Filed pursuant to Rule 424(b)(5)
Registration No. 333-00055
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 2, 1996)
$950,000,000
COMMERCIAL CREDIT COMPANY
MEDIUM-TERM NOTES, SEVENTH SERIES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
-------------------
Commercial Credit Company (the "Company") may offer from time to time its
Medium-Term Notes, Seventh Series (the "Notes"), in an aggregate principal face
amount of up to $950,000,000 (or (i) the equivalent thereof in other currencies
or currency units or (ii) such greater amount if Notes are issued at an original
issue discount, as shall result in aggregate proceeds of $950,000,000), subject
to reduction under certain circumstances as a result of the sale of other
Securities (as defined in the accompanying Prospectus). The Notes will be
offered at varying maturities of nine months or more from the date of issue as
selected by the purchaser and agreed to by the Company, and may be subject to
redemption at the option of the Company or repayment at the option of the holder
thereof prior to the Stated Maturity thereof (as defined below). The Notes
offered by this Prospectus Supplement will constitute unsecured unsubordinated
indebtedness of the Company and will rank pari passu with all other unsecured
unsubordinated indebtedness of the Company. Each Note will be denominated in
U.S. dollars or in other currencies or currency units (the "Specified
Currency"), including European Currency Units ("ECU"), as set forth in a pricing
supplement (the "Pricing Supplement") to this Prospectus Supplement. See
"Important Currency Exchange Information" and "Foreign Currency Risks."
(Continued on following page)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT HERETO OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO AGENTS' COMMISSIONS PROCEEDS TO
PUBLIC(1)(2) OR DISCOUNTS(2)(3) COMPANY(1)(4)
<S> <C> <C> <C>
Per Note............. 100% .125%-.750% 99.875%-99.250%
Total................ $950,000,000 $1,187,500-$7,125,000 $948,812,500-$942,875,000
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be issued at 100% of the principal amount thereof.
(2) Or the equivalent thereof in the Specified Currency.
(3) The Company will pay commissions to the Agents in the form of discounts,
ranging from 0.125% to 0.750% (or, with respect to Notes for which the
Stated Maturity is in excess of 30 years, such commission as shall be
agreed upon by the Company and the related Agent at the time of sale). The
Company may also sell Notes to an Agent for resale to investors or other
purchasers at varying prices related to prevailing market prices at the
time of resale to be determined by such Agent or, if so agreed, at a fixed
public offering price. Unless otherwise specified in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be
purchased by such Agent at a price equal to 100% of the principal amount
thereof less a percentage equal to the commission applicable to an agency
sale of a Note of identical maturity, and may be resold by such Agent. The
Company may also sell Notes directly to investors on its own behalf, in
which case no commission will be payable. The Company has agreed to
indemnify the Agents against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended.
(4) Before deducting expenses payable by the Company estimated at $175,000,
including fees and disbursements of counsel for the Agents.
-------------------
SMITH BARNEY INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
The date of this Prospectus Supplement is July 18, 1996.
<PAGE>
Each Note will bear interest (i) at a fixed rate (a "Fixed Rate Note"),
which may be zero in the case of certain Notes issued at a price representing a
substantial discount from the principal amount payable at Stated Maturity, (ii)
at a floating rate (a "Floating Rate Note") or (iii) at a combination of fixed
and floating rates. A Fixed Rate Note may pay both interest and principal
amortized over the life of the Note (an "Amortizing Note"). See "Description of
Notes--Fixed Rate Notes," "Description of Notes--Floating Rate Notes" and
"Description of Notes--Floating Rate/Fixed Rate Notes." The principal amount
payable at Maturity (as defined below) and/or the interest (or premium, if any)
on each Note may be determined by reference to the relationship between two or
more currencies, to the price of one or more specified securities or commodities
or to one or more securities or commodities exchange indices or other indices or
by other similar methods (an "Indexed Note"), as described in the applicable
Pricing Supplement. An Indexed Note whose principal amount payable at Maturity
and/or the interest rate of which is determined by reference to the relationship
between two currencies, two composite currencies or a currency and a composite
currency is referred to herein as a "Currency Indexed Note." See "Description of
Notes--Currency Indexed Notes" and "Description of Notes--Other Indexed Notes
and Certain Terms Applicable to All Indexed Notes."
Unless otherwise specified in the applicable Pricing Supplement, the dates,
if any, on which interest will be payable for each Fixed Rate Note (other than
an Amortizing Note) will be March 15 and September 15 of each year and at
Maturity. The dates on which interest will be payable for each Floating Rate
Note will be established on the date of issue of such Note and will be set forth
in the applicable Pricing Supplement. Amortizing Notes will pay principal and
interest semi-annually each March 15 and September 15, or quarterly each March
15, June 15, September 15 and December 15, and at Maturity, or otherwise, as
specified in the applicable Pricing Supplement. See "Description of
Notes--Payment of Principal and Interest." Interest rates and interest rate
formulae are subject to change by the Company, but no change will affect any
Note already issued or as to which an offer to purchase has been accepted by the
Company.
Each Note will be issued in fully registered form and will be represented by
a global security (a "Global Security") registered in the name of a nominee of
The Depository Trust Company ("DTC") or other depositary (DTC or such other
depositary as is specified in the applicable Pricing Supplement is herein
referred to as the "Depositary"). An interest in a Global Security will be shown
on, and transfers thereof will be effected only through, records maintained by
the Depositary or its participants. Except as described under "Description of
Notes--Book-Entry Notes", owners of Notes will not be entitled to receive
physical delivery of Notes in definitive form, and the Depositary, and not the
owners of beneficial interests in the Notes, will be considered the holder
thereof. Unless otherwise specified in the applicable Pricing Supplement, Notes
will be issued only in registered form in minimum denominations of $1,000 and
any amount in excess thereof that is an integral multiple of $1,000 or, in the
case of Notes denominated in a Specified Currency other than U.S. dollars, the
authorized denominations set forth in the applicable Pricing Supplement. See
"Description of Notes--General."
The Specified Currency, any applicable interest rate or formula, the Issue
Price (as defined below), the Stated Maturity, any Interest Payment Dates (as
defined below), any principal payment dates, any redemption or repayment
provisions, the extent to which such Note is a Fixed Rate Note, a Floating Rate
Note, an Amortizing Note or an Indexed Note and any other terms applicable to
each Note and established at the time of offering will be set forth in the
applicable Pricing Supplement.
The Notes are being offered on a continuing basis by the Company through the
Agents, all of which have agreed to use their reasonable best efforts to solicit
offers to purchase the Notes. The Company has reserved the right to sell Notes
directly on its own behalf or to the Agents acting as principals for resale to
investors and other purchasers or through other agents (provided that any other
agent will execute an agreement with the Company which contains substantially
the same terms and conditions as its agreement with the Agents). Unless
otherwise specified in an applicable Pricing Supplement, the Notes will not be
listed on any securities exchange, and there can be no assurance that the Notes
offered by this Prospectus Supplement will be sold or that there will be a
secondary market for the Notes. The Company reserves the right to withdraw,
cancel or modify the offer made hereby without notice. The Company or any
applicable Agent may reject any order in whole or in part. See "Plan of
Distribution."
This Prospectus Supplement and the accompanying Prospectus, together with an
appropriate Pricing Supplement, may be used by Smith Barney Inc., an Agent and
an affiliate of the Company ("SBI"), in connection with offers and sales of the
Notes in market-making transactions at negotiated prices related to prevailing
market prices at the time of sale. SBI may act as principal or agent in such
transactions.
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RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, --------------------------------------
1996 1995 1994 1993 1992 1991
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges...... 1.63 1.70 1.83 2.09 2.12(1) 1.67
</TABLE>
The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes and fixed charges by the fixed charges. For
purposes of this ratio, fixed charges consist of interest expense and that
portion of rentals deemed representative of the appropriate interest factor.
- ------------
(1) Included in earnings from continuing operations before income taxes for 1992
(used in this computation) are net gains of $47.0 million resulting from the
sale of stock of Inter-Regional Financial Group, Inc., the sale of the
Company's investment in the common stock of Musicland Stores Corporation and
the sale of 50% of Commercial Insurance Resources, Inc. Without giving
effect to these net gains, the ratio of earnings to fixed charges for 1992
would have been 1.99.
DESCRIPTION OF NOTES
The following description of the terms of the Notes offered hereby (referred
to in the accompanying Prospectus as the "Offered Securities") supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of Securities set forth under the heading "Description of
Securities" in the accompanying Prospectus, to which description reference is
hereby made. The following summary of the Notes is qualified in its entirety by
reference thereto and to the Indenture referred to therein. Capitalized terms
not otherwise defined in this Prospectus Supplement or the accompanying
Prospectus shall have the meanings given to them in the Indenture. The
provisions of the Notes summarized herein apply to the Notes unless otherwise
specified in the applicable Pricing Supplement and the applicable Note.
GENERAL
The Notes offered by this Prospectus Supplement are limited to $950,000,000
aggregate principal face amount (or (i) the equivalent thereof in one or more
currencies or (ii) such greater amount if Notes are issued at an original issue
discount, as shall result in aggregate proceeds of $950,000,000), subject to
reduction under certain circumstances as a result of the sale of other
Securities covered by the Registration Statement of which the Prospectus
accompanying this Prospectus Supplement is a part. The Notes will be issued
under an Indenture, dated as of December 1, 1986, between the Company and
Citibank, N.A.("Citibank"), as Trustee (the "Trustee"), as supplemented by the
First Supplemental Indenture, dated as of June 13, 1990, between the Company and
the Trustee (the indenture as so supplemented is hereinafter referred to as the
"Indenture"). The Indenture is further described under the heading "Description
of Securities" in the accompanying Prospectus. The provisions of the Indenture
and the designation of the Notes provide the Company with the ability to reopen
the series that is the Notes and to issue additional securities of that series.
The U.S. dollar equivalent of Notes denominated in a currency or currency unit
other than U.S. dollars will be determined upon issuance by the Exchange Rate
Agent (as defined below), on the basis of the Market Exchange Rate (as defined
below) for such other currency on the applicable trade dates. The Notes will be
subject to defeasance and covenant defeasance as described in the accompanying
Prospectus under the heading "Description of Securities--Defeasance." The
statements herein concerning the Notes and the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the Indenture, including the definitions therein of certain terms. Whenever
particular defined terms not otherwise defined herein are referred to, such
defined terms are incorporated herein by reference.
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<PAGE>
The Notes constitute one series of Securities (as defined in the Indenture),
unlimited as to principal amount, established by the Company pursuant to the
Indenture.
Notes will be offered on a continuing basis and will mature from nine months
or more from the date of issue, as selected by the purchaser and agreed to by
the Company, and may be subject to redemption at the option of the Company or
repayment at the option of the holder prior to Stated Maturity as set forth
below under "Redemption and Repayment." Each Note will bear interest from the
Original Issue Date (as defined below) or from such other date as may be
specified in the applicable Pricing Supplement at (i) a fixed rate, which may be
zero in the case of a Note issued at an Issue Price representing a substantial
discount from the principal amount payable at Stated Maturity (a "Zero-Coupon
Note"), (ii) a floating rate or rates determined by reference to a Base Rate,
which may be adjusted by a Spread and/or a Spread Multiplier (each as defined
below), or (iii) a combination of fixed and floating rates.
Each Note will be issued in fully registered form without coupons and will
be represented by a Global Security registered in the name of a nominee of the
Depositary. All Notes issued on the same day and having the same terms,
including, but not limited to, the same designation, Specified Currency,
Interest Payment Dates, rate of interest, Stated Maturity and redemption or
repayment provisions may be represented by a single Global Security. An interest
in a Global Security will be shown on, and transfers thereof will be effected
only through, records maintained by the Depositary or its participants. Payments
of principal and interest on Notes represented by a Global Security will be made
by the Company or its paying agent to the Depositary or its nominee. See
"Description of Notes--Book-Entry Notes."
Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of Notes (other than Global Securities) denominated in
U.S. dollars will be $1,000 and any amount in excess thereof that is an integral
multiple of $1,000. The authorized denominations of Notes denominated in a
Specified Currency other than U.S. dollars will be as set forth in the
applicable Pricing Supplement.
The Notes will constitute unsecured unsubordinated indebtedness of the
Company and will rank pari passu with all other unsecured unsubordinated
indebtedness of the Company. The Pricing Supplement will indicate whether the
Notes will be redeemable at the option of the Company, or repayable at the
option of the holder, or both, on or after a specified date prior to their
Stated Maturity. Unless otherwise specified in the applicable Pricing
Supplement, the Notes, other than Amortizing Notes, will not be subject to any
sinking fund. See "Description of Notes--Redemption and Repayment."
The amount of any Discount Note (as defined below) payable in the event of
redemption by the Company, repayment at the option of the holder or acceleration
of its Stated Maturity, in lieu of the stated principal amount due at the Stated
Maturity, shall be the Amortized Face Amount (as defined below) of such Discount
Note as of the date of such redemption, repayment or acceleration. For the
purpose of determining whether holders of the requisite amount of Securities
outstanding under the Indenture have made a demand or given a notice or waiver
or taken any other action, the outstanding principal amount will be deemed to be
the Amortized Face Amount. A "Discount Note" means a Note, including any
Zero-Coupon Note, issued with more than a de minimis amount of original issue
discount (as determined under United States federal income tax rules applicable
to original issue discount instruments). The "Amortized Face Amount" of a
Discount Note shall be the amount equal to (i) the Issue Price of such Discount
Note set forth in the applicable Pricing Supplement plus (ii) the portion of the
difference between the Issue Price and the principal amount of such Discount
Note that has accrued at the yield to maturity set forth in the Pricing
Supplement (computed in accordance with generally accepted United States bond
yield computation principles) at the date as of which the Amortized Face Amount
is calculated, but in no event shall the Amortized Face Amount of such Discount
Note exceed
S-4
<PAGE>
its stated principal amount. See "Certain Federal Income Tax
Considerations--U.S. Holders--Discount Notes."
The Pricing Supplement relating to each Note will describe the following
terms, as applicable: (1) the Specified Currency with respect to such Note (and,
if such Specified Currency is other than U.S. dollars, certain other terms
relating to such Note); (2) the extent to which such Note is a Fixed Rate Note,
an Amortizing Note, a Floating Rate Note, a Discount Note or a Zero-Coupon Note;
(3) whether such Note is a Currency Indexed Note or other Indexed Note, and if
so, the specific terms thereof; (4) the price (expressed as a percentage of the
aggregate principal amount thereof) at which such Note will be issued (the
"Issue Price"); (5) the date on which such Note will be issued (the "Original
Issue Date") and the date from which interest shall accrue (if different from
the Original Issue Date); (6) the date on which such Note will mature (the
"Stated Maturity") and whether the Stated Maturity may be extended by the
Company and if so, the Extension Periods and the Final Maturity Date (each as
defined below); (7) if such Note is a Fixed Rate Note, the rate per annum at
which such Note will bear interest, if any (the "Interest Rate"), the Interest
Payment Date or Dates and, if so specified in the applicable Pricing Supplement,
that such rate may be changed by the Company prior to the Stated Maturity and,
if so, the basis or formula for such change, if any; (8) if such Note is a
Floating Rate Note, the Base Rate, the Initial Interest Rate or formula for
determining such, the Interest Reset Period, the Interest Reset Date or Dates,
the Interest Payment Date or Dates, the Index Maturity, the Maximum Interest
Rate and/or the Minimum Interest Rate, if any, and the Spread and/or Spread
Multiplier, if any (all as defined below), and any other terms relating to the
particular method of calculating the Interest Rate for such Note and, if so
specified in the applicable Pricing Supplement, that any such Spread and/or
Spread Multiplier may be changed by the Company prior to the Stated Maturity
and, if so, the basis or formula for such change, if any; (9) if such Note is an
Amortizing Note, whether payments of principal thereof and interest thereon will
be made quarterly or semi-annually, and the repayment information in respect
thereof; (10) whether the interest rate on such Note may be reset upon the
occurrence of certain events or at the option of the Company; (11) whether such
Note may be redeemed at the option of the Company, or repaid at the option of
the holder, prior to the Stated Maturity, and if so, the provisions relating to
such redemption or repayment; (12) certain special federal income tax
consequences of the purchase, ownership and disposition of certain Notes, if
any; (13) whether such Note is a Renewable Note (as defined below), and, if so,
the specific terms thereof; (14) the use of proceeds, if such use materially
differs from that disclosed in the accompanying Prospectus; and (15) any other
terms of such Note not inconsistent with the provisions of the Indenture.
PAYMENT CURRENCY
Unless otherwise specified in the applicable Pricing Supplement, and except
as otherwise described herein with respect to Currency Indexed Notes, principal
(and premium, if any) and interest, if any, on each Note will be paid by the
Company in U.S. dollars in the manner described in the following paragraphs,
even if such Note is denominated in a Specified Currency other than U.S.
dollars; provided that, if the applicable Pricing Supplement and the Note so
indicate, the holder of a Note denominated in a Specified Currency other than
U.S. dollars may elect to receive all such payments in respect of such Note in
such Specified Currency, subject to certain conditions described in the
following paragraphs, by delivery of a written election to the Company's paying
agent (the "Paying Agent") in The City of New York. Except as otherwise provided
herein with respect to Global Securities, any such election must be received by
the Paying Agent on or prior to the applicable Regular Record Date (as defined
below) or at least 15 calendar days prior to Maturity, as the case may be, 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, (ii) the Company has
exercised any of its defeasance or covenant defeasance options, or (iii) the
Company has given notice of redemption. Such election shall remain in effect
unless and until changed by written notice to the Paying Agent, received on or
prior to the applicable Regular Record Date or at least 15 calendar days prior
to Maturity, as the case may be. Until the Notes are paid or payment
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thereof is provided for, the Company will, at all times, maintain a Paying Agent
in The City of New York capable of performing the duties described herein to be
performed by the Paying Agent and, to the extent permitted by the Indenture, the
Company may be the Paying Agent. The Company has initially appointed Citibank,
New York, New York as Paying Agent under the Indenture. The Company will notify
the holders of the Notes in accordance with the Indenture of any change in the
Paying Agent or its address. Except as may otherwise be provided in a Pricing
Supplement with respect to Currency Indexed Notes, all currency exchange costs
related to a Note, if any, will be borne by the holder of such Note by
deductions from payments otherwise due such holder.
Unless otherwise specified in the applicable Pricing Supplement, in the case
of a Note denominated in a Specified Currency other than U.S. dollars, the
amount of U.S. dollar payments in respect of such Note will be determined by an
agent for the Company specified in the applicable Pricing Supplement (the
"Exchange Rate Agent"), based on the indicative quotation in The City of New
York selected by such Exchange Rate Agent at approximately 11:00 a.m., New York
City time, on the second Business Day preceding the applicable payment date,
that yields the largest number of U.S. dollars upon conversion of the Specified
Currency. Except with respect to LIBOR Notes and LIBID Notes (each as defined
below), "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York City are
authorized or obligated by law or executive order to close and, with respect to
Notes denominated in or indexed to a Specified Currency other than U.S. dollars
or ECU, each Monday, Tuesday, Wednesday, Thursday or Friday which is not a day
on which banking institutions in the principal financial center of the country
issuing the Specified Currency are authorized or required by law or regulation
to close and a day on which banking institutions in such principal financial
center are carrying out transactions in such Specified Currency and, with
respect to Notes denominated in or indexed to ECU, each day which is not a day
that banking institutions in Luxembourg are authorized or required by law or
regulation to close and which is an ECU clearing day, as determined by the ECU
Banking Association in Paris. If the Notes are LIBOR Notes or LIBID Notes,
"Business Day" shall mean each day as determined pursuant to the preceding
sentence which is also a "London Business Day." "London Business Day" means any
day on which dealings in deposits in the Designated Deposit Currency (as defined
below) are transacted in the London interbank market. Unless otherwise specified
in the applicable Pricing Supplement, such selection shall be made from among
the quotations of at least three banks agreed to by the Company and the Exchange
Rate Agent appearing on the bank composite or multi-contributor pages of the
Reuters Monitor Foreign Exchange Service, or if not available, the Telerate
Monitor Foreign Exchange Service (the "Exchange Rate"). If such quotations are
unavailable from either such foreign exchange service, such selection shall be
made as specified in the applicable Pricing Supplement. If a payment is to be
made in a Specified Currency and such Specified Currency is unavailable due to
the imposition of exchange controls or to other circumstances beyond the
Company's control, or is no longer used by the government of the country issuing
such Specified Currency or for the settlement of transactions by public
institutions of or within the international banking community, the Company will
be entitled to make payments in U.S. dollars on the basis of the noon buying
rate in The City of New York for cable transfers in the Specified Currency as
certified for customs purposes by the Federal Reserve Bank of New York (the
"Market Exchange Rate") for such Specified Currency on the second Business Day
prior to such payment date, or on such other basis as shall be specified in the
applicable Pricing Supplement. In the event such Market Exchange Rate is not
then available, the Company will be entitled to make payments in U.S. dollars
(i) if such Specified Currency is not a composite currency, on the basis of the
most recently available Market Exchange Rate for such Specified Currency or (ii)
if such Specified Currency is a composite currency, including, without
limitation, ECU, in an amount determined by the Exchange Rate Agent to be the
sum of the results obtained by multiplying the number of units of each component
currency of such composite currency, as of the most recent date on which such
composite currency was used, by the Market Exchange Rate for such component
currency on the second Business Day prior to such payment date (or if such
Market Exchange Rate is not then available, by the most recently available
Market Exchange Rate for such component currency, or as
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otherwise specified in the applicable Pricing Supplement). Unless otherwise
provided in the applicable Pricing Supplement, Citibank will be the Exchange
Rate Agent with respect to the Notes.
Unless otherwise specified in the applicable Pricing Supplement, if a holder
of a Note denominated in a Specified Currency other than U.S. dollars or ECU
shall have elected to receive payments of principal (and premium, if any) and
interest, if any, on such Note in such Specified Currency as described above, or
if the Denominated Currency (as defined herein) of a Currency Indexed Note is a
foreign currency (other than ECU), and such Specified Currency or Denominated
Currency is unavailable as of the due date for any payment thereon because of
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
Specified Currency or Denominated Currency or for the settlement of transactions
by public institutions of or within the international banking community, then
all payments due on such due date with respect to such Note shall be made in
U.S. dollars. The amount so payable on any date in such Specified Currency or
Denominated Currency shall be converted into U.S. dollars at a rate determined
by the Exchange Rate Agent on the basis of the most recently available Market
Exchange Rate, or as otherwise specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, if a holder
of a Note denominated in ECU shall have elected to receive payments of principal
(and premium, if any) and interest, if any, on such Note in ECU as described
above, or if the Denominated Currency of a Currency Indexed Note is ECU, and ECU
are unavailable as of the due date for any payment thereon because of the
imposition of exchange controls or other circumstances beyond the Company's
control, or are no longer used in the European Monetary System, all payments due
on that due date with respect to such Note shall be made in U.S. dollars. The
amount so payable on any date in ECU shall be converted into U.S. dollars at a
rate determined by the Exchange Rate Agent as of the second Business Day prior
to the date on which such payment is due on the following basis: The component
currencies of ECU for this purpose shall be the currency amounts that were
components of the ECU as of the last date on which ECU were used in the European
Monetary System. The equivalent of ECU in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of such component currencies. The U.S.
dollar equivalent of each of such component currencies shall be determined by
the Exchange Rate Agent on the basis of the most recently available Market
Exchange Rate, or as otherwise specified in the applicable Pricing Supplement.
If the official unit of any component currency of a composite currency is
altered by way of combination or subdivision, the number of units of that
currency as a component shall be divided or multiplied in the same proportion.
If two or more component currencies are consolidated into a single currency, the
amounts of those currencies as components shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that currency as a component
shall be replaced by amounts of such two or more currencies having an aggregate
value on the date of division equal to the amount of the former component
currency immediately before such division.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and, in the absence of manifest error, shall be
conclusive for all purposes and binding on holders of the Notes, and the
Exchange Rate Agent shall have no liability therefor.
Each Note will provide that, in the event of an official redenomination of
the Specified Currency thereof (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. Except to the extent Currency Indexed Notes
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provide for the adjustment of the principal amount payable at Maturity thereof
pursuant to application of the formulae described under "Description of
Notes--Currency Indexed Notes--Payment of Principal and Interest," or any other
formulae provided for in the applicable Pricing Supplement, 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 currency is itself officially redenominated).
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.
PAYMENT OF PRINCIPAL AND INTEREST
Principal and interest on the Notes will be paid in accordance with the
Depositary's and the participant's procedures in effect from time to time as
described under "Description of Notes--Book-Entry Notes." Simultaneously with
the election of any holder of a Note to receive payments in a Specified Currency
other than U.S. dollars (as provided above), such holder may, if so entitled as
described above, elect to receive such payments in immediately available funds
by providing complete and appropriate instructions to the Paying Agent, and all
payments in respect of principal or premium, if any, of, or interest, if any,
on, such Note will be made in immediately available funds to an account
maintained by the payee with a bank located outside the United States or as
otherwise provided in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, principal, premium, if any, and
interest, if any, payable at Maturity will be paid by the Paying Agent by wire
transfer in immediately available funds (unless otherwise specified in the
applicable Pricing Supplement, payable to an account maintained by the payee
with a bank located outside the United States if payable in a Specified Currency
other than U.S. dollars) to an account specified by the Depositary. See
"Important Currency Exchange Information." Unless otherwise specified in the
applicable Pricing Supplement, payments of interest, and principal of Amortizing
Notes (in each case, other than at Maturity), will be made in same-day funds in
accordance with existing arrangements between the Paying Agent and the
Depositary. The Company will pay any administrative costs imposed by banks in
connection with making payments in immediately available funds, but any tax,
assessment or governmental charge imposed upon payments, including, without
limitation, any withholding tax, will be borne by the holders of the Notes in
respect of which such payments are made.
INTEREST AND INTEREST RATES
Each Note other than a Zero-Coupon Note will bear interest from its Original
Issue Date (or such other date on which such Note otherwise begins to accrue
interest if different from the Original Issue Date) or from the most recent
Interest Payment Date to which interest on such Note has been paid or duly
provided for at a fixed rate or rates per annum, or at a rate or rates per annum
determined pursuant to a Base Rate stated therein and in the applicable Pricing
Supplement that may be adjusted by a Spread and/or Spread Multiplier, until the
principal thereof is paid or made available for payment. Interest will be
payable on each Interest Payment Date and at Maturity. "Maturity" means the date
on which the principal of a Note or an installment of principal becomes due and
payable in full in accordance with its terms and the terms of the Indenture,
whether at Stated Maturity or by declaration of acceleration, call for
redemption, repayment or otherwise. Interest will be payable to the holder at
the close of business on the Regular Record Date next preceding such Interest
Payment Date; provided, however, that interest payable at Maturity will be
payable to the person to whom principal shall be payable. The first payment of
interest on any Note originally issued between a Regular Record Date for
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such Note and the succeeding Interest Payment Date will be made on the Interest
Payment Date following the next succeeding Regular Record Date for such Note to
the Holder on such next Regular Record Date.
Interest rates or yields offered by the Company with respect to the Notes
may differ depending upon, among other things, the aggregate initial offering
price of Notes purchased in any single transaction. Notes with similar variable
terms but different interest rates or yields, as well as Notes with different
variable terms, may be offered concurrently to different investors. Interest
rates and interest rate formulae are subject to change by the Company, but,
unless set forth in the applicable Pricing Supplement and agreed to by the
purchaser of such Notes, no such change will affect any Note already issued or
as to which an offer to purchase has been accepted by the Company. The Interest
Payment Dates and the Regular Record Dates for each Fixed Rate Note shall be as
described below under "Fixed Rate Notes." The Interest Payment Dates for each
Floating Rate Note shall be as described below under "Floating Rate Notes" and
in the applicable Pricing Supplement, and the Regular Record Dates for a
Floating Rate Note will be the fifteenth day (whether or not a Business Day)
next preceding each Interest Payment Date.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date or such
other date on which such Note otherwise begins to accrue interest (if different
from the Original Issue Date) at the rate per annum set forth thereon and in the
applicable Pricing Supplement until the principal amount thereof is paid, or
made available for payment, in full, except as described below under
"Description of Notes-- Subsequent Interest Periods" and "Description of Notes--
Extension of Maturity." Unless otherwise specified in the applicable Pricing
Supplement, interest on each Fixed Rate Note (other than a Zero-Coupon Note or
an Amortizing Note) will be payable semi-annually each March 15 and September
15, and at Maturity, and the Regular Record Dates will be each March 1 and
September 1. Unless otherwise specified in the applicable Pricing Supplement,
principal of and interest on each Amortizing Note will be payable either
quarterly on each March 15, June 15, September 15 and December 15, or
semi-annually on each March 15 and September 15 as set forth in the applicable
Pricing Supplement, and at Maturity. Unless otherwise specified in the
applicable Pricing Supplement, the Regular Record Dates will be each March 1,
June 1, September 1 and December 1 for each Amortizing Note that is payable
quarterly and each March 1 and September 1 for each Amortizing Note that is
payable semi-annually. Payments with respect to Amortizing Notes will be applied
first to interest due and payable thereon and then to the reduction of the
unpaid principal amount thereof. A table setting forth repayment information in
respect of each Amortizing Note will be included in the applicable Pricing
Supplement and set forth on such Notes. Each payment of interest on a Fixed Rate
Note shall include interest accrued through the day before the Interest Payment
Date or date of Maturity, as the case may be. Any payment of principal (and
premium, if any) or interest required to be made on a Fixed Rate Note on a day
that is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on such
day, and no additional interest shall accrue as a result of such delayed
payment. Unless otherwise specified in the applicable Pricing Supplement,
interest on Fixed Rate Notes, if any, will be computed on the basis of a 360-day
year of twelve 30-day months.
FLOATING RATE NOTES
Except for the period from the Original Issue Date (or the date on which
such Note otherwise begins to accrue interest (if different from the Original
Issue Date)) to the first Interest Reset Date set forth in the applicable
Pricing Supplement, each Floating Rate Note will bear interest at a rate
determined by reference to an interest rate base (the "Base Rate"), which may be
adjusted by a Spread and/or a Spread Multiplier. The applicable Pricing
Supplement will designate one or more of the
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following Base Rates as applicable to a Floating Rate Note: (a) the CD Rate (a
"CD Rate Note"), (b) the Commercial Paper Rate (a "Commercial Paper Rate Note"),
(c) LIBID (a "LIBID Note"), (d) LIBOR (a "LIBOR Note"), (e) the Treasury Rate (a
"Treasury Rate Note"), (f) the Federal Funds Rate (a "Federal Funds Rate Note"),
(g) the Prime Rate (a "Prime Rate Note"), (h) the J.J. Kenny Rate (a "J.J. Kenny
Rate Note"), (i) the Eleventh District Cost of Funds Rate (an "Eleventh District
Cost of Funds Rate Note"), (j) the CMT Rate (a "CMT Rate Note") or (k) such
other Base Rate or formula as is set forth in such Pricing Supplement and in
such Floating Rate Note. The "Index Maturity" for any Floating Rate Note is the
period to maturity (as specified in the applicable Pricing Supplement) of the
instrument or obligation from which the Base Rate is calculated.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period ("Maximum
Interest Rate"); and/or (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 pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by applicable
law (including, without limitation, New York law, which is stated to govern the
Notes and the Indenture), as the same may be modified by United States law of
general application. Under present New York law, the maximum rate of interest,
with certain exceptions, is 25% per annum on a simple interest basis. This limit
may not apply to Notes in which $2,500,000 or more has been invested, including
Notes purchased by an Agent in such aggregate principal amount or more for
resale to investors.
Unless otherwise specified herein or in the applicable Pricing Supplement,
all percentages resulting from any calculation of the rate of interest on a
Floating Rate Note will be rounded upward, if necessary, to the nearest one
hundred-thousandth of a percent (.0000001), with five one-millionths of a
percentage point being 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 five one-thousandths of a unit being
rounded upwards).
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (the "Interest Reset Period"), as
or unless otherwise specified in the applicable Pricing Supplement. Unless
otherwise specified in the applicable Pricing Supplement, the date or dates on
which interest will be reset (each an "Interest Reset Date") 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, the
Wednesday of each week; in the case of Treasury Rate Notes that reset weekly,
the Tuesday of each week (except as provided below); 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 each March, June, September
and December; in the case of Floating Rate Notes that reset semi-annually, the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes that reset annually,
the third Wednesday of the month of each year specified in the applicable
Pricing Supplement; provided that the interest rate in effect from the Original
Issue Date (or the date on which such Notes otherwise begin to accrue interest
(if different from the Original Issue Date)) to the first Interest Reset Date
will be the Initial Interest Rate (as defined below). If any Interest Reset Date
for any Floating Rate Note would otherwise be a day that is not a Business Day,
such Interest Reset Date shall be the succeeding Business Day, except that, in
the case of a LIBID Note or a LIBOR Note, if such Business Day is in the
succeeding calendar month, such Interest Reset Date shall be the next preceding
Business Day. If an auction of direct obligations of the 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. The interest rate or the formula for establishing the interest rate in
effect with respect to a Floating Rate Note from the Original Issue Date
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(or the date on which such Note otherwise begins to accrue interest (if
different from the Original Issue Date)) to the first Interest Reset Date (the
"Initial Interest Rate") will be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one basis point equals one-hundredth of a percentage point) to be added to or
subtracted from the related Base Rate applicable to such Floating Rate Note, and
the "Spread Multiplier" is the percentage of the related Base Rate applicable to
such Floating Rate Note by which said Base Rate is to be multiplied to determine
the applicable interest rate on such Floating Rate Note. Each Floating Rate Note
and the applicable Pricing Supplement will specify the Spread and/or Spread
Multiplier, if any, applicable to each such Floating Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, the
interest payable on each Interest Payment Date or at Maturity for Floating Rate
Notes will be the amount of interest accrued from and including the Original
Issue Date (or the date on which such Notes otherwise begin to accrue interest
(if different from the Original Issue Date)) or from and including the last
Interest Payment Date to which interest has been paid to, but excluding, such
Interest Payment Date or date of Maturity, as the case may be (an "Interest
Period"); provided that in the case of Floating Rate Notes that reset daily or
weekly, interest payments will include interest accrued to and including the
next preceding Regular Record Date, except that at Maturity or earlier
redemption, the interest payable will include interest accrued to, but
excluding, the Maturity date or the date of redemption, as the case may be.
With respect to a Floating Rate Note, unless otherwise specified in the
applicable Pricing Supplement, accrued interest will be calculated by
multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Unless otherwise specified in the applicable Pricing
Supplement, such accrued interest factor will be computed by adding the interest
factors calculated for each day in the Interest Period for which accrued
interest is being calculated. Unless otherwise specified in the applicable
Pricing Supplement, the interest factor for each such day is computed by
dividing the interest rate applicable on such day by 360, in the cases of CD
Rate Notes, Commercial Paper Rate Notes, LIBID Notes, LIBOR Notes, Federal Funds
Rate Notes, Prime Rate Notes, J.J. Kenny Rate Notes or Eleventh District Cost of
Funds Rate Notes, or by the actual number of days in the year, in the case of
Treasury Rate Notes and CMT Rate Notes. The interest rate applicable to any day
that is an Interest Reset Date is the interest rate as determined, in accordance
with the procedures hereinafter set forth, with respect to the Interest
Determination Date (as defined below) pertaining to such Interest Reset Date.
The interest rate applicable to any other day is the interest rate for the
immediately preceding Interest Reset Date (or, if none, the Initial Interest
Rate).
Unless otherwise specified in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes that reset daily or 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 month or 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 semi-annually, on the third Wednesday of the 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 the month of each year
specified in the applicable Pricing Supplement, and in each case at Maturity
(each such day being an "Interest Payment Date"). Unless otherwise specified in
the applicable Pricing Supplement, if an Interest Payment Date (other than at
Maturity) with respect to any Floating Rate Note would otherwise be a day that
is not a Business Day, such Interest Payment Date shall be the
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succeeding Business Day, except, in the case of a LIBID Note or a LIBOR Note, if
such day would fall in the succeeding calendar month, such Interest Payment Date
will be the preceding Business Day. Any payment of principal (and premium, if
any) and interest required to be made on a Floating Rate Note on a date of
Maturity that is not a Business Day will be made on the succeeding Business Day
(in each case with the same force and effect as if made on such date of Maturity
and no additional interest shall accrue as a result of any such delayed
payment).
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for CD Rate
Notes (the "CD Interest Determination Date"), Commercial Paper Rate Notes (the
"Commercial Paper Interest Determination Date"), Federal Funds Rate Notes (the
"Federal Funds Interest Determination Date"), Prime Rate Notes (the "Prime
Interest Determination Date"), J.J. Kenny Rate Notes (the "J.J. Kenny Interest
Determination Date") and CMT Rate Notes (the "CMT Interest Determination Date")
will be the second Business Day preceding such Interest Reset Date. Unless
otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for LIBID Notes (the
"LIBID Interest Determination Date") and LIBOR Notes (the "LIBOR Interest
Determination Date") will be the second London Business Day preceding such
Interest Reset Date. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to an Interest Reset Date
for a Treasury Rate Note (the "Treasury Interest Determination Date") will be
the day of the week in which such Interest Reset Date falls on which Treasury
bills of the applicable Index Maturity are auctioned. Treasury bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
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 Interest Determination Date pertaining to the Interest
Reset Date occurring in the succeeding week. Unless otherwise specified in the
applicable Pricing Supplement, the Interest Determination Date pertaining to an
Interest Reset Date for an Eleventh District Cost of Funds Rate Note (the
"Eleventh District Cost of Funds Interest Determination Date") will be the last
working day of the month immediately preceding such Interest Reset Date on which
the Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco")
publishes the monthly Eleventh District Cost of Funds Index (as defined below).
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if any such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day preceding the applicable
Interest Payment Date or date of Maturity, as the case may be.
The Company will appoint, and enter into an agreement with, an agent (the
"Calculation Agent") to calculate interest on the Floating Rate Notes. Unless
otherwise specified in the applicable Pricing Supplement, Citibank will be the
calculation agent with respect to Floating Rate Notes. Upon the request of the
holder of any Floating Rate Note, the Calculation Agent will advise such holder
of 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. All determinations to be made by the Calculation Agent shall
be at its sole discretion and, in the absence of manifest error, shall be
conclusive for all purposes and binding on holders of the Notes, and the
Calculation Agent shall have no liability therefor.
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CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as made available and subsequently published
by the Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication of the Board of
Governors of the Federal Reserve System ("H.15(519)") under the heading "CDs
(Secondary Market)." In the event that such rate is not made available prior to
3:00 P.M., New York City time, on the Calculation Date pertaining to such CD
Interest Determination Date, then the CD Rate will be the rate on such CD
Interest Determination Date for negotiable certificates of deposit having the
specified Index Maturity as made available and subsequently published by the
Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" or any successor
publication ("Composite Quotations") under the heading "Certificates of
Deposit." If by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such CD Interest Determination Date the rate for such CD Interest
Determination Date has not yet been made available in either H.15(519) or
Composite Quotations, then the CD Rate for such CD Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the secondary market offered rates as of 10:00 A.M., New York City time, on such
CD Interest 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 negotiable certificates of deposit of major United States
money center banks of the highest credit standing (in the market for negotiable
certificates of deposit) having a remaining maturity closest to the specified
Index Maturity in a denomination of $5,000,000; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the CD Rate with respect to such CD Interest
Determination Date will be the CD Rate in effect on such CD Interest
Determination Date.
CD Rate Notes, like other Notes, are not deposit obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as described below) on such date of the
rate for commercial paper having the Index Maturity designated in the applicable
Pricing Supplement as made available and subsequently published in H.15(519)
under the heading "Commercial Paper." In the event that such rate is not made
available by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Commercial Paper Interest Determination Date, then the Commercial Paper
Rate shall be the Money Market Yield of the rate on that Commercial Paper
Interest Determination Date for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement as made available and
subsequently 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
has not yet been made available in either H.15(519) or Composite Quotations, the
Commercial Paper Rate for such Commercial Paper Interest Determination Date
shall be calculated by the Calculation Agent and shall be the Money Market Yield
of the
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arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on
such Commercial Paper Interest Determination Date of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose senior unsecured bond rating is
"AA," or the equivalent, from a nationally recognized securities rating agency;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Commercial Paper Rate
with respect to such Commercial Paper Interest Determination Date will be the
Commercial Paper Rate in effect on such Commercial Paper Interest Determination
Date.
"Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
D x 360
Money Market Yield = --------------- x 100
360-(D x M)
where "D" refers to the per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal; and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
LIBID NOTES
LIBID Notes will bear interest at the interest rates (calculated by
reference to LIBID and the Spread and/or Spread Multiplier, if any) specified in
the LIBID Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBID will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBID Interest Determination Date, LIBID will be
as specified in the applicable Pricing Supplement, either LIBID Reuters (as
defined below) or LIBID Telerate (as defined below), subject to the last
sentence of this paragraph. "LIBID Reuters" means the arithmetic mean of the
bid rates (unless the specified Designated LIBO Page (as defined below) by
its terms provides for only a single rate, in which case such single rate
shall be used) for deposits in the Designated Deposit Currency having the
Index Maturity designated in the applicable Pricing Supplement, commencing
on the second London Business Day immediately following such LIBID Interest
Determination Date, that appear on the Designated LIBO Page specified in the
applicable Pricing Supplement as of 11:00 A.M., London time, on such LIBID
Interest Determination Date, if at least two such bid rates appear on the
Reuters Screen LIBO Page (unless, as aforesaid, only a single rate is
required). "LIBID Telerate" means the rate for deposits in the Designated
Deposit Currency having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Business Day immediately
following that LIBID Interest Determination Date, that appears on the
Designated Telerate Page (as defined below) specified in the applicable
Pricing Supplement as of 11:00 A.M., London time, on such LIBID Interest
Determination Date. If neither LIBID Reuters nor LIBID Telerate is specified
in the applicable Pricing Supplement, LIBID will be determined as if LIBID
Telerate had been specified. If fewer than two bid rates appear (unless the
specified Designated LIBO Page with respect to LIBID Reuters by its terms
provides for only a single rate, in which case such single rate shall be
used), or if no rate appears, as applicable, LIBID in respect of such LIBID
Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) With respect to a LIBID Interest Determination Date on which fewer
than two bid rates appear (unless the specified Designated LIBO Page with
respect to LIBID Reuters by its terms provides for only a single rate, in
which case such single rate shall be used), or on which no rate
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appears, as applicable, LIBID will be determined on the basis of the bid
rates at which deposits in the Designated Deposit Currency, having the Index
Maturity designated in the applicable Pricing Supplement, are quoted at
approximately 11:00 A.M., London time, on such LIBID Interest Determination
Date to prime banks in the London interbank market by four major banks in
the London interbank market selected by the Calculation Agent (the "LIBID
Reference Banks") commencing on the second London Business Day immediately
following such LIBID Interest Determination Date and in a principal amount
equal to an amount of not less than U.S. $1,000,000 (or the equivalent in
the Designated Deposit Currency) that is representative for a single
transaction in such market at such time. The Calculation Agent will request
the principal London office of each of such LIBID Reference Banks to provide
a quotation of its rate. If at least two such quotations are provided, LIBID
in respect of such LIBID Interest Determination Date will be the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBID in
respect of such LIBID Interest Determination Date will be the arithmetic
mean of the rates quoted in the applicable Principal Financial Center (as
defined below), on such LIBID Interest Determination Date by three major
banks in such Principal Financial Center selected by the Calculation Agent
for loans in the Designated Deposit Currency to leading banks, having the
Index Maturity designated in the applicable Pricing Supplement, commencing
on the second London Business Day immediately following the LIBID Interest
Determination Date and in a principal amount equal to an amount of not less
than U.S. $1,000,000 (or the equivalent in the Designated Deposit Currency)
that is representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, LIBID with
respect to such LIBID Interest Determination Date will be LIBID in effect on
such LIBID Interest Determination Date.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will be
as specified in the applicable Pricing Supplement, either LIBOR Reuters (as
defined below) or LIBOR Telerate (as defined below), subject to the last
sentence of this paragraph. "LIBOR Reuters" means the arithmetic mean of the
offered rates (unless the specified Designated LIBO Page by its terms
provides for only a single rate, in which case such single rate shall be
used) for deposits in the Designated Deposit Currency having the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date, that appear on the Designated LIBO Page specified in the
applicable Pricing Supplement as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date, if at least two such offered rates appear on
the Designated LIBO Page (unless, as aforesaid, only a single rate is
required). "LIBOR Telerate" means the rate for deposits in the Designated
Deposit Currency having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Business Day immediately
following that LIBOR Interest Determination Date, that appears on the
Designated Telerate Page specified in the applicable Pricing Supplement as
of 11:00 A.M., London time, on such LIBOR Interest Determination Date. If
neither LIBOR Reuters nor LIBOR Telerate is specified in the applicable
Pricing Supplement, LIBOR will be determined as if LIBOR Telerate had been
specified. If fewer than two offered rates appear (unless the specified
Designated LIBO Page with respect to LIBOR Reuters by its terms provides for
only a single rate, in which case such single rate shall be used), or if no
rate appears, as applicable,
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LIBOR in respect of such LIBOR Interest Determination Date will be
determined as if the parties had specified the rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear (unless the specified Designated LIBO Page
with respect to LIBOR Reuters by its terms provides for only a single rate,
in which case such single rate shall be used), or on which no rate appears,
as applicable, LIBOR will be determined on the basis of the rates at which
deposits in the Designated Deposit Currency, having the Index Maturity
designated in the applicable Pricing Supplement, are offered at
approximately 11:00 A.M., London time, on such LIBOR Interest Determination
Date by four major banks in the London interbank market selected by the
Calculation Agent (the "LIBOR Reference Banks") to prime banks in the London
interbank market commencing on the second London Business Day immediately
following such LIBOR Interest Determination Date and in a principal amount
equal to an amount of not less than U.S. $1,000,000 (or the equivalent in
the Designated Deposit Currency) that is representative for a single
transaction in such market at such time. The Calculation Agent will request
the principal London office of each of such LIBOR Reference Banks to provide
a quotation of its rate. If at least two such quotations are provided, LIBOR
in respect of such LIBOR Interest Determination Date will be the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBOR in
respect of such LIBOR Interest Determination Date will be the arithmetic
mean of the rates quoted in the applicable Principal Financial Center, on
such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Designated Deposit Currency to leading banks, having the Index Maturity
designated in the applicable Pricing Supplement, commencing on the second
London Business Day immediately following the LIBOR Interest Determination
Date and in a principal amount equal to an amount of not less than U.S.
$1,000,000 (or the equivalent in the Designated Deposit Currency) that is
representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR with
respect to such LIBOR Interest Determination Date will be LIBOR in effect on
such LIBOR Interest Determination Date.
"Designated Deposit Currency" means, with respect to any LIBID Note or LIBOR
Note, the currency (including a composite currency), if any, designated in the
applicable LIBID Note or LIBOR Note as the Designated Deposit Currency. If no
such currency is designated in the applicable LIBID Note or LIBOR Note, the
Designated Deposit Currency shall be U.S. dollars.
"Designated LIBO 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 that service for the purpose of displaying London interbank bid and
offered rates of major banks) for the Designated Deposit Currency.
"Designated Telerate Page" means the display designated as page "3750" on
the Telerate Service where the Designated Deposit Currency is U.S. Dollars or
such other applicable Telerate Page where the Designated Deposit Currency is
other than U.S. Dollars (or such other page as may replace the 3750 page or such
other applicable page on that service or such other service or services as may
be nominated by the British Bankers' Association for the purpose of displaying
London interbank bid and offered rates for deposits in the Designated Deposit
Currency).
"Principal Financial Center" means, with respect to any LIBID Note or LIBOR
Note, unless otherwise specified in the applicable Pricing Supplement, the
capital city of the country that issues as its legal tender the Designated
Deposit Currency of such LIBID Note or LIBOR Note, except that with respect to
U.S. dollars, Deutsche Marks, Dutch Guilders, Italian Lire, Swiss Francs and
ECUs, the Principal Financial Center shall be The City of New York, Frankfurt,
Amsterdam, Milan, Zurich and Luxembourg, respectively.
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TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of Treasury bills having the Index Maturity
designated in the applicable Pricing Supplement as made available and
subsequently published in H.15(519) under the heading "U.S. Government
Securities--Treasury bills-auction average (investment)" or, if not so made
available by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Treasury Interest Determination Date, the auction average rate
(expressed as a bond equivalent, rounded to the nearest one hundredth of a
percent, with five one thousandths of a percent rounded upward, on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) for such
auction or as otherwise announced by the United States Department of the
Treasury. In the event that the results of the auction of Treasury bills having
the Index Maturity designated in the applicable Pricing Supplement are not
otherwise made available or 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 in a particular week, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, rounded to the nearest one-hundredth of a percent, with five
one-thousandths of a percent rounded upward, 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 Interest Determination Date of three leading primary
United States government securities dealers selected by the Calculation Agent
for the issue of Treasury bills with a remaining maturity closest to the Index
Maturity designated in the applicable Pricing Supplement; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting bid rates as mentioned in this sentence, the Treasury Rate with respect
to such Treasury Interest Determination Date will be the Treasury Rate in effect
on such Treasury Interest Determination Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on such date for Federal Funds as made available and subsequently
published in H.15(519) under the heading "Federal Funds (Effective)." In the
event that such rate has not been made available by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such Federal Funds Interest
Determination Date, the Federal Funds Rate will be the rate on such Federal
Funds Interest Determination Date as made available and subsequently published
in Composite Quotations under the heading "Federal Funds/Effective Rate." If
such rate is not made available in H.15(519) or in Composite Quotations by 3:00
P.M., New York City time, on such Calculation Date, then the Federal Funds Rate
for such Federal Funds Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates as of 9:00 A.M.,
New York City time, on such Federal Funds Interest Determination Date for the
last transaction in overnight Federal Funds arranged by three leading brokers of
Federal Funds transactions in New York City selected by the Calculation Agent;
provided, however, that if the brokers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Federal Funds Rate with
respect to such Federal Funds Interest Determination Date will be the Federal
Funds Rate in effect on such Federal Funds Interest Determination Date.
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PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread and/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, "Prime
Rate" means, with respect to any Prime Interest Determination Date, 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
pertaining to such Prime Interest 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
USPRIME1 Page (as defined below) as such bank's prime rate or base lending rate
as in effect for such Prime Interest Determination Date. If fewer than four such
rates but more than one such rate appear on the Reuters Screen USPRIME1 Page for
the Prime Interest Determination Date, the rate shall be the arithmetic mean of
the prime rates quoted on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Prime Interest 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
USPRIME1 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 Interest 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 Interest Determination Date will be the Prime
Rate in effect on such Prime Interest Determination Date. "Reuters Screen
USPRIME1 Page" means the display designated as page "USPRIME1" on the Reuters
Monitor Money Rates Service (or such other page as may replace the USPRIME1 page
on that service for the purpose of displaying prime rates or base lending rates
of major United States banks).
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, "J.J. Kenny
Rate" means, with respect to any J.J. Kenny Interest Determination Date, 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 pertaining
to such J.J. Kenny Interest Determination Date, the J.J. Kenny Rate shall be the
rate quoted by a successor indexing agent selected by the Company equalling 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)
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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 Interest 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).
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, "Eleventh
District Cost of Funds Rate" means, with respect to any Eleventh District Cost
of Funds Interest Determination Date, the rate equal to the monthly weighted
average cost of funds for the calendar month preceding such Eleventh District
Cost of Funds Interest Determination Date as set forth under the caption "11th
District" on Telerate Page 7058 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
Interest Determination Date, the Eleventh District Cost of Funds Rate for such
Eleventh District Cost of Funds Interest Determination Date shall be the monthly
weighted average cost of funds paid by member institutions of the Eleventh
Federal Home Loan Bank District that was most recently announced (the "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 Interest Determination Date, then
the Eleventh District Cost of Funds Rate for such Eleventh District Cost of
Funds Interest Determination Date will be the Eleventh District Cost of Funds
Rate in effect on such Eleventh District Cost of Funds Interest Determination
Date.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates (calculated by
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the CMT Rate for
Treasury bills on such date having the Index Maturity designated in the
applicable Pricing Supplement as made available and subsequently published in
H.15(519) under the heading "Treasury constant maturities" or, if not so made
available by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such CMT Interest Determination Date, as displayed on Telerate Page 7052
under the heading "Treasury Constant Maturities." If by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such CMT Interest Determination Date
the rate has not yet been made available in H.15(519) or displayed on Telerate
Page 7052, then the CMT Rate shall be calculated by the Calculation Agent and
shall be a yield to maturity (expressed as a bond equivalent, rounded to the
nearest one-hundredth of a percent, with five one-thousandths of a percent
rounded upward, 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 CMT Interest
Determination Date of three leading primary United States government securities
dealers selected by the Calculation Agent for the issue of Treasury bills with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement; provided, however, that if the dealers selected as aforesaid
by the Calculation Agent are not quoting bid rates as mentioned in this
sentence, the CMT Rate with respect
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to such CMT Interest Determination Date will be the CMT Rate in effect
immediately prior to such CMT Interest 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 Original Issue Date (or the date on which such Note otherwise
begins to accrue interest (if different from the Original 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 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.
CURRENCY INDEXED NOTES
General
The Company may from time to time offer Notes, the principal amount payable
at Maturity and/or the interest rate of which is determined by reference to the
rate of exchange between the currency or composite currency in which such Notes
are denominated (the "Denominated Currency") and the other currency or composite
currency specified as the Indexed Currency (the "Indexed Currency") in the
applicable Pricing Supplement, or as determined in such other manner as may be
specified in the applicable Pricing Supplement ("Currency Indexed Notes").
Unless otherwise specified in the applicable Pricing Supplement, holders of
Currency Indexed Notes will be entitled to receive (i) an amount in respect of
such Currency Indexed Notes exceeding the amount designated as the face amount
of the principal (the "Face Amount") of, and/or interest calculated at the
designated rate of interest on, such Currency Indexed Notes in the applicable
Pricing Supplement if, on the date of Maturity or upon the relevant Interest
Payment Date, as the case may be, the rate at which the Denominated Currency can
be exchanged for the Indexed Currency is greater than the rate of such exchange
designated as the Base Exchange Rate, expressed in units of the Indexed Currency
per one unit of the Denominated Currency, in the applicable Pricing Supplement
(the "Base Exchange Rate"), or (ii) an amount in respect of such Currency
Indexed Notes less than the Face Amount and/or interest calculated at such
designated interest rate of such Currency Indexed Notes if, at Maturity or upon
the relevant Interest Payment Date, as the case may be, the rate at which the
Denominated Currency can be exchanged for the Indexed Currency is less than such
Base Exchange Rate, in each case determined as described below under "Payment of
Principal and Interest." Information as to the relative historical value (which
information is not necessarily indicative of relative future value) of the
applicable Denominated Currency against the applicable Indexed Currency, any
exchange controls applicable to such Denominated Currency or Indexed Currency
and the U.S. federal income tax consequences of the
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purchase, ownership and disposition of Currency Indexed Notes will be set forth
in the applicable Pricing Supplement. See "Foreign Currency Risks."
Unless otherwise specified in the applicable Pricing Supplement, the term
"Exchange Rate Day" shall mean any day which is a Business Day in The City of
New York, and if the Denominated Currency or Indexed Currency is any currency or
composite currency other than the U.S. dollar, in the principal financial center
of the country of such Denominated Currency or Indexed Currency.
Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, the payment
of principal at Maturity and interest on Currency Indexed Notes on each Interest
Payment Date (until principal thereof is paid or made available for payment)
will be payable in the Denominated Currency (except in the circumstances of the
unavailability of such currency, as otherwise described under "Payment Currency"
above) in amounts calculated in the manner described below.
Unless otherwise specified in the applicable Pricing Supplement, principal
at Maturity, if indexed, will be payable in an amount equal to the Face Amount
of the Currency Indexed Note, plus or minus an amount of the Denominated
Currency determined by the determination agent specified in the applicable
Pricing Supplement (the "Determination Agent") by reference to the difference
between the Base Exchange Rate and the rate at which the Denominated Currency
can be exchanged for the Indexed Currency on the second Exchange Rate Day (the
"Determination Date") prior to the date of Maturity of such Currency Indexed
Note. Such rate of exchange shall be the highest bid of the open market spot
offer quotations for the Indexed Currency (spot bid quotations for the
Denominated Currency) obtained by the Determination Agent from the Reference
Dealers (as defined below) in The City of New York at 11:00 A.M., New York City
time, on the Determination Date, for an amount of Indexed Currency equal to the
Face Amount of such Currency Indexed Note multiplied by the Base Exchange Rate,
with settlement on the date of Maturity to be in the Denominated Currency (such
rate of exchange, as so determined and expressed in units of the Indexed
Currency per one unit of the Denominated Currency, is hereafter referred to as
the "Spot Rate"). If such quotations from the Reference Dealers are not
available on the Determination Date due to circumstances beyond the control of
the Company or the Determination Agent, the Spot Rate will be determined on the
basis of the most recently available quotations from the Reference Dealers. As
used herein, the term "Reference Dealers" shall mean the three banks or firms
specified as such in the applicable Pricing Supplement, or if any of them shall
be unwilling or unable to provide the requested quotations, such other major
money center bank or banks in The City of New York selected by the Determination
Agent to act as Reference Dealer or Dealers in replacement therefor. In the
absence of manifest error, the determination by the Determination Agent of the
Spot Rate and the principal amount of and interest on the Currency Indexed Notes
payable at Maturity thereof shall be final and binding on the Company and the
holders of such Currency Indexed Notes.
Unless otherwise specified in the applicable Pricing Supplement, on the
basis of the aforesaid determination by the Determination Agent and the formulae
and limitations set forth below, (i) if the Base Exchange Rate equals the Spot
Rate for any Currency Indexed Note, then the principal amount of such Currency
Indexed Note payable at Maturity would be equal to the Face Amount of such
Currency Indexed Note; (ii) if the Spot Rate exceeds the Base Exchange Rate
(i.e., the Denominated Currency has appreciated against the Indexed Currency
during the term of the Currency Indexed Note), then the principal amount so
payable would be greater than the Face Amount of such Currency Indexed Note up
to an amount equal to twice the Face Amount of such Currency Indexed Note; (iii)
if the Spot Rate is less than the Base Exchange Rate (i.e., the Denominated
Currency has depreciated against the Indexed Currency during the term of the
Currency Indexed Note) but is greater than one-half of the Base Exchange Rate,
then the principal amount so payable would be less than the Face Amount of such
Currency Indexed Note; and (iv) if the Spot Rate is less than or equal to
one-half of the Base Exchange
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Rate, then the Spot Rate will be deemed to be one-half of the Base Exchange Rate
and no principal amount of the Currency Indexed Note would be payable at
Maturity.
With respect to the payment of interest on each Interest Payment Date, if
indexed, the amount will be the Face Amount multiplied by the relevant interest
rate, indexed as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the formula
to be used by the Determination Agent to determine the principal amount of a
Currency Indexed Note payable at Maturity will be as follows:
As to principal, if the Spot Rate exceeds or equals the Base Exchange Rate,
the principal amount of a Currency Indexed Note payable at Maturity shall equal:
Face Amount + (Face Amount x Spot Rate - Base Exchange Rate)
------------------------------
Spot Rate
and if the Base Exchange Rate exceeds the Spot Rate, the principal amount of a
Currency Indexed Note payable at Maturity (which shall, in no event, be less
than zero) shall equal:
Face Amount - (Face Amount x Base Exchange Rate - Spot Rate)
------------------------------
Spot Rate
Unless otherwise specified in the applicable Pricing Supplement, if the
formulae set forth above are applicable to a Currency Indexed Note, the maximum
principal amount payable at Maturity in respect of such a Currency Indexed Note
would be an amount equal to twice the Face Amount and the minimum principal
amount payable would be zero.
OTHER INDEXED NOTES AND CERTAIN TERMS APPLICABLE TO ALL INDEXED NOTES
The Notes may be issued as Indexed Notes, other than Currency Indexed Notes,
the principal amount of which payable at Maturity or the interest (or premium,
if any) thereon, or both, may be determined by reference to the relationship
between two or more currencies, to the price of one or more specified securities
or commodities, to one or more securities or commodities exchange indices or
other indices or by other similar methods or formulae. The Pricing Supplement
relating to such an Indexed Note will describe, as applicable, the method by
which the amount of interest payable on any Interest Payment Date and the amount
of principal payable at Maturity in respect of such Indexed Note will be
determined, the U.S. federal income tax consequences of the purchase, ownership
and disposition of such Notes, certain risks associated with an investment in
such Notes and other information relating to such Notes. See "Foreign Currency
Risks."
Unless otherwise specified in the applicable Pricing Supplement, the maximum
principal amount payable at Maturity in respect of any Indexed Note will be an
amount equal to twice the Face Amount of such Note and the minimum principal
amount so payable will be zero.
Unless otherwise specified in the applicable Pricing Supplement, (i) for the
purpose of determining whether holders of the requisite principal amount of
Securities outstanding under the 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.
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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. If the interest rate of a Note is indexed it may result in an
interest rate that is less than that payable on a conventional fixed rate debt
security issued at the same time, including the possibility that no interest
will be paid, and, if the principal amount of a Note is indexed, the principal
amount payable at Maturity may be less than the original purchase price of such
Note, including the possibility that no principal will be paid. The risks
entailed by an investment in Indexed Notes depend on a number of factors
including supply and demand for the particular commodity and economic and
political events over which the Company has no control. To the extent the
formula used to determine the principal amount of, or interest payable with
respect to, any Indexed Notes contains a multiple or leverage factor, the effect
of any change in the applicable currency, commodity, security or index will be
increased. 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 of fluctuations in
the price or rates of exchange that may occur during the term of any Indexed
Notes. The credit ratings assigned to the Company's medium-term note program are
a reflection of the Company's credit status and in no way are a reflection of
the potential impact of the factors discussed above, or any other factors, on
the market value of the Notes. Accordingly, prospective investors should consult
their own financial and legal advisors as to the risks entailed by an investment
in Indexed Notes. Indexed Notes are not an appropriate investment for investors
who are unsophisticated with respect to securities, commodities and/or foreign
currency transactions.
DUAL CURRENCY NOTES
The Company may from time to time offer 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 the Maturity Date, 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
the Maturity Date, on 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
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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.
The U.S. federal income tax consequences of the purchase, ownership and
disposition of Dual Currency Notes will be set forth in the applicable Pricing
Supplement.
SUBSEQUENT INTEREST PERIODS
The Pricing Supplement relating to each Note will indicate whether the
Company has the option with respect to such Note to reset the interest rate, in
the case of a Fixed Rate Note, or to reset the Spread and/or Spread Multiplier,
in the case of a Floating Rate Note, and, if so, the date or dates on which such
interest rate or such Spread and/or Spread Multiplier, as the case may be, may
be reset (each an "Optional Reset Date"). If the Company has such option with
respect to any Note, the following procedures shall apply, unless modified as
set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise at least 45 but not more than 60 days prior to an
Optional Reset Date for such Note. Not later than 40 days prior to such Optional
Reset Date, the Trustee will mail to the holder of such Note a notice (the
"Reset Notice") setting forth (i) the election of the Company to reset the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, (ii) such new interest rate or
such new Spread and/or Spread Multiplier, as the case may be, and (iii) 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 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 and/or
Spread Multiplier, as the case may be, shall take effect automatically, and,
except as modified by the Reset Notice and as described in the next paragraph,
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 Note, the Company may, at its option, revoke the interest rate,
in the case of a Fixed Rate Note, or the Spread and/or Spread Multiplier, in the
case of a Floating Rate Note, provided for in the Reset Notice and establish an
interest rate, in the case of a Fixed Rate Note, or a Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, that is higher than the
interest rate or Spread and/or Spread Multiplier, as the case may be, provided
for in the Reset Notice, for the Subsequent Interest Period commencing on such
Optional Reset Date by causing the Trustee to transmit notice of such higher
interest rate or higher Spread and/or Spread Multiplier, as the case may be, to
the holder of such Note. Such notice shall be irrevocable. All Notes with
respect to which the interest rate or Spread and/or Spread Multiplier is reset
on an Optional Reset Date and with respect to which the holders of such Notes
have not tendered such Notes for repayment (or have validly revoked any such
tender) pursuant to the next succeeding paragraph will bear such higher interest
rate, in the case of a Fixed Rate Note, or higher Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, for the Subsequent Interest
Period.
If the Company elects to reset the interest rate or the Spread and/or Spread
Multiplier of a Note as described above, the holder of such Note will have the
option to elect repayment of such Note by the Company on any Optional Reset Date
at a price equal to the aggregate principal amount thereof outstanding on, plus
any interest accrued to, such Optional Reset Date. In order for a Note to be so
repaid on an Optional Reset Date, the holder thereof must follow the procedures
set forth below under "Redemption and Repayment" for optional repayment, except
that the period for delivery of such Note or notification to the Trustee 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 Note for repayment pursuant to a Reset
Notice may,
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by written notice to the Trustee, revoke any such tender for repayment until the
close of business on the tenth day prior to such Optional Reset Date.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note (other than an Amortizing Note)
will indicate whether the Company has the option to extend the Stated Maturity
of such Note for one or more periods (each an "Extension Period") up to but not
beyond the date (the "Final Maturity Date") set forth in such Pricing
Supplement. If the Company has such option with respect to any Note (other than
an Amortizing Note), the following procedures shall apply, unless modified as
set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to a Note (other than an
Amortizing Note) by notifying the Trustee of such exercise at least 50 but not
more than 60 days prior to the Stated Maturity of such Note in effect prior to
the exercise of such option (the "Original Stated Maturity"). Not later than 40
days prior to the Original Stated Maturity, the Trustee will mail to the holder
of such Note a notice (the "Extension Notice") relating to such Extension
Period, setting forth (i) the election of the Company to extend the Original
Stated Maturity, (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 and/or Spread Multiplier 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 transmittal by the Trustee of an Extension Notice
to the holder of a Note, the Original Stated Maturity shall be extended
automatically, and, except as modified by the Extension Notice and as described
in the next paragraph, such Note will have the same terms as prior to the
transmittal of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Original
Stated Maturity for a Note, the Company may, at its option, revoke the interest
rate, in the case of a Fixed Rate Note, or the Spread and/or Spread Multiplier,
in the case of a Floating Rate Note, provided for in the Extension Notice and
establish an interest rate, in the case of a Fixed Rate Note, or a Spread and/or
Spread Multiplier, in the case of a Floating Rate Note, that is higher than the
interest rate or Spread and/or Spread Multiplier, as the case may be, provided
for in the Extension Notice, for the Extension Period by causing the Trustee to
transmit notice of such higher interest rate or higher Spread and/or Spread
Multiplier, as the case may be, to the holder of such Note. Such notice shall be
irrevocable. All Notes with respect to which the Stated Maturity is extended and
with respect to which the holders of such Notes have not tendered such Notes for
repayment (or have validly revoked any such tender) pursuant to the next
succeeding paragraph will bear such higher interest rate, in the case of a Fixed
Rate Note, or higher Spread and/or Spread Multiplier, in the case of a Floating
Rate Note, for the Extension Period.
If the Company elects to extend the Stated Maturity of a Note, the holder of
such Note will have the option to elect repayment of such Note by the Company on
the Original Stated Maturity at a price equal to the aggregate principal amount
thereof outstanding plus any accrued interest to such date. In order for a Note
to be so repaid on the Original Stated Maturity, the holder thereof must follow
the procedures set forth below under "Redemption and Repayment" for optional
repayment, except that the period for delivery of such Note or notification to
the Trustee shall be at least 25 but not more than 35 days prior to the Original
Stated Maturity and except that a holder who has tendered a Note for repayment
pursuant to an Extension Notice may, by written notice to the Trustee, revoke
any such tender for repayment until the close of business on the tenth day prior
to the Original Stated Maturity.
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RENEWABLE NOTES
The Company may from time to time offer 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 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).
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."
REDEMPTION AND REPAYMENT
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to its Stated Maturity or that such Note will be
redeemable, in whole or in part, at the option of the Company on a date or dates
specified prior to such Stated Maturity at a price or prices, set forth in the
applicable Pricing Supplement, together with accrued interest to the date of
redemption. Unless otherwise specified in the applicable Pricing Supplement, the
Notes, other than Amortizing Notes, will not be subject to any sinking fund. The
Company may redeem any of the Notes that are redeemable and remain outstanding,
either in whole or from time to time in part, upon not less than 30 nor more
than 60 days' notice. Unless otherwise specified in the applicable Pricing
Supplement, if less than all of the Notes with like tenor and terms are to be
redeemed, the Notes to be redeemed shall be selected by the Trustee by such
method as the Trustee shall deem fair and appropriate.
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The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid at the option of the holder prior to its Stated Maturity
or that such Note will be repayable at the option of the holder thereof on a
date or dates specified prior to its Stated Maturity at a price or prices set
forth in the applicable Pricing Supplement, together with accrued interest to
the date of repayment.
Unless otherwise specified in the applicable Pricing Supplement, in order
for a Note to be repaid at the option of the holder thereof, the Company must
receive at least 30 days but not more than 45 days prior to the repayment date
the Note with the form entitled "Option to Elect Repayment" on the reverse of or
otherwise accompanying the Note duly completed. Exercise of the repayment option
by the holder of a Note shall be irrevocable, except as otherwise described
above under "Description of Notes--Subsequent Interest Periods" and "Description
of Notes--Extension of Maturity." The repayment option may be exercised by the
holder of a Note for less than the aggregate principal amount of the Note then
outstanding provided that the principal amount of the Note remaining outstanding
after repayment is an authorized denomination.
The Depositary's nominee will be the holder of a Global Security and
therefore will be the only entity that can exercise a right to repayment. See
"Description of Notes--Book-Entry Notes" below. In order to ensure that the
Depositary's nominee will timely exercise a right to repayment with respect to a
particular beneficial interest in a Global Security, the beneficial owner of
such interest must instruct the broker or other direct or indirect participant
through which it holds a beneficial interest in such Global Security 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 Global
Security in order to ascertain the cut-off time by which such an instruction
must be given in order for timely notice to be delivered to the Depositary.
REPURCHASE
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held or resold or cancelled by the Trustee.
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 Note, its Interest
Payment Dates or any other matter relating thereto may be modified by the terms
as specified under "Other Provisions" in the applicable Pricing Supplement.
BOOK-ENTRY NOTES
Global Securities will be deposited with, or on behalf of, the Depositary
and registered in the name of the Depositary's nominee. Except as set forth
below, a Global Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor of the Depositary or a nominee of such successor.
Unless otherwise specified in the applicable Pricing Supplement, DTC will be the
Depositary.
DTC has advised the Company and the Agent that it is a limited-purpose trust
company organized under the laws of the State of New York, 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.
DTC was created to hold securities for its participants and to facilitate the
clearance and
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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. DTC's
participants include securities brokers and dealers (including the Agent), banks
(including the initial Paying Agent), trust companies, clearing corporations and
certain other organizations, some of whom (or their representatives, or both)
own DTC. Access to DTC'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.
Persons who are not participants may beneficially own securities held by DTC
only through participants.
Principal and interest payments on the Notes represented by one or more
Global Securities will be made by the Company to the Depositary or its nominee,
as the case may be, as the registered owner of the related Global Security or
Securities. The Company expects that the Depositary or its nominee, upon receipt
of any payment of principal or interest in respect of Global Securities, will
credit immediately the accounts of the related participants with payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interests in such Global Securities as shown on the records of the
Depositary. Neither the Company nor the Trustee or any Paying Agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of Global Securities,
or for maintaining, supervising or reviewing any records relating to such
beneficial interests. The Company also expects that payments by participants to
owners of beneficial interests in Global Securities held through such
participants will be governed by standing customer instructions and customary
practices, as is the case with securities registered in "street name." Such
instructions will be the responsibility of such participants.
If an issue of Notes is denominated in a currency other than the U.S.
dollar, the Company will make payments of principal and any interest in the
currency in which the Notes are denominated (the "foreign currency") or in U.S.
dollars. DTC has elected to have all such payments of principal and interest in
U.S. dollars unless notified by any of its participants through which an
interest in the Notes is held that it elects, in accordance with and to the
extent permitted by the applicable Pricing Supplement and the Note, to receive
such payment of principal or interest in the foreign currency. On or prior to
the third Business Day after the record date for payment of interest and twelve
days prior to the date for payment of principal, such participant shall notify
DTC of (i) its election to receive all, or the specified portion, of such
payment in the foreign currency and (ii) its instructions for wire transfer of
such payment to a foreign currency account.
DTC will notify the Paying Agent on or prior to the fifth Business Day after
the record date for payment of interest and ten days prior to the date for
payment of principal of the portion of such payment to be received in the
foreign currency and the applicable wire transfer instructions, and the Paying
Agent shall use such instructions to pay the participants directly. If DTC does
not so notify the Paying Agent, it is understood that only U.S. dollar payments
are to be made. The Paying Agent shall notify DTC on or prior to the second
Business Day prior to the payment date of the conversion rate to be used and the
resulting U.S. dollar amount to be paid per $1,000 face amount. In the event
that the Paying Agent's quotation to convert the foreign currency into U.S.
dollars is not available, the Paying Agent shall notify DTC's Dividend
Department that the entire payment is to be made in the foreign currency. In
such event, DTC will ask its participants for payment instructions and forward
such instructions to the Paying Agent and the Paying Agent shall use such
instructions to pay the participants directly.
If the Depositary is at any time unwilling, unable or ineligible to continue
as depositary and a successor depositary is not appointed by the Company within
90 days, the Company will issue Notes in certificated form in exchange for
beneficial interests in the Global Securities. In addition, the Company may at
any time determine not to have its Notes represented by one or more Global
Securities, and, in such event, will issue Notes in certificated form in
exchange for beneficial interests in Global Securities. In any such instance, an
owner of a beneficial interest in a Global Security will be entitled to physical
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delivery in certificated form of Notes equal in principal amount to such
beneficial interest and to have such Notes registered in its name. Notes so
issued in certificated form will be issued in denominations of $1,000 or any
amount in excess thereof that is an integral multiple of $1,000 and will be
issued in registered form only, without coupons. Certain provisions described in
this Prospectus Supplement pertaining to Global Securities, including without
limitation, provisions regarding the payment of principal and interest thereon,
may not be applicable to Notes in certificated form. In the event Notes in
certificated form are issued, the Company will provide supplemental information
setting forth the terms applicable to such Notes to each holder thereof.
A further description of the Depositary's procedures with respect to Global
Securities is set forth in the accompanying Prospectus under "Description of
Securities--Global Securities."
IMPORTANT CURRENCY EXCHANGE INFORMATION
Each purchaser of a Note is required to pay for such Note in the Specified
Currency thereof. Currently, there are limited facilities in the United States
for conversion of U.S. dollars into foreign currencies and vice versa, and banks
do not generally offer non-U.S. dollar checking or savings account facilities in
the United States. However, if requested by a prospective purchaser of Notes
denominated in a Specified Currency other than U.S. dollars, the applicable
Agent will arrange for the conversion of U.S. dollars into such Specified
Currency to enable the purchaser to pay for such Notes. Such request must be
made on or before the fifth Business Day preceding the date of delivery of the
Notes, or by such other date as is determined by such Agent. Each such
conversion will be made by the applicable Agent on such terms and subject to
such conditions, limitations and charges as such Agent may from time to time
establish in accordance with its regular foreign exchange practice. All costs of
any such exchange will be borne by the purchasers of the Notes requesting such
conversion.
FOREIGN CURRENCY RISKS
GOVERNING LAW AND JUDGMENTS
The Notes will state that they will be governed by and construed in
accordance with the laws of the State of New York. Courts in the United States
have not customarily rendered judgments for money damages denominated in any
currency other than the U.S. dollar. The Judiciary Law of the State of New York
provides, however, that judgment rendered in 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
a rate of exchange prevailing on the date of the entry of the judgment or
decree.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in 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 a Currency Indexed Note 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
(or, in the case of each Currency Indexed Note, the rate of exchange between the
Denominated Currency and the Indexed Currency for such Currency Indexed Note),
the possibility of significant changes in rates of exchange between U.S. dollars
and such Specified Currency (or, in the case of each Currency Indexed Note,
changes in rates of exchange between the Denominated Currency and the Indexed
Currency for such Currency Indexed Note) resulting from official redenomination
with respect to such Specified Currency (or, in the case of each Currency
Indexed Note, with respect to the Denominated Currency or the Indexed Currency
therefor)
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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, 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 or any Currency Indexed
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 loss to the investor on a U.S. dollar basis. Similarly, depreciation of the
Denominated Currency with respect to a Currency Indexed Note against the
applicable Indexed Currency would result in the principal amount payable with
respect to such Currency Indexed Note at the date of Maturity being less than
the Face Amount of such Currency Indexed Note which, in turn, would decrease the
effective yield of such Currency Indexed Note below its stated interest rate and
could also result in a loss to the investor. See "Description of Notes--
Currency Indexed Notes."
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 "Description of Notes--Payment Currency" and
"Description of Notes--Currency Indexed Notes--Payment of Principal and
Interest."
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT, AND ANY
PRICING SUPPLEMENT WILL NOT, DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES
DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A CURRENCY
OR COMPOSITE CURRENCY OTHER THAN U.S. DOLLARS, AND THE COMPANY DISCLAIMS ANY
RESPONSIBILITY TO ADVISE PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO
TIME. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH NOTES. SUCH NOTES ARE
NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT
TO FOREIGN CURRENCY TRANSACTIONS.
Unless otherwise specified in the applicable Pricing Supplement, no Foreign
Currency Note will be sold in or to residents of the country issuing the
Specified Currency of such Foreign Currency Note. The information set forth in
this Prospectus Supplement is directed to prospective purchasers who are United
States residents, and the Company disclaims any responsibility to advise
prospective purchasers who are residents of countries other than the United
States with respect to any matters that may affect the purchase, holding or
receipt of payments of principal (and premium, if any) or interest on such
Foreign Currency Notes. Such persons should consult their own counsel with
regard to such matters.
Pricing Supplements relating to Foreign Currency Notes or Currency Indexed
Notes will contain information concerning historical exchange rates for the
applicable Specified Currency or Denominated Currency against the U.S. dollar or
other relevant currency (including, in the case of Currency Indexed Notes, the
applicable Indexed Currency), a description of such currency or currencies and
any exchange controls affecting such currency or currencies. The information
therein concerning exchange rates is
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furnished as a matter of information only and should not be regarded as
indicative of the range of or trends in fluctuations in currency exchange rates
that may occur in the future.
CERTAIN FEDERAL TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Notes as of the
date hereof. It deals only with Notes held as capital assets and does not deal
with persons in special tax situations, such as financial institutions,
insurance companies, tax-exempt organizations, dealers in securities or
currencies, persons holding Notes as a hedge against currency risks or as a
position in a "straddle" for tax purposes, or persons whose functional currency
is not the U.S. dollar. It also does not deal with state, local or foreign tax
consequences or with holders other than original purchasers. This summary is
based upon the provisions of the Code and regulations, rulings and judicial
decisions thereunder as of the date hereof, which authorities may be repealed,
revoked or modified, possibly with retroactive effect, so as to result in
federal income tax consequences different from those discussed below.
Persons considering the purchase of the Notes should consult their tax
advisors concerning the application of United States federal income tax laws to
their particular situations as well as any consequences arising under the laws
of any state, local or foreign taxing jurisdiction. The material federal income
tax consequences of Indexed Notes, Currency Indexed Notes, Dual Currency Notes,
or Notes containing terms that result in consequences other than those described
below will be addressed in the applicable pricing supplement.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source. As used
herein, the term "non-U.S. Holder" means a holder of a Note that is not a U.S.
Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST ON THE NOTES
Interest paid on a Note (whether in U.S. dollars or in other than U.S.
dollars) that is not a Discount Note (as defined below) will generally be
taxable to a U.S. Holder as ordinary interest income at the time it accrues or
is received, in accordance with the U.S. Holder's method of accounting for
federal income tax purposes.
DISCOUNT NOTES
The following discussion is a summary of the principal United States federal
income tax consequences of the ownership and disposition of Discount Notes (as
defined below) by U.S. Holders. Additional rules applicable to Discount Notes
that are denominated in a Specified Currency (as defined below) other than the
U.S. dollar, or have payments of interest or principal determined by reference
to the value of one or more currencies or currency units other than the U.S.
dollar, are described under "Foreign Currency Notes" below.
A Note with an "issue price" that is less than its "stated redemption price
at maturity" generally will carry original issue discount equal to such
difference ("OID") for United States federal income tax purposes (a "Discount
Note"), unless such difference is less than a specified de minimis amount. In
general, the stated redemption price at maturity of a Discount Note is the total
of all payments required to be made under the Discount Note other than
"qualified stated interest" payments. "Qualified stated
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interest" is stated interest that is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually at a single fixed
rate of interest. In addition, qualified stated interest includes stated
interest with respect to a variable rate debt instrument that is unconditionally
payable at least annually at a single qualified floating rate or a rate that is
determined using a single fixed formula based on one or more qualified floating
rates.
A U.S. Holder of Discount Notes is required to include qualified stated
interest in income at the time it is received or accrued, in accordance with
such holder's method of accounting. In addition, U.S. Holders of Discount Notes
that mature more than one year from the date of issuance will be required to
include OID in income for United States federal income tax purposes as it
accrues, in accordance with a constant yield method, before the receipt of cash
payments attributable to such income, but such holders will not be required to
include separately in income cash payments received on such Notes, even if
denominated as interest, to the extent they do not constitute qualified stated
interest.
All stated interest on a Note that matures one year or less from its date of
issuance (a "short-term Discount Note") is included in its stated redemption
price at maturity. In general, a U.S. Holder who uses the cash method of tax
accounting is not required to accrue OID on a short-term Discount Note unless
such holder elects to do so. U.S. Holders who report income on the accrual
method, cash method U.S. Holders who elect to include OID on short-term Discount
Notes in income, and certain other holders, including banks and dealers in
securities, are required to include OID (or, alternatively, acquisition
discount) on such short-term Discount Notes on a straight-line basis, unless an
election is made to accrue the OID according to a constant yield method. In the
case of a U.S. Holder who is not required, and does not elect, to include OID in
income currently, (i) any gain realized on the sale, exchange or retirement of a
short-term Discount Note will be ordinary interest income to the extent of the
OID accrued on a straight-line basis (or, alternatively, upon election, under
the constant yield method) through the date of sale, exchange or retirement and
(ii) such U.S. Holder will be required to defer the deduction of all or a
portion of any interest paid on indebtedness incurred to purchase or carry
short-term Discount Notes until a corresponding amount of OID is included in
such holder's income.
U.S. Holders are permitted to elect to include all interest on a Note,
including stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium, under a constant yield method.
U.S. Holders considering such an election should consult their tax advisor.
MARKET DISCOUNT AND ACQUISITION PREMIUM
A Note (other than a Discount Note) purchased for an amount that is less
than its stated redemption price at maturity or, in the case of a Discount Note,
its revised issue price, will have "market discount" equal to such difference.
Under the market discount rules, a U.S. Holder will be required to treat any
gain recognized on the sale, exchange, retirement or other disposition of a Note
as ordinary income to the extent of the lesser of (i) the amount of such gain or
(ii) the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such disposition. Market
discount will be considered to accrue ratably during the period from the date of
acquisition to the Note's maturity, unless the U.S. Holder elects to accrue
market discount on the basis of a constant interest rate.
A Discount Note purchased for an amount that is greater than its revised
issue price, but less than or equal to the sum of all amounts payable on the
Note after the purchase date (other than qualified stated interest), will have
"acquisition premium" equal to such excess, which reduces the OID with respect
to such Note for any taxable year by a certain fraction.
AMORTIZABLE BOND PREMIUM
A Note purchased for an amount greater than its stated redemption price at
maturity will have "amortizable bond premium" equal to such excess, which a U.S.
Holder may elect to amortize, using a constant yield method.
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SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a U.S. Holder generally
will recognize capital gain or loss equal to the difference between the amount
realized and such holder's adjusted tax basis in the Note, except to the extent
attributable to accrued interest or market discount. Such gain or loss will be
long-term capital gain or loss if the holding period for such Note exceeds one
year. A U.S. Holder's adjusted tax basis in a Note generally will equal the cost
of the Note to such holder, increased by the amounts of any market discount, OID
and de minimis OID previously included in income by the holder with respect to
such Note and reduced by any amortized bond premium and any principal payments
received by the U.S. Holder and, in the case of a Discount Note, by the amounts
of any other payments that do not constitute qualified stated interest.
FOREIGN CURRENCY NOTES
The following discussion summarizes the principal United States federal
income tax consequences to a U.S. Holder of the ownership and disposition of
certain Notes (other than Indexed Notes, Currency Indexed Notes and Dual
Currency Notes) that are denominated in a Specified Currency other than the U.S.
dollar or the payments of interest or principal on which are payable in one or
more currencies or currency units other than the U.S. dollar (a "Foreign
Currency Note"). Such Foreign Currency Notes also may be subject to the rules
discussed above regarding original issue discount, market discount, acquisition
premium, etc.
PAYMENTS OF INTEREST ON FOREIGN CURRENCY NOTES
A U.S. Holder who uses the cash method of accounting for federal income tax
purposes and who receives a payment of qualified stated interest on a Foreign
Currency Note will be required to include in income the U.S. dollar value of the
foreign currency payment (determined at the spot rate on the date such payment
is received or paid) regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the U.S. Holder's
tax basis in such foreign currency. No exchange gain or loss will be recognized
with respect to the receipt of such payment. A U.S. Holder who uses the accrual
method of accounting for federal income tax purposes, or who otherwise is
required to accrue interest prior to receipt (e.g., under the OID rules), will
be required to include in income the U.S. dollar value of the amount of interest
income (including OID (as adjusted for acquisition premium, if any) or market
discount and reduced by amortizable bond premium to the extent applicable) that
has accrued and is otherwise required to be taken into account with respect to a
Foreign Currency Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
rate of exchange on the last day of the taxable year.
A U.S. Holder will recognize exchange gain or loss (which will be treated as
ordinary income or loss) with respect to accrued interest income on the date
such income is received.
Rules similar to those described above apply in the case of OID, market
discount and amortizable bond premium.
SALE, EXCHANGE OR RETIREMENT OF FOREIGN CURRENCY NOTES
A U.S. Holder's tax basis in, and amount realized on the sale of, a Foreign
Currency Note, and the amount of any subsequent adjustment to the holder's tax
basis, will be the U.S. dollar value of the
S-33
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foreign currency amount paid for such Foreign Currency Note, or of the foreign
currency amount of the adjustment, determined on the date of such purchase or
adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note will be ordinary income or loss to the extent it is attributable
to fluctuations in currency exchange rates.
A U.S. Holder will have a tax basis in any foreign currency received on the
sale, exchange or retirement of a Foreign Currency Note equal to the U.S. dollar
value of such foreign currency, determined at the time of such sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of foreign currency (including its exchange for U.S. dollars or its
use to purchase Foreign Currency Notes) will be ordinary income or loss.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current federal income tax law, information reporting and a 31% backup
withholding tax are required with respect to certain interest and principal
payments made to, and the proceeds of sales before maturity by, certain holders
(other than corporations) if such persons fail to supply taxpayer identification
numbers and other information. Amounts withheld under the backup withholding
rules would be allowed as a refund or a credit against the U.S. Holder's federal
income tax provided that the required information is furnished to the Internal
Revenue Service (the "Service").
NON-U.S. HOLDERS
A non-U.S. Holder will generally not be subject to U.S. federal income
taxes, including withholding taxes, on payments of principal, premium, if any,
or interest (including OID, if any) on a Note or coupon, or any gain arising
from the sale or disposition of a Note or coupon, provided that (i) any such
income is not effectively connected with the conduct of a trade or business
within the U.S., (ii) such non-U.S. Holder is not a person who owns (directly or
by attribution) ten percent or more of the total combined voting power of all
classes of stock of the Company, (iii) with respect to any gain, such non-U.S.
Holder (if an individual) is not present in the U.S. 183 days or more during the
taxable year of the disposition and does not have a "tax home" (as defined in
section 911(d)(3) of the Code) in the U.S. and (iv) required certification of
the non-U.S. status of the beneficial owner is provided to the Company or its
agents.
The 31% "backup" withholding and information reporting requirements will
generally not apply to payments by the Company or its agents of principal,
premium, if any, and interest on a Note, and to proceeds of the sale or
redemption of a Note before maturity, with respect to a non-U.S. Holder that
provides the Company or its agent with the certification of non-U.S. status.
A Note held by an individual who at death is not a citizen or resident of
the United States, as defined for estate tax purposes, will not be includible in
the individual's gross estate for purposes of the United States federal estate
tax if the individual did not own actually or constructively ten percent or more
of the total combined voting power of all classes of stock of the Company and
interest on the Note would not have been effectively connected with a United
States trade or business of the individual if such interest were received by the
decedent at the time of his or her death.
Non-U.S. Holders of Notes should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available. Any amounts withheld from a payment
to a non-U.S. Holder under the backup withholding rules will be allowed as a
credit against such holder's U.S. federal income tax liability and may entitle
such holder to a refund, provided that the required information is furnished to
the Service.
S-34
<PAGE>
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through
Smith Barney Inc., Lehman Brothers, Lehman Brothers Inc. (including its
affiliate Lehman Government Securities Inc.), Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and
Morgan Stanley & Co. Incorporated, as agents (the "Agents"), all of which have
agreed to use their reasonable best efforts to solicit purchases of the Notes.
The Company also may sell Notes to an Agent, as principal. Unless otherwise
indicated in the applicable Pricing Supplement, a Note sold to an Agent as
principal will be purchased by such Agent at a price equal to 100% of the
principal amount thereof less a percentage equal to the commission applicable to
an agency sale of a note of identical maturity. Such Notes may be resold to
investors and other purchasers from time to time at market prices prevailing at
the time of sale, at prices related to such prevailing prices, at a fixed price
or prices, which may be changed, or at negotiated prices. The Agents may sell
Notes that they have purchased as principal to other dealers and such Notes may
be sold at a discount which, unless otherwise specified in the applicable
Pricing Supplement, will not exceed the discount to be received by such Agents
from the Company. After the initial public offering of the Notes, the public
offering price (in the case of Notes to be resold at a fixed public offering
price), the concession and the discount may be changed. The Company reserves the
right to sell Notes directly on its own behalf, by itself or through an
affiliate, in those jurisdictions where authorized to do so. Notes also may be
offered through other agents, which offerings will be on substantially the same
terms and conditions as those described above for offerings through the Agents.
In such case, the names of the other agents and any terms of such agency which
differ from those described herein will be set forth in a Pricing Supplement.
The Company will have the sole right to accept offers to purchase Notes and may
reject any proposed purchase of Notes in whole or in part. Each Agent will have
the right, in its discretion reasonably exercised, to reject any proposed
purchase of Notes through it in whole or in part. The Company will pay each
Agent a commission in the form of a discount ranging from 0.125% to 0.750% of
the principal amount of Notes sold through such Agent depending upon Note
maturity. Commissions with respect to Notes with Stated Maturities in excess of
30 years that are sold through an Agent will be negotiated between the Company
and such Agent at the time of such sale. No commission will be payable on any
sales made directly by the Company.
Payment of the purchase price of the Notes will be required to be made in
immediately available funds in New York City on the date of settlement.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Securities Act, or to contribute to the payments the
Agents may be required to make in respect thereof, and will reimburse those
firms for certain legal and other expenses incurred by them in connection with
the offer and sale of the Notes.
The Agents have advised the Company that they may make a market in the Notes
as permitted by applicable laws and regulations; however, the Agents are not
obligated to do so. There can be no assurance that there will be a secondary
market for the Notes.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Securities pursuant to the Indenture
referred to in the Prospectus.
The Agents and certain of their affiliates engage in transactions (which may
include commercial banking transactions) with and perform services for the
Company or one or more of its affiliates in the ordinary course of business.
SBI is a member of the NASD and an affiliate of the Company. Accordingly,
offers and sales by SBI of the Notes will conform with the requirements set
forth in any applicable sections of Schedule E to the By-Laws of the NASD.
S-35
<PAGE>
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the Company
by Charles O. Prince, III, Esq., as counsel for the Company, 388 Greenwich
Street, New York, New York 10013 and for the Agents by Dewey Ballantine, 1301
Avenue of the Americas, New York, New York 10019. Mr. Prince, Executive Vice
President, General Counsel and Secretary of the Company, beneficially owns, or
has rights to acquire under Travelers Group Inc. employee benefit plans, an
aggregate of less than 1% of the common stock of Travelers Group Inc. Dewey
Ballantine has from time to time acted as counsel for Travelers Group Inc. and
certain of its subsidiaries and may do so in the future.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 31, 1995 and 1994, and for each of the years in the three-year period
ended December 31, 1995, included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, have been incorporated by reference
herein, in reliance upon the report (also incorporated by reference herein) of
KPMG Peat Marwick LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP covering the December 31, 1995 consolidated financial
statements and schedules refers to changes in the Company's method of accounting
for certain investments in debt and equity securities in 1994 and methods of
accounting for postretirement benefits other than pensions and accounting for
postemployment benefits in 1993.
S-36
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NO DEALER, SALESPERSON OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION, OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS OR THE
DOCUMENTS INCORPORATED BY REFERENCE $950,000,000
HEREIN OR THEREIN CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS, AND, IF GIVEN COMMERCIAL CREDIT
OR MADE, SUCH INFORMATION OR COMPANY
REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY AGENT. NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE ACCOMPANYING MEDIUM-TERM NOTES, SEVENTH SERIES
PROSPECTUS CONSTITUTES AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY,
ANY SECURITIES OTHER THAN THOSE TO WHICH
IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THOSE
TO WHICH IT RELATES IN ANY STATE TO ANY -------------------
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH PROSPECTUS SUPPLEMENT
STATE. THE DELIVERY OF THIS PROSPECTUS JULY 18, 1996
SUPPLEMENT AND THE ACCOMPANYING (INCLUDING PROSPECTUS
PROSPECTUS AT ANY TIME DOES NOT IMPLY DATED FEBRUARY 2, 1996)
THAT THE INFORMATION CONTAINED IN EITHER
IS CORRECT AS OF ANY TIME SUBSEQUENT TO -------------------
ITS DATE.
----------------
TABLE OF CONTENTS
PAGE
---- SMITH BARNEY INC.
PROSPECTUS SUPPLEMENT LEHMAN BROTHERS
MERRILL LYNCH & CO.
Ratio of Earnings to Fixed Charges...S-3 J.P. MORGAN & CO.
Description of Notes.................S-3 MORGAN STANLEY & CO.
Important Currency Exchange INCORPORATED
Information.........................S-29
Foreign Currency Risks..............S-29
Certain Federal Tax Consequences....S-31
Plan of Distribution................S-35
Legal Opinions......................S-36
Experts.............................S-36
PROSPECTUS
Available Information..................2
Incorporation of Certain Documents by
Reference............................3
The Company............................4
Use of Proceeds........................4
Ratio of Earnings to Fixed Charges.....4
Description of Securities..............5
Plan of Distribution..................11
ERISA Matters.........................12
Experts...............................12
Legal Matters.........................13
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