PROSPECTUS SUPPLEMENT
(To Prospectus dated December 20, 1995)
$2,500,000,000
CHRYSLER FINANCIAL CORPORATION
Medium-Term Notes, Series Q
Due 9 Months or More From Date of Issue
----------------
Chrysler Financial Corporation (the "Company") may offer from time to
time its Medium-Term Notes, Series Q (the "Notes") with an aggregate initial
public offering price or purchase price of up to $2,500,000,000 or the
equivalent thereof in one or more foreign or composite currencies, subject to
reduction as a result of the sale of other securities of the Company. Each Note
will mature nine months or more from its date of issue and may be subject to
redemption at the option of the Company or repayment at the option of the
Holder thereof, in each case, in whole or in part, prior to maturity, as set
forth therein and specified in a pricing supplement to this Prospectus
Supplement (each, a "Pricing Supplement"). Each Note will be denominated in the
currency designated by the Company (the "Specified Currency"). Unless otherwise
described in the applicable Pricing Supplement, Notes denominated in U.S.
Dollars will be issued in denominations of $1,000 or any integral multiple of
$1,000. If the Notes are to be denominated in one or more foreign currencies or
currency units, then the provisions with respect thereto (including authorized
denominations) and currency exchange rate information will be set forth in the
applicable Pricing Supplement.
Each Note will bear interest from the date of original issuance at a
fixed rate (a "Fixed Rate Note"), which may be zero in the case of certain
Notes issued at a price representing a discount from the principal amount
payable at maturity, or at a floating rate (a "Floating Rate Note") determined
by reference to one or more of the Commercial Paper Rate, LIBOR, the Treasury
Rate, the CD Rate, the Federal Funds Rate, the Prime Rate or such other base
rate or interest rate formula as may be specified in the applicable Pricing
Supplement, and may be adjusted by a "Spread" and/or "Spread Multiplier," if
any, each as defined herein. Unless otherwise indicated in the applicable
Pricing Supplement, interest on each Fixed Rate Note will be payable
semiannually in arrears on each February 15 and August 15 and at maturity or,
if applicable, upon redemption or repayment. The Specified Currency, interest
rate or interest rate formula, issue price, maturity, interest payment dates,
redemption provisions and certain other terms with respect to each Note will be
established at the time of issuance and set forth in a Pricing Supplement.
Each Note will initially be represented by a global security registered
in the name of a nominee of The Depository Trust Company ("DTC") or another
depositary (DTC or such other depositary, if any, described in the applicable
Pricing Supplement is herein referred to as the "Depository") (a "Book-Entry
Note"). Beneficial ownership interests in Book-Entry Notes will be shown on,
and the transfer thereof will be effected only through, records maintained by
the Depository's participants. Owners of beneficial interests in Book-Entry
Notes will be entitled to physical delivery of Notes in certificated form equal
in principal amount to their respective beneficial interests only under the
limited circumstances described herein. See "Book-Entry System." Owners of
beneficial interests in Book-Entry Notes will not be considered the holders
thereof.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================
Price to Agents' Discounts and Proceeds to
Public(1) Commissions(2) Company(2)(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........ 100% .125%-.925% 99.875%-99.075%
Total(4)........ $2,500,000,000 $3,125,000-$23,125,000 $2,496,875,000-$2,476,875,000
===============================================================================================
<FN>
(1) Unless otherwise specified in the applicable Pricing Supplement, the price
to public will be 100% of the principal amount.
(2) The Company will pay a commission to Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated or Salomon Brothers Inc (each an
"Agent" and together the "Agents") in the form of a discount, ranging from
.125% to .925% of the principal amount of the Notes sold through such
Agent, depending upon its Stated Maturity (as defined herein) and the
rating assigned to such Notes by nationally recognized securities rating
agencies, except that the commission payable by the Company to the Agents
with respect to Notes with maturities of greater than thirty years will be
negotiated at the time the Company issues such Notes. The Company has
reserved the right to sell Notes directly to investors on its own behalf,
in which case no commission will be payable. The Company may sell Notes to
an Agent, as principal, at a discount for resale to one or more investors
and other purchasers at varying prices related to prevailing market prices
at the time of resale, as determined by such Agent, or, if so agreed, on a
fixed public offering price basis. Unless otherwise indicated 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 with an identical Stated Maturity, and may be resold by such
Agent to investors and other purchasers as described above.
(3) Before deducting expenses payable by the Company estimated to be $625,000.
The Company has agreed to indemnify each Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
</TABLE>
----------------
The Notes are being offered on a continuous basis by the Company through
the Agents, each of which has agreed to use their reasonable efforts to solicit
offers to purchase Notes. The Company may also sell Notes to any Agent, acting
as principal, for resale to one or more investors and other purchasers. The
Company also may sell Notes directly on its own behalf. Unless otherwise
indicated in the applicable Pricing Supplement, the Notes will not be listed on
any securities exchange and there can be no assurance that the maximum amount
of Notes offered by this Prospectus 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 Agent may reject any offer to purchase Notes, in whole or in part. See
"Plan of Distribution."
----------------
Merrill Lynch & Co. Salomon Brothers Inc
----------------
The date of this Prospectus Supplement is December 20, 1995.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE PROSPECTUS.
----------------
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth under the
heading "Description of Debt Securities" in the Prospectus, to which reference
is hereby made. The following description will apply to each Note unless
otherwise specified in the applicable Pricing Supplement. Capitalized terms not
defined herein have the meanings ascribed to them in the Indenture (defined
below) and/or the Notes.
General
The Notes constitute a single series of Debt Securities of the Company
issued under an Indenture dated as of February 15, 1988, as amended (the
"Indenture"), between the Company and Manufacturers Hanover Trust Company,
which has been succeeded by United States Trust Company of New York as
successor trustee (the "Trustee"), which Indenture is more fully described in
the accompanying Prospectus. See the Prospectus for a further description of
the Trustee and the Notes, including the covenants, modification provisions and
events of default relating to the Notes.
The Notes are being offered on a continuous basis by the Company through
the Agents. The Notes will rank pari passu with all existing and future
unsecured and unsubordinated indebtedness of the Company. The Indenture does
not limit the aggregate principal amount of Debt Securities that may be issued
thereunder. As of the date of this Prospectus Supplement, the Company has
authorized the issuance and sale of up to $2,500,000,000 (or the equivalent
thereof denominated in one or more foreign currencies or composite currencies)
aggregate principal amount of Notes, subject to reduction as a result of the
sale of other securities of the Company. Each Note will mature nine months or
more from its date of issue, as selected by the purchaser and agreed to by the
Company and may be subject to redemption or repayment prior to its Stated
Maturity (as defined below). Notes may be issued at significant discounts from
their principal amount payable on the Stated Maturity (or on any prior date on
which the principal or an installment of principal of a Note becomes due and
payable, whether by the declaration of acceleration, call for redemption at the
option of the Company, repayment at the option of the holder or otherwise)
(each such date, a "Maturity"), and some Notes may not bear interest. See
"Redemption" and "Repayment at the Option of the Holder" below. Unless
otherwise indicated in the applicable Pricing Supplement, currency amounts in
this Prospectus Supplement, the accompanying Prospectus and any Pricing
Supplement are stated in United States dollars ("$", "U.S.$" or "U.S.
Dollars").
Unless otherwise specified in such Note and described in the applicable
Pricing Supplement, the Notes will be denominated in U.S. Dollars and payments
of principal, premium, if any, and any interest on the Notes will be made in
U.S. Dollars. If any Note is to be denominated other than exclusively in U.S.
Dollars, or if the principal of, premium, if any, or any interest on the Note
is to be payable in one or more currencies (or currency units or in amounts
determined by reference to an index or indices) other than that in which such
Note is denominated, additional information with respect thereto (including
authorized denominations and applicable exchange rate information) will be
provided in the applicable Pricing Supplement. Unless otherwise described in
the applicable Pricing Supplement, Notes denominated in U.S. Dollars will be
issued in denominations of $1,000 or any integral multiple of $1,000.
Interest rates offered by the Company with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount of
the Notes purchased in any single transaction. Interest rates, interest rate
formulae and other variable terms of the Notes are subject to change by the
Company from time to time, but no such change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
Each Note will be issued initially as a Book-Entry Note in fully
registered form without coupons. Except as set forth under "Book-Entry System,"
owners of beneficial interests in Book-Entry Notes will not be entitled to
physical delivery of Notes in certificated form (each a "Certificated Note").
Beneficial interests in Book-Entry Notes may be transferred through a
participating member of the Depository. All references herein to holders will
be, with respect to Book-Entry Notes, to the Depository or its nominee. See
"Book-Entry System."
Upon issuance thereof in the limited circumstances described in
"Book-Entry System," Certificated Notes will be exchangeable for Certificated
Notes in other authorized denominations, in an equal aggregate principal amount
and otherwise bearing identical terms and provisions, in accordance with the
provisions of the Indenture. Certificated Notes may be presented for
registration of transfer or for exchange at the office of the Registrar in The
City of New York designated for such purpose. No service charge will be made
for any transfer or exchange of any Certificated Note, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
The Pricing Supplement relating to a Note will describe the following
terms: (i) whether such Note is a Fixed Rate Note or a Floating Rate Note; (ii)
whether such Note is a Discount Note (as defined below), and, if so, the total
amount of original issue discount, the amount of original issue discount
allocable to the initial accrual period, and the yield to maturity of such
Note; (iii) the price (expressed as a percentage of the aggregate principal
amount thereof) at which such Note will be issued (the "Issue Price"); (iv) the
date on which such Note will be issued (the "Original Issue Date"); (v) the
date on which such Note will mature (the "Stated Maturity"); (vi) if such Note
is a Fixed Rate Note, the rate per annum at which such Note will bear interest,
if any; (vii) if such Note is a Floating Rate Note, the Base Rate (as defined
below), the Initial Interest Rate, the Interest Reset Period, the Interest
Payment Dates, the Index Maturity, the Maximum Interest Rate, if any, the
Minimum Interest Rate, if any, 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; (viii) 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, including, in the case of a Discount Note, the
information necessary to determine the amount due upon redemption or repayment;
(ix) the Specified Currency in which such Note is denominated; and (x) any
other terms of such Note not inconsistent with the provisions of the relevant
Indenture.
Unless otherwise specified in a Note and described in the applicable
Pricing Supplement, "Business Day" with respect to any Note means any day,
other than a Saturday or Sunday, that is (i) not a day on which banking
institutions are authorized or required by law, regulation or executive order
to be closed in The City of New York and (ii) if such Note is a LIBOR Note (as
defined below), a London Business Day. "London Business Day" means (a) if the
Index Currency (as defined below) is other than the European Currency Unit
("ECU"), any day on which dealings in deposits in such Index Currency are
transacted in the London interbank market or (b) if the Index Currency is the
ECU, any day that is not designated as an ECU Non-Settlement Date by the ECU
Banking Association in Paris or otherwise generally regarded in the ECU
interbank market as a day on which payments on ECUs shall not be made.
Notes may be issued as discounted securities (bearing no interest or
interest at rates which at the time of issuance are below market rates), at
prices below their stated principal amounts, which securities will provide that
upon redemption or acceleration of the maturity thereof amounts less than the
principal amounts thereof shall become due and payable, or as other Notes which
for United States Federal income tax purposes would be considered to have
original issue discount ("Discount Notes"). See "Certain United States Federal
Income Tax Considerations." Certain additional considerations relating to any
Discount Notes may be described in the Pricing Supplement relating thereto.
Unless otherwise specified in a Note and described in the applicable
Pricing Supplement, if the principal of any Discount Note is declared to be, or
automatically becomes, due and payable immediately as described in the
accompanying Prospectus under "Description of Debt Securities -- Events of
Default," the amount of principal due and payable with respect to such Note
shall be the Amortized Face Amount of such Note calculated as of the date of
such acceleration of the maturity of such Note. The "Amortized Face Amount" of
a Discount Note as of any date for which a calculation is being made shall be
an amount equal to the sum of (i) the aggregate principal amount of such Note
multiplied by the Issue Price plus (ii) the portion of the difference between
the Issue Price and the principal amount of such 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) to the
date with respect to which such calculation is being made, but in no event
shall the Amortized Face Amount of a Discount Note exceed its principal amount.
The initial Paying Agent, Registrar and Transfer Agent for the Notes is
Chemical Bank, acting through its principal corporate trust offices in The City
of New York. The Company reserves the right at any time to vary or terminate
the appointment of the Paying Agent, Registrar and the Transfer Agent and to
appoint additional Paying Agents, Registrars and Transfer Agents and to approve
any change in the office through which the Paying Agent, Registrar or Transfer
Agent acts, provided that, so long as any Notes remain outstanding, there will
at all times be a Paying Agent in The City of New York and the Company will
maintain in The City of New York one or more offices or agencies where Notes
may be presented for registration of transfer and exchange.
Payments of principal of, and premium and interest, if any, on Book-Entry
Notes will be made by the Company through the Paying Agent to the Depository.
See "Book-Entry System."
Upon issuance thereof in the limited circumstances described in
"Book-Entry System," payments of interest on a Certificated Note (other than
interest payable at Maturity) will be made, except as provided below, by check
mailed to the Person in whose name such Note is registered in the Security
Register (the "Registered Holder"). Notwithstanding the foregoing, a Holder of
$10,000,000 or more in aggregate principal amount of Certificated Notes of like
tenor and term shall be entitled to receive such U.S. dollar payments by wire
transfer of immediately available funds, but only if appropriate wire transfer
instructions have been received in writing by the Trustee not later than
fifteen calendar days prior to the applicable Interest Payment Date. Principal
and any premium and interest payable at the Maturity of a Certificated Note
will be paid in immediately available funds upon surrender of such Note at the
corporate trust office or agency of the Paying Agent in The City of New York.
Interest
General
Unless otherwise specified in an applicable Pricing Supplement, each Note
will bear interest from and including its Original Issue Date at the rate per
annum or, in the case of a Floating Rate Note, pursuant to the interest rate
formula stated therein and in the applicable Pricing Supplement until the
principal thereof is paid or made available for payment. Interest will be
payable in arrears on each date specified in the applicable Pricing Supplement
on which an installment of interest is due and payable (each such day being an
"Interest Payment Date") and at Maturity. Unless otherwise specified in the
applicable Pricing Supplement, the "Regular Record Date" with respect to any
Interest Payment Date for a Floating Rate Note shall be the date (whether or
not a Business Day) fifteen calendar days immediately preceding such Interest
Payment Date, and for a Fixed Rate Note (unless otherwise specified in the
applicable Pricing Supplement) shall be the February 1 or August 1 (whether or
not a Business Day) immediately preceding such Interest Payment Date. Interest
payable and punctually paid or duly provided for on any Interest Payment Date
will be paid to the Registered Holder at the close of business on the Regular
Record Date immediately preceding such Interest Payment Date; provided,
however, that in the case of a Note issued between a Regular Record Date and
the related Interest Payment Date, interest for the period beginning on the
Original Issue Date for such Note and ending on such Interest Payment Date
shall be paid on the first succeeding Interest Payment Date to the Registered
Holder of such Note on the related Regular Record Date, and provided, further,
that interest payable at Maturity will be payable to the Person to whom
principal shall be payable.
Fixed Rate Notes
Unless otherwise specified in an applicable Pricing Supplement, each
Fixed Rate Note will bear interest from, and including, its Original Issue
Date, or the most recent date to which interest has been paid or duly provided
for, to, but excluding, the Interest Payment Date or Maturity, as the case may
be, at the rate per annum stated on the face thereof until the principal amount
thereof is paid or made available for payment. Unless otherwise set forth in
the applicable Pricing Supplement, interest on each Fixed Rate Note will be
payable semiannually in arrears on each February 15 and August 15 and at
Maturity. Each payment of interest on a Fixed Rate Note in respect of an
Interest Payment Date shall include interest accrued through the day before
such Interest Payment Date. Unless otherwise specified in an applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months. Any payment required to be made in
respect of a Fixed Rate Note on a date that is not a Business Day for such Note
need not be made on such date, but may be made on the first succeeding Business
Day with the same force and effect as if made on such date, and no additional
interest shall accrue as a result of such delayed payment.
Floating Rate Notes
Each Floating Rate Note will bear interest from and including its
Original Issue Date in accordance with the interest rate formula specified
therein until the principal thereof is paid or otherwise made available for
payment. The interest rate on such Note for each Interest Reset Period (as
defined below) will be determined by reference to an interest rate basis (the
"Base Rate"), plus or minus the Spread, if any, and/or multiplied by the Spread
Multiplier, if any, or pursuant to an interest rate formula. The "Spread" is
the number of basis points (one basis point equals one one-hundredth of a
percentage point) that may be specified in the applicable Pricing Supplement as
being applicable to such Note, and the "Spread Multiplier" is the percentage
that may be specified in the applicable Pricing Supplement as being applicable
to such Note. The applicable Pricing Supplement will designate one or more of
the following Base Rates as applicable to a Floating Rate Note: (i) LIBOR (a
"LIBOR Note"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate Note"),
(iii) the Treasury Rate (a "Treasury Rate Note"), (iv) the CD Rate (a "CD Rate
Note"), (v) the Federal Funds Rate (a "Federal Funds Rate Note"), (vi) the
Prime Rate (a "Prime Rate Note") or (vii) such other Base Rate or interest rate
formula as is set forth in such Pricing Supplement and in such Note. In
addition, a Floating Rate Note may bear interest in respect of two or more Base
Rates. The "Index Maturity" for any Note is the period of maturity of the
instrument or obligation from which the Base Rate is calculated. "H.15(519)"
means the publication entitled "Statistical Release H.15(519), Selected
Interest Rates," or any successor publication, published by the Board of
Governors of the Federal Reserve System.
Unless otherwise provided in the applicable Pricing Supplement, each Base
Rate shall be the rate determined in accordance with the applicable provisions
below. Except as set forth above or in an applicable Pricing Supplement, the
interest rate in effect on each day shall be (a) if such day is an Interest
Reset Date (as defined below), the interest rate determined with respect to the
Interest Determination Date (as defined below) immediately preceding such
Interest Reset Date or (b) if such day is not an Interest Reset Date, the
interest rate determined with respect to the Interest Determination Date
immediately preceding the next preceding Interest Reset Date.
As specified in the applicable Pricing Supplement, a Floating Rate Note
may also have either or both of the following (in each case expressed as a rate
per annum on a simple interest basis); (i) a maximum limitation, or ceiling, on
the rate at which interest may accrue during any interest period ("Maximum
Interest Rate") and (ii) a minimum limitation, or floor, on the rate at which
interest may accrue during any interest period ("Minimum Interest Rate"). In
addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note, the interest rate on a Floating Rate Note will in no event be higher
than the maximum rate permitted by New York law, as the same may be modified by
United States law of general application.
The Company will appoint, and enter into an agreement with, First Trust
of New York, National Association (the "Calculation Agent") to calculate
interest rates on Floating Rate Notes. The interest rate on each Floating Rate
Note will be reset daily, weekly, monthly, quarterly, semiannually or annually
(such period being the "Interest Reset Period" for such Note, and the first day
of each Interest Reset Period being an "Interest Reset Date") as specified in
the applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, the Interest Reset Date will be, in the case of Floating
Rate Notes that reset daily, each Business Day; in the case of Floating Rates
Notes (other than Treasury Rate Notes) that reset weekly, Wednesday of each
week; in the case of Treasury Rate Notes that reset weekly, Tuesday of each
week (except as provided below); in the case of Floating Rate Notes that reset
monthly, the third Wednesday of each month; in the case of Floating Rate Notes
that reset quarterly, the third Wednesday of March, June, September and
December of each year; in the case of Floating Rate Notes that reset
semiannually, the third Wednesday of March and September; and, in the case of
Floating Rate Notes that reset annually, the third Wednesday of September;
provided, however, that, unless otherwise specified in the applicable Pricing
Supplement, the interest rate in effect from the Original Issue Date to but
excluding the first Interest Reset Date with respect to such Floating Rate Note
will be the Initial Interest Rate (as set forth in the applicable Pricing
Supplement). 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 postponed to the first succeeding Business Day, except that, in the case of
a LIBOR Note, if such Business Day is in the next succeeding calendar month,
such Interest Reset Date shall be the immediately preceding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, interest
payable in respect of Floating Rate Notes shall be the accrued interest from
and including the Original Issue Date or the last date to which interest has
been paid, as the case may be, to but excluding the applicable Interest Payment
Date or Maturity, as the case may be.
With respect to a Floating Rate Note, accrued interest shall be
calculated by multiplying the principal amount of such Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which accrued
interest is being calculated. Unless otherwise specified in the applicable
Pricing Supplement, the interest factor for each such day will be computed by
dividing the interest rate in effect on such day by 360, in the case of LIBOR
Notes, Commercial Paper Rate Notes, CD Rate Notes, Federal Funds Rate Notes and
Prime Rate Notes, or by the actual number of days in the year, in the case of
Treasury Rate Notes. Unless otherwise specified in an applicable Pricing
Supplement, the interest factor for Notes for which the interest rate is
calculated with reference to two or more Base Rates will be calculated in each
period in the same manner as if only one of the applicable Base Rates applied.
For purposes of making the foregoing calculation, the interest rate in effect
on any Interest Reset Date will be the applicable rate as reset on such date.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest of a
Floating Rate Note will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded
to 9.87655% (or .0987655) and 9.876544% (or .09876544) being rounded to
9.87654% (or .0987654)), and all dollar amounts used in or resulting from such
calculation on Floating Rate Notes will be rounded to the nearest cent (with
one-half cent being rounded upward).
Unless otherwise indicated in the applicable Pricing Supplement and
except as provided below, interest will be payable, in the case of Floating
Rate Notes that reset daily, weekly, or monthly, 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; in the case of
Floating Rate Notes that reset quarterly, on the third Wednesday of March,
June, September and December of each year; in the case of Floating Rate Notes
that reset semiannually, on the third Wednesday of March and September; and, in
the case of Floating Rate Notes that reset annually, on the third Wednesday of
September and, in all such cases, at Maturity. If an Interest Payment Date with
respect to any Floating Rate Note (other than an Interest Payment Date at
Maturity) would otherwise be a day that is not a Business Day, such Interest
Payment Date shall be postponed to the first succeeding Business Day, except
that, in the case of a LIBOR Note, if such Business Day falls in the next
calendar month, such Interest Payment Date shall be the immediately preceding
Business Day. If the Maturity of a Floating Rate Note falls on a day that is
not a Business Day, the payment of principal, premium, if any, and interest
will be made on the next succeeding Business Day, and no interest on such
payment shall accrue for the period from and after such Maturity.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be the
rate determined as of the applicable "Interest Determination Date." Unless
otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date with respect to the CD Rate, the Commercial Paper Rate, the
Federal Funds Rate and the Prime Rate will be the second Business Day preceding
each Interest Reset Date for the related Note; the Interest Determination Date
with respect to LIBOR will be the second London Business Day preceding each
Interest Reset Date. With respect to the Treasury Rate, unless otherwise
specified in an applicable Pricing Supplement, the Interest Determination Date
will be the day in the week in which the related Interest Reset Date falls on
which day Treasury bills (as defined below) are normally 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);
provided, however, that if an auction is held on the Friday of the week
preceding the related Interest Reset Date, the related Interest Determination
Date will be such preceding Friday; and provided, further, that if an auction
falls on any Interest Reset Date, then the related Interest Reset Date will
instead by the first Business Day following such auction. Unless otherwise
specified in the applicable Pricing Supplement, the Interest Determination Date
pertaining to a Floating Rate Note the interest rate of which is determined
with reference to two or more Base Rates will be the latest Business Day which
is at least two Business Days prior to such Interest Reset Date for such
Floating Rate Note on which each Base Rate is determinable. Each Base Rate will
be determined as of such date, and the applicable interest rate will take
effect on the related Interest Reset Date. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date," if applicable,
pertaining to any Interest Determination Date will be the earlier of (i) the
tenth calendar day after such Interest Determination Date, or, if such day is
not a Business Day, the next succeeding Business Day or (ii) the Business Day
preceding the applicable Interest Payment Date or Maturity, as the case may be.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect and, if determined, the
interest rate that will become effective on the next Interest Reset Date with
respect to such Note.
Commercial Paper Rate Notes. Each Commercial Paper Rate Note will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Commercial Paper Rate and the Spread and/or Spread Multiplier,
if any, specified in such Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note or any Floating Rate Note for which
the interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Determination Date"), the Money Market Yield (calculated
as described below) on such Commercial Paper Rate Determination Date of the
rate for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement, as such rate shall be published by the Board of Governors
of the Federal Reserve System in H.15(519) under the heading "Commercial
Paper." In the event that such rate is not so published prior to 9:00 a.m., New
York City time, on the Calculation Date pertaining to such Commercial Paper
Rate Determination Date, then the "Commercial Paper Rate" shall be the Money
Market Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published 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 of the
Federal Reserve Bank of New York ("Composite Quotations") under the heading
"Commercial Paper" (with an Index Maturity of one month or three months being
deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively). If by 3:00 p.m., New York City time, on such Calculation Date
such rate is not yet published in either H.15(519) or Composite Quotations,
then the "Commercial Paper Rate" for such Commercial Paper Rate Determination
Date shall be calculated by the Calculation Agent and shall be the Money Market
Yield of the arithmetic mean of the offered per annum rates (quoted on a bank
discount basis), as of 11:00 a.m., New York City time, on such Commercial Paper
Rate Determination Date, of three leading dealers of commercial paper in The
City of New York (any of which may be an Agent or an affiliate of an Agent)
selected by the Calculation Agent for commercial paper of the specified Index
Maturity placed for an industrial issuer whose bond rating is "AA" or the
equivalent, from a nationally recognized rating agency; provided, however, that
if the dealers selected as aforesaid by the Calculation Agent are not quoting
offered rates as mentioned in this sentence, the "Commercial Paper Rate" for
such Commercial Paper Rate Determination Date will be the same as the
Commercial Paper Rate in effect on such Commercial Paper Rate Determination
Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded
upwards to the nearest one hundred-thousandth of a percentage point) calculated
in accordance with the following formula:
D x 360
Money Market Yield = ------------- x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
LIBOR Notes. Each LIBOR Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to LIBOR and the Spread
and/or Spread Multiplier, if any, specified in such Note and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
With respect to an Interest Determination Date relating to a LIBOR Note
or any Floating Rate Note for which the interest rate is determined with
reference to LIBOR (a "LIBOR Determination Date"), LIBOR will be either: (a) if
"LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified Designated LIBOR
Page (as defined below) by its terms provides only for a single rate, in which
case such single rate shall be used) for deposits in the Index Currency (as
defined below) having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Business Day immediately following
that LIBOR Determination Date, that appear on the Designated LIBOR Page
specified in the applicable Pricing Supplement as of 11:00 a.m. London time, on
that LIBOR Determination Date, if at least two such offered rates appear
(unless, as aforesaid, only a single rate is required) on such Designated LIBOR
Page, or (b) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement, the rate for deposits in the Index Currency having the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second London Business Day immediately following that LIBOR Determination Date
that appears on the Designated LIBOR Page specified in the applicable Pricing
Supplement as of 11:00 a.m. London time, on that LIBOR Determination Date. If
fewer than two offered rates appear, or no rate appears, as applicable, LIBOR
in respect of the related LIBOR Determination Date will be determined as if the
parties had specified the rate described in clause (ii) below.
With respect to a LIBOR Determination Date on which fewer than two
offered rates appear, or no rate appears, as the case may be, on the applicable
Designated LIBOR Page as specified in clause (i) above, the Calculation Agent
will request the principal London offices of each of four major reference banks
in the London interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for deposits in the
Index Currency for the period of the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Determination Date, to prime banks in the
London interbank market at approximately 11:00 a.m., London time, on such LIBOR
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If at
least two such quotations are provided, LIBOR determined on such LIBOR
Determination Date will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, LIBOR determined on such LIBOR Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
a.m., (or such other time specified in the applicable Pricing Supplement), in
the applicable Principal Financial Center (as defined below), on such LIBOR
Determination Date by three major banks in such Principal Financial Center
selected by the Calculation Agent for loans in the Index Currency to leading
European banks, having the Index Maturity designated in the applicable Pricing
Supplement and in a principal amount that is representative for a single
transaction in such Index Currency in such market at such time; provided,
however, that if the banks so selected by the Calculation Agent are not quoting
as mentioned in this sentence, LIBOR determined on such LIBOR Determination
Date will be LIBOR in effect on such LIBOR Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. Dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. Dollar is the Index Currency, LIBOR Page 3750) has been specified.
"Principal Financial Center" will be the capital city of the country of
the specified Index Currency, except that with respect to U.S. dollars and
ECUs, the Principal Financial Center shall be The City of New York and
Luxembourg, respectively.
Treasury Rate Notes. Each Treasury Rate Note will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the
Treasury Rate and the Spread and/or Spread Multiplier, if any, specified in
such Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Treasury Rate" means, with respect to any Interest Determination Date relating
to a Treasury Rate Note or any Floating Rate Note for which the interest rate
is determined by reference to the Treasury Rate (a "Treasury Rate Determination
Date"), the rate applicable to the most recent auction of direct obligations of
the United States ("Treasury bills") having the Index Maturity specified in the
applicable Pricing Supplement, as such rate shall be published in H.15(519)
under the heading "U.S. Government Securities -- Treasury bills -- auction
average (investment)" or, in the event that such rate is not so published by
3:00 p.m., New York City time, on the Calculation Date pertaining to such
Treasury Rate Determination Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) on such Treasury Rate Determination Date as otherwise
announced by the United States Department of the Treasury. In the event that
the results of the auction of Treasury bills having the specified Index
Maturity are not published or reported as provided above by 3:00 p.m., New York
City time, on such Calculation Date, or if no such auction is held in a
particular week, then the "Treasury Rate" for such Interest Reset Period shall
be calculated by the Calculation Agent and shall be the yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time,
on such Treasury Rate Determination Date, of three leading primary United
States government securities dealers (any of which may be an Agent or an
affiliate of an Agent) selected by the Calculation Agent, for the issue of
Treasury bills with a remaining maturity closest to the specified Index
Maturity; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting bid rates as mentioned in this sentence, the
"Treasury Rate" with respect to such Treasury Rate Determination Date will be
the Treasury Rate in effect on such Treasury Rate Determination Date.
CD Rate Notes. Each CD Rate Note will bear interest for each Interest
Reset Period at the interest rate calculated with reference to the CD Rate and
the Spread and/or Spread Multiplier, if any, specified in such Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD
Rate" means, with respect to any Interest Determination Date relating to a CD
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the CD Rate (a "CD Rate Determination Date"), the rate on
such CD Rate Determination Date for negotiable certificates of deposit having
the Index Maturity designated in the applicable Pricing Supplement, as such
rate shall be published in H.15(519) under the heading "CDs (Secondary
Market)." In the event that such rate is not so published prior to 3:00 p.m.,
New York City time, on the Calculation Date pertaining to such CD Rate
Determination Date, then the "CD Rate" for such Interest Reset Period shall be
the rate on such CD Rate Determination Date for negotiable certificates of
deposit of the specified Index Maturity as published in Composite Quotations
under the heading "Certificates of Deposit." If, by 3:00 p.m., New York City
time, on such Calculation Date, such rate is not yet published in either
H.15(519) or Composite Quotations, then the "CD Rate" on such CD Rate Interest
Determination Date shall be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 a.m., New
York City time, on such CD Rate Determination Date, of three leading nonbank
dealers in negotiable U.S. dollar certificates of deposit in The City of New
York (any of which may be an Agent or an affiliate of an Agent) selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money market banks (in the market for negotiable certificates of deposit) with
a remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement in an amount that is representative for a single transaction
in that market at that time; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the CD Rate with respect to such CD Rate Determination Date will be
the CD Rate in effect on such CD Rate Determination Date.
Federal Funds Rate Notes. Each Federal Funds Rate Note will bear interest
for each Interest Reset Period at the interest rate calculated with reference
to the Federal Funds Rate and the Spread and/or Spread Multiplier, if any,
specified in such Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to
a Federal Funds Rate Note or any Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Determination Date"), the rate on such Federal Funds Rate Determination Date
for Federal Funds as such rate shall be published in H.15(519) under the
heading "Federal Funds (Effective)." In the event that such rate is not so
published prior to 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Federal Funds Rate Determination Date, then the "Federal
Funds Rate" on such Federal Funds Rate Determination Date shall be the rate as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate." If, by 3:00 p.m., New York City time, on such Calculation Date, such
rate is not yet published in either H.15(519) or Composite Quotations, then the
"Federal Funds Rate" for such Federal Funds Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
rates for the last transaction in overnight United States Dollar federal funds
arranged by three leading brokers of federal funds transactions in The City of
New York selected by the Calculation Agent prior to 9:00 a.m., New York City
time, on such Federal Funds Rate Determination Date; 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 Rate Determination Date will be the Federal Funds Rate in effect on such
Federal Funds Rate Determination Date.
Prime Rate Notes. Each Prime Rate Note will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the
Prime Rate and the Spread and/or Spread Multiplier, if any, specified in such
Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Prime Rate" means, with respect to any Interest Determination Date relating to
a Prime Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Prime Rate (a "Prime Rate Determination
Date"), the rate on such date as such rate is published in H.15(519) under the
heading "Bank Prime Loan." If such rate is not published prior to 3:00 p.m.,
New York City time, on the Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen USPRIME1 (as defined below) as such bank's prime
rate or base lending rate as in effect for that Prime Rate Determination Date.
If fewer than four such rates but more than one such rate appear on the Reuters
Screen USPRIME1 for such Prime Rate Determination Date, the Prime 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 a 360-day year as of the close of business on
such Prime Rate Determination Date by four major money center banks in The City
of New York selected by the Calculation Agent. If fewer than two such rates
appear on the Reuters Screen USPRIME1, the Prime Rate will be determined by the
Calculation Agent on the basis of the rates furnished in The City of New York
by the appropriate number of 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 are not quoting as mentioned in
this sentence, the Prime Rate for such Prime Rate Determination Date will be
the Prime Rate as determined based on the last such rate published in
H.15(519). "Reuters Screen USPRIME1" 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).
Redemption
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. If provided in an applicable Pricing
Supplement, Notes may be subject to redemption, in whole or in part, prior to
their Stated Maturity at the option of the Company or through operation of a
mandatory or optional sinking fund or analogous provisions. Such Pricing
Supplement will set forth the detailed terms of such redemption, including, but
not limited to, the date after or on which and the price or prices (including
premium, if any) at which such Notes may be redeemed. Unless otherwise
specified in the applicable Pricing Supplement, the Company may redeem any
Notes that are redeemable and remain outstanding either in whole or in part
upon not less than 30 nor more than 60 days' notice.
Repayment at the Option of the Holder
If provided in an applicable Pricing Supplement, Notes will be subject to
repayment at the option of the Holders thereof in accordance with the terms of
such Notes on their respective optional repayment dates, if any, as agreed upon
by the Company and the purchasers thereof at the time of sale (each, an
"Optional Repayment Date"). If no Optional Repayment Date is indicated with
respect to a Note, such Note will not be repayable at the option of the Holder
thereof prior to its Stated Maturity. Unless otherwise specified in the
applicable Pricing Supplement, on any Optional Repayment Date with respect to
any Note, such Note will be repayable in whole or in part in increments of
$1,000 (provided that any remaining principal amount of such Note shall not be
less than the minimum denomination of such Note) at the option of the Holder
thereof at a repayment price equal to 100% of the principal amount to be
repaid, together with interest thereon payable 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, the applicable Trustee
must receive the Note, at least 30 days but not more than 60 days prior to the
repayment date, with the section entitled "Option to Elect Repayment" on the
reverse of the Note duly completed. Exercise of a repayment option by the
Holder of a Note will be irrevocable.
Other Provisions; Addenda
Any provisions with respect to Notes, including the determination of a
Base Rate, calculation of the interest rate applicable to a Floating Rate Note,
its Interest Payment Dates or any other matter relating thereto may be modified
by the terms as specified under "Other Provisions" on the face thereof or in an
Addendum relating thereto, if so specified on the face thereof and in the
applicable Pricing Supplement.
Foreign-Currency Notes
If any Note is not to be denominated in U.S. Dollars, certain provisions
with respect thereto will be set forth in an applicable Pricing Supplement
which will specify the currency or currencies, including composite currencies
such as the ECU, in which the principal, premium, if any, and interest, if any,
with respect to such Note are to be paid, along with any other terms relating
to the non-U.S. Dollar denomination.
Indexed Notes
Notes also may be issued with the principal amount payable at Maturity
and/or interest to be paid thereon to be determined with reference to the price
or prices of specified commodities or stocks, the exchange rate of one or more
specified currencies (including a composite currency such as the ECU relative
to an indexed currency, or such other price or exchange rate as may be
specified in a Pricing Supplement relating to such Note ("Indexed Notes").
Holders of such Notes may receive a principal amount at Maturity that is
greater than or less than the face amount of the Notes depending upon the
relative value at Maturity of the specified indexed item. Information as to the
method for determining the principal amount payable at Maturity, certain
historical information with respect to the specified indexed item and tax
considerations associated with investment in Indexed Notes will be set forth in
the applicable Pricing Supplement.
Risks Associated with Indexed Notes
An investment in Notes indexed, as to principal or interest or both, to
one or more values of currencies (including exchange rates between currencies),
commodities or interest rate indices entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate of such a Note is so 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 such Note is so indexed, the principal
amount payable at maturity may be less than the original purchase price of such
Note if allowed pursuant to the terms of such Note, including the possibility
that no principal will be paid. The secondary market for such Notes will be
affected by a number of factors, independent of the creditworthiness of the
issuer and the value of the applicable currency, commodity or interest rate
index, including the volatility of the applicable currency, commodity or
interest rate index, the time remaining to the maturity of such Notes, the
amount outstanding of such Notes and market interest rates. The value of the
applicable currency, commodity or interest rate index depends on a number of
interrelated factors, including economic, financial and political events, over
which the Company has no control. Additionally, if the formula used to
determine the principal amount or interest payable with respect to such Notes
contains a multiple or leverage factor, the effect of any change in the
applicable currency, commodity or interest rate index will be increased. The
historical experiences of the relevant currencies, commodities or interest rate
indices should not be taken as an indication of future performance of such
currencies, commodities or interest rate indices during the term of any Note.
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 such Notes and the suitability of such Notes in light of their
particular circumstances.
BOOK-ENTRY SYSTEM
The Notes will initially be issued in whole or in part as Book-Entry
Notes represented by a Global Security (as defined in the accompanying
Prospectus) deposited with, or on behalf of, the Depository and registered in
the name of the Depository or a nominee of the Depository. Unless otherwise
specified in the applicable Pricing Supplement, DTC will be the Depository.
So long as the Depository for a Global Security, or a nominee of the
Depository, is the registered owner of the Global Security, the Depository or
its nominee, as the case may be, will be considered the sole owner or holder of
the Book-Entry Notes represented by such Global Security for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in
Book-Entry Notes represented by a Global Security will not be considered the
owners or holders thereof under the Indenture, will not be entitled to have
Book-Entry Notes represented by such Global Security registered in their names
and will not be entitled to physical delivery of Notes in certificated form
evidencing their respective beneficial interests therein. A Global Security may
not be transferred except as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any nominee to a successor of
the Depository or a nominee of such successor.
Payments of principal of and any premium and interest on Book-Entry Notes
represented by a Global Security registered in the name of a Depository or its
nominee will be made to the Depository or its nominee, as the case may be, as
the registered owner of the Global Security. Neither the Company, the Trustee,
any Paying Agent nor the Registrar will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in Book-Entry Notes represented by a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the Depository or its nominee, upon receipt of
any payment of principal, premium, if any, or interest, if any, in respect of a
Global Security, will credit immediately participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Security as shown on the records of such
Depository or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in Book-Entry Notes represented
by such Global Security held through such participants will be governed by
standing customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such participants.
If the Depository with respect to any Global Security 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 of such time, the
Company will issue Certificated Notes in exchange for each Book-Entry Note
represented by such Global Security. In addition, the Company may at any time
and in its sole discretion determine not to have the Notes represented by a
Global Security and, in such event, will issue Certificated Notes in exchange
for the Book-Entry Notes represented by such Global Security. In either
instance, an owner of a beneficial interest in a Book-Entry Note will be
entitled to have a Certificated Note or Notes equal in principal amount to such
beneficial interest registered in its name and will be entitled to physical
delivery of such Note or Notes.
DTC has advised the Company and the Agents as follows: DTC 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. DTC was created to hold securities for persons that have accounts
with DTC ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movements of securities certificates. DTC's
participants include securities brokers and dealers (including the Agents),
banks, trust companies, clearing corporations, and certain other organizations,
some of whom (and/or their representatives) own 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.
DTC has also advised the Company and the Agents that, upon the issuance
by the Company of Book-Entry Notes represented by a Global Security, DTC will
credit on its book-entry registration and transfer system the respective
principal amounts of the Book-Entry Notes represented by such Global Security
to the accounts of participants. The accounts to be credited shall be
designated by the applicable Agent or by the Company if such Notes are offered
and sold directly by the Company. Ownership of beneficial interests in
Book-Entry Notes represented by a Global Security registered in the name of DTC
or its nominee will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests in Book-Entry
Notes represented by a Global Security registered in the name of DTC or its
nominee will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC or its nominee (with respect to
beneficial interests of participants), or by participants or persons that may
hold interests through participants (with respect to beneficial interests of
persons other than participants). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to transfer
beneficial interests in Book-Entry Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the Notes arising under the laws of any
other taxing jurisdiction.
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, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any
other person whose income or gain in respect of a Note is effectively connected
with the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. Holders
Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
Original Issue Discount. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue
discount ("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") issued by the Internal Revenue Service
("IRS") on January 27, 1994 under the original issue discount provisions of the
Internal Revenue Code of 1986, as amended (the "Code").
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as defined below) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Note would be treated as original issue discount rather
than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is
the sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such Discount Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes
("Variable Notes") are subject to special rules whereby a Variable Note will
qualify as a "variable rate debt instrument" if (a) its issue price does not
exceed the total noncontingent principal payments due under the Variable Note
by more than a specified de minimis amount and (b) it provides for stated
interest, paid or compounded at least annually, at current values of (i) one or
more qualified floating rates, (ii) a single fixed rate and one or more
qualified floating rates, (iii) a single objective rate, or (iv) a single fixed
rate and a single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless such cap or floor
is fixed throughout the term of the Note. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and which is based upon (i) one or more qualified floating rates,
(ii) one or more rates where each rate would be a qualified floating rate for a
debt instrument denominated in a currency other than the currency in which the
Variable Note is denominated, (iii) either the yield or changes in the price of
one or more items of actively traded personal property (other than stock or
debt of the issuer or a related party) or (iv) a combination of objective
rates. The OID Regulations also provide that other variable interest rates may
be treated as objective rates if so designated by the IRS in the future.
Despite the foregoing, a variable rate of interest on a Variable Note will not
constitute an objective rate if it is reasonably expected that the average
value of such rate during the first half of the Variable Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Variable Note's term. A "qualified
inverse floating rate" is any objective rate where such rate is equal to a
fixed rate minus a qualified floating rate, as long as variations in the rate
can reasonably be expected to inversely reflect contemporaneous variations in
the cost of newly borrowed funds. The OID Regulations also provide that if a
Variable Note provides for stated interest at a fixed rate for an initial
period of less than one year followed by a variable rate that is either a
qualified floating rate or an objective rate and if the variable rate on the
Variable Note's issue date is intended to approximate the fixed rate (e.g., the
value of the variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of a specified de minimus amount.
Original issue discount on such a Variable Note arising from "true" discount is
allocated to an accrual period using the constant yield method described above
by assuming that the variable rate is a fixed rate equal to (i) in the case of
a qualified floating rate or qualified inverse floating rate, the value as of
the issue date, of the qualified floating rate or qualified inverse floating
rate, or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note.
In general, any other Variable Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original issue
discount and qualified stated interest on the Variable Note. The OID
Regulations generally require that such a Variable Note be converted into an
"equivalent" fixed rate debt instrument by substituting any qualified floating
rate or qualified inverse floating rate provided for under the terms of the
Variable Note with a fixed rate equal to the value of the qualified floating
rate or qualified inverse floating rate, as the case may be, as of the Variable
Note's issue date. Any objective rate (other than a qualified inverse floating
rate) provided for under the terms of the Variable Note is converted into a
fixed rate that reflects the yield that is reasonably expected for the Variable
Note. In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Note as of the Variable
Note's issue date is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate
or a qualified inverse floating rate, the Variable Note is then converted into
an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Each accrual period appropriate adjustments will be made
to the amount of qualified stated interest or original issue discount assumed
to have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
U.S. Holders should be aware that on December 15, 1994, the IRS released
proposed amendments to the OID Regulations which would broaden the definition
of an objective rate and would further clarify certain other provisions
contained in the OID Regulations. If ultimately adopted, these amendments to
the OID Regulations generally would be effective for debt instruments issued 60
days or more after the date on which such proposed amendments are finalized.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. The proper United States Federal income tax treatment
of Variable Notes that are treated as contingent payment debt obligations will
be more fully described in the applicable Pricing Supplement. Furthermore, any
other special United States Federal income tax considerations, not otherwise
discussed herein, which are applicable to any particular issue of Notes will be
discussed in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable
at the option of the holder prior to their stated maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase Notes with such
features should consult their own tax advisors, since the original issue
discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based on
daily compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States Federal
income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original
issue discount on a Short-Term Note on a straight-line basis unless an election
is made to accrue the original issue discount under a constant yield method
(based on daily compounding).
Market Discount. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, such U.S. Holder will be treated as having purchased such
Note at a "market discount," unless such difference is less than a specified de
minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or
realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time of
such payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount on the basis
of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion
of the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent that the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the first taxable year to which such election applies and may be revoked
only with the consent of the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, such U.S. Holder will be considered
to have purchased the Note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may offset interest
otherwise required to be included in respect of the Note during any taxable
year by the amortized amount of such excess for the taxable year. However, if
the Note may be optionally redeemed after the U.S. Holder acquires it at a
price in excess of its stated redemption price at maturity, special rules would
apply which could result in a deferral of the amortization of some bond premium
until later in the term of the Note. Any election to amortize bond premium
applies to all taxable debt instruments acquired by the U.S. Holder on or after
the first day of the first taxable year to which such election applies and may
be revoked only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. Such gain or loss generally will be long-term
capital gain or loss if the Note were held for more than one year.
Notes Denominated or on which Interest is Payable in a Foreign Currency
As used herein, "Foreign Currency" means a currency or currency unit
other than U.S. Dollars.
Payments of Interest in a Foreign Currency.
Cash Method. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of
interest on a Note (other than original issue discount or market discount) will
be required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) 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.
Accrual Method. A U.S. Holder who uses the accrual method of accounting
for United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the
U.S. dollar value of the amount of interest income (including original issue
discount 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 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. If the
last day of an accrual period is within five business days of the date of
receipt of the accrued interest, a U.S. Holder may translate such interest
using the rate of exchange on the date of receipt. The above election will
apply to other debt obligations held by the U.S. Holder and may not be changed
without the consent of the IRS. A U.S. Holder should consult a tax advisor
before making the above election. 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. The amount of ordinary
income or loss recognized will equal the difference, if any, between the U.S.
dollar value of the Foreign Currency payment received (determined on the date
such payment is received) in respect of such accrual period and the U.S. dollar
value of interest income that has accrued during such accrual period (as
determined above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a
Note with previously owned Foreign Currency will recognize ordinary income or
loss in an amount equal to the difference, if any, between such U.S. Holder's
tax basis in the Foreign Currency and the U.S. dollar fair market value of the
Foreign Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the
sale, exchange or retirement of a Note, a U.S. Holder will recognize taxable
gain or loss equal to the difference between the amount realized on the sale,
exchange or retirement and such U.S. Holder's adjusted tax basis in the Note.
Such gain or loss generally will be capital gain or loss (except to the extent
of any accrued market discount not previously included in the U.S. Holder's
income) and will be long-term capital gain or loss if at the time of sale,
exchange or retirement the Note has been held by such U.S. Holder for more than
one year. To the extent the amount realized represents accrued but unpaid
interest, however, such amounts must be taken into account as interest income,
with exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement the amount realized will be based on the U.S.
dollar value of the Foreign Currency on the date the payment is received or the
Note is disposed of (or deemed disposed of in the case of a taxable exchange of
the Note for a new Note). In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the
U.S. dollar value of the amount realized by translating the Foreign Currency
payment at the spot rate of exchange on the settlement date of the sale. A U.S.
Holder's adjusted tax basis in a Note will equal the cost of the Note to such
holder, increased by the amounts of any market discount or original issue
discount previously included in income by the holder with respect to such Note
and reduced by any amortized acquisition or other premium and any principal
payments received by the holder. A U.S. Holder's tax basis in a Note, and the
amount of any subsequent adjustments to such holder's tax basis, will be the
U.S. dollar value of the Foreign Currency amount paid for such 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 Note
that is attributable to fluctuations in currency exchange rates will be
ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date such payment is received or the Note
is disposed of, and the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date the U.S. Holder acquired the Note.
Such Foreign Currency gain or loss will be recognized only to the extent of the
total gain or loss realized by the U.S. Holder on the sale, exchange or
retirement of the Note.
Original Issue Discount. In the case of a Discount Note or Short-Term
Note, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency -- Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income
received attributable to the discount (either upon payment, maturity or an
earlier disposition), as translated into U.S. dollars at the rate of exchange
on the date of such receipt, with the amount of original issue discount
accrued, as translated above.
Premium and Market Discount. In the case of a Note with market discount,
(i) market discount is determined in units of the Foreign Currency, (ii)
accrued market discount taken into account upon the receipt of any partial
principal payment or upon the sale, exchange, retirement or other disposition
of the Note (other than accrued market discount required to be taken into
account currently) is translated into U.S. dollars at the exchange rate on such
disposition date (and no part of such accrued market discount is treated as
exchange gain or loss) and (iii) accrued market discount currently includible
in income by a U.S. Holder for any accrual period is translated into U.S.
dollars on the basis of the average exchange rate in effect during such accrual
period, and the exchange gain or loss is determined upon the receipt of any
partial principal payment or upon the sale, exchange, retirement or other
disposition of the Note in the manner described in "Payments of Interest in a
Foreign Currency -- Accrual Method" above with respect to computation of
exchange gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder
should recognize exchange gain or loss equal to the difference between the U.S.
dollar value of the bond premium amortized with respect to a period, determined
on the date the interest attributable to such period is received, and the U.S.
dollar value of the bond premium determined on the date of the acquisition of
the Note.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in
any Foreign Currency received as interest or on the sale, exchange or
retirement of a Note equal to the U.S. dollar value of such Foreign Currency,
determined at the time the interest is received or at the time of the 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 Notes) will be ordinary income or loss.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States Federal income
taxes on payments of principal, premium (if any) or interest (including
original issue discount, if any) on a Note, unless such non-U.S. Holder is a
direct or indirect 10% or greater shareholder of the Company, a controlled
foreign corporation related to the Company or a bank receiving interest
described in section 881(c)(3)(A) of the Code. To qualify for the exemption
from taxation, the last United States payor in the chain of payment prior to
payment to a non-U.S. Holder (the "Withholding Agent") must have received in
the year in which a payment of interest or principal occurs, or in either of
the two preceding calendar years, a statement that (i) is signed by the
beneficial owner of the Note under penalties of perjury, (ii) certifies that
such owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes
on any amount which constitutes capital gain upon retirement or disposition of
a Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
Backup Withholding
Backup withholding of United States Federal income tax at a rate of 31%
may apply to payments made in respect of the Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to
a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit
purchases of the Notes. The Company will pay each Agent a commission ranging
from .125% to .925% of the principal amount of Notes sold through such Agent,
depending on the maturity of the Notes sold and the rating assigned to such
Note, by nationally recognized securities rating agencies, except that the
commission payable by the Company to the Agents with respect to Notes with
maturities of greater than thirty years will be negotiated at the time the
Company issues such Notes. The Company has also agreed to reimburse the Agents
for certain of their expenses.
The Company may also sell the Notes to any Agent, as principal, at a
discount for resale to one or more investors and other purchasers at varying
prices related to prevailing market prices at the time of resale, as determined
by such Agent, or, if so agreed, on a fixed public offering price basis. The
Company reserves the right to sell Notes directly on its own behalf in those
jurisdictions where it is authorized to do so. No commission will be payable on
any sales made directly by the Company.
In addition, each Agent may offer the Notes they have purchased as
principal, to or through dealers and, unless otherwise specified in the
applicable Pricing Supplement, such dealers may receive compensation in the
form of discounts, concessions or commissions from the Agents not in excess of
the discount or commission received by the Agent from the Company.
Unless otherwise indicated 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 the Agent to investors and other purchasers as described
above. After the initial public offering of Notes to be resold to investors and
other purchasers the public offering price (in the case of Notes to be sold at
a fixed public offering price), the concession and the discount may be changed.
The applicable Pricing Supplement may set forth further information with
respect to distribution of the Notes.
The Company will have the sole right to accept offers to purchase Notes
and may reject any proposed purchase of Notes. Each Agent will have the right,
in its sole discretion, to reject any offer received by it. Payment of the
purchase price of Notes will be required to be made in immediately available
funds.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Securities Act.
The Notes are a new issue of securities with no established trading
market. The Agents have informed the Company that they intend to make a market
in the Notes, but are under no obligation to do so and such market making may
be discontinued at any time. No assurance can be given as to the liquidity of a
trading market for the Notes.
Concurrently with the offering of Notes described herein, the Company may
issue other Debt Securities described in the accompanying Prospectus pursuant
to the Indenture.
<PAGE>
PROSPECTUS
CHRYSLER FINANCIAL CORPORATION [logotype]
Debt Securities and Warrants
Chrysler Financial Corporation (the "Company") may offer from time to
time its debt securities consisting of senior debentures, notes, bonds and/or
other evidences of indebtedness ("Debt Securities"), and warrants to purchase
Debt Securities ("Warrants") up to an aggregate initial public offering price
of approximately $7,764,000,850 or the equivalent thereof in one or more
foreign currencies or composite currencies. Debt Securities and Warrants may be
offered, separately or together, in separate series in amounts, at prices and
on terms to be set forth in supplements to this Prospectus. Unless otherwise
provided in any such supplement, the Debt Securities and Warrants will be sold
only for U.S. dollars, and the principal of and any interest on the Debt
Securities will likewise be payable only in U.S. dollars.
The Debt Securities will rank pari passu in right of payment with all
existing and future unsecured and unsubordinated indebtedness of the Company.
See "Description of Debt Securities."
Debt Securities of a series may be issuable in registered form without
coupons ("Registered Securities"), in bearer form with coupons attached
("Bearer Securities") or in the form of one or more global securities (each a
"Global Security"). Warrants of a series may be issuable in registered form
("Registered Warrants") and may be issuable in bearer form ("Bearer Warrants").
Bearer Securities and Bearer Warrants will be offered only to non-United States
persons and to offices located outside the United States of certain United
States financial institutions.
The terms of the Debt Securities and/or Warrants in respect of which this
Prospectus is being delivered, including, where applicable, the specific
designation, aggregate principal amount, currency, denominations, maturity,
premium, rate (which may be fixed or variable) and time of payment of interest,
the nature of any liens securing the Debt Securities, terms for redemption at
the option of the Company or the holder, terms for sinking fund payments, terms
for exercising the Warrants, the initial public offering price, the names of,
and the principal amounts to be purchased by, underwriters and the compensation
of any agents and underwriters and other terms in connection with the offering
and sale of such Debt Securities and/or Warrants are set forth in the
accompanying Prospectus Supplement (the "Prospectus Supplement").
The Company may offer and sell Debt Securities and Warrants, separately
or together, to or through underwriters, and also may offer and sell Debt
Securities and Warrants, separately or together, directly to other purchasers
or through agents. See "Plan of Distribution." If any agents of the Company or
any underwriters are involved in the sale of any Debt Securities in respect of
which this Prospectus is being delivered, the names of such agents or
underwriters and any applicable commissions or discounts will be set forth in
the applicable Prospectus Supplement. The net proceeds to the Company from such
sale also will be set forth in the applicable Prospectus Supplement. This
Prospectus may not be used to consummate sales of Debt Securities or Warrants
unless accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is December 20, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company and Chrysler Corporation are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, file reports and other information with
the Securities and Exchange Commission (the "Commission"). Such reports and
other information may be inspected and copies may be obtained at the principal
office of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549 and at the following regional offices of the Commission:
Northwestern Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661-2511; and Seven World Trade Center, 13th Floor, New York, New
York, 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at Room 1024 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Reports and other information concerning the
Company can be inspected at the offices of the New York Stock Exchange, Inc.,
20 Broad Street, New York, New York 10005, on which certain of the Company's
debt securities are listed.
The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Debt Securities and Warrants offered hereby. This Prospectus does not
contain all of the information included in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Debt Securities and Warrants, reference is hereby made to the
Registration Statement and the exhibits and schedules thereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1994, Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995, June 30, 1995 and September 30, 1995, the Current Reports on Form
8-K dated January 17, 1995, May 5, 1995 and August 24, 1995 and Amendment
No. 1 to the Current Report on Form 8-K dated January 17, 1995 on Form 8-K/A
dated January 24, 1995, which were previously filed with the Commission
pursuant to the Exchange Act, are incorporated herein by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Debt Securities and Warrants
shall be deemed to be incorporated by reference into this Prospectus and to be
a part hereof from the date of filing such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein, in the accompanying Prospectus
Supplement or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superceded shall not be deemed, except
as so modified or superceded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request, a copy of any and
all documents incorporated by reference as a part of the Registration
Statement, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the information that the Prospectus
incorporates. Requests should be directed to: Office of the Secretary, Chrysler
Financial Corporation, 27777 Franklin Road, Southfield, Michigan 48034
(telephone: (810) 948-3060).
These securities have not been approved or disapproved by the
Commissioner of Insurance for the State of North Carolina, nor has the
Commissioner of Insurance ruled upon the accuracy or the adequacy of this
Prospectus or any Prospectus Supplement hereto.
<PAGE>
CHRYSLER FINANCIAL CORPORATION
General
The Company is a financial services organization engaged in automotive
retail and wholesale financing, servicing commercial leases and loans, secured
small business financing, property, casualty and other insurance, and
automotive dealership facility development and management. All of the Company's
common stock is owned by Chrysler Corporation, a Delaware corporation (together
with its subsidiaries, "Chrysler"). The Company's primary objective is to
provide financing for automotive dealers and retail purchasers of Chrysler's
products. The Company sells significant amounts of automotive receivables
acquired in transactions subject to limited recourse provisions. The Company
remains as servicer to such receivables for which it is paid a servicing fee.
At September 30, 1995, the Company had approximately 3,200 employees and its
portfolio of receivables managed, which includes receivables owned and serviced
for others, totaled $36.2 billion. The Company's executive offices are located
at 27777 Franklin Road, Southfield, Michigan 48034; telephone (810) 948-3060.
This Prospectus contains brief summaries of certain more detailed
information contained in documents incorporated herein by reference. Such
summaries are qualified in their entirety by the more detailed information
contained in the incorporated documents.
Company Operations
The Company's portfolio of finance receivables managed includes
receivables owned and receivables serviced for others. Receivables serviced for
others primarily represent sold receivables which the Company services for a
fee. At September 30, 1995, receivables serviced for others accounted for 66%
of the Company's portfolio of receivables managed. Total finance receivables
managed at September 30, 1995 and 1994 and at December 31 of each of the five
most recent years were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
-------------------- -----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(unaudited) (in millions of dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Automotive financing $33,802 $27,113 $29,962 $25,011 $22,481 $24,220 $25,117
Nonautomotive financing 2,436 2,857 2,775 3,251 7,657 9,486 10,709
------- ------- ------- ------- ------- ------- -------
Total $36,238 $29,970 $32,737 $28,262 $30,138 $33,706 $35,826
======= ======= ======= ======= ======= ======= =======
</TABLE>
Automotive Financing. The Company conducts its automotive finance
business principally through its subsidiaries Chrysler Credit Corporation,
Chrysler Credit Canada Ltd., and, in Mexico, Chrysler Comercial S.A. de
C.V. (collectively, "Chrysler Credit"). Chrysler Credit is the major source of
car and truck wholesale financing (also referred to as "floor plan") and retail
financing for Chrysler vehicles throughout North America. Chrysler Credit also
offers its floor plan dealers working capital loans, real estate and equipment
financing and financing plans for fleet buyers, including daily rental car
companies independent of, and affiliated with, Chrysler. The automotive
financing operations of Chrysler Credit and such other subsidiaries are
conducted through 94 branches in the United States, Canada and Mexico.
During the first nine months of 1995, the Company financed or leased
approximately 831,000 vehicles at retail, including approximately 483,000 new
Chrysler cars and trucks representing 29 percent of Chrysler's U.S. retail and
fleet deliveries. The Company also financed at wholesale approximately
1,193,000 new Chrysler cars and trucks representing 75 percent of Chrysler's
U.S. factory shipments in the first nine months of 1995. During 1994, the
Company financed or leased approximately 830,000 vehicles at retail, including
approximately 525,000 new Chrysler cars and trucks representing 24 percent of
Chrysler's U.S. retail and fleet deliveries. The Company also financed at
wholesale approximately 1,647,000 new Chrysler cars and trucks representing 73
percent of Chrysler's U.S. factory shipments in 1994.
Nonautomotive Financing. Chrysler Capital Corporation, a wholly-owned
subsidiary of the Company ("Chrysler Capital"), manages commercial leases
and loans in over 15 industries throughout the United States. At September 30,
1995, Chrysler Capital managed $2.1 billion of commercial finance receivables
<PAGE>
compared to $2.3 billion at December 31, 1994 and $2.7 billion at December 31,
1993. In addition, the Company managed a portfolio of secured small business
loans totaling $.5 billion at December 31, 1994. The Company has downsized
its nonautomotive operations through sales and liquidations over the last
several years.
Risk Factors
Prior to deciding to invest in the Debt Securities, potential purchasers
should carefully consider the following factors, together with the information
herein contained and incorporated herein by reference.
Liquidity and Capital Resources. The Company has significant liquidity
requirements. If cash provided by operations, borrowings under bank credit
lines, continued receivable sales and the placement of term debt does not
provide the necessary liquidity, the Company would be required to restrict its
financing of Chrysler products and dealers. A significant reduction in such
financing support would have a material adverse effect on the Company and
Chrysler. Additionally, an impairment of the Company's ability to sell or
securitize its receivables, a reduction in Chrysler's automotive product sales,
and a variety of other factors could affect the Company's ability to repay its
debt at maturity. See, "Chrysler Financial Corporation Selected Consolidated
Financial Data -- Liquidity and Capital Resources."
Relationship with Chrysler. Due to the significant portion of the
Company's business that relates to Chrysler and the Company's increasing
dependence upon Chrysler, lower levels of production and sales of Chrysler
automotive products would likely result in a reduction in the level of finance
operations of the Company. The Company's results of operations during the next
several years will depend significantly upon the success of Chrysler's new
products. The success of Chrysler's new products will depend upon a number of
factors, including the economy, competition, consumer acceptance, Chrysler's
ability to fund its new product development and facility modernization
programs, the effect of governmental regulation and the strength of Chrysler's
marketing and dealer networks. See "Information Concerning Chrysler
Corporation."
<PAGE>
CHRYSLER FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data of the Company for each of the last
five years ended December 31, 1994 have been derived from the audited
consolidated financial statements of the Company. The consolidated financial
statements as of December 31, 1994 and 1993 and for each of the last three
years ended December 31, 1994 and the report of Deloitte & Touche LLP thereon
are incorporated herein by reference. The selected historical financial data
presented below as of and for the nine-month periods ended September 30, 1995
and 1994 are derived from the unaudited consolidated financial statements of
the Company and its subsidiaries incorporated herein by reference and reflects
all adjustments, consisting of only normal recurring items, which are, in the
opinion of management, necessary to present a fair statement of the results
for such periods. Results for the nine-month period ended September 30, 1995
are not necessarily indicative of results to be expected for the entire year.
The following selected consolidated financial data should be read in
conjunction with such consolidated financial statements, related notes and
other financial information incorporated herein by reference.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ -----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(unaudited) (dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Statement Data:(1)
Total interest income $ 1,182 $ 990 $ 1,357 $ 1,418 $ 1,939 $ 2,598 $ 3,293
Interest expense 681 556 754 791 1,022 1,446 2,051
Interest margin 501 434 603 627 917 1,152 1,242
Other revenues 592 465 627 621 636 623 481
Operating expenses 288 338 497 463 595 614 566
Provision for credit losses 256 162 203 216 309 421 339
Earnings before income taxes and cumulative effect of
changes in accounting principles 374 226 315 267 295 402 476
Net earnings(2) 242 141 195 129 231 276 313
<CAPTION>
September 30, December 31,
----------------- -----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(unaudited) (dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:(1)
Finance receivables -- net $11,968 $10,894 $12,423 $ 9,626 $10,200 $15,579 $20,927
Retained interests in sold receivables and other
related amounts -- net 2,657 2,691 2,251 2,620 2,759 2,885 1,272
Cash and cash equivalents 427 170 174 265 433 522 266
Marketable securities 780 337 583 348 333 298 310
Assets held for sale -- -- -- -- 2,393 -- --
Amounts due from affiliated companies -- -- 66 -- -- 67 --
Repossessed collateral 166 240 162 269 192 182 93
Dealership properties leased -- net 381 409 407 423 454 469 464
Equipment and vehicles leased -- net 424 215 234 176 333 836 883
Other assets 302 405 348 524 451 442 487
Total assets $17,105 $15,361 $16,648 $14,251 $17,548 $21,280 $24,702
Short-term notes (primarily commercial paper) $ 2,676 $ 3,114 $ 4,315 $ 2,772 $ 352 $ 339 $ 1,114
Bank borrowings -- -- -- -- 5,924 6,633 6,241
Senior term debt 8,337 5,768 6,069 5,139 4,436 6,742 9,233
Subordinated term debt 27 27 27 77 585 949 1,686
Other debt 93 569 260 447 455 518 431
Accounts payable, accrued expenses and other 1,097 1,048 1,155 1,147 1,270 1,777 1,712
Amounts due to affiliated companies 97 15 -- 24 35 -- 224
Deferred income taxes 1,475 1,572 1,549 1,514 1,493 1,480 1,272
Total liabilities 13,802 12,113 13,375 11,120 14,550 18,438 21,913
Shareholder's investment:
Preferred -- -- -- -- -- 75 285
Common(3) 3,303 3,248 3,273 3,131 2,998 2,767 2,504
Total shareholder's investment 3,303 3,248 3,273 3,131 2,998 2,842 2,789
Total liabilities and shareholder's investment $17,105 $15,361 $16,648 $14,251 $17,548 $21,280 $24,702
<FN>
- ----------------
(1) Prior periods reclassified to conform to current classifications.
(2) Net earnings for 1993 included a $30 million after-tax charge from the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," while
1992 net earnings included a $51 million favorable after-tax adjustment
from the adoption of SFAS No. 109, "Accounting for Income Taxes" and an
after-tax one-time $24 million charge for the write-off of goodwill.
(3) The Company declared cash dividends totaling $229 million in respect of its
common stock for the nine months ended September 30, 1995, $40 million
during 1994 and $16 million for the nine months ended September 30, 1994.
The Company declared no cash dividends in respect of its common stock
during 1993, 1992 or 1991 and in 1990 declared cash dividends of $150
million.
</TABLE>
<PAGE>
Financial Condition
The Company's primary objective is to provide financing support for
automotive dealers and retail customers of Chrysler's products. The Company's
receivables managed and total assets at September 30, 1995 increased from
year-end 1994 levels reflecting growth in automotive volume. Total assets
increased during 1994 for the first time since 1989 due to higher volumes of
automotive receivables acquired and lower levels of automotive retail
receivable sales. The Company paid $229 million and $16 million in dividends
to Chrysler in the first nine months of 1995 and 1994, respectively, and $40
million during 1994.
The Company's portfolio of receivables managed, which includes
receivables owned and receivables serviced for others, totaled $36.2 billion
at September 30, 1995 compared to $32.7 billion at December 31, 1994 and
$30.0 billion at September 30, 1994. The increase in receivables managed
reflects higher volumes of automotive receivables acquired, partially offset
by continued liquidations of nonautomotive finance receivables.
Receivables serviced for others primarily represent sold receivables
which the Company services for a fee. Receivables serviced for others totaled
$24.0 billion at September 30, 1995 compared to $20.1 billion at December 31,
1994 and $20.9 billion at September 30, 1994.
The Company's total allowance for credit losses, including receivables
sold subject to limited recourse provisions, totaled $595 million, $510
million and $525 million at September 30, 1995, December 31, 1994, and
September 30, 1994, respectively. The total allowance for credit losses as a
percentage of related finance receivables managed was 1.85%, 1.66% and 1.85%
at September 30, 1995, December 31, 1994, and September 30, 1994,
respectively.
Total assets at September 30, 1995 increased to $17.1 billion from $16.6
billion at December 31, 1994 and $15.4 billion at September 30, 1994. Total
debt outstanding at September 30, 1995 was $11.1 billion compared to $10.7
billion at December 31, 1994 and $9.5 billion at September 30, 1994. The
Company's debt-to-equity ratio increased to 3.4 to 1 at September 30, 1995
compared to 3.3 t o 1 at December 31, 1994 and 2.9 to 1 at September 30, 1994,
reflecting increased use of term debt and commercial paper to fund the
Company's asset growth.
Results of Operations
The Company's earnings before taxes were $138 million and $374 million
for the three and nine months ended September 30, 1995, respectively, which
compares to $82 million and $226 million for the comparable periods of 1994.
The Company's net earnings were $87 million and $242 million for the three and
nine months ended September 30, 1995, respectively, compared to $50 million and
$141 million in the comparable periods of 1994. The increase in earnings for
the three months ended September 30, 1995 reflects higher levels of automotive
financing and lower operating expenses. The increase in earnings for the nine
months ended September 30, 1995 reflects higher levels of automotive financing,
lower bank costs and lower operating expenses.
Earnings before income taxes and cumulative effect of changes in
accounting principles for 1994 totaled $315 million, which compared to $267
million and $295 million in 1993 and 1992, respectively. The increase in 1994
earnings before income taxes and cumulative effect of changes in accounting
principles resulted from higher volumes of automotive financing, improved
credit loss experience and lower costs of bank facilities. The decline in
1993 earnings before income taxes and cumulative effect of changes in
accounting principles from 1992 resulted largely from higher borrowing costs
incurred under the Company's revolving credit agreements.
The Company's net earnings were $195 million, $129 million and $231
million in 1994, 1993 and 1992, respectively. Net earnings for 1993 included
charges totaling $30 million from the adoption of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." Net earnings for 1992
included a $51 million favorable adjustment from the adoption of SFAS No. 109,
"Accounting for Income Taxes."
<PAGE>
Net credit loss experience, including net losses on receivables sold
subject to limited recourse provisions, for the first nine months of 1995 and
1994 and for the years ended December 31, 1994, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
Net Credit Losses
----------------------------------------
September 30, December 31,
-------------- ------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(unaudited) (in millions of dollars)
<S> <C> <C> <C> <C> <C>
Automotive financing $134 $ 76 $117 $109 $163
Nonautomotive financing 23 30 41 88 147
Total $157 $106 $158 $197 $310
</TABLE>
<TABLE>
<CAPTION>
Net Credit Losses to Average
Gross Receivables Outstanding
-----------------------------------
September 30, December 31,
-------------- --------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Automotive financing .55% .37% .42% .44% .68%
Nonautomotive financing .92% 1.01% 1.05% 1.73% 1.50%
Total .59% .45% .50% .66% .92%
</TABLE>
The recent increase in net credit losses to average receivables
outstanding is primarily related to retail automotive financing.
The Company's Mexican subsidiary, Chrysler Comercial S.A. de C.V.
("Chrysler Comercial") had total assets of $216 million and $626 million at
September 30, 1995 and 1994, respectively. The decline in Chrysler Comercial's
assets reflects the devaluation of the peso in 1994 and its negative impact on
Chrysler Comercial's retail and wholesale lending activities. The Company
believes its reserves for Mexican credit losses and a parent company support
agreement entered into with Chrysler during September, 1995, are adequate to
cover expected losses.
Liquidity and Capital Resources
Term debt borrowings, commercial paper borrowings and receivable sales
represent the Company's primary funding sources. The Company raised $3.1
billion from term debt placements during the first nine months of 1995, as
compared to $1.0 billion in the first nine months of 1994.
During the second quarter of 1995, the Company entered into new revolving
credit facilities which replaced its existing U.S. and Canadian revolving
credit and receivable sale facilities. The new facilities which total $8.0
billion consist of a $2.4 billion facility expiring in May, 1996 and a $5.6
billion facility expiring in May, 2000. These facilities include $0.8 billion
allocated to Chrysler Credit Canada Ltd. As of September 30, 1995, no amounts
were outstanding under these facilities.
Receivable sales continued to be a significant source of funding during
the first nine months of 1995 as the Company realized $4.7 billion of net
proceeds from the sale of automotive retail receivables, compared to $5.2
billion of net proceeds in the same period of 1994. During 1994, the Company
realized $6.4 billion of net proceeds from the sale of automotive retail
receivables. In addition, revolving wholesale receivable sale arrangements
provided funding which aggregated $6.6 billion, $3.8 billion and $3.6 billion
at September 30, 1995, December 31, 1994 and September 30, 1994, respectively.
At September 30, 1995, the Company had contractual debt maturities of
$3.1 billion during the remainder of 1995 (including $2.7 billion of short-term
notes), $1.6 billion in 1996 and $2.3 billion in 1997.
For additional information regarding the results of operations and
financial condition of the Company, see the Company's Annual Report on
Form 10-K for the year ended December 31, 1994 and
<PAGE>
the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995, June 30, 1995 and September 30, 1995, which are
incorporated by reference into this Prospectus.
New Accounting Standard
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
effective for fiscal years beginning after December 15, 1995. This statement
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and long-lived assets and certain identifiable intangibles to be
disposed. The statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In addition, the statement
requires that certain long-lived assets and intangibles to be disposed of be
reported at the lower of carrying amount or fair value less cost to sell. The
Company has not determined the impact that the adoption of this accounting
standard will have on its consolidated operating results or financial position.
The Company will adopt this accounting standard on or before January 1, 1996,
as required.
<PAGE>
INFORMATION CONCERNING CHRYSLER CORPORATION
The Company's results of operations depend significantly upon the
results of operations of Chrysler. Chrysler is subject to the informational
requirements of the Exchange Act, and in accordance therewith files reports
and other information with the Commission. Such reports and other information
can be inspected and copied at the public reference facilities of the
Commission referred to above under "Available Information."
The results of operations and balance sheet data set forth below for
Chrysler reflect the full consolidation of the accounts of all significant
majority-owned subsidiaries and entities over which Chrysler has a controlling
financial interest, and, for each of the last three years ended December 31,
1994, have been derived from the audited consolidated financial statements of
Chrysler, and, as of and for the nine-month periods ended September 30, 1995
and 1994, have been derived from the unaudited consolidated financial
statements of Chrysler.
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
------------------ ----------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
Results of Operations Data (unaudited) (in millions of dollars)
<S> <C> <C> <C> <C> <C>
Sales of manufactured products $35,666 $35,858 $49,363 $40,831 $33,548
Finance and insurance income 1,146 1,002 1,373 1,429 1,953
Other income 1,326 1,110 1,488 1,340 1,396
Total Revenues 38,138 37,970 52,224 43,600 36,897
Total Expenses 36,348 33,771 46,394 39,762 35,963
Earnings Before Income Taxes and Cumulative Effect of
Changes in Accounting Principles 1,790 4,199 5,830 3,838 934
Provision for income taxes 709 1,654 2,117 1,423 429
Earnings Before Cumulative Effect of Changes in
Accounting Principles 1,081 2,545 3,713 2,415 505
Cumulative effect of changes in accounting principles -- -- -- (4,966) 218
Net Earnings (Loss) $ 1,081 $ 2,545 $ 3,713 $(2,551) $ 723
Preferred stock dividends 19 60 80 80 69
Net Earnings (Loss) on Common Stock $ 1,062 $ 2,485 $ 3,633 $(2,631) $ 654
<CAPTION>
September 30, December 31,
------------------ ----------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
Balance Sheet Data (unaudited) (in millions of dollars)
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and marketable securities $ 7,611 $ 7,137 $ 8,371 $ 5,095 $ 3,649
Total assets 50,789 46,506 49,539 43,679 40,690
Total debt 13,106 11,919 13,106 11,451 15,551
Shareholders' equity 10,526 9,044 10,694 6,836 7,538
</TABLE>
Results of Operations
Chrysler reported earnings before income taxes of $582 million for the
third quarter of 1995, compared with $1,063 million for the third quarter of
1994. For the first nine months of 1995, Chrysler reported earnings before
income taxes of $1,790 million, compared with $4,199 million for the first nine
months of 1994. Net earnings for the third quarter of 1995 were $354 million,
or $0.91 per common share, compared with $651 million, or $1.76 per common
share, for the third quarter of 1994. Net earnings for the nine months ended
September 30, 1995 were $1,081 million, or $2.82 per common share, compared
with $2,545 million, or $6.92 per common share, for the comparable 1994 period.
<PAGE>
The lower operating results in the third quarter of 1995 compared with
the corresponding period in 1994 resulted primarily from lower minivan
production volume, costs associated with the launch of Chrysler's all-new
minivans and the launch of Chrysler's full-size Dodge Ram pickup truck at an
additional facility, a lower mix of higher-margin vehicles, higher incentives
and lower factory unit sales in Mexico.
The lower operating results in the first nine months of 1995 compared
with the corresponding period in 1994 resulted primarily from lower minivan
production volume and costs associated with the model changeover and launch of
Chrysler's all-new minivans, higher incentives and material costs, a provision
for costs associated with production changes at Chrysler's Newark assembly
plant, a lower mix of higher-margin vehicles, and lower factory unit sales in
Mexico.
Chrysler reported earnings before income taxes and the cumulative effect
of changes in accounting principles of $5.8 billion in 1994, compared with $3.8
billion in 1993. The earnings in 1993 included a gain on sales of automotive
assets and investments totaling $265 million. Excluding the effects of these
items, Chrysler's pretax earnings for 1993 were $3.6 billion.
Chrysler reported net earnings for 1994 of $3.7 billion, or $10.11 per
common share, compared to a net loss for 1993 of $2.6 billion, or $7.62 per
common share. Net earnings for 1994 included favorable tax adjustments
aggregating $132 million. The net loss for 1993 resulted from a charge of $4.68
billion, or $13.57 per common share, for the cumulative effect of a change in
accounting principle related to the adoption of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Also included in
the 1993 results was a charge of $283 million, or $0.82 per common share, for
the cumulative effect of a change in accounting principle relating to the
adoption of SFAS No. 112, "Employers' Accounting for Postemployment Benefits"
and a $72 million favorable adjustment of Chrysler's deferred tax assets and
liabilities as a result of the increased U.S. federal income tax rate.
The improvement in earnings in 1994 over 1993 was primarily the result of
an increase in sales volume, a reduction in lower-margin fleet sales in
proportion to total retail sales and reduced sales incentives, partially offset
by increased profit-based employee costs. During 1994, Chrysler's worldwide
factory sales of cars increased 2 percent to 1,051,750 units, while worldwide
factory sales of trucks increased 18 percent to 1,710,353 units. Combined U.S.
and Canadian dealers' days supply of vehicles increased to 69 days at December
31, 1994 from 63 days at December 31, 1993.
During 1994 and 1993, Chrysler continued to take various actions to
strengthen its financial condition, improve liquidity and add to its equity
base in order to ensure its ability to carry out its capital spending plans.
During 1994 and 1993, Chrysler contributed a total of $6.1 billion to its
pension fund. At December 31, 1994, Chrysler had plan assets in excess of its
projected pension benefit obligation ("PBO") of $244 million, compared to a PBO
in excess of plan assets of $3.9 billion at December 31, 1992. During 1993,
Chrysler issued 52 million shares of common stock for net proceeds of $1.95
billion. During 1994 and 1993, Chrysler sold assets and investments for
proceeds totaling approximately $786 million.
Chrysler's revenues and results of operations are principally derived
from the U.S. and Canada automotive marketplace. During 1994, combined U.S. and
Canada automobile industry sales increased 8 percent from the 1993 levels, as
the economic recoveries in the U.S. and Canada continued. Overall, Chrysler
experienced sales growth consistent with the U.S. and Canada automobile
industry. In response to the economic recovery, Chrysler intends to increase
its worldwide production capacity by approximately 500,000 units per year by
1996.
Chrysler vehicles manufactured and sold in Mexico during the third
quarter and first nine months of 1995 were 5,000 and 15,100 units,
respectively, a decrease of 15,700 and 48,100 units from the corresponding 1994
periods. The impact of the lower sales in Mexico during the third quarter and
first nine months of 1995 was partially offset by higher profits on vehicles
manufactured in Mexico and exported to other markets. The unfavorable economic
conditions in Mexico are expected to continue to have a negative impact on
Chrysler's operating results and financial position.
Chrysler has benefitted from several factors, including: (1) continuing
economic recoveries (including low interest rates) and strong automobile sales
in the U.S. and Canada, where Chrysler's sales
<PAGE>
are concentrated, (2) a cost advantage in comparison to vehicles manufactured
in Japan (or vehicles containing significant material components manufactured
in Japan) as a result of favorable exchange rates between the Japanese Yen
and the U.S. Dollar, and (3) a shift in U.S. and Canada consumer preferences
toward trucks, as Chrysler manufactures a higher proportion of trucks to total
vehicles than its principal competitors in the U.S. and Canada. A significant
deterioration of any of these factors could adversely affect Chrysler's
operating results.
Chrysler's automotive operations, including product design and
development efforts, manufacturing operations and sales, are conducted mainly
in North America. The automotive industry in North America is highly
competitive with respect to a number of factors, including product quality,
price, appearance, size, special options, distribution organization,
warranties, reliability, fuel economy, dealer service and financing terms. As a
result, Chrysler's ability to increase vehicle prices and to use retail sales
incentives effectively are significantly affected by the pricing actions and
sales programs of its principal competitors. Moreover, the introduction of new
products by other manufacturers may adversely affect the market shares of
competing products made by Chrysler. Also, many of Chrysler's competitors have
larger worldwide sales volumes and greater financial resources, which may place
Chrysler at a competitive disadvantage in responding to substantial changes in
consumer preferences, governmental regulations, or adverse economic conditions
in North America.
Chrysler's long-term profitability depends upon its ability to introduce
and market its new products effectively. The success of Chrysler's new products
will depend on a number of factors, including the economy, competition,
consumer acceptance, new product development, the effect of governmental
regulation and the strength of Chrysler's marketing and dealer networks. As
both Chrysler and its competitors plan to introduce new products, Chrysler
cannot predict the market shares its new products will achieve. Moreover,
Chrysler is substantially committed to its product plans and would be adversely
affected by events requiring a major shift in product development.
Liquidity and Capital Resources
Chrysler's combined cash, cash equivalents, and marketable securities
totaled $7.6 billion at September 30, 1995 (including $1.2 billion held by the
Company), compared with $8.4 billion at December 31, 1994. The decrease in the
first nine months of 1995 was the result of capital expenditures, profit-based
employee payments, common stock repurchases and dividend payments, largely
offset by cash generated by operating activities. Chrysler's combined cash,
cash equivalents and marketable securities totaled $8.4 billion at December
31, 1994 (including $757 million held by the Company), compared to $5.1
billion and $3.6 billion at December 31, 1993 and 1992, respectively. The
increase in 1994 was the result of cash generated by operating activities,
partially offset by capital expenditures and pension contributions. The
increase in 1993 was the result of cash generated by operating activities, the
issuance of 52 million shares of new common stock and the sale of assets and
investments, partially offset by debt repayments, pension contributions and
capital expenditures.
Chrysler's long-term profitability will depend on its ability to develop
and market its products successfully. Chrysler's expenditures for new product
development and the acquisition of productive assets were $13.7 billion for the
three-year period ended December 31, 1994. Expenditures for these items during
the succeeding three-year period are expected to be at similar or higher
levels. At December 31, 1994, Chrysler had commitments for capital
expenditures, including commitments for assets currently under construction,
totaling approximately $1.0 billion.
Chrysler's pension assets exceeded its PBO by $244 million at December
31, 1994, compared to a PBO in excess of plan assets of $2.2 billion and $3.9
billion at December 31, 1993 and 1992, respectively. These reductions in the
unfunded pension obligation resulted from Chrysler's contributions of $2.6
billion and $3.5 billion to the pension fund in 1994 and 1993, respectively. In
addition to the contributions in 1994, the projected pension benefit obligation
was reduced by an increase in the discount rate used to measure the obligation.
The favorable impact of the 1993 contributions was partially offset by
increases in the PBO caused by the reduction in the discount rate used to
measure the obligation and pension benefit increases which were included in
Chrysler's 1993 national labor agreements with its principal collective
bargaining units.
<PAGE>
At September 30, 1995, Chrysler (excluding the Company) had debt
maturities totaling $229 million through 1997. During the first nine months of
1995, Chrysler redeemed $300 million of its 13% Debentures Due 1997 and repaid
$180 million of other debt. At September 30, 1995, Chrysler had a $1.7 billion
revolving credit agreement which expires in July 1999. At September 30, 1995,
none of the commitment was drawn upon.
Financing by the Company
Chrysler's ability to market its products successfully depends
significantly on the availability of vehicle financing for its dealers and, to
a lesser extent, the availability of financing for retail and fleet purchasers
of its products, both of which the Company provides. The Company provided
inventory financing for approximately 73 percent of the vehicles Chrysler sold
to dealers in the United States in 1994. The Company also provided financing
for approximately 24 percent of Chrysler's U.S. retail and fleet deliveries in
1994.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges of the Company Consolidated and
Chrysler Consolidated for the first nine months of 1995 and for each of the
last five years were as follows:
<TABLE>
<CAPTION>
Nine Months Years Ended December 31,
Ended -------------------------------------
September 30, 1995 1994 1993 1992 1991 1990
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
The Company Consolidated 1.54X 1.41X 1.33X 1.28X 1.27X 1.23X
Chrysler Consolidated 2.69X 5.52X 3.62X 1.48X 0.59X 1.03X
</TABLE>
The Company Consolidated. The ratios of earnings to fixed charges have
been computed by dividing earnings before taxes on income and fixed charges by
fixed charges. Fixed charges consist of interest, amortization of debt discount
and expense, and rentals. Rentals included in fixed charges are the portion of
total rent expense representative of the interest factor (deemed to be
one-third).
Chrysler Consolidated. For purposes of computing the ratios of earnings
to fixed charges, earnings are determined by adding back fixed charges to
earnings (loss) from continuing operations (including equity in net earnings of
unconsolidated subsidiaries) before taxes on income and excluding undistributed
earnings from less than 50% owned affiliates. Fixed charges consist of interest
expense, credit line commitment fees and the interest portion of rent expense.
In 1991, earnings were not sufficient to cover fixed charges. The coverage
deficiency was $897 million.
<PAGE>
USE OF PROCEEDS
Unless otherwise provided in the applicable Prospectus Supplement, the
net proceeds to be received by the Company from the sale of the Debt Securities
and Warrants and the exercise of Warrants will be added to its general
corporate funds and may be used to repay long-term or short-term borrowings and
for other general corporate purposes. If the Company elects at the time of the
issuance of Debt Securities or Warrants to make different or more specific use
of proceeds other than as set forth herein, such use will be described in the
Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities set forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered will be
described in the Prospectus Supplement relating to such Debt Securities.
The Debt Securities are to be issued under an Indenture dated as of
February 15, 1988, as amended (the "Indenture"), between the Company and
Manufacturers Hanover Trust Company, which has been succeeded by United States
Trust Company of New York as successor Trustee (the "Trustee"). The Indenture
is incorporated by reference as an exhibit to the Registration Statement. The
following summary of certain provisions of the Indenture does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
Indenture. Numerical references in parentheses below are to sections of the
Indenture. Wherever particular sections or defined terms of the Indenture are
referred to, it is intended that such sections or defined terms shall be
incorporated herein by reference.
General
Debt Securities and Warrants offered by this Prospectus will be limited
to an aggregate initial public offering price of approximately $7,764,000,850
or the equivalent thereof in one or more foreign currencies or composite
currencies. The Indenture provides that Debt Securities in an unlimited amount
may be issued thereunder from time to time in one or more series. (Section 301)
The Securities will rank pari passu in right of payment with all existing
and future unsecured and unsubordinated indebtedness of the Company.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for the terms of such Debt
Securities, including, where applicable: (i) the designation, aggregate
principal amount, currency or currencies and denominations of such Debt
Securities; (ii) the price (expressed as a percentage of the aggregate
principal amount thereof) at which such Debt Securities will be issued; (iii)
the date or dates on which such Debt Securities will mature; (iv) the currency
or currencies in which such Debt Securities are being sold and in which the
principal of and any interest on such Debt Securities will be payable, whether
the holder of any such Debt Securities may elect the currency in which payments
thereon are to be made and, if so, the manner of such election; (v) the rate or
rates (which may be fixed or variable) per annum at which such Debt Securities
will bear interest; (vi) the date from which such interest on such Debt
Securities will accrue, the dates on which such interest will be payable and
the date on which payment of such interest will commence; (vii) the dates on
which and the price or prices at which such Debt Securities will, pursuant to
any mandatory sinking fund provision, or may, pursuant to any optional
redemption or required repayment provisions, be redeemed or repaid and the
other terms and provisions of any such optional redemption or required
repayment; (viii) whether such Debt Securities are to be issuable as Registered
Securities, Bearer Securities or both and the terms upon which any Bearer
Securities of such series may be exchanged for Registered Securities of such
series; (ix) whether such Debt Securities are to be issued in whole or in part
in the form of one or more Global Securities and, if so, the identity of the
Depositary for such Global Security or Securities; (x) any special provisions
for the payment of additional amounts with respect to
<PAGE>
such Debt Securities; (xi) if a temporary Global Security is to be issued
with respect to such series, whether any interest thereon payable on an
interest payment date prior to the issuance of a permanent Global Security
or definitive Bearer Securities will be credited to the account of the
persons entitled thereto on such interest payment date; (xii) if a
temporary Global Security is to be issued with respect to such series,
the terms upon which interests in such temporary Global Security may
be exchanged for interests in a permanent Global Security or for
definitive Debt Securities of the series and the terms upon which
interests in a permanent Global Security, if any, may be exchanged for
definitive Debt Securities of the series; (xiii) any additional restrictive
covenants included for the benefit of holders of such Debt Securities; (xiv)
additional Events of Default provided with respect to such Debt Securities; and
(xv) the terms of any Warrants offered together with such Debt Securities.
The Debt Securities may be issuable as Registered Securities, Bearer
Securities or both. Debt Securities of a series may be issuable in whole or in
part in the form of one or more Global Securities, as described below under
"Global Securities." Unless the Prospectus Supplement relating thereto
specifies otherwise, Registered Securities denominated in U.S. dollars will be
issued only in denominations of $1,000 or any integral multiple thereof and
Bearer Securities denominated in U.S. dollars will be issued only in the
denomination of $5,000. See, however, "Limitations on Issuance of Bearer
Securities and Bearer Warrants" below. One or more Global Securities may be
issued in a denomination or aggregate denominations equal to the aggregate
principal amount of Outstanding Debt Securities of the series to be represented
by such Global Security or Securities. The Prospectus Supplement relating to a
series of Debt Securities denominated in a foreign or composite currency will
specify the denomination thereof. No service charge will be made for any
transfer or exchange of Debt Securities, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. (Sections 302 and 305)
At the option of the Holder upon request confirmed in writing, and
subject to the terms of the applicable Indenture, Bearer Securities (with all
unmatured coupons, except as provided below) of any series will be
exchangeable into an equal aggregate principal amount of Registered Securities
(if the Debt Securities of such series are issuable as Registered Securities)
or Bearer Securities of the same series (with the same interest rate and
maturity date), but no Bearer Security will be delivered in or to the United
States, and Registered Securities of any series (other than a Global Security,
except as set forth below) will be exchangeable into an equal aggregate
principal amount of Registered Securities of the same series (with the same
interest rate and maturity date) of different authorized denominations. If a
Holder surrenders Bearer Securities in exchange for Registered Securities
between a Regular Record Date or, in certain circumstances, a Special Record
Date, and the relevant interest payment date, such Holder will not be required
to surrender the coupon relating to such interest payment date. Registered
Securities may not be exchanged for Bearer Securities. (Section 305)
Debt Securities may be presented for exchange, and Registered Securities
(other than a Global Security) may be presented for transfer (with the form of
transfer endorsed thereon duly executed), at the office of any transfer agent
or at the office of the Security Registrar, without service charge and upon
payment of any taxes and other governmental charges as described in the
applicable Indenture. (Section 305) Bearer Securities will be transferable by
delivery.
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a discount below their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any such Original Issue Discount Securities will
be described in the Prospectus Supplement relating thereto. "Original Issue
Discount Securities" means any Debt Securities that provide for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof upon the occurrence of an Event of Default
and the continuation thereof. (Section 101)
Global Securities
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued in either registered
or bearer form and in either temporary or permanent form. Unless and until it
is exchanged in whole or in
<PAGE>
part for Debt Securities in definitive form, a Global Security may not be
transferred except as a whole by the Depositary for such Global Security
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by such Depositary or
any such nominee to a successor of such Depositary or a nominee of such
successor. (Sections 303 and 305)
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will
apply to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of institutions that have accounts with such
Depositary ("participants"). The accounts to be credited shall be designated by
the underwriters of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by participants or
persons that hold through participants. The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole owner or holder of the Debt Securities
represented by such Global Security for all purposes under the Indenture
governing such Debt Securities. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities of
the series represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Debt Securities of
such series in definitive form and will not be considered the owners or holders
thereof under the Indenture.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, principal, premium, if any, and
interest payments on Debt Securities registered in the name of or held by a
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner or the holder of the Global Security
representing such Debt Securities. None of the Company, the Trustee for such
Debt Securities, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary for Debt Securities of a series,
upon receipt of any payment of principal, premium or interest in respect of a
permanent Global Security, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depositary. The Company also expects that payments by participants to owners of
beneficial interests in such Global Security held through such participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
participants. Receipt by owners of beneficial interests in a temporary Global
Security of payments in respect of such temporary Global Security will be
subject to the restrictions discussed under "Limitations on Issuance of Bearer
Securities and Bearer Warrants" below.
If a Depositary for Debt Securities of a series is at any time unwilling
or unable to continue as depositary and a successor depositary is not appointed
by the Company within ninety days, the Company will issue Debt Securities of
such series in definitive form in exchange for all of the Global Securities
representing the Debt Securities of such series. In addition, the Company may
at any time and in its sole
<PAGE>
discretion determine not to have any Debt Securities of a series represented
by one or more Global Securities and, in such event, will issue Debt
Securities of such series in definitive form in exchange for all of the
Global Securities representing such Debt Securities. Further, if the
Company so specifies with respect to the Debt Securities of a series, an
owner of a beneficial interest in a Global Security representing Debt
Securities of such series may, on terms acceptable to the Company and the
Depositary for such Global Security, receive Debt Securities of such series in
definitive form. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of
Debt Securities of the series represented by such Global Security equal in
principal amount to such beneficial interest and to have such Debt Securities
registered in its name (if the Debt Securities of such series are issuable as
Registered Securities). Debt Securities of such series so issued in definitive
form will be issued (a) as Registered Securities in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof if
the Debt Securities of such series are issuable as Registered Securities, (b)
as Bearer Securities in the denomination, unless otherwise specified by the
Company, of $5,000 if the Debt Securities of such series are issuable as Bearer
Securities or (c) as either Registered or Bearer Securities, if the Debt
Securities of such series are issuable in either form. (Section 305) See,
however, "Limitations on Issuance of Bearer Securities and Bearer Warrants"
below for a description of certain restrictions on the issuance of a Bearer
Security in definitive form in exchange for an interest in a Global Security.
Payment and Paying Agents
Payment of principal of and premium, if any, and interest on Bearer
Securities will be payable in the currency designated in the Prospectus
Supplement, subject to any applicable laws and regulations, at such paying
agencies outside the United States as the Company may appoint from time to
time. Any such payment may be made by a check in the designated currency. No
payment with respect to any Bearer Securities will be made at the Corporate
Trust Office of the Trustee or any other paying agency maintained by the
Company in the United States nor will any such payment be made by transfer to
an account, or by mail to an address, in the United States. Notwithstanding the
foregoing, payments of principal of and premium, if any, and interest on Bearer
Securities will be made in U.S. dollars at the Corporate Trust Office of the
Trustee in The City of New York if payment of the full amount thereof at all
paying agencies outside the United States is illegal or effectively precluded
by exchange controls or other similar restrictions. (Section 1002)
Payment of principal of and premium, if any, on Registered Securities
will be made in the designated currency against surrender of such Registered
Securities at the Corporate Trust Office of the Paying Agent in The City of New
York. Unless otherwise indicated in the Prospectus Supplement, payment of any
installment of interest on Registered Securities will be made to the person in
whose name such Debt Security is registered at the close of business on the
regular record date for such interest. Unless otherwise indicated in the
Prospectus Supplement, payments of such interest will be made at the Corporate
Trust Office of the Paying Agent in The City of New York, or by a check in the
designated currency mailed to each Holder at such Holder's registered address.
(Sections 307 and 1001)
The paying agents outside the United States initially appointed by the
Company for a series of Debt Securities will be named in the Prospectus
Supplement. The Company may terminate the appointment of any of the paying
agents from time to time, except that the Company will maintain at least one
paying agent in The City of New York for payments with respect to Registered
Securities and at least one paying agent in a city in Europe so long as any
Bearer Securities are outstanding where Bearer Securities may be presented for
payment and may be surrendered for exchange, provided that so long as any
series of Debt Securities is listed on The International Stock Exchange of the
United Kingdom and the Republic of Ireland or the Luxembourg Stock Exchange or
any other stock exchange located outside the United States and such stock
exchange shall so require, the Company will maintain a paying agent in London
or Luxembourg or any other required city located outside the United States, as
the case may be, for such series of Debt Securities. (Section 1002)
All moneys paid by the Company to a paying agent for the payment of
principal of or premium, if any, or interest on any Debt Security that remains
unclaimed at the end of two years after such
<PAGE>
principal, premium or interest shall have become due and payable may be
repaid to the Company and the Holder of such Debt Security or any coupon
appertaining thereto will thereafter look only to the Company for payment
thereof. (Section 1003)
Covenants
The Indenture imposes the following restrictive covenants on the Company.
Limitation on Liens. The Company will not subject its assets or assets
of a Restricted Subsidiary to liens without securing the Debt Securities
equally and ratably with other indebtedness for borrowed money so secured
except for (1) liens securing exports to or marketing of goods in foreign
countries other than Canada, (2) liens on receivables payable in foreign
currencies to secure borrowings in foreign countries other than Canada, (3)
deposits in connection with public obligations or legal proceedings, (4) liens
securing intercompany indebtedness, (5) purchase money mortgages on fixed
assets hereafter acquired by the Company or any of its Restricted Subsidiaries
for use in the Finance Business or the Finance-Related Insurance Business,
liens on such property at the time of its acquisition or liens on fixed assets
used in the Finance Business or the Finance-Related Insurance Business existing
when a company becomes a Subsidiary, and (6) renewals of the foregoing.
(Section 1004) The term "Restricted Subsidiary" means any Subsidiary of the
Company engaged in the Finance Business or in the Finance-Related Insurance
Business other than Subsidiaries that are organized or conduct a major portion
of their business outside the United States, Puerto Rico or Canada. The term
"Subsidiary" means a corporation a majority of the outstanding voting stock of
which is owned, directly or indirectly, by the Company. (Section 101)
Limitation on Dividends. Cash dividends on or acquisitions for value of
capital stock of the Company subsequent to December 31, 1984 are limited to the
<PAGE>
sum of (i) consolidated net income of the Company and its consolidated
Subsidiaries calculated in accordance with generally accepted accounting
principles and (ii) net proceeds from cash sales of or cash contributions to
capital stock, subsequent to December 31, 1984. Substantially concurrent
acquisitions of capital stock out of the net proceeds of sales of capital stock
are excluded. (Section 1005)
Restricted Subsidiary Stock and Debt. The Company will not, and will not
permit any Subsidiary to, sell or otherwise dispose of any shares of stock or
indebtedness for borrowed money of any Restricted Subsidiary except to the
Company or to a Restricted Subsidiary unless simultaneously therewith all
shares of stock and such indebtedness of such Restricted Subsidiary at the time
owned by the Company and all Subsidiaries are sold or transferred. The Company
will not permit any Restricted Subsidiary to issue, sell or dispose of, except
to the Company or to a Restricted Subsidiary, (i) any preferred stock, except
to any holders of the stock of such Restricted Subsidiary in the exercise of a
pre-emptive right to subscribe to such preferred stock, or (ii) any other class
of stock except on the condition that the proportionate amount of shares of
stock of such class and of the total number of shares of stock of such
Restricted Subsidiary held by persons other than the Company and its Restricted
Subsidiaries shall not be increased and except for directors' qualifying
shares. (Sections 1007 and 1008)
Modification of the Indentures
The Indenture permits the Company and the Trustee, with the consent of
the holders of not less than 66-2/3% in principal amount of the Debt Securities
at the time outstanding thereunder and affected thereby, to execute a
supplemental indenture modifying the Indenture or the rights of the holders of
such Debt Securities and any related coupons, provided that no such
modification shall, without the consent of the holder of each Debt Security
affected thereby, (i) change the maturity of any Debt Security or coupon, or
reduce the principal amount thereof, or reduce the rate or change the time of
payment of interest thereon, or change any Place of Payment or change the coin
or currency in which a Debt Security or coupon is payable or affect the right
of any holder to institute suit for the enforcement of payment in accordance
with the foregoing, or (ii) reduce the aforesaid percentage of Debt Securities,
the consent of the holders of which is required for any such modification.
(Section 902)
<PAGE>
The Indenture contains provisions for convening meetings of the Holders
of Debt Securities of a series if Debt Securities of that series are issuable
in whole or in part as Bearer Securities. (Section 1401) A meeting may be
called at any time by the Trustee, or upon the request of the Company or the
Holders of at least 10% in principal amount of the outstanding Debt Securities
of such series, in any such case upon notice given in accordance with the
Indenture. (Section 1402) The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders
of not less than 66-2/3% in principal amount of the outstanding Debt Securities
of a series, the persons holding or representing 66-2/3% in principal amount of
the outstanding Debt Securities of such series will constitute a quorum.
(Section 1404) Except as limited by the proviso in the preceding paragraph, any
resolution presented at a meeting or adjourned meeting at which a quorum is
present may be adopted by the affirmative vote of the Holders of a majority in
principal amount of the outstanding Debt Securities of that series; provided,
however, that, except as limited by the proviso in the preceding paragraph, any
resolution with respect to any consent or waiver that may be given by the
Holders of not less than 66-2/3% in principal amount of the outstanding Debt
Securities of a series may be adopted at a meeting or an adjourned meeting at
which a quorum is present only by the affirmative vote of 66-2/3% in principal
amount of the outstanding Debt Securities of that series; and provided further
that, except as limited by the proviso in the preceding paragraph, any
resolution with respect to any demand, consent, waiver or other action that may
be made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of outstanding Debt Securities of a series
may be adopted at a meeting or adjourned meeting at which a quorum is present
by the affirmative vote of the Holders of such specified percentage in
principal amount of the outstanding Debt Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series and the related
coupons.
Events of Default
The Indenture provides that the following shall constitute Events of
Default with respect to any series of Debt Securities thereunder: (i) default
in payment of principal of or premium, if any, on any Debt Security of such
series when due; (ii) default for 30 days in payment of interest on any Debt
Security of such series when due; (iii) default in the deposit of any sinking
fund payment on any Debt Security of such series when due; (iv) default in
performance of any other covenant in such Indenture, continued for 30 days
after written notice thereof by the Trustee thereunder or the holders of 25% in
principal amount of the Debt Securities of such series at the time outstanding;
(v) default resulting in acceleration of maturity of any other indebtedness of
the Company or any Restricted Subsidiary provided that such acceleration has
not been rescinded or annulled within 10 days of written notice; and (vi)
certain events of bankruptcy, insolvency or reorganization. (Section 501) The
Company is required to file with each Trustee annually an Officers' Certificate
as to the absence of certain defaults under the terms of the Indenture.
(Section 1010)
The Indenture provides that if an Event of Default specified therein
shall occur and be continuing, either the Trustee or the holders of 25% in
principal amount of the Debt Securities of such series then outstanding may
declare the principal of all such Debt Securities (or in the case of Original
Issue Discount Securities, such portion of the principal amount thereof as may
be specified in the terms thereof) to be due and payable. (Section 502) In
certain cases, the holders of a majority in principal amount of the outstanding
Debt Securities of any series may on behalf of the holders of all such Debt
Securities and any related coupons waive any past default or event of default
except a default not theretofore cured in payment of the principal of or
premium, if any, or interest on any of the Debt Securities of such series and
any related coupons. (Sections 502 and 513)
The Indenture contains a provision entitling the Trustee, subject to the
duty of such Trustee during default to act with the required standard of care,
to be indemnified by the holders of the Debt Securities of any series or any
related coupons before proceeding to exercise any right or power under the
<PAGE>
Indenture with respect to such series at the request of such holders. (Section
603) The Indenture provides that no holder of any Debt Securities of any series
or any related coupons may institute any proceeding, judicial or otherwise, to
enforce the Indenture except in the case of failure of the Trustee, for 60
days, to act after it is given notice of default, a request to enforce the
Indenture by the holders of not less than 25% in aggregate principal amount of
the then outstanding Debt Securities of such series and an offer of reasonable
indemnity to such Trustee. (Section 507) This provision will not prevent any
holder of Debt Securities or any related coupons from enforcing payment of the
principal thereof and premium, if any, and interest thereon at the respective
due dates thereof. (Section 508) The holders of a majority in aggregate
principal amount of the Debt Securities of any series then outstanding may
direct the time, method and place of conducting any proceedings for any remedy
available to the Trustee or exercising any trust or power conferred on it with
respect to the Debt Securities of such series. However, the Trustee may refuse
to follow any direction that conflicts with law or the Indenture or which would
be unjustly prejudicial to holders not joining therein. (Section 512)
The Indenture provides that the Trustee thereunder will, within 90 days
after the occurrence of a default with respect to any series of Debt Securities
thereunder known to it, give to the holders of the Debt Securities of such
series notice of such default if not cured or waived; but, except in the case
of a default in the payment of principal of (or premium, if any), or interest
on, any Debt Securities, the Trustee shall be protected in withholding such
notice if it determines in good faith that the withholding of such notice is in
the interests of the holders of such Debt Securities. (Section 602)
Defeasance
The Company may terminate certain of its obligations under the Indenture
with respect to Debt Securities of any series, including its obligations to
comply with the covenants described under the heading "Restrictive Covenants"
above, with respect to the Debt Securities of such series, on the terms and
subject to the conditions contained in the Indenture, by depositing in trust
with the Trustee money or Government Obligations sufficient to pay the
principal of and interest on the Debt Securities of such series to maturity.
Such deposit and termination is conditioned upon the Company's delivery of (a)
an opinion of nationally recognized independent counsel that the holders of the
Debt Securities of such series will have no federal income tax consequences as
a result of such deposit and termination, (b) an officer's certificate and (c)
if the Debt Securities of such series are then listed on the New York Stock
Exchange, an opinion of counsel that the Debt Securities of such series will
not be delisted as a result of the exercise of this option. Such termination
will not relieve the Company of its obligation to pay when due the principal of
or interest on the Debt Securities of such series if the Debt Securities of
such series are not paid from the money or Government Obligations held by the
Trustee for the payment thereof. (Section 1301)
Concerning the Trustee
The Trustee is also trustee under indentures dated as of June 15, 1984
and September 15, 1986 between it and the Company.
DESCRIPTION OF WARRANTS
The following description of the terms of the Warrants sets forth certain
general terms and provisions of the Warrants to which any Prospectus Supplement
may relate. The particular terms of the Warrants offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply
to the Warrants so offered will be described in the Prospectus Supplement
relating to such Warrants.
Warrants may be offered independently or together with any series of Debt
Securities offered by a Prospectus Supplement and may be attached to or
separate from such Debt Securities. Each series of Warrants will be issued
under a separate warrant agreement ("Warrant Agreement") to be entered into
between the Company and a bank or trust company, as Warrant Agent (the "Warrant
Agent"), all as set
<PAGE>
forth in the Prospectus Supplement relating to such series of Warrants.
The Warrant Agent will act solely as the agent of the Company in connection
with the certificates for the Warrants (the "Warrant Certificates") of
such series and will not assume any obligation or relationship of agency or
trust for or with any holders of Warrant Certificates or beneficial owners of
Warrants. Copies of the forms of Warrant Agreements, including the forms of
Warrant Certificates, are filed as an exhibit to the Registration Statement to
which this Prospectus pertains. The following summaries of certain provisions
of the forms of Warrant Agreements and Warrant Certificates do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Warrant Agreements and the Warrant
Certificates. Numerical references in parentheses below are to sections of the
Warrant Agreements. Wherever particular sections or defined terms of the
Warrant Agreement are referred to, it is intended that such sections or defined
items shall be incorporated herein by reference.
General
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of such
Warrants, including, where applicable: (i) the offering price; (ii) the
currency or currencies in which such Warrants are being offered; (iii) the
designation, aggregate principal amount, currency or currencies, denominations
and terms of the series of Debt Securities purchasable upon exercise of such
Warrants; (iv) the designation and terms of the series of Debt Securities with
which such Warrants are being offered and the number of such Warrants being
offered with each such Debt Security; (v) the date on and after which such
Warrants and the related series of Debt Securities will be transferable
separately; (vi) the principal amount of the series of Debt Securities
purchasable upon exercise of each such Warrant and the price at which and
currency or currencies in which such principal amount of Debt Securities of
such series may be purchased upon such exercise; (vii) the date on which the
right to exercise such Warrants shall commence and the date (the "Expiration
Date") on which such right shall expire; (viii) whether such Warrants are to be
issuable as Bearer Warrants and the terms upon which any Bearer Warrants of
such series may be exchanged for Registered Warrants of such series; (ix)
federal income tax consequences; and (x) any other terms of such Warrants.
Warrant Certificates of each series will be issuable as Registered
Warrants and may be issuable as Bearer Warrants. At the option of the holder
upon request confirmed in writing, and subject to the terms of the relevant
Warrant Agreement, Bearer Warrants of any series will be exchangeable into
Registered Warrants or Bearer Warrants of the same series representing in the
aggregate the number of Warrants surrendered for exchange, and Registered
Warrants of any series will be exchangeable into Registered Warrants of the
same series representing in the aggregate the number of Warrants surrendered
for exchange. Warrant Certificates may be presented for exchange, and
Registered Warrants may be presented for transfer (with the form of transfer
endorsed thereon duly executed), at the corporate trust office of the Warrant
Agent for such series of Warrants (or any other office indicated in the
Prospectus Supplement relating to such series of Warrants) without service
charge and upon payment of any taxes and other governmental charges as
described in the relevant Warrant Agreement. Such transfer or exchange will be
effected when the Warrant Agent for such series of Warrants is satisfied with
the documents of title and identity of the person making the request. Bearer
Warrants will be transferable by delivery. (Section 4.01) Prior to the exercise
of their Warrants, holders of Warrants will not have any of the rights of
holders of the series of Debt Securities purchasable upon such exercise,
including the right to receive payments of principal of, premium, if any, or
interest, if any, on the series of Debt Securities purchasable upon such
exercise, or to enforce any of the covenants in the Indenture. (Section 3.01)
Exercise of Warrants
Each Warrant will entitle the holder thereof to purchase such principal
amount of the related series of Debt Securities at such exercise price as shall
in each case be set forth in, or calculable as set forth in, the Prospectus
Supplement relating to such Warrant. Warrants of a series may be exercised at
the corporate trust office of the Warrant Agent for such series of Warrants (or
any other office indicated in
<PAGE>
the Prospectus Supplement relating to such series of Warrants) at any time
prior to 5:00 P.M., New York City time, on the Expiration Date set forth
in the Prospectus Supplement relating to such series of Warrants. After
the close of business on the Expiration Date relating to such series of
Warrants (or such later date to which such Expiration Date may be
extended by the Company), unexercised Warrants of such series will become
void. (Sections 2.02 and 2.03)
Warrants of a series may be exercised by delivery to the appropriate
Warrant Agent of payment, as provided in the Prospectus Supplement relating to
such series of Warrants, of the amount required to purchase the principal
amount of the series of Debt Securities purchasable upon such exercise,
together with certain information as set forth on the reverse side of the
Warrant Certificate evidencing such Warrants and, in the case of Bearer
Warrants, compliance with the procedures specified in the applicable Prospectus
Supplement. Such Warrants will be deemed to have been exercised upon receipt of
the exercise price, subject to the receipt within five business days of such
Warrant Certificate. Upon receipt of such payment and such Warrant Certificate,
properly completed and duly executed, at the corporate trust office of the
appropriate Warrant Agent (or any other office indicated in the Prospectus
Supplement relating to such series of Warrants), the Company will, as soon as
practicable, issue and deliver the principal amount of the series of Debt
Securities purchasable upon such exercise. Registered Securities will be issued
and delivered upon exercise of Registered Warrants. At the option of the holder
of any Bearer Warrants, Registered Securities or Bearer Securities will be
issued and delivered upon exercise of such Bearer Warrants. If fewer than all
of the Warrants represented by a Registered Warrant are exercised, a new
Registered Warrant will be issued and delivered for the remaining amount of
Warrants. If fewer than all the Warrants represented by a Bearer Warrant are
exercised, at the option of the holder thereof, a new Registered Warrant or
Bearer Warrant will be issued and delivered for the remaining amount of
Warrants. (Section 2.03)
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United Stated federal tax laws and regulations
regarding the distribution of debt securities in bearer form, Bearer Securities
and Bearer Warrants may not, in connection with their original issuance, be
offered, sold, resold or delivered in the United States or to United States
persons (as defined below) other than to offices located outside the United
States of certain United States financial institutions that agree in writing to
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the
Internal Revenue Code of 1986 (the "Code") and the regulations thereunder, and
any underwriters, agents and dealers participating in the offering of Bearer
Securities or Bearer Warrants will agree that they will not offer any Bearer
Securities or Bearer Warrants for sale or resale in the United States or to
United States persons (other than the financial institutions described above)
or deliver Bearer Securities or Bearer Warrants within the United States. In
addition, any such underwriters, agents and dealers will agree to send
confirmations to each purchaser of a Bearer Security or Bearer Warrant
confirming that such purchaser represents that it is not a United States person
or is a financial institution described above and, if such person is a dealer,
that it will send similar confirmations to purchasers from it. Bearer
Securities will bear a legend substantially to the following effect: "Any
United States person who holds this obligation will be subject to limitations
under the United States income tax laws, including the limitations provided in
Sections 165(j) and 1287(a) of the Internal Revenue Code."
Generally, for United States federal income tax purposes, any United
States person who holds a Bearer Security will not be allowed to deduct any
loss sustained on the sale, exchange, redemption or other disposition of such
Bearer Security and will be taxed at ordinary income rates on any gain (which
might otherwise be characterized as capital gain) recognized on such sale,
exchange, redemption or disposition.
As used herein, "United States" mean the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction, and "United States
person" means an individual who is a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or any estate
or trust the income of which is subject to United States federal income
taxation regardless of its source.
<PAGE>
Pending the availability of a permanent Global Security or definitive
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security, with or without interest coupons, each to be deposited with a
depositary in London for Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System ("Euroclear") and Centrale de
Livraisons de Valeurs Mobilieres, S.A. ("CEDEL S.A.") for credit to the
designated accounts against certifications to the effect described below.
Following the availability of a permanent Global Security or definitive forms
of Bearer Securities and subject to any further limitations described in the
applicable Prospectus Supplement, the temporary Global Security will be
exchangeable for a permanent Global Security or for definitive Bearer
Securities, respectively, only upon certification that an interest in such
permanent Global Security or such definitive Bearer Securities is not being
acquired by or on behalf of a United States person or, if a beneficial interest
in such a Bearer Security is being acquired by or on behalf of a United States
person, that such United States person is a financial institution described
above; provided, however, that no definitive Bearer Security will be issued if
the Company has reason to know that such certificate is false. No definitive
Bearer Security will be delivered in or to the United States. If so specified
in the applicable Prospectus Supplement, interest in respect of any portion of
the temporary Global Security payable in respect of an Interest Payment Date
prior to the issuance of a permanent Global Security or definitive Bearer
Securities of any series will be paid to each of Euroclear and CEDEL S.A. with
respect to the portion of the temporary Global Security held for its account.
Each of Euroclear and CEDEL S.A. will undertake in such circumstances to credit
such interest received by it in respect of the temporary Global Security to the
respective accounts for which it holds the temporary Global Security only upon
receipt in each case of (i) certification that as of the relevant interest
payment date the portion of the temporary Global Security on which such
interest is to be so credited is not beneficially owned by a United States
person or any person who has purchased its interest in the temporary Global
Security for resale to any United States person or (ii) if a beneficial
interest in the portion of the temporary Global Security on which such interest
is to be so credited is beneficially owned by a United States person or any
person who has purchased its interest in the temporary Global Security for
resale to any United States person, certification that such United States
person is a financial institution described above.
Bearer Warrants will be issued only on receipt of a certification that
the Bearer Warrant in question is not being acquired by or on behalf of a
United States person or, if a beneficial interest in such Bearer Warrant is
being acquired by or on behalf of a United States person, that such United
States person is a financial institution described above.
PLAN OF DISTRIBUTION
The Company may offer and sell Debt Securities and Warrants, separately
or together, to or through underwriters, acting as principals for their own
accounts and/or as agents, and also may offer and sell Debt Securities and
Warrants, separately or together, directly to dealers or other purchasers. Any
such Debt Securities and Warrants may be offered and sold upon their original
issuance or, if so indicated in the Prospectus Supplement, in connection with a
remarketing upon their purchase by or on behalf of the Company, whether in
accordance with a redemption or repayment pursuant to their terms, in the open
market or otherwise. Any underwriter and/or agent will be identified and the
terms of its agreement with the Company and its compensation will be described
in the Prospectus Supplement. Only underwriters named in the Prospectus
Supplement are deemed to be underwriters in connection with the Debt Securities
or Warrants offered thereby.
Debt Securities and Warrants, separately or together, also may be offered
and sold, if so indicated in the Prospectus Supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption or repayment
pursuant to their terms, by one or more firms ("remarketing firms") acting as
principals for their own accounts or as agents for the Company. Any remarketing
firm will be identified and the terms of its agreement, if any, with the
Company and its compensation will be described in the Prospectus Supplement.
Remarketing firms may be deemed to be underwriters in connection with the Debt
Securities and Warrants remarketed thereby.
<PAGE>
The distribution of the Debt Securities and Warrants may be effected from
time to time in one or more transactions at a fixed price or prices, which may
be changed, or at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities and Warrants, dealers may
receive compensation from the Company or from purchasers of Debt Securities or
Warrants for whom they may act as agents, in the form of discounts, concessions
or commissions. The dealers that participate in the distribution of Debt
Securities or Warrants may be deemed to be underwriters and any discounts or
commissions received by them and any profit on the resale of Debt Securities or
Warrants by them may be deemed to be underwriting discounts and commissions
under the Act. Any such compensation will be described in the Prospectus
Supplement.
Under agreements that may be entered into with the Company, underwriters,
dealers, agents and remarketing firms may be entitled to indemnification by the
Company against certain liabilities, including liabilities under the Act.
Underwriters, dealers, agents and remarketing firms may be customers of, engage
in transactions with, or perform services for the Company in the ordinary
course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
dealers or other persons acting as the Company's agents to solicit offers by
certain institutions to purchase Debt Securities or Warrants from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will not be subject to any conditions except that (i)
the purchase of the Debt Securities or Warrants shall not at the time of
delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject, and (ii) if the series of Debt Securities or Warrants
being sold to such institutions are also being sold to underwriters, the
Company shall have sold to such underwriters the Debt Securities or Warrants
not sold for delayed delivery. The dealers and such other persons will not have
any responsibility in respect of the validity of performance of such contracts.
Each underwriter, dealer, agent and remarketing firm participating in the
distribution of any Debt Securities that are issuable as Bearer Securities will
agree that it will not offer, sell or deliver, directly or indirectly, Bearer
Securities in the United States or to United States persons (other than
qualifying financial institutions) in connection with the original issuance of
such Debt Securities.
For as long as Part III of The Companies Act 1985 remains in force in
relation to the Debt Securities or the Warrants, as the case may be, neither
the Debt Securities nor the Warrants may be offered or sold in the United
Kingdom, by means of this Prospectus, any Prospectus Supplement or any other
document, other than to persons whose ordinary business it is to buy or sell
shares or debentures (whether as principal or agent) or in circumstances which
do not constitute an offer to the public within the meaning of The Companies
Act 1985. All applicable provisions of The Financial Services Act 1986 must be
complied with in respect of anything done or to be done in relation to the Debt
Securities or the Warrants in, from or otherwise involving the United Kingdom.
Furthermore, each underwriter, dealer, agent and remarketing firm participating
in the distribution of Debt Securities or Warrants will agree that it will only
issue or pass on to any person in the United Kingdom any document received by
it in connection with the issue of such Debt Securities or Warrants if that
person is of a kind described in Article 9(3) of The Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1988. Once the provisions
of Part V of The Financial Services Act 1986 come into force in relation to the
Debt Securities or the Warrants, no advertisement may be issued in the United
Kingdom offering the Debt Securities or the Warrants, as the case may be, in
circumstances which would require (for the avoidance of any contravention of
those provisions) a prospectus to have been delivered to the Registrar of
Companies.
<PAGE>
LEGAL MATTERS
The validity of the Debt Securities and Warrants offered hereby will be
passed upon for the Company by Allan L. Ronquillo, Esq., Vice President and
General Counsel of the Company, and for any underwriters and agents by Brown &
Wood, New York, New York. Mr. Ronquillo will rely as to all matters of New York
law on the opinion of Brown & Wood, and Brown & Wood will rely as to all
matters of Michigan law on the opinion of Mr. Ronquillo. Mr. Ronquillo holds
787 shares of Chrysler's common stock and options to purchase 18,920 shares
of Chrysler's common stock. Brown & Wood may from time to time render legal
services to the Company and its affiliates.
EXPERTS
The consolidated financial statements and the related financial statement
schedules of the Company as of December 31, 1994 and 1993 and for each of the
three years in the period ended December 31, 1994 incorporated in this
prospectus by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1994, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for periods
included in the Company's Quarterly Reports on Form 10-Q which are incorporated
herein by reference, Deloitte & Touche LLP has applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their reports included in the Company's Quarterly reports
on Form 10-Q for the quarters ended March 31, 1995, June 30, 1995 and
September 30, 1995 and incorporated by reference herein, they did not audit and
they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP is not subject to the liability provisions of Section 11
of the Act for their reports on unaudited interim financial information because
those reports are not "reports" or a "part" of the registration statement
prepared or certified by an accountant within the meanings of Section 7 and 11
of the Securities Act of 1933.
<PAGE>
=================================== ===================================
No person is authorized to
give any information or to make
any representations other than
those contained in this Prospectus
Supplement (including the
accompanying Pricing Supplement)
or the Prospectus, and if given or
made such information or $2,500,000,000
representation must not be relied
upon as having been authorized.
This Prospectus Supplement [ "CHRYSLER FINANCIAL" logotype
(including the accompanying and "Pentastar" logo ]
Pricing Supplement) and the
Prospectus do not constitute an
offer to sell or a solicitation of Chrysler Financial Corporation
an offer to buy any securities
other than the securities offered
by this Prospectus Supplement
(including the accompanying
Pricing Supplement) and the
Prospectus or an offer to sell or Medium-Term Notes, Series Q
a solicitation of an offer to buy
such securities in any
jurisdiction to any person to whom
it is unlawful to make such offer
or solicitation in such
jurisdiction. Neither the delivery
of this Prospectus Supplement -------------------
(including the accompanying
Pricing Supplement) and the PROSPECTUS SUPPLEMENT
Prospectus nor any sale made
hereunder shall, under any -------------------
circumstances, create any
implication that there has been no
change in the affairs of the
Company or Chrysler Corporation
since the date hereof, or that the
information herein is correct as
of any time since its date.
---------------- Merrill Lynch & Co.
Salomon Brothers Inc
Table of Contents
Page
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Prospectus Supplement
Description of Notes......... S-2 December 20, 1995
Book-Entry System............ S-13
Certain United States Federal
Income Tax Considerations.. S-14
Plan of Distribution......... S-22
Prospectus
Available Information........ 2
Incorporation of Certain
Documents by Reference..... 2
Chrysler Financial
Corporation................ 3
Selected Consolidated
Financial Data............. 5
Information Concerning
Chrysler Corporation....... 9
Ratio of Earnings to Fixed
Charges.................... 12
Use of Proceeds.............. 13
Description of Debt
Securities................. 13
Description of Warrants...... 19
Limitations on Issuance of
Bearer Securities and
Bearer Warrants............ 21
Plan of Distribution......... 22
Legal Matters................ 24
Experts...................... 24
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