PROSPECTUS SUPPLEMENT
(To Prospectus dated March 13, 1995)
$250,000,000
[logo] VALERO ENERGY CORPORATION
Medium-Term Notes
Due From Nine Months to 30 Years From Date of Issue
Valero Energy Corporation (the "Company") may offer from time
to time its Medium-Term Notes (the "Notes") having an aggregate
initial public offering price of up to $250,000,000 on terms to
be determined at the time or times of sale. The Notes will be
issued under an Indenture, as supplemented by the First
Supplemental Indenture (as it may be supplemented or amended from
time to time, the "Indenture"), between the Company and Bankers
Trust Company, as trustee (the "Trustee"). The Notes will be
issued only for consideration in the form of cash and will rank
equally with all other unsecured, unsubordinated indebtedness of
the Company.
The interest rate, if any, or the formula for the
determination of any interest rate, applicable to each Note, the
formula, if any, for determining the principal amount payable
upon maturity of each Note and other variable terms of the Notes
as described herein will be established by the Company at the
date of issue of the Note and will be set forth therein and
specified in a pricing supplement (a "Pricing Supplement") to be
delivered with this Prospectus Supplement to the Purchaser of any
Note. Interest rates, interest rate and/or principal formulas
and other variable terms are subject to change by the Company,
but no change will affect any Note already issued or as to which
an offer to purchase has been accepted by the Company. Each Note
will be represented either by a global certificate (a "Book-Entry
Note") registered in the name of a nominee of The Depository
Trust Company, or its successor selected pursuant to the
Indenture, as depositary (the "Depositary"), or by a certificate
registered in the name of the purchaser of the Note or its
nominee (a "Certificated Note"), as set forth in the applicable
Pricing Supplement. Beneficial interests in Global Notes
representing Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the
Depositary with respect to its participants' interests and by the
Depositary's participants. Book-Entry Notes will not be issuable
as Certificated Notes except under the circumstances described in
the accompanying Prospectus.
Unless otherwise specified in an applicable Pricing
Supplement, the Notes will bear interest at fixed rates (the
"Fixed Rate Notes"), which may be zero in the case of certain OID
Notes (as defined), or at floating rates (the "Floating Rate
Notes"). The applicable Pricing Supplement will specify whether
a Floating Rate Note is a Floating Rate/Fixed Rate Note or
Inverse Floating Rate Note or whether its rate of interest is
determined by reference to one or more of the CD Rate, the CMT
Rate, the Commercial Paper Rate, the Eleventh District Cost of
Funds Rate, the Federal Funds Rate, the J.J. Kenny Rate, LIBOR,
the Prime Rate or the Treasury Rate (each, an "Interest Rate
Basis"), or any other interest rate formula, as adjusted by any
Spread and/or Spread Multiplier and will specify such other terms
applicable to the Note. Interest on Fixed Rate Notes will accrue
from their date of issue and, unless otherwise specified in the
applicable Pricing Supplement, will be payable semiannually in
arrears on March 15 and September 15 of each year and at Maturity
(as defined). Unless otherwise specified in an applicable
Pricing Supplement, the rate of interest on each Floating Rate
Note will be reset daily, weekly, monthly, quarterly,
semiannually or annually, as set forth therein and specified in
the applicable Pricing Supplement, and interest on each Floating
Rate Note will accrue from its date of issue and will be payable
in arrears monthly, quarterly, semiannually or annually, as
specified in the applicable Pricing Supplement, and at Maturity.
Notes may also be issued with original issue discount ("OID"),
and such Notes may or may not currently pay interest. Each Note
will mature on a Business Day (as defined) more than nine months
from the date of issue, as set forth in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing
Supplement, the Notes may not be redeemed by the Company or the
holder prior to maturity and will be issued in fully registered
form in denominations of $1,000 or any amount in excess thereof
which is an integral multiple of $1,000. See "Description of
Notes" in the Prospectus Supplement for a more complete
description of the terms and provisions of the Notes.
____________________
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 HERETO OR THE ACCOMPANYING PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Agents' Commissions Proceeds to
Public (1) or Discounts (2) Company (2) (3)
<S> <C> <C> <C>
Per Note . . . . . . . . . . . . . . 100.000% .125% - .750% 99.875% - 99.250%
Total . . . . . . . . . . . . . . . . $250,000,000 $312,500 - $1,875,000 $249,687,500 - $248,125,000
</TABLE>
<FN1>
(1) Unless otherwise specified in the applicable Pricing
Supplement, Notes will be sold at 100% of their principal amount.
If the Company issues any Note at a discount from or at a premium
over its principal amount, the Price to Public of any Note issued
at a discount or premium will be set forth in the applicable
Pricing Supplement.
<FN2>
(2) The Company will pay Lehman Brothers, Lehman Brothers Inc.
(including its affiliate, Lehman Government Securities Inc.),
Salomon Brothers Inc and BT Securities Corporation as agents
(each an "Agent," collectively the "Agents"), a commission in the
form of a discount ranging from .125% to .750% of the principal
amount of any Note, depending on its stated maturity, sold
through such Agent. The Company may also sell Notes to any
Agent, as principal, at a discount for resale to one or more
investors at varying prices related to prevailing market prices
at the time of resale or, if so agreed, a fixed public offering
price, as determined by the Agent. In addition, the Company has
reserved the right to sell Notes directly from time to time on
its own behalf, in which case no commission will be paid. The
Company has also agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act of
1933, as amended.
<FN3>
(3) Before deducting expenses payable by the Company estimated
at $350,000.
____________________
The Notes are being offered on a continuous basis through the
Agents, each of which has agreed to use reasonable best efforts
to solicit purchases of the Notes. The Company may also sell
Notes to an Agent acting as principal for its own account for
resale to one or more investors. No termination date for the
offering of the Notes has been established. The Company reserves
the right to withdraw, cancel, or modify the offer made hereby
without notice. The Company or an Agent may reject any offer in
whole or in part. The Notes will not be listed on any securities
exchange, and there can be no assurance that the Notes offered
hereby will be sold or that there will be a secondary market for
the Notes. See "Plan of Distribution."
This Prospectus Supplement and the accompanying Prospectus
may be used by an Agent in connection with offers and sales of
the Notes in market-making transactions at negotiated prices
related to prevailing market prices at the time of such sales or
otherwise. An Agent may act as principal or agent in such
transactions.
____________________
Lehman Brothers Salomon Brothers Inc BT Securities Corporation
March 13, 1995
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be added to
the Company's funds and used for general corporate purposes,
including the repayment of existing indebtedness, financing of
capital projects and additions to working capital, or for the
acquisition of properties in related businesses.
DESCRIPTION OF NOTES
The Notes offered hereby will be issued under the Indenture
and, together with $150,000,000 principal amount of Medium-Term
Notes (the "Prior Notes") previously issued under the Indenture,
constitute a single series of Debt Securities under the
Indenture. The summary contained herein of certain provisions of
the Notes and Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the
provisions of the Notes and the Indenture. The Indenture has
been incorporated by reference as an exhibit to the Registration
Statement of which the accompanying Prospectus is a part. The
following description of the particular terms of the Notes
offered hereby supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and
provisions of the Debt Securities set forth in the Prospectus, to
which reference is hereby made. The particular terms of the
Notes sold pursuant to any Pricing Supplement will be described
therein. The provisions of the Notes summarized herein will
apply to such Notes unless otherwise specified in the applicable
Pricing Supplement and the applicable Note. Certain capitalized
terms used herein have the meanings specified in the Prospectus.
References herein are to sections in the Indenture.
General
The Notes and the Prior Notes constitute a single series for
purposes of the Indenture; the Notes are limited to an aggregate
initial public offering price of $250,000,000. The Indenture
does not limit the aggregate principal amount of Debt Securities
which may be issued thereunder. The Company may from time to
time sell additional series of Debt Securities, including
additional series of Medium-Term Notes.
The Notes will constitute unsecured and unsubordinated
indebtedness of the Company and will rank pari passu with the
Prior Notes and the Company's other unsecured and unsubordinated
indebtedness. At December 31, 1994, the Company's total debt
outstanding (including current maturities) was approximately
$1,084 million, of which approximately $605 million was secured
indebtedness. The Company is primarily a holding company and the
Notes will not be guaranteed by any of the Company's
subsidiaries. The ability of the Company to pay the principal
of, premium, if any, and interest, if any, on the Notes is, to a
large extent, dependent upon the receipt by it of dividends or
other payments from its subsidiaries. See "Description of the
Debt Securities General" in the Prospectus. The Indenture
contains certain limitations on the creation of additional
secured indebtedness by the Company. See "Description of the
Debt Securities Certain Covenants of the Company" in the
Prospectus. Neither the Indenture nor the Notes contain
provisions permitting the holders of the Notes (the "Holders") to
require prepayment in the event of a change in the management or
control of the Company, or in the event that the Company enters
into one or more highly leveraged transactions, nor are any such
events deemed to be events of default under the terms of the
Indenture or the Notes.
The Notes are offered on a continuous basis and will mature
on a Business Day more than nine months from their date of issue,
as selected by the initial purchaser and agreed to by the
Company, and may be subject to redemption or repayment prior to
stated maturity as set forth under " Redemption" below.
Each Note will be issued initially as either a Book-Entry
Note or a Certificated Note, in fully registered form. Except as
set forth below, Book-Entry Notes will not be issuable in
definitive form. See " Book-Entry System." Unless otherwise
specified in the applicable Pricing Supplement, Notes will be
issued in denominations of $1,000 and integral multiples of
$1,000 in excess thereof.
The Notes will be denominated in U.S. dollars, and payments
of principal of and premium, if any, and any interest on the
Notes will be made in U.S. dollars.
The Pricing Supplement relating to each Note will describe
the following terms: (i) whether the Note is a Fixed Rate Note or
a Floating Rate Note; (ii) the price (expressed as a percentage
of the aggregate principal amount thereof) at which the Note will
be issued (the "Issue Price"); (iii) the date on which the Note
will be issued (the "Original Issue Date"); (iv) the date on
which the Note will mature ("Maturity"); (v) if the Note is a
Fixed Rate Note, the rate per annum at which the Note will bear
interest; (vi) if the Note is a Floating Rate Note, the Interest
Rate Basis, the Initial Interest Rate, the Interest Reset Period,
the Interest Reset Dates, the Interest Payment Dates, the Index
Maturity, the maximum interest rate and the minimum interest
rate, if any, and the Spread or Spread Multiplier, if any (all as
defined below), and any other terms relating to the particular
method of calculating the interest rate for the Note; (vii)
whether the Note may be redeemed or is subject to repayment or
repurchase prior to Maturity and, if so, the provisions relating
to such redemption, repayment or repurchase; (viii) the terms of
any option of the Company to extend the stated maturity of the
Notes; (ix) whether the Note will be issued as a Book-Entry or
Certificated Note; and (x) any other terms of the Note not
inconsistent with the provisions of the Indenture.
Interest
General
Unless otherwise specified in an applicable Pricing
Supplement, each Note will bear interest from the date of issue
or from the most recent Interest Payment Date (as defined) to
which interest on such Note has been paid or duly provided for 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. Unless otherwise specified in the
applicable Pricing Supplement, 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
(an "Interest Payment Date") and at Maturity or upon redemption.
Interest will be payable to the Holders of record at the close of
business on the Regular Record Date next preceding such Interest
Payment Date; provided, however, that interest payable at
Maturity or upon redemption will be payable to the person to whom
principal is payable. Unless otherwise specified in an
applicable Pricing Supplement, the first payment of interest on
any Note originally issued between a Regular Record Date and the
related Interest Payment Date will be made on the Interest
Payment Date immediately following the next succeeding Regular
Record Date to the registered Holder on such next succeeding
Regular Record Date. Unless otherwise specified in an applicable
Pricing Supplement, the "Regular Record Date" for each Note shall
be the March 1 or September 1 (whether or not a Business Day)
immediately preceding the related Interest Payment Date.
Fixed Rate Notes
Unless otherwise specified in an applicable Pricing
Supplement, each Fixed Rate Note will bear interest from, and
including, the date of issue, 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 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.
Interest on Fixed Rate Notes will be payable semiannually on
March 15 and September 15 of each year, unless otherwise
specified in an applicable Pricing Supplement, and at Maturity.
If any Interest Payment Date or the Maturity of a Fixed Rate Note
falls on a day that is not a Business Day, the related payment of
principal, premium, if any, or interest will be made on the next
succeeding Business Day as if made on the date such payment was
due, and no interest will accrue on the amount so payable for the
period from and after such Interest Payment Date or Maturity, as
the case may be.
Floating Rate Notes
Unless otherwise specified in an applicable Pricing
Supplement, Floating Rate Notes will be issued as described
below. Each applicable Pricing Supplement will specify certain
terms with respect to which such Floating Rate Note is being
delivered, including: whether such Floating Rate Note is a
"Regular Floating Rate Note" (as defined below), an "Inverse
Floating Rate Note" (as defined below) or a "Floating Rate/Fixed
Rate Note" (as defined below); the Interest Rate Basis or Bases,
Initial Interest Rate, Interest Reset Dates, Interest Reset
Period, Interest Payment Dates, Index Maturity, maximum interest
rate and minimum interest rate, if any, and the Spread and/or
Spread Multiplier, if any, and if one or more of the specified
Interest Rate Bases is LIBOR, the Index Currency and the
Designated LIBOR Page, as described below.
The interest rate borne by the Floating Rate Notes will be
determined as follows:
(i) Unless such Floating Rate Note is designated as a
"Floating Rate/Fixed Rate Note," an "Inverse Floating Rate Note"
or as having an Addendum attached which specifies different or
additional interest payment terms, such Floating Rate Note will
be designated a "Regular Floating Rate Note" and, except as
described below or in an applicable Pricing Supplement, bear
interest at the rate determined by reference to the applicable
Interest Rate Basis (i) plus or minus the applicable Spread, if
any, and/or (ii) multiplied by the applicable Spread Multiplier,
if any. Commencing on the Initial Interest Reset Date, the rate
at which interest on such Regular Floating Rate Note shall be
payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period from the
Original Issue Date to the Initial Interest Reset Date will be
the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a
"Floating Rate/Fixed Rate Note," then, except as described below
or in an applicable Pricing Supplement, such Floating Rate Note
will bear interest at the rate determined by reference to the
applicable Interest Rate Basis (i) plus or minus the applicable
Spread, if any, and/or (ii) multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset
Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset
Date; provided, however, that (i) the interest rate in effect for
the period from the Original Issue Date to the Initial Interest
Reset Date will be the Initial Interest Rate; and (ii) unless
otherwise specified in the applicable Pricing Supplement, the
interest rate in effect commencing on, and including, the Fixed
Rate Commencement Date to Maturity shall be the Fixed Interest
Rate, if such rate is specified in the applicable Pricing
Supplement, or if no such Fixed Interest Rate is so specified,
the interest rate in effect thereon on the day immediately
preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an
"Inverse Floating Rate Note," then, except as described below or
in an applicable Pricing Supplement, such Floating Rate Note will
bear interest equal to the Fixed Interest Rate specified in the
related Pricing Supplement minus the rate determined by reference
to the Interest Rate Basis (i) plus or minus the applicable
Spread, if any, and/or (ii) multiplied by the applicable Spread
Multiplier, if any; provided, however, that the interest rate
thereon will not be less than zero. Commencing on the Initial
Interest Reset Date, the rate at which interest on such Inverse
Floating Rate Note is payable shall be reset as of each Interest
Reset Date; provided, however, that the interest rate in effect
for the period from the Original Issue Date to the Initial
Interest Reset Date will be the Initial Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note is
designated as having an Addendum attached as specified on the
face thereof which Addendum specifies different or additional
interest payment terms, such Floating Rate Note shall bear
interest in accordance with the terms described in such Addendum
and the applicable Pricing Supplement.
Unless otherwise provided in the applicable Pricing
Supplement, each Interest Rate Basis 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, the interest rate determined on 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 on the Interest
Determination Date immediately preceding the next preceding
Interest Reset Date.
Interest on Floating Rate Notes will be determined by
reference to an "Interest Rate Basis," which may be one or more
of (i) the "CD Rate," (ii) the "CMT Rate," (iii) the "Commercial
Paper Rate," (iv) the "Eleventh District Cost of Funds Rate," (v)
the "Federal Funds Rate," (vi) the "J.J. Kenny Rate," (vii)
"LIBOR," (viii) the "Prime Rate," (ix) the "Treasury Rate," or
(x) such other Interest Rate Basis or interest rate formula as
may be set forth in the applicable Pricing Supplement; provided,
however, that with respect to a Floating Rate/Fixed Rate Note,
the interest rate commencing on the Fixed Rate Commencement Date
and continuing, unless otherwise specified in the applicable
Pricing Supplement, until Maturity shall be the Fixed Interest
Rate, if such rate is specified in the applicable Pricing
Supplement, or if no such Fixed Interest Rate is so specified,
the interest rate in effect thereon on the day immediately
preceding the Fixed Rate Commencement Date. In addition, a
Floating Rate Note may bear interest in respect of the lowest of
two or more Interest Rate Bases.
The "Spread" is the number of basis points to be added to or
subtracted from the related Interest Rate Basis or Bases
applicable to such Floating Rate Note. The "Spread Multiplier"
is the percentage of the related Interest Rate Basis or Bases
applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable
interest rate on such Floating Rate Note. The "Index Maturity"
is the period to maturity of the instrument or obligation with
respect to which the Interest Rate Basis or Bases will be
calculated. The Spread, Spread Multiplier, Index Maturity and
other variable terms of the Floating Rate Notes are subject to
change by the Company from time to time, but no such change will
affect any Floating Rate Note previously issued or as to which an
offer has been accepted by the Company.
Each applicable Pricing Supplement will specify whether the
rate of interest on the related Floating Rate Note will be reset
daily, weekly, monthly, quarterly, semiannually, annually or such
other specified period (each, an "Interest Reset Period") and the
dates on which such Interest Rate will be reset (each,
an"Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be,
in the case of Floating Rate Notes which reset: (i) daily, each
Business Day; (ii) weekly, the Wednesday of each week (with the
exception of weekly reset Treasury Rate Notes which will reset
the Tuesday of each week, except as specified below); (iii)
monthly, the third Wednesday of each month (with the exception of
Eleventh District Cost of Funds Rate Notes, all of which reset
monthly, which will reset on the first calendar day of the
month); (iv) quarterly, the third Wednesday of March, June,
September and December of each year; (v) semiannually, the third
Wednesday of the two months specified in the applicable Pricing
Supplement; and (vi) annually, the third Wednesday of the month
specified in the applicable Pricing Supplement; provided however,
that, with respect to Floating Rate/Fixed Rate Notes, the fixed
rate of interest in effect for the period from the Fixed Rate
Commencement Date until Maturity shall be the Fixed Interest Rate
or the interest rate in effect on the day immediately preceding
the Fixed Rate Commencement Date, as specified 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 will be postponed to the next succeeding
day that is a Business Day, except that in the case of a Floating
Rate Note as to which LIBOR is an applicable Interest Rate Basis,
if such Business Day falls in the next succeeding calendar month,
such Interest Reset Date will be the immediately preceding
Business Day. As used herein with respect to any Note, "Business
Day" means, unless otherwise specified in the applicable Pricing
Supplement, any day other than a Saturday or Sunday or any other
day on which banks in The City of New York are generally
authorized or obligated by law or executive order to close and,
with respect to Notes as to which LIBOR is an applicable Interest
Rate Basis, is also a London Business Day. As used herein,
"London Business Day" means any day (a) if the Index Currency (as
defined below) is other than the European Currency Unit ("ECU"),
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, that is not designated as an ECU
Non-Settlement Day 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.
A Floating Rate Note may also have either or both of the
following: (i) a maximum numerical limitation, or ceiling, on the
rate at which interest may accrue during any interest period and
(ii) a minimum numerical limitation, or floor, on the rate at
which interest may accrue during any interest period. In
addition to any maximum interest rate that may be applicable to
any Floating Rate Note pursuant to the above provisions, the
interest rate on Floating Rate Notes 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.
Each Floating Rate Note will bear interest from the date of
issue at the rates specified therein until the principal thereof
is paid or otherwise made available for payment. Except as
provided below or in an applicable Pricing Supplement, interest
will be payable in the case of Floating Rate Notes which reset:
(i) 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; (ii) quarterly, on the third Wednesday of March,
June, September and December of each year; (iii) semiannually, on
the third Wednesday of the two months of each year specified in
the applicable Pricing Supplement; and (iv) annually, on the
third Wednesday of the month of each year specified in the
applicable Pricing Supplement (each, an "Interest Payment Date")
and, in each case, at Maturity. If any Interest Payment Date for
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 will be the next succeeding day that
is a Business Day except that in the case of a Floating Rate Note
as to which LIBOR is an applicable Interest Rate Basis, if such
Business Day falls in the next succeeding calendar month, such
Interest Payment Date will 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.
All percentages resulting from any calculation on Floating
Rate Notes will be rounded 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) would be
rounded to 9.87655% (or .0987655)), 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 specified in the applicable Pricing
Supplement, interest payments on Floating Rate Notes will equal
the amount of interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has
been paid (or from and including the date of issue, if no
interest has been paid with respect to such Floating Rate Notes),
to but excluding the related Interest Payment Date; provided,
however, that the interest payments on Floating Rate Notes made
at Maturity will include interest accrued to but excluding the
date of Maturity.
Except as otherwise specified in the applicable Pricing
Supplement, each Floating Rate Note will accrue interest on an
"Actual/360" basis, an "Actual/Actual" basis, or a "30/360"
basis, in each case as specified in the applicable Pricing
Supplement. For Floating Rate Notes calculated on an Actual/360
basis and an Actual/Actual basis, accrued interest for each
Interest Calculation Period will be calculated by multiplying (i)
the face amount of such Floating Rate Note, (ii) the applicable
interest rate, and (iii) the actual number of days in the related
Interest Calculation Period, and dividing the resulting product
by 360 or 365, as applicable (or, with respect to an
Actual/Actual basis Floating Rate Note, if any portion of the
related Interest Calculation Period falls in a leap year, the
product of (i) and (ii) above will be multiplied by the sum of
(X) the actual number of days in that portion of the related
Interest Calculation Period falling in a leap year divided by 366
and (Y) the actual number of days in that portion of such
Interest Calculation Period falling in a non-leap year divided by
365). For Floating Rate Notes calculated on a 30/360 basis,
accrued interest for an Interest Calculation Period will be
computed on the basis of a 360-day year of twelve 30-day months,
irrespective of how many days are actually in such Interest
Calculation Period. Unless otherwise specified in the related
Pricing Supplement, with respect to any Floating Rate Note that
accrues interest on a 30/360 basis, if any Interest Payment Date
or the date of Maturity falls on a day that is not a Business
Day, the related payment of principal or interest will be made on
the next succeeding Business Day as if made on the date such
payment was due, and no interest will accrue on the amount so
payable for the period from and after such Interest Payment Date
or Maturity, as the case may be. As used herein, "Interest
Calculation Period" means with respect to any period, the period
from and including the most recent Interest Reset Date (or from
and including the original issue date in the case of the first
Interest Reset Date) to but excluding the next succeeding
Interest Reset Date for which accrued interest is being
calculated. Unless otherwise specified in an applicable Pricing
Supplement, interest with respect to Notes for which the interest
rate is calculated with reference to two or more Interest Rate
Bases will be calculated in the same manner as if only one of the
applicable Interest Rate Bases applied.
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 on the
applicable "Interest Determination Date." Unless otherwise
specified in the applicable Pricing Supplement, the Interest
Determination Date with respect to the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Federal Funds Rate, the J.J. Kenny
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 the Eleventh District Cost of
Funds Rate will be the last working day of the month immediately
preceding each Interest Reset Date on which the Federal Home Loan
Bank of San Francisco (the "FHLB of San Francisco") publishes the
Index (as defined below); 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 be 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 Interest Rate Bases 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 Interest Rate Basis is determinable. Each Interest
Rate Basis will be determined and compared on such date, and the
applicable interest rate will take effect on the related Interest
Reset Date.
Unless otherwise provided in the applicable Pricing
Supplement, Bankers Trust Company will be the "Calculation
Agent." Upon 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 as a result of a determination made for the next
Interest Reset Date with respect to such Floating Rate Note.
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.
CD Rate. CD Rate Notes will bear interest at the rates
(calculated with reference to the CD Rate and the Spread and/or
Spread Multiplier, if any) specified in such CD Rate Notes and in
any 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 Interest Determination
Date"), the rate on such date for negotiable certificates of
deposit having the Index Maturity specified in the applicable
Pricing Supplement as published in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication
("H.15(519)") under the heading "CDs (Secondary Market)," or, if
not published by 3:00 P.M., New York City time, on the related
Calculation Date, the rate on such CD Rate Interest Determination
Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement 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 ("Composite Quotations")
under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then
the CD Rate on such CD Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic
mean of the secondary market offered rates as of 10:00 A.M., New
York City time, on such CD Rate Interest Determination Date, of
three leading nonbank dealers in negotiable United States dollar
certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major
United States money market banks 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 so selected by the
Calculation Agent are not quoting as set forth above, the CD Rate
with respect to such CD Rate Interest Determination Date will be
the CD Rate in effect on such CD Rate Interest Determination
Date.
CMT Rate Notes. CMT Rate Notes will bear interest at the
rates (calculated with reference to the CMT Rate and the Spread
and/or Spread Multiplier, if any) specified in such CMT Rate
Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "CMT Rate" means, with respect to any Interest
Determination Date relating to a CMT Rate Note or any Floating
Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination
Date"), the rate displayed on the Designated CMT Telerate Page
under the caption ". . . .Treasury Constant Maturities. .
.Federal Reserve Board Release H.15. . .Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity
Index for (i) if the Designated CMT Telerate Page is 7055, the
rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as
applicable, ended immediately preceding the week in which the
related CMT Rate Interest Determination Date occurs. If such
rate is no longer displayed on the relevant page, or if not
displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such Treasury Constant Maturity rate
for the Designated CMT Maturity Index as published in the
relevant H.15(519). If such rate is no longer published, or if
not published by 3:00 P.M. New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such Treasury Constant Maturity rate
for the Designated CMT Maturity Index (or other United States
Treasury rate for the Designated CMT Maturity Index) for the CMT
Rate Interest Determination Date with respect to such Interest
Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines
to be comparable to the rate formerly displayed on the Designated
CMT Telerate Page and published in the relevant H.15(519). If
such information is not provided by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for the
CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the
arithmetic mean of the secondary market closing offer side prices
as of approximately 3:30 p.m. (New York City time) on the CMT
Rate Interest Determination Date reported, according to their
written records, by three leading primary United States
government securities dealers (each, a "Reference Dealer") in The
City of New York selected by the Calculation Agent (from five
such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality,
one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States
("Treasury Note") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of
not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for such CMT Rate Interest Determination
Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 P.M. (New York
City time) on the CMT Rate Interest Determination Date of three
Reference Dealers in The City of New York (from five such
Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality,
one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an
original maturity of the number of years that is the next highest
to the Designated CMT Maturity Index and a remaining term to
maturity closest to the Designated CMT Maturity Index and in an
amount of at least $100 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then
the CMT Rate will be based on the arithmetic mean of the offer
prices obtained and neither the highest nor lowest of such quotes
will be eliminated; provided however, that if fewer than three
Reference Dealers selected by the Calculation Agent are quoting
as described herein, the CMT Rate will be the CMT Rate in effect
on such CMT Rate Interest Determination Date. If two Treasury
Notes with an original maturity as described in the third
preceding sentence, have remaining terms to maturity equally
close to the Designated CMT Maturity Index, the quotes for the
CMT Rate Note with the shorter remaining term to maturity will be
used.
"Designated CMT Telerate Page" means the display on the Dow
Jones Telerate Service on the page designated in the applicable
Pricing Supplement (or any other page as may replace such page on
that service for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519)), for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519).
If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page shall be 7052, for
the most recent week.
"Designated CMT Maturity Index" means the original period to
maturity of the U.S. Treasury securities (either 1, 2, 3, 5, 7,
10, 20, or 30 years) specified in the applicable Pricing
Supplement with respect to which the CMT Rate will be calculated.
If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate. Commercial Paper Rate Notes will bear
interest at the rates (calculated with reference to the
Commercial Paper Rate and the Spread and/or Spread Multiplier, if
any) specified in such Commercial Paper Rate Notes and in any
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 Interest Determination Date"), the Money
Market Yield (as defined below) on such date of the rate for
commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as 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
published by 3:00 P.M., New York City time, on the related
Calculation Date, then the Commercial Paper Rate will be the
Money Market Yield on such Commercial Paper Rate Interest
Determination Date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as
published in 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 the
related 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 Interest Determination Date will
be calculated by the Calculation Agent and will be the Money
Market Yield of the arithmetic mean of the offered rates at
approximately 11:00 A.M., New York City time, on such Commercial
Paper Rate Interest Determination Date of three leading dealers
of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA", or the equivalent,
from a nationally recognized securities rating agency; provided,
however, that if the dealers so selected by the Calculation Agent
are not quoting as mentioned in this sentence, the Commercial
Paper Rate determined on such Commercial Paper Rate Interest
Determination Date will be the rate in effect on such Commercial
Paper Rate Interest Determination Date.
"Money Market Yield" means 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:
Money Market Yield = Dx360
--------- x 100
360-(DxM)
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.
Eleventh District Cost of Funds Rate. Eleventh District
Cost of Funds Rate Notes will bear interest at the rates
(calculated with reference to the Eleventh District Cost of Funds
Rate and the Spread and/or Spread Multiplier, if any) specified
in such Eleventh District Cost of Funds Rate Notes and in any
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "Eleventh District Cost of Funds Rate" means, with
respect to any Interest Determination Date relating to an
Eleventh District Cost of Funds Rate Note or any Floating Rate
Note for which the interest rate is determined with reference to
the Eleventh District Cost of Funds Rate (an "Eleventh District
Cost of Funds Rate Interest Determination Date"), the rate equal
to the monthly weighted average cost of funds for the calendar
month preceding such Eleventh District Cost of Funds Rate
Interest Determination Date as set forth under the caption "11th
District" on Telerate Page 7058 as of 11:00 A.M., San Francisco
time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate
Page 7058 on any related Eleventh District Cost of Funds Rate
Interest Determination Date, the Eleventh District Cost of Funds
Rate for such Eleventh District Cost of Funds Rate Interest
Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home
Loan Bank District that was most recently announced (the "Index")
by the FHLB of San Francisco as such cost of funds for the
calendar month preceding the date of such announcement. If the
FHLB of San Francisco fails to announce such rate for the
calendar month next preceding such Eleventh District Cost of
Funds Rate Interest Determination Date, then the Eleventh
District Cost of Funds Rate for such Eleventh District Cost of
Funds Rate Interest Determination Date will be the Eleventh
District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date. "Telerate Page
7058" means the display on the Dow Jones Telerate Service on such
page (or such other page as may replace such page on that service
for the purpose of displaying the Eleventh District Cost of Funds
Rate) for the purpose of displaying the monthly average cost of
funds paid by member institutions of the Eleventh Federal Home
Loan Bank District.
Federal Funds Rate. Federal Funds Rate Notes will bear
interest at the rates (calculated with reference to the Federal
Funds Rate and the Spread and/or Spread Multiplier, if any)
specified in such Federal Funds Rate Notes and in any 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 Interest Determination Date"), the rate on such date
for Federal Funds as published in H.15(519) under the heading
"Federal Funds (Effective)" or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on
such Federal Funds Rate Interest Determination Date as published
in Composite Quotations under the heading "Federal
Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City
time, on the related Calculation Date, the Federal Funds Rate for
such Federal Funds Rate Interest 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 Interest Determination Date; provided,
however, that if the brokers so selected by the Calculation Agent
are not quoting as mentioned in this sentence, the Federal Funds
Rate with respect to such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on
such Federal Funds Rate Interest Determination Date.
J.J. Kenny Rate Notes. J.J. Kenny Rate Notes will bear
interest at the rates (calculated with reference to the J.J.
Kenny Rate and the Spread and/or Spread Multiplier, if any)
specified in such J.J. Kenny Rate Notes and any applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "J.J. Kenny Rate" means, with respect to any Interest
Determination Date relating to a J.J. Kenny Rate Note or any
Floating Rate Note for which the interest rate is determined with
reference to the J.J.Kenny Rate (a "J.J. Kenny Rate Interest
Determination Date"), the rate in the high grade weekly index
(the "Weekly Index") on such date made available by Kenny
Information Systems ("Kenny") to the Calculation Agent. The
Weekly Index is, and shall be, based upon 30-day yield
evaluations at par of bonds, the interest of which is exempt from
federal income taxation under the Internal Revenue Code of 1986,
as amended (the "Code"), of not less than five high grade
component issuers selected by Kenny which shall include, without
limitation, issuers of general obligation bonds. The specific
issuers included among the component issuers may be changed from
time to time by Kenny in its discretion. The bonds on which the
Weekly Index is based shall not include any bonds on which the
interest is subject to a minimum tax or similar tax under the
Code, unless all tax-exempt bonds are subject to such tax. In
the event Kenny ceases to make available such Weekly Index, a
successor indexing agent will be selected by the Calculation
Agent, such index to reflect the prevailing rate for bonds rated
in the highest short-term rating category by Moody's Investors
Service, Inc. and Standard & Poor's Corporation in respect of
issuers most closely resembling the high grade component issuers
selected by Kenny for its Weekly Index, the interest on which is
(A) variable on a weekly basis, (B) exempt from federal income
taxation under the Code, and (C) not subject to a minimum tax or
similar tax under the Code, unless all tax-exempt bonds are
subject to such tax. If such successor indexing agent is not
available, the rate for any J.J. Kenny Rate Interest
Determination Date shall be 67% of the rate determined as if the
Treasury Rate option had been originally selected.
LIBOR. LIBOR Notes will bear interest at the rates
(calculated with reference to LIBOR and the Spread and/or Spread
Multiplier, if any) specified in such LIBOR Notes and in any
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:
(i) 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 Interest
Determination Date"), LIBOR will be either: (a) if "LIBOR
Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page (as defined below) by its terms provides
only for a single rate, in which case such single rate shall be
used) for deposits in the Index Currency (as defined below)
having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Business Day
immediately following that LIBOR Interest 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 Interest 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
Interest 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 Interest Determination Date. If
fewer than two offered rates appear, or no rate appears, as
applicable, LIBOR in respect of the related LIBOR Interest
Determination Date will be determined as if the parties had
specified the rate described in clause (ii) below.
(ii) With respect to a LIBOR Interest 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 Interest Determination Date, to
prime banks in the London interbank market at approximately 11:00
A.M., London time, on such LIBOR Interest 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 Interest Determination Date will be the arithmetic
mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such LIBOR Interest 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 Interest
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 Interest Determination Date will be LIBOR in effect
on such LIBOR Interest 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 on the page designated
in the applicable Pricing Supplement (or such other page as may
replace such designated page on that service for the purpose of
displaying London interbank offered rates of major banks) for the
related Index Currency 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
on the page designated in the applicable Pricing Supplement (or
such other page as may replace such designated page on that
service or such other service or services as may be nominated by
the British Bankers' Association for the purpose of displaying
London interbank offered rates for the related Index Currency)
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, page 3750) had been specified.
"Principal Financial Center" will generally be the capital
city of the country of the specified Index Currency, except that
with respect to U.S. dollars, Deutsche marks, Italian lira, Swiss
francs, Dutch guilders and ECUs, the Principal Financial Center
shall be The City of New York, Frankfurt, Milan, Zurich,
Amsterdam and Luxembourg, respectively.
Prime Rate. Prime Rate Notes will bear interest at the
rates (calculated with reference to the Prime Rate and the Spread
and/or Spread Multiplier, if any) specified in such Prime Rate
Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "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 Interest 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
related 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 NYMF Page as such
bank's prime rate or base lending rate as in effect for that
Prime Rate Interest Determination Date. If fewer than four such
rates but more than one such rate appear on the Reuters Screen
NYMF Page for such Prime Rate Interest 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
Interest Determination Date by four major money center banks in
The City of New York selected by the Calculation Agent. If fewer
than two such rates appear on the Reuters Screen NYMF Page, the
Prime Rate will be determined by the Calculation Agent on the
basis of the rates furnished in The City of New York by three
substitute banks or trust companies organized and doing business
under the laws of the United States, or any state thereof, having
total equity capital of at least $500 million 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 Interest Determination Date will
be the Prime Rate in effect on such Prime Rate Interest
Determination Date.
"Reuters Screen NYMF Page" means the display designated as
page "NYMF" on the Reuters Monitor Money Rates Service (or such
other page as may replace the NYMF page on that service for the
purpose displaying prime rates or base lending rates of major
United States banks).
Treasury Rates. Treasury Rate Notes will bear interest at
the rates (calculated with reference to the Treasury Rate and the
Spread and/or Spread Multiplier, if any) specified in such
Treasury Rate Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest
Determination Date relating to a Treasury Rate Note or any
Floating Rate Note for which the interest rate is determined by
reference to the Treasury Rate (a "Treasury Rate Interest
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 is published in H.15(519) under
the heading "U.S. Government Securities-Treasury Bills-auction
average (investment)" or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the auction average
rate (expressed as a bond equivalent yield on the basis of a year
of 365 or 366 days, as applicable, and applied on a daily basis)
as otherwise announced by the United States Department of the
Treasury. In the event that the results of the auction of
Treasury Bills having the Index Maturity designated in the
applicable Pricing Supplement are not reported as provided 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
will be the rate published in H.15(519) under the heading "U.S.
Government Securities-Treasury Bills-Secondary Market" (expressed
as a bond equivalent yield on the basis of a 365 or 366 day year,
as applicable, on a daily basis), or if not published by 3:00
P.M. New York City time on the related Calculation Date, the
Treasury Rate will be calculated by the Calculation Agent and
will be a yield to maturity (expressed as a bond equivalent yield
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 Interest Determination Date, of three
leading primary United States government securities dealers
(which may include one or more of the Agents) selected by the
Calculation Agent, for the issue of Treasury Bills with a
remaining maturity closest to the Index Maturity designated in
the applicable Pricing Supplement; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Treasury Rate with respect to
such Treasury Rate Interest Determination Date will be the
Treasury Rate in effect on such Treasury Rate Interest
Determination Date.
Other Provisions; Addenda
Any provisions with respect to Notes, including the
determination of an Interest Rate Basis, the specification of
Interest Rate Basis, 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.
Original Issue Discount Notes
Notes may be issued at a price less than their redemption
price at Maturity, resulting in such Notes being treated as if
they were issued with OID for federal income tax purposes ("OID
Notes"). Such OID Notes may currently pay no interest or
interest at a rate which at the time of issuance is below market
rates. See "Taxation." Certain additional considerations
relating to any OID Notes may be described in the Pricing
Supplement relating thereto.
Registration and Transfer
Certificated Notes will be exchangeable for other
Certificated Notes of a like aggregate principal amount and tenor
of different authorized denominations. Certificated Notes may be
presented for exchange as provided above, and Certificated Notes
may be presented for registration of transfer (with the form of
transfer set forth thereon duly endorsed) at the office of the
Security Registrar without service charge and upon payment of any
taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the
Security Registrar's being satisfied with the documents of title
and identity of the person making the request. The Company has
appointed the Trustee as Security Registrar (Section 305).
Certificated Notes may be presented for registration of
transfer or exchange at the corporate trust office of the Trustee
in the Borough of Manhattan, The City of New York.
Payment and Paying Agents
Unless otherwise indicated in an applicable Pricing
Supplement, the Trustee will act as the Company's sole Paying
Agent with respect to the principal amount of the Notes through
its corporate trust office in the Borough of Manhattan, The City
of New York. Any other Paying Agent initially designated by the
Company for the Notes will be named in an applicable Pricing
Supplement. The Company may at any time designate additional
Paying Agents, rescind the designation of any Paying Agent, or
approve a change in the office through which any Paying Agent
acts; provided, however, the Company will be required to maintain
a Paying Agent in each place of payment.
Payments of principal, premium, if any, and interest payable
at stated maturity or upon redemption will be made in immediately
available funds at the corporate trust office of the Trustee in
the Borough of Manhattan, The City of New York, provided that the
Note is presented to the Trustee in time for the Trustee to make
such payments in such funds in accordance with its normal
procedures. The Trustee will also act as Paying Agent with
respect to periodic payments of interest, which will be made by
check mailed to the address of the person entitled thereto as it
appears in the Security Register (which, in the case of
Book-Entry Notes, will be a nominee of the Depositary) as of the
applicable Regular Record Date or, at the option of the Company,
by wire transfer to an account maintained by such person with a
bank located in the United States. Notwithstanding the
foregoing, upon written notice to the Trustee on or before the
Regular Record Date for any interest payment (other than interest
payable at stated maturity or upon redemption), such payment may
be made by wire transfer to an account with a bank located in the
United States designated by a Holder of $1 million or more in
aggregate principal amount of Notes having the same Interest
Payment Date pursuant to arrangements satisfactory to both the
Trustee and the Company.
All moneys paid by the Company to the Trustee or a Paying
Agent for the payment of principal of, and premium, if any, and
any interest on, any Note which remain unclaimed at the end of
two years after such principal, premium, or interest has become
due and payable will be returned to the Company, and the Holder
of such Note may thereafter look only to the Company for payment
thereof (Section 1203).
Redemption
Unless otherwise specified in an applicable Pricing
Supplement, the Notes will not be redeemable prior to their
stated maturity. If so specified in an applicable Pricing
Supplement with respect to a Note, such Note will be redeemable
on or after the date set forth in such Pricing Supplement, either
in whole or from time to time in part, at the option of the
Company, at the redemption price set forth in the applicable
Pricing Supplement, together with interest accrued thereon to the
date of redemption on notice given not more than 60 nor less than
30 days prior to the date of redemption. In the event of any
redemption in part, the Company will not be required to (i)
issue, register the transfer of, or exchange Notes during a
period beginning at the opening of business 15 days before any
selection of Notes to be redeemed and ending at the close of
business on the date of mailing of the relevant notice of
redemption, or (ii) register the transfer of or exchange any
Note, or any portion thereof, called for redemption, except the
unredeemed portion of any Note being redeemed in part (Section
305). Unless otherwise specified in an applicable Pricing
Supplement, the Notes will not be subject to any sinking fund.
Book-Entry System
Upon issuance, all Book-Entry Notes having the same original
issuance date, interest rate, stated maturity, and redemption
provisions, if any, will be represented by a single Global
Security. Each Global Security representing one or more
Book-Entry Notes will be deposited with, or on behalf of, the
Depositary and registered in the name of a nominee of the
Depositary. Upon the issuance of such a Global Security, the
Depositary 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 institutions that have accounts with the Depositary
or its nominee ("participants"). The accounts to be credited
will be designated by the Agents.
The Depositary has advised the Company and the Agents as
follows: The Depositary is a limited-purpose trust company
organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. The Depositary holds securities
that its participants deposit with the Depositary, and
facilitates the settlement of securities transactions among its
participants in such securities through electronic book-entry
changes in participants' accounts, thereby eliminating the need
for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers
(including the Agents), banks, trust companies, clearing
corporations, and certain other organizations, some of which
(and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others, such
as banks, brokers, dealers, and trust companies that clear
through or maintain a custodial relationship with a participant,
either directly or indirectly. The rules applicable to the
Depositary and its participants are on file with the Securities
and Exchange Commission.
The Indenture provides that if at any time the Depositary
for any series of Debt Securities is unwilling or unable, or is
no longer qualified, to serve as such, the Company shall appoint
a successor Depositary with respect to such series of Debt
Securities. If a successor Depositary is not appointed by the
Company within 90 days, the Company will issue Debt Securities in
definitive registered form in exchange for the Global Security or
Securities representing such Debt Securities. See "Description
of Debt Securities Global Securities" in the Prospectus. A
further description of the Depositary's procedures with respect
to Global Securities representing Book-Entry Notes, including
procedures for payment of principal, premium, if any, or
interest, if any, in respect of a Global Security, is set forth
in the Prospectus under "Description of Debt Securities Global
Securities."
TAXATION
It is the opinion of Fulbright & Jaworski L.L.P., counsel to
the Company ("Counsel"), that the material United States federal
income tax consequences to purchasers that are likely to result
from the purchase, ownership, and sale or other taxable
disposition of a Note under currently applicable laws are
described herein. This opinion is based upon the current
provisions of the Code, applicable Treasury regulations
(including proposed regulations), judicial authority, and
administrative rulings and practice. There can be no assurance
that the Internal Revenue Service ("IRS") will not take a
contrary view, and no ruling from the IRS has been or will be
sought. Legislative, judicial, or administrative changes or
interpretations may be forthcoming that could alter or modify the
statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect
the tax consequences to Holders. Finally, it is possible that
based upon the specific terms of a Note as proposed to be issued
or upon subsequent changes in, or interpretations of, applicable
law, the material United States federal income tax consequences
could differ from those described herein. If this should occur,
Counsel's opinion as to such differing United States federal
income tax consequences will be set forth in the applicable
Pricing Supplement relating to the issuance of such Notes.
The following discussion does not address all aspects of
United States federal income taxation that may be relevant to
Holders entitled to special treatment under the United States
federal income tax laws, such as individual retirement and other
tax-deferred accounts, life insurance companies, and tax exempt
organizations, or except where noted, with special situations,
such as those of dealers in securities, financial institutions,
Notes held as a hedge or hedged currency risks, or persons whose
functional currency is not the United States dollar. With
respect to Holders who are subject to United States federal
income taxation on their worldwide income, the discussion is
limited to Holders who hold Notes as capital assets.
Prospective purchasers of the Notes should consult their own
tax advisors as to the particular tax consequences of acquiring,
holding, and disposing of the Notes in light of their particular
situations, including the applicability and effect of any
federal, state, local, or foreign tax laws, and the prospects
for, and the potential impact of, any changes in the applicable
tax laws.
Stated Interest
In general, all interest payments on a Note that are payable
at a single fixed rate and are unconditionally payable in cash or
in property (other than debt instruments of the Company) at least
annually ("qualified stated interest") will be includible in the
Holder's gross income as ordinary interest income in accordance
with such Holder's regular method of accounting for tax purposes.
For cash basis Holders, such payments will be includible in
income when received (or when made available for receipt, if
earlier). For accrual basis Holders, such payments will be
includible in income when all events necessary to establish the
right to receive such payments have occurred.
Original Issue Discount
A Note may be issued with OID, as described below, and any
such Note is referred to herein as an "OID Note." Holders of OID
Notes generally will be subject to the special tax accounting
rules for original issue discount obligations provided by the
Code and certain Treasury Regulations issued on January 27, 1994
(the "OID Regulations"). For United States federal income tax
purposes, a Note will be issued with OID if the excess of its
"stated redemption price at maturity" over its "issue price"
equals or exceeds a de minimis amount (generally 0.25% of such
Note's stated redemption price at maturity multiplied by the
number of complete years from the issue date to the stated
maturity of the Note). For purposes of the OID rules, the
"stated redemption price at maturity" of a Note is the sum of all
payments provided by the Note other than payments of qualified
stated interest. The "issue price" of a debt instrument issued
for cash is generally the first price at which a substantial
amount of the debt instruments is sold. In addition, 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 part or all of the stated
interest on the Note would be treated as OID rather than
qualified stated interest.
A Holder of an OID Note may be required to include OID in
income in advance of the receipt of some or all of the related
cash payments. Thus, the effect of holding an OID Note will
generally be to accelerate the inclusion of interest income for
cash method taxpayers.
For any taxable year, the amount of OID includible in income
by the initial Holder of an OID Note with a term in excess of one
year and, subject to adjustment, by any subsequent Holder is the
sum of the daily portions of OID for each day during such taxable
year or portion of the taxable year in which such Holder held the
OID Note. The daily portions of OID on an OID Note are
determined by allocating to each day in any accrual period a
ratable portion of the OID allocable to that accrual period. An
accrual period may be any length of time, and the lengths may
vary during the time the Note is outstanding, so long as no
accrual period is greater than one year and provided that 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. In the case of an initial Holder, the amount of OID on
an OID Note allocable to each accrual period is determined by (i)
multiplying the "adjusted issue price" (as defined below) of the
Note at the beginning of the accrual period by the yield to
maturity of the Note (as adjusted for the length of the accrual
period) and (ii) subtracting from that product the amount, if
any, of qualified stated interest allocable to that accrual
period.
The "adjusted issue price" of an OID Note at the beginning
of any accrual period will generally be the sum of its issue
price and the amount of OID allocable to all prior accrual
periods, reduced by the amount of all payments other than
payments of qualified stated interest, if any, made with respect
to such Note in all prior accrual periods. As discussed above,
in order to determine the amount of OID allocable to an accrual
period, the adjusted issue price of an OID Note will be
multiplied by the Note's yield to maturity (as adjusted for the
length of the accrual period). As a result of this "constant
yield" method of including OID into income, the amounts so
includible in income by a Holder, in respect of an OID Note, will
generally be lesser in the early years and greater in the later
years than the amounts that would be includible on a
straight-line basis.
If so specified in the applicable Pricing Supplement, the
Company will have an option to redeem a Note prior to its stated
maturity. Under the OID Regulations, the Company will be deemed
to exercise such option for purposes of calculating the yield to
maturity on the Note if by utilizing the redemption date as the
stated maturity date and the amount payable upon redemption in
accordance with the terms of the Note (the "redemption price") as
the stated redemption price at maturity, the yield on the Note
would be lower than its yield to stated maturity. If the Company
is deemed to exercise its option to redeem a Note and does not do
so, the Note will be treated (for purposes of measuring OID) as
if it were redeemed and a new Note were issued on the presumed
redemption date for an amount equal to the redemption price.
In general, an individual or other cash method Holder of an
OID Note that has a term of one year or less from the date of its
issuance (a "Short-Term OID Note") is not required to accrue OID
unless such Holder elects to do so. Accrual method Holders and
certain other Holders, including banks and dealers in securities,
are required to accrue OID on Short-Term OID Notes on a
straight-line basis unless an election is made to accrue OID
under the constant interest rate method described above. Any
such election, once made, is irrevocable. In the case of a
Holder who is not required and does not elect to include OID in
income currently, any gain recognized by such Holder upon the
sale or exchange (including by reason of redemption or
retirement) of the Short-Term OID Note will be treated as
ordinary income to the extent of the OID that has accrued on a
straight-line basis through the date of such sale or maturity.
Furthermore, such a Holder of a Short-Term OID Note may be
required to defer deductions for a portion of the Holder's
interest expense with respect to any indebtedness incurred or
maintained to purchase or carry a Short-Term OID Note. In the
case of Holders that include OID on Short-Term OID Notes in
income currently, the amount of accrued OID that is included in
income will be added to the Holder's tax basis in the Note.
Floating Rate Notes
The Floating Rate Notes are treated as either "variable rate
debt instruments" or Contingent Notes (as defined below). The
OID Regulations provide special rules for determining the amount
and accrual of qualified stated interest and OID on a Floating
Rate Note which qualifies as a variable rate debt instrument.
Under the OID Regulations, a Floating Rate Note will qualify as a
variable rate debt instrument if (a) its issue price does not
exceed the total noncontingent principal payments due under such
Floating Rate Note by more than a specified de minimis amount and
(b) it provides for stated interest, paid or compounded at least
annually, at (where applicable) 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," as such terms are defined
under the OID Regulations. The definitions of such terms and
their application, if any, to a particular Floating Rate Note
will be described in the related Pricing Supplement.
If a Floating Rate Note that qualifies as a variable rate
debt instrument provides for stated interest at either a single
qualified floating rate or a single objective rate that is
unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually, then such stated
interest will constitute qualified stated interest, and will be
taxable to the Holder as ordinary interest income at the time it
is accrued or received, depending on such Holder's method of
accounting for tax purposes. Such a Floating Rate Note thus
generally will not be treated as having OID unless its stated
principal amount exceeds its issue price and such excess is
greater than or equal to a specified de minimis amount. OID, if
any, on such a Floating Rate Note is allocated to an accrual
period under the method described above.
Any other Floating Rate Note that qualifies as a variable
rate debt instrument generally will be converted into a fixed
rate instrument, and the amount and accrual of qualified stated
interest and OID on such Floating Rate Note are then determined
by applying the general OID rules. The method for converting
such a Floating Rate Note to a fixed rate instrument will depend
on its characteristics. Such a Floating Rate Note providing for
one or more qualified floating rates or qualified inverse
floating rates is converted by substituting a fixed rate (the
"equivalent" fixed rate) equal to the value of each qualified
floating rate or qualified inverse floating rate as of such
Floating Rate Note's issue date. Such a Floating Rate Note
providing for an objective rate (other than a qualified inverse
floating rate) is converted by substituting an equivalent fixed
rate that reflects the yield that is reasonably expected on such
Floating Rate Note. In the case of a Floating Rate Note that
qualifies as a variable rate debt instrument and provides for
stated interest at one or more qualified floating rates or a
qualified inverse floating rate and additionally provides for
stated interest at a single fixed rate, the fixed rate is
converted into a qualified floating rate (or a qualified inverse
floating rate if such Floating Rate Note provides for a qualified
inverse floating rate). The qualified floating rate or qualified
inverse floating rate that replaces the fixed rate must be such
that the fair market value of the Floating Rate Note as of the
Floating Rate Note's issue date would be 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.
Such a Floating Rate Note is then converted into an equivalent
fixed rate debt instrument as described above. In the event that
the amount of interest assumed to have accrued or been paid with
respect to the equivalent fixed rate debt instrument of a
Floating Rate Note that qualifies as a variable rate debt
instrument differs from the amount of interest actually accrued
or paid on such Floating Rate Note during an accrual period, the
OID Regulations provide for appropriate adjustments to be made to
the amount of qualified stated interest or OID assumed to have
accrued or been paid.
Contingent Notes
Notes may be issued under circumstances in which the amount
and/or timing of interest and principal on the Notes is subject
to a contingency ("Contingent Notes"). For example, the Company
may issue Notes under which interest and/or principal is
determined by reference to multiple formulas based on the values
of specified stocks, commodities, foreign currencies or other
such personal property. If a Floating Rate Note does not qualify
as a variable rate debt instrument under the OID Regulations,
then the Floating Rate Note would be treated as a Contingent
Note. The anticipated United States federal income tax treatment
of a Contingent Note will be described in the related Pricing
Supplement.
Sale or Exchange of Notes
If a Note is sold or exchanged (including by reason of
redemption or retirement), the disposing Holder will recognize
gain or loss in an amount equal to the difference between the
amount realized on the sale or exchange (less any amount received
in payment of accrued interest if the interest constitutes
qualified stated interest) and the Holder's tax basis in the
Note. Except as otherwise provided in this discussion, any gain
or loss on the sale or exchange of a Note will be capital gain or
loss. Any capital gain or loss recognized on the sale or
exchange of a Note will be long-term capital gain or loss if the
Note was held for more than one year as of the time of its
disposition.
A Holder's initial tax basis in a Note will generally be
equal to the Holder's cost of the Note. At any time, a Holder's
tax basis in a Note will generally be equal to his initial tax
basis, plus any OID (and accruals of market discount, if any)
previously included in the Holder's gross income with respect to
the Note, minus any payments included in the stated redemption
price at maturity previously received by the Holder and any
allowable accruals of amortizable bond premium.
Treatment of Premium; Amortizable Bond Premium
If a Holder purchases an OID Note at an "acquisition
premium" (i.e., at a price in excess of the Note's adjusted issue
price at the time of purchase, but less than or equal to the sum
of all amounts payable on the Note after the purchase date other
than qualified stated interest), the amount includible in income
as OID will be reduced by an amount equal to the daily portions
of OID with respect to such Note multiplied by a fraction, the
numerator of which is the amount of such acquisition premium, and
the denominator of which is the excess of the sum of all amounts
payable on the Note after the purchase date, other than qualified
stated interest, over the adjusted issue price of the Note. If a
Holder purchases a Note for an amount that exceeds the sum of all
amounts payable on the Note after the purchase date other than
qualified stated interest, the Holder will not be required to
accrue OID with respect to the Note and may generally elect to
amortize the amount of such excess purchase price as "amortizable
bond premium" under a constant interest rate method over the
remaining term of the Note. Holders who elect to amortize bond
premium must reduce their tax bases in the related obligations by
the amount of the aggregate allowable accruals of amortizable
bond premium. Any such election applies to all taxable debt
instruments held by such Holder at the beginning of the first
taxable year to which the election applies and to all taxable
debt instruments thereafter acquired. The election may not be
revoked without the consent of the IRS. Amortizable bond premium
is treated for federal income tax purposes as an offset to
interest income on the Note, rather than as interest expense.
Market Discount
A subsequent Holder of a Note will be subject to the "market
discount" rules of the Code if such holder acquires a Note that
has a term of more than one year from its issue date at a market
discount that is greater than the de minimis amount described
below. Market discount with respect to a Note is defined as the
excess of (i) the Note's stated redemption price at maturity, or,
in the case of an OID Note, its adjusted issue price (as that
term is defined above), over (ii) the subsequent Holder's basis
for the Note immediately after its acquisition by such Holder.
However, under a de minimis rule, if such excess is less than
0.25% of the stated redemption price at maturity of the Note
multiplied by the number of complete years to maturity remaining
after the Holder acquired the Note, market discount is deemed to
be zero. The market discount rules will also apply to any Holder
that acquires a Note at original issue at a discount from the
issue price for the Note (as defined above) which exceeds such de
minimis amount.
The Holder of a Note containing market discount generally
will be required to treat any partial principal payments (or in
the case of an OID Note, any payment that does not constitute
qualified stated interest) on, or any gain realized on the sale
or exchange (including by reason of redemption or retirement) of,
a Note as ordinary interest income to the extent of the market
discount that has accrued during the time the Holder held the
Note and that has not previously been included in income. Under
some circumstances, such as a gift of a Note, any gain on the
transfer of a Note must be recognized notwithstanding any other
provisions of the Code, to the extent of the market discount (if
any) accrued during the period the Holder held the Note. The
accrual of market discount is calculated on a straight-line
basis. However, a Holder may elect to calculate the accrual of
market discount on a constant interest rate basis. The market
discount rules may also require the deferral of a portion of any
interest deduction on debt incurred or continued to purchase or
carry a Note containing market discount. Such deferred
deductions are generally allowed when the market discount is
included in income. The rules requiring characterization of gain
as ordinary income, recognition of gain on gifts and certain
other transactions on which gain would not ordinarily be
recognized, and deferral of interest deductions will not apply to
a Holder who elects to include market discount in income as it
accrues either on a ratable basis or a constant interest rate
basis. This current inclusion election, once made, applies to
all market discount obligations acquired by the Holder on or
after the first day of the first taxable year to which the
election applies, and may not be revoked without the consent of
the IRS.
Holders should consult their own tax advisors regarding the
application of the de minimis rule to a Note and regarding the
advisability of making any of the elections allowed under the
market discount rules.
Non-U.S. Holders
Notwithstanding the foregoing discussion, a beneficial owner
of a Note that is not a citizen or resident of the United States,
a corporation, partnership, or other entity created or organized
in or under the laws of the United States, or an estate or trust,
the income of which is subject to United States federal taxation
regardless of its source (a "Non-U.S. Holder") will, subject to
the discussion of backup withholding below, generally not be
subject to United States federal withholding taxes on payments of
principal (including any OID) and interest on any Notes provided
that (i) the Non-U.S. Holder does not own, actually or
constructively, 10% or more of the total combined voting power of
all classes of voting stock of the Company, (ii) the Non-U.S.
Holder is not a controlled foreign corporation related to the
Company through stock ownership, and (iii) the Company or its
agent receives certification, under penalties of perjury, either
(a) from the beneficial owner of the Note certifying that the
beneficial owner is not a United States person and the owner's
name and address are provided, or (b) in the case of a Note held
by a securities clearing organization, a bank, or other financial
institution that holds customers' securities in the ordinary
course of its trade or business (a "financial institution"), from
the financial institution certifying that it or a financial
institution between it and the beneficial owner has received a
certificate described in clause (iii)(a) of this sentence from
the beneficial owner and a copy of such certificate is furnished
to the Company or its agent. Certification by the beneficial
owner may be made on an IRS Form W-8 or a substantially similar
form.
If a Non-U.S. Holder is engaged in a trade or business in
the United States and interest and OID on the Note are
effectively connected with the conduct of such trade or business,
the Non-U.S. Holder may be subject to United States federal
income tax on such interest and OID at the rates and in the
manner applicable to United States persons. In addition, if a
Note is held by a Non-U.S. Holder that is a foreign corporation,
interest and OID paid with respect to such note may also be
subject to a United States branch profits tax at a rate of 30%,
or at a lesser applicable treaty rate, to the extent that the
interest and OID are effectively connected with the conduct of a
United States trade or business by such Holder.
Any gain or income realized by a Non-U.S. Holder upon the
sale or disposition (including by reason of redemption or
retirement) of a Note (other than an amount representing stated
interest or accrued OID, the treatment of which is described
above) will not be subject to United States federal income tax
unless (i) such gain or income is effectively connected with a
trade or business in the United States of the Non-U.S. Holder,
or, alternatively, if a tax treaty applies, attributable to a
United States permanent establishment maintained by the Non-U.S.
Holder (in which cases such gain will be subject to tax at the
rates and in the manner applicable to United States persons and
the branch profits tax described above may also apply if such
Non-U.S. Holder is a foreign corporation), or (ii) in the case of
an individual holder, the Non-U.S. Holder is present in the
United States for a period or periods aggregating 183 days or
more in the calendar year (or taxable year if one has been
established) in which such sale occurs, the Note is a capital
asset and either (a) such individual's "tax home," within the
meaning of Section 911(d)(3) of the Code, is in the United States
or (b) the gain is attributable to an office or other fixed place
of business maintained in the United States by such individual.
An individual Holder of a Note who is not a citizen or
resident of the United States at the time of his or her death
will not be subject to United States federal estate tax as a
result of such individual's death, if (i)(a) such Holder does not
own, actually or constructively, on the date of death 10% or more
of the total combined voting power of all classes of the voting
stock of the Company, and (b) any interest received on the Note,
if received by such Holder at the time of his or her death, would
not be effectively connected with the conduct of a trade or
business in the United States or (ii) an exemption is otherwise
available.
The United States federal income and estate tax treatment to
a Non-U.S. Holder of a Contingent Note will be materially
different from that described above if interest on any such Note
is contingent on sales, income, or certain other results of
operations of, changes in the value of property owned by, or
dividends paid by the Company or a related person. Such tax
treatment will be described in the Pricing Supplement related to
any such Contingent Notes.
Backup Withholding and Information Reporting
Payments of interest and accruals of OID will generally be
subject to information reporting and possibly to "backup"
withholding at a rate of 31%. The amounts of OID required to be
reported by the Company may not be the same as the amount of OID
required to be included in the gross income of a Holder who is
not an original purchaser. A Holder generally will be subject to
31% backup withholding in respect of a payment, unless such
Holder provides its taxpayer identification number (i.e., social
security number in the case of an individual) in the manner
prescribed in applicable United States Treasury regulations and
certain other conditions are met. Such certification may be made
on an IRS Form W-9 or substantially similar form. Backup
withholding, however does not generally apply to payments to
certain "exempt recipients" such as corporations. Non-U.S.
Holders generally may establish an exemption from backup
withholding with respect to payments by the Company or any paying
agency thereof by providing the certification described in clause
(iii) in the first paragraph under "Non-U.S. Holders" above.
Such certification may be made on an IRS Form W-8 or
substantially similar form.
Under current Treasury regulations, if interest or OID is
paid or collected outside the United States by a foreign office
of a custodian, nominee or other agent acting on behalf of a
Holder of a Note, such custodian, nominee or other agent will not
be required to apply backup withholding to payments made to such
Holder. However, if such custodian, nominee or other agent is a
United States person, a controlled foreign corporation for United
States tax purposes, or a foreign person 50% or more of whose
gross income is from a United States trade or business for a
specified three-year period, such custodian, nominee or other
agent may be subject to certain information reporting
requirements with respect to such payment unless it has in its
records documentary evidence that the holder is not a United
States person and certain conditions are met or the Holder
otherwise establishes an exemption. The United States Treasury
Department has indicated that it is studying the possible
application of backup withholding in the case of United States
and United States-related custodians, nominees and other agents.
Under current Treasury regulations, payments of the proceeds
of the sale of a Note to a Holder by or through a foreign office
of a broker will not be subject to backup withholding. However,
if such broker is a United States person, a controlled foreign
corporation for United States federal tax purposes, or a foreign
person 50% or more of whose gross income is from a United States
trade or business for a specified three-year period, information
reporting will apply unless such broker has in its records
documentary evidence that the Holder is not a United States
person and certain conditions are met or the Holder otherwise
establishes an exemption. The United States Treasury Department
has indicated that it is studying the possible application of
backup withholding in the case of foreign offices of United
States and United States-related brokers. Payments of the
proceeds of a sale of a Note to a Holder by or through the United
States office of a broker will be subject to information
reporting and backup withholding unless the Holder certifies to
its non-United States status or otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules from
a payment to a Holder should be allowed as a refund or credit
against such Holder's United States federal income tax, provided
that the required information is furnished to the IRS.
The backup withholding rules are currently under review by
the United States Treasury Department, and their application to
the Notes is subject to change.
PLAN OF DISTRIBUTION OF NOTES
Under the terms of a Distribution Agreement between the
Company and the Agents (the "Distribution Agreement"), the Notes
are being offered on a continuous basis by the Company through
the Agents, each of which has agreed to use its reasonable best
efforts to solicit offers to purchase the Notes. The Company
will pay each Agent a commission in the form of a discount
ranging from .125% to .750% of the principal amount of any Note
(or of the issue price in the case of an OID Note), depending on
its stated maturity, sold through such Agent. The Company also
may sell Notes to any Agent, acting as principal, at a discount
to be agreed upon at the time of sale, for resale to one or more
investors or to another broker-dealer (acting as principal for
purposes of resale) at varying prices related to prevailing
market prices at the time of such resale or, if so agreed, a
fixed public offering price, as determined by such Agent. An
Agent may resell a Note purchased by it as principal to another
broker-dealer at a discount, and, unless otherwise specified in
the applicable Pricing Supplement, such discount allowed to any
broker-dealer will not be in excess of the commission or discount
received by such Agent from the Company in connection with the
original sale of such Note. Such broker-dealer may reallow all
or any portion of such discount to other broker-dealers. The
Company has also reserved the right to sell the Notes directly
from time to time on its own behalf, in which case no commission
will be paid. The Company will have the sole right to accept
offers to purchase Notes and may reject any such offer, in whole
or in part.
Unless otherwise indicated in the applicable Pricing
Supplement, payment of the purchase price of the Notes will be
required to be made in funds immediately available in The City of
New York on the date of settlement.
The Agents may be deemed to be "underwriters" within the
meaning of the Securities Act. The Company has agreed to
indemnify each Agent against certain liabilities, including
liabilities under the Securities Act. The Company has also
agreed to reimburse the Agents for certain expenses, including
fees and disbursements of counsel to the Agents.
The Company has been advised by the Agents that they may
from time to time purchase and sell Notes in the secondary market
or make a market in the Notes, but that they are not obligated to
do so. No assurance can be given that there will be a secondary
market for the Notes.
The Agents or their affiliates may engage in transactions
with and perform services for the Company in the ordinary course
of business. BT Securities Corporation, one of the Agents, is an
affiliate of the Trustee. See "Description of the Debt
Securities Concerning the Trustee" in the Prospectus.
<PAGE>
PROSPECTUS
$250,000,000
[Logo] VALERO ENERGY CORPORATION
Debt Securities
Valero Energy Corporation (the "Company") may from time to
time offer or solicit offers to purchase its unsecured debt
securities consisting of debentures, notes or other unsecured
evidences of indebtedness in one or more series ("Debt
Securities"), having an aggregate initial offering price not to
exceed US$250,000,000 at prices and on terms to be determined at
the time of offering. All securities issued hereunder will be
issued only for consideration in the form of cash.
All specified terms of the offering and sale of the Debt
Securities will be set forth in one or more supplements to this
Prospectus ("Prospectus Supplement"), including the title,
aggregate principal amount, denominations, maturity, rate of
interest (if any, which may be fixed or variable) or method of
calculation thereof, and time of payment of any interest, the
coin or currency in which principal, premium and interest (if
any) will be payable, any terms for redemption or extension of
maturity at the option of the Company or the holder, any terms
for sinking fund payments, any conversion or exchange rights, any
listing on a securities exchange, the initial public offering
price and any other terms in connection with the offering and
sale of the Debt Securities. The Debt Securities will rank
equally with all other unsecured, unsubordinated indebtedness of
the Company. See "Description of Debt Securities."
_____________________
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 Debt Securities may be sold directly to purchasers or
through underwriters, dealers or agents. The Prospectus
Supplement will set forth the names of any underwriters, dealers
or agents involved in the sale of the Debt Securities, the
amounts, if any, to be purchased by underwriters, and the
compensation of such underwriters, dealers or agents. The net
proceeds to the Company from sales of Debt Securities will be set
forth in the Prospectus Supplement and will be the purchase price
of the Debt Securities less attributable issuance expenses,
including underwriters', dealers' or agents' compensation
arrangements. See "Plan of Distribution" for indemnification
arrangements for underwriters, dealers and agents.
_____________________
This Prospectus may not be used to consummate sales of Debt
Securities unless accompanied by a Prospectus Supplement.
_____________________
March 13, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, files reports, proxy
statements, and other information with the Securities and
Exchange Commission (the "Commission"). The reports, proxy
statements, and other information filed by the Company can be
inspected and copied at the Public Reference Room of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the public reference facilities
maintained by the Commission at Seven World Trade Center, Suite
1300, New York, New York 10048 and at Room 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of the materials can be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. Documents filed by the
Company can also be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005, on
which exchange certain of the Company's securities are listed.
This Prospectus constitutes a part of a Registration
Statement on Form S-3 (the "Registration Statement") filed by the
Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the securities
offered hereby. This Prospectus omits certain of the information
contained in the Registration Statement, as permitted by the
Commission's rules and regulations, and reference is hereby made
to the Registration Statement and to the exhibits relating
thereto for further information with respect to the Company and
the securities offered hereby. Any statements contained herein
concerning the provisions of any document are not necessarily
complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
_____________________
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates into this Prospectus by
reference its Annual Report on Form 10-K for the year ended
December 31, 1994 (the "Form 10-K").
All documents subsequently 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 made hereby, shall be deemed
incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of the filing of those 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 or in any subsequently
filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes that statement. Any
statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this
Prospectus.
Any person receiving a copy of this Prospectus may obtain,
without charge, upon written or oral request, a copy of any of
the documents incorporated by reference herein, except for the
exhibits to those documents (other than the exhibits expressly
incorporated by reference into the information that this
Prospectus incorporates). Written requests should be directed
to: Investor Relations, Valero Energy Corporation, P.O. Box 500,
San Antonio, Texas 78292-0500 (telephone 210-246-2000).
_____________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS, IF ANY,
MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON ANY EXCHANGES ON WHICH THE
SECURITIES ARE LISTED, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
<PAGE>
THE COMPANY
The Company was incorporated under the laws of the State of
Delaware in 1955 and became a publicly held corporation in 1979.
Its principal executive offices are located at 530 McCullough
Avenue, San Antonio, Texas 78215 and its telephone number is
(210) 246-2000.
Through subsidiaries, the Company engages in three principal
businesses: petroleum refining, natural gas operations and
processing of natural gas for the extraction of natural gas
liquids ("NGLs"). The Company's subsidiary, Valero Refining
Company, owns a specialized petroleum refinery (the "Refinery")
in Corpus Christi, Texas, and engages in petroleum refining and
marketing operations. The Refinery can produce over 150,000
barrels per day of refined products, with gasoline and
gasoline-related products comprising approximately 85% of the
Refinery's throughput.
Through Valero Natural Gas Company ("VNGC") and its
subsidiaries, the Company owns and operates natural gas pipeline
systems with approximately 8,000 miles of mainlines, lateral
lines and gathering lines principally serving Texas intrastate
markets. The Company also markets gas throughout the United
States and into Mexico and provides gas transportation services
to third parties. Through VNGC, the Company also owns and
operates 11 natural gas processing plants in Texas which extract
NGLs comprised of ethane, propane, butanes and natural gasoline.
The Company's plants process approximately 1.3 billion cubic feet
of gas per day.
VNGC's natural gas and NGL operations are conducted
primarily through Valero Natural Gas Partners, L.P. and its
subsidiaries (the "Natural Gas Partnership"). Effective May 31,
1994, the Company acquired through a merger (the "Merger") the
approximate 51% effective equity interest in the Natural Gas
Partnership previously owned by the public. As a result of the
Merger, the Company changed its method of accounting for its
investment in the Natural Gas Partnership from the equity method
to the full consolidation method as of May 31, 1994.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth for the periods indicated the
ratio of earnings to fixed charges for the Company. The ratio of
earnings to fixed charges is computed by dividing (i) the sum of
pretax income, amortization of previously capitalized interest,
distributions in excess of/(less than) equity in earnings of the
Natural Gas Partnership (prior to the Merger) and fixed charges
(excluding capitalized interest) by (ii) fixed charges. Fixed
charges consist of total interest, whether expensed or
capitalized, amortization of debt expense and one-third of rents,
which is deemed representative of the interest portion of rental
expense.
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1994 December 31, 1993 Year Ended December 31,
Pro Forma (1) Historical Pro Forma (1) Historical 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges. . . . . 1.35x 2.00x 1.62x 2.04x 3.36x 4.00x 5.75x 3.50x
</TABLE>
______________________________
<FN1>
(1) Assuming that the Company owned 100% of the Natural Gas
Partnership during the period indicated.
USE OF PROCEEDS
The Debt Securities may be offered by the Company from time
to time when the Company determines that market conditions are
favorable. Unless otherwise indicated in the applicable
Prospectus Supplement, the net proceeds from the sale of the Debt
Securities will be added to the Company's funds and used for
general corporate purposes, including the repayment of existing
indebtedness, financing of capital projects and additions to
working capital. The Company expects that it will raise
additional funds from time to time through equity or debt
financings, including borrowings under bank credit agreements.
DESCRIPTION OF THE DEBT SECURITIES
The following description of the Debt Securities sets 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 (the
"Offered Debt Securities") and the extent, if any, to which these
general provisions do not apply to the Offered Debt Securities
will be described in the Prospectus Supplement relating to the
Offered Debt Securities. The Offered Debt Securities may contain
any terms and provisions not inconsistent with the Indenture
(hereinafter defined).
The Debt Securities to which this Prospectus relates will be
issued only for consideration in the form of cash, and will be
issued under an Indenture, dated as of March 30, 1992, as
supplemented and amended by a First Supplemental Indenture (the
"First Supplemental Indenture") dated as of March 13, 1995 (as it
may be supplemented or amended from time to time, the
"Indenture"), between the Company and Bankers Trust Company, as
trustee (the "Trustee"). The Indenture is filed as an exhibit to
the Registration Statement. The following summary of certain
provisions of the Indenture do not purport to be complete and are
subject to and are qualified in their entirety by reference to
all the provisions of the Indenture, including its definitions of
certain capitalized terms used herein. Numerical references in
parentheses below are to sections in the Indenture.
General
The Company is primarily a holding company and the Debt
Securities will not be guaranteed by any of the Company's
subsidiaries. Thus, the ability of the Company to pay the
principal of and any premium and interest on the Debt Securities
is largely dependent upon the receipt by the Company of dividends
or other payments from its subsidiaries. None of the Company's
subsidiaries is prohibited by the Indenture from entering into
agreements limiting its ability to make distributions to the
Company. Furthermore, because the Company's subsidiary
corporations are incorporated in Delaware, they are subject to
the restrictions of Delaware law that permit a corporation to pay
dividends to its stockholders only out of its surplus or out of
its net profits for the current and/or preceding fiscal year.
The Company does not believe, however, that existing contractual
or statutory restrictions should reduce the level of dividends
and other payments that the Company is able to receive from its
subsidiaries below the level necessary for the Company to meet
all of its debt service obligations, including obligations with
respect to any series of Offered Debt Securities.
The rights of creditors of the Company upon its liquidation,
reorganization, or otherwise are necessarily subject to the prior
claims of lenders and other creditors of the Company's
subsidiaries, except to the extent that claims of the Company
itself as a creditor of any of its subsidiaries may be
recognized. As a result, the Debt Securities will be
structurally subordinated to any indebtedness of the Company's
subsidiaries. Except as described below, the Indenture does not
limit the amount of other indebtedness or securities that may be
issued by the Company or its subsidiaries.
The Indenture does not limit the amount of Debt Securities
that may be issued thereunder. Debt Securities may be issued
under the Indenture from time to time in one or more series up to
the aggregate principal amount that may be authorized by the
Company. All Debt Securities will be unsecured and will rank
pari passu with all other unsecured, unsubordinated indebtedness
of the Company. Unless otherwise specified in the Prospectus
Supplement, the principal and any premium and interest on the
Debt Securities will be payable in U.S. Dollars.
Reference is made to the Prospectus Supplement regarding the
particular series of Offered Debt Securities offered thereby for
the following terms: (i) the designation, aggregate principal
amount, and authorized denominations of the Offered Debt
Securities; (ii) the purchase price of the Offered Debt
Securities (expressed as a percentage of the principal amount
thereof); (iii) the date or dates on which the Offered Debt
Securities will mature; (iv) the rate or rates, if any (which may
be fixed or variable), at which the Offered Debt Securities will
bear interest or the method by which the rate or rates will be
determined; (v) the dates on which any interest will be payable
and the record dates for payment of interest; (vi) the coin or
currency in which payment of the principal of and any premium or
interest on the Offered Debt Securities will be payable; (vii)
the terms of any mandatory or optional redemption (including any
sinking fund) or any obligation of the Company to repurchase
Offered Debt Securities; (viii) the terms of any option of the
Company to extend the stated maturity of the Offered Debt
Securities; (ix) whether the Offered Debt Securities will be
issued in whole or in part in the form of one or more temporary
or permanent global Debt Securities ("Global Securities") and, if
so, the identity of any depositary for the Global Security or
Securities; and (x) any additional provisions or specific terms
not inconsistent with the Indenture applicable to the series of
Offered Debt Securities, including any additional events of
default or specific covenants with respect to the Offered Debt
Securities.
Debt Securities may be presented for exchange, and
registered Debt Securities may be presented for transfer, in the
manner prescribed in the Indenture, the Debt Securities and the
Prospectus Supplement. No service fee will be charged for any
registration of transfer or exchange of the Debt Securities, but
the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith
(Section 305).
Principal, premium and interest (if any) will be payable at
the office or agency of the Company designated for that purpose
in San Antonio, Texas (initially at the offices of the Company),
or in New York City (initially at the office of the Trustee).
Unless otherwise indicated in the Prospectus Supplement, the
Company may act as paying agent for payments of interest (other
than interest payable at the stated maturity of the Debt
Securities) on the Debt Securities in San Antonio, Texas.
Payments of interest (other than interest payable at the stated
maturity of the Debt Securities) may be made at the option of the
Company by check mailed to the registered holders. Upon written
notice to the Trustee on or before the record date for any
interest payment, the interest payment may be made by wire
transfer to an account designated by a registered holder of $1
million or more in aggregate principal amount of Debt Securities
of a series pursuant to arrangements satisfactory to the Trustee
and the Company. Interest, if any, will be payable on any
interest payment date to the persons in whose names the Debt
Securities are registered at the close of business on the record
date (Sections 305, 307 and 1202). Specific details regarding
the payment of principal and any premium and interest on any
series of Offered Debt Securities will be stated in the
Prospectus Supplement.
Unless otherwise indicated in the Prospectus Supplement
relating thereto, the Debt Securities will be issued only in
fully registered form, without coupons, in denominations of
$1,000 or any integral multiple thereof (Section 302). Some or
all of the Debt Securities may be issued as discounted Debt
Securities (bearing no interest or interest at a rate which at
the time of issuance is below market rates) to be sold at a
substantial discount below their stated principal amount.
Federal income tax consequences and other special considerations
applicable to discounted Debt Securities will be described in any
Prospectus Supplement relating thereto.
Neither the Indenture nor any Debt Securities will contain
any provision permitting the holders of the Debt Securities to
require prepayment in the event of a change in the management or
control of the Company, or in the event the Company enters into
one or more highly leveraged transactions, nor are any such
events deemed to be events of default under the terms of the
Indenture or the Debt Securities.
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 located in the United
States (the "Depositary"). The Depositary and the specific
depositary arrangements 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.
Unless otherwise specified in an applicable Prospectus
Supplement, Debt Securities that are to be represented by a
Global Security to be deposited with or on behalf of the
Depositary will be represented by a Global Security registered in
the name of the Depositary or its nominee. Upon the issuance of
a Global Security in registered form, the Depositary for the
Global Security will credit, on its book-entry registration and
transfer system, the respective principal amounts of the Debt
Securities represented by the Global Security to the accounts of
institutions that have accounts with the Depositary or its
nominee ("participants"). The accounts to be credited will be
designated by the underwriters or agents of the Debt Securities.
Ownership of beneficial interests in the Global Securities will
be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests by
participants in the Global Securities will be shown on, and the
transfer of that ownership interest will be effected only
through, records maintained by the Depositary or its nominee for
the Global Security. Ownership of beneficial interests in Global
Securities by persons that hold through participants will be
shown on, and the transfer of that ownership interest within such
participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of
the securities in definitive form. Such limits and laws may
impair the ability to transfer beneficial interests in a Global
Security.
So long as the Depositary for a Global Security in
registered form, or its nominee, is the registered owner of the
Global Security, the Depositary or nominee, as the case may be,
will be considered the sole owner or holder of the Debt
Securities represented by the Global Security for all purposes
under the Indenture. Except as set forth below, owners of
beneficial interests in the Global Security will not be entitled
to have Debt Securities of the series represented by the 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.
Payment of principal of, premium and interest (if any) 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 the Debt Securities. Neither the
Company, the Trustee, any paying agent, nor the security
registrar for the 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 the 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 represented by a Global Security, upon receipt of any
payment of principal, premium, or interest in respect of a
permanent Global Security, will credit immediately the
participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of
the Global Security as shown on the records of the Depositary.
The Company also expects that payments by participants to owners
of beneficial interests in the Global Security will be governed
by standing instructions and customary practices, as is now the
customary practice with respect to securities held for the
accounts of customers in bearer form or registered in "street
name," and will be the responsibility of the participants.
However, the Company has no control over the practices of the
Depositary or the participants and there can be no assurance that
these practices will not change.
A Global Security may be transferred only as a whole by the
Depositary for the Global Security to a nominee of such
Depositary, or by a nominee of such Depositary to the Depositary
or another nominee of the Depositary, or by the Depositary or any
nominee to a successor of the Depositary or a nominee of the
successor. If a Depositary for Debt Securities of a series is
unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by the Company within 90 days, the
Company will issue Debt Securities in definitive registered form
in exchange for the Global Security or Securities representing
the Debt Securities. In addition, the Company may at any time
and in its sole discretion determine not to have any Debt
Securities in registered form represented by one or more Global
Securities and, in such event, will issue Debt Securities in
definitive form in exchange for the Global Security or Securities
representing the Debt Securities, whereupon, 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 the Global Security equal in principal
amount to its beneficial interest and to have the Debt Securities
registered in its name. (Section 304).
Certain Covenants of the Company
Limitations on Mortgages. The Indenture provides that
neither the Company nor any Subsidiary may create or assume any
mortgage, lien, pledge, security interest or other encumbrance
("Mortgage") upon any of its assets or upon any stock or
indebtedness of any Subsidiary, whether now owned or hereafter
acquired (all property and assets of whatever kind or description
being referred to herein as "property"), without effectively
providing that all Debt Securities then outstanding and
thereafter created under the Indenture (together with, if the
Company so determines, any other indebtedness or obligation then
existing and any other indebtedness or obligation thereafter
created ranking equally with the Debt Securities) will be secured
equally and ratably with (or prior to) any Mortgage as long as
such Mortgage is so secured. The foregoing restriction does not
apply to, among others:
(i) Mortgages securing all or part of the purchase price of
any property (or to refinance all or part of the purchase price
within 12 months of the acquisition of the property) or to secure
a loan made to enable the Company or a Subsidiary to acquire the
property described in the Mortgage;
(ii) Mortgages existing on any property at the time of its
acquisition by the Company or a Subsidiary, whether or not
assumed by the Company or a Subsidiary; Mortgages on property
acquired or constructed by the Company or a Subsidiary and
created not later than 12 months after the acquisition or
completion of construction or commencement of full operation of
the property, whichever is later; and Mortgages on any property
with respect to which the Company or a Subsidiary has made
additions, substantial repairs, alterations or improvements and
created not later than 12 months after completion thereof;
provided, that in the case of any Mortgage described in clause
(i) above or this clause (ii), the principal amount of the
indebtedness secured by such Mortgage, together with all other
indebtedness secured by a Mortgage on the property, does not
exceed the purchase price of the property acquired, the cost of
the property constructed or the cost of additions, repairs,
alterations or improvements, and, except as described in clause
(xi) below, such Mortgage does not extend to or cover any
property other than the property acquired, constructed, repaired,
altered or improved;
(iii) Mortgages created or assumed by the Company or a
Subsidiary on any contract for the sale of any product or service
or any rights thereunder or any proceeds therefrom, including
accounts and other receivables, related to the operation or use
of any property acquired or constructed by the Company or a
Subsidiary and created not later than 12 months after the
acquisition, or completion of construction, or commencement of
full operation of the property, whichever is later;
(iv) Mortgages existing on any property of an entity at the
time it is acquired by the Company or a Subsidiary, whether
through merger, consolidation, purchase of assets or otherwise;
provided that, except as described in clause (xi) below, the
Mortgage does not extend to any other property of the Company or
its Subsidiaries;
(v) Mortgages incidental to the conduct of the business of
the Company or its Subsidiaries or the ownership of the property
of the Company and its Subsidiaries (including warehousemen's and
attorneys' liens, operators' liens, brokers' liens, landlords'
liens and liens granted in favor of partnerships or joint
ventures or the participants therein) that were not incurred in
connection with the borrowing of money (or as payment for
property) or the obtaining of advances or credit (other than
trade credit, including margin accounts with brokerage firms),
and that do not materially interfere with the conduct of the
business of the Company and of its Subsidiaries taken as a whole;
(vi) Mortgages on property of any Subsidiary to secure
obligations of the Subsidiary to the Company or to another
Subsidiary; provided that the obligation secured thereby is not
thereafter assigned, sold or otherwise transferred to a Person
other than the Company or a Subsidiary unless otherwise permitted
under the Indenture;
(vii) Mortgages on current assets of the Company or a
Subsidiary created to secure indebtedness and letter of credit
reimbursement obligations incurred in connection with the
extension of working capital financing;
(viii) Mortgages existing on any property of the Company
or any Subsidiary at the date of the Indenture;
(ix) Mortgages incurred in connection with the borrowing of
funds if, within 120 days following the date of such borrowing,
the funds are used to repay indebtedness in the same (or greater)
principal amount secured by other Mortgages (other than Mortgages
referred to in clause (vii) above) on property of the Company or
any Subsidiary having a fair market value at least equal to the
fair market value of the property that secures the new Mortgage;
(x) Mortgages incurred within 90 days (or any longer
period, not in excess of one year, as permitted by law) after
acquisition of the property subject to the Mortgage arising
solely in connection with certain transfers of tax benefits;
(xi) Mortgages on property constituting substitutions or
replacements for or accessions to property which is encumbered
pursuant to after-acquired property provisions of other permitted
Mortgages; and
(xii) Mortgages on any property of the Natural Gas
Partnership or any Subsidiary thereof existing as of the date of
the First Supplemental Indenture (or property constituting
substitutions or replacements for, or accessions to, property
that is encumbered pursuant to after-acquired property provisions
of the agreements in accordance with which such Mortgages were
granted);
(xiii) renewals, refundings or extensions of any Mortgage
referred to in clauses (i), (ii), (iii), (iv), (viii), (ix), (x),
(xi) or (xii) above; provided that the principal amount of the
indebtedness secured is not increased and the Mortgage is
limited, except as provided in clause (xi) above, to the same
property that secured the prior Mortgage (Section 1205).
Limitations on Sale and Leaseback Transactions. The
Indenture provides that neither the Company nor any Subsidiary
may enter into any arrangement with any Person (other than the
Company or a Subsidiary) providing for the leasing to the Company
or a Subsidiary for a period of more than three years of any
asset that has been or is to be sold or transferred by the
Company or the Subsidiary to such Person or to any other Person
(other than the Company or a Subsidiary), and with respect to
which the funds have been or are to be advanced by the Person on
the security of the leased property (a "Sale and Leaseback
Transaction"), unless either (i) the Company or such Subsidiary
would be entitled, pursuant to the provisions described under
"Limitations on Mortgages" above, to incur debt secured by a
Mortgage on the asset to be leased without equally and ratably
securing the Debt Securities, or (ii) the Company during or
immediately after the expiration of 90 days after the effective
date of the transaction applies to the voluntary retirement of
its funded debt an amount equal to the greater of the net
proceeds of the sale of the property leased in the transaction or
the fair value of the leased property at the time the transaction
was entered into, in each case net of the principal amount of all
Debt Securities delivered for retirement and cancellation under
the Indenture and the principal amount of other funded debt
voluntarily retired by the Company during such 90-day period
(Section 1206).
Exempted Transactions. Notwithstanding the foregoing, the
Company and any one or more Subsidiaries may, without securing
the Debt Securities, issue, assume, or guarantee debt secured by
Mortgages and enter into Sale and Leaseback Transactions that
would otherwise be subject to the foregoing restrictions in an
aggregate principal amount which, together with (i) all other
such debt of the Company and its Subsidiaries secured by
Mortgages that would otherwise be subject to the restrictions on
the creation of Mortgages described under "Limitations on
Mortgages" above (not including Mortgages permitted to be created
under "Limitations on Mortgages" above) and (ii) the aggregate
Attributable Debt (as defined below) in respect of Sale and
Leaseback Transactions (not including those permitted as
described under "Limitations on Sale and Leaseback Transactions"
above), does not exceed, at the time of incurrence thereof, 10%
of Consolidated Net Tangible Assets (as defined below) of the
Company and its consolidated Subsidiaries (Section 1207).
Certain Definitions. The term "Consolidated Net Tangible
Assets" at any date means the total assets shown on a
consolidated balance sheet of the Company and its Subsidiaries,
prepared in accordance with generally accepted accounting
principles, less (i) all current liabilities (other than current
maturities of long-term debt and notes payable), and (ii)
goodwill and other intangible assets included on such balance
sheet.
The term "Attributable Debt" means (a) for any capitalized
lease obligations, the debt carried on the balance sheet in
accordance with generally accepted accounting principles, and (b)
for any operating leases, the total net amount of rent required
to be paid under such leases during the remaining term thereof
discounted at the rate of 1% per annum plus the weighted average
yield to maturity of all Debt Securities issued and outstanding
under the Indenture, compounded semi-annually.
The term "Subsidiary" means, with respect to any Person, (i)
a corporation of which at least a majority of the outstanding
stock having ordinary voting rights is owned or controlled
directly or indirectly by that Person or (ii) any other Person in
which the Person has directly or indirectly a greater than 50%
equity interest. Notwithstanding the foregoing, neither the
Natural Gas Partnership nor any Subsidiary thereof that may
otherwise be deemed a "Subsidiary" pursuant to the provisions of
the foregoing sentence shall be deemed a "Subsidiary" for any
purposes of the Indenture for any period prior to the date of the
First Supplemental Indenture to the Indenture.
Consolidation, Merger, Conveyance of Assets. The Indenture
provides that the Company may not consolidate with or merge into
any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, unless (i) the
Person formed by the consolidation or into which the Company is
merged or the Person that acquires such assets is a corporation
organized under the laws of the United States or any State
thereof and such corporation expressly assumes the Company's
obligations under the Indenture and the Debt Securities issued
thereunder, (ii) immediately after giving effect to the
transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of
Default, has happened and is continuing and (iii) certain other
conditions are met (Section 1001).
Events of Default
The following are "Events of Default" under the Indenture
with respect to Debt Securities of any series: (i) failure to pay
principal of or any premium on any Debt Security of that series
when due and payable; (ii) failure to pay any interest on any
Debt Security of that series when due and payable, and the
continuation of the default for 30 days; (iii) failure to deposit
any sinking fund payment or analogous obligation in respect of
any Debt Security of that series when due; (iv) failure to
perform any other covenant, or breach of any warranty, of the
Company in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of a series of
Debt Securities other than such series), continued for 60 days
after written notice is given or received as provided in the
Indenture; (v) certain events of bankruptcy, insolvency, or
reorganization; (vi) failure to pay at final maturity or upon the
declaration of acceleration of payment of indebtedness for
borrowed money of the Company or any Subsidiary in excess of $10
million (whether the indebtedness now exists or is hereafter
created) as a result of the occurrence of one or more events of
default as defined in any mortgages, indentures, or instruments
under which such indebtedness may have been issued or by which
the indebtedness may have been secured, and the failure to pay is
not cured or the acceleration is not rescinded, annulled, or
cured, in any case prior to the expiration of 30 days after the
date the failure to pay or acceleration occurred; and (vii) any
other Event of Default provided with respect to Debt Securities
of that series (Section 501). If any Event of Default (except an
Event of Default described in clause (v) above) with respect to
Debt Securities of any series at any time outstanding occurs and
is continuing, either the Trustee or the holders of at least 25%
in aggregate principal amount of the outstanding Debt Securities
of that series may declare the principal amount (or, if the Debt
Securities of that series are discounted Debt Securities, such
portion of the principal amount as may be specified in the terms
of that series) of all the Debt Securities of that series to be
due and payable immediately. If an Event of Default with respect
to Debt Securities of any series at any time outstanding
described in clause (v) above occurs and is continuing, then the
principal amount of all the Debt Securities of such series will
be immediately due and payable without any act on the part of the
Trustee or any holder. At any time after a declaration or
occurrence of acceleration with respect to Debt Securities of any
series has been made, but before a judgment or decree based on
acceleration has been obtained, the holders of a majority in
aggregate principal amount of outstanding Debt Securities of that
series may, under certain circumstances, rescind and annul the
acceleration (Section 502).
The Indenture provides that, subject to the duty of the
Trustee during the continuance of an Event of Default to act
with the required standard of care, the Trustee will be under
no obligation to exercise any of its rights or powers under
the Indenture at the request or direction of any of the holders
unless the holders have offered to the Trustee reasonable
indemnity (Section 603). Subject to such provisions for the
indemnification of the Trustee, the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of
any series will have the right to direct the time, method, and
place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Debt Securities of that series
(Section 512). The Company is required to furnish the Trustee
annually with a statement of the performance by the Company of
certain of its obligations under the Indenture and of any
default in such performance (Section 1208).
Modification and Waiver
The Indenture provides that the Company and the Trustee may
enter into supplemental indentures (which conform to the
provisions of the Trust Indenture Act of 1939) without the
consent of the holders in order to, among other things: (i)
secure any Debt Securities; (ii) evidence the assumption by a
successor Person of the obligations of the Company; (iii) add
further covenants for the protection of the holders or additional
events of default; (iv) cure any ambiguity or correct any
inconsistency in the Indenture, so long as such action will not
adversely affect the interests of the holders; (v) establish the
form or terms of Debt Securities of any series; and (vi) evidence
the acceptance of appointment by a successor trustee (Section
1101).
Modifications of and amendments to the Indenture may also be
made by the Company and the Trustee with the consent of the
holders of not less than a majority in aggregate principal amount
of the outstanding Debt Securities of each series affected by the
modification or amendment; provided that no such modification or
amendment may, without the consent of the holder of each
outstanding Debt Security affected thereby, (i) change the stated
maturity of the principal of or any installment of interest on
any Debt Security, (ii) reduce the principal amount of, or any
premium or interest on, any Debt Security, (iii) reduce the
amount of principal of discounted Debt Securities payable upon
acceleration of the stated maturity thereof, (iv) change the
currency of payment for any Debt Security, (v) impair the right
to institute suit for the enforcement of any payment with respect
to any Debt Security, or (vi) reduce the percentage in principal
amount of outstanding Debt Securities of any series, the consent
of whose holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of
the Indenture or for waiver of certain defaults (Section 1102).
The holders of a majority in aggregate principal amount of
the outstanding Debt Securities of each series, on behalf of all
holders of Debt Securities of that series, may waive any past
default under the Indenture with respect to Debt Securities of
that series, except a default in the payment of principal,
premium or interest, or in the payment of any sinking fund
installment, or a covenant or provision that cannot be modified
or amended without the consent of the holders of each outstanding
Debt Security affected thereby (Section 513).
Defeasance
The Indenture provides that the Company, at its option, (i)
will be discharged from any and all obligations in respect of any
series of Debt Securities except for certain obligations to
register the transfer or exchange of the Debt Securities; replace
stolen, lost, or mutilated Debt Securities; maintain paying
agencies; and hold money for payment in trust, or (ii) will not
be subject to provisions of the Indenture concerning limitations
upon Mortgages, Sale and Leaseback Transactions and
consolidation, merger, and sale of assets, or (iii) may obtain
the benefits described in both clauses (i) and (ii), in each case
if the Company deposits with the Trustee, in trust, money, or
U.S. Government Obligations (as defined in the Indenture) that
through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount
sufficient to pay all principal, premium and interest on the Debt
Securities of such series on the dates the payments are due in
accordance with the terms of the Debt Securities. To exercise
this option, the Company is required, among other things, to
deliver to the Trustee an opinion of counsel to the effect that
(a) the deposit and related defeasance would not cause the
holders of that series of Debt Securities to recognize income,
gain, or loss for United States federal income tax purposes and
(b) with respect to any such series of Debt Securities then
listed on any national securities exchange, if any, the Debt
Securities would not be delisted from such exchange as a result
of the exercise of such option (Article Four).
Notices
Notices to holders will be given by mail to the addresses of
such holders as they appear in the Security Register (Sections
105 and 703).
Governing Law
The Indenture and the Debt Securities will be governed by
and construed in accordance with the laws of the State of New
York (Section 111).
Concerning the Trustee
Bankers Trust Company is Trustee under the Indenture.
Bankers Trust Company is a party to and serves as agent under
bank loan agreements with the Company and certain of its
Subsidiaries. Bankers Trust Company also serves as one of the
depositaries of funds of, and has other financial relationships
with, the Company and its Subsidiaries.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in the following
ways: (i) through agents, (ii) through underwriters, (iii)
through dealers and (iv) directly to purchasers. Sales of Debt
Securities may be made in or outside the United States. Any
sales of Debt Securities outside the United States will comply
with all applicable laws of the jurisdiction in which any sale of
Debt Securities is made.
The Prospectus Supplement with respect to the Debt
Securities will set forth the terms of the offering of the Debt
Securities, including the name or names of any underwriters,
dealers, or agents, the purchase price of the Debt Securities and
the proceeds to the Company from such sale, any delayed delivery
arrangements, any underwriting discounts and other items
constituting underwriters' compensation, the initial public
offering price, any discounts or concessions allowed or reallowed
or paid to dealers, and any securities exchanges on which the
Debt Securities may be listed. No assurances can be given that
there will be a market for the Debt Securities or, if a market is
created, that it will continue.
If underwriters are used in the sale, the Debt Securities
will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The
Debt Securities may be offered to the public either through
underwriting syndicates represented by one or more managing
underwriters or directly by one or more firms acting as
underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Debt Securities will be named
in the Prospectus Supplement relating to such offering, and if an
underwriting syndicate is used, the managing underwriter or
underwriters will be set forth on the cover of the Prospectus
Supplement. Unless otherwise set forth in the Prospectus
Supplement, the obligations of the underwriters or agents to
purchase the Debt Securities will be subject to conditions
precedent and the underwriters will be obligated to purchase all
the Debt Securities if any are purchased. The initial public
offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If dealers are used in the sale of Debt Securities with
respect to which this Prospectus is delivered, the Company will
sell the Debt Securities to the dealers as principals. The
dealers may then resell the Debt Securities to the public at
varying prices to be determined by the dealers at the time of
resale. The names of the dealers and the terms of the
transaction will be set forth in the Prospectus Supplement.
The Debt Securities may be sold directly by the Company or
through agents designated by the Company from time to time at
fixed prices, which may be changed, or at varying prices
determined at the time of sale. Any agent involved in the offer
or sale of the Debt Securities with respect to which this
Prospectus is delivered will be named, and any commissions
payable by the Company to the agent will be set forth, in the
Prospectus Supplement relating thereto. Any such agent will act
on a best efforts basis for the period of its appointment.
In connection with the sale of the Debt Securities,
underwriters or agents may receive compensation from the Company
or from purchasers of Debt Securities for whom they may act as
agents in the form of discounts, concessions, or commissions.
Underwriters, agents, and dealers participating in the
distribution of the Debt Securities may be deemed to be
underwriters, and any discounts or commissions received by them
from the Company and any profit on the resale of the Debt
Securities by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
Debt Securities may be sold directly by the Company to
institutional investors or others, who may be deemed to be
underwriters within the meaning of the Securities Act with
respect to any resale thereof. The terms of any sales to
institutional investors will be described in the Prospectus
Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company
will authorize agents, underwriters, or dealers to solicit offers
from certain types of institutions to purchase Debt Securities
from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the
future. These contracts will be subject only to those conditions
set forth in the Prospectus Supplement, and the Prospectus
Supplement will set forth the commission payable for solicitation
of the contracts.
Agents, dealers, and underwriters may be entitled under
agreements with the Company to indemnification by the Company
against certain civil liabilities, including liabilities under
the Securities Act, or to contribution with respect to payments
that such agents, dealers, or underwriters may be required to
make with respect thereto. Agents, dealers, and underwriters may
be customers of, engage in transactions with, or perform services
for the Company in the ordinary course of business.
LEGAL OPINIONS
The validity of the Debt Securities will be passed upon for
the Company by Stan L. McLelland, Esq., Executive Vice President
and General Counsel of the Company. Mr. McLelland is an employee
of the Company and at February 28, 1995, beneficially owned
approximately 108,000 shares of the Company's Common Stock
(including shares held under employee benefit plans) and held
options under employee stock option plans of the Company to
purchase approximately 119,000 additional shares of the Company's
Common Stock. None of such shares or options were granted in
connection with the offering of the Debt Securities. Fulbright &
Jaworski L.L.P., Dallas, Texas, will render an opinion to the
Company regarding certain tax matters in connection with the
issuance of the Debt Securities. Certain legal matters in
connection with the Debt Securities will be passed upon for
underwriters, dealers or agents by Baker & Botts, L.L.P.,
Houston, Texas. Baker & Botts, L.L.P. also renders legal
services to the Company from time to time.
EXPERTS
The audited consolidated financial statements and schedules
of the Company contained in the Form 10-K incorporated by
reference herein have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing
in giving said reports.
The reports of independent auditors relating to the audited
consolidated financial statements and schedules of the Company in
any documents filed pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior
to the termination of the offering will, to the extent covered by
consents thereto filed with the Commission, be incorporated by
reference in reliance upon the authority of such independent
auditors as experts in accounting and auditing.
<PAGE>
No dealer, salesman or other person has been authorized to
give any information or to make any representations other than
those contained in this Prospectus Supplement and Prospectus or
any Pricing Supplement in connection with the offer made by this
Prospectus Supplement and Prospectus and, if given or made, such
information or representations must not be relied upon as having
been authorized. This Prospectus Supplement and Prospectus and
any Pricing Supplement do not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the
securities described in this Prospectus Supplement or an offer to
sell or the solicitation of an offer to buy such securities in
any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus Supplement
and Prospectus or any Pricing Supplement nor any sale made
hereunder or thereunder shall under any circumstances create any
implication that the information contained herein or therein is
correct as of any time subsequent to the date of such
information.
_______________________
TABLE OF CONTENTS
Prospectus Supplement
Page
Use of Proceeds. . . . . . . . . . . . . . . . . . . . S-3
Description of Notes . . . . . . . . . . . . . . . . . S-3
Taxation . . . . . . . . . . . . . . . . . . . . . . . S-17
Plan of Distribution of Notes. . . . . . . . . . . . . S-23
Prospectus
Available Information. . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . . . . . . 2
The Company. . . . . . . . . . . . . . . . . . . . . . 3
Ratio of Earnings to Fixed Charges . . . . . . . . . . 3
Use of Proceeds. . . . . . . . . . . . . . . . . . . . 4
Description of the Debt Securities . . . . . . . . . . 4
Plan of Distribution . . . . . . . . . . . . . . . . . 11
Legal Opinions . . . . . . . . . . . . . . . . . . . . 13
Experts. . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
$250,000,000
[Logo] VALERO
ENERGY CORPORATION
Medium-Term Notes
____________________
PROSPECTUS and
PROSPECTUS SUPPLEMENT
March 13, 1995
____________________
Lehman Brothers
Salomon Brothers Inc
BT Securities Corporation
