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Pursuant to Rule 424(b)(2)
Registration No. 333-38931
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 1, 1997)
$11,710,346,786
SALOMON SMITH BARNEY HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES H AND SERIES I
DUE MORE THAN NINE MONTHS FROM DATE OF ISSUE
GENERAL TERMS OF SALE
The following terms will generally apply to the medium-term notes that we
will sell from time to time using this Prospectus Supplement and the attached
Prospectus. We will include information on the specific terms for each note in a
Pricing Supplement to this Prospectus Supplement that we will deliver to
prospective buyers of any note. The maximum amount that we expect to receive
from the sale of the notes is between $11,622,519,185 and $11,695,708,853 after
paying the agents commissions of between $14,637,933 and $87,827,601.
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<S> <C> <C>
MATURITY: More than 9 Months TERMS OF SPECIFIC NOTES MAY PERMIT ONE OR MORE OF
THESE FEATURES. YOU SHOULD REVIEW THE PRICING
SUPPLEMENT FOR FEATURES THAT APPLY TO YOUR NOTES
INTEREST RATES: Fixed, Floating, - May be redeemable or repurchasable by us
or Zero Coupon
BASE FLOATING LIBOR - May be renewable at your option or extendible at
RATES: Commercial Paper Rate our option
Treasury Rate
CD Rate - Interest rate may be reset at our option from
Prime Rate time to time and be redeemable by you at the time
J.J. Kenny Rate of any reset
Eleventh District Cost of
Funds Rate - May be issued with Original Issue Discount for
Federal Funds Rate tax purposes
- Portion of principal may be payable prior to
maturity
INDEXED NOTES: Payments of interest or
principal may be linked to the
price of one or more
securities, currencies,
commodities or other goods
PAYMENT DATES: Generally semi-annually for Notes will be sold through our broker-dealer
Fixed Rate Notes subsidiaries, as Agents
Interest on Floating Rate or Notes may be subject to certain indexation and
Indexed Notes may be paid currency risks
monthly, quarterly, semi-
annually or annually Series H Notes are part of our Senior
Indebtedness; Series I Notes are part of our
Subordinated Indebtedness
CURRENCIES: U.S. Dollars and other
currencies
DENOMINATION: Minimum of $1,000
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THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES
COMMISSION, NOR HAS ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT, OR ANY ACCOMPANYING PROSPECTUS OR PRICING SUPPLEMENT, IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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SALOMON SMITH BARNEY
December 5, 1997
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THE COMPANY
Pursuant to an agreement and plan of merger dated as of September 24, 1997,
a newly-formed wholly owned subsidiary of Travelers Group Inc. ("Travelers
Group") merged with and into Salomon Inc ("Salomon") on November 28, 1997;
Salomon then became a wholly owned subsidiary of Travelers Group and was renamed
Salomon Smith Barney Holdings Inc. (the "Company"). Immediately thereafter,
Smith Barney Holdings Inc., another wholly owned subsidiary of Travelers Group,
was merged into the Company. The Company is a holding company primarily engaged
in investment banking, proprietary trading, retail brokerage and asset
management activities through its two broker-dealer subsidiaries, Smith Barney
Inc. ("Smith Barney") and Salomon Brothers Inc ("Salomon Brothers").
The principal offices of the Company are located at 388 Greenwich Street,
New York, New York 10013 (telephone number (212) 816-6000).
SMITH BARNEY
Smith Barney provides investment banking, asset management, brokerage and
other financial services for United States and foreign corporations, governments
and institutional and individual investors. These activities include securities,
options and commodities brokerage for domestic and international institutional
and individual clients; underwriting and distribution of securities; arranging
for the private placement of securities; assisting in mergers and acquisitions
and providing financial advisory services; market making and trading in
corporate debt and equity, United States government and agency, mortgage-related
and municipal securities and foreign exchange, futures and forward contracts;
consumer financing activities; securities lending activities; investment
management and advisory services; securities research; and other related
activities.
SALOMON
Together with Salomon Brothers Holding Company Inc and its subsidiaries
(which subsidiaries include Salomon Brothers), Salomon Brothers engages in
global investment banking and global securities trading activities; provides
capital raising, advisory, trading and risk management services to its
customers; and executes proprietary trading strategies on its own behalf.
Certain of the Company's commodities trading activities are conducted by the
Company's wholly owned subsidiary, Phibro Inc., and its subsidiaries.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Registered Note (as defined below)
in the currency designated by the Company (the "Specified Currency") for such
Note. If requested by a prospective purchaser of a Registered Note having a
Specified Currency other than U.S. dollars, each of the Agents may at its
discretion arrange for the exchange of U.S. dollars into such Specified Currency
to enable the purchaser to pay for such Note. Each such exchange will be made by
an Agent on such terms and subject to such conditions, limitations and charges
as an Agent may from time to time establish in accordance with its regular
foreign exchange practice. All costs of exchange will be borne by the purchaser.
References herein to "U.S. dollars," "U.S.$," "dollar" or "$" are to the
lawful currency of the United States.
DESCRIPTION OF REGISTERED NOTES
The following description of the particular terms of the Registered Notes
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
Prospectus, to which description reference is hereby made. Numerical references
in parentheses below are to sections in the Senior Debt Indenture and the
Subordinated Debt Indenture. Wherever particular sections or defined terms of
the Indentures 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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GENERAL
The Company's Medium-Term Notes, Series H Notes (the "Series H Notes") are
a series of Debt Securities issued under the Senior Debt Indenture, and the
Company's Medium-Term Notes, Series I Notes (the "Series I Notes" and, together
with the Series H Notes, the "Notes") are a series of Debt Securities issued
under the Subordinated Debt Indenture. At the date of this Prospectus
Supplement, the Notes offered pursuant to this Prospectus Supplement are limited
to an aggregate initial public offering price or purchase price of up to
$11,710,346,786 or the equivalent thereof in one or more foreign or composite
currencies, which amount is subject to reduction as a result of the sale of
other securities under the registration statement of which this Prospectus
Supplement and the accompanying Prospectus form a part or under a registration
statement to which this Prospectus Supplement and the accompanying Prospectus
relate. The amount of Notes sold of either series will reduce the amount of
Notes of the other series that may be sold. The Company reserves the right to
withdraw, cancel or modify the offer made hereby without notice. The aggregate
amount of Notes may be increased from time to time to such larger amount as may
be authorized by the Company. In addition to the Notes in registered form
("Registered Notes") being offered hereby in the United States, the Company may
offer Notes in bearer form ("Bearer Notes") in a concurrent offering outside the
United States. The U.S. dollar equivalent of the public offering price or
purchase price of a Note having a Specified Currency other than U.S. dollars
will be determined on the basis of the noon buying rate in New York City for
cable transfers in foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York (the "Market Exchange Rate") for such Specified
Currency on the applicable issue date. Such determination will be made by the
Company or its agent, as exchange rate agent for the applicable series of Notes
(the "Exchange Rate Agent").
The Series H Notes will constitute part of the Senior Indebtedness of the
Company and will rank pari passu with all other unsecured debt of the Company
except subordinated debt. The Series I Notes will be subordinate and junior in
the right of payment, to the extent and in the manner set forth in the
Subordinated Debt Indenture, to all Senior Indebtedness of the Company. See
"Description of Debt Securities -- Subordinated Debt" in the Prospectus. On a
consolidated basis after giving effect to the merger of Smith Barney Holdings
Inc. with and into the Company, as of September 30, 1997, the aggregate
principal amount of Senior Indebtedness of the Company outstanding was $30.9
billion, consisting of the following: $19.7 billion of term debt, $5.4 billion
in commercial paper and $5.8 billion in other short-term borrowings.
The Notes will consist of Registered Notes and Bearer Notes, each of which
will be offered on a continuous basis. Registered Notes will be issued in fully
registered form only, without coupons. Registered Notes may not be exchanged for
Bearer Notes.
Each Registered Note will be issued initially as either a Global Security
registered in the name of a nominee of The Depository Trust Company, as
Depositary (a "Book-Entry Note") or, if specified in the applicable pricing
supplement to this Prospectus Supplement (a "Pricing Supplement"), a certificate
issued in temporary or definitive form (a "Certificated Note"). Except as set
forth in the Prospectus under "Description of Debt Securities -- Global
Securities," Book-Entry Notes will not be issuable as Certificated Notes. See
"Book-Entry System" below.
Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of Registered Notes denominated in U.S. dollars will be
$1,000 and any larger amount that is an integral multiple of $1,000, and the
authorized denominations of Registered Notes having a Specified Currency other
than U.S. dollars will be the approximate equivalents thereof in the Specified
Currency.
Unless otherwise specified in the applicable Pricing Supplement, each
Registered Note will mature on a Business Day more than nine months from its
date of issue, as selected by the purchaser and agreed to by the Company (the
"Stated Maturity"), which maturity date may be subject to extension at the
option of the Company. Each Registered Note may also be subject to redemption at
the option of the Company, or to repayment at the option of the Holder, prior to
its Stated Maturity. Each Registered Note having a Specified Currency of Pounds
Sterling will mature in compliance with such regulations as the Bank of England
may promulgate from time to time.
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The Pricing Supplement relating to a Registered Note will describe the
following terms: (i) the Specified Currency for such Note; (ii) whether such
Note bears interest at a fixed rate (a "Fixed Rate Note") (which rate may be
zero in the case of certain OID Notes, as defined below), a floating rate (a
"Floating Rate Note"), and/or is 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, by application of a formula, or by reference to an
index and/or an indexed note (an "Indexed Note") on which the amount of any
interest payment, in the case of an Indexed Rate Note (as defined below), and/or
the principal amount payable at maturity, in the case of an Indexed Principal
Note (as defined below), will be determined by reference to the level of prices,
or changes in prices, or differences between prices, of securities, currencies,
intangibles, goods, articles or commodities or by application of a formula;
(iii) the price (expressed as a percentage of the aggregate principal amount or
face amount thereof) at which such Note will be issued (the "Issue Price"); (iv)
the date on which such Note will be issued (the "Original Issue Date"); (v) the
date of the Stated Maturity; (vi) 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; (vii) if
such Note is a Floating Rate Note, the Base Rate, the Initial Interest Rate, the
Interest Reset 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; (viii) whether such Note is
an OID Note (as defined below); (ix) if such Note is an Amortizing Note, the
terms for repayment prior to Stated Maturity; (x) if such Note is an Indexed
Note, in the case of an Indexed Rate Note, the manner in which the amount of any
interest payment will be determined or, in the case of an Indexed Principal
Note, its Face Amount and the manner in which the principal amount payable at
Stated Maturity will be determined; (xi) 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 relating to such redemption or
repayment, including, in the case of an OID Note or Indexed Note, the
information necessary to determine the amount due upon redemption or repayment;
(xii) whether such Note is subject to an optional extension beyond its Stated
Maturity as described under "Extension of Maturity" below; (xiii) whether such
Note will be represented by a Global Security or a certificate issued in
definitive form; (xiv) certain special United States federal income tax
consequences of the purchase, ownership and disposition of certain Notes, if
any; (xv) whether such Note is a Renewable Note (as defined below), and, if so,
the specific terms thereof; (xvi) the use of proceeds, if such use materially
differs from that disclosed in the accompanying Prospectus; and (xvii) any other
terms of such Note provided in the accompanying Prospectus to be set forth in a
Pricing Supplement or otherwise not inconsistent with the provisions of the
Indenture under which such Note will be issued.
"Business Day" with respect to any Registered 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 (a) The City of
New York or (b) if the Specified Currency for such Note is other than U.S.
dollars, the financial center of the country issuing such Specified Currency
(which, in the case of the Euro, shall be Brussels, Belgium) and (ii) if such
Note is a LIBOR Note (as defined below), a London Banking Day. "London Banking
Day" with respect to any Registered Note means any day on which dealings in
deposits in the Specified Currency of such Note are transacted in the London
interbank market.
"OID Note" is defined under "Certain United States Federal Income Tax
Considerations -- United States Holders -- Original Issue Discount."
A "basis point" or "bp" equals one one-hundredth of a percentage point.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of and any premium and interest on each Registered Note are
payable by the Company in the Specified Currency for such Note. If the Specified
Currency for a Registered Note is other than U.S. dollars, the Company will
(unless otherwise specified in the applicable Pricing Supplement) arrange to
convert all payments in respect of such Note into U.S. dollars in the manner
described in the following
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paragraph. The Holder of a Registered Note having a Specified Currency other
than U.S. dollars may (if the applicable Pricing Supplement and such Note so
indicate) elect to receive all payments in respect of such Note in the Specified
Currency by delivery of a written notice to the Trustee for such Note not later
than fifteen calendar days prior to the applicable payment date, except under
the circumstances described under "Currency Risks -- Payment Currency" below.
Such election will remain in effect until revoked by written notice to such
Trustee received not later than fifteen calendar days prior to the applicable
payment date and no such change of election may be made with respect to payments
on any Note with respect to which (i) an Event of Default has occurred or (ii)
the Company has given notice of redemption.
In the case of a Registered Note having a Specified Currency other than
U.S. dollars, the amount of any U.S. dollar payment in respect of such
Registered Note will be determined by the Exchange Rate Agent based on the
highest firm bid quotation expressed in U.S. dollars received by the Exchange
Rate Agent at approximately 11:00 a.m., New York City time, on the second
Business Day preceding the applicable payment date (or, if no such rate is
quoted on such date, the last date on which such rate was quoted), from three
(or, if three are not available, then two) recognized foreign exchange dealers
in The City of New York (one or more of which may be an Agent (as defined
herein) and another of which may be the Exchange Rate Agent) selected by the
Exchange Rate Agent, for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of such Specified Currency payable on
such payment date in respect of all Registered Notes denominated in such
Specified Currency. All currency exchange costs will be borne by the Holders of
such Notes by deductions from such payments. If no such bid quotations are
available, such payments will be made in such Specified Currency, unless such
Specified Currency is unavailable due to the imposition of exchange controls or
to other circumstances beyond the Company's control, in which case such payments
will be made as described under "Currency Risks -- Payment Currency" below.
Unless otherwise specified in the applicable Pricing Supplement, U.S.
dollar payments of interest on Registered Notes (other than interest payable at
Stated Maturity) will be made, except as provided below, by check mailed to the
registered Holders of such Notes (which, in the case of Global Securities
representing Book-Entry Notes, will be a nominee of the Depositary); provided,
however, that, in the case of a Registered Note issued between a Regular Record
Date and the related Interest Payment Date, unless otherwise specified in the
related Pricing Supplement, interest for the period beginning on the Original
Issue Date for such Note and ending on such Interest Payment Date shall be paid
on the next succeeding Interest Payment Date to the registered Holder of such
Note on the related Regular Record Date. A Holder of $10,000,000 (or the
equivalent thereof in a Specified Currency other than U.S. dollars) or more in
aggregate principal amount of Registered Notes of like tenor and term shall be
entitled to receive such U.S. dollar payments by wire transfer of immediately
available funds, but only if appropriate wire transfer instructions have been
received in writing by the Trustee for such Notes not later than fifteen
calendar days prior to the applicable Interest Payment Date. Simultaneously with
the election by any Holder to receive payments in a Specified Currency other
than U.S. dollars (as provided above), such Holder shall provide appropriate
wire transfer instructions to the Trustee for such Notes. Unless otherwise
specified in the applicable Pricing Supplement, principal and any premium and
interest payable at the Stated Maturity of a Registered Note will be paid in
immediately available funds upon surrender of such Note at the corporate trust
office or agency of the Trustee for such Note in The City of New York.
Unless otherwise specified in this Prospectus Supplement or the applicable
Pricing Supplement, any payment required to be made in respect of a Registered
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.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any OID Note (other than an Indexed Note (as defined herein)) is
declared to be due and payable immediately as a result of the acceleration of
Stated Maturity, as described under "Description of Debt Securities -- Events of
Default" in the Prospectus, the amount of principal due and payable with respect
to such Note shall be limited to the aggregate principal amount of such Note
multiplied by the sum of its Issue Price (expressed as a percentage of the
aggregate principal amount) plus the original issue discount amortized from the
date of issue to the date of
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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 Regular Record Date with respect to any Interest Payment Date for a
Floating Rate Note, Fixed Rate Note or an Indexed Rate Note shall be the date
(whether or not a Business Day) fifteen calendar days immediately preceding such
Interest Payment Date.
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
as described below under "Subsequent Interest Periods" and "Extension of
Maturity", and 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 set forth in the applicable Pricing Supplement, interest on each Fixed
Rate Note will be payable semiannually in arrears on such dates as set forth in
the applicable Pricing Supplement (each such day being an "Interest Payment
Date") and at Stated Maturity. 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") or, in the case of an incomplete month, the
number of days elapsed.
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 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 in
each case as described below under "Subsequent Interest Periods" and "Extension
of Maturity," and 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"), (v) the CD Rate (a "CD Rate Note"), (vi) the Prime
Rate (a "Prime Rate Note"), (vii) the J.J. Kenny Rate (a "J.J. Kenny Rate
Note"), (viii) the Eleventh District Cost of Funds Rate (an "Eleventh District
Cost of Funds Rate Note"), or (ix) such other Base Rate as is set forth in such
Pricing Supplement and in such 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
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"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 Series H Floating Rate Note and Bankers Trust Company
shall be the Calculation Agent for each Series I Floating Rate 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 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, the third Wednesday of each month (with the exception of monthly
reset Eleventh District Cost of Funds Rate Notes, which reset on the first
calendar day of each month); in the case of Floating Rate Notes that reset
quarterly, the third Wednesday of March, June, September and December of each
year; in the case of Floating Rate Notes that reset semiannually, the third
Wednesday of each of two months of each year specified in the applicable Pricing
Supplement; and, in the case of Floating Rate Notes that reset annually, the
third Wednesday of one month of each year specified in the applicable Pricing
Supplement. 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. If an auction of
direct obligations of United States Treasury Bills ("Treasury bills") falls on a
day that is an Interest Reset Date for Treasury Rate Notes, the Interest Reset
Date shall be the succeeding Business Day.
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, a "Treasury Rate
Determination Date" or a "Constant Maturity Treasury Rate Determination Date" in
the case of a Treasury Rate Note, a "Prime Rate Determination Date" in the case
of a Prime Rate Note, a "J.J. Kenny Rate Determination Date" in the case of a
J.J. Kenny Rate Note, or an "Eleventh District Cost of Funds Rate Date" in the
case of Eleventh District Cost of Funds Rate Note.
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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
(or, in the case of a Floating Rate Note that is an Indexed Principal Note, its
Face Amount, as indicated in the applicable Pricing Supplement) 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, Prime Rate Notes, J.J. Kenny Rate Notes, Eleventh
District Cost of Funds Rate 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, Prime Rate Notes, J.J. Kenny Rate Notes, Eleventh District
Cost of Funds Rate 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).
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
that reset daily, weekly or monthly (other than Eleventh District Cost of Funds
Rate Notes), on the third Wednesday of each month or on the third Wednesday of
March, June, September and December of each year, as specified in the applicable
Pricing Supplement or, in the case of Eleventh District Cost of Funds Rate
Notes, on the first calendar day of each March, June, September and December, as
specified in the applicable Pricing Supplement; in the case of Floating Rate
Notes that reset quarterly, on the third Wednesday of March, June, September,
and December of each year; in the case of Floating Rate Notes that reset
semiannually, on the third Wednesday of each of two months of each year
specified in the applicable Pricing Supplement; and, in the case of Floating
Rate Notes that reset annually, on the third Wednesday of one month of each year
specified in the applicable Pricing Supplement, and in each case at Maturity
(each such day being an "Interest Payment Date"). 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 does not
Accrue to Pay on a date (including the day of Stated Maturity) that is not a
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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.
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.
CD Rate Notes, like other Registered Notes, are not deposit obligations of
a bank and are not insured by the Federal Deposit Insurance Corporation.
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
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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
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:
<TABLE>
<S> <C> <C>
D X 360
----------------
Money Market Yield = X 100
360 - (DXM)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the 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.
"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 the Specified Currency 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 as 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
approximate 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 approximate 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).
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.
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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 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 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
Treasury Rate, in the applicable Index Maturity, for the Constant Maturity
Treasury Rate Determination Date. If the Federal Reserve Board does not provide
such information, then the 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 or more of
which may be an Agent (as defined herein)), according to 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 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 Treasury Rate for such Interest Reset Date will be the arithmetic mean of
all such quotations, or if only one such quotation is
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<PAGE> 13
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 one or more of the Agents or
other affiliates of the Company. 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.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, the "Prime
Rate" for each Interest Reset Period will be determined by the Calculation Agent
for such Prime Rate Note as of the second Business Day prior to the Interest
Reset Date for such Interest Reset Period (a "Prime Rate Determination Date")
and shall be the rate made available and subsequently published on such date in
H.15(519) under the heading "Bank Prime Loan." In the event that such rate has
not been made available prior to 3:00 P.M., New York City time, on the
Calculation Date (as defined below) pertaining to such Prime Rate Determination
Date, the Prime Rate will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen NYMF Page (as defined below) as such bank's prime
rate or base lending rate as in effect for such Prime Rate Determination Date.
If fewer than four such rates but more than one such rate appear on the Reuters
Screen NYMF Page for the Prime Rate Determination Date, the rate shall be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Prime Rate
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two such rates appear on the
Reuters Screen NYMF Page, the Prime Rate will be calculated by the Calculation
Agent and will be the arithmetic mean of the prime rates quoted in The City of
New York on such Prime Rate Determination Date by at least three substitute
banks or trust companies organized and doing business under the laws of the
United States, or any State thereof, having total equity capital of at least
U.S. $500,000,000 and being subject to supervision or examination by Federal or
State authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks or trust companies selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Prime Rate with respect to such Prime Rate Determination Date will
be the Prime Rate in effect on such Prime Rate Determination Date. "Reuters
Screen NYMF Page" means the display designated as page "NYMF" on the Reuters
Monitor Money Rates Service (or such other page as may replace the NYMF page on
that service for the purpose of displaying prime rates or base lending rates of
major United States banks).
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The "Calculation Date" pertaining to any Prime Rate Determination Date
shall be the tenth calendar day after such Prime Rate Determination Date or, if
such day is not a Business Day, the next succeeding Business Day.
J.J. Kenny Rate Notes
J.J. Kenny Rate Notes will bear interest at the interest rates (calculated
by reference to the J.J. Kenny Rate and the Spread and/or Spread Multiplier, if
any) specified in the J.J. Kenny Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, the "J.J.
Kenny Rate" for each Interest Reset Period will be determined by the Calculation
Agent for such J.J. Kenny Rate Note as of the second Business Day prior to the
Interest Reset Date for such Interest Reset Period (a "J.J. Kenny Rate
Determination Date") and shall be the per annum rate on such date equal to the
index made available and subsequently published by Kenny Information Systems or
its successor, based upon 30-day yield evaluations at par of bonds, the interest
on which is excludable from gross income for federal income tax purposes under
the Internal Revenue Code of 1986, as amended (the "Code"), of not less than
five "high grade" component issuers selected from time to time by Kenny
Information Systems, including without limitation, issuers of general obligation
bonds; provided, however, that the bonds on which the index is based shall not
include any bonds the interest on which is subject to an "alternate minimum tax"
or similar tax under the Code, unless all tax-exempt bonds are subject to such
tax. If such rate is not made available by 3:00 P.M., New York City time, on the
Calculation Date (as defined below) pertaining to such J.J. Kenny Rate
Determination Date, the J.J. Kenny Rate shall be the rate quoted by a successor
indexing agent selected by the Company equaling the prevailing rate for bonds
rated in the highest short-term rating category by Moody's Investors Service,
Inc. and Standard & Poor's Corporation in respect of issuers selected by such
successor indexing agent most closely resembling the "high grade" component
issuers selected by Kenny Information Systems that are subject to tender by the
holders thereof for purchase on not more than seven days' notice and the
interest on which is (A) variable on a weekly basis, (B) excludable from gross
income for federal income tax purposes under the Code, and (C) not subject to an
"alternate minimum tax" or similar tax under the Code, unless all tax-exempt
bonds are subject to such tax; provided, however, that if a successor indexing
agent is not available, the J.J. Kenny Rate with respect to such J.J. Kenny Rate
Determination Date will be the J.J. Kenny 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 J.J. Kenny Rate Determination Date
shall be the tenth calendar day after such J.J. Kenny Rate Determination Date
or, if such day is not a Business Day, the next succeeding Business Day.
Eleventh District Cost of Funds Rate Notes
Eleventh District Cost of Funds Rate Notes will bear interest at the
interest rates (calculated by reference to the Eleventh District Cost of Funds
Rate and the Spread and/or Spread Multiplier, if any) specified in the Eleventh
District Cost of Funds Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, the
"Eleventh District Cost of Funds Rate", for each Interest Reset Period will be
determined by the Calculation Agent for such Eleventh District Cost of Funds
Rate Note as of the last working day of the month immediately prior to such
Interest Reset Date for such Interest Reset Period on which the Federal Home
Loan Bank of San Francisco (the "FHLB of San Francisco") publishes the Eleventh
District Cost of Funds Index (as defined below) (the "Eleventh District Cost of
Funds Rate Determination Date"), and shall be the rate equal to the monthly
weighted average cost of funds for the calendar month preceding such Eleventh
District Cost of Funds Rate Determination Date as set forth under the caption
"Eleventh District" on the Telerate Page 7058 (which page shall be deemed to
include any successor page (as determined by the Calculation Agent)) as of 11:00
A.M., San Francisco time, on such Eleventh District Cost of Funds Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related Eleventh District Cost of Funds Rate Determination Date, the Eleventh
District Cost of Funds Rate for such Eleventh District Cost of Funds Rate
Determination Date shall be the monthly weighted average cost of funds paid by
member institutions of the Eleventh Federal
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<PAGE> 15
Home Loan Bank District that was most recently announced (the "Eleventh District
Cost of Funds Rate Index") by the FHLB of San Francisco as such cost of funds
for the calendar month preceding the date of such announcement. If the FHLB of
San Francisco fails to announce such rate for the calendar month next preceding
such Eleventh District Cost of Funds Rate Determination Date, then the Eleventh
District Cost of Funds Rate for such Eleventh District Cost of Funds Rate
Determination Date will be the Eleventh District Cost of Funds Rate in effect on
such Eleventh District Cost of Funds Rate Determination Date.
Inverse Floating Rate Notes
Any Floating Rate Note may be designated in the applicable Pricing
Supplement as an "Inverse Floating Rate Note," in which event, unless otherwise
specified in the applicable Pricing Supplement, the interest rate on such
Floating Rate Note will be equal to (i) in the case of the period, if any,
commencing on the Issue Date (or the date on which such Note otherwise begins to
accrue interest (if different from the Issue Date)) up to the first Interest
Reset Date, a fixed rate of interest established by the Company as described in
the applicable Pricing Supplement and (ii) in the case of each period commencing
on an Interest Reset Date, a fixed rate of interest specified in the Pricing
Supplement minus the interest rate determined by reference to the Base Rate as
adjusted by the Spread and/or Spread Multiplier, if any; provided, however, that
(x) the interest rate thereon will not be less than zero and (y) the interest
rate in effect for the ten days immediately prior to the date of Maturity of
such Inverse Floating Rate Note will be that in effect on the tenth day
preceding such date.
Floating Rate/Fixed Rate Notes
The applicable Pricing Supplement may provide that a Registered Note will
be a Floating Rate Note for a specified portion of its term and a Fixed Rate
Note for the remainder of its term, in which event the interest rate on such
Note will be determined as herein provided as if it were a Floating Rate Note
and a Fixed Rate Note hereunder for each such respective period, all as
specified in such applicable Pricing Supplement.
SUBSEQUENT INTEREST PERIODS
The Pricing Supplement relating to each Registered Note will indicate
whether the Company has the option to reset the interest rate (in the case of a
Fixed Rate Note) with respect to such Registered Note or the Spread, Spread
Multiplier, or method of calculation (in the case of a Floating Rate Note) with
respect to such Registered Note and, if so, the date or dates on which such
interest rate or such Spread, Spread Multiplier, or method of calculation, as
the case may be, may be reset (each an "Optional Reset Date").
The Company shall notify the Trustee for a Registered Note whether or not
it intends to exercise such option with respect to such Registered Note at least
45 but not more than 60 days prior to an Optional Reset Date for such Registered
Note. Not later than 40 days prior to such Optional Reset Date, the Trustee for
such Registered Note will mail to the Holder of such Registered Note a notice
(the "Reset Notice"), first class, postage prepaid, indicating whether the
Company has elected to reset the interest rate (in the case of a Fixed Rate
Note) or the Spread, Spread Multiplier or method of calculation (in the case of
a Floating Rate Note) and, if so, (i) such new interest rate or such new Spread,
Spread Multiplier, or method of calculation, as the case may be; and (ii) the
provisions, if any, for redemption during the period from such Optional Reset
Date to the next Optional Reset Date or, if there is no such next Optional Reset
Date, to the Stated Maturity of such Registered Note (each such period a
"Subsequent Interest Period"), including the date or dates on which or the
period or periods during which and the price or prices at which such redemption
may occur during such Subsequent Interest Period. Upon the transmittal by the
Trustee of a Reset Notice to the Holder of a Note, such new interest rate or
such new Spread, Spread Multiplier, and/or method of calculation as the case may
be, shall take effect automatically, and, except as modified by the Reset Notice
and as described below, such Note will have the same terms as prior to the
transmittal of such Reset Notice.
Notwithstanding the foregoing, not later than 20 days prior to an Optional
Reset Date for a Registered Note, the Company may, at its option, revoke the
interest rate (in the case of a Fixed Rate Note) or the
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Spread or Spread Multiplier (in the case of a Floating Rate Note) provided for
in the Reset Notice with respect to such Optional Reset Date and establish a
higher interest rate (in the case of a Fixed Rate Note) or a higher Spread or
Spread Multiplier (in the case of a Floating Rate Note) for the Subsequent
Interest Period commencing on such Optional Reset Date by causing the Trustee
for such Registered Note to mail notice of such higher interest rate or higher
Spread or Spread Multiplier, as the case may be, first class, postage prepaid,
to the Holder of such Registered Note. Such notice shall be irrevocable. All
Registered Notes with respect to which the interest rate or Spread or Spread
Multiplier is reset on an Optional Reset Date will bear such higher interest
rate (in the case of Fixed Rate Notes) or higher Spread or Spread Multiplier (in
the case of Floating Rate Notes), whether or not tendered for repayment.
The Holder of a Registered Note will have the option to elect repayment of
such Note by the Company on each Optional Reset Date at a price equal to the
principal amount thereof, plus interest accrued to such Optional Reset Date. In
order for a Registered Note to be repaid on an Optional Reset Date, the Holder
thereof must follow the procedures set forth below under "Optional Redemption,
Repayment and Repurchase" for optional repayment, except that the period for
delivery of such Registered Note or notification to the Trustee for such
Registered Note shall be at least 25 but not more than 35 days prior to such
Optional Reset Date, and except that a Holder who has tendered a Registered Note
for repayment pursuant to a Reset Notice may, by written notice to the Trustee
for such Registered Note, revoke any such tender for repayment until the close
of business on the tenth day prior to such Optional Reset Date.
AMORTIZING NOTES
The Company may from time to time offer Registered Notes ("Amortizing
Notes") on which a portion or all the principal amount is payable prior to
Stated Maturity in accordance with a schedule, by application of a formula, or
by reference to an Index (as defined below). 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.
INDEXED NOTES
The Company may from time to time offer Indexed Notes on which certain or
all interest payments (in the case of an "Indexed Rate Note"), and/or the
principal amount payable at Stated Maturity or earlier redemption or retirement
(in the case of an "Indexed Principal Note"), is determined by reference to the
principal amount of such Notes (or, in the case of an Indexed Principal Note, to
the amount designated in the applicable Pricing Supplement as the "Face Amount"
of such Indexed Note) and by reference to prices, changes in prices, or
differences between prices, of securities, currencies, intangibles, goods,
articles or commodities or by application of a formula or by such other
objective price, economic or other measures as are described in the applicable
Pricing Supplement (any such measure or measures, an "Index"). A description of
the Index used in any determination of an interest or principal payment, and the
method or formula by which interest or principal payments will be determined by
reference to such Index, will be set forth in the applicable Pricing Supplement.
In the case of a Fixed Rate Note, Floating Rate Note or Indexed Rate Note
that is also an Indexed Principal Note, the amount of any interest payment will
be determined by reference to the Face Amount of such Indexed Note unless
specified otherwise in the applicable Pricing Supplement. In the case of an
Indexed Principal Note, the principal amount payable at Stated Maturity or any
earlier redemption or repayment of the Indexed Note may be different from the
Face Amount.
If the determination of the Index on which any interest payment or the
principal amount of an Indexed Note is calculated or announced by a third party,
which may be an Agent or another affiliate of the Company, and such third party
either suspends the calculation or announcement of such Index or changes the
basis upon which such Index is calculated (other than changes consistent with
policies in effect at the time such Indexed Note was issued and permitted
changes described in the applicable Pricing Supplement), then such Index shall
be calculated for purposes of such Indexed Note by another third party selected
by the Company, which may be an Agent or another affiliate of the Company,
subject to the same conditions and controls as applied to the original third
party. If for any reason such Index cannot be calculated on the same basis and
subject to the
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same conditions and controls as applied to the original third party, then the
indexed interest payments, if any, or any indexed principal amount of such
Indexed Note shall be calculated in the manner set forth in the applicable
Pricing Supplement. Any determination of such third party shall, in the absence
of manifest error, be binding on all parties.
Unless otherwise specified in the applicable Pricing Supplement, (i) for
the purpose of determining whether Holders of the requisite principal amount of
Notes outstanding under the applicable Indenture have made a demand or given a
notice or waiver or taken any other action, the outstanding principal amount of
Indexed Notes will be deemed to be the Face Amount thereof, and (ii) in the
event of an acceleration of the Stated Maturity of an Indexed Note, the
principal amount payable to the Holder of such Note upon acceleration will be
the principal amount determined by reference to the formula by which the
principal amount of such Note would be determined on the Stated Maturity
thereof, as if the date of acceleration were the Stated Maturity.
An investment in Indexed Notes entails significant risks, including wide
fluctuations in market value as well as in the amounts of payments due
thereunder, that are not associated with a similar investment in a conventional
debt security. Such risks depend on a number of factors including supply and
demand for the particular security, currency, commodity or other good or article
to which the Note is indexed and economic and political events over which the
Company has no control. Fluctuations in the price of any particular security or
commodity, in the rates of exchange between particular currencies or in
particular indices that have occurred in the past are not necessarily
indicative, however, of fluctuations in the price or rates of exchange that may
occur during the term of any Indexed Notes. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks entailed
by investment in Indexed Notes.
DUAL CURRENCY NOTES
The Company may from time to time offer Registered Notes (the "Dual
Currency Notes") as to which the Company has a one time option, exercisable on
any one of the dates specified in the applicable Pricing Supplement (each an
"Option Election Date") in whole, but not in part, with respect to all Dual
Currency Notes issued on the same day and having the same terms (a "Tranche"),
of thereafter making all payments of principal, premium, if any, and interest
(which payments would otherwise be made in the Specified Currency of such Notes)
in the optional currency specified in the applicable Pricing Supplement (the
"Optional Payment Currency"). Information as to the relative value of the
Specified Currency compared to the Optional Payment Currency will be set forth
in the applicable Pricing Supplement.
The Pricing Supplement for each issuance of Dual Currency Notes will
specify, among other things, the Specified Currency and Optional Payment
Currency of such issuance and the Designated Exchange Rate for such issuance,
which will be a fixed exchange rate used for converting amounts denominated in
the Specified Currency into amounts denominated in the Optional Payment Currency
(the "Designated Exchange Rate"). The Pricing Supplement will also specify the
Option Election Dates and Interest Payment Dates for the related issuance of
Dual Currency Notes. Each Option Election Date will be a certain number of days
before an Interest Payment Date or Stated Maturity, as set forth in the
applicable Pricing Supplement, and will be the date on which the Company may
select whether to make all scheduled payments due thereafter in the Optional
Payment Currency rather than in the Specified Currency.
If the Company makes such an election, the amount payable in the Optional
Payment Currency shall be determined using the Designated Exchange Rate
specified in the applicable Pricing Supplement. If such election is made, notice
of such election shall be mailed in accordance with the terms of the applicable
Tranche of Dual Currency Notes within two Business Days of the Option Election
Date and shall state (i) the first date, whether an Interest Payment Date and/or
Stated Maturity, in which scheduled payments in the Optional Payment Currency
will be made and (ii) the Designated Exchange Rate. Any such notice by the
Company, once given, may not be withdrawn. The equivalent value in the Specified
Currency of payments made after such an election may be less, at the then
current exchange rate, than if the Company had made such payment in the
Specified Currency.
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For United States federal income tax purposes, holders of Dual Currency
Notes may be subject to rules which differ from the general rules applicable to
holders of other types of Notes offered hereby. The United States federal income
tax consequences of the purchase, ownership and disposition of Dual Currency
Notes will be set forth in the applicable Pricing Supplement.
RENEWABLE NOTES
The Company may from time to time offer Registered Notes which will mature
on an Interest Payment Date specified in the applicable Pricing Supplement
occurring in or prior to the twelfth month following the Original Issue Date of
such Notes (the "Initial Maturity Date") unless the term of all or any portion
of any such Note (a "Renewable Note") is renewed in accordance with the
procedures described below.
On the Interest Payment Date occurring in the sixth month (unless a
different interval (the "Special Election Interval") is specified in the
applicable Pricing Supplement) prior to the Initial Maturity Date of a Renewable
Note (the "Initial Renewal Date") and on the Interest Payment Date occurring in
each sixth month (or in the last month of each Special Election Interval) after
such Initial Renewal Date (each, together with the Initial Renewal Date, a
"Renewal Date"), the term of such Renewable Note may be extended to the Interest
Payment Date occurring in the twelfth month (or, if a Special Election Interval
is specified in the applicable Pricing Supplement, the last month in a period
equal to twice the Special Election Interval) after such Renewal Date, if the
holder of such Renewable Note elects to extend the term of such Renewable Note
or any portion thereof as described below. If a Holder does not elect to extend
the term of any portion of the principal amount of a Renewable Note during the
specified period prior to any Renewal Date, such portion will become due and
payable on the Interest Payment Date occurring in the sixth month (or the last
month in the Special Election Interval) after such Renewal Date (the "New
Maturity Date").
A Holder of a Renewable Note may elect to renew the term of such Renewable
Note, or if so specified in the applicable Pricing Supplement, any portion
thereof, by delivering a notice to such effect to the Trustee (or any duly
appointed paying agent) at the corporate trust office of the Trustee or agency
of the Trustee in the City of New York not less than 15 nor more than 30 days
prior to such Renewal Date (unless another period is specified in the applicable
Pricing Supplement as the "Special Election Period"). Such election will be
irrevocable and will be binding upon each subsequent Holder of such Renewable
Note. An election to renew the term of a Renewable Note may be exercised with
respect to less than the entire principal amount of such Renewable Note only if
so specified in the applicable Pricing Supplement and only in such principal
amount, or any integral multiple in excess thereof, as is specified in the
applicable Pricing Supplement. Notwithstanding the foregoing, the term of the
Renewable Notes may not be extended beyond the Stated Maturity specified for
such Renewable Notes in the applicable Pricing Supplement.
If the Holder does not elect to renew the term, such Renewable Note must be
presented to the Trustee (or any duly appointed paying agent) and, with respect
to a Renewable Note that is a certificate issued in definitive form, as soon as
practicable following receipt of such Renewable Note the Trustee (or any duly
appointed paying agent) shall issue in exchange therefore in the name of such
Holder (i) a Note, in a principal amount equal to the principal amount of such
exchanged Renewable Note for which no election to renew the term thereof was
exercised, with terms identical to those specified on such Renewable Note
(except that such Note shall have a fixed, nonrenewable Stated Maturity on the
New Maturity Date) and (ii) if an election to renew is made with respect to less
than the full principal amount of such holder's Renewable Note, a replacement
Renewable Note, in a principal amount equal to the principal amount of such
exchanged Renewable Note for which the election to renew was made, with terms
identical to such exchanged Renewable Notes.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Registered Note will indicate
whether the Company has the option to extend the Stated Maturity of such Note
for one or more periods of whole years from one to five (each an "Extension
Period") up to but not beyond the date (the "Final Maturity") set forth in such
Pricing Supplement.
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The Company may exercise such option with respect to a Registered Note by
notifying the Trustee for such Registered Note at least 45 but not more than 60
days prior to the old Stated Maturity of such Registered Note. Not later than 40
days prior to the old Stated Maturity of such Registered Note, the Trustee for
such Registered Note will mail to the Holder of such Registered Note a notice
(the "Extension Notice"), first class, postage prepaid. The Extension Notice
will set forth (i) the election of the Company to extend the Stated Maturity of
such Registered Note; (ii) the new Stated Maturity; (iii) in the case of a Fixed
Rate Note, the interest rate applicable to the Extension Period or, in the case
of a Floating Rate Note, the Spread, Spread Multiplier or method of calculation
applicable to the Extension Period; and (iv) the provisions, if any, for
redemption during the Extension Period, including the date or dates on which or
the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing by such
Trustee of an Extension Notice to the Holder of a Registered Note, the Stated
Maturity of such Registered Note shall be extended automatically, and, except as
modified by the Extension Notice and as described in the next paragraph, such
Registered Note will have the same terms as prior to the mailing of such
Extension Notice. Notwithstanding the foregoing, not later than 20 days prior to
the old Stated Maturity of such Registered Note, the Company may, at its option,
revoke the interest rate (in the case of a Fixed Rate Note) or the Spread or
Spread Multiplier (in the case of a Floating Rate Note) provided for in the
Extension Notice for such Registered Note and establish a higher interest rate
(in the case of a Fixed Rate Note) or a higher Spread or Spread Multiplier (in
the case of a Floating Rate Note) for the Extension Period, by causing the
Trustee for such Registered Note to mail notice of such higher interest rate or
higher Spread or Spread Multiplier, as the case may be, first class, postage
prepaid, to the Holder of such Registered Note. Such notice shall be
irrevocable. All Registered Notes with respect to which the Stated Maturity is
extended will bear such higher interest rate (in the case of Fixed Rate Notes)
or higher Spread or Spread Multiplier (in the case of Floating Rate Notes) for
the Extension Period, whether or not tendered for repayment.
If the Company extends the Stated Maturity of a Registered Note, the Holder
of such Registered Note will have the option to elect repayment of such
Registered Note by the Company on the old Stated Maturity at a price equal to
the principal amount thereof, plus interest accrued to such date. In order for a
Registered Note to be repaid on the old Stated Maturity once the Company has
extended the Stated Maturity thereof, the Holder thereof must follow the
procedures set forth below under "Optional Redemption, Repayment and Repurchase"
for optional repayment, except that the period for delivery of such Registered
Note or notification to the Trustee for such Registered Note shall be at least
25 but not more than 35 days prior to the old Stated Maturity and except that a
Holder who has tendered a Registered Note for repayment pursuant to an Extension
Notice may, by written notice to the Trustee for such Registered Note, revoke
any such tender for repayment until the close of business on the tenth day
before the old Stated Maturity.
COMBINATION OF PROVISIONS
If so specified in the applicable Pricing Supplement, any Note may be
subject to all of the provisions, or any combination of the provisions,
described above under "Subsequent Interest Periods," "Extension of Maturity" and
"Renewable Notes."
BOOK-ENTRY SYSTEM
Upon issuance, and subject to the rules of the Depositary, all Fixed Rate
Book-Entry Notes having the same Original Issue Date and otherwise identical
terms will be represented by a single Global Security. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of the
Depositary, and registered in the name of a nominee of the Depositary.
Book-Entry Notes will not be exchangeable for Certificated Notes and, except
under the circumstances described in the Prospectus under "Description of Debt
Securities -- Global Securities," will not otherwise be issuable as Certificated
Notes.
The Depositary has advised the Company and each of the Agents 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 Securities Exchange
Act of 1934, as amended. The Depositary was
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created to hold securities of its participants and to facilitate the clearance
and settlement of securities 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. The Depositary's participants include securities brokers and
dealers (including the Agents), 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.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities -- Global Securities." The Depositary has
confirmed to the Company, the Agents and the Trustees that it intends to follow
such procedures.
OPTIONAL REDEMPTION, REPAYMENT AND REPURCHASE
The Pricing Supplement relating to each Registered 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. Unless otherwise specified in the applicable
Pricing Supplement, the Company may exercise such option with respect to a
Registered 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 Registered Note. In the event of
redemption of a Registered 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 Registered Notes (other than Amortizing Notes) will
not be subject to any sinking fund.
The Pricing Supplement relating to each Registered 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 Registered Note to be repaid, the Trustee for such
Registered Note must receive, at least 30 but not more than 45 days prior to an
Optional Repayment Date (i) such Registered 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 Registered Note, the principal amount of such Registered Note to be
repaid, the certificate number or a description of the tenor and terms of such
Registered Note, a statement that the option to elect repayment is being
exercised thereby and a guarantee that the Registered Note to be repaid with the
form entitled "Option to Elect Repayment" on the reverse of the Registered 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 Registered Note and form duly completed must be received by such
Trustee by such fifth Business Day. Any tender of a Registered 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
Registered 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 Registered Note
shall be canceled 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.
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If a Registered 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
Registered 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 Registered 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 Supplement to the contrary, if
a Registered Note is an OID Note (other than an Indexed 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) 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
Amortized Face Amount of a Note on any date shall be the amount equal to (i) the
Issue Price set forth on the face of the applicable Pricing Supplement plus (ii)
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) the Bond Yield to
Maturity set forth on the face of the applicable Pricing Supplement or (y) 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), provided, however, 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 occurring 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 occurring 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.
The Company may at any time purchase Registered Notes at any price in the
open market or otherwise. Registered Notes so purchased by the Company may, at
the discretion of the Company, be held or resold or surrendered to the Trustee
for such Notes for cancellation.
OTHER PROVISIONS
Any provisions with respect to the determination of an interest rate basis,
the specification of an interest rate basis, calculation of the interest rate
applicable to, or the principal payable at Maturity on, any Registered Note, its
Interest Payment Dates or any other matter relating thereto may be modified by
the terms as specified in the applicable Pricing Supplement.
DEFEASANCE
The defeasance provisions described in the Prospectus will not be
applicable to the Registered Notes.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Registered Notes that are denominated in a Specified
Currency other than U.S. dollars ("Foreign Currency Notes") entails significant
risks that are not associated with a similar investment in a security
denominated in U.S. dollars. Similarly, an investment in an Indexed Note on
which all or a part of any payment due is determined by reference to a currency
other than U.S. dollars entails significant risks that are not associated with a
similar investment in non-Indexed Notes. Such risks include, without limitation,
the possibility of significant market changes in rates of exchange between U.S.
dollars and such Specified Currency, the possibility of significant changes in
rates of exchange between U.S. dollars and such Specified
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Currency resulting from official redenomination with respect to such Specified
Currency and the possibility of the imposition or modification of foreign
exchange controls by either the United States or foreign governments. Such risks
generally depend on factors over which the Company has no control and which
cannot be readily foreseen, such as economic and political events, and on the
supply of and demand for the relevant currencies. In recent years, rates of
exchange between the U.S. dollar and certain foreign currencies, and between
certain foreign currencies and other foreign currencies, have been volatile, and
such volatility may be expected in the future. Fluctuations that have occurred
in any particular exchange rate in the past are not necessarily indicative,
however, of fluctuations that may occur in the rate during the term of any
Foreign Currency Note. Depreciation of the Specified Currency of a Foreign
Currency Note against U.S. dollars would result in a decrease in the effective
yield of such Foreign Currency Note below its coupon rate and, in certain
circumstances, could result in a substantial loss to the investor on a U.S.
dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency (other than U.S. dollars) at the time of payment of
principal of, or premium, if any, or interest on, a Foreign Currency Note. There
can be no assurance that exchange controls will not restrict or prohibit
payments of principal (and premium, if any) or interest in any such Specified
Currency. Even if there are no actual exchange controls, it is possible that
such Specified Currency would not be available to the Company when payments on
such Note are due because of circumstances beyond the control of the Company. In
any such event, the Company will make required payments in U.S. dollars on the
basis described herein. See "-- Payment Currency" and "Description of Registered
Notes -- Payment of Principal and Interest." Prospective purchasers should
consult their own financial and legal advisors as to the risks entailed by an
investment in Registered Notes denominated in a currency other than U.S.
dollars.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers of Registered Notes who are United States residents, and
the Company disclaims any responsibility to advise prospective purchasers who
are residents of countries other than the United States with respect to any
matters that may affect the purchase or holding of, or receipt of payments of
principal, premium or interest in respect of, Registered Notes. Such persons
should consult their advisors with regard to such matters. Any Pricing
Supplement relating to Registered Notes having a Specified Currency other than
U.S. dollars will contain a description of any material exchange controls
affecting such currency and any other required information concerning such
currency.
PAYMENT CURRENCY
Except as set forth below, if payment in respect of a Registered Note is
required to be made in a Specified Currency other than U.S. dollars and such
currency is unavailable due to the imposition of exchange controls or other
circumstances beyond the Company's control or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions of or within the international banking
community, then all payments in respect of such Note shall be made in U.S.
dollars until such currency is again available or so used. The amounts so
payable on any date in such currency shall be converted into U.S. dollars on the
basis of the most recently available Market Exchange Rate for such currency or
as otherwise indicated in the applicable Pricing Supplement. Any payment in
respect of such Note made under such circumstances in U.S. dollars will not
constitute an Event of Default under the Indenture under which such Note shall
have been issued.
In the event of an official redenomination of the Specified Currency of a
Registered Note (other than as a result of European Monetary Union, but
including, without limitation, an official redenomination of any such Specified
Currency that is a composite currency), the obligations of the Company with
respect to payments on Notes denominated in such Specified Currency shall, in
all cases, be deemed immediately following such redenomination to provide for
the payment of that amount of redenominated currency representing the amount of
such obligations immediately before such redenomination. Registered Notes will
not provide for any adjustment to any amount payable under such Notes as a
result of (i) any change in the value of the Specified Currency thereof relative
to any other currency due solely to fluctuations in exchange rates or (ii) any
redenomination of any component currency of any composite currency (unless such
composite
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currency is itself officially redenominated). The procedures described in this
section shall not apply in the event of European Monetary Union. For a
description of the procedure to be followed in connection with European Monetary
Union, see "European Monetary Union" in the Prospectus.
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. In addition, banks do
not generally offer non-U.S. dollar-denominated checking or savings account
facilities in the United States. Accordingly, payments on Notes made in a
currency other than U.S. dollars will be made from an account at a bank located
outside the United States unless otherwise specified in the applicable Pricing
Supplement.
FOREIGN CURRENCY JUDGMENTS
The Registered Notes will be governed by and construed in accordance with
the law of the State of New York. Courts in the United States customarily have
not rendered judgments for money damages denominated in any currency other than
the U.S. dollar. A 1987 amendment to the Judiciary Law of the State of New York
provides, however, that an action based upon an obligation denominated in a
currency other than U.S. dollars will be rendered in the foreign currency of the
underlying obligation and converted into U.S. dollars at the rate of exchange
prevailing on the date of the entry of the judgment or decree.
RISKS OF INDEXED NOTES
An investment in Indexed Notes may entail significant risks that are not
associated with a similar investment in a debt instrument that has a fixed
principal amount, is denominated in U.S. dollars and bears interest at either a
fixed rate or a floating rate determined by reference to nationally published
interest rate references. The risks of a particular Indexed Note will depend on
the terms of such Indexed Note, but may include, without limitation, the
possibility of significant changes in the prices of securities, currencies,
intangibles, goods, articles or commodities or of other objective price,
economic or other measures making up the relevant Index (the "Underlying
Assets"). Such risks generally depend on factors over which the Company has no
control and which cannot readily be foreseen, such as economic and political
events and the supply of and demand for the Underlying Assets. In recent years,
currency exchange rates and prices for various Underlying Assets have been
highly volatile, and such volatility may be expected in the future. Fluctuations
in any such rates or prices that have occurred in the past are not necessarily
indicative, however, of fluctuations that may occur during the term of any
Indexed Note.
In considering whether to purchase Indexed Notes, investors should be aware
that the calculation of amounts payable in respect of Indexed Notes may involve
reference to an Index determined by an affiliate of the Company or to prices
which are published solely by third parties or entities which are not subject to
regulation under the laws of the United States. The risk of loss as a result of
the linkage of principal or interest payments on Indexed Notes to an Index and
to the Underlying Assets can be substantial. Prospective purchasers should
consult their own financial and legal advisors as to the risks entailed by an
investment in Indexed Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations that may be relevant to a holder of a Registered Note. The
summary is based on laws, regulations, rulings and decisions now in effect, all
of which are subject to change, possibly with retroactive effect. This summary
deals only with holders that will hold Registered Notes as capital assets, and
does not address tax considerations applicable to investors that may be subject
to special tax rules, including, without limitation, banks, tax-exempt entities,
insurance companies, regulated investment companies, common trust funds or
dealers in securities or currencies, persons that will hold Registered Notes as
a part of an integrated investment (including a "straddle" or "conversion
transaction") comprised of a Registered Note and one or more other positions or
persons that have a "functional currency" other than the U.S. dollar. Any
special United States federal income tax considerations relevant to a particular
issue of Registered Notes, including any Indexed Notes,
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Dual Currency Notes or Notes providing for contingent payments, will be provided
in the applicable Pricing Supplement. Purchasers of such Notes should carefully
examine the applicable Pricing Supplement and should consult with their tax
advisors with respect to such Notes.
Investors should consult their tax advisors in determining the tax
consequences to them of holding Registered Notes, including the application to
their particular situation of the United States federal income tax
considerations discussed below, as well as the application of state, local,
foreign or other tax laws.
As used herein, the term "United States holder" means a person who is a
citizen or resident of the United States, or that is a corporation, partnership
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, an estate the income of which is subject
to United States federal income taxation regardless of its source or a trust if
(i) a U.S. court is able to exercise primary supervision over the trust's
administration and (ii) one or more United States persons have the authority to
control all of the trust's substantial decisions, and the term "United States"
means the United States of America (including the States and the District of
Columbia).
UNITED STATES HOLDERS
Payments of Interest
Payments of "qualified stated interest" (as defined below under "Original
Issue Discount") on a Registered Note will be taxable to a United States holder
as ordinary interest income at the time that such payments are accrued or are
received (in accordance with the United States holder's method of tax
accounting). If such payments of interest are made with respect to a Registered
Note that is denominated in a Specified Currency other than the U.S. dollar (a
"Foreign Currency Note"), the amount of interest income realized by a United
States holder that uses the cash method of tax accounting will be the U.S.
dollar value of the Specified Currency payment based on the spot rate of
exchange on the date of receipt regardless of whether the payment in fact is
converted into U.S. dollars. A United States holder that uses the accrual method
of tax accounting will accrue interest income on the Foreign Currency Note in
the relevant foreign currency and translate the amount accrued into U.S. dollars
based on the average exchange rate in effect during the interest accrual period
(or portion thereof within such holder's taxable year), or, at such holder's
election, at the spot rate of exchange on (i) the last day of the accrual period
(or the last day of the taxable year within such accrual period if the accrual
period spans more than one taxable year), or (ii) the date of receipt, if such
date is within five business days of the last day of the accrual period. Such
election must be applied consistently by the United States holder to all debt
instruments from year to year and can be changed only with the consent of the
Internal Revenue Service (the "IRS"). A United States holder that uses the
accrual method of tax accounting will recognize foreign currency gain or loss,
which will be treated as ordinary income or loss, on the receipt of an interest
payment made with respect to a Foreign Currency Note if the spot rate of
exchange on the date the payment is received differs from the rate applicable to
a previous accrual of that interest income.
Purchase, Sale and Retirement of Registered Notes
A United States holder's tax basis in a Registered Note generally will
equal the cost of such Registered Note to such holder, increased by any amounts
includible in income by the holder as original issue discount ("OID") and market
discount and reduced by any amortized premium (each as described below) and any
payments other than payments of qualified stated interest (as described below)
made on such Registered Note. In the case of a Foreign Currency Note, the cost
of such Note to a United States holder will be the U.S. dollar value of the
foreign currency purchase price on the date of purchase. In the case of a
Foreign Currency Note that is traded on an established securities market, a
United States holder that uses the cash method of tax accounting (and, if it so
elects, a United States holder that uses the accrual method of tax accounting)
will determine the U.S. dollar value of the cost of such Note by translating the
amount paid at the spot rate of exchange on the settlement date of the purchase.
The amount of any subsequent adjustments to a United States holder's tax basis
in a Foreign Currency Note in respect of OID, market discount and premium
denominated in a Specified Currency other than the U.S. dollar will be
determined in the manner described
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under "Original Issue Discount," "Market Discount" and "Notes Purchased at a
Premium" below. The conversion of U.S. dollars to another Specified Currency and
the immediate use of such Specified Currency to purchase a Foreign Currency Note
generally will not result in taxable gain or loss for a United States holder.
Upon the sale, exchange or retirement (collectively, a "disposition") of a
Registered Note, a United States holder generally will recognize gain or loss
equal to the difference between the amount realized on the disposition (less any
accrued qualified stated interest, which will be taxable as ordinary income) and
the United States holder's adjusted tax basis in such Registered Note. If a
United States holder receives a Specified Currency other than the U.S. dollar in
respect of the disposition of a Registered Note, the amount realized will be the
U.S. dollar value of the Specified Currency received calculated at the spot rate
of exchange on the date of disposition. In the case of a Foreign Currency Note
that is traded on an established securities market, a United States holder that
uses the cash method of tax accounting, and if it so elects, a United States
holder that uses the accrual method of tax accounting will determine the U.S.
dollar value of the amount realized by translating such amount at the spot rate
of exchange on the settlement date of the disposition. The election available to
accrual basis United States holders in respect of the purchase and sale of
Foreign Currency Notes traded on an established securities market, discussed
above, must be applied consistently by the United States holder to all debt
instruments from year to year and can be changed only with the consent of the
IRS.
Except as discussed below with respect to market discount, Short-Term Notes
(as defined below) and foreign currency gain or loss, gain or loss recognized by
a United States holder will generally be long term capital gain or loss if the
United States holder's holding period for the Registered Note exceeded one year
at the time of disposition. Recently enacted United States tax legislation
reduced the maximum United States federal income tax rate applicable to long
term capital gains recognized by individuals in respect of capital assets held
for more than 18 months. Prospective investors should consult their tax advisers
regarding the possible effect of such legislation on such investors.
Gain or loss recognized by a United States holder on the disposition of a
Foreign Currency Note generally will be treated as ordinary income or loss to
the extent that the gain or loss is attributable to changes in exchange rates
during the period in which the holder held such Note.
Original Issue Discount
In General. Registered Notes with a term greater than one year may be
issued with OID for United States federal income tax purposes ("OID Notes"). For
United States federal income tax purposes, United States holders generally must
accrue OID in gross income over the term of the OID Notes on a constant yield
basis, regardless of their regular method of tax accounting. As a result, United
States holders generally will recognize taxable income in respect of an OID Note
in advance of the receipt of cash attributable to such income.
OID generally will arise if the "stated redemption price at maturity" of
the Note exceeds its "issue price" by more than a de minimis amount (0.25% of
the Note's stated redemption price at maturity multiplied by the number of
complete years to maturity), or if a Note has certain interest payment
characteristics (e.g., interest holidays, interest payable in additional
securities or stepped interest). For this purpose, the "issue price" of a Note
is the first price at which a substantial amount of Notes is sold for cash
(other than to bond houses, brokers or similar persons or organizations acting
in the capacity of underwriters, placement agents or wholesalers), and the
"stated redemption price at maturity" of a Note is the sum of all payments due
under the Note, other than payments of "qualified stated interest." The term
"qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually during the entire term of the OID Note at a single
fixed rate of interest or, subject to certain conditions, based on one or more
interest indices.
For each taxable year of a United States holder, the amount of OID that
must be included in gross income in respect of an OID Note will be the sum of
the daily portions of OID for each day during such taxable year (or any portion
thereof) in which such a United States holder held the OID Note. Such daily
portions are determined by allocating to each day in an accrual period a pro
rata portion of the OID allocable
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to that accrual period. Accrual periods may be of any length and may vary in
length over the term of an OID Note, provided that such accrual period is no
longer than one year and each scheduled payment of principal or interest occurs
on the first day or the final day of such period. The amount of OID allocable to
any accrual period generally will equal the product of the OID Note's "adjusted
issue price" at the beginning of such accrual period multiplied by its 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) and
subtracting from that product the amount (if any) of qualified stated interest
allocable to that accrual period. The "adjusted issue price" of an OID Note at
the beginning of any accrual period will equal the issue price of the OID Note,
as defined above, increased by previously accrued OID from prior accrual
periods, and reduced by any payment made on such Note (other than payments of
qualified stated interest) on or before the first day of the accrual period.
Foreign Currency Notes. In the case of an OID Note that is also a Foreign
Currency Note, a United States holder should determine the U.S. dollar amount
includible in income as OID for each accrual period by (a) calculating the
amount of OID allocable to each accrual period in the Specified Currency using
the constant-yield method described above, and (b) translating the amount of the
Specified Currency so derived at the average exchange rate in effect during that
accrual period (or portion thereof within a United States holder's taxable year)
or, at the United States holder's election (as described above under "Payments
of Interest"), at the spot rate of exchange on (i) the last day of the accrual
period (or the last day of the taxable year within such accrual period if the
accrual period spans more than one taxable year), or (ii) on the date of
receipt, if such date is within five business days of the last day of the
accrual period. All payments on an OID Note (other than payments of qualified
stated interest) will generally be viewed first as payments of previously
accrued OID (to the extent thereof), with payments attributed first to the
earliest accrued OID, and then as payments of principal. Upon the receipt of an
amount attributable to OID (whether in connection with a payment of an amount
that is not qualified stated interest or the disposition of the OID Note), a
United States holder will recognize ordinary income or loss measured by the
difference between the amount received (translated into U.S. dollars at the spot
rate of exchange on the date of receipt or on the date of disposition of the OID
Note, as the case may be) and the amount accrued (using the spot rate of
exchange applicable to such previous accrual).
Acquisition Premium. A United States holder that purchases an OID Note for
an amount less than or equal to the sum of all amounts payable on the OID Note
after the purchase date other than payments of qualified stated interest (the
"remaining redemption amount") but in excess of the OID Note's adjusted issue
price (any such excess being "acquisition premium") generally is permitted to
reduce the daily portions of OID by a fraction, the numerator of which is the
excess of the United States holder's adjusted tax basis in the OID Note
immediately after its purchase over the OID Note's adjusted issue price, and the
denominator of which is the excess of remaining redemption amount over the OID
Note's adjusted issue price.
Certain of the Registered Notes may be subject to special redemption,
repayment or interest rate reset features, as indicated in the applicable
Pricing Supplement. Registered Notes containing such features, in particular OID
Notes, may be subject to special rules that differ from the general rules
discussed above. Accordingly, purchasers of Registered Notes with such features
should carefully examine the applicable Pricing Supplement and should consult
their tax advisors with respect to such Registered Notes.
Market Discount
If a United States holder purchases a Registered Note, other than a
Short-Term Note (as described below), for an amount that is less than the Note's
stated redemption price at maturity or, in the case of an OID Note, the Note's
"revised issue price" (i.e., the Note's issue price, increased by the amount of
accrued OID), the Note will be considered to have "market discount." The market
discount rules are subject to a de minimis rule similar to the rule relating to
de minimis OID, described above. Any gain recognized by the United States holder
on the disposition of Registered Notes having market discount generally will be
treated as ordinary income to the extent of the market discount that accrued on
the Registered Note while held by such United States holder. Alternatively, the
United States holder may elect to include market discount in income currently
over the life of the Registered Note. Such an election will apply to market
discount Notes acquired by the United States holder on or after the first day of
the first taxable year to which such election
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applies and is revocable only with the consent of the IRS. Market discount will
accrue on a straight-line basis unless the United States holder elects to accrue
the market discount on a constant-yield method. Such an election will apply to
the Registered Note to which it is made and is irrevocable. Unless the United
States holder elects to include market discount in income on a current basis, as
described above, the United States holder could be required to defer the
deduction of a portion of the interest paid on any indebtedness incurred or
maintained to purchase or carry the Note.
Market discount on a Foreign Currency Note will be accrued by a United
States holder in the Specified Currency. The amount includible in income by a
United States holder in respect of such accrued market discount will be the U.S.
dollar value of the amount accrued, generally calculated at the spot rate of
exchange on the date that the Note is disposed of by the United States holder.
Any accrued market discount on a Foreign Currency Note that is currently
includible in income will be translated into U.S. dollars at the average
exchange rate for the accrual period (or portion thereof within the United
States holder's taxable year).
Short-Term Notes
The rules set forth above also will generally apply to Registered Notes
having maturities of not more than one year from the date of issuance
("Short-Term Notes"), but with certain modifications.
First, none of the interest on a Short-Term Note is treated as qualified
stated interest but instead is treated as part of the Short-Term Note's stated
redemption price at maturity, thereby giving rise to OID. Thus, all Short-Term
Notes will be OID Notes. OID will be treated as accruing on a Short-Term Note
ratably, or at the election of a United States holder, under a constant yield
method.
Second, a United States holder of a Short-Term Note that uses the cash
method of tax accounting will generally not be required to include OID in
respect of the Short-Term Note in income on a current basis. Such a United
States holder may not be allowed to deduct all of the interest paid or accrued
on any indebtedness incurred or maintained to purchase or carry such Note until
the maturity of the Note or its earlier disposition in a taxable transaction. In
addition, such a United States holder will be required to treat any gain
realized on a disposition of the Note as ordinary income to the extent of the
holder's accrued OID with respect to the Note. Notwithstanding the foregoing, a
United States holder of a Short-Term Note using the cash method of tax
accounting may elect to accrue OID into income on a current basis (in which case
the limitation on the deductibility of interest described above will not apply).
A United States holder using the accrual method of tax accounting generally will
be required to include OID on a Short-Term Note in income on a current basis.
Third, any United States holder of a Short-Term Note (whether using the
cash or accrual method of tax accounting) can elect to accrue the "acquisition
discount," if any, with respect to the Note on a current basis. If such an
election is made, the OID rules will not apply to the Note. Acquisition discount
is the excess of the Note's stated redemption price at maturity over the
holder's purchase price for the Note. Acquisition discount will be treated as
accruing ratably or, at the election of the United States holder, under a
constant-yield method based on daily compounding.
As described above, certain of the Registered Notes may be subject to
special redemption features. These features may affect the determination of
whether a Registered Note has a maturity of not more than one year and thus is a
Short-Term Note. Purchasers of Notes with such features should carefully examine
the applicable Pricing Supplement and should consult their tax advisors with
respect to such features.
Notes Purchased at a Premium
A United States holder that purchases a Registered Note for an amount in
excess of the remaining redemption amount will be considered to have purchased
the Registered Note at a premium. Such holder may elect to amortize such premium
(as an offset to interest income), using a constant-yield method, over the
remaining term of the Registered Note. Such election, once made, generally
applies to all debt instruments held or subsequently acquired by the United
States holder on or after the first taxable year to which the election applies
and may be revoked only with the consent of the IRS. A United States holder that
elects to
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amortize such premium must reduce its tax basis in a Registered Note by the
amount of the premium amortized during its holding period. With respect to a
United States holder that does not elect to amortize bond premium, the amount of
such premium will be included in the United States holder's tax basis when the
Registered Note matures or is disposed of by the United States holder.
Amortizable bond premium in respect of a Foreign Currency Note will be computed
in the Specified Currency and will reduce interest income in the Specified
Currency. At the time amortized bond premium offsets interest income, exchange
gain or loss, which will be taxable as ordinary income or loss, will be realized
with respect to amortized bond premium on such Note based on the difference
between the spot rate of exchange on the date or dates such premium is recovered
through interest payments on the Note and the spot rate of exchange on the date
on which the United States holder acquired the Note. See "Original Issue
Discount -- Acquisition Premium," above for a Registered Note purchased for an
amount less than or equal to the remaining redemption amount but in excess of
the Note's adjusted issue price.
Information Reporting and Backup Withholding
The Trustee will be required to file information returns with the IRS with
respect to payments made to certain United States holders of Registered Notes.
In addition, certain United States holders may be subject to a 31 percent backup
withholding tax in respect of such payments if they do not provide their
taxpayer identification numbers to the Trustee.
NON-UNITED STATES HOLDERS
Under current United States federal income tax law: (a) payment on a
Registered Note to a holder who is not a United States holder (a "non-United
States holder") will not be subject to withholding of United States federal
income tax, provided that, with respect to payments of interest on a Registered
Note having a maturity when issued greater than 183 days, (i) the holder does
not actually or constructively own 10 percent or more of the combined voting
power of all classes of stock of the Company and is not a controlled foreign
corporation related to the Company through stock ownership and (ii) the
beneficial owner provides a statement signed under penalties of perjury that
includes its name and address and certifies that it is a non-United States
holder in compliance with applicable requirements (or, with respect to payments
made after December 31, 1998, satisfies certain documentary evidence
requirements for establishing that it is a non-United States holder); (b) a
non-United States holder will not be subject to United States federal income tax
on gain realized on the disposition of the Registered Note. Notwithstanding the
above, a Non-United States holder that is subject to United States federal
income taxation on a net income basis generally will be subject to the same
rules to which a United States holder is subject with respect to interest
payments on a Registered Note and with respect to gain or loss realized or
recognized on the disposition of a Registered Note. Special rules might also
apply to a Non-United States holder that is a qualified resident of a country
with which the United States has an income tax treaty.
United States information reporting requirements and backup withholding tax
will not apply to payments on a Registered Note if the beneficial owner
certifies its non-U.S. status under penalties of perjury (or, with respect to
payments made after December 31, 1998, satisfies certain documentary evidence
requirements for establishing that it is a non-United States holder)or otherwise
establishes an exemption. Information reporting requirements and backup
withholding tax will not apply to any payment of the proceeds of the sale of a
Registered Note effected outside the United States by a foreign office of a
foreign "broker" (as defined in applicable Treasury regulations), provided that
such broker (i) derives less than 50% of its gross income for certain periods
from the conduct of a trade or business in the United States, (ii) is not a
controlled foreign corporation for United States federal income tax purposes and
(iii) with respect to payments made after December 31, 1998, is not a foreign
partnership that, at any time during its taxable year is 50% or more (by income
or capital interest) owned by United States holders or is engaged in the conduct
of a U.S. trade or business. Payment of the proceeds of the sale of a Registered
Note effected outside the United States by a foreign office of any other broker
will not be subject to backup withholding tax, but will be subject to
information reporting requirements unless such broker has documentary evidence
in its records that the beneficial owner is a non-United States person and
certain other conditions are met, or the beneficial owner
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otherwise establishes an exemption. Payment of the proceeds of a sale of a
Registered Note by the U.S. office of a broker will be subject to information
reporting requirements and backup withholding tax unless the beneficial owner
certifies its non-U.S. status under penalties of perjury or otherwise
establishes an exemption.
On October 7, 1997, the U.S. Treasury Department issued final Treasury
regulations governing information reporting and the certification procedures
regarding withholding and backup withholding on certain amounts paid to
non-United States persons after December 31, 1998. Such regulations, among other
things, may change the certification procedures relating to the receipt by
intermediaries of payments on behalf of a beneficial owner of a Registered Note.
Prospective investors should consult their tax advisors regarding the effect, if
any, of such new Treasury regulations on an investment in the Notes.
With respect to payments made after December 31, 1998, for purposes of
applying the rules set forth in the three preceding paragraphs to an entity that
is treated as fiscally transparent (e.g., a partnership or certain trusts) for
United States federal income tax purposes, the beneficial owner means each of
the ultimate beneficial owners of the entity.
PLAN OF DISTRIBUTION
The Registered Notes are being offered on a continuous basis by the Company
through Salomon Brothers and Smith Barney (together with any successor or
successors thereto, the "Agents"), which have agreed to use their respective
reasonable efforts to solicit orders to purchase Registered Notes. The Company
will have the sole right to accept orders to purchase Registered Notes and may
reject proposed purchases in whole or in part. An Agent shall have the right, in
its discretion reasonably exercised and without notice to the Company, to reject
any proposed purchase of Registered Notes in whole or in part. The Company will
pay each Agent a commission of from not more than .125% to not more than .750%
of the principal amount of Registered Notes sold through it, depending upon the
Stated Maturity.
The Company may also sell Registered Notes at a discount to an Agent for
its own account or for resale to one or more purchasers at varying prices
related to prevailing market prices at the time of resale or, if set forth in
the applicable Pricing Supplement, at a fixed public offering price, as
determined by an Agent. After any initial public offering of Registered Notes to
be resold to purchasers at a fixed public offering price, the public offering
price and any concession or discount may be changed. In addition, an Agent may
offer Registered Notes purchased by it as principal to other dealers. Registered
Notes sold by an Agent to a dealer may be sold at a discount and, unless
otherwise specified in the applicable Pricing Supplement, such discount allowed
will not be in excess of the discount received by an Agent from the Company.
Unless otherwise specified in the applicable Pricing Supplement, any Registered
Note purchased by an Agent as principal will be purchased at 100% of the
principal amount or face amount thereof less a percentage equal to the
commission applicable to an agency sale of a Registered Note of identical
maturity.
No Registered Note will have an established trading market when issued.
Unless otherwise specified in the applicable Pricing Supplement, the Registered
Notes will not be listed on any securities exchange. The Agents may make a
market in the Registered Notes, but no Agent is obligated to do so and any Agent
may discontinue any market-making at any time without notice, at its sole
discretion. There can be no assurance of the existence or liquidity of a
secondary market for any Registered Notes, or that the maximum amount of
Registered Notes will be sold.
Each of the Agents, whether acting as agent or principal, may be deemed to
be an "underwriter" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"). The Company has agreed to indemnify each of the Agents
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments that such Agents may be required to make in respect
thereof and will reimburse each of the Agents for certain legal and other
expenses incurred by it in connection with the offer and sale of the Registered
Notes.
The Registered Notes have not been and will not be registered under the
Securities and Exchange Law of Japan (the "Securities and Exchange Law").
Accordingly, each of the Agents will represent and agree that it has not,
directly or indirectly, offered or sold and will not, directly or indirectly,
offer or sell any Registered
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Notes in Japan or to a resident of Japan except pursuant to an exemption from
the registration requirements of, and otherwise in compliance with the
Securities and Exchange Law and other relevant laws and regulations of, Japan.
As used in this paragraph, "resident of Japan" means any person resident in
Japan, including any corporation or other entity organized under the laws of
Japan or located in Japan. In addition to the Registered Notes being offered
through an Agent as described herein, Bearer Notes that may have terms identical
or similar to the terms of the Registered Notes may be concurrently offered by
the Company on a continuous basis outside the United States by affiliates of the
Agents located outside the United States. Such affiliates of the Agents may also
purchase Bearer Notes as principal for their own accounts or for resale. Any
Bearer Notes so offered and sold will reduce correspondingly the maximum
aggregate principal amount of Registered Notes that may be offered by this
Prospectus Supplement and the Prospectus.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Registered Notes will be required to be made in
immediately available funds in New York City on the date of settlement.
Concurrently with the offering of Registered Notes through the Agents as
described herein, the Company may issue other Securities pursuant to the
Indenture referred to in the Prospectus.
Each of the Agents is a wholly owned subsidiary of the Company. The
participation of each Agent in the offering of the Registered Notes will comply
with the requirements of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. regarding the underwriting by an
affiliate of the securities of its parent.
This Prospectus Supplement, the related Pricing Supplement and the
accompanying Prospectus may be used by the Company, the Agents or other
affiliates of the Company in connection with offers and sales of the Registered
Notes offered hereby in market-making transactions at negotiated prices related
to prevailing market prices at the time of sale. Any Agent may act as principal
or agent in such transactions.
S-30
<PAGE> 31
PROSPECTUS
SALOMON SMITH BARNEY HOLDINGS INC.
may offer --
DEBT SECURITIES
INDEX WARRANTS
We will provide the specific terms of these securities in supplements to
this Prospectus. You should read this Prospectus and the supplements carefully
before you invest.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES
COMMISSION, NOR HAS ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS,
OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT OR PRICING SUPPLEMENT, IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
SALOMON SMITH BARNEY
December 1, 1997
<PAGE> 32
PROSPECTUS SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the terms
of our securities, you should carefully read this document and the Prospectus
Supplement that explains the specific terms of the securities we are offering.
You should also read the documents we have referred you to in "Where You Can
Find More Information" on page 4 for information on our Company and our
financial statements. The Prospectus Supplement may also add, update or change
information contained in this Prospectus. It is important for you to consider
the information in the Prospectus and any Prospectus Supplement in making your
investment decision.
OUR COMPANY
Salomon Smith Barney Holdings Inc. is a holding company primarily engaged
in investment banking, proprietary trading, retail brokerage and asset
management activities through its U.S. and foreign broker-dealer subsidiaries.
THE SECURITIES WE MAY OFFER
We may use this Prospectus to offer up to $11,710,346,786 of Debt
Securities and Index Warrants. A Prospectus Supplement will describe the
specific types, amounts, prices, and detailed terms of any securities we offer.
DEBT SECURITIES
These securities are unsecured general obligations of our Company in the
form of senior or subordinated debt. Senior debt includes our notes, debt, and
guarantees, which are for money borrowed and not subordinated. Subordinated
debt, designated at the time it is issued, is not entitled to interest and
principal payments if payments on the senior debt are not made.
The senior and subordinated debt will be issued under separate indentures
between the Company and a trustee. The trustees under the indentures are bank or
trust companies; we have certain banking relationships with these companies. We
have summarized below the general features of the debt securities from these
indentures. We encourage you to read the indentures (which are incorporated by
reference in our registration statement No. 333-38931), our recent annual report
on Form 10-K, our recent quarterly reports on Form 10-Q and our recent Reports
on Form 8-K, including the Report on Form 8-K filed on November 28, 1997.
Directions on how you can receive copies of these documents are provided on page
4.
GENERAL INDENTURE PROVISIONS THAT APPLY TO SENIOR AND SUBORDINATED DEBT
- - None of the indentures limits the amount of debt that we may issue or provides
holders any protection should there be a highly leveraged transaction
involving our Company, although the senior debt indenture does limit our
company's ability to pledge the stock of certain of our important
subsidiaries.
- - Each indenture allows for different types of Debt Securities (including
indexed securities) to be issued in series and provides for the issuance of
securities in book-entry, certificated, and, in limited circumstances, bearer
form.
- - The indentures allow us to merge or to consolidate with another company, or
sell all or substantially all of our assets to another company. If any of
these events occur, the other company will be required to assume our
responsibilities on the debt, and, assuming that the transaction has not
resulted in an event of default, we will be released from all liabilities and
obligations under the Debt Securities.
- - The indentures provide that holders of a majority of the total principal
amount of the Debt Securities outstanding in any series may vote to change
certain of our obligations or your rights concerning those securities.
However, every holder of a particular security must consent to certain
important changes in the
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<PAGE> 33
terms of that security, including changes in the payment of principal or
interest on any security or the currency of payment.
- - We may discharge certain of the Debt Securities issued under the indentures or
be released from our obligation to comply with the limitations discussed above
at any time by depositing sufficient amounts of cash or U.S. government
securities with the trustee to pay our obligations under the particular
securities when due. If we choose to discharge certain securities, all amounts
due to you on those securities will be paid by the trustee from the deposited
funds.
- - The indentures govern the actions of the trustee with regard to the Debt
Securities, including the circumstances under which the trustee is required to
give notices to holders of the securities and the procedures by which lost or
stolen Debt Securities may be replaced.
EVENTS OF DEFAULT
The events of default specified in the indentures include:
- Principal not paid when due.
- Sinking fund payment not made when due.
- Failure to pay interest for 30 days.
- Covenants not performed for 60 days following notice.
- Certain events of insolvency or bankruptcy, whether voluntary or not.
REMEDIES
If there is a default, the trustee or holders of 25% of the principal
amount of Debt Securities outstanding in a series may declare the principal
immediately payable. However, holders of a majority in principal amount of the
securities in that series may rescind this action.
INDEX WARRANTS
We may issue Index Warrants independently or together with Debt Securities.
We will issue each series of Index Warrants under a separate Warrant Agreement
between our Company and a bank or trust company. We encourage you to read the
standard form of the Warrant Agreement, which is incorporated by reference in
our registration statement No. 333-38931. We provide directions on how you can
get copies of these documents on page 4.
Index Warrants are securities that, when exercised by the purchaser at a
time when certain conditions are met, entitle you to receive from our Company an
amount in cash or number of securities that will be indexed to prices, yields,
or other specified measures or changes in an index or differences between two or
more indexes. You may only exercise Index Warrants during a specified period and
the Index Warrants expire on a specified date. Depending on circumstances and
the terms and conditions of the particular Index Warrant, you may not be
entitled to receive any amount for an Index Warrant during any period when you
may exercise it or at its expiration.
The Prospectus Supplement for a series of Index Warrants will set forth the
formula for determining the amount in cash or number of securities, if any, that
we will pay you when you exercise an Index Warrant and certain information about
the relevant underlying assets, as well as other information about the specific
terms of the Index Warrant.
We will generally issue Index Warrants in book-entry form and list Index
Warrants for trading on a national securities exchange, such as the New York
Stock Exchange, American Stock Exchange or Chicago Board Options Exchange.
The Warrant Agreement for any series of Index Warrants will provide that
holders of a majority of the total principal amount of the Index Warrants
outstanding in any series may vote to change certain of our
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<PAGE> 34
obligations or your rights concerning those Index Warrants. However, every
holder of a particular Index Warrant must consent to certain important changes
in the terms of that security, including changes in the amount or manner of
payment on an Index Warrant or further limits on the time during which it may be
exercised.
Index Warrants can involve a high degree of risk, including risks arising
from changes in the values of the underlying assets that are used to determine
the amount to be paid to you when you exercise the Index Warrant. Certain Index
Warrants may also involve risks linked to changes in foreign exchange rates,
securities markets, interest rates and the business of certain companies or
groups of companies. You should recognize that any Index Warrant that does not
have a specified minimum expiration value may be worthless when it expires.
Buyers of Index Warrants should be experienced in options transactions and
understand these types of risks. You should only decide to buy Index Warrants
after careful consideration with your advisers about the suitability of the
Index Warrants in light of your particular financial circumstances and the terms
and conditions of the particular Index Warrant.
Any prospective purchasers of Index Warrants should be aware of special
United States federal income tax considerations applicable to instruments such
as the Index Warrants. The Prospectus Supplement relating to each series of
Index Warrants will describe certain tax considerations.
USE OF PROCEEDS
We will use the net proceeds we receive from any offering of these
securities for general corporate purposes, primarily to fund our operating units
and subsidiaries. We may use some of the proceeds to refinance or extend the
maturity of some of the Company's existing debt obligations. We will use a
portion of the proceeds from the sale of Index Warrants and Indexed Notes to
hedge our exposure to payments that we may have to make on such Index Warrants
and Indexed Notes.
PLAN OF DISTRIBUTION
We may sell the securities in any of the following ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; (iii) through
agents or (iv) through a combination of any of these methods of sale. The
Prospectus Supplement will explain the ways in which we are selling specific
securities, including the names of any underwriters and details of the pricing
of the securities, including the commissions, concessions or discounts we are
granting the underwriters, dealers or agents.
If we use underwriters in any sale, the underwriters will buy the
securities for their own account and may resell the securities from time to time
in one or more transactions, at a fixed public offering price or at varying
prices determined at the time of sale. In connection with an offering,
underwriters and selling group members and their affiliates may engage in
transactions to stabilize, maintain or otherwise affect the market price of the
securities, in accordance with applicable law.
We expect that the underwriters for any offering will include one or more
of our broker-dealer subsidiaries.
These broker-dealer subsidiaries (including their successors) also expect
to offer and sell previously issued Debt Securities and Index Warrants as part
of their business, and may act as a principal or agent in such transactions. We
or any of our subsidiaries may use this Prospectus and the related Prospectus
Supplements and Pricing Supplements in connection with these activities.
4
<PAGE> 35
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. SEC filings are also available to the public from
the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to other documents. The information incorporated by reference is
considered to be part of this Prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June
30, 1997 and September 30, 1997;
(c) Current Reports on Form 8-K filed on January 21, 1997, March 17, 1997, April
15, 1997, July 17, 1997, September 24, 1997, September 29, 1997 (as amended
by the Current Report on Form 8-K/A filed on October 28, 1997 and the
Current Report on Form 8-K/A2 filed on December 1, 1997), October 21, 1997,
October 28, 1997 (as amended by the Current Report on Form 8-K/A filed on
December 1, 1997), November 21, 1997 (as amended by the Current Report on
Form 8-K/A filed on December 1, 1997), and November 28, 1997.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Treasurer
Salomon Smith Barney Holdings Inc.
388 Greenwich Street
New York, NY 10013
212-816-6000
You should rely only on the information incorporated by reference or
provided in this Prospectus or the Prospectus Supplement. We have authorized no
one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this Prospectus or the Prospectus Supplement is
accurate as of any date other than the date on the front of the document.
5
<PAGE> 36
THE COMPANY
Pursuant to an agreement and plan of merger dated as of September 24, 1997,
a newly-formed wholly owned subsidiary of Travelers Group Inc. ("Travelers
Group") merged with and into Salomon Inc ("Salomon") on November 28, 1997;
Salomon then became a wholly owned subsidiary of Travelers Group and was renamed
Salomon Smith Barney Holdings Inc. (the "Company"). Immediately thereafter,
Smith Barney Holdings Inc., another wholly owned subsidiary of Travelers Group,
was merged into the Company. The Company is a holding company primarily engaged
in investment banking, proprietary trading, retail brokerage and asset
management activities through its two broker-dealer subsidiaries, Smith Barney
Inc. ("Smith Barney") and Salomon Brothers Inc ("Salomon Brothers").
The principal offices of the Company are located at 388 Greenwich Street,
New York, New York 10013 (telephone number: (212) 816-6000).
SMITH BARNEY
Smith Barney provides investment banking, asset management, brokerage and
other financial services for United States and foreign corporations, governments
and institutional and individual investors. These activities include securities,
options and commodities brokerage for domestic and international institutional
and individual clients; underwriting and distribution of securities; arranging
for the private placement of securities; assisting in mergers and acquisitions
and providing financial advisory services; market making and trading in
corporate debt and equity, United States government and agency, mortgage-related
and municipal securities and foreign exchange, futures and forward contracts;
consumer financing activities; securities lending activities; investment
management and advisory services; securities research; and other related
activities.
SALOMON
Together with Salomon Brothers Holding Company Inc and its subsidiaries
(which subsidiaries include Salomon Brothers), Salomon Brothers engages in
global investment banking and global securities trading activities; provides
capital raising, advisory, trading and risk management services to its
customers; and executes proprietary trading strategies on its own behalf.
Certain of the Company's commodities trading activities are conducted by the
Company's wholly owned subsidiary, Phibro Inc., and its subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
NINE MONTHS ENDED -----------------------------------------------
SEPTEMBER 30, 1997 1996 1995 1994 1993 1992
------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges.......................... 1.29 1.37 1.20 0.98* 1.32 1.27
</TABLE>
- ---------------
* For the year ended December 31, 1994, earnings as defined were inadequate to
cover fixed charges. The amount by which fixed charges exceeded earnings as
defined for the year was $173 million.
The ratio of earnings to fixed charges has been computed by dividing earnings
before income taxes and fixed charges by the fixed charges. For the purpose of
this ratio, fixed charges consist of interest expense and that portion of
rentals deemed representative of the appropriate interest factor.
THE OFFERED SECURITIES
The Company intends to issue from time to time (i) debt securities ("Debt
Securities"), which may be subordinated to other indebtedness of the Company; or
(ii) warrants ("Index Warrants") representing the right to receive, upon
exercise, an amount in cash or number of securities that will be determined by
reference to prices, yields, levels or other specified objective measures, or
changes in an Index or differences between two or more Indexes all having an
aggregate initial public offering price or purchase price of up to
$11,710,346,786, or the equivalent thereof in one or more foreign or composite
currencies. The Debt Securities and Index Warrants are referred to herein
collectively as the "Offered Securities." The Offered Securities may
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<PAGE> 37
be offered separately or as units with other Offered Securities, in separate
series in amounts, at prices and on terms to be determined at or prior to the
time of sale. 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 will reduce the amount of Offered Securities which may
be sold hereunder.
The specific terms of the Offered Securities with respect to which this
Prospectus is being delivered will be set forth in an accompanying supplement to
this Prospectus (a "Prospectus Supplement"), together with the terms of the
offering of the Offered Securities and the initial price and the net proceeds to
the Company from the sale thereof. The Prospectus Supplement will also contain
information, where applicable, about material United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Offered Securities covered by such Prospectus Supplement. This Prospectus may
not be used to consummate sales of Offered Securities unless accompanied by a
Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be unsecured general obligations of the Company.
As a holding company, the Company's sources of funds are derived principally
from advances and dividends from subsidiaries, certain of which are subject to
regulatory considerations, and from sales of assets and investments. The Debt
Securities will constitute either senior or subordinated debt of the Company and
will be issued, in the case of Debt Securities that will be senior debt, under a
senior debt indenture (as amended or supplemented from time to time, the "Senior
Debt Indenture") and, in the case of Debt Securities that will be subordinated
debt, under a subordinated debt indenture (as amended or supplemented from time
to time, the "Subordinated Debt Indenture"). The Senior Debt Indenture and the
Subordinated Debt Indenture are sometimes hereinafter referred to individually
as an "Indenture" and collectively as the "Indentures." The institutions named
as trustees under the Indentures are hereinafter referred to individually as a
"Trustee" and collectively as the "Trustees." Forms of the Indentures have been
filed with the Securities and Exchange Commission (the "Commission") and are
incorporated by reference as part of the registration statement on Form S-3
under the Securities Act of 1933, as amended (the "Securities Act") that the
Company has filed with the Commission relating to the Offered Securities (such
registration statement, together with all exhibits and amendments, the
"Registration Statement"). The following summaries of certain provisions of the
Indentures and the Debt Securities do not purport to be complete and such
summaries are subject to the detailed provisions of the applicable Indenture to
which reference is hereby made for a full description of such provisions,
including the definition of certain terms used, and for other information
regarding the Debt Securities. Numerical references in parentheses below are to
sections in the applicable Indenture or, if no Indenture is specified, to
sections in each of the Indentures. Wherever particular sections or defined
terms of the applicable 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.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trustee under the Senior Debt Indenture will be Citibank, N.A., a national
banking association, under an Indenture dated as of December 1, 1988, as amended
or supplemented from time to time, and the Trustee under the Subordinated Debt
Indenture will be Bankers Trust Company, a New York banking corporation, under
an Indenture dated as of December 1, 1988, as amended or supplemented from time
to time.
GENERAL
Neither of the Indentures limits the amount of Debt Securities that may be
issued thereunder, and each Indenture provides that Debt Securities may be
issued from time to time in series (Section 301). The Debt Securities to be
issued under either of the Indentures will be unsecured senior or subordinated
obligations of the Company as set forth below. Debt Securities of a series may
be issuable as individual securities in registered form without coupons
("Registered Securities") or in bearer form ("Bearer Securities") with or
without coupons ("Coupons") attached or as one or more global securities in
registered or bearer form (each a "Global Security").
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<PAGE> 38
Reference is made to the Prospectus Supplement for a description of the
following terms of the Debt Securities in respect of which this Prospectus is
being delivered: (i) the title and series of such Debt Securities, whether such
Debt Securities will be senior or subordinated debt of the Company and under
which indenture such Debt Securities are being issued; (ii) the limit, if any,
upon the aggregate principal amount of such Debt Securities and the method by
which such principal amount (and premium, if any) will be determined; (iii) the
dates on which or periods during which such Debt Securities may be issued and
the dates on which, or the range of dates within which, the principal of (and
premium, if any, on) such Debt Securities will be payable or the method by which
such date or dates shall be determined; (iv) the rate or rates (which may be
fixed or variable) or the method of determination thereof, at which such Debt
Securities will bear interest, if any; the date or dates from which such
interest will accrue; the dates on which such interest will be payable (each, an
"Interest Payment Date"); in the case of Registered Securities, the regular
record dates for the interest payable on such Interest Payment Dates (each, a
"Regular Record Date"); and the place or places where the principal of, premium,
if any, and interest on the Debt Securities shall be payable; (v) the
obligation, if any, of the Company to redeem or purchase such Debt Securities
pursuant to any sinking fund or analogous provisions, or at the option of the
Company or a Holder, and the periods within which or the dates on which, the
prices at which and the terms and conditions upon which such Debt Securities
will be redeemed or repurchased, in whole or in part, pursuant to such
obligation or option; (vi) the periods within which or the dates on which, the
prices at which and the terms and conditions upon which such Debt Securities may
be redeemed, if any, in whole or in part, at the option of the Company; (vii) if
other than denominations of $1,000 and any integral multiple thereof, the
denominations in which such Debt Securities will be issuable; (viii) whether
such Debt Securities are to be issued as Discount Securities (as defined below)
and the amount of discount with which such Debt Securities will be issued; (ix)
provisions, if any, for the defeasance of such Debt Securities; (x) whether such
Debt Securities are to be issued as Registered Securities or Bearer Securities
or both and, if Bearer Securities are to be issued, whether Coupons will be
attached thereto, whether Bearer Securities of the series may be exchanged for
Registered Securities having the same terms and the circumstances under which
and the place or places at which any such exchanges, if permitted, may be made;
(xi) whether such Debt Securities are to be issued in whole or in part in the
form of one or more Global Securities and, if so, the identity of the Depositary
(as defined below) for such Global Security or Securities; (xii) if a temporary
Debt Security is to be issued with respect to such Debt Securities, whether any
interest thereon payable on an Interest Payment Date prior to the issuance of a
definitive Debt Security of the series will be credited to the account of the
persons entitled thereto on such Interest Payment Date; (xiii) if a temporary
Global Security is to be issued with respect to such Debt Securities, the terms
upon which beneficial interests in such temporary Global Security may be
exchanged in whole or in part for beneficial interests in a definitive Global
Security or for individual Debt Securities of the series and the terms upon
which beneficial interests in a definitive Global Security, if any, may be
exchanged for individual Debt Securities having the same terms; (xiv) if other
than United States dollars, the foreign or composite currency in which such Debt
Securities are to be denominated, or in which payment of the principal of (and
premium, if any) and any interest on such Debt Securities will be made and the
circumstances, if any, under which such currency of payment may be changed; (xv)
if the principal of (and premium, if any) or any interest on such Debt
Securities are to be payable, at the election of the Company or a Holder, in a
currency other than that in which such Debt Securities are denominated or stated
to be payable, the periods within which, and the terms and conditions upon
which, such election may be made and the time and the manner of determining the
exchange rate between the currency in which such Debt Securities are denominated
or stated to be payable and the currency in which such Debt Securities are to be
paid pursuant to such election; (xvi) if the amount of payments of principal of
(and premium, if any) or any interest on such Debt Securities may be determined
with reference to an index based on a currency or currencies other than that in
which such Debt Securities are stated to be payable, the manner in which such
amounts shall be determined; (xvii) if the amount of payments of principal of
(and premium, if any) or any interest on such Debt Securities may be determined
with reference to an index based on the prices, changes in prices, or
differences between prices, of one or more securities, currencies, intangibles,
goods, articles or commodities or by application of a formula (any such index,
or index referred to in clause (xvi) being referred to herein as an "Index"),
the manner in which such amounts shall be determined; (xviii) any additional
Events of Default (as defined below) or restrictive covenants provided for with
respect to such Debt Securities; (xix) whether and under what circumstances the
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<PAGE> 39
Company will pay additional interest on such Debt Securities held by a Person
who is not a U.S. Person (as defined herein) in respect of any tax, assessment
or governmental charge withheld or deducted and, if so, whether the Company will
have the option to redeem such Debt Securities under such circumstances; (xx)
whether and under what circumstances the Company will be obligated to redeem
such Debt Securities if certain events occur involving United States information
reporting requirements; (xxi) the terms, if any, upon which such Debt Securities
may or shall be exchangeable or exercisable for or payable in, among other
things, securities of any kind, instruments, contracts, currencies, commodities,
or other forms of property, rights or interests, or any combination of the
foregoing, and the terms and conditions upon which such exchange, exercise or
payment shall be effected, including, but not limited to, the initial, exchange
or exercise price, rate or ratio, and the relevant exchange or exercise period;
and (xxii) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture under which they are issued (Section 301).
Under the Indentures, the Company may authorize the issuance and provide
the terms of a series of Debt Securities pursuant to a supplemental indenture or
pursuant to a resolution of its Board of Directors, any duly authorized
committee of the Board or any committee of officers or other representatives of
the Company duly authorized by the Board of Directors for such purpose. The
provisions of the Indentures provide the Company with the ability, in addition
to the ability to issue Securities with terms different from those of Debt
Securities previously issued, to "reopen" a previous issue of a series of
Securities and to issue additional Securities of such series.
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities will be issued only as Registered Securities in denominations of
$1,000 and any integral multiple thereof and will be payable only in United
States dollars (Section 302).
If Bearer Securities are issued, the United States federal income tax
consequences and other special considerations applicable to such Bearer
Securities will be described in the Prospectus Supplement relating thereto.
If the amount of payments of principal of (and premium, if any) or any
interest on Debt Securities is determined with reference to any type of Index,
the United States federal income tax consequences, specific terms and other
information with respect to such Debt Securities and such index or formula,
securities, currencies, intangibles, goods, articles or commodities will be
described in the Prospectus Supplement relating thereto.
If the principal of (and premium, if any) or any interest on Debt
Securities are payable in a foreign or composite currency, the restrictions,
elections, United States federal income tax consequences, specific terms and
other information with respect to such Debt Securities and such currency will be
described in the Prospectus Supplement relating thereto.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate that at the time of
issuance is below market rates ("Discount Securities"). Debt Securities may be
variable rate debt securities that may be exchangeable for fixed rate debt
securities. United States federal income tax consequences and other special
considerations applicable to any such Debt Securities will be described in the
Prospectus Supplement relating thereto.
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on Debt Securities will be
payable (in the case of Registered Securities) at the corporate trust office or
agency of the applicable Trustee in the City and State of New York or (in the
case of Bearer Securities) at the principal London office of the applicable
Trustee; provided, however, that payment of interest on Registered Securities
may be made at the option of the Company by check mailed to the Registered
Holders thereof or, if so provided in the applicable Prospectus Supplement, at
the option of a Holder by wire transfer to an account designated by such Holder
(Section 307). Except as otherwise provided in the applicable Prospectus
Supplement, no payment on a Bearer Security will be made by mail to an address
in the United States or by wire transfer to an account maintained by the Holder
thereof in the United States.
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged at the corporate trust
office or agency of the applicable Trustee in the City and State
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<PAGE> 40
of New York, subject to the limitations provided in the applicable Indenture,
without the payment of any service charge, other than any tax or governmental
charge payable in connection therewith (Section 305). Bearer Securities will be
transferable by delivery. Provisions with respect to the exchange of Bearer
Securities will be described in the applicable Prospectus Supplement.
All moneys paid by the Company to a paying agent for the payment of
principal of (and premium, if any) or any interest on any Debt Security that
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company, and
the Holder of such Debt Security or any Coupon appertaining thereto will
thereafter look only to the Company for payment thereof (Section 1204).
Unless otherwise indicated in the applicable Prospectus Supplement, the
covenants contained in the Indenture and the Debt Securities would not afford
Holders protection in the event of a highly leveraged or other similar
transaction that may adversely affect Holders.
GLOBAL SECURITIES
Debt Securities having the same issue date and the same terms may be issued
in whole or in part in the form of one or more Global Securities that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such Debt Securities. Global Securities
may be issued in either registered or bearer form and in either temporary or
definitive form. Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a Global Security may not be
transferred except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor of such Depositary or a nominee of such successor (Sections 303
and 305).
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depositary arrangements for Debt Securities.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Debt Securities represented by
such Global Security to the accounts of institutions that have accounts with
such Depositary ("participants"). The accounts to be credited shall be
designated by the underwriters of such Debt Securities or, if such Debt
Securities are offered and sold directly by the Company or through one or more
agents, by the Company or such agent or agents. Ownership of beneficial
interests in a Global Security will be limited to participants or Persons that
may hold beneficial interests through participants. Ownership of beneficial
interests in a Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depositary
for such Global Security or by participants or Persons that hold through
participants. The laws of some states require that certain purchasers of
securities take physical delivery of such securities. Such limits and such laws
may limit the market for beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole Holder of the individual Debt Securities
represented by such Global Security for all purposes under the Indenture
governing such Debt Securities. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have any of the
individual Debt Securities represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of any
such Debt Securities and will not be considered the Holders thereof under the
Indenture governing such Debt Securities.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, payments of principal of (and
premium, if any) and any interest on individual Debt Securities represented by a
Global Security will be made to the Depositary or its nominee, as the case may
be, as the Holder of such Global Security. None of the Company, the Trustee for
such Debt Securities, any
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paying agent or the security registrar for such Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Company expects that the Depositary for any Debt Securities, upon
receipt of any payment of principal, premium or interest in respect of a
definitive Global Security representing any of such Debt Securities, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Security as shown on the records of such Depositary. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed under
"Limitations on Issuance of Bearer Securities and Bearer Warrants" below.
If the Depositary for any Debt Securities is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within ninety days, the Company will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. In addition, the Company may at any time and in its sole
discretion determine not to have certain Debt Securities represented by one or
more Global Securities and, in such event, will issue individual Debt Securities
in exchange for the Global Security or Securities representing such Debt
Securities. Further, if the Company so specifies with respect to any Debt
Securities, an owner of a beneficial interest in a Global Security representing
such Debt Securities may, on terms acceptable to the Company and the Depositary
for such Global Security, receive individual Debt Securities in exchange for
such beneficial interest. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery of
individual Debt Securities represented by such Global Security equal in
principal amount to such beneficial interest and to have such Debt Securities
registered in its name (if the Debt Securities are issuable as Registered
Securities). Individual Debt Securities so issued will be issued (i) as
Registered Securities in denominations, unless otherwise specified by the
Company, of $1,000 and integral multiples thereof if the Debt Securities are
issuable as Registered Securities, (ii) as Bearer Securities in the denomination
or denominations specified by the Company if the Debt Securities are issuable as
Bearer Securities or (iii) as either Registered or Bearer Securities, if the
Debt Securities are issuable in either form (Section 305). See, however,
"Limitations on Issuance of Bearer Securities and Bearer Warrants," below, for a
description of certain restrictions on the issuance of individual Bearer
Securities in exchange for beneficial interests in a Global Security.
SENIOR DEBT
The Debt Securities and Coupons that will constitute part of the senior
debt of the Company will be issued under the Senior Debt Indenture and will rank
pari passu with all other unsecured debt of the Company except subordinated
debt.
SUBORDINATED DEBT
The Debt Securities and Coupons that will constitute part of the
subordinated debt of the Company will be issued under the Subordinated Debt
Indenture and will be subordinate and junior in the right of payment, to the
extent and in the manner set forth in the Subordinated Debt Indenture, to all
"Senior Indebtedness" of the Company. The Subordinated Debt Indenture defines
"Senior Indebtedness" as the following indebtedness or obligations, whether
outstanding at the date of such Indenture or thereafter incurred, assumed,
guaranteed or otherwise created, unless in the instrument creating or evidencing
any such indebtedness or obligation or pursuant to which the same is outstanding
it is provided that such indebtedness or obligation is not superior in right of
payment to the subordinated Debt Securities and any appurtenant Coupons: (a) all
indebtedness of the Company (including indebtedness of others guaranteed by the
Company), other than the subordinated Debt Securities and any appurtenant
Coupons and other than the debt securities issuable under the indenture dated as
of July 1, 1986 between the Company and The Bank of New York, as trustee, that
(i) is for money borrowed, (ii) arises in connection with the acquisition of any
business, properties, securities or assets of any
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kind, other than in the ordinary course of the Company's business as heretofore
conducted or (iii) is secured, in whole or in part, by real or personal
property, (b) obligations of the Company (including obligations of others
guaranteed by the Company) as lessee under leases required to be capitalized on
the balance sheet of the lessee under generally accepted accounting principles
and leases of property or assets made as part of any sale and lease-back
transaction and (c) amendments, renewals, extensions, modifications and
refundings of any such indebtedness or obligation (Subordinated Debt Indenture,
Section 101). The subordinated Debt Securities and any appurtenant Coupons will
not be superior in right of payment to the debt securities issuable under the
indenture dated as of July 1, 1986 between the Company and The Bank of New York,
as trustee (Subordinated Debt Indenture, Section 1601).
In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or a substantial part of its property, or (b) that (i) a
default shall have occurred with respect to the payment of principal of (and
premium, if any) or any interest on or other monetary amounts due and payable on
any Senior Indebtedness, or (ii) there shall have occurred an event of default
(other than a default in the payment of principal, premium, if any, or interest,
or other monetary amounts due and payable) with respect to any Senior
Indebtedness, as defined therein or in the instrument under which the same is
outstanding, permitting the holder or holders thereof to accelerate the maturity
thereof (with notice or lapse of time, or both), and such event of default shall
have continued beyond the period of grace, if any, in respect thereof, and such
default or event of default shall not have been cured or waived or shall not
have ceased to exist, or (c) that the principal of and accrued interest on the
subordinated Debt Securities issued under the Subordinated Debt Indenture shall
have been declared due and payable upon an Event of Default pursuant to Section
502 thereof and such declaration shall not have been rescinded and annulled as
provided therein, then the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount due thereon, or provision shall
be made for such payment in money or money's worth, before the Holders of any of
the subordinated Debt Securities or Coupons issued under the Subordinated Debt
Indenture are entitled to receive a payment on account of the principal of (and
premium, if any) or any interest on the indebtedness evidenced by such Debt
Securities or such Coupons (Subordinated Debt Indenture, Section 1601). If this
Prospectus is being delivered in connection with a series of subordinated Debt
Securities, the related Prospectus Supplement will set forth the amount of
Senior Indebtedness outstanding as of the most recent practicable date.
LIMITATION ON LIENS
The Senior Debt 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 Debt Securities issued thereunder
(Section 1205). The term "Restricted Subsidiary" is defined in the Senior Debt
Indenture to mean each of Salomon Brothers Inc, Smith Barney 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 will constitute Events of Default under each Indenture with
respect to any series of Debt Securities issued thereunder: (i) default in the
payment of the principal of (and premium, if any, on) any Debt Security of such
series when due; (ii) default for 30 days in the payment of any interest on any
Debt Security of such series or of any related Coupon when due; (iii) default in
the deposit of any sinking fund payment, when and as due by the terms of any
Debt Security of such series; (iv) default in the performance of any other
covenant in such Indenture, continued for 60 days after written notice thereof
by the applicable Trustee or the Holders of at least 25% in principal amount of
the Debt Securities then outstanding (the "Outstanding Debt Securities") of such
series; and (v) certain events of bankruptcy, insolvency or reorganization
(Section 501). Any additional Events of Default provided with respect to a
series of Debt Securities will be set forth in the applicable Prospectus
Supplement. No Event of Default with respect to a particular series of Debt
Securities issued under either Indenture necessarily constitutes an Event of
Default with respect to any other series of Debt Securities.
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Each Indenture provides that if an Event of Default specified therein shall
occur and be continuing with respect to a series of Debt Securities issued
thereunder, either the Trustee thereunder or the Holders of at least 25% in
principal amount of the Outstanding Debt Securities of such series may declare
the principal of and all accrued interest on all Debt Securities of such series
(or, in the case of Discount Securities or Indexed Notes (as defined herein), an
amount equal to such portion of the principal amount thereof as will be
specified in the related Prospectus Supplement or Pricing Supplement) to be due
and payable. In certain cases, the Holders of a majority in principal amount of
the Outstanding Debt Securities of a series may, on behalf of the Holders of all
such Debt Securities, rescind and annul such declaration and its consequences
(Section 502).
Each Indenture contains a provision entitling the Trustee thereunder,
subject to the duty of such Trustee during the continuance of a default to act
with the required standard of care, to be indemnified by the Holders of the Debt
Securities or any Coupons of any series thereunder before proceeding to exercise
any right or power under such Indenture with respect to such series at the
request of such Holders (Section 603). Each Indenture provides that no Holder of
a Debt Security or any Coupon of any series thereunder may institute any
proceeding, judicial or otherwise, to enforce such Indenture except in the case
of failure of the Trustee thereunder, for 60 days, to act after it receives (i)
written notice of such default, (ii) a written request to enforce such Indenture
by the Holders of at least 25% in aggregate principal amount of the Outstanding
Debt Securities of such series (and the Trustee receives no direction
inconsistent with such written request from the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of such series)
and (iii) an offer of reasonable indemnity (Section 507). This provision will
not prevent any Holder of any such Debt Security from enforcing payment of the
principal thereof (and premium, if any, thereon) and any interest thereon or of
any such Coupon from enforcing payment thereof at the respective due dates
thereof (Section 508). The Holders of a majority in aggregate principal amount
of the Outstanding Debt Securities of any series may direct the time, method and
place of conducting any proceedings for any remedy available to the applicable
Trustee or of exercising any trust or power conferred on it with respect to the
Debt Securities of such series. However, such Trustee may refuse to follow any
direction that conflicts with law or the applicable Indenture or that would be
unjustly prejudicial to Holders not joining therein (Section 512).
Each Indenture provides that the Trustee thereunder will, within 90 days
after the occurrence of a default with respect to any series of Debt Securities
thereunder known to it, give to the Holders of Debt Securities and Coupons of
such series notice of such default, 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 any interest on any Debt Security or of any Coupon of
such series or in the payment of any sinking fund installment with respect to
Debt Securities of such series, 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 such Debt Securities and Coupons (Section
602).
The Company will be required to file annually with each Trustee a
certificate of an appropriate officer of the Company as to the absence of
certain defaults under the terms of the appropriate Indenture (Section 1206;
Subordinated Debt Indenture, Section 1205).
MODIFICATION AND WAIVER
Each Indenture contains provisions for convening meetings of Holders to
consider matters affecting their interests (Article Nine).
Modifications of and amendments to each Indenture may be made by the
Company and the Trustee thereunder with the consent of the Holders of a majority
in principal amount of the Outstanding Debt Securities of each series issued
thereunder that is affected by such modification or amendment, voting
separately; provided, however, that no such modification or amendment may,
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 or additional amounts payable on, any Debt Security or Coupon; (ii)
reduce the principal amount (including the amount payable on a Discount Security
upon the acceleration of the maturity thereof) of, or any interest on or any
premium payable upon redemption of, or additional amounts payable on, any Debt
Security or Coupon; (iii) change the currency or composite currency of
denomination or payment of the principal of (and premium, if any, on) or any
interest or additional amounts payable on any Debt Security or Coupon; (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to any
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Debt Security or Coupon; (v) 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 applicable Indenture with
respect to waiver of compliance with certain provisions of the applicable
Indenture or waiver of certain defaults; (vi) limit the Company's obligation to
maintain a paying agent outside the United States for Bearer Securities; or
(vii) limit the obligation of the Company to redeem certain Bearer Securities if
certain events occur involving United States information reporting requirements
(Section 1102).
The Subordinated Debt Indenture may not be amended to alter or impair the
subordination of the subordinated Debt Securities issued thereunder without the
consent of each holder of Senior Indebtedness then outstanding (Subordinated
Debt Indenture, Section 1107).
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 applicable Indenture before
the time for such compliance (Section 1207; Subordinated Debt Indenture, Section
1206). 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 applicable Indenture with respect
to Debt Securities of that series, except a default in the payment of the
principal of (and premium, if any) or any interest on any such Debt Security or
in the payment of any Coupon of that series and except a default 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
Each 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 applicable Indenture and
on the Debt Securities and any Coupons issued thereunder; (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; (iv) the Successor Corporation waives any right to redeem any
Bearer Security under circumstances in which the Successor Corporation would be
entitled to redeem such Bearer Security but the Company would not have been so
entitled if such consolidation, merger, transfer or lease had not occurred; and
(v) certain other conditions are met (Section 1001).
DEFEASANCE
If so specified in the applicable Prospectus Supplement with respect to
Debt Securities of any series that are Registered Securities payable only in
United States dollars, the Company, at its option, (i) will be discharged from
any and all obligations in respect of the Debt Securities of such series (except
for certain obligations to register the transfer or exchange of Debt Securities
of such series, replace stolen, lost or mutilated Debt Securities of such
series, maintain paying agencies and hold moneys for payment in trust) or (ii)
will not be subject to provisions of the applicable Indenture described above
under "Limitation on Liens" and "Consolidation, Merger and Transfer or Lease of
Assets" with respect to the Debt Securities of such series, in each case if the
Company deposits with the applicable Trustee, in trust, money or U.S. Government
Obligations that through the payment of interest thereon and principal thereof
in accordance with their terms will provide money in an amount sufficient to pay
all the principal of (and premium, if any) and any interest on the Debt
Securities of such series on the dates such payments are due in accordance with
the terms of such Debt Securities. To exercise any such option under either of
the Indentures, the Company is required to deliver to the applicable Trustee an
opinion of counsel to the effect that (1) the deposit and related defeasance
would not cause the Holders of the Debt Securities of such series to recognize
income, gain or loss for Federal income tax purposes and, in the case of a
discharge pursuant to clause (i) above, a ruling to such effect received from or
published by the United States Internal Revenue Service, and (2) if the Debt
Securities of such series are then listed on the New York Stock Exchange, such
Debt Securities would not be delisted from
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the New York Stock Exchange as a result of the exercise of such option (Sections
1501 and 1502). Defeasance provisions, if any, with respect to any other Debt
Securities of any series will be described in the applicable Prospectus
Supplement.
REPLACEMENT DEBT SECURITIES
Unless otherwise provided in the applicable Prospectus Supplement, if a
Debt Security of any series or any related Coupon is mutilated, destroyed, lost
or stolen, it may be replaced at the corporate trust office or agency of the
applicable Trustee in the City and State of New York (in the case of Registered
Securities) or at the principal London office of the applicable Trustee (in the
case of Bearer Securities and Coupons) upon payment by the Holder of such
expenses as may be incurred by the Company and the applicable Trustee in
connection therewith and the furnishing of such evidence and indemnity as the
Company and such Trustee may require. Mutilated Debt Securities and Coupons must
be surrendered before new Debt Securities (with or without Coupons) will be
issued (Section 306).
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, any
notice required to be given to a Holder of a Debt Security of any series that is
a Registered Security will be mailed to the last address of such Holder set
forth in the applicable security register. Any notice required to be given to a
Holder of a Debt Security that is a Bearer Security will be published in a daily
morning newspaper of general circulation in the city or cities specified in the
Prospectus Supplement relating to such Bearer Security (Section 105).
CONCERNING THE TRUSTEES
The Company and certain of its subsidiaries maintain lines of credit and
have other customary banking relationships with Citibank, N.A. and Bankers Trust
Company, and certain of their respective affiliates, and may have such
relationships with other Trustees and their affiliates.
DESCRIPTION OF INDEX WARRANTS
The following description of the terms of the Index Warrants sets forth
certain general terms and provisions of the Index Warrants to which any
Prospectus Supplement may relate. The particular terms of the Index Warrants
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions do not apply to the Index Warrants so offered will be
described in such Prospectus Supplement.
Index Warrants may be issued independently or together with Debt Securities
offered by any Prospectus Supplement and may be attached to or separate from any
such Offered Securities. Each series of Index Warrants will be issued under a
separate index warrant agreement (each, an "Index Warrant Agreement") to be
entered into between the Company and a bank or trust company, as warrant agent
(the "Index Warrant Agent"), all as described in the Prospectus Supplement
relating to such Index Warrants. A single bank or trust company may act as Index
Warrant Agent for more than one series of Index Warrants. The Index Warrant
Agent will act solely as the agent of the Company under the applicable Index
Warrant Agreement and will not assume any obligation or relationship of agency
or trust for or with any owners of such Index Warrants. A copy of the form of
Index Warrant Agreement, including the form of index warrant certificate (the
"Index Warrant Certificate," or, if issued in global form, the "Index Warrant
Global Certificate"), is filed as an exhibit to or incorporated by reference in
the Registration Statement. The following summaries of certain provisions of the
Index Warrants and the form of Index Warrant Agreement do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Index Warrant Agreement and the Index Warrant
Certificate or Index Warrant Global Certificate.
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GENERAL
The Index Warrant Agreement does not limit the number of Index Warrants
that may be issued thereunder. The Company will have the right to "reopen" a
previous series of Index Warrants and to issue additional Index Warrants of such
series.
Each Index Warrant will entitle the holder (each, a "Warrant Holder") to
receive from the Company, upon exercise, including any automatic exercise, an
amount in cash or a number of securities that will be determined by reference to
an Index calculated by reference to prices, yields, levels or other specified
objective measures in respect of specified securities or securities indexes or
specified foreign currencies or currency indexes, or a combination thereof, or
changes in such measure or differences between two or more such measures. The
Prospectus Supplement for a series of Index Warrants will set forth the formula
or methodology pursuant to which the amount payable or distributable on the
Index Warrants will be determined by reference to the relevant Index or Indexes.
Certain Index Warrants will, if specified in the Prospectus Supplement,
entitle the Warrant Holder to receive from the Company, upon automatic exercise
at expiration and under certain other circumstances, a minimum or maximum
amount.
The Prospectus Supplement applicable to any series of Index Warrants will
set forth any circumstances in which the payment or distribution or the
determination of the payment or distribution on the Index Warrants may be
postponed and the period for which such payment or distribution or determination
may be postponed. Conversely, the Index Warrants may be subject to early
exercise or cancellation in certain circumstances described in the applicable
Prospectus Supplement. The amount due, or the means by which the amount due, on
the Index Warrants may be determined after any such delay or postponement, or
early exercise or cancellation will be set forth in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
Company will be under no obligation to, nor will it, purchase or take delivery
of or sell or deliver any securities or currencies (including the Underlying
Assets), other than the payment of any cash or distribution of any securities
due on the Index Warrants, from or to Warrant Holders pursuant to the Index
Warrants.
Unless otherwise specified in the applicable Prospectus Supplement, the
Index Warrants will be deemed to be automatically exercised upon expiration.
Upon such automatic exercise, Warrant Holders will be entitled to receive the
cash amount or number of securities due, if any, on such exercise of the Index
Warrants.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Index Warrants offered thereby for the terms of such Index
Warrants, including, where applicable: (i) the aggregate number of such Index
Warrants; (ii) the offering price of such Index Warrants; (iii) the measure or
measures by reference to which payment or distribution on such Index Warrants
will be determined; (iv) certain information regarding the underlying
securities, foreign currencies or indexes; (v) the amount of cash or number of
securities due, or the means by which the amount of cash or number of securities
due may be calculated, on exercise of the Index Warrants, including automatic
exercise, or upon cancellation; (vi) the date on which the Index Warrants may
first be exercised and the date on which they expire; (vii) any minimum number
of Index Warrants exercisable at any one time; (viii) any maximum number of
Index Warrants that may, subject to the Company's election, be exercised by all
Warrant Holders (or by any person or entity) on any day; (ix) any provisions
permitting a Warrant Holder to condition an exercise of Index Warrants; (x) the
method by which the Index Warrants may be exercised; (xi) the currency in which
the Index Warrants will be denominated and in which payments on the Index
Warrants will be made or the securities that may be distributed in respect of
the Index Warrants; (xii) the method of making any foreign currency translation
applicable to payments or distributions on the Index Warrants; (xiii) the method
of providing for a substitute Index or Indexes or otherwise determining the
amount payable in connection with the exercise of Index Warrants if an Index
changes or is no longer available; (xiv) the time or times at which amounts will
be payable or distributable in respect of such Index Warrants following exercise
or automatic exercise; (xv) any national securities exchange on, or
self-regulatory organization with which, such Index Warrants will be listed;
(xvi) any provisions for issuing such Index Warrants in certificated form;
(xvii) if
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such Index Warrants are not issued in book-entry form, the place or places at
and the procedures by which payments or distributions on the Index Warrants will
be made; and (xviii) any other terms of such Index Warrants.
Prospective purchasers of Index Warrants should be aware of special United
States federal income tax considerations applicable to instruments such as the
Index Warrants. The Prospectus Supplement relating to each series of Index
Warrants will describe such tax considerations. The summary of United States
federal income tax considerations contained in the Prospectus Supplement will be
presented for informational purposes only, however, and will not be intended as
legal or tax advice to prospective purchasers. Prospective purchasers of Index
Warrants are urged to consult their own tax advisors prior to any acquisition of
Index Warrants.
BOOK-ENTRY PROCEDURES AND SETTLEMENT FOR INDEX WARRANTS
Subject to the rules of the Warrant Depositary (as defined below) and
unless otherwise specified in the Prospectus Supplement, the Index Warrants
offered thereby will be issued in the form of a single Index Warrant Global
Certificate that will be deposited with, or on behalf of, a depositary (the
"Warrant Depositary"), which shall be, unless otherwise specified in the
applicable Prospectus Supplement, the Depository Trust Company, New York, New
York ("DTC"). Index Warrants will be registered in the name of the Warrant
Depositary or a nominee of the Warrant Depositary. Unless and until it is
exchanged in whole or in part for the individual Index Warrants represented
thereby, an Index Warrant Global Certificate may not be transferred except as a
whole by the Warrant Depositary to a nominee of the Warrant Depositary or by a
nominee of the Warrant Depositary to the Warrant Depositary or another nominee
of the Warrant Depositary or by the Warrant Depositary or any such nominee to a
successor of the Warrant Depositary or a nominee of such successor.
The Company anticipates that the following provisions will apply to all
depository arrangements.
Upon the issuance of an Index Warrant Global Certificate, the Warrant
Depositary will credit, on its book-entry registration and transfer system, the
respective numbers of the individual Index Warrants represented by such Index
Warrant Global Certificate to the accounts of institutions that have accounts
with the Warrant Depositary ("depositary participants"). The accounts to be
credited shall be designated by the underwriters of such Index Warrants or, if
such Index Warrants are offered and sold directly by the Company or through one
or more agents, by the Company or such agent or agents. Ownership of beneficial
interests in an Index Warrant Global Certificate will be limited to participants
or persons that may hold beneficial interests through participants. Ownership of
beneficial interests in an Index Warrant Global Certificate will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Warrant Depositary for such Index Warrant Global Certificate
or by participants or persons that hold through participants. The laws of some
states require that certain purchasers of securities take physical delivery of
such securities. Such limits and such laws may limit the market for beneficial
interests in an Index Warrant Global Certificate.
The Warrant Depositary's nominee for all purposes will be considered the
sole owner or holder of the Index Warrants under the related Index Warrant
Agreement. Except as set forth below, owners of beneficial interests in the
Index Warrant Global Certificate will not be entitled to have any of the
individual Index Warrants represented by such Index Warrant Global Certificate
registered in their names, will not receive or be entitled to receive physical
delivery of any such Index Warrants, and will not be considered the holders
thereof under the related Index Warrant Agreement.
Neither the Company nor the Index Warrant Agent 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 Index Warrant
Global Certificate or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
If the Warrant 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 individual Index Warrant
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Certificates in exchange for the Index Warrant Global Certificate. In addition,
the Company may at any time and in its sole discretion determine not to have
certain Index Warrants represented by an Index Warrant Global Certificate and,
in such event, will issue individual Index Warrant Certificates in exchange for
such Global Certificate. Further, if the Company so specifies with respect to
any Index Warrants, an owner of a beneficial interest in an Index Warrant Global
Certificate may, on such terms acceptable to the Company and the Warrant
Depositary, receive individual Index Warrants in exchange for such beneficial
interest. In any such instance, an owner of a beneficial interest in the Index
Warrant Global Certificate will be entitled to have Index Warrants equal in
aggregate number to such beneficial interest registered in its name and will be
entitled to physical delivery of such Index Warrants. The registered owner of
such Index Warrants will be entitled to receive any amounts payable in respect
of such Index Warrants, upon surrender of such Index Warrants to the Index
Warrant Agent in accordance with the procedures set forth in the Prospectus
Supplement.
LISTING
Unless otherwise indicated in the Prospectus Supplement, the Index Warrants
will be listed on a national securities exchange or with a self-regulatory
organization, the rules and regulations of which are filed with the Commission
pursuant to Section 19(b) of the Exchange Act (a "Self-Regulatory
Organization"), in each case as specified in the Prospectus Supplement. It is
expected that such Self-Regulatory Organization will cease trading a series of
Index Warrants as of the close of business on the related expiration date of
such Index Warrants.
MODIFICATION
The Index Warrant Agreement and the terms of the related Index Warrants may
be amended by the Company and the Index Warrant Agent, without the consent of
the holders of any Index Warrants, for the purpose of curing any ambiguity or of
curing, correcting or supplementing any defective or inconsistent provision
contained therein, maintaining the listing of such Index Warrants on any
national securities exchange or with any other Self-Regulatory Organization or
registration of such Index Warrants under the Exchange Act, permitting the
issuance of individual Index Warrant certificates to Warrant Holders, reflecting
the issuance by the Company of additional Index Warrants of the same series or
reflecting the appointment of a successor depository, or for any other purpose
which the Company may deem necessary or desirable and which will not materially
and adversely affect the interests of the Warrant Holders.
The Company and the Index Warrant Agent also may modify or amend the Index
Warrant Agreement and the terms of the related Index Warrants, with the consent
of the holders of not less than a majority in number of the then outstanding
Warrants affected by such modification or amendment, for any purposes; provided,
however, that no such modification or amendment that changes the amount to be
paid to the Warrant Holder or the manner in which such amount is to be
determined, shortens the period of time during which the Index Warrants may be
exercised, or otherwise materially and adversely affects the exercise rights of
the holders of the Index Warrants or reduces the percentage of the number of
outstanding Index Warrants the consent of whose holders is required for
modification or amendment of the Index Warrant Agreement or the terms of the
related Index Warrants, may be made without the consent of each Holder affected
thereby.
MERGER, CONSOLIDATION, SALE OR OTHER DISPOSITION
If at any time there is a merger or consolidation involving the Company or
a sale, transfer, conveyance (other than by way of lease) or other disposition
of all or substantially all of the assets of the Company, then the successor or
assuming corporation will succeed to and be substituted for the Company under
the Index Warrant Agreement and the related Index Warrants, with the same effect
as if it had been named in such Index Warrant Agreement and Index Warrants as
the Company. The Company will thereupon be relieved of any further obligation
under such Index Warrant Agreement and Index Warrants and may at any time
thereafter be dissolved, wound up or liquidated.
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ENFORCEABILITY OF RIGHTS BY WARRANT HOLDERS
Any Warrant Holder may, without the consent of the Index Warrant Agent or
any other Warrant Holder, enforce by appropriate legal action on his own behalf
his right to exercise, and to receive payment for, his Index Warrants.
SPECIAL CONSIDERATIONS RELATING TO INDEX WARRANTS
The Index Warrants involve a high degree of risk, including risks arising
from fluctuations in the values of the underlying securities, foreign currencies
or indexes, risks relating to the relevant Index or Indexes by which payments or
distributions on the Index Warrants are calculated, general risks applicable to
the securities or currency markets on which the underlying securities, foreign
currencies or indexes are traded and, in the case of certain Index Warrants,
foreign exchange, interest rate, issuer and other risks. Purchasers should
recognize that their Index Warrants, other than Index Warrants having a minimum
expiration value, may expire worthless. Purchasers should be prepared to sustain
a total loss of the purchase price of their Index Warrants, and are advised to
consider carefully the information set forth herein and under "Risk Factors
Relating to the Index Warrants" in the applicable Prospectus Supplement.
Prospective purchasers of the Index Warrants should be experienced with respect
to options and options transactions and understand the risks of the relevant
Index or Indexes and the underlying securities, foreign currencies or indexes
(and, if applicable, foreign currency transactions), and should reach an
investment decision only after careful consideration, with their advisers, of
the suitability of the Index Warrants in light of their particular financial
circumstances, the information set forth herein under "Description of Index
Warrants," and the information regarding the Index Warrants, the relevant Index
or Indexes and the underlying securities, foreign currencies or indexes set
forth in the Prospectus Supplement.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security and during the period ending 40 days after the issue
date of such Bearer Security, they will not offer, sell or deliver such Bearer
Security, directly or indirectly, to a U.S. Person or to any person within the
United States, except to the extent permitted under United States Treasury
regulations.
Bearer Securities will bear a legend to the following effect: "Any United
States Person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the Internal Revenue Code." The sections referred to in
the legend provide that, with certain exceptions, a U.S. Person who holds Bearer
Securities will not be allowed to deduct any loss with respect to, and will not
be eligible for capital gain treatment with respect to any gain realized on a
sale, exchange, redemption or other disposition of, such Bearer Securities.
As used herein, "U.S. Person" means a person who is a citizen or resident
of the United States, or that is a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, an estate the income of which is subject to United States
federal income taxation regardless of its source or a trust if (i) a United
States court is able to exercise primary supervision over the trust's
administration and (ii) one or more United States persons have the authority to
control all of the trust's substantial decisions, and the term "United States"
means the United States of America (including the States and the District of
Columbia).
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security, without interest coupons, to be deposited with a common depositary in
London for Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System ("Euroclear"), and Cedel Bank, Societe Anonyme
("Cedel") for credit to the accounts designated by or on behalf of the
purchasers thereof. Following the availability of a definitive Global Security
in bearer form, without coupons
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attached, or individual Bearer Securities and subject to any further limitations
described in the applicable Prospectus Supplement, the temporary Global Security
will be exchangeable for interests in such definitive Global Security or for
such individual Bearer Securities, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership". A "Certificate of Non-U.S.
Beneficial Ownership" is a certificate to the effect that a beneficial interest
in a temporary Global Security or Bearer Warrant is owned by a person that is
not a U.S. Person or is owned by or through a financial institution in
compliance with applicable U.S. Treasury regulations. In no event will a
definitive Bearer Security be delivered to a purchaser without the receipt of a
Certificate of Non-U.S. Beneficial Ownership. No Bearer Security will be
delivered in or to the United States. If so specified in the applicable
Prospectus Supplement, interest on a temporary Global Security will be paid to
each of Euroclear and Cedel with respect to that portion of such temporary
Global Security held for its account, but only upon receipt as of the relevant
Interest Payment Date of a Certificate of Non-U.S. Beneficial Ownership.
Limitations on the offer, sale, delivery and exercise of Bearer Warrants
(including a requirement that a Certificate of Non-U.S. Beneficial Ownership be
delivered upon exercise of a Bearer Warrant) will be described in the Prospectus
Supplement relating to such Bearer Warrants.
EUROPEAN MONETARY UNION
Stage III of the European Economic and Monetary Union ("Stage III") is
presently scheduled to commence on January 1, 1999 for those member states of
the European Union that satisfy the economic convergence criteria set forth in
the Treaty on European Union. Certain of the foreign currencies in which Debt
Securities may be denominated or payments in respect of Index Warrants may be
due or by which amounts due on the Offered Securities may be calculated are
issued by countries that are signatories to such Treaty (any such country, a
"Relevant Jurisdiction" with respect to such Offered Securities). Stage III
includes the introduction of a single currency (the "Euro") which will be legal
tender in such member states. It is anticipated that the European Union will
adopt regulations or other legislation providing specific rules for the
introduction of the Euro in substitution for the respective current national
currencies of such member states, which regulations or legislation may be
supplemented by legislation of the individual member states. In the event that
any Relevant Jurisdiction adopts the Euro, the laws and regulations of the
European Union (and, if any, of such Relevant Jurisdiction) relating to the Euro
implemented pursuant to or by virtue of the Treaty on European Union shall apply
to the relevant Offered Securities, Indenture or Indentures and Index Warrant
Agreement or Agreements, and, except as provided in the following paragraph, the
payment of principal of, or interest on, or any other amounts in respect of such
relevant Offered Securities or the calculation of amounts due thereon at any
time after the official date of introduction of the Euro by the Relevant
Jurisdiction shall be effected in Euro in conformity with any such legally
applicable measures.
If, following the introduction of the Euro by a Relevant Jurisdiction, the
Company has the option, pursuant to legally applicable measures, to make
payments of principal of, or interest on or any other amounts in respect of, the
relevant Offered Securities, or to calculate amounts due thereon, in either the
current national currency of such Relevant Jurisdiction or Euro, the Company
will make such payments or calculations in such national currency or Euro at its
sole discretion. To the extent that the terms and conditions of the relevant
Offered Securities require the rounding up or down of certain amounts or
quotations expressed in Euro, such rounding will be made to the smallest
currency unit of the Euro.
The circumstances and consequences described in this section and any
resultant amendment to the terms and conditions of the relevant Offered
Securities will not entitle any Holder of such Offered Securities (i) to any
legal remedy, including, without limitation, redemption, rescission, notice,
repudiation, adjustment or renegotiation of the terms and conditions of the
Offered Securities, Indenture or Indentures and Index Warrant Agreement or
Agreements, or (ii) to raise any defense or make any claim (including, without
limitation, claims of breach, force majeure, frustration of purpose or
impracticability) or any other claim for compensation, damages or any other
relief, nor will any such events affect any of the other obligations of the
Company under the Offered Securities, Indenture or Indentures and Index Warrant
Agreement or Agreements.
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USE OF PROCEEDS AND HEDGING
General. The proceeds to be received by the Company from the sale of the
Offered Securities 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 or capital contributions 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. In order to
fund its business, the Company expects to incur additional indebtedness in the
future. The Company or an affiliate may enter into a swap agreement with one of
the Company's affiliates in connection with the sale of the Offered Securities
and may earn additional income as a result of payments pursuant to such swap or
related hedge transactions.
Use of Proceeds Relating to Index Warrants and Indexed Notes. All or a
portion of the proceeds to be received by the Company from the sale of Index
Warrants or Debt Securities on which certain or all payments of interest,
principal or premium may be linked to an Index ("Indexed Notes") may be used by
the Company or one or more of its subsidiaries to purchase or maintain positions
in all or certain of the assets by reference to which the relevant Index or
Indexes are determined or calculated ("Underlying Assets"), or options, futures
contracts, forward contracts or swaps, or options on the foregoing, or other
derivative or synthetic instruments relating to such Index or Underlying Assets,
as the case may be, and, if applicable, to pay the costs and expenses of hedging
any currency, interest rate or other Index-related risk with respect to such
Index Warrants and Indexed Notes. From time to time after the initial offering
and prior to the maturity of the Index Warrants and Indexed Notes, depending on
market conditions (including the value of the Index and/or the Underlying
Assets), in connection with hedging with respect to such Offered Securities, the
Company expects that it or one or more of its subsidiaries will increase or
decrease their initial hedging positions using dynamic hedging techniques and
may take long or short positions in the Index, the Underlying Assets, options,
futures contracts, forward contracts, swaps, or other derivative or synthetic
instruments related to, the Index and such Assets. In addition, the Company or
one or more of its subsidiaries may purchase or otherwise acquire a long or
short position in Index Warrants and Indexed Notes from time to time and may, in
their sole discretion, hold, resell, exercise, cancel or retire such Offered
Securities. The Company or one or more of its subsidiaries may also take hedging
positions in other types of appropriate financial instruments that may become
available in the future. To the extent that the Company or one or more of its
subsidiaries has a long hedge position in, options contracts in, or other
derivative or synthetic instruments related to, the Underlying Assets or Index,
the Company or one or more of its subsidiaries may liquidate all or a portion of
its holdings at or about the time of the maturity of the Index Warrants and
Indexed Notes. Depending on, among other things, future market conditions, the
aggregate amount and composition of such positions are likely to vary over time.
Profits or losses from any such position cannot be ascertained until such
position is closed out and any offsetting position or positions are taken into
account. Although the Company has no reason to believe that its hedging activity
will have a material impact on the price of such options, swaps, futures
contracts, options on the foregoing, or other derivative or synthetic
instruments, or on the value of the Index or the Underlying Assets, there can be
no assurance that the Company will not affect such prices or value as a result
of its hedging activities. The remainder of the proceeds from the sale of Index
Warrants and Indexed Notes will be used by the Company or its subsidiaries for
general corporate purposes, as described above.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities in any of the following ways: (i)
through underwriters or dealers; (ii) directly to one or more purchasers; (iii)
through agents or (iv) through a combination of any such methods of sale. The
applicable Prospectus Supplement will set forth the terms of the offering of any
Offered Securities, including the names of any underwriter or underwriters, the
purchase price of such Offered Securities and the proceeds to the Company from
such sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price, any discounts or concessions
allowed or reallowed or paid to dealers, any securities exchanges on which such
Offered Securities may be listed and any restrictions on the sale and delivery
of Offered Securities in bearer form. The Company reserves the right to
withdraw, cancel or modify the offer of any Offered Securities at any time
without notice.
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If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
Such Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or by underwriters
without a syndicate. The Company expects that such managing underwriters or
underwriters in the United States will include one or more broker-dealer
subsidiaries of the Company. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to purchase such
Offered Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of such Offered Securities if any
of such Offered Securities are purchased. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
In connection with underwritten offerings of Offered Securities, certain
underwriters and selling group members and their respective affiliates may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the Offered Securities. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to
which such persons may bid for or purchase Offered Securities for the purposes
of stabilizing their market price. The underwriters also may create a short
position for their respective accounts by selling more Offered Securities in
connection with this offering than they are committed to purchase from the
Company, and in such case may purchase Offered Securities in the open market
following completion of this offering to cover all or a portion of such short
position. The underwriters may also cover all or a portion of such short
position, up to a specified aggregate principal amount or number of Offered
Securities, by exercising any underwriters' over-allotment option that may be
applicable with respect to the particular underwritten offering. In addition,
the managing underwriter for the particular offering, on behalf of the
underwriters, may impose "penalty bids" under contractual arrangements between
the underwriters whereby it may reclaim from an underwriter (or dealer
participating in this offering) for the account of the underwriters, the selling
concession with respect to Offered Securities that are distributed in the
relevant offering but subsequently purchased for the account of the underwriters
in the open market. Any of the transactions described in this paragraph may
result in the maintenance of the price of the Offered Securities at a level
above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if any are
undertaken, they may be discontinued at any time.
Offered Securities may also be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, by one or
more firms ("remarketing firms") acting as principals for their own accounts or
as agents for the Company. Any remarketing firm will be identified and the terms
of its agreement, if any, with the Company and its compensation will be
described in the Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Offered Securities remarketed thereby.
Offered Securities may also be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of Offered Securities will be named, and any commissions payable
by the Company to such agent will be set forth, in the applicable Prospectus
Supplement. Unless otherwise indicated in the applicable Prospectus Supplement,
any such agent will act on a best efforts basis for the period of its
appointment.
As one of the means of direct issuance of Offered Securities, the Company
may utilize the services of an entity through which it may conduct an electronic
"dutch auction" or similar offering of the Offered Securities among potential
purchasers who are eligible to participate in the auction or offering of such
Offered Securities, if so described in the applicable Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Securities at the public offering price set
forth in such Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified in such Prospectus
Supplement. Such contracts will be subject only to those conditions set forth in
the applicable Prospectus Supplement, and such Prospectus Supplement will set
forth the commissions payable for solicitation of such contracts.
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The anticipated date of delivery of Offered Securities will be as set forth
in the Prospectus Supplement relating to the offering of such Securities.
Any underwriters, dealers or agents participating in the distribution of
Offered Securities may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Agents, underwriters and dealers may be entitled under agreements entered into
with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments that the agents or underwriters may be required to make
in respect thereof or reimbursement of certain legal and other expenses. Agents,
underwriters and dealers may be customers of, engage in transactions with, or
perform services for, the Company or its affiliates in the ordinary course of
business.
The participation of any affiliate of the Company in the offer and sale of
Offered Securities will comply with the requirements of Rule 2720 of the Conduct
Rules of the National Association of Securities Dealers, Inc. regarding the
underwriting by an affiliate of securities of its parent. Each of the Company's
broker-dealer affiliates may act as an underwriter in an "at the market" equity
offering pursuant to Rule 415(a)(4) under the Securities Act.
Certain of the Company's affiliates expect to offer and sell previously
issued Offered Securities in the course of each of their respective business in
market-making transactions at negotiated prices related to prevailing market
prices at the time of sale, and may act as principal or agent in such
transactions, but no such entity is obligated to do so, and any such entity may
discontinue any market-making at any time without notice, at its sole
discretion. This Prospectus and the related Prospectus Supplements and Pricing
Supplements may be used by the Company or any of its affiliates in connection
with such transactions.
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 any accompanying Prospectus Supplement and Pricing
Supplement) and the accompanying Prospectus 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 an agent. Neither
the delivery of this Prospectus (including any accompanying Prospectus
Supplement and 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 any accompanying Prospectus Supplement and Pricing
Supplement). This Prospectus (including any accompanying Prospectus Supplement
and 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.
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 the Offered
Securities 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 the Offered Securities 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 Offered Securities by a Plan that is subject
to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of
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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
Offered Securities 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
OFFERED SECURITIES SHOULD CONSULT WITH ITS COUNSEL.
EXPERTS
The consolidated financial statements and schedules of Salomon Inc as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, included in Salomon Inc's Annual Report on Form 10-K
for the year ended December 31, 1996 (the "Salomon Financials"), are
incorporated by reference herein, in reliance upon the report (also incorporated
by reference herein) of Arthur Andersen LLP, independent public accountants, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements and schedule of Smith Barney Holdings
Inc. and its subsidiaries for the fiscal years ended December 31, 1996 and 1995,
and for each of the three years in the period ended December 31, 1996, included
in the Company's Current Report on Form 8-K filed on September 29, 1997, have
been audited by Coopers & Lybrand L.L.P., independent certified public
accountants, as set forth in their report therein, included thereon and
incorporated herein by reference. Such financial statements referred to above
are incorporated by reference herein in reliance upon such report given upon the
authority of said firm as experts in accounting and auditing.
The supplemental consolidated financial statements of the Company and its
subsidiaries for the fiscal years ended December 31, 1996 and 1995 and for each
of the three years in the period ended December 31, 1996, included in the
Company's Current Report on Form 8-K filed on November 28, 1997, have been
audited by Coopers & Lybrand L.L.P., independent certified public accountants,
as set forth in their report thereon, included therein and incorporated herein
by reference, which report states that Coopers & Lybrand L.L.P. did not audit
the Salomon Financials and that their opinion with respect to any amounts
contained in the Salomon Financials is based on the report of Arthur Andersen
LLP. Such financial statements referred to above are incorporated by reference
herein in reliance upon such reports given upon the authority of said firm as
experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the Offered Securities will be passed
upon for the Company by Robert H. Mundheim, Esq., General Counsel of the
Company. Mr. Mundheim beneficially owns, or has rights to acquire under
Travelers Group employee benefit plans, an aggregate of less than one percent of
the common stock of Travelers Group.
Certain legal matters relating to the Offered Securities will be passed
upon for any underwriters or agents by Cleary, Gottlieb, Steen & Hamilton, New
York or Skadden, Arps, Slate, Meagher & Flom LLP, New York. Kenneth J. Bialkin,
a partner of Skadden, Arps, Slate, Meagher & Flom LLP, is a director of
Travelers Group, the parent of the Company, and he and other attorneys in such
firm beneficially own an aggregate of less than one percent of the common stock
of Travelers Group. Each of Cleary, Gottlieb, Steen & Hamilton and Skadden,
Arps, Slate, Meagher & Flom LLP has from time to time acted as counsel for
Travelers Group and certain of its subsidiaries and may do so in the future.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with 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. The Commission also maintains a site on the World Wide Web,
the address of which is http://www.sec.gov that contains reports, proxy and
information statements and other information concerning issuers, such as the
Company, that file electronically with the Commission. Such reports and other
information may also 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 the Registration Statement under the Securities Act
relating to the Offered Securities with the Commission. 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 and to the exhibits thereto. Statements contained herein
concerning the provisions of certain documents are not necessarily complete, and
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
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,
1996, (ii) the Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997 and (iii) the Current Reports on Form
8-K filed on January 21, 1997, March 17, 1997, April 15, 1997, July 17, 1997,
September 24, 1997, September 29, 1997 (as amended by the Current Report on Form
8-K/A filed on October 28, 1997 and the Current Report on Form 8-K/A2 filed on
December 1, 1997), October 21, 1997, October 28, 1997 (as amended by the Current
Report on Form 8-K/A filed on December 1, 1997), November 21, 1997 (as amended
by the Current Report on Form 8-K/A filed on December 1, 1997) and November 28,
1997.
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 Offered Securities 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 of Offered Securities, 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
Treasurer, Salomon Smith Barney Holdings Inc., 388 Greenwich Street, New York,
New York 10013. Telephone requests for such copies should be directed to the
Treasurer at (212) 816-6000.
25
<PAGE> 56
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YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND
PRICING SUPPLEMENT. WE HAVE AUTHORIZED NO ONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE
THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND PRICING SUPPLEMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE DOCUMENT.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company........................... S-2
Important Currency Information........ S-2
Description of Registered Notes....... S-2
Currency Risks........................ S-21
Risks of Indexed Notes................ S-23
Certain United States Federal Income
Tax Considerations.................. S-23
Plan of Distribution.................. S-29
PROSPECTUS
Prospectus Summary.................... 2
The Company........................... 6
Ratio of Earnings to Fixed Charges.... 6
The Offered Securities................ 6
Description of Debt Securities........ 7
Description of Index Warrants......... 15
Limitations on Issuance of Bearer
Securities and Bearer Warrants...... 19
European Monetary Union............... 20
Use of Proceeds and Hedging........... 21
Plan of Distribution.................. 21
ERISA Matters......................... 23
Experts............................... 24
Legal Matters......................... 24
Available Information................. 25
Incorporation of Certain Documents by
Reference........................... 25
</TABLE>
======================================================
======================================================
$11,710,346,786
SALOMON SMITH
BARNEY HOLDINGS INC.
MEDIUM-TERM NOTES,
SERIES H AND SERIES I
DUE MORE THAN NINE MONTHS
FROM DATE OF ISSUE
------------
PROSPECTUS SUPPLEMENT
DECEMBER 5, 1997
(INCLUDING PROSPECTUS
DATED DECEMBER 1, 1997)
------------
SALOMON SMITH BARNEY
======================================================
