d) such Sale and
Lease-Back Transaction relates to a sale which occurs within 180 days from the
date of acquisition of such property by the Company or a subsidiary or the date
of the completion of construction or commencement of full operations on such
property, whichever is later, or (e) such transaction was consummated prior to
the date of the Senior Indenture.
DEFEASANCE PROVISIONS
The Indentures provide that the Company will be discharged from any and
all obligations in respect of the Notes of the applicable series (except for
certain obligations to register the transfer or exchange of Notes,
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to replace stolen, lost or mutilated Notes, to maintain paying agencies and to
hold moneys for payment in trust) upon the deposit with the Trustee, in trust,
of money and/or U.S. Government Obligations, which through the payment of
interest and principal thereof in accordance with their terms will provide money
in an amount sufficient to pay any installment of principal of, premium, if any,
and interest on and any mandatory sinking fund payments in respect of any of the
Notes of such series on the stated maturity of such payments, or on any
redemption date established for such Notes, in accordance with the terms of the
applicable Indenture and such Notes. Such discharge may only occur if the
Company has delivered to the Trustee an opinion of counsel based on a change in
law occurring after the issue dates of the Notes or a United States Internal
Revenue Service ruling to the effect that such a discharge will not cause the
Holders of such Notes to recognize income, gain or loss for Federal income tax
purposes and will be subject to Federal income tax in the same amount and in the
same manner and at the same times, as would have been the case if such discharge
had not occurred.
The Company may omit to comply with the covenants described under the
heading "Certain Covenants of the Company" above under the circumstances
described herein only with respect to the Senior Notes of each series. The
Company, in order to exercise such option, will be required to deposit with the
Trustee, in trust, money and/or U.S. Government Obligations which through the
payment of interest and principal thereof in accordance with their terms will
provide money in an amount sufficient to pay any installment of principal of,
premium, if any, and interest on and any mandatory sinking fund payments in
respect of any of the Senior Notes of such series on the stated maturity of such
payments in accordance with the terms of the Senior Indenture and such Senior
Notes. Such covenant defeasance may only occur if the Company has delivered to
the Trustee an opinion of counsel satisfactory to the Trustee to the effect that
the covenant defeasance and related deposit will not cause the Holders of such
series to recognize income, gain or loss for federal income tax purposes and
that the Holders will be subject to Federal income tax in the same amount and in
the same manner and at the same times, as would have been the case if such
covenant defeasance and related deposit had not occurred.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly
provided for. Unless otherwise specified in the applicable Pricing Supplement,
interest payments in respect of Fixed Rate Notes and Floating Rate Notes will be
made in an amount equal to the interest accrued from and including the
immediately 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 or duly provided for) to but excluding the applicable
Interest Payment Date or the Maturity Date, as the case may be (each, an
"Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest on
any such Note originally issued between a Record Date (as hereinafter defined)
and the related Interest Payment Date will be made on the Interest Payment Date
immediately following the next succeeding Record Date to the Holder on such next
succeeding Record Date. Unless otherwise specified in the applicable Pricing
Supplement, a "Record Date" for Notes other than Remarketed Notes shall be the
fifteenth calendar day (whether or not a Business Day) immediately preceding the
related Interest Payment Date; and (ii) a "Record Date" for Remarketed Notes
shall be as set forth under "Special Provisions Relating to Remarketed Notes."
For information with respect to interest on Remarketed Notes, see
"Special Provisions Relating to Remarketed Notes."
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Fixed Rate Notes
Interest on Fixed Rate Notes will be payable on March 1 and September 1
of each year or on such other date(s) specified in the applicable Pricing
Supplement (each, an "Interest Payment Date" with respect to Fixed Rate Notes)
and on the Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after such Interest Payment Date or the
Maturity Date, as the case may be, to the date of such payment on the next
succeeding Business Day.
Floating Rate Notes
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement. The applicable Pricing Supplement will specify
certain terms with respect to which each Floating Rate Note is being delivered,
including: whether such Floating Rate Note is a "Regular Floating Rate Note," a
"Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate Note," the Fixed
Rate Commencement Date, if applicable, Fixed Interest Rate, if applicable,
Interest Rate Basis or Bases, Initial Interest Rate, if any, Initial Interest
Reset Date, Interest Reset Dates, Interest Payment Dates, Index Maturity,
Maximum Interest Rate and/or Minimum Interest Rate, if any, and Spread and/or
Spread Multiplier, if any, as such terms are defined below. If one or more of
the applicable Interest Rate Bases is LIBOR or the CMT Rate, the applicable
Pricing Supplement will also specify the Designated LIBOR Currency and
Designated LIBOR Page or the Designated CMT Maturity Index and Designated CMT
Telerate Page, respectively, as such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined
as follows:
(i) Unless such Floating Rate Note is designated as a
"Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate Note," or
as having an Addendum attached or having "Other/Additional Provisions"
apply, in each case relating to a different interest rate formula, such
Floating Rate Note will be designated as a "Regular Floating Rate Note"
and, except as described below or in the applicable Pricing Supplement,
will bear interest at the rate determined by reference to the
applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable
Spread Multiplier, if any. Commencing on the Initial Interest Reset
Date, the rate at which interest on such Regular Floating Rate Note
shall be payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period, if
any, from the date of issue to the Initial Interest Reset Date will be
the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the
applicable Pricing Supplement, such Floating Rate Note will bear
interest at the rate determined by reference to the applicable Interest
Rate Basis or Bases (a) plus or minus the applicable Spread, if any,
and/or (b) multiplied by the applicable Spread Multiplier, if any.
Commencing on the Initial Interest Reset Date, the rate at which
interest on such Floating Rate/Fixed Rate Note shall be payable shall
be reset as of each Interest Reset Date; provided, however, that (y)
the interest rate in effect for the period, if any, from the date of
issue to the Initial Interest Reset Date will be the Initial Interest
Rate and (z) the interest rate in effect (the "Fixed Interest Rate")
for the period commencing on a date specified in the applicable Pricing
Supplement (the "Fixed Rate Commencement Date") to the Maturity Date
shall be the interest rate so specified in the applicable Pricing
Supplement or, if no such rate is specified, the interest rate in
effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse
Floating Rate Note," then, except as defined below or in the applicable
Pricing Supplement, such Inverse Floating Rate Note will bear interest
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at the Fixed Interest Rate minus the rate determined by reference to
the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable
Spread Multiplier, if any; provided, however, that, unless otherwise
specified in the applicable Pricing Supplement, the interest rate
thereon will not be less than zero. Commencing on the Initial Interest
Reset Date, the rate at which interest on such Inverse Floating Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period, if
any, from the date of issue to the Initial Interest Reset Date will be
the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate on
such Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as hereinafter defined) immediately preceding
such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
The applicable Pricing Supplement will specify whether the rate of
interest on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year; (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided however, that,
with respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon
will not reset after the applicable Fixed Rate Commencement Date. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing
on the related Interest Reset Date will be the rate determined by the
Calculation Agent (as hereinafter defined) as of the applicable Interest
Determination Date and calculated on or prior to the Calculation Date (as
hereinafter defined), except with respect to LIBOR and the Eleventh District
Cost of Funds Rate, which will be calculated on such Interest Determination
Date. The "Interest Determination Date" with respect to the CD Rate, the CMT
Rate, the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will
be the second Business Day immediately preceding the applicable Interest Reset
Date; the "Interest Determination Date" with respect to the Eleventh District
Cost of Funds Rate will be the last working day of the month immediately
preceding the applicable Interest Reset Date on which the Federal Home Loan Bank
of San Francisco (the "FHLB of San Francisco") publishes the Index (as
hereinafter defined); and the "Interest Determination Date" with respect to
LIBOR will be the second London Business Day immediately preceding the
applicable Interest Reset Date, unless the Designated LIBOR Currency is British
pounds sterling, in which case the "Interest Determination Date" will be the
applicable Interest Reset Date. With respect to the Treasury Rate, the "Interest
Determination Date" will be the day in the week in which the applicable Interest
Reset Date falls on which day Treasury Bills (as hereinafter defined) are
normally auctioned (Treasury Bills are normally sold at an auction held on
Monday of each week, unless such Monday is a legal holiday, in which case the
auction is normally held
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on the immediately succeeding Tuesday although such auction may be held on the
preceding Friday); provided, however, that if an auction is held on the Friday
of the week preceding the applicable Interest Reset Date, the "Interest
Determination Date" will be such preceding Friday; provided, further, that if
the Interest Determination Date would otherwise fall on an Interest Reset Date,
then such Interest Reset Date will be postponed to the next succeeding Business
Day. The "Interest Determination Date" pertaining to a Floating Rate Note the
interest rate of which is determined by reference to two or more Interest Rate
Bases will be the most recent Business Day which is at least two Business Days
prior to the applicable Interest Reset Date for such Floating Rate Note on which
each Interest Rate Basis is determinable. Each Interest Rate Basis will be
determined as of such date, and the applicable interest rate will take effect on
the applicable Interest Reset Date.
Notwithstanding the foregoing, a Floating Rate Note may also have
either or both of the following: (i) a Maximum Interest Rate, or ceiling, that
may accrue during any Interest Period and (ii) a Minimum Interest Rate, or
floor, that may accrue during any Interest Period. In addition to any Maximum
Interest Rate that may apply to any Floating Rate Note, the interest rate on
Floating Rate Notes will in no event be higher than the maximum rate permitted
by Texas law, as the same may be modified by United States law of general
application.
Except as provided below or in the applicable Pricing Supplement,
interest will be payable, in the case of Floating Rate Notes which reset: (i)
daily, weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, on the third Wednesday of the month of
each year specified in the applicable Pricing Supplement (each, an "Interest
Payment Date" with respect to Floating Rate Notes) and, in each case, on the
Maturity Date. If any Interest Payment Date other than the Maturity Date for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Payment Date will be postponed to the next succeeding Business Day,
except that in the case of a Floating Rate Note as to which LIBOR is an
applicable Interest Rate Basis and such Business Day falls in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding Business Day. If the Maturity Date of a Floating Rate Note falls on a
day that is not a Business Day, the required payment of principal, premium, if
any, and interest will be made on the next succeeding Business Day as if made on
the date such payment was due, and no interest will accrue on such payment for
the period from and after the Maturity Date to the date of such payment on the
next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes
will be rounded 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) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign or composite currency, to the nearest unit (with one-half cent or unit
being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated
by multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year in the case of Floating Rate Notes for which an applicable Interest
Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise specified in
the applicable Pricing Supplement, the interest factor for Floating Rate Notes
for which the interest rate is calculated with reference to two or more Interest
Rate Bases will be calculated in each period in the same manner as if only the
applicable Interest Rate Basis specified in the applicable Pricing Supplement
applied.
Unless otherwise specified in the applicable Pricing Supplement, Chase
Bank of Texas, National Association, will be the "Calculation Agent." Upon
request of the Holder of any Floating Rate Note, the Calculation Agent will
disclose the interest rate then in effect and, if determined, the interest rate
that will become effective as a result of a determination made for the next
succeeding Interest Reset Date with respect to such Floating Rate Note.
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Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," if applicable, pertaining to any Interest Determination Date
will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or the Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD RATE. Unless otherwise specified in the applicable Pricing
Supplement, "CD Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable United States dollar certificates of deposit having the
Index Maturity specified in the applicable Pricing Supplement as published in
H.15(519) (as hereinafter defined) under the heading "CDs (secondary market)"
or, if not so published by 3:00 P.M., New York City time, on the related
Calculation Date, the rate on such CD Rate Interest Determination Date for
negotiable United States dollar certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published in H.15 Daily Update
(as hereinafter defined), or such other recognized electronic source used for
the purpose of displaying such rate, under the caption "CDs (secondary market)."
If such rate is not yet published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the related
Calculation Date, then the CD Rate on such CD Rate Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the secondary market offered rates as of 10:00 A.M., New York City time, on such
CD Rate Interest Determination Date, of three leading nonbank dealers in
negotiable United States dollar certificates of deposit in The City of New York
(which may include the Agents or their affiliates) selected by the Calculation
Agent for negotiable United States dollar certificates of deposit of major
United States money center banks for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement in an amount that is representative for a single transaction
in that market at that time; provided, however, that if the dealers so selected
by the Calculation Agent are not quoting as mentioned in this sentence, the CD
Rate determined as of such CD Rate Interest Determination Date will be the CD
Rate in effect on such CD Rate Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as such, or
any successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available
through the world-wide-web site of the Board of Governors of the Federal Reserve
System at http://www.bog.frb.fed.us/releases/h15/update, or any successor site
or publication.
CMT RATE. Unless otherwise specified in the applicable Pricing
Supplement, "CMT Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page under the caption "...Treasury
Constant Maturities...Federal Reserve Board Release H.15...Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7051, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
weekly or monthly average, as specified in the applicable Pricing Supplement,
for the week or the month, as applicable, ended immediately preceding the week
or the month, as applicable, in which the related CMT Rate Interest
Determination Date falls. If such rate is no longer displayed on the relevant
page or is not so displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index as published in H.15(519). If such rate is no longer published or
is not so published by 3:00 P.M., New York City time, on the related Calculation
Date, then the CMT Rate on such CMT Rate Interest Determination Date will be
such treasury constant maturity rate for the Designated CMT Maturity Index (or
other United States Treasury rate for the Designated CMT Maturity Index) for the
CMT Rate Interest Determination Date with respect to such Interest Reset Date as
may then be published by either the Board of Governors of the Federal Reserve
System or the United States Department of the Treasury that the Calculation
Agent determines to be comparable to the rate formerly displayed on the
Designated CMT Telerate Page and published in
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H.15(519). If such information is not so provided by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate on the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
offered rates as of approximately 3:30 P.M., New York City time, on such CMT
Rate Interest Determination Date reported, according to their written records,
by three leading primary United States government securities dealers in The City
of New York (which may include the Agents or their affiliates) (each, a
"Reference Dealer") selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States ("Treasury
Notes") with an original maturity of approximately the Designated CMT Maturity
Index and a remaining term to maturity of not less than such Designated CMT
Maturity Index minus one year. If the Calculation Agent is unable to obtain
three such Treasury Note quotations, the CMT Rate on such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary market offered
rates as of approximately 3:30 P.M., New York City time, on such CMT Rate
Interest Determination Date of three Reference Dealers in The City of New York
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offered rates obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers so selected by the Calculation Agent are quoting as
mentioned herein, the CMT Rate determined as of such CMT Rate Interest
Determination Date will be the CMT Rate in effect on such CMT Rate Interest
Determination Date. If two Treasury Notes with an original maturity as described
in the second preceding sentence have remaining terms to maturity equally close
to the Designated CMT Maturity Index, the Calculation Agent will obtain
quotations for the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on Bridge Telerate,
Inc. (or any successor service) on the page specified in the applicable Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519) or,
if no such page is specified in the applicable Pricing Supplement, page 7052.
"Designated CMT Maturity Index" means the original period to maturity
of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated or, if no such maturity is specified in the applicable
Pricing Supplement, 2 years.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable
Pricing Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as hereinafter
defined) on such date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the caption "Commercial Paper-Nonfinancial" or, if not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on such
Commercial Paper Rate Interest Determination Date for commercial paper having
the Index Maturity specified in the applicable Pricing Supplement as published
in H.15 Daily Update, or such other recognized electronic source used for the
purpose of displaying such rate, under the caption "Commercial Paper-
Nonfinancial." If such rate is not yet published in H.15(519), H.15 Daily Update
or another recognized electronic source by 3:00 P.M., New York City time, on the
related Calculation Date, then the Commercial Paper Rate on such Commercial
Paper Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the Money Market Yield of the arithmetic mean of the offered
rates at approximately 11:00 A.M., New York City time, on such Commercial Paper
Rate Interest Determination Date of three leading dealers of commercial paper in
The City of New York (which may include the Agents or their affiliates) selected
by the Calculation Agent for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement placed for industrial issuers
whose bond rating is "Aa", or the equivalent, from a nationally recognized
statistical rating organization; provided, however, that if the dealers so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the
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Commercial Paper Rate determined as of such Commercial Paper Rate Interest
Determination Date will be the Commercial Paper Rate in effect on such
Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage)
calculated in accordance with the following formula:
Money Market Yield = D x 360 X 100
---------------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the applicable Interest Reset Period.
ELEVENTH DISTRICT COST OF FUNDS RATE. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate Note
for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls as set
forth under the caption "11th District" on the display on Bridge Telerate, Inc.
(or any successor service) on page 7058 ("Telerate Page 7058") as of 11:00 A.M.,
San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable
Pricing Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)", as such rate is displayed on Bridge Telerate, Inc. (or any
successor service) on page 120 ("Telerate Page 120"), or, if such rate does not
appear on Telerate Page 120 or is not so published by 3:00 P.M., New York City
time, on the related Calculation Date, the rate on such Federal Funds Rate
Interest Determination Date for United States dollar federal funds as published
in H.15 Daily Update, or such other recognized electronic source used for the
purpose of displaying such rate, under the caption "Federal Funds (Effective)."
If such rate does not appear on Telerate Page 120 or is not yet published in
H.15(519), H.15 Daily Update or another recognized electronic source by 3:00
P.M., New York City time, on the related Calculation Date, then the Federal
Funds Rate on such Federal Funds Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the rates
for the last transaction in overnight United States dollar federal funds
arranged by three leading brokers of federal funds transactions in The City of
New York (which may include the Agents or their affiliates) selected by the
Calculation Agent prior to 9:00 A.M., New York City time, on such Federal Funds
Rate Interest Determination Date; provided, however, that if the brokers so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Rate Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
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(i) With respect to any Interest Determination Date relating
to a Floating Rate Note for which the interest rate is determined with
reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (a) if "LIBOR Telerate" is specified in the applicable
Pricing Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate"
is specified in the applicable Pricing Supplement as the method for
calculating LIBOR, the rate for deposits in the Designated LIBOR
Currency having the Index Maturity specified in such Pricing
Supplement, commencing on the applicable Interest Reset Date, that
appears on the Designated LIBOR Page as of 11:00 A.M., London time, on
such LIBOR Interest Determination Date; or (b) if "LIBOR Reuters" is
specified in the applicable Pricing Supplement, the arithmetic mean of
the offered rates (unless the Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate shall
be used) for deposits in the Designated LIBOR Currency having the Index
Maturity specified in such Pricing Supplement, commencing on the
applicable Interest Reset Date, that appear (or, if only a single rate
is required as aforesaid, appears) on the Designated LIBOR Page as of
11:00 A.M., London time, on such LIBOR Interest Determination Date. If
fewer than two such offered rates so appear, or if no such rate so
appears, as applicable, LIBOR on such LIBOR Interest Determination Date
will be determined in accordance with the provisions described in
clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on
which fewer than two offered rates appear, or no rate appears, as the
case may be, on the Designated LIBOR Page as specified in clause (i)
above, the Calculation Agent will request the principal London offices
of each of four major reference banks (which may include affiliates of
the Agents) in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Designated LIBOR Currency for the period
of the Index Maturity specified in the applicable Pricing Supplement,
commencing on the applicable Interest Reset Date, to prime banks in the
London interbank market at approximately 11:00 A.M., London time, on
such LIBOR Interest Determination Date and in a principal amount that
is representative for a single transaction in the Designated LIBOR
Currency in such market at such time. If at least two such quotations
are so provided, then LIBOR on such LIBOR Interest Determination Date
will be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable Principal Financial Center,
on such LIBOR Interest Determination Date by three major banks (which
may include affiliates of the Agents) in such Principal Financial
Center selected by the Calculation Agent for loans in the Designated
LIBOR Currency to leading European banks, having the Index Maturity
specified in the applicable Pricing Supplement and in a principal
amount that is representative for a single transaction in the
Designated LIBOR Currency in such market at such time; provided,
however, that if the banks so selected by the Calculation Agent are not
quoting as mentioned in this sentence, LIBOR determined as of such
LIBOR Interest Determination Date will be LIBOR in effect on such LIBOR
Interest Determination Date.
"Designated LIBOR Currency" means the currency or composite currency
specified in the applicable Pricing Supplement as to which LIBOR shall be
calculated or, if no such currency or composite currency is specified in the
applicable Pricing Supplement, United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks for the
Designated LIBOR Currency, or (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the display on Bridge Telerate, Inc. (or any successor service) on the
page specified in such Pricing Supplement (or any other page as may replace such
page on such service) for the purpose of displaying the London interbank rates
of major banks for the Designated LIBOR Currency.
PRIME RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as such rate
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is published in H.15(519) under the caption "Bank Prime Loan" or, if not
published by 3:00 P.M., New York City time, on the related Calculation Date, the
rate on such Prime Rate Interest Determination Date as published in H.15 Daily
Update, or such other recognized electronic source used for the purpose of
displaying such rate, under the caption "Bank Prime Loan." If such rate is not
yet published in H.15(519), H.15 Daily Update or another recognized electronic
source by 3:00 P.M., New York City time, on the related Calculation Date, then
the Prime Rate shall be the arithmetic mean of the rates of interest publicly
announced by each bank that appears on the Reuters Screen USPRIME1 Page (as
hereinafter defined) as such bank's prime rate or base lending rate as of 11:00
A.M., New York City time, on such Prime Rate Interest Determination Date. If
fewer than four such rates appear on the Reuters Screen USPRIME1 Page for such
Prime Rate Interest Determination Date, then the Prime Rate shall be the
arithmetic mean of the prime rates or base lending rates quoted on the basis of
the actual number of days in the year divided by a 360-day year as of the close
of business on such Prime Rate Interest Determination Date by four major money
center banks (which may include affiliates of the Agents) in The City of New
York selected by the Calculation Agent. If fewer than four such quotations are
so provided, then the Prime Rate shall be the arithmetic mean of four prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date as furnished in The City of New York by the major money
center banks, if any, that have provided such quotations and by a reasonable
number of substitute banks or trust companies (which may include affiliates of
the Agents) to obtain four such prime rate quotations, provided such substitute
banks or trust companies are organized and doing business under the laws of the
United States, or any State thereof, each 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 so selected by
the Calculation Agent are not quoting as mentioned in this sentence, the Prime
Rate determined as of such Prime Rate Interest Determination Date will be the
Prime Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable Pricing
Supplement under the caption "AVGE INVEST YIELD" on the display on Bridge
Telerate, Inc. (or any successor service) on page 56 ("Telerate Page 56") or
page 57 ("Telerate Page 57") or, if not so published by 3:00 P.M., New York City
time, on the related Calculation Date, the auction average rate of such Treasury
Bills (expressed as a bond equivalent on the basis of a year of 365 or 366 days,
as applicable, and applied on a daily basis) as otherwise announced by the
United States Department of the Treasury. In the event that the results of the
Auction of Treasury Bills having the Index Maturity specified in the applicable
Pricing Supplement are not so published by 3:00 P.M., New York City time, on the
related Calculation Date, or if no such Auction is held, then the Treasury Rate
will be the 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) on such Treasury Rate
Interest Determination Date of Treasury Bills having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the caption "U.S. Government Securities/Treasury Bills/Secondary Market" or, if
not yet published by 3:00 P.M., New York City time, on the related Calculation
Date, the rate on such Treasury Rate Interest Determination Date of such
Treasury Bills as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "U.S. Government Securities/Treasury Bills/Secondary Market." If such
rate is not yet published in H.15(519), H.15 Daily Update or another recognized
electronic source, then the Treasury Rate will be calculated by the Calculation
Agent and will be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Treasury Rate Interest Determination
Date, of three leading primary United States government securities dealers
(which may include the Agents or their affiliates) selected by the Calculation
Agent, for the issue of Treasury Bills with a remaining maturity closest to the
Index Maturity specified in the applicable Pricing Supplement; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as
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mentioned in this sentence, the Treasury Rate determined as of such Treasury
Rate Interest Determination Date will be the Treasury Rate in effect on such
Treasury Rate Interest Determination Date.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification
and determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Stated Maturity Date, any redemption or repayment provisions or any other
term relating thereto, may be modified and/or supplemented as specified under
"Other/Additional Provisions" on the face thereof or in an Addendum relating
thereto, if so specified on the face thereof and described in the applicable
Pricing Supplement.
DISCOUNT NOTES
The Company may from time to time offer Notes ("Discount Notes") that
have an Issue Price (as specified in the applicable Pricing Supplement) that is
less than 100% of the principal amount thereof (i.e. par) by more than a
percentage equal to the product of 0.25% and the number of full years to the
Stated Maturity Date. Discount Notes may not bear any interest currently or may
bear interest at a rate that is below market rates at the time of issuance. The
difference between the Issue Price of a Discount Note and par is referred to
herein as the "Discount." In the event of redemption, repayment or acceleration
of maturity of a Discount Note, the amount payable to the Holder of such
Discount Note will be equal to the sum of (i) the Issue Price (increased by any
accruals of Discount) and, in the event of any redemption of such Discount Note
(if applicable), multiplied by the Initial Redemption Percentage (as adjusted by
the Annual Redemption Percentage Reduction, if applicable) and (ii) any unpaid
interest accrued thereon to the date of such redemption, repayment or
acceleration of maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for a
Discount Note, such Discount will be accrued using a constant yield method. The
constant yield will be calculated using a 30-day month, 360-day year convention,
a compounding period that, except for the Initial Period (as hereinafter
defined), corresponds to the shortest period between Interest Payment Dates for
the applicable Discount Note (with ratable accruals within a compounding
period), a coupon rate equal to the initial coupon rate applicable to such
Discount Note and an assumption that the maturity of such Discount Note will not
be accelerated. If the period from the date of issue to the initial Interest
Payment Date for a Discount Note (the "Initial Period") is shorter than the
compounding period for such Discount Note, a proportionate amount of the yield
for an entire compounding period will be accrued. If the Initial Period is
longer than the compounding period, then such period will be divided into a
regular compounding period and a short period with the short period being
treated as provided in the preceding sentence. The accrual of the applicable
Discount may differ from the accrual of original issue discount for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), certain Discount
Notes may not be treated as having original issue discount within the meaning of
the Code, and Notes other than Discount Notes may be treated as issued with
original issue discount for federal income tax purposes. See "Certain United
States Federal Income Tax Considerations".
INDEXED NOTES
The Company may from time to time offer Notes ("Indexed Notes") with
the amount of principal, premium and/or interest payable in respect thereof to
be determined with reference to the price or prices of specified commodities or
stocks, to the exchange rate of one or more designated currencies relative to an
indexed currency or to other items, in each case as specified in the applicable
Pricing Supplement. In certain cases, Holders of Indexed Notes may receive a
principal payment on the Maturity Date that is greater than or less than the
principal amount of such Indexed Notes depending upon the relative value on the
Maturity Date of the specified indexed item. Information as to the method for
determining the amount of principal, premium, if any, and/or interest, if any,
payable in respect of Indexed Notes, certain historical information with respect
to the specified indexed item and any material tax considerations associated
with an investment in Indexed Notes will be specified in the applicable Pricing
Supplement. See also "Risk Factors."
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AMORTIZING NOTES
The Company may from time to time offer Notes ("Amortizing Notes") with
the amount of principal thereof and interest thereon payable in installments
over the term of such 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 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 provisions of Amortizing Notes will
be specified in the applicable Pricing Supplement, including a table setting
forth repayment information for such Amortizing Notes.
BOOK-ENTRY NOTES
The Company has established a depositary arrangement with The
Depository Trust Company with respect to the Book-Entry Notes, the terms of
which are summarized below. Any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Notes will be described in the
applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes of like tenor and terms up to
$200,000,000 aggregate principal amount will be represented by a single Global
Security. Each Global Security representing Book-Entry Notes will be deposited
with, or on behalf of, the Depositary and will be registered in the name of the
Depositary or a nominee of the Depositary. No Global Security may be transferred
except as a whole by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or such nominee to a successor
of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or its nominee, as the case may be, will be the
sole Holder of the Book-Entry Notes represented thereby for all purposes under
the Indentures. Except as otherwise provided below, the Beneficial Owners of the
Global Security or Securities representing Book-Entry Notes will not be entitled
to receive physical delivery of Certificated Notes and will not be considered
the Holders thereof for any purpose under the Indentures, and no Global Security
representing Book-Entry Notes shall be exchangeable or transferable.
Accordingly, each Beneficial Owner must rely on the procedures of the Depositary
and, if such Beneficial Owner is not a Participant, on the procedures of the
Participant through which such Beneficial Owner owns its interest in order to
exercise any rights of a Holder under such Global Security or the Indentures.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in certificated form. Such limits and
laws may impair the ability to transfer beneficial interests in a Global
Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each
Global Security representing Book- Entry Notes will be exchangeable for
Certificated Notes of like tenor and terms and of differing authorized
denominations in a like aggregate principal amount, only if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Securities or the Company becomes aware that the Depositary has
ceased to be a clearing agency registered under the Exchange Act and, in any
such case, the Company shall not have appointed a successor to the Depositary
within 60 calendar days thereafter, (ii) the Company, in its sole discretion,
determines that the Global Securities shall be exchangeable for Certificated
Notes or (iii) an Event of Default shall have occurred and be continuing with
respect to the Notes under the Indentures. Upon any such exchange, the
Certificated Notes shall be registered in the names of the Beneficial Owners of
the Global Security or Securities representing Book-Entry Notes, which names
shall be provided by the Depositary's relevant Participants (as identified by
the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the
Book-Entry Notes. The Book-Entry Notes will be issued as fully
registered securities registered in the name of Cede & Co. (the
Depositary's partnership nominee). One fully registered Global Security
will be issued for each issue of Book-Entry Notes, each in the
aggregate principal amount of such issue, and will be deposited with
the Depositary. If, however, the aggregate principal amount of any
issue exceeds $200,000,000, one Global Security will be
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issued with respect to each $200,000,000 of principal amount and an
additional Global Security will be issued with respect to any remaining
principal amount of such issue.
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 Exchange Act. The Depositary holds
securities that its participants ("Participants") deposit with the
Depositary. The Depositary also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants of
the Depositary ("Direct Participants") include securities brokers and
dealers (including the Agents), banks, trust companies, clearing
corporations and certain other organizations. The Depositary is owned
by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to the
Depositary and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system
must be made by or through Direct Participants, which will receive a
credit for such Book-Entry Notes on the Depositary's records. The
ownership interest of each actual purchaser of each Book-Entry Note
represented by a Global Security ("Beneficial Owner") is in turn to be
recorded on the records of Direct Participants and Indirect
Participants. Beneficial Owners will not receive written confirmation
from the Depositary of their purchase, but Beneficial Owners are
expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct Participants or Indirect Participants through which such
Beneficial Owner entered into the transaction. Transfers of ownership
interests in a Global Security representing Book-Entry Notes are to be
accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive Certificated Notes
representing their ownership interests therein, except in the event
that use of the book-entry system for such Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Securities
representing Book-Entry Notes which are deposited with, or on behalf
of, the Depositary are registered in the name of the Depositary's
nominee, Cede & Co. The deposit of Global Securities with, or on behalf
of, the Depositary and their registration in the name of Cede & Co.
effect no change in beneficial ownership. The Depositary has no
knowledge of the actual Beneficial Owners of the Global Securities
representing the Book-Entry Notes; the Depositary's records reflect
only the identity of the Direct Participants to whose accounts such
Book-Entry Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance of notices and other communications by the
Depositary to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from
time to time.
Neither the Depositary nor Cede & Co. will consent or vote
with respect to the Global Securities representing the Book-Entry
Notes. Under its usual procedures, the Depositary mails an Omnibus
Proxy to the Company as soon as possible after the applicable record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts the Book-Entry
Notes are credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
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Principal, premium, if any, and/or interest, if any, payments
on the Global Securities representing the Book-Entry Notes will be made
in immediately available funds to the Depositary. The Depositary's
practice is to credit Direct Participants' accounts on the applicable
payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that
it will not receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name",
and will be the responsibility of such Participant and not of the
Depositary, the Trustee or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment
of principal, premium, if any, and/or interest, if any, to the
Depositary is the responsibility of the Company and the Trustee,
disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to
the Beneficial Owners shall be the responsibility of Direct
Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co.
If less than all of the Book-Entry Notes of like tenor and terms are
being redeemed, the Depositary's practice is to determine by lot the
amount of the interest of each Direct Participant in such issue to be
redeemed.
A Beneficial Owner shall give notice of any option to elect to
have its Book-Entry Notes repaid by the Company, through its
Participant, to the Trustee, and shall effect delivery of such
Book-Entry Notes by causing the Direct Participant to transfer the
Participant's interest in the Global Security or Securities
representing such Book-Entry Notes, on the Depositary's records, to the
Trustee. The requirement for physical delivery of Book-Entry Notes in
connection with a demand for repayment will be deemed satisfied when
the ownership rights in the Global Security or Securities representing
such Book-Entry Notes are transferred by Direct Participants on the
Depositary's records.
The Depositary may discontinue providing its services as
securities depository with respect to the Book-Entry Notes at any time
by giving reasonable notice to the Company and the Trustee. Under such
circumstances, in the event that a successor securities depository is
not obtained, Certificated Notes are required to be printed and
delivered.
The Company may decide to discontinue use of the system of
book-entry transfers through the Depositary (or a successor securities
depository). In that event, Certificated Notes will be printed and
delivered.
Management of the Depositary is aware that some computer applications,
systems and programs for processing data ("Systems") that are dependent upon
calendar dates, including dates before, on and after January 1, 2000, may
encounter "Year 2000 problems." The Depositary has informed its Participants
and other members of the financial community (the "Industry") that it has
developed and is implementing a program so that its Systems, as the same relate
to the timely payment of distributions (including principal and income
payments) to securityholders, book-entry deliveries and settlement of trades
within the Depositary ("Depositary Services"), continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, the Depositary's plan includes a
testing phase, which is expected to be completed within appropriate time frames.
However, the Depositary's ability to perform properly its services is
also dependent upon other parties, including but not limited to issuers and
their agents, as well as third party vendors from whom the Depositary licenses
software and hardware, and third party vendors on whom the Depositary relies
for information or the provision of services, including telecommunication and
electrical utility service providers, among others. The Depositary has informed
the Industry that it is contacting (and will continue to contact) third party
vendors from whom the Depositary acquires services to: (i) impress upon them
the importance of such services being Year 2000 compliant; and (ii) determine
the extent of their efforts for Year 2000 remediation (and, as appropriate,
testing) of their services. In addition, the Depositary is in the process of
developing such contingency plans as it deems appropriate.
According to the Depositary, the foregoing information with respect to
the Depositary has been provided to the Industry for informational purposes
only and is not intended to serve as a representation, warranty, or contract
modification of any kind.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but neither the Company nor any Agent takes any responsibility for
the accuracy thereof.
MULTI-CURRENCY AND INDEXED NOTES
If any Note is not to be denominated in U.S. dollars, certain
provisions with respect thereto will be set forth in a foreign currency
Prospectus Supplement (a "Multi-Currency and Indexed Note Prospectus
Supplement") and applicable Pricing Supplement which will specify the currency
or currencies, including composite currencies such as the European Currency
Unit, in which the principal, premium, if any, and interest with respect to such
Note are to be paid (the "Specified Currency"), along with any other terms
relating to the non-U.S. dollar denomination.
The Notes also may be issued with the principal amount payable at
maturity to be determined with reference to the exchange rate of a Specified
Currency relative to an indexed currency (the "Indexed Currency"), each as set
forth in the Multi-Currency and Indexed Note Prospectus Supplement and an
applicable Pricing Supplement. Holders of such Notes may receive a principal
amount at maturity (or upon redemption or repayment, if applicable) that is
greater than or less than the face amount of the Note depending upon the
relative value at maturity of the Specified Currency compared to the Indexed
Currency. Information as to the method for determining the principal amount
payable at maturity (or upon redemption or repayment, if applicable), the
relative value of the Specified Currency compared to the applicable Indexed
Currency and certain additional risks and tax considerations associated with
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investment in Indexed Notes will be set forth in the applicable Multi-Currency
and Indexed Note Prospectus Supplement.
SPECIAL PROVISIONS RELATING TO REMARKETED NOTES
The following description of the terms of the Remarketed Notes
supplements the description of the Notes set forth above under "Description of
Notes" with respect to Notes issued as Remarketed Notes.
Interest
GENERAL. Each Remarketed Note initially will earn interest at the
Initial Interest Rate for the Initial Interest Rate Period specified in the
applicable Pricing Supplement. Thereafter, unless otherwise specified in the
applicable Pricing Supplement, each Remarketed Note will earn interest at the
Company's option in either the Short Term Rate Mode or the Long Term Rate Mode
(collectively, "Interest Rate Modes"), in each case as described below under
"Interest Rate Modes." A Remarketed Note will have Interest Rate Periods of 365
days or less ("Short Term Rate Periods") if in the Short Term Rate Mode and more
than 365 days ("Long Term Rate Periods") if in the Long Term Rate Mode. Unless
otherwise specified in the applicable Pricing Supplement, each Remarketed Note
may bear interest at different rates and have different Interest Rate Modes,
Interest Rate Periods and other terms as described herein.
Following the Initial Interest Rate Period, the interest rate for each
Remarketed Note will be established by a remarketing agent (the "Remarketing
Agent") selected by the Company or otherwise as specified herein. While a
Remarketed Note is in the Short Term Rate Mode, it will earn interest during
each Short Term Rate Period at fixed rates established by the Remarketing Agent
on the first day of such Short Term Rate Period as described below under
"Interest--Determination of Interest Rates, Spreads and Spread Multipliers."
While a Remarketed Note is in the Long Term Rate Mode, it will earn interest
during each Long Term Rate Period at fixed rates established by the Remarketing
Agent prior to the commencement of such Long Term Rate Period and/or rates
established in the Interest Rate Adjustment Date (as defined below) for such
Long Term Rate Period and reset at intervals established by the Remarketing
Agent with the consent of the Company prior to the commencement of such Long
Term Rate Period by reference to an Interest Rate Basis or Interest Rate Bases
established by the Company prior to the commencement of such Long Term Rate
Period as adjusted by a Spread, if any, and a Spread Multiplier, if any,
established prior to the commencement of such Long Term Rate Period by the
Remarketing Agent, in each case as specified below under "Interest-Determination
of Interest Rates, Spreads and Spread Multipliers." and "--Determination of
Floating Interest Rates."
Interest on each Remarketed Note during the Initial Interest Rate
Period will be payable on the Interest Payment Dates to holders on the
applicable Record Dates. Unless otherwise specified in the applicable Pricing
Supplement, the Record Date during the Initial Interest Rate Period will be the
Business Day next preceding the applicable Interest Payment Date during such
period. Thereafter, unless otherwise specified in the applicable Pricing
Supplement, the Record Date for each Interest Payment Date will be (y) in the
case of each Short Term Rate Period, the Business Day next preceding such
Interest Payment Date, and (z) in the case of each Long Term Rate Period, the
fifteenth day (whether or not a Business day) prior to such Interest Payment
Date. Also, after the Initial Interest Rate Period, unless otherwise specified
in the applicable Pricing Supplement, the Interest Payment Dates for Remarketed
Notes will be determined as follows; (i) interest with respect to each Short
Term Rate Period will be payable on the Business Day next following such Short
Term Rate Period; and (ii) interest with respect to each Long Term Rate Period
will be payable no less frequently than semiannually on such dates as are
established by the Remarketing Agent prior to the commencement of each Long Term
Rate Period in the case of a fixed interest rate, and as described below under
"--Determination of Floating Interest Rates" in the case of a floating interest
rate.
Interest on each Remarketed Note will be computed during the Initial
Interest Rate Period as specified in the applicable Pricing Supplement. Unless
otherwise specified in the applicable Pricing Supplement, (i) interest earned
during a Short Term Rate Period and interest earned at a floating rate during a
Long Term Rate Period will be computed on the basis of actual days elapsed over
360 (or over the actual number of days in the year if an applicable Interest
Rate Basis is the CMT Rate or Treasury Rate), and (ii) interest on Remarketed
Notes bearing
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interest at a fixed rate during a Long Term Rate Period will be computed on the
basis of a year of 360 days consisting of twelve 30-day months.
All percentages resulting from any calculation of floating interest
rates on Remarketed Notes will be rounded 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) would be rounded to 9.87655% (or
.0987655)), and all amounts used in or resulting from such calculation of
floating interest rates on Remarketed Notes will be rounded to the nearest cent,
or, in the case of a foreign or composite currency, to the nearest unit (with
one-half cent or unit being rounded upward).
Payments of principal of, and interest on, Remarketed Notes will be
made by the Company through the Trustee to the Depositary. See "Description of
Notes--Book-Entry Notes" above and "-- Purchase and Redemption of Remarketed
Notes--Special Mandatory Purchase" below.
DETERMINATION OF INTEREST RATES, SPREADS AND SPREAD MULTIPLIERS. The
interest rate and, in the case of a floating interest rate, the Spread (if any)
and the Spread Multiplier (if any) for each Remarketed Note following the
Initial Interest Rate Period will be adjusted by the Remarketing Agent on the
first day of each succeeding Interest Rate Period, which must be a Business Day
(each, an "Interest Rate Adjustment Date"), and will be the minimum interest
rate and, in the case of a floating interest rate, Spread (if any) and Spread
Multiplier (if any) necessary in the judgment of the Remarketing Agent to
produce a par bid in the remarketing of such Remarketed Note for such Interest
Rate Period. Each remarketing will take place at the times described below under
"--Interest Rate Modes." The floating interest rate for any Long Term Rate
Period for any Remarketed Note will be determined in the manner discussed below
under "--Determination of Floating Interest Rates."
In the event that (i) the Remarketing Agent for any Remarketed Note has
been removed or has resigned and no successor has been appointed, or (ii) the
Remarketing Agent for such Remarketed Note has failed to announce the
appropriate interest rate, Spread or Spread Multiplier, as the case may be, on
the Interest Rate Adjustment Date for such Remarketed Note for whatever reason,
or (iii) the appropriate interest rate, Spread, Spread Multiplier or Interest
Rate Period cannot be determined for such Remarketed Note for whatever reason,
then in each case (x) the Interest Rate Period for such Remarketed Note will be
converted automatically to a Weekly Rate Period (a Short Term Rate Period
described below) and the rate of interest thereon will be equal to the rate per
annum announced by The First National Bank of Chicago (or such other nationally
recognized bank located in the United States as the Company may select and
notify the Trustee in writing) as its prime lending rate (such rate of interest
being referred to herein as the "Special Interest Rate") and (y) such Remarketed
Note will be subject to Special Mandatory Purchase. See "--Purchase and
Redemption of Remarketed Notes" below.
After any Interest Rate Adjustment Date, any beneficial owner of
Remarketed Notes ("Beneficial Owner") may contact the Trustee or the Remarketing
Agent in order to be advised of the following information relating to the terms
established for such Remarketed Notes on such Interest Rate Adjustment Date: the
interest rate and, in the case of a floating interest rate, Interest Rate Basis
or Bases, Spread (if any) and Spread Multiplier (if any), and in each case the
other terms applicable to such Beneficial Owner's Remarketed Notes. Except as
described below under "--Determination of Floating Interest Rates" with respect
to Remarketed Notes earning interest at floating rates, no notice of the
applicable interest rate, Spread (if any) or Spread Multiplier (if any) will be
given to Beneficial Owners.
The interest rate, Spread (if any) and Spread Multiplier (if any)
announced by the Remarketing Agent, as well as the other matters disclosed to
holders and prospective purchasers of Remarketed Notes as described below under
"--Determination of Floating Interest Rates," absent manifest error, will be
binding and conclusive upon the Beneficial Owners, the Company and the Trustee.
Interest Rate Modes
The Short Term Rate Mode and the Long Term Rate Mode, and conversion
from one Interest Rate Mode to another and among Interest Rate Periods within a
particular Interest Rate Mode, are described below.
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SHORT TERM RATE MODE. The Interest Rate Period for each Remarketed Note
in the Short Term Rate Mode will be a Short Term Rate Period, which will be a
period of not less than one nor more than 365 consecutive calendar days, as
determined by the Company (as described below under "--Conversion Between Short
Term Rate Periods") or, if not so determined, a Weekly Rate Period. Each Short
Term Rate Period will commence on the Interest Rate Adjustment Date therefor and
end on the day next preceding the date specified by such Remarketing Agent as
the first day of the next Interest Rate Period for such Remarketed Note, which
day must be a Business Day and will be the Interest Adjustment Date for such
next Interest Rate Period. The interest rate for any Short Term Rate Period
relating to a Remarketed Note will be a fixed rate determined not later than
12:00 p.m., New York City time, on the Interest Rate Adjustment Date for such
Short Term Rate Period.
A Weekly Rate Period is a Short Term Rate Period and will be a period
of seven days commencing on any Interest Rate Adjustment Date and ending on the
day next preceding the first day of the next Interest Rate Period for such
Remarketed Note.
LONG TERM RATE MODE. The Interest Rate Period for each Remarketed Note
in the Long Term Rate Mode will be a Long Term Rate Period, which will be a
period of more than 365 consecutive days and not exceeding the remaining term of
such Remarketed Note established by the Company upon notice to the Remarketing
Agent and the Trustee not less than eleven (11) Business Days prior to the
applicable Interest Rate Adjustment Date. Each Long Term Rate Period will
commence on the Interest Rate Adjustment Date therefor and end on the day next
preceding the date specified by such Remarketing Agent as the first of the next
Interest Rate Period for such Remarketed Note, which day must be a Business Day
and will be the Interest Adjustment Date for such next Interest Rate Period;
however, the last day of each Long Term Rate Period must end on the day prior to
the last Interest Payment Date for such period. The interest rate for any Long
Term Rate Period for a Remarketed Note will be a fixed rate or a floating rate
determined not later than 4:00 p.m., New York City time, on the third Business
Day next preceding the Interest Rate Adjustment Date for such Long Term Rate
Period.
Determination of Floating Interest Rates
The floating interest rate for any Long Term Rate Period for any
Remarketed Note will be determined as provided above under "Description of
Notes-Interest" with respect to Floating Rate Notes, modified as set forth below
or in the applicable Floating Interest Rate Notice (as defined below).
Unless otherwise specified in the applicable Pricing Supplement, a
floating interest rate described below will apply to any Long Term Rate Period
for a Remarketed Note specified by the Company upon receipt by the Trustee and
the Remarketing Agent for such Remarketed Note of a notice in or confirmed in
writing (the "Floating Interest Rate Notice") from the Company not less than
eleven (11) Business Days prior to the Interest Rate Adjustment Date for such
Long Term Rate Period. Each Floating Interest Rate Notice must identify by CUSIP
number or otherwise each Remarketed Note to which it relates and the Long Term
Rate Period to which it relates. Each Floating Interest Rate Notice must also
state whether the floating interest rate is a "Regular Floating Rate," a
"Floating Rate/Fixed Rate" or an "Inverse Floating Rate," the Fixed Rate
Commencement Date, if applicable, the Interest Rate Basis or Bases, the Initial
Interest Reset Date, the Interest Reset Period and Dates, the Interest Payment
Period and Dates, the Index Maturity and the Maximum Interest Rate and/or
Minimum Interest Rate, if any, as such terms are defined above under
"Description of Notes-Interest." If one or more of the applicable Interest Rate
Bases is LIBOR or the CMT Rate, the Floating Interest Rate Notice will also
specify the Index Currency and Designated LIBOR Page or the Designated CMT
Maturity Index and Designated CMT Telerate Page, respectively.
Except as set forth herein or in the applicable Floating Interest Rate
Notice, the interest rate in effect on each day during such Long Term Rate
Period shall be (i) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date immediately preceding such
Interest Reset date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
The applicable floating interest rate on Remarketed Notes during any
Long Term Rate Period will be determined by reference to the applicable Interest
Rate Basis or Interest Rate Bases, which may include (i) the CD
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Rate, (ii) the CMT Rate, (iii) the Commercial Paper Rate, (iv) the Eleventh
District Cost of Funds Rate, (v) the Federal Funds Rate, (vi) LIBOR, (vii) the
Prime Rate, (viii) the Treasury Rate, or (ix) such other Interest Rate Basis or
interest rate formula as may be specified in the applicable Floating Interest
Rate Notice; provided, however, in the case of a Floating Rate/Fixed Rate, the
interest rate in effect for the period commencing on the Fixed Rate Commencement
Date to the last day of such Long Term Rate Period will be the Fixed Interest
Rate, if such rate is specified by the Remarketing Agent or, if no such Fixed
Interest Rate is specified, the interest rate in effect thereon on the day
immediately preceding the Fixed Rate Commencement Date.
Except as provided below or in the applicable Floating Interest Rate
Notice, interest will be payable, in the case of floating interest rates which
reset: (i) daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the applicable Floating Interest Rate Notice; (ii) quarterly, on
the third Wednesday of March, June, September and December of each year; (iii)
semiannually, on the third Wednesday of the two months of each year specified in
the applicable Floating Interest Rate Notice; and (iv) annually, on the third
Wednesday of the month of each year specified in the applicable Floating
Interest Rate Notice and, in each case, on the Business Day immediately
following the applicable Long Term Rate Period. If any Interest Payment Date for
the payment of interest at a floating rate (other than following the end of the
applicable Long Term Rate Period) would otherwise be a day that is not a
Business Day, such Interest Payment Date will be postponed to the next
succeeding Business Day, except that if LIBOR is an applicable Interest Rate
Basis and such Business Day falls in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding Business Day.
Unless otherwise specified in the applicable Floating Interest Rate
Notice, the Calculation Agent shall determine each Interest Rate Basis in
accordance with the provision set forth above under "Description of Notes-
Interest." Upon request of the Beneficial Owner of any Remarketed Note, the
Calculation Agent will disclose the interest rate then in effect and, if
determined, the interest rate that will become effective as a result of a
determination made for the next succeeding Interest Reset Date with respect to
such Remarketed Note.
Conversion
CONVERSION BETWEEN SHORT TERM RATE PERIODS. Each Remarketed Note in a
Short Term Rate Period may be remarketed into the same Interest Rate Period or
converted at the option of the Company to a different Short Term Rate Period on
any Interest Rate Adjustment Date upon receipt by the Remarketing Agent and the
Trustee of a notice, which will be in or promptly confirmed in writing (which
includes facsimile or appropriate electronic media), from the Company (a
"Conversion Notice") prior to 9:30 a.m., New York City time, or the remarketing
of such Remarketed Note, whichever later occurs, on such Interest Rate
Adjustment Date.
CONVERSION FROM THE SHORT TERM RATE MODE TO THE LONG TERM RATE MODE.
Each Remarketed Note in the Short Term Rate Mode may be converted at the option
of the Company to the Long Term Rate Mode on any Interest Rate Adjustment Date
upon receipt not less than eleven (11) Business Days prior to such Interest Rate
Adjustment Date by the Remarketing Agent and the Trustee of a Conversion Notice
from the Company.
CONVERSION BETWEEN LONG TERM RATE PERIODS OR FROM THE LONG TERM RATE
MODE TO THE SHORT TERM RATE MODE. Each Remarketed Note in a Long Term Rate
Period may be remarketed in the same Interest Rate Period or converted at the
option of the Company to a different Long Term Rate Period or from the Long Term
Rate Mode to the Short Term Rate Mode on any Interest Rate Adjustment Date for
such Remarketed Note upon receipt by the Trustee and the Remarketing Agent for
such Remarketed Note of a Conversion Notice from the Company not less than
eleven (11) Business Days prior to such Interest Rate Adjustment Date.
CONVERSION NOTICE. Each Conversion Notice must state each Remarketed
Note to which it relates and the new Interest Rate Modes (if applicable), the
new Interest Rate Period (which, if not so stated, shall be the Weekly Rate
Period), the date of the applicable conversion (the "Conversion Date") and, with
respect to any Long Term Rate Period, any optional redemption or repayment terms
for each such Remarketed Note. If the Company revokes a Conversion Notice or the
Trustee and the Remarketing Agent fail to receive a Conversion Notice from the
Company
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by the specified date in advance of the Interest Rate Adjustment Date for a
Remarketed Note, the Remarketed Note shall be converted automatically to the
Weekly Rate Period.
Revocation or Change of Conversion Notice or Floating Interest Rate
Notice
The Company may, upon written notice (which includes facsimile or
appropriate electronic media) received by the Remarketing Agent and the Trustee,
revoke any Conversion Notice or Floating Interest Rate Notice, change any
Interest Rate Mode or Interest Rate Period or any optional redemption terms
specified in any Conversion Notice or change any Floating Interest Rate Notice
not later than (i) 9:30 a.m., New York City time, on the Conversion Date with
respect to any attempted conversion of the applicable Remarketed Note to a Short
Term Rate Period, or (ii) 4:00 p.m., New York City time, on the third Business
Day next preceding the Conversion Date with respect to any attempted conversion
of the applicable Remarketed Note to or establishment of a floating interest
rate for, a Long Term Rate Period.
Tender of Remarketed Notes
Unless otherwise indicated in the applicable Pricing Supplement, any
Remarketed Note bearing interest at the Initial Interest Rate or in the Long
Term Rate Mode or the Short Term Rate Mode will be automatically tendered for
purchase, or deemed tendered for purchase, on each Interest Rate Adjustment Date
relating thereto and, if successfully remarketed, repurchased or redeemed on
such date, each Beneficial Owner tendering Remarketed Notes will not be entitled
to further interest thereon after such date. Remarketed Notes will be purchased
on the Interest Rate Adjustment Date relating thereto as described below. See
"Remarketing" below.
Remarketing
The Remarketing Agent for each Remarketed Note will use its reasonable
efforts to remarket such Remarketed Note on behalf of the Beneficial Owner
thereof at a price equal to 100% of the principal amount thereof. The
Remarketing Agent may purchase tendered Remarketed Notes for its own account in
a remarketing, but will not be obligated to do so. The Company may offer to
purchase Remarketed Notes in a remarketing, provided that the interest rate
established with respect to Remarketed Notes in such remarketing is not
different from the interest rate that would have been established if the Company
had not purchased such Remarketed Notes. Any Remarketed Notes for which the
Company shall have given a notice of redemption or repayment to the Remarketing
Agent and the Trustee shall not be included in a remarketing.
INTEREST RATE ADJUSTMENT DATE; DETERMINATION OF INTEREST RATE. In
connection with any Remarketed Note that is being remarketed into a Short Term
Rate Period on the next Interest Rate Adjustment Date for such Remarketed Note,
by 12:00 p.m., New York City time, on such Interest Rate Adjustment Date, the
Remarketing Agent will determine the interest rate for such Remarketed Note
being remarketed to the nearest one thousandth (0.001) of one percent per annum
for the next Interest Rate Period.
In connection with any Remarketed Note that is being remarketed into a
Long Term Rate Period on the next Interest Rate Adjustment Date for such
Remarketed Note, by 4:00 p.m., New York City time, on the third Business Day
next preceding such Interest Rate Adjustment Date, the Remarketing Agent will
determine the interest rate for such Remarketed Note to the nearest one
thousandth (0.001) of one percent per annum for the next Interest Rate Period in
the case of a fixed interest rate, and the Spread, if any, or the Spread
Multiplier, if any, in the case of a floating interest rate; provided, that, if
for any reason the Remarketing Agent is unable to determine such interest rate
by such time, the next Interest Rate Period for such Remarketed Note shall be a
Weekly Rate Period or such other Short Term Rate Period as the Company may
determine by 9:30 a.m., New York City time, on such Interest Rate Adjustment
Date.
In determining the applicable interest rate for any Remarketed Note and
other terms, the Remarketing Agent will, after taking into account market
conditions as reflected in the prevailing yields on fixed and variable rate
taxable debt securities, (i) consider the principal amount of all Remarketed
Notes of such series tendered or to be tendered on the applicable Interest Rate
Adjustment Date and the principal amount of such Remarketed Notes prospective
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purchasers are or may be willing to purchase and (ii) contact, by telephone or
otherwise, prospective purchasers and ascertain the interest rates therefor at
which they would be willing to hold or purchase such Remarketed Notes.
NOTIFICATION OF RESULTS, SETTLEMENT. By 12:30 p.m., New York City time,
on the Interest Rate Adjustment Date for any Remarketed Notes, the Remarketing
Agent will notify the Company and the Trustee in writing (which includes
facsimile or appropriate electronic media) of (i) the interest rate or, in the
case of a floating interest rate, the initial interest rate and the initial
Interest Reset Date, the Spread and Spread Multiplier and in each case the
Interest Rate Adjustment Date applicable to such Remarketed Notes for the next
Interest Rate Period, (ii) the Interest Payment Dates (in the case of Remarketed
Notes in the Long Term Rate Mode), (iii) the aggregate principal amount of
tendered Remarketed Notes, (iv) the aggregate principal amount of such tendered
Remarketed Notes which the Remarketing Agent was able to remarket, at a price
equal to 100% of the principal amount thereof, plus accrued and unpaid interest,
if any, thereon and (v) such other information as the Trustee may require for
settlement purposes. Promptly thereafter, the Trustee will assign one or more
CUSIP numbers to the Remarketed Notes and transmit to the Depositary, in
accordance with the Depositary's procedures in effect from time to time, such
information as the Depositary may require.
By telephone at approximately 1:00 p.m., New York City time, on such
Interest Rate Adjustment Date, the Remarketing Agent will advise each purchaser
of such Remarketed Notes (or the Participant of each such purchaser who it is
expected in turn will advise such purchaser) of the principal amount of such
Remarketed Notes that such purchaser is to purchase.
As long as the Depositary's nominee holds the certificates representing
any Remarketed Notes in the book entry system of the Depositary, no certificates
for such Remarketed Notes will need to be delivered by any selling Beneficial
Owner to reflect any transfer of such Remarketed Notes effected in any
remarketing and the following procedures will apply.
Each purchaser of Remarketed Notes in a remarketing will be required to
give instructions to its Participant to pay the purchase price therefor in same
day funds to the Remarketing Agent by 3:00 p.m., New York City time, on the
Interest Rate Adjustment Date pending delivery of the principal amount of such
Remarketed Notes by book entry through the Depositary by the close of business
on the Interest Rate Adjustment Date. The Remarketing Agent will use its
reasonable efforts to cause to be made payment of such amount to the Trustee.
All tendered Remarketed Notes will be automatically delivered to the
account of the Trustee, by book entry through the Depositary pending payment of
the purchase price or redemption price therefor, on the Interest Rate Adjustment
Date relating thereto.
Subject to receipt of funds form the purchaser or the Company, as the
case may be, the Trustee will make payment to the Depositary, which will make
payment to the Participant of each Beneficial Owner tendering Remarketed Notes
subject to a remarketing, by book entry through the Depositary by the close of
business on the Interest Rate Adjustment Date against delivery through the
Depositary of such Beneficial Owner's tendered Remarketed Notes, of: (i) the
purchase price for tendered Remarketed Notes that have been sold in the
remarketing, and (ii) if any such Remarketed Notes were purchased pursuant to a
Special Mandatory Purchase, the purchase price of such Remarketed Notes plus, in
each case, accrued interest, if any, to such date.
The transactions described above for a remarketing of any Remarketed
Notes will be executed on the Interest Rate Adjustment Date for such Remarketed
Notes through the Depositary in accordance with the procedures of the
Depositary, and the accounts of the respective Participants will be debited and
credited and such Remarketed Notes delivered by book entry as necessary to
effect the purchases and sales thereof, in each case as determined in the
related remarketing. See "Description of Notes--Book-Entry Notes."
Except as otherwise set forth herein under "--Purchase and Redemption
of Remarketed Notes" below, any Remarketed Notes rendered in a remarketing will
be purchased solely out of the proceeds received from purchasers of such
Remarketed Notes in such remarketing, and neither the Remarketing Agent for such
Remarketed Notes, the
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Trustee nor the Company will be obligated to provide funds to make payment upon
any Beneficial Owner's tender in a remarketing.
Although tendered Remarketed Notes will be subject to purchase by the
Remarketing Agent in a remarketing, the Remarketing Agent will not be obligated
to purchase any such Remarketed Notes.
The remarketing procedures set forth above will apply to all Remarketed
Notes except to the extent otherwise indicated in the applicable Pricing
Supplement for such Remarketed Notes. The settlement and remarketing procedures
described above, including the notice provisions and provisions for payment by
purchasers of tendered Remarketed Notes or for payment to selling Beneficial
Owners of tendered Remarketed Notes, may be modified to the extent required by
the Depositary. In addition, the Remarketing Agent may, in accordance with the
terms of the Remarketed Notes, modify the settlement and remarketing procedures
set forth above in order to facilitate the settlement and remarketing process.
FAILED REMARKETING. Unless otherwise provided in the applicable Pricing
Supplement, any Remarketed Notes not successfully remarketed will be purchased
by the Company. By 12:15 p.m., New York City time, on any Interest Rate
Adjustment Date, the Remarketing Agent for such Remarketed Notes will notify the
Trustee and the Company by telephone, confirmed in writing (which includes
facsimile or appropriate electronic media), of the principal amount of
Remarketed Notes that such Remarketing Agent was unable to remarket on such
date. Payment of the principal amount of unremarketed Remarketed Notes by the
Company and payment of accrued and unpaid interest, if any, by the Company,
shall be made by deposit of same-day funds with the Trustee by 3:00 p.m., New
York City time, on such Interest Rate Adjustment Date. See "--Purchase and
Redemption of Remarket Notes" below.
Purchase and Redemption of Remarketed Notes
SPECIAL MANDATORY PURCHASE. Remarketed Notes which have not been
remarketed by 12:15 p.m., New York City time, on an Interest Rate Adjustment
Date for such Remarketed Notes will be purchased by the Company pursuant to the
Special Mandatory Purchase Right. In such event the Company will deposit same
day funds with the Trustee irrevocably in trust for the benefit of the
Beneficial Owners of Remarketed Notes subject to Special Mandatory Purchase by
3:00 p.m., New York City time, on such Interest Rate Adjustment Date. Such funds
shall be in an amount sufficient to pay 100% of the principal amount of and
accrued and unpaid interest, if any, on such Remarketed Notes. Such Remarketed
Notes will remain outstanding and enjoy the benefits of the applicable Indenture
until such time as the Company delivers certificates for the Remarketed Notes to
the Trustee for cancellation or otherwise instructs the Trustee to reflect on
its records that such funds have been paid in full and to cancel such Remarketed
Notes. With respect to any portion of a Remarketed Note purchased pursuant to
the Special Mandatory Purchase and remaining outstanding, the Company will
provide the Trustee with such instructions and other information as the Trustee
may require for settlement purposes.
Failure by the Company to purchase Remarketed Notes after written
notice of a failed remarketing by the Remarketing Agent on behalf of the
Beneficial Owners of such Remarketed Notes in the manner provided in the
Remarketed Notes will constitute an Event of Default under the applicable
Indenture in which event the date of such failure shall constitute a date of
Maturity for such Remarketed Notes and the principal thereof may be declared due
and payable in the manner and with the effect provided in the applicable
Indenture.
REDEMPTION WHILE REMARKETED NOTES ARE IN THE INITIAL RATE PERIOD.
During the Initial Interest Rate Period for any Remarketed Notes, such
Remarketed Notes will be subject to redemption only to the extent provided, and
upon the terms set forth, in the applicable Pricing Supplement.
OPTIONAL REDEMPTION ON ANY INTEREST RATE ADJUSTMENT DATE.
Notwithstanding any provision to the contrary in the applicable Indenture, each
Remarketed Note will be subject to redemption at the option of the Company
without notice to the holder thereof on any Interest Rate Adjustment Date
therefor at a redemption price equal to the principal amount thereof plus
accrued and unpaid interest, if any, to such date.
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REDEMPTION WHILE REMARKETED NOTES ARE IN THE LONG TERM RATE MODE.
Unless otherwise provided in the applicable Pricing Supplement, any Remarketed
Notes in the Long Term Rate Mode are subject to redemption at the option of the
Company at the times and upon the terms specified at the time of conversion to
such Long Term Rate Mode.
ALLOCATION. Except in the case of a Special Mandatory Purchase, if the
Remarketed Notes are to be redeemed in part, and as long as the Depositary's
nominee holds the certificates representing any Remarketed Notes, the
Depositary, after receiving notice of redemption specifying the aggregate
principal amount of Remarketed Notes to be so redeemed, will determine by lot
(or otherwise in accordance with the procedures of the Depositary) the principal
amount of such Remarketed Notes to be redeemed from the account of each
Participant. After making its determination as described above, the Depositary
will give notice of such determination to each Participant from whose account
such Remarketed Notes are to be redeemed. Each such Participant, upon receipt of
such notices will in turn determine the principal amount of Remarketed Notes to
be redeemed from the accounts of the Beneficial Owners of such Remarketed Notes
for which it serves as Participant, and give notice of such determination to the
Remarketing Agent.
OPTIONAL REPAYMENT WHILE REMARKETED NOTES ARE IN THE INITIAL INTEREST
RATE PERIOD OR IN THE LONG TERM RATE MODE. During the Initial Interest Rate
Period, Remarketed Notes will be subject to repayment at the option of the
Holders thereof only to the extent provided, and upon the terms set forth, in
the applicable Pricing Supplement. Thereafter, any Remarketed Notes in the Long
Term Rate Mode will be subject to repayment at the option of the Holder thereof
at the time specified at the time of conversion to such Long Term Rate Mode.
Notwithstanding the foregoing, for any Remarketed Note to be repaid at the
option of the Holder thereof, a duly completed election form must be received by
the Trustee and delivered to the Company not later than fifteen (15) Business
Days prior to the next succeeding Interest Rate Adjustment Date for such
Remarketed Note. Any Remarketed Note for which the duly completed election form
is not so received and delivered by such date will not be repaid by the Company
at the option of the Holder thereof but will be subject to remarketing on such
next succeeding Interest Rate Adjustment Date as otherwise described herein.
The Remarketing Agreement
The Company and each Remarketing Agent for Remarketed Notes will enter
into a Remarketing Agreement. The summaries below are summaries of certain
provisions of the form of Remarketing Agreement and do not purport to be
complete and are subject to, and qualified in their entirety by, the provisions
of the Remarketing Agreement.
FEES AND EXPENSES. For its services in determining the interest rate
and remarketing Remarketed Notes, the Remarketing Agent will receive from the
Company a fee to be determined in accordance with the Remarketing Agreement. The
Remarketing Agent may pay to selected broker-dealers a portion of any fees it
receives from the Company for its services as Remarketing Agent reflecting
Remarketed Notes sold through such broker-dealers to purchasers in remarketings.
INDEMNIFICATION OF REMARKETING AGENT. The Company will agree to
indemnify the Remarketing Agent against certain liabilities, including
liabilities under the Securities Act of 1933 arising out of or in connection
with its duties under the Remarketing Agreement.
CONDITIONS TO THE REMARKETING AGENT'S OBLIGATIONS. The obligation of
the Remarketing Agent to remarket Remarketed Notes and perform its other
obligations under the Remarketing Agreement are subject to certain conditions,
including (a) the accuracy of certain representations and warranties by the
Company and the performance by the Company of its obligations and agreements set
forth in the Remarketing Agreement and in the Distribution Agreement relating to
the initial sale of such Remarketed Notes; (b) none of the following events
shall exist at the time the Remarketing Agent's performance is required: (i) all
of the Remarketed Notes for which the Remarketing Agent is responsible shall
have been called for redemption, tendered for repayment or purchased pursuant to
a Special Mandatory Purchase; (ii) without the prior written consent of the
Remarketing Agent, the applicable Indenture or the Remarketed Notes shall have
been amended in any manner, or otherwise contain any provision not contained
therein as of their dates, that in the reasonable opinion of the Remarketing
Agent materially changes the nature of
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the Remarketed Notes or remarketing procedures; (iii) a suspension or material
limitation in trading in securities generally on the American Stock Exchange or
the New York Stock Exchange or the suspension of trading of the Company's
securities on any exchange shall have occurred or a banking moratorium shall
have been declared by federal or New York authorities; (iv) any outbreak or
escalation of major hostilities, any declaration of war by Congress or any other
substantial calamity or emergency shall have occurred; or (v) a material adverse
change or any development which could reasonably be expected to result in a
material adverse change in the financial condition, results of operations or
business affairs of the Company and its subsidiaries considered as one
enterprise shall have occurred; and (c) between the time at which the interest
rate on any Remarketed Note is established and the time at which payment
therefor is to be made, the rating of the Remarketed Notes shall not have been
downgraded or put on Credit Watch or Watch List with negative implications or
withdrawn by a national rating service, the effect of which, in the opinion of
the Remarketing Agent, is to affect materially and adversely the market price of
the Remarketed Notes or the Remarketing Agent's ability to remarket the
Remarketed Notes.
REMOVAL OF THE REMARKETING AGENT. The Remarketing Agreement will
provide that the Company may in its absolute discretion remove any Remarketing
Agent by giving at least 30 days prior notice to such Remarketing Agent, the
Trustee and the other Remarketing Agents; provided, however, that if (i) such
removed Remarketing Agent shall then be the sole Remarketing Agent or (ii) all
of the remaining Remarketing Agents elect to resign or are removed within one
week of delivery of such notice, then, except as provided in the following
sentence, no such removal shall become effective until the Company shall have
appointed a successor to perform the services of the Remarketing Agent under the
Remarketing Agreement. In such case, the Company will use its best efforts to
appoint a successor Remarketing Agent as soon as reasonably practicable;
provided, however, that, if the Company has not so appointed a successor
Remarketing Agent within 90 days of delivery of such notice, the Remarketing
Agreement shall automatically terminate on such 90th day at 5:00 p.m., New York
time.
RESIGNATION OF THE REMARKETING AGENT. The Remarketing Agreement will
also provide that a Remarketing Agent may resign at any time as Remarketing
Agent, such resignation to be effective 30 days after the delivery to the
Company, the Trustee and the other Remarketing Agents of notice of such
resignation; provided, however, that if (i) such resigning Remarketing Agent
shall then be the sole Remarketing Agent or (ii) all of the remaining
Remarketing Agents elect to resign or are removed within one week of delivery of
such notice, then, except as provided in the following sentence no such
resignation shall become effective until the Company shall have appointed at
least one successor to perform the services of the Remarketing Agent under the
Remarketing Agreement. In such case, the Company will use its best efforts to
appoint a successor Remarketing Agent as soon as reasonably practicable;
provided, however, that, if the Company has not so appointed a successor
Remarketing Agent within 90 days of delivery of such notice, the Remarketing
Agreement shall automatically terminate on such 90th day at 5:00 p.m., New York
time. In such case, it shall be the sole obligation of the Company to appoint a
successor Remarketing Agent. In certain circumstances, including upon the
occurrence of any events described in clause (b) or clause (c) under
"--Conditions to the Remarketing Agent's Obligations" above, a Remarketing Agent
may resign effective immediately upon giving notice to the Company, the Trustee
and the other Remarketing Agents.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
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As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation or partnership created or
organized in or under the laws of the United States, any state thereof or the
District of Columbia (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate whose
income is subject to United States federal income tax regardless of its source,
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust, or
(v) any other person whose income or gain in respect of a Note is effectively
connected with the conduct of a United States trade or business. Notwithstanding
the preceding clause (iv), to the extent provided in regulations, certain trusts
in existence on August 20, 1996 and treated as United States persons prior to
such date that elect to continue to be so treated also shall be considered U.S.
Holders. As used herein, the term "non-U.S. Holder" means a beneficial owner of
a Note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Except as provided below, payments of interest on
a Note generally will be taxable to a U.S. Holder as ordinary interest income at
the time such payments are accrued or are received (in accordance with the U.S.
Holder's regular method of tax accounting).
ORIGINAL ISSUE DISCOUNT NOTES. The following summary is a general
discussion of the United States Federal income tax consequences to U.S. Holders
of the purchase, ownership and disposition of Notes issued with original issue
discount ("Original Issue Discount Notes"). Original Issue Discount Notes
generally will include Discount Notes other than Discount Notes with a fixed
maturity of one year or less and, depending on their maturity dates and payment
terms, may include Fixed Rate Notes, Amortizing Notes and Remarketed Notes. The
following summary is based upon final Treasury regulations (the "OID
Regulations") released by the Internal Revenue Service ("IRS") on January 27,
1994, as amended on June 11, 1996, under the original issue discount provisions
of the Code.
For United States Federal income tax purposes, original issue discount
is the excess of the stated redemption price at maturity of a Note over its
issue price, if such excess equals or exceeds a de minimis amount (generally 1/4
of 1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest (as
defined below) prior to maturity, multiplied by the weighted average maturity
of such Note). Unless issued at a discount, Remarketed Notes will not be
considered Original Issue Discount Notes. For purposes of determining whether
Remarketed Notes are issued with original issue discount that exceeds the de
minimis amount, although the matter is not free from doubt, the Company intends
to treat Remarketed Notes as maturing at the end of the Initial Interest Rate
Period. The issue price of each Note in an issue of Notes equals the first
price at which a substantial amount of such Notes has been sold to the public
(ignoring sales to bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers). The
stated redemption price at maturity of a Note is the sum of all payments
provided by the Note other than "qualified stated interest" payments. The term
"qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate that appropriately takes into
account the length of the interval between payments. In addition, under the OID
Regulations, if a Note bears interest for one or more accrual periods at a rate
below the rate applicable for the remaining term of such Note (e.g., Notes with
teaser rates or interest holidays), and if the greater of either the resulting
foregone interest on such Note or any "true" discount on such Note (i.e., the
excess of the Note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then the stated interest on the Note
would be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an Original Issue Discount Note, other than Notes
with a fixed maturity of one year or less, must include original issue discount
in income as ordinary interest for United States Federal income tax purposes as
it accrues under a constant yield method in advance of receipt of the cash
payments attributable to such income, regardless of such U.S. Holder's regular
method of tax accounting. In general, the amount of original issue discount
included in income by the initial U.S. Holder of an Original Issue Discount Note
is the sum of the daily
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portions of original issue discount with respect to such Original Issue Discount
Note for each day during the taxable year (or portion of the taxable year) on
which such U.S. Holder held such Original Issue Discount Note. The "daily
portion" of original issue discount on any Original Issue Discount Note is
determined by allocating to each day in any accrual period a ratable portion of
the original issue discount allocable to that accrual period. An "accrual
period" may be of any length and the accrual periods may vary in length over the
term of the Original Issue Discount Note, provided that each accrual period is
no longer than one year and each scheduled payment of principal or interest
occurs either on the final day of an accrual period or on the first day of an
accrual period. The amount of original issue discount allocable to each accrual
period is generally equal to the difference between (i) the product of the
Original Issue Discount Note's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of compounding
at the close of each accrual period and appropriately adjusted to take into
account the length of the particular accrual period) and (ii) the amount of any
qualified stated interest payments allocable to such accrual period. The
"adjusted issue price" of an Original Issue Discount Note at the beginning of
any accrual period is the sum of the issue price of the Original Issue Discount
Note plus the amount of original issue discount allocable to all prior accrual
periods (disregarding any reduction on account of acquisition premium, described
below) minus the amount of any prior payments on the Original Issue Discount
Note that were not qualified stated interest payments. The "yield to maturity"
of an Original Issue Discount Note is the interest rate that, when used in
computing the present value of all payments to be made on such note, produces an
amount equal to the issue price of the Original Issue Discount Note. Solely for
purposes of calculating the accrual of original issue discount, Remarketed Notes
will be treated as maturing on the last day of the Initial Interest Rate Period
for an amount equal to the reset value and reissued on the following day for an
amount equal to the reset value. Under these rules, U.S. Holders generally will
have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases an Original Issue Discount Note for an
amount that is greater than its adjusted issue price as of the purchase date and
less than or equal to the sum of all amounts payable on the Original Issue
Discount Note after the purchase date other than payments of qualified stated
interest, will be considered to have purchased the Original Issue Discount Note
at an "acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross income
with respect to such Original Issue Discount Note for any taxable year (or
portion thereof in which the U.S. Holder holds the Original Issue Discount Note)
will be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
VARIABLE NOTES. Under the OID Regulations, Floating Rate Notes and
Indexed Notes ("Variable Notes") are subject to special rules whereby a Variable
Note will qualify as a "variable rate debt instrument" if (a) its issue price
does not exceed the total noncontingent principal payments due under the
Variable Note by more than a specified de minimis amount and (b) it provides for
stated interest, paid or compounded at least annually, at current values of (i)
one or more qualified floating rates, (ii) a single fixed rate and one or more
qualified floating rates, (iii) a single objective rate, or (iv) a single fixed
rate and a single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in
the value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable Note's
issue date) will be treated as a single qualified floating rate. Notwithstanding
the foregoing, a variable rate that would otherwise constitute a qualified
floating rate but which is subject to one or more restrictions such as a maximum
stated interest rate (i.e., a cap) or a minimum stated interest rate (i.e., a
floor) may, under certain circumstances, fail to be treated as a qualified
floating rate under the OID Regulations unless such cap or floor is fixed
throughout the term of the Note or certain other exceptions are satisfied. An
"objective rate" is a rate that is not itself a qualified floating rate but
which is determined using a single fixed formula and that is based on objective
financial or economic information. A rate will not qualify as an objective rate
if it is based on information that is within the control of the issuer (or a
related party) or that is unique to the circumstances of the issuer (or a
related party), such as dividends, profits, or the value of the issuer's stock
(although a rate does not fail
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to be an objective rate merely because it is based on the credit quality of the
issuer). A "qualified inverse floating rate" is any objective rate where such
rate is equal to a fixed rate minus a qualified floating rate, as long as
variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate. The OID Regulations
also provide that if a Variable Note provides for stated interest at a fixed
rate for an initial period of one year or less followed by a variable rate that
is either a qualified floating rate or an objective rate and if the variable
rate on the Variable Note's issue date is intended to approximate the fixed rate
(e.g., the value of the variable rate on the issue date does not differ from the
value of the fixed rate by more than 25 basis points), then the fixed rate and
the variable rate together will constitute either a single qualified floating
rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations and if
the interest on such Note is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually, then all stated interest
on the Note will constitute qualified stated interest and will be taxed
accordingly. Thus, a Variable Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof and that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued with original
issue discount unless the Variable Note is issued at a "true" discount (i.e., at
a price below the Note's stated principal amount) in excess of a specified de
minimis amount. The amount of qualified stated interest and the amount of
original issue discount, if any, that accrues during an accrual period on such a
Variable Note is determined under the rules applicable to fixed rate debt
instruments by assuming that the variable rate is a fixed rate equal to (i) in
the case of a qualified floating rate or qualified inverse floating rate, the
value, as of the issue date, of the qualified floating rate or qualified inverse
floating rate, or (ii) in the case of an objective rate (other than a qualified
inverse floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note. The qualified stated interest allocable to an
accrual period is increased (or decreased) if the interest actually paid during
an accrual period exceeds (or is less than) the interest assumed to be paid
during the accrual period pursuant to the foregoing rules.
In general, any other Variable Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original issue
discount and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
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If a Variable Note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Variable Note would be treated
as a contingent payment debt obligation. Final regulations concerning the proper
United States Federal income tax treatment of contingent payment debt
instruments (the "CPDI Regulations") generally require a U.S. Holder of such an
instrument to include future contingent and noncontingent interest payments in
income as such interest accrues based upon a projected payment schedule, whether
or not the amount of any payment is fixed or determinable in the taxable year.
Moreover, in general, under the CPDI Regulations, any gain recognized by a U.S.
Holder on the sale, exchange, or retirement of contingent payment debt
instruments that have contingent payments remaining on their projected payment
schedule will be treated as ordinary interest income and all or a portion of any
loss realized could be treated as ordinary loss as opposed to capital loss
(depending upon the circumstances). The proper United States Federal income tax
treatment of Variable Notes that are treated as contingent payment debt
obligations will be more fully described in the applicable Pricing Supplement.
MARKET DISCOUNT. If a U.S. Holder purchases a Note, other than an
Original Issue Discount Note, for an amount that is less than its issue price
(or, in the case of a subsequent purchaser, its stated redemption price at
maturity) or, in the case of an Original Issue Discount Note, for an amount that
is less than its adjusted issue price as of the purchase date, such U.S. Holder
will be treated as having purchased such Note at a "market discount," unless
such market discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to
treat any partial principal payment (or, in the case of an Original Issue
Discount Note, any payment that does not constitute qualified stated interest)
on, or any gain realized on the sale, exchange, retirement or other disposition
of, a Note as ordinary income to the extent of the lesser of (i) the amount of
such payment or realized gain or (ii) the market discount which has not
previously been included in income and is treated as having accrued on such Note
at the time of such payment or disposition. Market discount will be considered
to accrue ratably during the period from the date of acquisition to the maturity
date of the Note, unless the U.S. Holder elects to accrue market discount on the
basis of a constant interest rate.
A U.S. Holder may be required to defer the deduction of all or a
portion of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry a Note with market discount until the maturity
of the Note or certain earlier dispositions, because a current deduction is only
allowed to the extent the interest expense exceeds an allocable portion of
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest rate basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the first taxable year to which such election applies and may be revoked
only with the consent of the IRS.
PREMIUM. If a U.S. Holder purchases a Note for an amount that is
greater than the sum of all amounts payable on the Note after the purchase date
other than payments of qualified stated interest, such U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium" equal in
amount to such excess. A U.S. Holder may elect to amortize such premium using a
constant yield method over the remaining term of the Note and may offset
interest otherwise required to be included in respect of the Note during any
taxable year by the amortized amount of such excess for the taxable year.
However, if the Note may be optionally redeemed after the U.S. Holder acquires
it at a price in excess of its stated redemption price at maturity, special
rules would apply which could result in a deferral of the amortization of some
bond premium until later in the term of the Note. Any election to amortize bond
premium applies to all taxable debt instruments acquired by the U.S. Holder on
or after the first day of the first taxable year to which such election applies
and may be revoked only with the consent of the IRS.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale,
exchange or retirement of a Note, a U.S. Holder generally will recognize taxable
gain or loss equal to the difference between the amount realized on the sale,
exchange or retirement (other than amounts representing accrued and unpaid
interest) and such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's
adjusted tax basis in a Note generally will equal such U.S. Holder's initial
investment in the Note increased by any original issue discount included in
income (and accrued market discount, if any, if the U.S. Holder has included
such market discount in income) and decreased by the amount of
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any payments, other than qualified stated interest payments, received and
amortizable bond premium taken with respect to such Note. Such gain or loss
generally will be long-term capital gain or loss if the Note is held for more
than twelve months. Non-corporate taxpayers are subject to reduced maximum rates
on long-term capital gains and are generally subject to tax at ordinary income
rates on short-term capital gains. The deductibility of capital losses is
subject to certain limitations. Prospective investors should consult their own
tax advisors concerning these tax law provisions.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
Holders of Remarketed Notes who tender their Notes automatically on an
Interest Rate Adjustment Date and who repurchase their Notes in the remarketing
should consult their own tax advisors regarding the tax consequences of the
tender and the repurchase.
U.S. Holders may generally, upon election, include in income all
interest (including stated interest, acquisition discount, original issue
discount, de minimis original issue discount, market discount, de minimis market
discount, and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Any other special United States Federal income tax considerations, not
otherwise discussed herein, which are applicable to any particular issue of
Notes will be discussed in the applicable Pricing Supplement.
NON-U.S. HOLDERS
A non-U.S. Holder generally will not be subject to United States
Federal income taxes on payments of principal, premium (if any) or interest
(including original issue discount, if any) on a Note, unless such non-U.S.
Holder is a direct or indirect 10% or greater shareholder of the Company, a
controlled foreign corporation related to the Company or a bank receiving
interest described in section 881(c)(3)(A) of the Code. To qualify for the
exemption from taxation, the last United States payor in the chain of payment
prior to payment to a non-U.S. Holder (the "Withholding Agent") must have
received in the year in which a payment of interest or principal occurs, or in
either of the two preceding calendar years, a statement that (i) is signed by
the beneficial owner of the Note under penalties of perjury, (ii) certifies that
such owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the Withholding
Agent of any change in the information on the statement within 30 days of such
change. If a Note is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide a
signed statement to the Withholding Agent. However, in such case, the signed
statement must be accompanied by a copy of the IRS Form W-8 or the substitute
form provided by the beneficial owner to the organization or institution. The
Treasury Department is considering implementation of further certification
requirements aimed at determining whether the issuer of a debt obligation is
related to holders thereof.
A non-U.S. Holder that is not exempt from tax under these rules will be
subject to United States Federal income tax withholding at a rate of 30% unless
the interest is effectively connected with the conduct of a United States trade
or business, in which case the interest will be subject to the United States
Federal income tax on net income that applies to United States persons
generally. Effectively connected interest received by a corporate non- U.S.
Holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate).
Such effectively connected interest is not subject to withholding tax if the
non-U.S. Holder delivers to the payor a withholding certificate stating that
the income is effectively connected with a U.S.
trade or business.
S-35
<PAGE> 36
Final regulations dealing with withholding tax on income paid to
foreign persons and related matters (the "New Withholding Regulations") and
providing alternative methods for establishing exemptions from withholding on
payments to foreign persons were issued by the Treasury Department on October 6,
1997. The New Withholding Regulations will generally be effective for payments
made after December 31, 1999, subject to certain transition rules. Prospective
Non-U.S. Holders are strongly urged to consult their own tax advisors with
respect to the New Withholding Regulations.
Generally, a non-U.S. Holder will not be subject to Federal income
taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should consult
its tax advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
Non-U.S. Holders should consult applicable income tax treaties, which
may include different rules, subject to compliance with certain requirements to
document entitlement to treaty benefits.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31%
may apply to payments made in respect of the Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient or
(ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such seller is
a non-U.S. Holder (and certain other conditions are met). Such a sale must also
be reported by the broker to the IRS, unless either (i) the broker determines
that the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment
to a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the
Company to or through First Chicago Capital Markets, Inc., Credit Suisse First
Boston Corporation, Morgan Stanley & Co. Incorporated, NationsBanc Montgomery
Securities LLC and Warburg Dillon Read LLC (the "Agents"). The Agents may
purchase Notes, as principal, from the Company from time to time for resale to
investors and other purchasers at varying prices relating to prevailing market
prices at the time of resale as determined by the Agents or, if so specified in
the applicable Pricing Supplement, for resale at a fixed offering price. If
agreed to by the Company and any Agent, such Agent may also utilize its
reasonable efforts on an agency basis to solicit offers to purchase the Notes at
100% of the
S-36
<PAGE> 37
principal amount thereof, unless otherwise specified in the applicable Pricing
Supplement. The Company will pay a commission to such Agent, ranging from .125%
to .750% of the principal amount of each Note, depending upon its stated
maturity (or Initial Interest Rate Period, in the case of Remarketed Notes),
sold through such Agent as an agent of the Company. Commissions with respect to
Notes with stated maturities (or an Initial Interest Rate Period, in the case of
Remarketed Notes) in excess of 30 years that are sold through the Agents as
agents of the Company will be negotiated between the Company and the Agents at
the time of such sale.
Unless otherwise specified in the applicable Pricing Supplement, any
Note sold to an Agent as principal will be purchased by such Agent at a price
equal to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. The Agent may sell Notes it has purchased from the Company
as principal to certain dealers less a concession equal to all or any portion of
the discount received in connection with such purchase. The Agent may allow, and
such dealers may reallow, a discount to certain other dealers. After the initial
offering of Notes, the offering price (in the case of Notes to be resold on a
fixed offering price basis), the concession and the reallowance may be changed.
The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice and may reject offers in whole or in part (whether
placed directly with the Company or through an Agent). Such Agent will have the
right, in its discretion reasonably exercised, to reject in whole or in part any
offer to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement,
payment of the purchase price of the Notes will be required to be made in
immediately available funds in U.S. dollars in The City of New York on the date
of settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established trading market.
The Notes will not be listed on any securities exchange. The Agents may from
time to time purchase and sell Notes in the secondary market, but the Agents are
not obligated to do so, and there can be no assurance that there will be a
secondary market for the Notes or that there will be liquidity in the secondary
market if one develops. From time to time, the Agents may make a market in the
Notes, but the Agents are not obligated to do so and may discontinue any
market-making activity at any time.
In connection with an offering of Notes purchased by an Agent as
principal on a fixed offering price basis, such Agent will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of Notes. If the Agent creates a short position in
Notes, i.e., if it sells Notes in an aggregate principal amount exceeding that
set forth in the applicable Pricing Supplement, such Agent may reduce that short
position by purchasing Notes in the open market. In general, purchases of Notes
for the purpose of stabilization or to reduce a short position could cause the
price of Notes to be higher than it might be in the absence of such purchases.
Neither the Company nor any Agent makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described in the immediately preceding paragraph may have on the price of Notes.
In addition, neither the Company nor any Agent makes any representation that
such Agent will engage in any such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Agents may be deemed to be an "underwriter" within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments the Agents
may be required to make in respect thereof. The Company has agreed to reimburse
the Agents for certain other expenses.
In the ordinary course of its business, the Agents and their affiliates
have engaged and may in the future engage in investment and commercial banking
transactions with the Company and certain of its affiliates. First Chicago
Capital Markets, Inc. is an affiliate of The First National Bank of Chicago and
Bank One, Texas, N.A. and NationsBanc Montgomery Securities LLC is a subsidiary
of BankAmerica Corporation. Each banking affiliate has several credit facilities
in place with the Company and may receive their proportionate share of the
proceeds from the sale of the Notes should the Company use the proceeds to repay
these particular credit facilities. The offering of the Notes will be conducted
in accordance with Rule 2710(c)(8) of the Rules of Conduct of the National
Association of Securities Dealers, Inc.
S-37
<PAGE> 38
From time to time, the Company may issue and sell other Debt Securities
described in the accompanying Prospectus, and the amount of Notes offered hereby
is subject to reduction as a result of such sales.
LEGAL OPINIONS
Raymond G. Smerge, Esq., our Executive Vice President, Chief Legal
Officer and Secretary, will issue an opinion about the legality of the offered
securities for us. Certain legal matters in connection with the offered
securities will be passed upon for us by Thompson & Knight, P.C., Dallas, Texas,
our special counsel. Certain legal matters in connection with the sale of the
Notes offered hereby will be passed upon for the Agents by Milbank, Tweed,
Hadley & McCloy, New York, New York.
S-38
<PAGE> 39
PROSPECTUS
[CENTEX LOGO]
$200,000,000
DEBT SECURITIES
CENTEX CORPORATION
2728 North Harwood Street
Dallas, Texas 75201
(214) 981-5000
------------------------------
We may offer unsecured general obligations of our company in the form
of either senior or subordinated debt. Senior debt includes our notes, debt and
guarantees, which are for money borrowed and not subordinated. Subordinated
debt, designated at the time it is issued, is entitled to interest and principal
payments after the senior debt payments.
We will provide the specific terms of these securities in supplements
to this Prospectus. You should read this Prospectus and the supplements
carefully before you invest.
------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is a
criminal offense.
------------------------------
The date of this Prospectus is October 21, 1998.
<PAGE> 40
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the SEC utilizing a "shelf" registration process. Under this shelf process, we
may sell any combination of the securities described in this prospectus in one
or more offerings up to a total dollar amount of $200,000,000. This prospectus
provides you with a general description of the securities we may offer. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with additional information described under the heading WHERE YOU CAN
FIND MORE INFORMATION.
We are complying with the SEC's plain English program. This is an
initiative launched by the SEC to make prospectuses and other information more
understandable to the general investor. To see more detail, you should read the
exhibits filed with this registration statement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and at 7 World Trade Center, Suite 1300, New York, New York 10048.
Our SEC filings are also available to the public over the Internet at the SEC's
web site at http://www.sec.gov. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities.
o Joint Annual Report on Form 10-K of Centex 3333 Holding
Corporation and Centex Development Company, L.P. for the year
ended March 31, 1998; and
o Joint Quarterly Report on Form 10-Q of Centex 3333 Holding
Corporation and Centex Development Company, L.P. for the
quarter ended June 30, 1998.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Corporate Secretary
Centex Corporation
2728 North Harwood Street
Dallas, Texas 75201
(214) 981-5000
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this document, and in our public
documents to which we refer, that are subject to risks and uncertainties. These
forward-looking statements include information about possible or assumed future
results of our operations. Also, when we use any of the words "believes,"
"expects," "anticipates" or similar expressions, we are making forward-looking
statements. Many possible events or factors could affect the future financial
results and performance of our company. This could cause results or performance
to differ materially from those expressed in our forward-looking statements.
You should consider these risks when you purchase securities. These possible
events or factors include the following:
o changes in interest rates;
o business conditions;
o growth in home building, investment real estate, financial
services, construction products and contracting and
construction services industries in the local markets where
we conduct business;
o pending litigation; and
o competitive factors, governmental regulation and the cost and
availability of raw materials.
2
<PAGE> 41
THE COMPANY
Centex Corporation is one of the nation's largest home builders,
mortgage lenders and general building contractors. We currently operate in five
principal business segments: Home Building, Investment Real Estate, Financial
Services, Construction Products and Contracting and Construction Services. The
Home Building business has expanded to include both Conventional Homes and
Manufactured Homes. The Conventional Homes operations currently involve the
construction and sale of single-family homes, town homes and low-rise
condominiums and also include the purchase and development of land. In March
1997, we entered into the Manufactured Homes business when we acquired
approximately 80% of the common stock of Cavco Industries, Inc. Manufactured
Homes operations include the manufacture of quality residential and park model
homes and their sale through company-owned retail outlets and a network of
independent dealers. Investment Real Estate operations involve the acquisition,
development and sale of land, the development of industrial, office, retail and
other commercial projects and apartment complexes. Through our Financial
Services operations, we offer financing of conventional and manufactured homes,
home equity and sub-prime lending and the sale of title and other insurance
coverages. These activities include mortgage origination and other related
services for homes sold by our subsidiaries and by others. We also manufacture
cement, gypsum wallboard and ready-mix concrete for distribution and sale
through our Construction Products operations. Contracting and Construction
Services activities involve the construction of buildings for both private and
government interests, including office, commercial and industrial buildings,
hospitals, hotels, museums, libraries, airport facilities and educational
facilities. In April 1994, our construction products subsidiary, Centex
Construction Products, Inc. ("CXP"), completed an initial public offering of 51%
of its common stock. Principally as a result of stock repurchases by CXP, our
ownership interest in CXP was 56.4% as of June 30, 1998.
Our principal executive office is located at 2728 N. Harwood Street,
Dallas, Texas 75201, and our telephone number is (214) 981-5000.
USE OF PROCEEDS
Except as otherwise provided in the related Prospectus Supplement, the
net proceeds from the sale of the offered securities will be used for general
corporate purposes, and substantially all of the proceeds initially will be used
to repay short-term notes payable to banks and commercial paper borrowings.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30, FISCAL YEARS ENDED MARCH 31,
--------------- ------------------------------------------
1998 1997 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Centex (excluding financial services and
savings and loan operations)........ 10.89x 6.10x 5.86x 4.4 x 2.56x 4.57x 2.80x
Total enterprise ............................ 3.58x 3.29x 3.69x 3.28x 2.17x 3.23x 2.77x
</TABLE>
These computations include Centex Corporation, and except as otherwise
noted, our subsidiaries, and 50% or less owned companies. For these ratios,
"earnings" is determined by adding "fixed charges" (excluding interest
capitalized), income taxes, minority common stockholders' equity in net income
and amortization of interest capitalized to income from continuing operations
after eliminating equity in undistributed earnings and adding back losses of
companies in which at least 20% but less than 50% stock is owned. For this
purpose, "fixed charges" consists of (i) interest on all debt and amortization
of debt discount and expense, (ii) interest capitalized, and (iii) an interest
factor attributable to rentals.
3
<PAGE> 42
SUMMARY OF SELECTED FINANCIAL DATA
In the table below, we provide you with selected historical
consolidated financial data of Centex Corporation. We prepared this information
using the consolidated financial statements of Centex Corporation for each of
the fiscal years in the five-year period ended March 31, 1998, as well as for
the three-month periods ended June 30, 1998 and 1997. The financial statements
as of the dates indicated and for each of the fiscal years in the five-year
period ended March 31, 1998 have been audited by Arthur Andersen LLP,
independent public accountants. The financial statements for the three-month
period ended June 30, 1998 and 1997 have not been audited.
When you read this selected historical consolidated financial data, you
should also read the historical financial statements and accompanying Notes that
Centex Corporation has included in its joint annual report on Form 10-K for the
year ended March 31, 1998 and its joint quarterly report on Form 10-Q for the
three months ended June 30, 1998. (You can obtain these reports by following the
instructions we provide under "Where You Can Find More Information" on page 2.)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, FISCAL YEARS ENDED MARCH 31,
------------------------- -----------------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues (1)................... $ 1,110,606 $ 861,375 $ 3,975,450 $ 3,784,991 $ 3,102,987 $ 3,277,504 $ 3,039,709
Net earnings (2)............... 48,161 27,010 144,806 106,563 53,365 92,248 85,162
Total assets................... 3,854,893 2,836,826 3,416,219 2,678,829 2,336,966 2,049,698 2,580,356
Total long-term debt,
including debentures (3).... 208,431 240,530 237,715 236,769 321,002 222,530 222,832
Total debt (3)................. 475,877 400,530 311,538 283,769 408,253 427,381 429,470
Deferred income tax (asset)
liability (3)............... (124,398) (192,869) (144,090) (195,983) 16,085 27,795 35,088
Stockholders' equity........... 1,034,460 866,942 991,172 835,777 772,836 668,227 668,659
Total debt as a percent of total
capitalization (total debt,
deferred income tax liability,
negative goodwill, minority
interest and stockholders'
equity) (3)................. 27.4% 26.8% 20.3% 20.9% 35.6% 38.0% 37.9%
</TABLE>
- -------------------------------
(1) As a result of CXP's repurchases of its own stock during the June 30, 1996
quarter, Centex's ownership interest in CXP increased to more than 50%
(and principally as a result of additional repurchases by CXP, 56.4% as of
June 30, 1998). Accordingly, beginning with the quarter ended June 30,
1996, CXP's financial results have been consolidated with those of Centex
and are reflected in Centex's revenues and earnings. Had CXP's revenues
been consolidated for the years ended March 31, 1996, 1995 and 1994,
Centex's consolidated revenues for those years would have increased by
$222,594, $194,313 and $166,826, respectively.
(2) Net earnings for the fiscal year ended March 31, 1995 include a
nonrecurring gain of $37.5 million realized in connection with an initial
public offering of 51% of CXP's common stock.
(3) Excludes debt and deferred income taxes of the financial services
subsidiaries and discontinued savings and loan operations. Reference is
made to Note 6 under "Capitalization" in the accompanying Prospectus
Supplement and to the consolidated balance sheet and Note (A) to Centex's
Consolidated Financial Statements incorporated by reference in the joint
annual report on Form 10-K of Centex for the year ended March 31, 1998,
which annual report on Form 10-K is incorporated by reference.
4
<PAGE> 43
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be our direct unsecured general obligations. The
Debt Securities will be either senior debt securities or subordinated debt
securities. The Debt Securities will be issued under one or more separate
indentures between us and Chase Bank of Texas, National Association (successor
to Texas Commerce Bank, National Association) as Trustee. Senior Debt Securities
will be issued under a "Senior Indenture" and Subordinated Debt Securities will
be issued under a "Subordinated Indenture." Together the Senior Indentures and
the Subordinated Indentures are called "Indentures." As used in this section of
the Prospectus, unless the context otherwise requires, "debt securities" in
lower case letters shall mean all debt securities issued or issuable, as the
case may be, under the respective Indentures, and "Debt Securities" with initial
capital letters shall mean the Debt Securities covered by this Prospectus and
any accompanying Prospectus Supplement.
We have summarized selected provisions of the Indentures below. The
summary is not complete. The forms of the Indentures have been filed as exhibits
to the registration statement and you should read the Indentures for provisions
that may be important to you. In the summary below, we have included references
to section numbers of the applicable Indentures so that you can easily locate
these provisions. Capitalized terms used in the following summary have the
meanings specified in the Indentures unless otherwise defined below.
GENERAL
Because we are a holding company that conducts all of our operations
through our subsidiaries, holders of Debt Securities will generally have a
junior position to claims of creditors of our subsidiaries, including trade
creditors, debtholders, secured creditors, taxing authorities, guarantee holders
and any preferred stockholders. All of our operating subsidiaries have ongoing
corporate debt programs used to finance their business activities. As of June
30, 1998, our subsidiaries had approximately $1.3 billion of outstanding debt.
Moreover, our ability to pay principal and interest on the Debt Securities is,
to a large extent, dependent upon our receiving dividends, interest or other
amounts from our subsidiaries. The Indentures under which the Debt Securities
are to be issued do not contain any limitation on our ability to incur
additional debt or on our subsidiaries' ability to incur additional debt to us
or to unaffiliated third parties. In addition, we borrow funds and lend funds to
our subsidiaries from time to time to manage our working capital needs. Our
indebtedness to our subsidiaries will rank equally in right of payment to Senior
Debt Securities and senior in right of payment to Subordinated Debt Securities.
A prospectus supplement and a supplemental indenture relating to any
series of Debt Securities being offered will include specific terms relating to
the offering. These terms will include some or all of the following:
o The title, type and amount of the Debt Securities;
o The total principal amount and priority of the Debt Securities;
o The percentage of the principal amount at which the Debt Securities
will be issued and any payments due if the maturity of the Debt
Securities is accelerated;
o The dates on which the principal of the Debt Securities will be
payable;
o The interest rate which the Debt Securities will bear and the
interest payment dates for the Debt Securities;
o Any optional redemption periods;
o Any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem the Debt Securities;
o Any provisions granting special rights to holders when a specified
event occurs;
5
<PAGE> 44
o Any changes to or additional Events of Defaults or covenants;
o Any special tax implications of the Debt Securities, including
provisions for Original Issue Discount Securities, if offered; and
o Any other terms of the Debt Securities.
None of the Indentures limits the amount of Debt Securities that may be
issued. Each Indenture allows Debt Securities to be issued up to the principal
amount that may be authorized by us and may be in any currency or currency unit
designated by us.
Debt Securities of a series may be issued in registered, bearer, coupon or
global form.
COVENANTS
Under the Indentures, we will:
o pay the principal, interest and any premium on the Debt Securities
when due;
o maintain a place of payment;
o deliver a report to the Trustee at the end of each fiscal year
reviewing our obligations under the Indentures; and
o deposit sufficient funds with any paying agent on or before the due
date for any principal, interest or any premium.
PAYMENT AND TRANSFER
Unless we designate otherwise, we will pay principal, interest and any
premium on fully registered securities in Dallas, Texas. We will make payments
by check mailed to the persons in whose names the Debt Securities are registered
on days specified in the Indentures or any prospectus supplement. We will make
Debt Securities payments in other forms at a place we designate and specify in a
prospectus supplement. You may transfer or exchange fully registered securities
at the corporate trust office of the Trustee or at any other office or agency
maintained by us for such purposes, without having to pay any service charge
except for any tax or governmental charge. (Sections 2.04, 2.06 and 5.02)
SENIOR DEBT SECURITIES
Generally speaking, Senior Debt Securities will rank equally with all of
our other Senior Debt and unsubordinated debt. As of June 30, 1998, the total
amount of our debt that would rank equally with Senior Debt Securities was
approximately $553.1 million, including approximately $285.6 million of debt to
our subsidiaries. All series of Senior Debt Securities issued under the Senior
Indenture will rank equally in right of payment with each other and with such
senior notes. Any additional senior debt securities would rank equally in right
of payment with the Senior Debt Securities offered hereby. Further, the Senior
Indenture does not prohibit us from issuing additional debt securities that may
rank equally in right of payment to the Senior Debt Securities.
Any Senior Debt Securities offered pursuant to the Senior Indenture will
be senior in right of payment to our $100,000,000 of 8.75% subordinated notes
due March 1, 2007 and $100,000,000 of 7-3/8% subordinated notes due June 1,
2005, all issued under the Subordinated Indenture.
"Senior Debt" is defined to include all notes or other unsecured evidences
of indebtedness including guarantees of Centex for money borrowed by us, not
expressed to be subordinate or junior in right of payment to any other
indebtedness of Centex.
6
<PAGE> 45
SUBORDINATED DEBT SECURITIES
The Subordinated Debt Securities will have a junior position to all of our
Senior Debt. Under the Subordinated Indenture, payment of the principal,
interest and any premium on the Subordinated Debt Securities will generally be
subordinated and junior in right of payment to the prior payment in full of all
Senior Debt. The Subordinated Indenture provides that no payment of principal,
interest and any premium on the Subordinated Debt Securities may be made in the
event:
o of any insolvency, bankruptcy or similar proceeding involving us or
our property, or
o we fail to pay the principal, interest, any premium or any other
amounts on any Senior Debt when due.
The Subordinated Indenture will not limit the amount of Senior Debt that
we may incur.
The Subordinated Indenture provides that the Subordinated Debt Securities
are equal in priority to a $2,100,000 convertible subordinated note due in the
year 2000, are entitled to similar rights of subrogation and are otherwise not
superior in right of payment to such note. (Subordinated Indenture Section
3.02.) All series of Subordinated Debt Securities as well as other series of
subordinated debt securities issued under the Subordinated Indenture, including
our $100,000,000 8.75% subordinated notes due March 1, 2007 and our $100,000,000
7-3/8% subordinated notes due June 1, 2005, will rank equally with each other in
right of payment.
Except as discussed below, the Subordinated Indenture prohibits us from
making any payment of principal of or premium, if any, or interest on, or
sinking fund requirements for, the Subordinated Debt Securities during the
continuance of any default in respect of certain Senior Debt or any default
under any agreement pursuant to which the Senior Debt was issued beyond the
period of grace, unless and until such default on the Senior Debt is cured or
waived. (Subordinated Indenture Section 3.02.)
Except as discussed below, upon any distribution of our assets in
connection with any dissolution, winding up, liquidation, reorganization,
bankruptcy or other similar proceeding relative to us, our creditors or our
property, the holders of all Senior Debt will first be entitled to receive
payment in full of the principal thereof and premium, if any, and interest due
thereon before the holders of the Subordinated Debt Securities are entitled to
receive any payment of the principal of and premium, if any, or interest on the
Subordinated Debt Securities. (Subordinated Indenture Section 3.02.) Because of
this subordination, if we become insolvent, our creditors who are not holders of
Senior Debt or of the Subordinated Debt Securities may recover less, ratably,
than holders of Senior Debt but may recover more, ratably, than holders of the
Subordinated Debt Securities.
GLOBAL CERTIFICATES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global certificates that will be deposited with a depository
identified in a prospectus supplement.
The specific terms of the depository arrangements with respect to any Debt
Securities of a series will be described in a prospectus supplement.
Unless otherwise specified in a prospectus supplement, Debt Securities
issued in the form of a global certificate to be deposited with a Depository
will be represented by a global certificate registered in the name of the
Depository or its nominee. Upon the issuance of a global certificate in
registered form, the Depository for the global certificate will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by the global certificate to the accounts of
institutions that have accounts with the Depository or its nominee
("participants"). The accounts to be credited shall be designated by the
underwriters or agents of the Debt Securities, or by us if the Debt Securities
are offered and sold directly by us. Ownership of beneficial interests in a
global certificate will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in a global certificate will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Depository or its nominee for the global certificate.
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Ownership of beneficial interests in a global certificate by persons that hold
through participants will be shown on, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a global certificate.
So long as the Depository for a global certificate in registered form, or
its nominee, is the registered owner of the global certificate, the Depository
or its nominee, as the case may be, will be considered the sole owner or holder
of the Debt Securities of the series represented by the global certificate for
all purposes under the Indentures. Except as set forth below, owners of
beneficial interests in a global certificate will not be entitled to have Debt
Securities of the series represented by the global certificate registered in
their names, will not receive or be entitled to receive physical delivery of
Debt Securities in definitive form, and will not be considered the owners or
holders of the global certificate under the applicable Indenture.
Payment of principal of, premium, if any, and any interest on Debt
Securities of a series registered in the name of or held by a Depository or its
nominee will be made to the Depository or its nominee, as the case may be, as
the registered owner or the holder of a global certificate representing the Debt
Securities. None of Centex, the Trustee, any Paying Agent, or the applicable
Debt Security Registrar for the Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a global certificate for such Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
We expect that the Depository for Debt Securities of a series, upon
receipt of any payment of principal, premium or interest in respect of a
permanent global certificate, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the global certificate as shown on the records of the
Depository. We also expect that payments by participants to owners of beneficial
interests in a global certificate 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 in bearer form or registered
in "street name," and such payments will be the responsibility of the
participants. However, we have no control over the practices of the Depository
and/or the participants and there can be no assurance that these practices will
not be changed.
Unless it is exchanged in whole or in part for Debt Securities in
definitive form, a global certificate may generally be transferred only as a
whole unless it is being transferred to certain nominees of the Depository.
Unless otherwise stated in any prospectus supplement, The Depository Trust
Company, New York, New York will act as Depository. Beneficial interests in
global certificates will be shown on, and transfers of global certificates will
be effected only through, records maintained by The Depository Trust Company and
its participants.
EVENTS OF DEFAULT
"Event of Default" when used in an Indenture will mean any of the
following:
o failure to pay the principal or any premium on any Debt Security
when due;
o failure to deposit any sinking fund payment when due;
o failure to pay interest on any Debt Security for 30 days;
o failure to perform any other covenant in the Indenture that
continues for 60 days after being given written notice;
o certain events in bankruptcy, insolvency or reorganization of
Centex; or
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o any other Event of Default included in any Indenture or
supplemental indenture. (Section 7.01.)
An Event of Default for a particular series of Debt Securities does not
necessarily constitute an Event of Default for any other series of Debt
Securities issued under an Indenture. The Trustee may withhold notice to the
holders of Debt Securities of any default (except in the payment of principal or
interest) if it considers such withholding of notice to be in the best interests
of the holders.
If an Event of Default for any series of Debt Securities occurs and
continues, the Trustee or the holders of at least 25% of the total principal
amount of the Debt Securities of the series may declare the entire principal of
that series due and payable immediately. (Section 7.01.) If this happens,
subject to certain conditions, the holders of a majority of the aggregate
principal amount of the Debt Securities of that series can void the declaration.
(Section 7.01.) The Trustee will not be charged with knowledge of any Event of
Default other than our failure to make principal and interest payments unless
actual written notice is received by the Trustee. (Section 7.01.)
The Indentures limit the right to institute legal proceedings. No holder
of any Debt Securities will have the right to bring a claim under an Indenture
unless (i) the holder has given written notice of default to the Trustee; (ii)
the holders of not less than 25% of the aggregate principal amount of Debt
Securities of such series shall have made a written request to the Trustee to
bring the claim and furnished the Trustee such reasonable indemnification as it
may require; (iii) the Trustee has not commenced such action within 60 days of
receipt of such notice and indemnification; and (iv) no direction inconsistent
with such request has been given to the Trustee by the holders of not less than
a majority of the aggregate principal amount of the Debt Securities of the
series then outstanding. Subject to applicable law and any applicable
subordination provisions, the holders of Debt Securities may enforce payment of
the principal of or premium, if any, or interest on their Debt Securities. No
holder of Debt Securities of a particular series has the right to prejudice the
rights or obtain priority or preference over the rights of any other holder of
Debt Securities of such series. (Section 7.04.)
The holders of a majority in aggregate principal amount of any series of
Debt Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any power
conferred on the Trustee, provided, however, that the Trustee may decline to
follow such direction if, being advised by counsel, the Trustee determines that
the action is not lawful, or if the Trustee in good faith determines that the
action would unduly prejudice the holders of the Debt Securities not taking part
in the action or would impose personal liability on the Trustee. (Section 7.06.)
Each Indenture provides that, in case an Event of Default in respect of a
particular series of Debt Securities has occurred, the Trustee is to use the
degree of care of a prudent man in the conduct of his own affairs. (Section
8.01.) Subject to such provisions, the Trustee is under no obligation to
exercise any of its rights or power under the Indenture at the request of any of
the holders of the Debt Securities of such series unless they have furnished to
the Trustee reasonable security or indemnity. (Section 8.02.)
We will be required to furnish to the Trustee an annual statement as to
the fulfillment by Centex of all of our obligations under the relevant
Indenture. (Section 5.06.)
DEFEASANCE
We will be discharged from our obligations on the Debt Securities of any
series at any time we deposit with the Trustee sufficient cash or government
securities to pay the principal, interest, any premium and any other sums due to
the stated maturity date or a redemption date of the Debt Securities of the
series. If this happens, the holders of the Debt Securities of the series will
not be entitled to the benefits of the Indenture except for registration of
transfer and exchange of Debt Securities and replacement of destroyed, lost,
stolen or mutilated Debt Securities.
(Section 13.01.)
Under Federal income tax law as of the date of this prospectus, a
discharge may be treated as an exchange of the related Debt Securities. Each
holder might be required to recognize a gain or loss equal to the difference
between the holder's cost or other tax basis for the Debt Securities and the
value of the holder's interest in the trust. Holders
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might be required to include as income a different amount than would be
includible without the discharge. We urge you to consult your tax adviser as to
the consequences of a discharge, including the applicability and effect of tax
laws other than the Federal income tax law.
CONSOLIDATION, MERGER OR SALE
Each Indenture generally permits us to consolidate or merge with another
corporation. The Indentures also permit us to sell all or substantially all of
our property and assets. If this happens, the remaining or acquiring corporation
shall assume all of our responsibilities and liabilities under the Indentures
including the payment of all amounts due on the Debt Securities and performance
of the covenants in the Indentures.
However, we will only consolidate or merge with or into any other
corporation or sell all or substantially all of our assets according to the
terms and conditions of the Indentures. The remaining or acquiring corporation
will be substituted for us in the Indentures with the same effect as if it had
been an original party to the Indentures. Thereafter, the successor corporation
may exercise our rights and powers under any Indenture, in our name or in its
own name. Any act or proceeding required or permitted to be done by our Board of
Directors or any of our officers may be done by the board or officers of the
successor corporation. (Article Twelve.)
MODIFICATION OF THE INDENTURES
Under each Indenture, we may modify our rights and obligations and the
rights of the holders with the consent of the holders of a majority in aggregate
principal amount of the outstanding debt securities of each series affected by
the modification. We cannot, however, modify the principal or interest payment
terms, or reduce the percentage required for modification, against any holder
without its consent. We may also enter into supplemental indentures with the
Trustee, without obtaining the consent of the holders of any series of debt
securities, to cure any ambiguity or to correct or supplement any provision of
an Indenture or any supplemental indenture which may be defective or
inconsistent with any other provision, to pledge any property to or with the
Trustee or to make any other provisions with respect to matters or questions
arising under the Indentures, provided that such action does not adversely
affect the interests of the holders of the debt securities. We may also enter
into supplemental indentures without the consent of holders of any series of
debt securities to set forth the terms of additional series of debt securities,
to evidence the succession of another person to our obligations under the
Indenture or to add to our covenants. (Article Eleven.)
CERTIFICATES AND OPINIONS TO BE FURNISHED TO TRUSTEE
Each Indenture provides that, in addition to other certificates or
opinions that may be specifically required by other provisions of an Indenture,
every time we ask the Trustee to take action under such Indenture, we must
provide a certificate of certain of our officers and an opinion of counsel (who
may be our counsel) stating that, in the opinion of the signers, all conditions
precedent to such action have been complied with. (Section 15.07.)
REPORT TO HOLDERS OF DEBT SECURITIES
We will provide audited financial statements annually to holders of debt
securities. (Section 6.03.) The Trustee is required to submit an annual report
to the holders of the debt securities regarding, among other things, the
Trustee's eligibility to serve as such, the priority of the Trustee's claims
regarding certain advances made by it, and any action taken by the Trustee
materially affecting the debt securities.
THE TRUSTEE
Chase Bank of Texas, National Association, whose Corporate Trust Office is
located at 2200 Ross Avenue, Fifth Floor, Dallas, Texas 75201, will be the
Trustee under the Subordinated Indenture and the Senior Indenture. Chase Bank of
Texas, National Association also serves as Trustee with respect to our
$100,000,000 8.75% subordinated notes due March 1, 2007 and our $100,000,000
7-3/8% subordinated notes due June 1, 2005, all previously issued under the
Subordinated Indenture, as supplemented by a Subordinated Indenture Supplement
dated as of March 12, 1987 and a Subordinated Indenture Supplement dated as of
June 9, 1995, respectively.
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Pursuant to applicable provisions of the Indentures and the Trust
Indenture Act of 1939, as amended, governing trustee conflicts of interest, any
uncured Event of Default with respect to any series of Senior Debt Securities
will force the Trustee to resign as trustee under either the Subordinated
Indenture or the Senior Indenture. Likewise, any uncured Event of Default with
respect to any series of Subordinated Debt Securities will force the Trustee to
resign as trustee under either the Senior Indenture or the Subordinated
Indenture. Any resignation requires the appointment of a successor trustee under
the applicable Indenture in accordance with the terms and conditions.
Centex and its affiliates maintain other banking relationships in the
ordinary course of business with the Trustee and its affiliates.
The Trustee may resign or be removed by us with respect to one or more
series of debt securities and a successor trustee may be appointed to act with
respect to any such series. The holders of a majority in aggregate principal
amount of the debt securities of any series may remove the Trustee with respect
to the debt securities of such series. (Section 8.10.)
Each Indenture contains certain limitations on the right of the Trustee
thereunder, in the event that it becomes a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. (Section 8.13.)
PLAN OF DISTRIBUTION
We may sell the offered securities (a) through agents; (b) through
underwriters or dealers; or (c) directly to one or more purchasers.
BY AGENTS
Offered securities may be sold through agents designated by us. The agents
agree to use their reasonable best efforts to solicit purchases for the period
of their appointment.
BY UNDERWRITERS
If underwriters are used in the sale, the offered securities will be
acquired by the underwriters for their own account. The underwriters may resell
the securities in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the securities will be
subject to certain conditions. The underwriters will be obligated to purchase
all the securities of the series offered if any of the securities are purchased.
Any initial public offering price and any discounts or concessions allowed or
re-allowed or paid to dealers may be changed from time to time.
DIRECT SALES
Offered securities may also be sold directly by us. In this case, no
underwriters or agents would be involved.
GENERAL INFORMATION
Underwriters, dealers and agents that participate in the distribution of
the offered securities may be underwriters as defined in the Securities Act of
1933 (the "Act"), and any discounts or commissions received by them from us and
any profit on the resale of the offered securities by them may be treated as
underwriting discounts and commissions under the Act. Any underwriters or agents
will be identified and their compensation described in a prospectus supplement.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Act, or to contribute with respect to payments which the underwriters,
dealers or agents may be required to make.
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Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our subsidiaries in the ordinary course of their
businesses.
LEGAL OPINIONS
Raymond G. Smerge, Esq., our Executive Vice President, Chief Legal
Officer and Secretary, will issue an opinion about the legality of the offered
securities for us. Certain legal matters in connection with the offered
securities will be passed upon for us by Thompson & Knight, P.C., Dallas, Texas,
our special counsel. Any underwriters will be advised about other issues
relating to any offering by their own legal counsel.
EXPERTS
Arthur Andersen LLP, independent accountants, audited our financial
statements and schedules incorporated by reference in this prospectus and
elsewhere in the registration statement. These documents are incorporated by
reference herein in reliance upon the authority of Arthur Andersen as experts in
accounting and auditing in giving the report.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO
SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE ON THE FRONT COVER.
[CENTEX LOGO]
$135,000,000
SENIOR MEDIUM-TERM NOTES, SERIES A
SUBORDINATED MEDIUM-TERM NOTES, SERIES A
DUE NINE MONTHS FROM DATE OF ISSUE
------------------------------
Prospectus Supplement
------------------------------
FIRST CHICAGO CAPITAL MARKETS, INC.
CREDIT SUISSE FIRST BOSTON
MORGAN STANLEY DEAN WITTER
NATIONSBANC MONTGOMERY SECURITIES LLC
WARBURG DILLON READ LLC
NOVEMBER 13, 1998
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