Prospectus Supplement
(To Prospectus dated January 23, 1997)
$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.
See "Risk Factors" commencing on page S-2 for a discussion of certain
risks that should be considered in connection with an investment in the Notes
offered hereby.
--------------------
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 February 4, 1997.
<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.
RISK FACTORS
This Prospectus Supplement does not describe all of the risks of an
investment in Notes, whether resulting from such Notes being denominated or
payable in or determined by reference to a currency or composite currency
other than United States dollars or to one or more interest rate, currency or
other indices or formulas, or otherwise. The Company and the Agents disclaim
any responsibility to advise prospective investors of such risks as they
exist at the date of this Prospectus Supplement or as they change from time
to time. Prospective investors should consult their own financial and legal
advisors as to the risks entailed by an investment in such Notes and the
suitability of investing in such Notes in light of their particular
circumstances. Such Notes are not an appropriate investment for investors who
are unsophisticated with respect to foreign currency transactions or
transactions involving the applicable interest rate or currency index or
other indices or formulas. Prospective investors should carefully consider,
among other factors, the matters described below.
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.
Exchange Rates and Exchange Controls
An investment in Foreign Currency Notes (as defined under "Description
of Notes -- Foreign-Currency Notes") entails significant risks that are not
associated with a similar investment in a debt security denominated and
payable in United States dollars. Such risks include, without limitation, the
possibility of significant changes in the rate of exchange between the United
States dollar and the
S-2
<PAGE>
Specified Currency (as defined under "Description of Notes --
Foreign-Currency Notes") and the possibility of the imposition or
modification of exchange controls by the applicable governments or monetary
authorities. Such risks generally depend on factors over which the Company
has no control, such as economic, financial and political events and the
supply and demand for the applicable currencies or composite currencies. In
addition, if the formula used to determine the amount of principal, premium,
if any, and/or interest, if any, payable with respect to Foreign Currency
Notes contains a multiplier or leverage factor, the effect of any change in
the applicable currencies or composite currencies will be magnified. In
recent years, rates of exchange between the United States dollar and foreign
or composite currencies have been highly volatile and such volatility may be
expected to continue in the future. Fluctuations in any particular exchange
rate that have occurred in the past are not necessarily indicative, however,
of fluctuations that may occur in the future. Depreciation of the Specified
Currency applicable to a Foreign Currency Note against the United States
dollar would result in a decrease in the United States dollar-equivalent
[yield of such Foreign Currency Note, in the United States dollar-equivalent]
value of the principal and premium, if any, payable on the Stated Maturity of
such Foreign Currency Note, and, generally, in the United States dollar-
equivalent market value of such Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and
may in the future impose or revise, exchange controls at or prior to the date
on which any payment of principal of, or premium, if any, or interest, if
any, on, a Foreign Currency Note is due, which could affect exchange rates as
well as the availability of the Specified Currency on such date. Even if
there are no exchange controls, it is possible that the Specified Currency
would not be available on the applicable payment date due to other
circumstances beyond the control of the Company. In such cases, the Company
will be entitled to satisfy its obligations in respect of such Foreign
Currency Note in United States dollars.
PRIOR SALES
The Company commenced offering the Notes on December 29, 1995. As of
February 4, 1997, the Company has issued $672,600,000 principal amount of
Notes.
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 $2,500,000,000 (or the equivalent
thereof denominated in one or more foreign currencies or composite currencies)
aggregate principal amount of Notes, subject to reduction as a result of the
sale of other securities of the Company. Each Note will mature nine months or
more from its date
S-3
<PAGE>
of issue, as selected by the purchaser and agreed to by the Company and may
be subject to redemption or repayment prior to its Stated Maturity (as
defined below). Notes may be issued at significant discounts from their
principal amount payable on the Stated Maturity (or on any prior date on
which the principal or an installment of principal of a Note becomes due and
payable, whether by the declaration of acceleration, call for redemption at
the option of the Company, repayment at the option of the holder or
otherwise) (each such date, a "Maturity"), and some Notes may not bear
interest. See "Redemption" and "Repayment at the Option of the Holder" below.
Unless otherwise indicated in the applicable Pricing Supplement, currency
amounts in this Prospectus Supplement, the accompanying Prospectus and any
Pricing Supplement are stated in United States dollars ("$", "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
S-4
<PAGE>
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
S-5
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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
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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
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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.
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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
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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.
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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
S-11<PAGE>
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.
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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 (a "Foreign-Currency
Note"), 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 (the "Specified Currency"), 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.
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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
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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, as amended on June 11, 1996, under the original
issue discount provisions of the Internal Revenue Code of 1986, as amended (the
"Code").
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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
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by more than a specified de minimis amount and (b) it provides for stated
interest, paid or compounded at least annually, at current values of (i) one or
more qualified floating rates, (ii) a single fixed rate and one or more
qualified floating rates, (iii) a single objective rate, or (iv) a single fixed
rate and a single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum 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 that is based on objective financial or economic information.
A rate will not qualify as an objective rate if it is based on information that
is within the control of the issuer (or a related party) or that is unique to
the circumstances of the issuer (or a related party), such as dividends,
profits, or the value of the issuer's stock (although a rate does not fail to
be an objective rate merely because it is based on the credit quality of the
issuer). A "qualified inverse floating rate" is any objective rate where such
rate is equal to a fixed rate minus a qualified floating rate, as long as
variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate. The OID Regulations
also provide that if a Variable Note provides for stated interest at a fixed
rate for an initial period of one year or less followed by a variable rate that
is either a qualified floating rate or an objective rate and if the variable
rate on the Variable Note's issue date is intended to approximate the fixed
rate (e.g., the value of the variable rate on the issue date does not differ
from the value of the fixed rate by more than 25 basis points), then the fixed
rate and the variable rate together will constitute either a single qualified
floating rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations and if
the interest on such Note is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually, then all stated
interest on the Note will constitute qualified stated interest and will be
taxed accordingly. Thus, a Variable Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a "variable rate debt instrument" under
the OID Regulations will generally not be treated as having been issued with
original issue discount unless the Variable Note is issued at a "true" discount
(i.e., at a price below the Note's stated principal amount) in excess of a
specified de minimus amount. The amount of qualified stated interest and the
amount of original issue discount, if any, that accrues during an accrual
period on such a Variable Note is determined under the rules applicable to
fixed rate debt instruments by assuming that the variable rate is a fixed rate
equal to (i) in the case of a qualified floating rate or qualified inverse
floating rate, the value as of the issue date, of the qualified floating rate
or qualified inverse floating rate, or (ii) in the case of an objective rate
(other than a qualified inverse floating rate), a fixed rate that reflects the
yield that is reasonably expected for the Variable Note. The qualified stated
interest allocable to an accrual period is increased (or decreased) if the
interest actually paid during an accrual period exceeds (or is less than) the
interest assumed to be paid during the accrual period pursuant to the foregoing
rules.
In general, any other Variable Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and
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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.
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. U.S. Holders should be aware that on June
11, 1996, the Treasury Department issued final regulations (the "CPDI
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. In general, the CPDI Regulations would
cause the timing and character of income, gain or loss reported on a contingent
payment debt instrument to substantially differ from the timing and character
of income, gain or loss reported on a contingent payment debt instrument under
general principles of current United States Federal income tax law.
Specifically, the CPDI Regulations generally require a U.S. Holder of such an
instrument to include future contingent and noncontingent interest payments in
income as such interest accrues based upon a projected payment schedule.
Moreover, in general, under the CPDI Regulations, any gain recognized by a U.S.
Holder on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any loss
realized could be treated as ordinary loss as opposed to capital loss
(depending upon the circumstances). The CPDI Regulations apply to debt
instruments issued on or after August 13, 1996. 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.
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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
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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
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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.
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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
S-22
<PAGE>
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.
S-23
<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 $6,871,400,850 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 January 23, 1997.
<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, 1996, which was previously filed with the Commission pursuant to
the Exchange Act, is 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) 948-3058).
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.
2
<PAGE>
CHRYSLER FINANCIAL CORPORATION
General
The Company is a financial services organization that principally
provides consumer and dealer automotive financing. The Company provides
retail and lease financing for vehicles, dealer inventory and other financing
needs, dealer property and casualty insurance, and dealership facility
development and management, primarily for Chrysler Corporation dealers and
their customers. 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 of
such receivables for which it is paid a servicing fee. At December 31, 1996,
the Company had approximately 3,000 employees and its portfolio of
receivables managed, which includes receivables owned and serviced for
others, totaled $39.1 billion. The Company's executive offices are located at
27777 Franklin Road, Southfield, Michigan 48034; telephone (810) 948-3058.
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 includes securitized automotive receivables and retail leases. At
December 31, 1996, receivables serviced for others accounted for 71% of the
Company's portfolio of receivables managed. Total finance receivables managed
at the end of each of the five most recent years were as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in millions of dollars)
<S> <C> <C> <C> <C> <C>
Automotive ................ $36,858 $35,696 $29,962 $25,011 $22,481
Nonautomotive ............. 2,204 2,391 2,775 3,251 7,657
------- ------- ------- ------- -------
Total financing ........... $39,062 $38,087 $32,737 $28,262 $30,138
======= ======= ======= ======= =======
</TABLE>
Automotive Financing. The Company conducts its automotive finance
business through Chrysler Financial Corporation in the United States and
Chrysler Credit Canada Ltd. in Canada. The Company is the major source of car
and truck wholesale financing and retail financing for Chrysler vehicles
throughout North America. The Company also offers 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 the Company are
conducted through 29 zone offices in the United States and Canada. During
1996, the Company expanded into international markets by opening offices in
Belgium, France, Italy and Japan.
During 1996, the Company financed or leased approximately 790,000 new
and used vehicles at retail in the United States, including approximately
485,000 new Chrysler cars and trucks representing 20 percent of Chrysler's
U.S. retail and fleet deliveries. During 1996, the Company financed
approximately 2,693,000 new and used vehicles at wholesale in the United
States, including approximately 1,771,000 new Chrysler cars and trucks
representing 72 percent of Chrysler's U.S. factory shipments.
Nonautomotive Financing. The Company conducts its nonautomotive finance
business through its subsidiary, Chrysler Capital Corporation. At December
31, 1996, the nonautomotive receivables managed throughout the United States
consisted of $0.2 billion of commercial loans and leases and $2.0 billion of
leveraged leases.
3
<PAGE>
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. Chrysler's long-term profitability will
depend significantly on its ability to continue its capital expenditure and
vehicle development programs and market its vehicles successfully. See
"Information Concerning Chrysler Corporation."
4
<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, 1996 have been derived from the audited
consolidated financial statements of the Company. The consolidated financial
statements as of December 31, 1996 and 1995 and for each of the last three
years in the period ended December 31, 1996 and the report of Deloitte &
Touche LLP thereon are incorporated herein by reference. 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>
Year Ended December 31,
-----------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Earnings Statement Data:(1)
Total finance revenue .................. $ 1,672 $ 1,631 $ 1,368 $ 1,418 $ 1,939
Interest expense ....................... 797 910 754 791 1,022
Depreciation on vehicles leased ........ 92 46 11 -- --
Net margin ............................. 783 675 603 627 917
Other revenues ......................... 809 808 627 621 636
Operating and other expenses ........... 523 508 603 463 595
Provision for credit losses ............ 387 342 203 216 309
Earnings before income taxes and
cumulative effect of changes in
accounting principles ................ 586 522 315 267 295
Net earnings(2) ........................ 376 339 195 129 231
<CAPTION>
December 31,
-----------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(dollars in millions)
Balance Sheet Data:(1)
Finance receivables -- net ............. $11,158 $12,644 $12,423 $ 9,626 $10,200
Retained interests in sold
receivables -- net ................... 3,153 2,733 2,251 2,620 2,759
Cash and cash equivalents .............. 230 476 174 265 433
Marketable securities .................. 472 674 583 348 333
Assets held for sale ................... -- -- -- -- 2,393
Loans and other amounts due from
affiliated companies................. 859 -- 66 -- --
Repossessed collateral ................. 146 194 162 269 192
Dealership properties leased -- net .... 319 363 407 423 454
Vehicles leased -- net ................. 614 397 130 -- --
Other assets ........................... 582 354 452 700 784
------- ------- ------- ------- -------
Total assets ....................... $17,533 $17,835 $16,648 $14,251 $17,548
======= ======= ======= ======= =======
Short-term notes (primarily
commercial paper) .................... $ 2,616 $ 2,435 $ 4,315 $ 2,772 $ 352
Bank borrowings ........................ 90 -- -- -- 5,924
Senior term debt ....................... 8,435 9,234 6,069 5,139 4,436
Subordinated term debt ................. -- -- 27 77 585
Other debt ............................. 104 100 260 447 455
Accounts payable, accrued
expenses and other ................... 1,372 1,236 1,155 1,147 1,270
Amounts due to affiliated companies .... -- 29 -- 24 35
Deferred income taxes .................. 1,628 1,499 1,549 1,514 1,493
------- ------- ------- ------- -------
Total liabilities .................. 14,245 14,533 13,375 11,120 14,550
------- ------- ------- ------- -------
Shareholder's investment:
Common(3) ............................ 3,288 3,302 3,273 3,131 2,998
------- ------- ------- ------- -------
Total shareholder's investment ..... 3,288 3,302 3,273 3,131 2,998
------- ------- ------- ------- -------
Total liabilities and shareholder's
investment ....................... $17,533 $17,835 $16,648 $14,251 $17,548
======= ======= ======= ======= =======
<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 paid dividends to Chrysler Corporation totaling $382 million,
$335 million and $40 million for the years ended December 31, 1996, 1995,
and 1994, respectively. The Company declared no cash dividends in respect
of its common stock, during 1993 and 1992.
</TABLE>
5
<PAGE>
Financial Review
The Company had net earnings of $376 million in 1996 compared to $339
million and $195 million in 1995 and 1994, respectively. The increase in net
earnings for the year ended December 31, 1996 reflects net margin
improvements partially offset by an increase in the provision for credit
losses.
Total assets at December 31, 1996 totaled $17.5 billion compared to
$17.8 billion at December 31, 1995. Total debt outstanding at December 31,
1996 was $11.2 billion compared to $11.8 billion at December 31, 1995. The
Company's debt-to-equity ratio was 3.4 to 1 at December 31, 1996 compared to
3.6 to 1 at December 31, 1995.
The Company's portfolio of receivables managed, which includes
receivables owned and receivables serviced for others, totaled $39.1 billion
at December 31, 1996, up from $38.1 billion at December 31, 1995. The
increase in receivables managed during the last two years reflects higher
volumes of automotive receivables acquired. Receivables serviced for others
totaled $27.8 billion at December 31, 1996 compared to $25.2 billion at
December 31, 1995.
The Company's allowance for credit losses totaled $526 million, $578
million, and $512 million at December 31, 1996, 1995, and 1994, respectively.
The allowance for credit losses as a percentage of related finance
receivables outstanding was 1.52 percent at December 31, 1996, 1.69 percent
at December 31, 1995, and 1.66 percent at December 31, 1994. The decline in
the allowance for credit losses as a percentage of related finance
receivables outstanding from December 31, 1995 is primarily attributable to
the Company's sale of nonautomotive assets and higher loss experience on the
Company's retail automotive receivables.
Net credit loss experience, including net losses on receivables sold
subject to limited recourse provisions, for the years ended December 31,
1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
Net Credit Losses
-----------------------------
December 31,
-----------------------------
1996 1995 1994
---- ---- ----
(in millions of dollars)
<S> <C> <C> <C>
Automotive financing .................... $358 $229 $117
Nonautomotive financing ................. 35 23 41
---- ---- ----
Total ............................... $393 $252 $158
==== ==== ====
<CAPTION>
Net Credit Losses to Average
Gross Receivables Outstanding
-----------------------------
December 31,
-----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Automotive financing .................... 1.06% .70% .42%
Nonautomotive financing ................. 1.06% .69% 1.05%
Total ............................... 1.06% .70% .50%
</TABLE>
6
<PAGE>
Liquidity and Capital Resources
Term debt, commercial paper and receivable sales represent the
Company's primary funding sources. During 1996, the Company issued $1.2
billion of term debt (primarily medium term notes), repaid term debt of $2.0
billion and increased its commercial paper outstandings by $0.2 billion as
compared to 1995.
Receivable sales continued to be a significant source of funding. Net
proceeds from the sales of automotive retail receivables were $8.1 billion
during 1996, as compared to $6.5 billion for 1995. Securitization of
revolving wholesale account balances provided funding which aggregated $6.8
billion and $6.7 billion at December 31, 1996 and 1995, respectively.
As of December 31, 1996, the Company had contractual debt maturities of
$5.7 billion in 1997 (including $2.6 billion of short-term notes with an
average remaining term of 37 days), $2.6 billion in 1998, $1.6 billion in
1999, $0.8 billion in 2000, $0.4 billion in 2001, and $0.1 billion in years
thereafter.
The Company's revolving credit facilities which total $8.0 billion
consist of a $2.0 billion facility expiring in April, 1997 and a $6.0 billion
facility expiring in April, 2001. These facilities include $0.8 billion
allocated to Chrysler Credit Canada Ltd. As of December 31, 1996, no amounts
were outstanding under these facilities.
The Company paid $382 million and $335 million in dividends to Chrysler
during 1996 and 1995, respectively.
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, 1996, which is incorporated by
reference into this Prospectus.
New Accounting Standard
In June 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS
No. 125 requires securitization transactions to be accounted for as sales
when legal and effective control over transferred receivables is surrendered.
In addition, servicing assets or liabilities are to be recognized when
servicing rights are retained by the seller. Current accounting standards do
not permit recognition of servicing assets arising from securitization
transactions. SFAS No. 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December
31, 1996, and is to be applied prospectively.
The Company will adopt SFAS No. 125 effective on January 1, 1997. The
adoption of SFAS No. 125 is not expected to have a material effect on results
of operations or financial position of the Company. Securitization
transactions entered into after December 31, 1996 are expected to be
structured in a manner that qualifies for sale accounting under SFAS No. 125.
Gains or losses from securitization transactions occurring after December 31,
1996 may vary from historical results due to, among other things, adoption
of SFAS No. 125, the level of securitization activity and interest rates.
7
<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 for each of the last three years ended
December 31, 1996. Such information has been derived from the audited
consolidated financial statements of Chrysler.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1995 1994
---- ---- ----
(in millions of dollars)
<S> <C> <C> <C>
Results of Operations Data
Sales of manufactured products ................ $57,587 $49,601 $49,363
Finance and insurance revenues ................ 1,746 1,589 1,384
Other revenues ................................ 2,064 2,005 1,488
------- ------- -------
Total Revenues ................................ 61,397 53,195 52,235
------- ------- -------
Total Expenses ................................ 55,305 49,746 46,405
------- ------- -------
Earnings Before Income Taxes, Extraordinary
Item, and Cumulative Effect of a Change in
Accounting Principle ....................... 6,092 3,449 5,830
Provision for income taxes .................... 2,372 1,328 2,117
------- ------- -------
Earnings Before Extraordinary Item and
Cumulative Effect of a Change in Accounting
Principle .................................. 3,720 2,121 3,713
Extraordinary item -- Loss on early
extinguishment of debt, net of taxes ........ (191) -- --
Cumulative effect of a change in accounting
principle ................................... -- (96) --
------- ------- -------
Net Earnings .................................. $ 3,529 $ 2,025 $ 3,713
Preferred stock dividends ..................... 3 21 80
------- ------- -------
Net Earnings on Common Stock ................. $ 3,526 $ 2,004 $ 3,633
======= ======= =======
<CAPTION>
December 31,
---------------------------
1996 1995 1994
---- ---- ----
(in millions of dollars)
<S> <C> <C> <C>
Balance Sheet Data
Cash, cash equivalents and marketable
securities .................................. $ 7,752 $ 8,125 $ 8,371
Total assets .................................. 56,184 53,756 49,539
Total debt .................................... 13,396 14,193 13,106
Shareholders' equity .......................... 11,571 10,959 10,694
</TABLE>
Results of Operations
Chrysler reported earnings before income taxes, extraordinary item, and
the cumulative effect of a change in accounting principle of $6.1 billion in
1996, compared with $3.4 billion in 1995. Net earnings for 1996 were $3.5
billion, or $4.77 per common share, compared with $2.0 billion, or $2.65 per
common share in 1995.
Earnings before income taxes, extraordinary item, and the cumulative
effect of a change in accounting principle for 1996 included a charge of $97
million ($61 million after taxes) for costs associated with a voluntary early
retirement program for certain salaried employees, a charge of $77 million
($51 million after taxes) related to a write-down of Pentastar Electronics,
Inc. ("PEI"), a charge of $65 million ($100 million after taxes) related to a
write-down of Thrifty Rent-A-Car System, Inc. ("Thrifty"), a charge of $50
million ($31 million after taxes) for lump sum retiree pension costs related
8
<PAGE>
to the new UAW collective bargaining agreement, and a gain of $101 million
($87 million after taxes) from the sale of Electrospace Systems, Inc. ("ESI")
and Chrysler Technologies Airborne Systems, Inc. ("CTAS"). Earnings before
income taxes, extraordinary item, and the cumulative effect of a change in
accounting principle for 1995 included a charge of $263 million ($162 million
after taxes) for costs associated with production changes at Chrysler's
Newark assembly plant and a charge of $115 million ($71 million after taxes)
for a voluntary minivan owner service action.
Excluding the items listed above, pretax earnings for calendar-year
1996 increased as compared with calendar-year 1995 primarily as a result of
an increase in vehicle shipments and improved vehicle margins due to pricing
actions and a reduction in average sales incentives per vehicle, partially
offset by increased profit-based employee compensation costs. The increase in
shipments for calendar-year 1996 was primarily due to increased shipments of
minivans and Dodge Ram pickup trucks. Minivan shipments for calendar-year
1995 were adversely affected by the changeover and launch of Chrysler's
all-new minivans. The increase in shipments of Dodge Ram pickup trucks
primarily reflects a full year of production in 1996 at two additional
assembly plants.
In December 1996, Chrysler extinguished $550 million, or 50% of the
outstanding principal amount of its Auburn Hills Trust Guaranteed
Exchangeable Certificates Due 2020 (the "Certificates") at a cost of $859
million. The extinguishment of the Certificates resulted in an extraordinary
after-tax loss of $191 million (net of income tax benefit of $118 million),
or $0.26 per common share.
Effective January 1, 1995, Chrysler changed its accounting treatment
for certain vehicle sales (principally to non-affiliated rental car
companies) in accordance with Emerging Issues Task Force issue 95-1,
"Revenue Recognition on Sales with a Guaranteed Minimum Resale Value." This
change in accounting principle resulted in the recognition of an after-tax
charge of $96 million (net of income tax benefit of $59 million), or $0.13
per common share in 1995. The ongoing effect of this accounting change was
not material to 1996 and 1995 earnings.
Chrysler's worldwide vehicle shipments in 1996 were 2,958,800 units, an
increase of 285,261 units or 11 percent from 1995 levels. Chrysler's vehicle
shipments outside of the U.S., Canada and Mexico in 1996 were 223,657 units,
an increase of 15,385 units or seven percent from 1995 levels.
Chrysler's revenues and results of operations are principally derived
from the U.S. and Canada automotive marketplaces. Retail industry sales
(including fleet) of new cars and trucks in the U.S. and Canada were 16.6
million units in 1996, compared with 16.3 million units in 1995, an increase
of two percent.
Chrysler's U.S. and combined U.S. and Canada retail sales and market
share data for 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Increase/
1996 1995 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
U.S. Retail Market(1):
Car sales ............................ 832,633 786,180 46,453
Car market share ..................... 9.8% 9.1% 0.7%
Truck sales (including minivans) ..... 1,618,193 1,378,163 240,030
Truck market share ................... 23.3% 21.3% 2.0%
Combined car and truck sales ......... 2,450,826 2,164,343 286,483
Combined car and truck market share .. 15.9% 14.3% 1.6%
U.S. and Canada Retail Market(1):
Combined car and truck sales ......... 2,690,340 2,389,465 300,875
Combined car and truck market share .. 16.1% 14.7% 1.4%
<FN>
- ----------------
(1) All retail sales and market share data include fleet sales.
</TABLE>
9
<PAGE>
The increase in Chrysler's U.S. car market share during 1996 was
primarily due to increased sales of its midsize sedans and coupes, including
the new Plymouth Breeze and Chrysler Sebring convertible. The increase in
Chrysler's U.S. truck market share during 1996 was primarily due to increased
sales of its Dodge Ram pickup trucks, Jeep(R) sport-utility vehicles, and
minivans.
In 1996, Chrysler completed the sale of ESI and CTAS for net proceeds
of $476 million. ESI and CTAS were engaged principally in the manufacture of
defense electronics and aircraft modification, respectively, and represented
substantially all of the operations of Chrysler Technologies Corporation, a
wholly owned subsidiary of Chrysler. The sale resulted in a pretax gain of
$101 million ($87 million after taxes).
Consistent with its strategy to focus on its core automotive business,
in 1996, Chrysler committed to a plan of disposal for Thrifty. In accordance
with 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," a pretax loss of $65 million ($100 million after taxes)
was recognized in 1996 to write down Thrifty's carrying value to estimated
fair value less cost to sell. Chrysler's estimate of the fair value of
Thrifty is based principally on an analysis of non-binding bids. The
after-tax loss includes the effect of not being able to claim a tax deduction
for the capital loss on Chrysler's investment in Thrifty. Thrifty's assets
and liabilities at December 31, 1996 and its results of operations for 1996
were immaterial to Chrysler's consolidated assets and liabilities and results
of operations, respectively. Chrysler is continuing with its efforts to sell
Thrifty and is uncertain when the sale of Thrifty may occur.
In the fourth quarter of 1996, Chrysler signed an agreement to sell PEI
for net proceeds of $17 million. PEI produces automatic test equipment for
military applications and represents the remaining operations of Chrysler
Technologies Corporation. In accordance with SFAS No. 121, a pretax loss of
$77 million ($51 million after taxes) was recognized in the fourth quarter of
1996 to write down PEI's carrying value to estimated fair value less cost to
sell. Chrysler's estimate of the fair value of PEI was based on the terms of
the agreement. Included in the cost to sell PEI is an estimate for job
security benefits, special early retirement benefits and other employee costs
related to employees which Chrysler agreed to retain. PEI's assets and
liabilities at December 31, 1996 and its results of operations for 1996 were
immaterial to Chrysler's consolidated assets and liabilities and results of
operations, respectively. The sale of PEI was completed on January 10, 1997.
In 1995, Chrysler recorded a $263 million provision ($162 million after
taxes) for costs associated with production changes at its Newark assembly
plant. Newark production of the Chrysler Concorde and Dodge Intrepid was
reduced to one shift in August 1995 and terminated in July 1996. Production
of an all-new sport-utility vehicle, the Dodge Durango, is scheduled to begin
at the Newark assembly plant in the fall of 1997. The provision reflects the
recognition of supplemental unemployment benefits, job security benefits and
other related employee costs, and the write-down of certain equipment and
tooling.
Chrysler's effective tax rates in 1996, 1995 and 1994 were 38.9
percent, 38.5 percent and 36.3 percent, respectively. The provision for
income taxes in 1994 included favorable adjustments aggregating $132 million,
including $100 million for the recognition of tax credits related to
expenditures in prior years for qualifying research and development
activities.
For the past several years, Chrysler has benefitted from the following
factors: (1) favorable economic conditions in the U.S. and Canada, where
Chrysler's sales are concentrated, and (2) a continuing 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 in either of these factors could
adversely affect Chrysler's consolidated operating results. In addition,
Chrysler has also benefitted over the past several years from a cost
advantage in comparison to vehicles manufactured in Japan (and vehicles
containing significant material components manufactured in Japan) as a result
of favorable exchange rates between the Japanese yen and the U.S. dollar.
During 1996, this cost advantage was substantially reduced as a result of
unfavorable changes in the Japanese yen to U.S. dollar exchange rate. These
changes did not have a material adverse effect on Chrysler's 1996
consolidated operating results. Chrysler believes, however, that further
substantial
10
<PAGE>
unfavorable exchange rate changes could, over time, have an adverse effect on
Chrysler's consolidated operating results. Further, Chrysler has benefitted
from a strategy of focusing resources on its core automotive business and an
aggressive capital expenditure and vehicle development program that has
resulted in the replacement of its entire product lineup over the last five
years. Chrysler's long-term profitability will depend significantly on its
ability to continue its capital expenditure and vehicle development programs
and to market its vehicles successfully in an increasingly competitive
environment.
Liquidity and Capital Resources
Chrysler's consolidated combined cash, cash equivalents and marketable
securities totaled $7.8 billion at December 31, 1996 (including $797 million
held by the Company and Car Rental Operations), $8.1 billion at December 31,
1995 (including $1.2 billion held by the Company and Car Rental Operations),
and $8.4 billion at December 31, 1994 (including $756 million held by the
Company and Car Rental Operations). At December 31, 1996, the Company had
approximately $400 million of marketable securities which were limited for
use in its insurance operations in accordance with various statutory
requirements. The decrease in Chrysler's consolidated combined cash, cash
equivalents and marketable securities in 1996 was primarily the result of
capital expenditures, common stock repurchases, net debt repayments and
dividend payments, largely offset by cash generated by operating activities,
marketable securities acquired in non-cash transactions related to the
securitization of retail receivables and net proceeds from the sales of
nonautomotive assets. The decrease in Chrysler's consolidated combined cash,
cash equivalents and marketable securities in 1995 was primarily the result
of capital expenditures, net finance receivables acquired and common stock
repurchases, largely offset by cash generated by operating activities and
cash provided by an increase in long-term debt.
Chrysler's long-term profitability will depend significantly on its
ability to continue its capital expenditure and vehicle development programs
and to market its vehicles successfully in an increasingly competitive
environment. Chrysler's expenditures for new product development and the
acquisition of productive assets were $17.1 billion for the three-year period
ended December 31, 1996. Expenditures for these items during the succeeding
three-year period are expected to be at similar or higher levels. At December
31, 1996, Chrysler had commitments for capital expenditures, including
commitments for assets currently under construction, totaling approximately
$1.6 billion.
In May 1996, Chrysler declared a two-for-one stock split in the form of
a 100 percent stock dividend which was distributed on July 15, 1996 to
shareholders of record on June 15, 1996. All per share data and the average
common and dilutive equivalent shares outstanding have been adjusted to
reflect this stock split for all periods presented. The number of common
shares issued, outstanding and held in treasury for 1996 have been adjusted
to reflect this stock split. In addition, the par value of the new shares
issued as a result of the two-for-one stock split has been transferred from
additional paid-in capital to common stock. Additional paid-in capital,
common stock balances, common shares issued, outstanding and held in treasury
for prior periods have not been restated for the two-for-one stock split.
During 1996, Chrysler repurchased 66 million shares of its common stock
at a cost of $2.0 billion (including $16 million in unsettled repurchases at
December 31, 1996). In December 1996, Chrysler's Board of Directors approved
an increase in Chrysler's planned 1997 common stock repurchases from $1
billion to $2 billion. The planned 1997 common stock repurchases are subject
to market and general economic conditions. Since beginning its common stock
repurchase program in 1995, Chrysler has repurchased 112 million shares of
its common stock at a cost of $3.1 billion.
In the second quarter of 1996, Chrysler increased its quarterly
dividend from $0.30 to $0.35 per common share. In the fourth quarter of 1996,
Chrysler increased its quarterly dividend from $0.35 to $0.40 per common
share. Dividends per common share have been adjusted to reflect the
two-for-one stock split.
In December 1996, Chrysler extinguished $550 million, or 50 percent of
the outstanding principal amount of its Auburn Hills Trust Guaranteed
Exchangeable Certificates Due 2020 at a cost of $859 million. At December 31,
1996, $550 million of the Certificates remained outstanding. The remaining
11
<PAGE>
Certificates outstanding are not redeemable prior to maturity and carry a
current interest rate of 12 percent. In addition, Chrysler entered into
forward contracts (notional amount $520 million) to mitigate interest rate
risk related to debt Chrysler intends to incur in the first quarter of 1997
to refinance the extinguished Certificates. The refinancing is subject to
market and general economic conditions.
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
customers, both of which are provided by the Company.
Chrysler's strategy is to focus on its core automotive business. As
part of this strategy, Chrysler has sold certain assets and businesses in
past years which are not related to its core automotive business, and is
exploring the sale of other such assets and businesses in the near term.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges of the Company Consolidated and
Chrysler Consolidated for each of the last five years were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
The Company Consolidated .......... 1.72X 1.56X 1.41X 1.33X 1.28X
Chrysler Consolidated ............. 5.51X 3.45X 5.52X 3.62X 1.48X
</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 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.
12
<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 $6,871,400,850
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
13
<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
14
<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
15
<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
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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 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)
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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
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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
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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
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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 (each as defined below) except as otherwise permitted
by Treasury Regulation Section 1.163-5(c)(2)(i)(D) including offers and sales
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 in writing that they will not offer, sell or resell any Bearer
Securities or Bearer Warrants to persons within the United States or to
United States persons (except as described above) nor 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 and any
coupons attached thereto 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 United States
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,
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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 income of which is subject to United States federal income taxation
regardless of its source, or a trust if a court within the United States is
able to exercise primary supervision of the administration of the trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of the trust.
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 Cedel Bank,
societe anonyme ("Cedel") 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, with respect to the
portion of the temporary Global Security held for its account. Each of
Euroclear and Cedel, 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
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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.
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 Securities 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 Securities 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.
Neither the Debt Securities nor the Warrants may be offered or sold
directly or indirectly in Great Britain other than to persons whose ordinary
business it is to buy or sell shares or debentures (except in circumstances
which do not constitute an offer to the public within the meaning of the
Companies Act of 1985), and this Prospectus and any Prospectus Supplement or
any other offering material relating to the Debt Securities or the Warrants
may not be distributed in or from Great Britain other than to persons whose
business involves the acquisition and disposal, or the holding, of securities
whether as principal or as agent.
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LEGAL MATTERS
The validity of the Debt Securities and Warrants offered hereby will be
passed upon for the Company by Christopher A. Taravella, Esq., Vice President
and General Counsel of the Company, and for any underwriters and agents by
Brown & Wood LLP, New York, New York. Mr. Taravella will rely as to all
matters of New York law on the opinion of Brown & Wood LLP, and Brown & Wood
LLP, will rely as to all matters of Michigan law on the opinion of Mr.
Taravella Mr.Taravella owns and has options to purchase shares of common stock
of Chrysler. Brown & Wood LLP may from time to time render legal services to
the Company and its affiliates.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of the Company as of December 31, 1996 and 1995 and for
each of the three years in the period ended December 31, 1996 incorporated in
this prospectus by reference from the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, 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.
24
<PAGE>
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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
representation must not be relied
upon as having been authorized.
This Prospectus Supplement
(including the accompanying
Pricing Supplement) and the
Prospectus do not constitute an $2,500,000,000
offer to sell or a solicitation of
an offer to buy any securities [Chrysler Logo]
other than the securities offered
by this Prospectus Supplement
(including the accompanying
Pricing Supplement) and the
Prospectus or an offer to sell or Chrysler Financial Corporation
a solicitation of an offer to buy
such securities in any
jurisdiction to any person to whom
it is unlawful to make such offer Medium-Term Notes, Series Q
or solicitation in such
jurisdiction. Neither the delivery
of this Prospectus Supplement
(including the accompanying
Pricing Supplement) and the ----------------------------
Prospectus nor any sale made PROSPECTUS SUPPLEMENT
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.
Table of Contents
<TABLE>
<CAPTION>
Page
<C> <S>
Prospectus Supplement
Prior Sales ...................... S-2
Risk Factors....................... S-3
Description of Notes ............. S-3
Book-Entry System ................ S-14
Certain United States Federal
Income Tax Considerations ...... S-15
Plan of Distribution ............. S-23 Merrill Lynch & Co.
Prospectus Salomon Brothers Inc
Available Information ............ 2
Incorporation of Certain Documents
by Reference ................... 2
Chrysler Financial Corporation ... 3
Chrysler Financial Corporation
Selected Consolidated Financial
Data ........................... 5
Information Concerning Chrysler
Corporation .................... 8
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 February 4, 1997
Plan of Distribution ............. 22
Legal Matters .................... 24
Experts .......................... 24
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</TABLE>
