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Rule 424(b)(2)
Registration No. 333-1807
PROSPECTUS
$1,000,000,000
SALOMON INC
NOTES, SERIES G
DUE MORE THAN NINE MONTHS FROM DATE OF ISSUE
Salomon Inc (the 'Company') may from time to time offer its Notes, Series G (the
'Notes') with an aggregate initial public offering price or purchase price of up
to $1,000,000,000. The sale of other securities under the Registration Statement
of which this Prospectus forms a part or under a Registration Statement to which
this Prospectus relates may reduce the amount of Notes that may be sold
hereunder. Each Note will mature more than nine months from its date of issue.
The interest rate or interest rate formula, reset provisions, Issue Price,
Stated Maturity, Interest Payment Dates, repayment provisions and certain other
terms (including a Survivor's Option, if applicable) with respect to each Note
will be established at the time of issuance and set forth in a pricing
supplement to this Prospectus (a 'Pricing Supplement'). A Note may bear interest
at a fixed rate (a 'Fixed Rate Note'), which may be zero in the case of certain
Discount Notes, or at a floating rate (a 'Floating Rate Note') determined by
reference to LIBOR, the CD Rate, the Commercial Paper Rate, the Federal Funds
Rate or the Treasury Rate, as selected by the purchaser and agreed to by the
Company, adjusted by the Spread or Spread Multiplier, if any, applicable to such
Note. Such fixed rate, Spread or Spread Multiplier may be subject to change as
described in the applicable Pricing Supplement. A Note may be issued as an
amortizing note (an 'Amortizing Note') on which a portion or all the principal
amount is payable prior to Stated Maturity in accordance with a schedule or by
application of a formula. The Pricing Supplement also will state whether
interest will be payable monthly, quarterly or semi-annually. Unless otherwise
specified in the applicable Pricing Supplement, in the case of a Note that
provides for monthly interest payments, interest will be payable, in arrears, on
the fifteenth day of each calendar month; provided, however, that in the case of
such Note issued between the first and fifteenth day of a calendar month,
interest otherwise payable on the fifteenth day of such calendar month will be
payable on the fifteenth day of the next succeeding calendar month. Unless
otherwise specified in the applicable Pricing Supplement, in the case of a Note
that provides quarterly interest payments, interest will be payable, in arrears,
commencing on the day that is three months from (i) the day on which such Note
is issued, if such Note is issued on the fifteenth day of a calendar month, or
(ii) the preceding fifteenth day of a calendar month prior to the issuance of
such Note. Unless otherwise specified in the applicable Pricing Supplement, in
the case of a Note that provides for semi-annual interest payments, interest
will be payable, in arrears, commencing on the day that is six months from (i)
the day on which such Note is issued, if such Note is issued on the fifteenth
day of a calendar month, or (ii) the preceding fifteenth day of a calendar month
prior to the issuance of such Note.
Each Note will be issued in book-entry form and will be represented only by a
global certificate (a 'Global Certificate') registered in the name of a nominee
of The Depository Trust Company, as depositary (the 'Depositary'), and
certificates representing Notes will not be issued to the beneficial owners
thereof except as otherwise set forth herein. See 'Book-Entry Procedures and
Settlement' and 'Certificated Notes' under 'Description of the Notes' herein.
Beneficial ownership of a Note will be recorded on or through the records of the
brokerage firm or other entity that maintains the beneficial owner's account.
Transfer of ownership of any Note may be effected only through the selling
owner's brokerage firm or such other entity.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY PRICING SUPPLEMENT HERETO. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITER'S DISCOUNT PROCEEDS TO THE
PUBLIC(1) OR COMMISSION(2) COMPANY(3)
<S> <C> <C> <C>
Per Note... 100.000% .500%-2.750% 97.250%-99.500%
Total...... $1,000,000,000 $5,000,000-$27,500,000 $972,500,000-$995,000,000
</TABLE>
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(1) Unless otherwise specified in the applicable Pricing Supplement, the price
to public will be 100% of the principal amount.
(2) The underwriter's discount, which will be a percentage of the principal
amount of each Note, will vary depending on the Stated Maturity of such
Note.
(3) Before deduction of expenses payable by the Company estimated at $4,525,000,
including reimbursement of certain expenses of Salomon Brothers Inc (the
'Underwriter').
The Notes will be sold through the Underwriter acting as principal, unless
otherwise specified in the applicable Pricing Supplement. The Pricing Supplement
with respect to each offering of Notes will set forth, among other things, the
fixed price to public of such Notes, or that such Notes will be resold to one or
more purchasers at varying prices related to prevailing market prices at the
time of resale,the proceeds to the Company from such sale, the underwriter's
discount and any dealer's selling concession and the name of the underwriter, if
other than Salomon Brothers Inc. The Notes will not be listed on any securities
exchange, and there can be no assurance that the maximum amount of Notes offered
by this Prospectus will be sold or that there will be a secondary market for the
Notes. The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice. Any Notes offered through the Underwriter (or any
other underwriter named in the applicable Pricing Supplement) acting as
principal are offered subject to receipt and acceptance by the Underwriter, to
prior sale and to the Underwriter's right to reject any order in whole or in
part and to withdraw, cancel or modify the offer made hereby without notice. See
'Plan of Distribution'.
The Prospectus and the accompanying Pricing Supplement may be used by the
Company, Salomon Brothers Inc, a wholly owned subsidiary of the Company, or
other affiliates of the Company in connection with offers and sales related to
secondary market transactions in the Notes offered hereby and approximately
$454,602,000 of Notes initially sold pursuant to an earlier prospectus, as
described herein. Salomon Brothers Inc or other such Company affiliates may act
as principal or agent in such transactions. Such sales will be made at varying
prices related to prevailing market prices at the time of sale.
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SALOMON BROTHERS INC
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The date of this Prospectus is April 5, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the 'Commission'). Reports, proxy statements
and other information concerning the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at Seven World Trade Center, 13th Floor, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, reports, proxy statements and other information
concerning the Company may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005 and the American Stock
Exchange, 86 Trinity Place, New York, New York 10006.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
'Registration Statement') under the Securities Act of 1933, as amended (the
'Securities Act'), relating to the Notes. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Commission pursuant
to Section 13 of the Exchange Act (File No. 1-4346), are incorporated herein by
reference: (i) the Annual Report on Form 10-K for the year ended December 31,
1995 (the '1995 10-K'); and (ii) the Current Reports on Form 8-K dated January
23, 1996, February 1, 1996 and February 12, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Notes shall be deemed to be incorporated
by reference in this Prospectus.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN
OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, EXCEPT THE EXHIBITS TO SUCH DOCUMENTS (UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS).
WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE CORPORATE SECRETARY,
SALOMON INC, SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048. TELEPHONE
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE CORPORATE SECRETARY AT (212)
783-7000.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBT SECURITIES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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Pursuant to a Prospectus dated December 14, 1993 (and applicable Pricing
Supplements) filed with the Commission under Registration Statement No. 33-51269
and a Prospectus dated October 12, 1994 (and applicable Pricing Supplements)
filed with the Commission under Registration Statement No. 33-54929, the Company
had outstanding as of March 31, 1996 approximately $454,602,000 of its Notes,
Series G. The Notes offered by this Prospectus are part of the same series of
Notes as the Notes described in the preceding sentence.
SALOMON INC
Salomon Inc was incorporated in 1960 under the laws of the State of
Delaware. Salomon Inc conducts global investment banking, global securities and
commodities trading, and U.S. oil refining and gathering activities. Investment
banking activities are conducted by Salomon Brothers Holding Company Inc and its
subsidiaries ('Salomon Brothers'), including Salomon Brothers Inc. Salomon
Brothers provides capital raising, advisory, trading and risk management
services to its customers, and executes proprietary trading strategies on its
own behalf. Salomon Inc's commodities trading activities are conducted by the
Company's wholly-owned subsidiary, Phibro Inc. and its subsidiaries. Oil
refining and gathering activities are conducted by Basis Petroleum, Inc. At
December 31, 1995, the Company employed 8,439 people.
The Company's principal executive offices are located at Seven World Trade
Center, New York, New York 10048 (telephone (212) 783-7000). Its registered
office in Delaware is c/o Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
USE OF PROCEEDS
The proceeds to be received by the Company from the sale of the Notes will
be used for general corporate purposes, principally to fund the business of its
operating units and to fund investments in, or extensions of credit to, its
subsidiaries and to lengthen the average maturity of liabilities, which may
include the reduction of short-term liabilities or the refunding of maturing
indebtedness.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was 1.12, 0.83, 1.32, 1.25 and 1.16,
for the years 1995, 1994, 1993, 1992 and 1991, respectively. Such ratios were
calculated by dividing fixed charges into the sum of earnings before taxes and
fixed charges. Fixed charges consist largely of interest expense, including
capitalized interest, and a portion of rental expense representative of the
interest factor. For the year ended December 31, 1994, earnings as defined were
inadequate to cover fixed charges. The amount by which fixed charges exceed
earnings as defined for the year ended December 31, 1994 was $834 million.
DESCRIPTION OF THE NOTES
The Notes will be issued as a series under an indenture, dated as of
December 1, 1988 (as amended or supplemented from time to time, the
'Indenture'), between the Company and Citibank, N. A., a national banking
association (the 'Trustee'). The Notes will rank pari passu with all other
unsecured debt of the Company except subordinated debt. A copy of the Indenture
has previously been filed with the Commission and is incorporated by reference
as part of the Registration Statement. The following summary of certain
provisions of the Indenture and the Notes does not purport to be complete and
such summary is subject to the detailed provisions of the Indenture, to which
reference is hereby made for a full description of such provisions, including
the definition of certain capitalized terms used herein, and for other
information regarding the Notes. Numerical references in parentheses below are
to sections in the Indenture. Wherever particular sections or defined terms of
the Indenture are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference.
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The Indenture does not limit the aggregate principal amount of Debt
Securities, which term includes the Notes offered hereby, that may be issued
thereunder and provides that Debt Securities may be issued from time to time in
series (Section 301).
GENERAL
At the date of this Prospectus, the Notes offered pursuant to this
Prospectus are limited to an aggregate initial public offering price or purchase
price of up to $1,000,000,000, which amount may be reduced as a result of the
sale of other securities under the Registration Statement of which this
Prospectus forms a part or under a Registration Statement to which this
Prospectus relates. In addition, the Company had outstanding as of March 31,
1996 approximately $454,602,000 of Series G Notes sold pursuant to an earlier
prospectus. The aggregate amount of Notes may be increased from time to time to
such larger amount as may be authorized by the Company. The Notes will be
represented only by Global Certificates registered in the name of a nominee of
the Depositary, except as described below under 'Certificated Notes'. The
nominal authorized denominations of the Notes will be $1,000 and any larger
amount that is an integral multiple of $1,000. Each Note will mature more than
nine months from its date of issue on the day that is the final Interest Payment
Date for such Note.
Each Note will bear interest from its Original Issue Date (as defined
below)at the rate per annum stated on the face thereof until the principal
amount thereof is paid or made available for payment. Interest on each Note will
be payable, in arrears, either monthly, quarterly or semi-annually. Unless
otherwise specified in the applicable Pricing Supplement, in the case of a Note
that provides for monthly interest payments, interest will be payable on the
fifteenth day of each calendar month; provided, however, that in the case of
such Note issued between a Regular Record Date (as defined below) and an
Interest Payment Date, interest will be payable on the next succeeding Interest
Payment Date. Unless otherwise specified in the applicable Pricing Supplement,
in the case of a Note that provides for quarterly interest payments, interest
will be payable commencing on the day that is three months from (i) the Original
Issue Date, if such Note is issued on the fifteenth day of a calendar month, or
(ii) the preceding fifteenth day of a calendar month prior to the Original Issue
Date. Unless otherwise specified in the applicable Pricing Supplement, in the
case of a Note that provides for semi-annual interest payments, interest will be
payable commencing on the day that is six months from (i) the Original Issue
Date, if such Note is issued on the fifteenth day of a calendar month, or (ii)
the preceding fifteenth day of a calendar month prior to the Original Issue
Date. Unless otherwise specified in the applicable Pricing Supplement, the
Regular Record Date with respect to any Interest Payment Date for a Note will be
the first day of the calendar month in which such Interest Payment Date occurs,
except that the Regular Record Date with respect to the final Interest Payment
Date will be the final Interest Payment Date. Each payment of interest in
respect of an Interest Payment Date will include interest accrued to such
Interest Payment Date.
The Pricing Supplement relating to a Note will set forth, among other
things, the following terms: (i) whether such Note is a Fixed Rate Note, a
Floating Rate Note and/or an Amortizing Note, (ii) the price at which such Note
will be issued (the 'Issue Price'); (iii) the date on which such Note will be
issued (the 'Original Issue Date'); (iv) the date on which such Note will mature
(the 'Stated Maturity'); (v) if such Note is a Fixed Rate Note, the rate per
annum at which such Note will bear interest, if any, and whether and the manner
in which such rate may be changed prior to its Stated Maturity; (vi) if such
Note is a Floating Rate Note, the Base Rate, the Initial Interest Rate, the
Interest Period or the Interest Reset Dates, the Interest Payment Dates, and, if
applicable, the Index Maturity, the Maximum Interest Rate, the Minimum Interest
Rate, the Spread or Spread Multiplier (all as defined below), and any other
terms relating to the particular method of calculating the interest rate for
such Note and whether and the manner in which such Spread or Spread Multiplier
may be changed prior to Stated Maturity; (vii) whether such Note is an Original
Issue Discount Note (as defined below); (viii) if such Note is an Amortizing
Note, the terms for repayment prior to Stated Maturity; (ix) whether such Note
may be redeemed at the option of the Company, or repaid at the option of the
Holder, prior to Stated Maturity as described under 'Optional Redemption,
Repayment and Repurchase' below and, if so, the provisions
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relating to such redemption or repayment, including, in the case of an Original
Issue Discount Note, the information necessary to determine the amount due upon
redemption; (x) whether the Holder of such Note has a Survivor's Option, as
described below under 'Repayment Upon Death'; and (xi) any other terms not
inconsistent with the provisions of the Indenture.
'Original Issue Discount Note' means (i) a Note, including any Note whose
interest rate is zero, that has a stated redemption price at Stated Maturity
that exceeds its Issue Price by at least 0.25% of its stated redemption price at
Stated Maturity, multiplied by the number of full years from the Original Issue
Date to the Stated Maturity for such Note and (ii) any other Note designated by
the Company as issued with original issue discount for United States Federal
income tax purposes.
A 'basis point' or 'bp' equals one one-hundredth of a percentage point.
REPAYMENT UPON DEATH
The Pricing Supplement relating to any Note will indicate whether the
Holder of such Note will have the option (the 'Survivor's Option') to elect
repayment of such Note prior to its Stated Maturity in the event of the death of
the beneficial owner of such Note. SEE THE PRICING SUPPLEMENT TO DETERMINE
WHETHER THE SURVIVOR'S OPTION APPLIES TO ANY PARTICULAR NOTE.
Pursuant to exercise of the Survivor's Option, if applicable, the Company
will repay any Note properly tendered for repayment by or on behalf of the
person (the 'Representative') that has authority to act on behalf of the
deceased beneficial owner of such Note under the laws of the appropriate
jurisdiction (including, without limitation, the personal representative,
executor, surviving joint tenant or surviving tenant by the entirety of such
deceased beneficial owner) at a price equal to the Amortized Face Amount
thereof, subject to the following limitations. The Company may, in its sole
discretion, limit to $2,500,000 the aggregate principal amount of Notes as to
which exercises of the Survivor's Option will be accepted in any calendar year
(the 'Annual Put Limitation') and, in the event that the Annual Put Limitation
is applied, limit to $250,000 the aggregate principal amount of Notes (or
portions thereof) as to which exercise of the Survivor's Option will be accepted
in such calendar year with respect to any individual deceased beneficial owner
of Notes. Moreover, the Company will not make principal repayments pursuant to
exercise of the Survivor's Option in amounts that are less than $5,000, and, in
the event that the limitations described in the preceding sentence would result
in the partial repayment of any Note, the principal amount of such Note
remaining outstanding after repayment must be at least $5,000 (the minimum
authorized denomination of the Notes). Any Note tendered pursuant to exercise of
the Survivor's Option may be withdrawn by a written request of its Holder
received by the Trustee prior to its repayment.
The Amortized Face Amount of a Note on any date shall be the
amount equal to (i)[nb]the Issue Price set forth on the face of the
applicable Pricing Supplement plus (ii)[nb]that portion of the
difference between such Issue Price and the stated principal amount of
such Note that has accrued by such date at (x)[nb]the Bond Yield to
Maturity set forth on the face of the applicable Pricing Supplement or
(y)[nb]if so specified in the applicable Pricing Supplement, the Bond
Yield to Call set forth on the face thereof (computed in each case in
accordance with generally accepted United States bond yield computation
principles), [cfi]provided, however,[cfn] that in no event shall the
Amortized Face Amount of a Note exceed its stated principal amount. The
Bond Yield to Call listed on the face of a Pricing Supplement shall be
computed on the basis of the first occuring Optional Redemption Date
with respect to such Note and the amount payable on such Optional
Redemption Date. In the event that any such Note is not redeemed on such
first occuring Optional Redemption Date, the Bond Yield to Call with
respect to such Note shall be recomputed on such Optional Redemption
Date on the basis of the next occurring Optional Redemption Date and the
amount payable on such Optional Redemption Date, and shall continue to
be so recomputed on each succeeding Optional Redemption Date until the
Note is so redeemed.
Each Note that is tendered pursuant to valid exercise of the Survivor's
Option will be accepted promptly in the order all such Notes are tendered,
except for any Note (or portion thereof) the acceptance of which would (i)
contravene the Annual Put Limitation or (ii) result in the acceptance
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during the then current calendar year of an aggregate principal amount
of Notes (or portions thereof) exceeding $250,000 with respect to the
relevant individual deceased beneficial owner. If as of the end of any
calendar year the Company has not imposed the Annual Put Limitation or
the aggregate principal amount of Notes that have been accepted pursuant
to exercise of the Survivor's Option during such year has not exceeded
the Annual Put Limitation for such year, any exercise(s) of the
Survivor's Option with respect to Notes (or portions thereof) not
accepted during such calendar year because more than $250,000 aggregate
principal amount of Notes was tendered with respect to an individual
deceased beneficial owner will be accepted in the order all such Notes
were tendered, to the extent that any such exercise would not trigger
the Annual Put Limitation, if any, for such calendar year. Any Note (or
portion thereof)accepted for repayment pursuant to exercise of the
Survivor's Option will be repaid on the first Interest Payment Date that
occurs 20 or more calendar days after the date of such acceptance. Each
Note (or any portion thereof) tendered for repayment that is not
accepted in any calendar year due to the application of the Annual Put
Limitation will be deemed to be tendered in the following calendar year
in the order in which all such Notes were originally tendered, unless
any such Note is withdrawn by its Holder. In the event that a Note (or
any portion thereof) tendered for repayment pursuant to valid exercise
of the Survivor's Option is not accepted, the Trustee will deliver a notice
to any affected Representative by first-class mail to the broker or
other entity that represents the deceased beneficial owner of the Note
or, in the case of a certificated Note, to the registered Holder thereof
at its last known address as indicated on the records of the Security
Registrar that states the reasons such Note (or portion thereof) has not
been accepted for repayment.
Subject to the foregoing, in order for a Survivor's Option to be validly
exercised, the Trustee must receive (i) a written request for repayment signed
by the Representative, and such signature must be guaranteed by a member firm of
a registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States, (ii) tender of the Note to be repaid,
(iii) appropriate evidence satisfactory to the Company and the Trustee that (A)
the Representative has authority to act on behalf of the deceased beneficial
owner, (B) the death of such beneficial owner has occurred and (C) the deceased
was the beneficial owner of such Note at the time of death, (iv) if applicable,
a properly executed assignment or endorsement, and (v) if the Note is held by a
nominee of the deceased beneficial owner, a certificate satisfactory to the
Trustee from such nominee attesting to the beneficial ownership of such Note.
All questions as to the eligibility or validity of any exercise of the
Survivor's Option will be determined by the Company, in its sole discretion,
which determinations will be final and binding on all parties.
If a Note is represented by a Global Certificate, the Depositary's nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise the Survivor's Option for such Note. To obtain repayment pursuant to
exercise of the Survivor's Option with respect to such Note, the Representative
must provide to the broker or other entity through which the deceased beneficial
owner holds an interest in such Note (i) the documents described in clauses (i)
and (iii) of the preceding paragraph and (ii) instructions to such broker or
other entity to notify the Depositary of such Representative's desire to obtain
repayment pursuant to exercise of the Survivor's Option. Such broker or other
entity will provide to the Trustee (i) the documents received from the
Representative referred to in clause (i) of the preceding sentence, (ii) its
tender of such Note pursuant to exercise of the Survivor's Option and (iii) a
certificate satisfactory to the Trustee from such broker or other entity stating
that it represents the deceased beneficial owner. Such broker or other entity
will be responsible for disbursing any payments it receives pursuant to exercise
of the Survivor's Option to the appropriate Representative.
A REPRESENTATIVE MAY OBTAIN THE FORMS USED TO EXERCISE THE SURVIVOR'S
OPTION FROM CITIBANK, N. A., THE TRUSTEE, AT 111 WALL STREET, 5TH FLOOR, NEW
YORK, NEW YORK 10043 (TELEPHONE (212) 412-6206), DURING NORMAL BUSINESS HOURS.
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OPTIONAL REDEMPTION, REPAYMENT AND REPURCHASE
The Pricing Supplement relating to each Note will indicate either that
such Note cannot be redeemed prior to its Stated Maturity or that such Note will
be redeemable at the option of the Company, in whole or in part, and the date or
dates (each an 'Optional Redemption Date') on which such Note may be redeemed
and the price (the 'Redemption Price') at which (together with accrued interest
to such Optional Redemption Date) such Note may be redeemed on each such
Optional Redemption Date. The Company may exercise such option with respect to a
Note by notifying the Trustee for such Note at least 45 days prior to any
Optional Redemption Date. Unless otherwise specified in the applicable Pricing
Supplement, at least 30 but not more than 60 days prior to the date of
redemption, such Trustee shall mail notice of such redemption, first class,
postage prepaid, to the Holder of such Note. In the event of redemption of
a Note in part only, a new Note or Notes for the unredeemed portion thereof
shall be issued to the Holder thereof upon the cancellation thereof. The
Notes will not be subject to any sinking fund.
The Pricing Supplement relating to each Note will also indicate whether the
Holder of such Note will have the option to elect repayment of such Note by the
Company prior to its Stated Maturity, and, if so, such Pricing Supplement will
specify the date or dates on which such Note may be repaid (each an 'Optional
Repayment Date') and the price (the 'Optional Repayment Price') at which,
together with accrued interest to such Optional Repayment Date, such Note may be
repaid on each such Optional Repayment Date.
In order for a Note to be repaid, the Trustee for such Note must receive,
at least 30 but not more than 45 days prior to an Optional Repayment Date (i)
such Note with the form entitled 'Option to Elect Repayment' on the reverse
thereof duly completed, or (ii) a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company in
the United States setting forth the name of the Holder of such Note, the
principal amount of such Note to be repaid, the certificate number or a
description of the tenor and terms of such Note, a statement that the option to
elect repayment is being exercised thereby and a guarantee that the Note to be
repaid with the form entitled 'Option to Elect Repayment' on the reverse of the
Note duly completed will be received by such Trustee not later than five
Business Days after the date of such telegram, telex, facsimile transmission or
letter. If the procedure described in clause (ii) of the preceding sentence is
followed, then such Note and form duly completed must be received by such
Trustee by such fifth Business Day. Any tender of a Note by the Holder for
repayment (except pursuant to a Reset Notice or an Extension Notice) shall be
irrevocable. The repayment option may be exercised by the Holder of a Note for
less than the entire principal amount of such Note provided that the principal
amount of such Note remaining outstanding after repayment is an authorized
denomination. Upon such partial repayment, such Note shall be cancelled and a
new Note or Notes for the remaining principal amount thereof shall be issued in
the name of the Holder of such repaid Note.
If a Note is represented by a Global Security, the Depositary's nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different cut-off times for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a Note in
order to ascertain the cut-off time by which such an instruction must be given
in order for timely notice to be delivered to the Depositary.
Notwithstanding anything in this Prospectus to the contrary, if a Note is
an Original Issue Discount Note, the amount payable on such Note in the event of
redemption or repayment prior to its Stated Maturity (other than pursuant to an
optional redemption by the Company at a stated Redemption Price)
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shall be the Amortized Face Amount of such Note as of the date of redemption or
the date of repayment, as the case may be.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company, may, at the discretion of the
Company, be held or resold or surrendered to the Trustee for cancellation. The
Notes will not be subject to a sinking fund.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
The Notes offered hereby will be issued only in book-entry form from the
perspective of beneficial owners of Notes ('Noteholders'), except as described
below under 'Certificated Notes'. Notes having the same Original Issue Date,
interest rate and Stated Maturity will typically be issued in the form of a
single Global Certificate registered in the name of a nominee of the Depositary
(Section 303).
The Depositary's nominee will be considered the sole Holder of the Notes
represented by a Global Certificate for all purposes of the Indenture. Owners of
beneficial interests in a Global Certificate will not be entitled to have Notes
registered in their names, will not receive or be entitled to receive physical
delivery of Notes in definitive form and will not be considered the Holders of
Notes under the Indenture (except as described below under 'Certificated
Notes').
A Noteholder's beneficial ownership of a Note will be recorded on or
through the records of the brokerage firm or other entity that maintains such
Noteholder's account. In turn, the total number of Notes held by an individual
brokerage firm or other entity for its clients will be maintained on the records
of the Depositary in the name of such brokerage firm or other entity (or in the
name of a Participant (as defined below) that acts as the agent for the
Noteholder's brokerage firm or other entity if it is not a Participant).
Therefore, a Noteholder must rely upon the records of such brokerage firm or
other entity to evidence such Noteholder's beneficial ownership of a Note.
Transfer of ownership of any Note may be effected only through the selling
Noteholder's brokerage firm or such other entity.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under 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 was created to
hold securities of its Participants and to facilitate the clearance and
settlement of transactions among its Participants in such securities through
electronic book-entry changes in accounts of the Participants, thereby
eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the Underwriter),
banks, trust companies, clearing corporations and certain other organizations,
some of whom (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
PAYMENTS OF INTEREST AND PRINCIPAL
Payments of interest and principal on a Note payable on any Interest
Payment Date and at Stated Maturity will be made by the Company to the Trustee
in immediately available funds, unless such Note is represented by an individual
certificate. See 'Certificated Notes' below. Thereafter on such Interest Payment
Date or at Stated Maturity, the Trustee will pay to the Depositary, in funds
immediately available to the Depositary, the amount of interest and principal
(if any) due on such date. Any payment required to be made in respect of a Note
on a day (including the day of Stated Maturity) that is not a Business Day need
not be made on such day, but may be made on the next succeeding Business Day
with the same force and effect as if made on such day, and no additional
interest shall accrue as a result of such delayed payment. 'Business Day' with
respect to any Note means any day, other than a Saturday or Sunday, that is (i)
not a day on which banking institutions are authorized or required by law or
regulation to be closed in the City of New York and (ii) if such Note is a LIBOR
Note (as defined
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below), a London Banking Day. 'London Banking Day' with respect to any Note
means any day on which dealings in deposits in U.S. dollars are transacted in
the London interbank market.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Discount Note is declared to be due and payable immediately as
described under 'Description of the Notes--Events of Default', the amount of
principal due and payable with respect to such Note shall be limited to the
aggregate principal amount of such Note multiplied by the sum of the Issue Price
(expressed as a percentage of the aggregate principal amount) plus the original
issue discount amortized from the date of issue to the date of declaration,
which amortization shall be calculated using the 'interest method' (computed in
accordance with generally accepted accounting principles in effect on the date
of declaration).
The Depositary will be responsible for crediting the payments on the
Notes that it receives from the Trustee to the accounts of Participants in
accordance with procedures that provide for payment in same-day funds. Each
Participant will be responsible for disbursing such payments to the
Noteholders that it represents and to each brokerage firm or other entity for
which it acts as agent. Each such brokerage firm or other entity will be
responsible for disbursing funds to the Noteholders that it represents.
All moneys paid by the Company to the Trustee or any other Paying Agent for
the payment of principal of or interest on any Note that remain unclaimed at the
end of two years after such principal or interest shall have become due and
payable will be repaid to the Company, and the Holder of such Note will
thereafter look only to the Company for payment thereof (Section 1204).
None of the Company, the Trustee or any other Paying Agent or Security
Registrar will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Notes, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date, or
from the last Interest Payment Date to which interest has been paid or duly
provided for, at the rate per annum stated in the applicable Pricing Supplement
until the principal amount thereof is paid or made available for payment, except
that if so specified in the applicable Pricing Supplement, the rate of interest
payable on certain Fixed Rate Notes may be subject to adjustment from time to
time as described in such Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, if an Interest Payment Date with respect to any
Fixed Rate Note would otherwise be a day that is not a Business Day, such
Interest Payment Date shall not be postponed; provided, however, that any
payment required to be made in respect of such Note on a date (including the day
of Stated Maturity) that is not a Business Day for such Note need not be made on
such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on such date, and no additional interest shall
accrue as a result of such delayed payment. However, if with respect to any
Fixed Rate Note, 'Accrue to Pay' is specified in the applicable Pricing
Supplement, and any Interest Payment Date with respect to such Fixed Rate Note
would otherwise be a day that is not a Business Day, such Interest Payment Date
shall be postponed to the next succeeding Business Day. Each payment of interest
in respect of an Interest Payment Date shall include interest accrued through
the day before such Interest Payment 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 ('30 over 360').
FLOATING RATE NOTES
From its Original Issue Date to but not including the first Interest Reset
Date (the 'Initial Interest Period'), each Floating Rate Note will bear interest
at the Initial Interest Rate set forth, or otherwise described in the Pricing
Supplement. From each Interest Reset Date to but not including the following
Interest Reset Date (each such period, an 'Interest Reset Period'; and together
with the Initial Interest
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Period, the 'Interest Periods'), the interest rate for each Floating Rate Note
will be determined by reference to an interest rate basis (the 'Base Rate'),
plus or minus the Spread, if any, or multiplied by the Spread Multiplier, if
any. The 'Spread' is the number of basis points that may be specified in the
applicable Pricing Supplement as being applicable to such Note, and the 'Spread
Multiplier' is the percentage that may be specified in the applicable Pricing
Supplement as being applicable to such Note, except that if so specified in the
applicable Pricing Supplement, the Spread or Spread Multiplier on certain
Floating Rate Notes may be subject to adjustment from time to time as described
in such Pricing Supplement. The applicable Pricing Supplement will designate one
of the following Base Rates as applicable to a Floating Rate Note: (i) LIBOR (a
'LIBOR Note'), (ii) the Commercial Paper Rate (a 'Commercial Paper Rate Note'),
(iii) the Treasury Rate (a 'Treasury Rate Note'), (iv) the Federal Funds Rate (a
'Federal Funds Rate Note') or (v) the CD Rate (a 'CD Rate Note'). The 'Index
Maturity' for any Floating Rate Note is the period of maturity of the instrument
or obligation from which the Base Rate is calculated. 'H.15(519)' means the
publication entitled 'Statistical Release H.15(519), 'Selected Interest Rates',
or any successor publication, published by the Board of Governors of the Federal
Reserve System. 'Composite Quotations' means the daily statistical release
entitled 'Composite 3:30 p.m. Quotations for U.S. Government Securities'
published by the Federal Reserve Bank of New York.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following (in each case expressed as a rate per
annum on a simple interest basis): (i) a maximum limitation, or ceiling, on the
rate at which interest may accrue during any interest period ('Maximum Interest
Rate') and (ii) a minimum limitation, or floor, on the rate at which interest
may accrue during any interest period ('Minimum Interest Rate'). In addition to
any Maximum Interest Rate that may be applicable to any Floating Rate Note, the
interest rate on a Floating Rate Note will in no event be higher than the
maximum rate permitted by applicable law, as the same may be modified by United
States law of general application. The Notes will be governed by the law of the
State of New York and, under such law as of the date of this Prospectus
Supplement, the maximum rate of interest under provisions of the penal law, with
certain exceptions, is 25% per annum on a simple interest basis. Such maximum
rate of interest only applies to obligations that are less than $2,500,000.
The Company will appoint, and enter into agreements with, agents (each a
'Calculation Agent') to calculate interest rates on Floating Rate Notes. Unless
otherwise specified in a Pricing Supplement, Citibank, N.A. shall be the
Calculation Agent for each Note. All determinations of interest by the
Calculation Agent shall, in the absence of manifest error, be conclusive for all
purposes and binding on the holders of the Floating Rate Notes.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (each day on which the interest
rate is reset, an 'Interest Reset Date'), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement, the
Interest Reset Period will be monthly for Floating Rate Notes on which interest
is payable monthly, quarterly for Floating Rate Notes on which interest is
payable quarterly, and semiannually for Floating Rate Notes on which interest is
payable semiannually. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Reset Dates will be, in the case of Floating Rate Notes
that reset daily, each Business Day; in the case of Floating Rate Notes (other
than Treasury Rate Notes) that reset weekly, Wednesday of each week; in the case
of Treasury Rate Notes that reset weekly, Tuesday of each week (except as
provided below under 'Treasury Rate Notes'); in the case of Floating Rate Notes
that reset monthly, quarterly or semiannually, each Interest Payment Date other
than the Final Interest Payment Date; provided, however,that in all instances
involving Floating Rate Notes issued prior to September 16, 1994 the interest
rate in effect for the ten days immediately prior to Stated Maturity will be
that in effect on the tenth day preceding Stated Maturity. If an Interest Reset
Date for any Floating Rate Note would otherwise be a day that is not a Business
Day, such Interest Reset Date shall be postponed to the next succeeding Business
Day, except that, in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Reset Date shall be the
immediately preceding Business Day.
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Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest that goes into effect on any Interest Reset Date shall be determined
on a date (the 'Rate Determination Date') preceding such Interest Reset Date, as
further described below. Such Rate Determination Date may be referred to below
as a 'CD Rate Determination Date' in the case of a CD Rate Note, a 'Commercial
Paper Rate Determination Date' in the case of a Commercial Paper Rate Note, a
'Federal Funds Rate Determination Date' in the case of a Federal Funds Rate
Note, a 'LIBOR Determination Date' in the case of a LIBOR Note or a 'Treasury
Rate Determination Date' or a 'Constant Maturity Treasury Rate Determination
Date' in the case of a Treasury Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, interest
payable in respect of Floating Rate Notes shall be the accrued interest from and
including the Original Issue Date or the last date to which interest has been
paid, as the case may be, to but excluding the applicable Interest Payment Date.
In the case of a Floating Rate Note that resets daily or weekly, interest
payable shall be the accrued interest from and including the Original Issue Date
or the last date to which interest has been accrued and paid, as the case may
be, to but excluding the Record Date immediately preceding the applicable
Interest Payment Date, except that, at Stated Maturity, interest payable will
include interest accrued to but excluding the date of Stated Maturity.
With respect to a Floating Rate Note with more than one Interest Reset Date
during any period for which accrued interest is being calculated, accrued
interest shall be calculated by multiplying the principal amount of such Note by
an accrued interest factor. Such accrued interest factor will be computed by
adding the interest factors calculated for each day in the period for which
accrued interest is being calculated. The interest factor (expressed as a
decimal calculated to seven decimal places without rounding) for each such day
is computed, unless otherwise specified in the applicable Pricing Supplement, by
dividing the interest rate in effect on such day by 360 ('Actual over 360'), in
the case of LIBOR Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes
and CD Rate Notes, or by the actual number of days in the year ('Actual over
Actual'), in the case of Treasury Rate Notes. For purposes of making the
foregoing calculation, the interest rate in effect on any Interest Reset Date
will be the applicable rate as reset on such date. With respect to all other
Floating Rate Notes, accrued interest shall be calculated by multiplying the
principal amount of such Note (or, in the case of a Floating Rate Note that is
an Indexed Principal Note, its Face Amount) by the interest rate in effect
during the period for which accrued interest is being calculated, and
multiplying that product by the quotient obtained by dividing the number of days
in the period for which accrued interest is being calculated by 360, in the case
of LIBOR Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes and CD
Rate Notes, or by the actual number of days in the year, in the case of Treasury
Rate Notes.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest on a Floating
Rate Note will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward, and
all currency amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest one-hundredth of a unit (with .005 of a
unit being rounded upward).
If an Interest Payment Date with respect to any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Payment Date shall
be postponed to the next succeeding Business Day, except that, in the case of a
LIBOR Note, if such Business Day is in the next succeeding calendar month, such
Interest Payment Date shall be the immediately preceding Business Day; provided,
however, if with respect to any Floating Rate Note, the applicable Pricing
Supplement provides that the Note does not Accrue to Pay, if an Interest Payment
Date with respect to such Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Payment Date shall not be postponed; provided,
further, that any payment required to be made in respect of a Floating Rate Note
that is not Accrue to Pay on a date (including the day of Stated Maturity)that
is not a Business Day for such Note need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on such dates, and no additional interest shall accrue as a result of such
delayed payment.
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Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent for such Note will provide the interest rate then in effect and, if
determined, the interest rate that will become effective on the next Interest
Reset Date with respect to such Floating Rate Note.
CD Rate Notes
Each CD Rate Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the CD Rate and the Spread or Spread
Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the 'CD
Rate' for each Interest Reset Period shall be the rate as of the second Business
Day prior to the Interest Reset Date for such Interest Reset Period (a 'CD Rate
Determination Date') for negotiable certificates of deposit having the Index
Maturity designated in the applicable Pricing Supplement as published in
H.15(519) under the heading 'CDs (Secondary Market)'. In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date (as defined below) pertaining to such CD Rate Determination Date, then the
'CD Rate' for such Interest Reset Period will be the rate on such CD Rate
Determination Date for negotiable certificates of deposit of the Index Maturity
designated in the applicable Pricing Supplement as published in Composite
Quotations under the heading 'Certificates of Deposit'. If by 3:00 p.m., New
York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the 'CD Rate' for such Interest
Reset Period will be calculated by the Calculation Agent for such CD Rate Note
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 Determination Date of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The
City of New York selected by the Calculation Agent for such CD Rate Note for
negotiable certificates of deposit of major United States money center banks of
the highest credit standing (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the Index Maturity designated in
the Pricing Supplement in a denomination of $5,000,000; provided, however, that
if the dealers selected as aforesaid by such Calculation Agent are not quoting
offered rates as mentioned in this sentence, the 'CD Rate' for such Interest
Reset Period will be the same as the CD Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Interest Rate).
The 'Calculation Date' pertaining to any CD Rate Determination Date shall
be the tenth calendar day after such CD Rate Determination Date or, if such day
is not a Business Day, the next succeeding Business Day.
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Commercial Paper
Rate and the Spread or Spread Multiplier, if any, specified in such Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
'Commercial Paper Rate' for each Interest Reset Period will be determined by the
Calculation Agent for such Commercial Paper Rate Note as of the second Business
Day prior to the Interest Reset Date for such Interest Reset Period (a
'Commercial Paper Rate Determination Date') and shall be the Money Market Yield
(as defined below)on such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement, as such rate shall be published in H.15(519)under the
heading 'Commercial Paper'. In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
'Commercial Paper Rate' for such Interest Reset Period shall be the Money Market
Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading 'Commercial Paper'. If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the 'Commercial Paper Rate' for
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such Interest Reset Period shall be the Money Market Yield of the arithmetic
mean of the offered rates, as of 11:00 a.m., New York City time, on such
Commercial Paper Rate Determination Date of three leading dealers of commercial
paper in The City of New York selected by the Calculation Agent for such
Commercial Paper Rate Note for commercial paper of the specified Index Maturity
placed for an industrial issuer whose bonds are rated 'AA' or the equivalent by
a nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting offered rates as
mentioned in this sentence, the 'Commercial Paper Rate' for such Interest Reset
Period will be the same as the Commercial Paper Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the Initial Interest Rate).
'Money Market Yield' shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = -------------- 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 specified Index Maturity.
The 'Calculation Date' pertaining to any Commercial Paper Rate
Determination Date shall be the tenth calendar day after such Commercial Paper
Rate Determination Date or, if such day is not a Business Day, the next
succeeding Business Day.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Federal Funds Rate
and the Spread or Spread Multiplier, if any, specified in such Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
'Federal Funds Rate' for each Interest Reset Period shall be the effective rate
on the Interest Reset Date for such Interest Reset Period (a 'Federal Funds Rate
Determination Date') for Federal Funds as published in H.15(519) under the
heading 'Federal Funds (Effective)'. In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Calculation Date (as
defined below) pertaining to such Federal Funds Rate Determination Date, the
'Federal Funds Rate' for such Interest Reset Period shall be the rate on such
Federal Funds Rate Determination Date as published in Composite Quotations under
the heading 'Federal Funds/Effective Rate'. If by 3:00 p.m., New York City time,
on such Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the 'Federal Funds Rate' for such Interest Reset
Period shall be the rate on such Federal Funds Rate Determination Date made
publicly available by the Federal Reserve Bank of New York which is equivalent
to the rate which appears in H.15(519) under the heading 'Federal Funds
(Effective)'; provided, however, that if such rate is not made publicly
available by the Federal Reserve Bank of New York by 3:00 p.m., New York City
time, on such Calculation Date, the 'Federal Funds Rate' for such Interest Reset
Period will be the same as the Federal Funds Rate in effect for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the Initial Interest Rate). In the case of a Federal Funds Rate Note that resets
daily, the interest rate on such Note for the period from and including a Monday
to but excluding the succeeding Monday will be reset by the Calculation Agent
for such Note on such second Monday (or, if not a Business Day, on the next
succeeding Business Day) to a rate equal to the average of the Federal Funds
Rates in effect with respect to each such day in such week.
The 'Calculation Date' pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding Business Day.
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LIBOR Notes
Each LIBOR Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to LIBOR and the Spread or Spread
Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
With respect to LIBOR indexed to the offered rates for U.S. dollar
deposits, 'LIBOR' for each Interest Reset Period will be determined by the
Calculation Agent for such LIBOR Notes as follows:
(i) On the second London Banking Day prior to the Interest Reset Date
for such Interest Reset Period (a 'LIBOR Determination Date'), the
Calculation Agent for such LIBOR Note will determine the offered rates for
deposits in U.S. dollars for the period of the Index Maturity specified in
the applicable Pricing Supplement, commencing on such Interest Reset Date,
which appear on the Designated LIBOR Page at approximately 11:00 a.m.,
London time, on such LIBOR Determination Date. If 'LIBOR Telerate' is
designated in the applicable Pricing Supplement, 'Designated LIBOR Page'
means the display designated as page '3750' on the Dow Jones Telerate
Service (or such other page as may replace page '3750' on such service or
such other service as may be nominated by the British Bankers' Association
for the purpose of displaying the London interbank offered rates of major
banks), and LIBOR for such Interest Reset Period will be the relevant
offered rate or determined by the Calculation Agent. If 'LIBOR Reuters' is
designated in the applicable Pricing Supplement, 'Designated LIBOR Page'
means the display designated as page 'LIBO' on the Reuters Monitor Money
Rates Service (or such other page as may replace the LIBO page on such
service or such other service as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates of
major banks)provided that at least two such offered rates appear on the
Designated LIBOR Page, in which case 'LIBOR' for such Interest Reset Period
will be the arithmetic mean of such offered rates as determined by the
Calculation Agent for such LIBOR Note.
(ii) If LIBOR cannot be determined as above (either because the
Designated LIBOR Page is no longer available or because less than two rates
appear on page 'LIBO' on the Reuters Monitor Money Rate Services) on such
LIBOR Determination Date, the Calculation Agent for such LIBOR Note will
request the principal London offices of each of four major banks in the
London interbank market selected by such Calculation Agent to provide such
Calculation Agent with its offered quotations for deposits in the Specified
Currency for the period of the specified Index Maturity, commencing on such
Interest Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Determination Date and
in a principal amount equal to an amount of not less than $1,000,000 or the
equivalent thereof in the Specified Currency that is representative of a
single transaction in such market at such time. If at least two such
quotations are provided, 'LIBOR' for such Interest Reset Period will be the
arithmetic mean of such quotations. If fewer than two such quotations are
provided, 'LIBOR' for such Interest Reset Period will be the arithmetic
mean of rates quoted by three major banks in The City of New York selected
by the Calculation Agent for such LIBOR Note at approximately 11:00 a.m.,
New York City time, on such LIBOR Determination Date for loans in the
Specified Currency to leading European banks, for the period of the
specified Index Maturity, commencing on such Interest Reset Date, and in a
principal amount equal to an amount of not less than $1,000,000 or the
equivalent thereof in the Specified Currency that is representative of a
single transaction in such market at such time; provided, however, that if
fewer than three banks selected as aforesaid by such Calculation Agent are
quoting rates as mentioned in this sentence, 'LIBOR' for such Interest
Reset Period will be the same as LIBOR for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Interest Rate).
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Treasury Rate Notes
Each Treasury Rate Note will bear interest for each Interest Reset Period
at the interest rate calculated with reference to the Treasury Rate and the
Spread or Spread Multiplier, if any, specified in such Note and in the
applicable Pricing Supplement.
Unless 'Constant Maturity' is specified or unless otherwise specified in
the applicable Pricing Supplement, the 'Treasury Rate' for each Interest Reset
Period will be the rate for the auction held on the Treasury Rate Determination
Date (as defined below) for such Interest Reset Period of direct
obligations of the United States ('Treasury securities') having the Index
Maturity specified in the applicable Pricing Supplement, as such rate shall be
published in H.15(519)under the heading 'U.S. Government Securities-Treasury
bills-auction average (investment)' or, in the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Calculation Date (as
defined below) pertaining to such Treasury Rate Determination Date, the auction
average rate (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) on such Treasury Rate
Determination Date as otherwise announced by the United States Department of the
Treasury. In the event that the results of the auction of Treasury securities
having the specified Index Maturity are not published or reported as provided
above by 3:00 p.m., New York City time, on such Calculation Date, or if no such
auction is held on such Treasury Rate Determination Date, then the 'Treasury
Rate' for such Interest Reset Period shall be calculated by the Calculation
Agent for such Treasury Rate Note and shall be a yield to maturity (expressed as
a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time, on such Treasury Rate
Determination Date, of three leading primary United States government securities
dealers selected by such Calculation Agent for the issue of Treasury securities
with a remaining maturity closest to the specified Index Maturity; provided,
however, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting bid rates as mentioned in this sentence, then the 'Treasury Rate'
for such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Interest Rate).
The 'Treasury Rate Determination Date' for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury securities would normally be auctioned. Treasury
securities are normally sold at auction on Monday of each week, unless that day
is legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Rate Determination Date pertaining to the
Interest Reset Period commencing in the next succeeding week. If an auction date
shall fall on any day that would otherwise be an Interest Reset Date for a
Treasury Rate Note, then such Interest Reset Date shall instead be the Business
Day immediately following such auction date.
If 'Constant Maturity' is specified in the applicable Pricing Supplement,
the 'Treasury Rate' for each Interest Reset Period will be the rate that is set
forth in the Federal Reserve Board publication H.15(519) opposite the caption
'U.S. Government/Securities/Treasury Constant Maturities/' in the Index Maturity
with respect to the applicable Constant Maturity Treasury Rate Determination
Date (as defined below). If the H.15(519) is not published, the 'Constant
Maturity-Treasury Rate' shall be the rate that was set forth on Telerate Page
7055, or its successor page (as determined by the Calculation Agent), on the
applicable Constant Maturity Treasury Rate Determination Date opposite the
applicable Index Maturity. If no such rate is set forth, then the Constant
Maturity Treasury Rate for such Interest Reset Period shall be established by
the Calculation Agent as follows. The Calculation Agent will contact the Federal
Reserve Board and request the Constant Maturity Treasury Rate, in the applicable
Index Maturity, for the Constant Maturity Treasury Determination Date. If the
Federal Reserve Board does not provide such information, then the Constant
Maturity Treasury Rate for such Interest Reset Date will be the arithmetic mean
of bid-side quotations, expressed in terms of yield, reported by three leading
U.S. government securities dealers (one of which may be Salomon Brothers Inc),
according to
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their written records, as of 3:00 p.m. (New York City time) on the
Constant Maturity Treasury Rate Determination Date, for the noncallable U.S.
Treasury Note that is nearest in maturity to the Index Maturity, but not less
than exactly the Index Maturity and for the noncallable U.S. Treasury Note that
is nearest in maturity to the Index Maturity, but not more than exactly the
Index Maturity. The Calculation Agent shall calculate the Constant Maturity
Treasury Rate by interpolating to the Index Maturity based on an actual/actual
date count basis, the yield on the two Treasury Notes selected. If the
Calculation Agent cannot obtain three such adjusted quotations, the Constant
Maturity Treasury Rate for such Interest Reset Date will be the arithmetic mean
of all such quotations, or if only one such quotation is obtained, such
quotation, obtained by the Calculation Agent. In all events, the Calculation
Agent shall continue polling dealers until at least one adjusted yield quotation
can be determined.
'The Constant Maturity Treasury Rate Determination Date' shall be the tenth
Business Day prior to the Interest Reset Date for the applicable Interest Reset
Period.
The Treasury constant maturity rate for a Treasury security maturity (the
'CMT Rate') as published in H.15(519) as of any Business Day is intended to be
indicative of the yield of a U.S. Treasury security having as of such Business
Day a remaining term to maturity equivalent to such maturity. The CMT Rate as of
any Business Day is based upon an interpolation by the U.S. Treasury of the
daily yield curve of outstanding Treasury securities. This yield curve, which
relates the yield on a security to its time to maturity, is based on the
over-the-counter market bid yields on actively traded Treasury securities. Such
yields are calculated from composites of quotations reported by leading U.S.
government securities dealers, which may include Salomon Brothers Inc. Certain
constant maturity yield values are read from the yield curve. Such interpolation
from the yield curve provides a theoretical yield for a Treasury security having
ten years to maturity, for example, even if no outstanding Treasury security has
as of such date exactly ten years remaining to maturity.
The 'Calculation Date' pertaining to any Treasury Rate Determination Date
or Constant Maturity Rate Determination Date, as applicable, shall be the tenth
calendar day after such Treasury Rate Determination Date or Constant Maturity
Rate Determination Date, as applicable, or, if such a day is not a Business Day,
the next succeeding Business Day.
AMORTIZING NOTES
The Company may from time to time offer Notes ('Amortizing Notes') on which
a portion or all the principal amount is payable prior to Stated Maturity in
accordance with a schedule or by application of a formula. Further information
concerning additional terms and conditions of any Amortizing Notes, including
terms for repayment thereof, will be set forth in the applicable Pricing
Supplement.
CERTIFICATED NOTES
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within 90
days, the Company will issue Notes in definitive form in exchange for each
Global Certificate. In addition, the Company may at any time and in its sole
discretion determine not to have Notes represented by Global Certificates and,
in such event, will issue individual Notes in definitive form in exchange for
Global Certificates. In either instance, a beneficial owner of Notes represented
by a Global Certificate will be entitled to have such Notes registered in its
name and will be entitled to physical delivery of such Notes in definitive form.
Individual Notes so issued will be issued as registered Debt Securities, without
coupons, in one or more authorized denominations as described above under
'General' (Section 305). Payments of interest on such Notes (other than interest
payable at Stated Maturity) will be made by check mailed to the registered
Holders thereof. Principal and interest payable at the Stated Maturity of any
such Note will be paid in immediately available funds upon surrender of such
Note at the corporate trust office or agency of the Trustee in the City of New
York (Section 307).
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Certificated Notes may be transferred or exchanged at the corporate trust
office or agency of the Trustee in the City of New York, subject to the
limitations provided in the Indenture, without the payment of any service
charge, other than any tax or governmental charge payable in connection
therewith (Section 305).
If a certificated Note is mutilated, destroyed, lost or stolen, it may be
replaced at the corporate trust office or agency of the Trustee in the City of
New York upon payment by the Holder of such expenses as may be incurred by the
Company and the Trustee in connection therewith and the furnishing of such
evidence and indemnity as the Company and the Trustee may require. Mutilated
Notes must be surrendered before new Notes will be issued (Section 306).
LIMITATION ON LIENS
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, incur, issue, assume, guarantee or suffer to exist any
indebtedness for borrowed money if the payment of such indebtedness is secured
by a pledge of, lien on or security interest in any shares of stock of any
Restricted Subsidiary without effectively providing for the equal and ratable
securing of the payment of the Notes (Section 1205). The term 'Restricted
Subsidiary' is defined in the Indenture to mean each of Phibro Inc. and Salomon
Brothers Inc and any Subsidiary of the Company owning, directly or indirectly,
any of the common stock of, or succeeding to any substantial part of the
business now conducted by, any of such corporations.
EVENTS OF DEFAULT
The following events will constitute Events of Default with respect to the
Notes under the Indenture: (i) default in the payment of the principal of (and
premium, if any, on) any Note when due; (ii) default for 30 days in the payment
of any interest on any Note when due; (iii) default in the performance of any
other applicable covenant in the Indenture, continued for 60 days after written
notice thereof by the Trustee or the Holders of at least 25% in principal amount
of the Notes then Outstanding; and (iv) certain events of bankruptcy, insolvency
or reorganization (Section 501).
The Indenture provides that if an Event of Default specified therein shall
occur and be continuing, either the Trustee thereunder or the Holders of at
least 25% in principal amount of the Notes then Outstanding may declare the
principal of and all accrued interest on all such Notes to be due and payable
immediately. In certain cases, the Holders of a majority in principal amount of
the Outstanding Notes may on behalf of the Holders of all such Notes waive,
rescind and annul such declaration and its consequences (Section 502).
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during the continuance of an Event of Default to act with
the required standard of care, to be indemnified by the Holders of the Notes
before proceeding to exercise any right or power under the Indenture with
respect to the Notes at the request of such Holders (Section 603). The Indenture
provides that no Holder of a Note may institute any proceeding, judicial or
otherwise, to enforce the Indenture except in the case of failure of the
Trustee, for 60 days, to act after it receives (i) written notice of such Event
of Default from such Holder, (ii) a written request to enforce the Indenture by
the Holders of at least 25% in principal amount of the Notes then Outstanding
(and the Trustee receives no direction inconsistent with such written request
from the Holders of a majority in principal amount of the Notes then
Outstanding) and (iii) an offer of reasonable indemnity (Section 507). This
provision will not prevent any Holder of a Note from enforcing payment of the
principal thereof (and premium, if any, thereon) and interest thereon at the
respective due dates thereof (Section 508). The Holders of a majority in
principal amount of the Notes then Outstanding may direct the time, method and
place of conducting any proceedings for any remedy available to the Trustee or
of exercising any trust or power conferred on the Trustee with respect to the
Notes. However, the Trustee may refuse to follow any direction that conflicts
with law or the Indenture or that would be unjustly prejudicial to Holders not
joining therein (Section 512).
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The Indenture provides that the Trustee will, within 90 days after the
occurrence of any default with respect to the Notes, give to the Holders of
Notes notice of each such default known to the Trustee, unless such default
shall have been cured or waived; but, except in the case of a default in the
payment of the principal of (and premium, if any) or interest on any Note, the
Trustee shall be protected in withholding such notice if it determines in good
faith that the withholding of such notice is in the interest of the Holders of
Notes (Section 602).
The Company will be required to file annually with the Trustee a
certificate of an appropriate officer of the Company as to the absence of
certain defaults under the terms of the Indenture (Section 1206).
MODIFICATION AND WAIVER
The Indenture contains provisions for convening meetings of Holders to
consider matters affecting their interests (Article Nine).
Modifications of and amendments to the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the Outstanding Debt Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, among other things, without the consent of the Holder of each
Outstanding Debt Security affected thereby: (i) change the Stated Maturity of
the principal of, or any installment of interest payable on, any Debt Security;
(ii) reduce the principal amount of, or any interest on or any premium payable
upon redemption of, any Debt Security; (iii) impair the right to institute suit
for the enforcement of any payment on or with respect to any Debt Security; or
(iv) reduce the percentage of the principal amount of the Outstanding Debt
Securities of any series, the consent of the Holders of which is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or waiver of certain defaults (Section
1102).
The Holders of a majority in principal amount of the Outstanding Debt
Securities of each series may, on behalf of all Holders of Debt Securities of
that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the Indenture before the time for
such compliance (Section 1207). The Holders of a majority in principal amount of
the Outstanding Debt Securities of each series may, on behalf of all Holders of
Debt Securities of that series, waive any past default under the Indenture with
respect to the Debt Securities of that series, except a default in the payment
of the principal of (and premium, if any) or any interest on any Debt Securities
or in respect of a covenant or provision the modification or amendment of which
would require the consent of the Holder of each Outstanding Debt Security
affected thereby (Section 513).
CONSOLIDATION, MERGER AND TRANSFER OR LEASE OF ASSETS
The Indenture provides that the Company may not consolidate with or merge
into any corporation, or transfer or lease its assets substantially as an
entirety to any Person, unless: (i) the successor corporation or transferee or
lessee (the 'Successor Corporation') is a corporation organized under the laws
of the United States or any political subdivision thereof; (ii) the Successor
Corporation assumes the Company's obligations under the Indenture and on the
Debt Securities; (iii) after giving effect to the transaction, no Event of
Default and no event that, after notice or lapse of time, or both, would become
an Event of Default shall have occurred and be continuing; and (iv) certain
other conditions are met (Section 1001).
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CONCERNING THE TRUSTEE
The Company and certain of its subsidiaries maintain lines of credit and
have other customary banking relationships with the Trustee and certain of its
affiliates.
UNITED STATES TAX CONSIDERATIONS
The following is a summary of the principal U.S. Federal income tax
considerations that may be relevant to a holder of a Note that is (i) a U.S.
Person (as defined below) or that otherwise is subject to U.S. Federal income
taxation on a net income basis in respect of a Note (a 'U.S. Holder') or (ii) a
non-U.S. Person. This summary is based on U.S. Federal income tax laws,
regulations, rulings and decisions now in effect, all of which are subject to
prospective or retroactive change. Except to the extent discussed below under
'Non-United States Persons', this summary deals only with U.S. Holders
that will hold Notes as capital assets. Except as expressly indicated, it deals
only with initial holders and does not address tax considerations applicable to
investors that may be subject to special tax rules, such as banks, insurance
companies, dealers in securities, persons that will hold Notes as a position in
a 'straddle' for tax purposes or as part of a 'synthetic security' or other
integrated investment (including a 'conversion transaction') comprised of a Note
and one or more other investments, or persons that have a 'functional currency'
other than the U.S. dollar. It does not include any description of the tax laws
of any state or local governments, or of any foreign government, that may be
applicable to the Notes or to the holders thereof.
As used in this Prospectus, 'U.S. Person' means a citizen or resident of
the United States, a corporation created or organized in or under the laws of
the United States, or a person otherwise subject to United States Federal income
taxation on its worldwide income.
Investors should consult their own tax advisors in determining the tax
consequences to them of holding Notes, including the application to their
particular situation of the U.S. Federal income tax considerations discussed
below, as well as the application of state, local or other tax laws.
U.S. HOLDERS
PAYMENTS OF INTEREST
In general, interest on a Note (other than certain payments on a Discount
Note, as defined and described below under 'Original Issue Discount') will be
taxable to a U.S. Holder as ordinary income at the time it is received or
accrued, depending on the holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT
The following discussion summarizes the United States Federal income tax
consequences to U.S. Holders of Notes issued with original issue discount
('OID'). U.S. Holders of Notes issued with OID generally will be subject to
special tax accounting rules provided in the Internal Revenue Code of 1986, as
amended (the 'Code'). Treasury Department regulations (the 'OID Regulations')
illustrate the rules provided by the Code.
General. A Note will be treated as issued with OID (a 'Discount Note') if
the excess of the Note's 'stated redemption price at maturity' over its issue
price is greater than a de minimis amount (set forth in the Code and the OID
Regulations). Generally, the issue price of a Note (or any Note that is part of
an issue of Notes) will be the first price at which a substantial amount of
Notes that are part of such issue of Notes are sold (other than to underwriters,
placement agents or wholesalers). Under the OID Regulations, the 'stated
redemption price at maturity' of a Note is the sum of all payments provided by
the Note that are not payments of 'qualified stated interest'. A 'qualified
stated interest' payment includes any stated interest payment on a Note that is
unconditionally payable at least annually at a
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single fixed rate (or at certain floating rates) that appropriately takes into
account the length of the interval between stated interest payments.
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of one percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to
maturity, then such excess constitutes 'de minimis OID'. Under the OID
Regulations, unless the election described below under 'Election to Treat All
Interest as Original Issue Discount' is made, such a Note will not be treated as
issued with OID (in which case the following paragraphs under 'Original Issue
Discount' will not apply) and a U.S. Holder of such a Note will recognize
capital gain with respect to such de minimis OID as stated principal payments on
the Note are made. The amount of such gain with respect to each such payment
will equal the product of the total amount of the Note's de minimis OID and a
fraction, the numerator of which is the amount of the principal payment made and
the denominator of which is the stated principal amount of the Note.
In certain cases, Notes that bear stated interest and are issued at par may
be deemed to bear OID for Federal income tax purposes, with the result that the
inclusion of interest in income for Federal income tax purposes may vary from
the actual cash payments of interest made on such Notes, generally accelerating
income for cash method taxpayers. Under the OID Regulations, a Note may be a
Discount Note where, among other things, (i) a Note bearing interest at a
floating rate (a 'Floating Rate Note') provides for a maximum interest rate or a
minimum interest rate that is reasonably expected as of the issue date to cause
the yield on the debt instrument to be significantly less, in the case of a
maximum rate, or more, in the case of a minimum rate, than the expected yield
determined without the maximum or minimum rate, as the case may be; (ii) a
Floating Rate Note provides for significant front-loading or back-loading of
interest; or (iii) certain Notes bear interest at a floating rate in combination
with one or more other floating or fixed rates. Notice will be given in the
applicable Pricing Supplement when the Company determines that a particular Note
will be a Discount Note.
The Code and the OID Regulations provide rules that require a U.S. Holder
of a Discount Note having a maturity of more than one year from its date of
issue to include OID in gross income before the receipt of cash attributable to
such income, without regard to the holder's method of accounting for tax
purposes. The amount of OID includible in gross income by a U.S. Holder of a
Discount Note is the sum of the 'daily portions' of OID with respect to the
Discount Note for each day during the taxable year or portion of the taxable
year in which the U.S. Holder holds such Discount Note ('accrued OID'). The
daily portion is determined by allocating to each day in any 'accrual period' a
pro rata portion of the OID allocable to that accrual period. Under the OID
Regulations, accrual periods with respect to a Note may be any set of periods
(which may be of varying lengths) selected by the U.S. Holder as long as (i) no
accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Note occurs on the first day or final day of an
accrual period.
The amount of OID allocable to an accrual period equals the excess of (a)
the product of the Discount Note's adjusted issue price at the beginning of the
accrual period and the Discount Note's yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (b) the sum of any payments of
qualified stated interest on the Discount Note allocable to the accrual period.
In the case of a Discount Note that is a Floating Rate Note, both the yield to
maturity and the qualified stated interest will be determined for these purposes
as though the Note will bear interest in all periods at a fixed rate generally
equal to the rate that would be applicable to interest payments on the Note on
its date of issue or, in the case of certain Floating Rate Notes, the rate that
reflects the yield that is reasonably expected for the Note. (Additional rules
may apply if interest on a Floating Rate Note is based on more than one interest
index). The 'adjusted issue price' of a Discount Note at the beginning of the
first accrual period is the issue price and at the beginning of any accrual
period thereafter is (x) the sum of the issue price of such Discount Note, the
accrued OID for each prior accrual period (determined without regard to the
amortization of any acquisition premium or bond premium, which are discussed
below), and the amount of any qualified stated interest on the Note that has
accrued prior to the beginning of the accrual period
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but is not payable until a later date, less (y) any prior payments on the
Discount Note that were not qualified stated interest payments. If a payment
(other than a payment of qualified stated interest) is made on the first day of
an accrual period, then the adjusted issue price at the beginning of such
accrual period is reduced by the amount of the payment. All payments on a
Discount Note (other than a payment of qualified stated interest) generally will
be viewed first as payments of previously accrued OID (to the extent thereof),
with payments made for the earliest accrual periods first, and then as a payment
of principal. If a portion of the initial purchase price of a Note is
attributable to interest that accrued prior to the Note's issue date, the first
stated interest payment on the Note is to be made within one year of the Note's
issue date and such payment will equal or exceed the amount of pre-issuance
accrued interest, then the issue price will be decreased by the amount of
pre-issuance accrued interest, in which case a portion of the first stated
interest payment will be treated as a return of the excluded pre-issuance
accrued interest and not as an amount payable on the Note.
The OID Regulations contain certain special rules that generally allow any
reasonable method to be used in determining the amount of OID allocable to a
short initial accrual period (if all other accrual periods are of equal length)
and require that the amount of OID allocable to the final accrual period equal
the excess of the amount payable at the maturity of the Discount Note (other
than any payment of qualified stated interest) over the Discount Note's adjusted
issue price as of the beginning of such final accrual period. In addition, if an
interval between payments of qualified stated interest on a Discount Note
contains more than one accrual period, then the amount of qualified stated
interest payable at the end of such interval is allocated pro rata (on the basis
of their relative lengths) between the accrual periods contained in the
interval.
U.S. Holders of Discount Notes generally will have to include in income
increasingly greater amounts of OID over the life of the Notes.
Acquisition Premium. A U.S. Holder that purchases a Discount Note for an
amount in excess of its issue price but less than its stated redemption price at
maturity (any such excess being 'acquisition premium'), and that does not make
the election described below under 'Original Issue Discount--Election To Treat
All Interest as Original Issue Discount', is permitted to reduce the daily
portions of OID by a fraction, the numerator of which is the excess of the U.S.
Holder's purchase price for the Note over the issue price, and the denominator
of which is the excess of the sum of all amounts payable on the Note after the
purchase date, other than payments of qualified stated interest, over the Note's
issue price. Alternatively, a U.S. Holder may elect to compute OID accruals as
described under 'Original Issue Discount--General' above, treating the U.S.
Holder's purchase price as the issue price.
Short-Term Notes. Under the Code, special rules apply with respect to OID
on Notes that mature one year or less from the date of issuance ('Short-Term
Notes'). In general, a cash basis U.S. Holder of a Short-Term Note is not
required to include OID in income as it accrues for United States Federal income
tax purposes unless it elects to do so. Accrual basis U.S. Holders and certain
other U.S. Holders, including banks, regulated investment companies, dealers in
securities and cash basis U.S. Holders who so elect, are required to include OID
in income as it accrues on Short-Term Notes on a straight-line basis or, at the
election of the U.S. Holder, under the constant yield method (based on daily
compounding). In the case of U.S. Holders not required and not electing to
include OID in income currently, any gain realized on the sale or retirement of
Short-Term Notes will be ordinary income to the extent of the OID accrued on a
straight-line basis (unless an election is made to accrue the original issue
discount under the constant yield method) through the date of sale or
retirement. U.S. Holders who are not required and do not elect to include OID on
Short-Term Notes in income as it accrues will be required to defer deductions
for interest on borrowings allocable to Short-Term Notes in an amount not
exceeding the deferred income until the deferred income is realized.
Any U.S. Holder of a Short-Term Note can elect to apply the rules in the
preceding paragraph taking into account the amount of 'acquisition discount', if
any, with respect to the Note (rather than the OID with respect to such Note).
Acquisition discount is the excess of the stated redemption price at
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maturity of the Short-Term Note over the U.S. Holder's purchase price therefor.
Acquisition discount will be treated as accruing on a ratable basis or, at the
election of the U.S. Holder, on a constant yield basis.
For purposes of determining the amount of OID subject to these rules, the
OID Regulations provide that no interest payments on a Short-Term Note are
qualified stated interest, but instead such interest payments are included in
the Short-Term Notes's stated redemption price at maturity.
NOTES PURCHASED AT A PREMIUM
Under the Code, a U.S. Holder that purchases a Note for an amount in excess
of its stated redemption price at maturity will not be subject to the OID rules
and may elect to treat such excess as 'amortizable bond premium', in which case
the amount of qualified stated interest required to be included in the U.S.
Holder's income each year with respect to interest on the Note will be reduced
by the amount of amortizable bond premium allocable (based on the Note's yield
to maturity) to such year. Any election to amortize bond premium is applicable
to all bonds (other than bonds the interest on which is excludible from gross
income) held by the U.S. Holder at the beginning of the first taxable year to
which the election applies or thereafter acquired by the U.S. Holder, and may
not be revoked without the consent of the Internal Revenue Service ('IRS'). See
also 'Original Issue Discount--Election to Treat All Interest as Original Issue
Discount'.
NOTES PURCHASED AT A MARKET DISCOUNT
A Note, other than a Short-Term Note, will be treated as issued at a market
discount (a 'Market Discount Note') if the amount for which a U.S. Holder
purchased the Note is less than the Note's issue price, subject to a de minimis
rule similar to the rule relating to de minimis OID described under 'Original
Issue Discount--General'.
In general, any gain recognized on the maturity or disposition of a Market
Discount Note will be treated as ordinary income to the extent that such gain
does not exceed the accrued market discount on such Note. Alternatively, a U.S.
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Market Discount Note. Such an election applies to
all debt instruments with market discount acquired by the electing U.S. Holder
on or after the first day of the first taxable year to which the election
applies and may not be revoked without the consent of the IRS.
Market discount accrues on a straight-line basis unless the U.S. Holder
elects to accrue such discount on a constant yield to maturity basis. Such an
election is applicable only to the Market Discount Note with respect to which it
is made and is irrevocable. A U.S. Holder of a Market Discount Note that does
not elect to include market discount in income currently generally will be
required to defer deductions for interest on borrowings allocable to such Note
in an amount not exceeding the accrued market discount on such Note until the
maturity or disposition of such Note.
The market discount rules do not apply to a Short-Term Note.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT.
Any U.S. Holder may elect to include in gross income all interest that
accrues on a Note using the constant yield method described above under the
heading 'Original Issue Discount--General,' with the modifications described
below. For purposes of this election, interest includes stated interest, OID, de
minimis OID, market discount, acquisition discount, de minimis market discount
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium.
In applying the constant yield method to a Note with respect to which this
election has been made, the issue price of such Note will equal the electing
U.S. Holder's adjusted basis in the Note immediately after its acquisition, the
issue date of the Note will be the date of its acquisition by the electing U.S.
Holder, and no payments on the Note will be treated as payments of qualified
stated interest. This election is generally applicable only to the Note with
respect to which it is made and may not be revoked
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without the consent of the IRS. If this election is made with respect to a Note
with amortizable bond premium, the electing U.S. Holder will be deemed to have
elected to apply amortizable bond premium against interest with respect to all
debt instruments with amortizable bond premium (other than debt instruments the
interest on which is excludible from gross income) held by such electing U.S.
Holder as of the beginning of the taxable year in which the election is made or
any debt instruments acquired thereafter. The deemed election with respect to
amortizable bond premium may not be revoked without the consent of the IRS.
If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Market Discount Note, as defined
above, then the electing U.S. Holder will be treated as having made the election
discussed above under 'Notes Purchased at a Market Discount' to include market
discount in income currently over the life all debt instruments held or
thereafter acquired by such U.S. Holder.
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A U.S. Holder's tax basis in a Note will generally equal its U.S dollar
cost, increased by the amount of any OID or market discount (or acquisition
discount, in the case of a Short-Term Note) included in the U.S. Holder's income
with respect to the Note and the amount, if any, of income attributable to de
minimis OID included in the U.S. Holder's income with respect to the Note, and
reduced by the sum of (i) the amount of any payments that are not qualified
stated interest payments, and (ii) the amount of any amortizable bond premium
applied to reduce interest on the Note. A U.S. Holder generally will recognize
gain or loss on the sale or retirement of a Note equal to the difference between
the amount realized on the sale or retirement and the U.S. Holder's tax basis in
such Note. Except to the extent described above under 'Original Issue
Discount--Short Term Notes' or 'Market Discount', and except to the extent
attributable to accrued but unpaid interest, gain or loss recognized on the sale
or retirement of a Note will be capital gain or loss and will be long-term
capital gain or loss if the Note was held for more than one year.
NON-UNITED STATES PERSONS
Under the U.S. Federal income tax laws as in effect on the date of this
Prospectus and subject to the discussion of backup withholding below, payments
of principal (and premium, if any) and interest, including OID, by the Company
or any agent of the Company (acting in its capacity as such) to any holder of a
Note that is not a U.S. Person will not be subject to U.S. Federal withholding
tax; provided, in the case of interest, including OID, that (i) such holder does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (ii) such holder
is not a controlled foreign corporation for U.S. tax purposes that is related to
the Company (directly or indirectly) through stock ownership and (iii) either
(A) the beneficial owner of the Note certifies to the Company or its agent,
under penalties of perjury, that it is not a U.S. Person and provides its name
and address or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a 'financial institution') and holds the Note certifies to the
Company or its agent under penalties of perjury that such statement has been
received from the beneficial owner by it or by another financial institution and
furnishes the payor with a copy thereof.
If a holder of a Note that is not a U.S. Person is engaged in a trade or
business in the United States and interest, including OID, on the Note is
effectively connected with the conduct of such trade or business, such holder,
although exempt from the withholding tax discussed in the preceding paragraph
(provided that such holder furnishes a properly executed IRS Form 4224 on or
before any payment date to claim such exemption), may be subject to U.S. Federal
income tax on such interest, and OID, in the same manner as if it were a U.S.
Person. In addition, if such a holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments. For
purposes of the branch profits tax, interest (including
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OID) on a Note will be included in the earnings and profits of such holder if
such interest (or OID) is effectively connected with the conduct by such holder
of a trade or business in the United States.
Any capital gain or market discount realized upon the sale, exchange,
retirement or other disposition of a Note by a holder that is not a U.S. Person
will not be subject to U.S. Federal income or withholding taxes if (i) such gain
is not effectively connected with a U.S. trade or business of the holder and
(ii) in the case of an individual, such holder (A) is not present in the United
States for 183 days or more in the taxable year of the sale, exchange,
retirement or other disposition or (B) does not have a tax home (as defined in
Section 911(d)(3) of the Code) in the United States in the taxable year of the
sale, exchange, retirement or other disposition and the gain is not attributable
to an office or other fixed place of business maintained by such individual in
the United States.
Notes held by an individual who is neither a citizen nor a resident of the
United States for U.S. Federal tax purposes at the time of such individual's
death will not be subject to U.S. Federal estate tax provided that the income
from such Notes was not or would not have been effectively connected with a U.S.
trade or business of such individual and that such individual qualified for the
exemption from U.S. Federal withholding tax (without regard to the certification
requirements) that is described above. Purchasers of Notes that are not a U.S.
Person should consult their own tax advisors with respect to the possible
applicability of United States withholding and other taxes upon income realized
in respect of the Notes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
For each calendar year in which the Notes are outstanding, the Company is
required to provide the IRS with certain information, including the holder's
name, address and taxpayer identification number (either the holder's Social
Security number or its employer identification number, as the case may be), the
aggregate amount of principal and interest paid (including OID, if any) to that
holder during the calendar year and the amount of tax withheld, if any. This
obligation, however, does not apply with respect to certain U.S. holders,
including corporations, tax-exempt organizations, qualified pension and profit
sharing trusts and individual retirement accounts.
In the event that a U.S. holder subject to the reporting requirements
described above fails to supply its taxpayer identification number in the manner
required by applicable law, provides an incorrect taxpayer identification number
that is used by a payor on an information return or underreports its tax
liability, the Company, its agents or paying agents or a broker may be required
to 'backup' withhold a tax equal to 31 percent of each payment of interest
(including OID) and principal (and premium, if any) on the Notes. This backup
withholding is not an additional tax and may be credited against the U.S.
holder's U.S. Federal income tax liability, provided that the required
information is furnished to the IRS.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof
(in its capacity as such) to a holder of a Note that is not a U.S. person if
such holder has provided the required certification that it is not a U.S. person
as set forth in clause (iii) in the first paragraph under 'Non-United States
Persons' above, or has otherwise established an exemption (provided that neither
the Company nor its agent has actual knowledge that the holder is a U.S. person
or that the conditions of any exemption are not in fact satisfied).
Payment of the proceeds from the sale of a Note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that if the broker is a U.S. person, a controlled foreign
corporation for U.S. tax purposes or a foreign person 50 percent or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the payment was effectively connected with a
U.S. trade or business, information reporting may apply to such payments.
Payment of the proceeds from a sale of a Note to or through the U.S. office of a
broker is subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its taxpayer identification number or
otherwise establishes an exemption from information reporting and backup
withholding.
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PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
(the 'Underwriting Agreement') entered into by the Company and the Underwriter,
the Company has agreed to sell to the Underwriter, and the Underwriter has
agreed to purchase, the Notes from time to time. Notes acquired by the
Underwriter pursuant to the Underwriting Agreement are expected to be offered
either directly to the public or to certain dealers (the 'Dealers') that will
then reoffer the Notes to the public. Sales by the Underwriter to any Dealer
will be made pursuant to an agreement between the Underwriter and such Dealer
(each a 'Dealer Agreement').
The Pricing Supplement with respect to each offering of Notes by the
Company will set forth, among other things, the fixed price to public of such
Notes, or that such Notes will be resold to one or
more purchasers at varying prices related to prevailing market prices at the
time of resale, and the proceeds to the Company from such sale, any underwriting
discounts and other items constituting Underwriter's compensation, and any
discounts or concessions allowed, reallowed or paid to Dealers. The Company will
pay underwriting compensation in connection with any issue of Notes of from not
more than .500% to not more than 2.750% of the principal amount of Notes sold by
an underwriter, depending upon the Stated Maturity. After any initial public
offering of Notes, the price to public of such Notes, and the related
underwriting discount and selling concession, may be changed.
The Underwriter has advised the Company that all initial offers by it and
by the Dealers, unless otherwise set forth in the applicable Pricing Supplement,
are proposed to be made at prices equal to 100% of the principal amount of the
Notes being sold, less, in the case of an offer by the Underwriter to a Dealer,
a price concession not in excess of the amount set forth in the applicable
Pricing Supplement. Offers and sales by the Underwriter or Dealers subsequent to
the initial offering may be at varying prices determined at the time of sale.
If specified in the applicable Pricing Supplement, Notes may also be sold
directly by the Company, through underwriters other than the Underwriter, or
through underwriters acting as agents, from time to time. Any underwriters other
than the Underwriter will agree to act in accordance with this Plan of
Distribution as if they were the Underwriter. Unless otherwise specified in such
Pricing Supplement, any underwriter acting as agent will be acting on a best
efforts basis for the period of its appointment. All commissions payable by the
Company to any such underwriter, whether acting as principal or as agent, will
be set forth in such Pricing Supplement.
The Notes will not be listed on any securities exchange and will not be
traded, when issued, on any other established trading market. The Underwriter or
any Dealer, including Salomon Brothers Inc, may make a market in the Notes, but
are not obligated to do so. Any market-making so undertaken may be discontinued
at any time without notice. There can thus be no assurance that a secondary
market for the Notes will exist or as to the liquidity of any such market.
Moreover, the Company reserves the right to withdraw, cancel or modify the offer
made hereby at any time without notice, and any such withdrawal, cancellation or
modification also may adversely affect the liquidity of the Notes.
The Underwriting Agreement provides, and the terms of each Dealer Agreement
will provide, that the obligations of the Underwriter or a Dealer to purchase
Notes will be subject to certain conditions precedent. The Underwriter will be
obligated to purchase all the Notes offered by any Pricing Supplement naming it
if any such Notes are purchased.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriter may be required to make in respect thereof.
Salomon Brothers Inc is an indirect wholly owned subsidiary of the Company,
and its participation in the offer and sale of Notes complies with Schedule E of
the By-Laws of the National Association of Securities Dealers, Inc. regarding
the underwriting by Salomon Brothers Inc of securities of its parent. Schedule E
provides, among other things, that Notes may not be purchased from or sold to a
customer
25
<PAGE>
discretionary account by the Underwriter or a Dealer without the prior specific
written approval of the customer.
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ('ERISA'),
imposes certain restrictions on employee benefit plans ('Plans') that are
subject to ERISA and on persons who are fiduciaries with respect to such Plans.
In accordance with ERISA's general fiduciary requirements, a fiduciary with
respect to any such Plan who is considering the purchase of Notes on behalf of
such Plan should determine whether such purchase is permitted under the
governing Plan documents and is prudent and appropriate for the Plan in view of
its overall investment policy and the composition and diversification of its
portfolio. Other provisions of ERISA and Section 4975 of the Internal Revenue
Code of 1986, as amended (the 'Code'), prohibit certain transactions involving
the assets of a Plan and persons who have certain specified relationships to the
Plan ('parties in interest' within the meaning of ERISA or 'disqualified
persons' within the meaning of Section 4975 of the Code). Thus, a Plan fiduciary
considering the purchase of Notes should consider whether such a purchase might
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code.
The Company, directly or through its affiliates, may be considered a 'party
in interest' or a 'disqualified person' with respect to many Plans that are
subject to ERISA. The purchase of Notes by a Plan that is subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of Section 4975 of the Code (including individual retirement accounts
and other plans described in Section 4975(e)(1) of the Code) and with respect to
which the Company is a party in interest or a disqualified person may constitute
or result in a prohibited transaction under ERISA or Section 4975 of the Code,
unless such Notes are acquired pursuant to and in accordance with an applicable
exemption, such as Prohibited Transaction Class Exemption ('PTCE') 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), or PTCE
95-60 (an exemption for certain transactions involving insurance company general
accounts). ANY PENSION OR OTHER EMPLOYEE BENEFIT PLAN PROPOSING TO ACQUIRE ANY
NOTES SHOULD CONSULT WITH ITS COUNSEL.
EXPERTS
The financial statements and related schedules included in the 1995 10-K
have been audited by Arthur Andersen LLP, independent public accountants, to the
extent and for the periods indicated in their reports included therein, and are
incorporated by reference in this Prospectus in reliance upon such reports and
upon the authority of said firm as experts in accounting and auditing in giving
such reports.
LEGAL OPINIONS
Certain legal matters relating to the Notes will be passed upon for the
Company by Cravath, Swaine & Moore, New York, New York, and for the Underwriter
by Cleary, Gottlieb, Steen & Hamilton, New York, New York.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS (INCLUDING THE ACCOMPANYING PRICING SUPPLEMENT) IN CONNECTION WITH
THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS (INCLUDING THE
ACCOMPANYING PRICING SUPPLEMENT) NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS
PROSPECTUS (INCLUDING THE ACCOMPANYING PRICING SUPPLEMENT). THIS PROSPECTUS
(INCLUDING THE ACCOMPANYING PRICING SUPPLEMENT) DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............................. 2
Incorporation of Certain Documents by Reference... 2
Salomon Inc....................................... 3
Use of Proceeds................................... 3
Ratio of Earnings to Fixed Charges................ 3
Description of the Notes.......................... 3
United States Tax Considerations.................. 18
Plan of Distribution.............................. 24
ERISA Matters..................................... 25
Experts........................................... 26
Legal Opinions.................................... 26
</TABLE>
$1,000,000,000
SALOMON INC
NOTES, SERIES G
DUE MORE THAN NINE
MONTHS FROM DATE OF ISSUE
- -------------------------
Salomon Brothers Inc.
------------------------------------------------
PROSPECTUS
DATED APRIL 5, 1996
