<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-3766
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 1, 1996)
$750,000,000
COX COMMUNICATIONS, INC.
MEDIUM-TERM NOTES
---------------------
Due More Than Nine Months From Date of Issue
---------------------
Cox Communications, Inc. (the "Company") may offer from time to time its
Medium-Term Notes, which are issuable in one or more series. The Medium-Term
Notes offered by this Prospectus Supplement are offered in the United States at
an aggregate initial public offering price of up to U.S. $750,000,000, or the
equivalent thereof in other currencies, including composite currencies such as
the European Currency Unit (the "Specified Currency"). See "Important Currency
Exchange Information." Such aggregate offering price is subject to reduction as
a result of the sale by the Company of certain other Debt Securities. See "Plan
of Distribution." The Interest rate on each Note will be either a fixed rate
established by the Company at the date of issue of such Note, which may be zero
in the case of certain Original Issue Discount Notes, or a floating rate as set
forth therein and specified in the applicable Pricing Supplement. A Fixed Rate
Note may pay a level amount in respect of both interest and principal amortized
over the life of the Note (an "Amortizing Note").
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Fixed Rate Note is payable each December 15 and June 15 and at maturity or
upon earlier redemption or repayment. Interest on each Floating Rate Note is
payable on the date set forth herein and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Amortizing
Notes will pay principal and interest semiannually each December 15 and June 15,
or quarterly each December 15, March 15, June 15 and September 15, and at
maturity or upon earlier redemption or repayment. Each Note will mature on any
day more than nine months from the date of issue, as set forth in the applicable
Pricing Supplement. See "Description of Notes." Unless otherwise specified in
the applicable Pricing Supplement, the Notes may not be redeemed by the Company
prior to maturity and will be issued in fully registered form in denominations
of $1,000 (or, in the case of Notes not denominated in U.S. dollars, the
equivalent thereof in the Specified Currency, rounded to the nearest 1,000 units
of the Specified Currency) or any amount in excess thereof which is an integral
multiple of $1,000 (or, in the case of Notes not denominated in U.S. dollars,
1,000 units of the Specified Currency). Any terms relating to Notes being
denominated in foreign currencies or composite currencies will be as set forth
in the applicable Pricing Supplement. Each Note will be represented either by a
Global Security registered in the name of a nominee of The Depository Trust
Company, as Depositary (a "Global Note"), or by a certificate issued in
definitive form (a "Definitive Note"), as set forth in the applicable Pricing
Supplement. Interests in Global Securities representing Global Notes will be
shown on, and transfer thereof will be affected only through records maintained
by the Depositary (with respect to participants' interests) and its
participants. Global Notes will not be issuable as Definitive Notes except under
the circumstances described in the Prospectus.
---------------------
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 SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
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<S> <C> <C> <C>
Per Note.......... 100.000% .125% - 750% 99.875% - 99.250%
Total(4).......... $750,000,000 $937,500 - $5,625,000 $749,062,500 - $744,375,000
</TABLE>
- ---------------
(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.
(2) The Commission payable to an Agent for each Note sold through such Agent
shall range from .125% to .750% of the principal amount of such Note,
provided, however, that commissions with respect to Notes maturing in thirty
years or greater will be negotiated. The Company may also sell Notes to an
Agent, as principal at negotiated discounts, for resale to investors and
other purchasers.
(3) Before deducting expenses payable by the Company estimated at $658,621.
(4) Or the equivalent thereof in other currencies including composite
currencies.
---------------------
Offers to purchase the Notes are being solicited from time to time by Morgan
Stanley & Co. Incorporated, Deutsche Morgan Grenfell/C.J. Lawrence Inc., Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and NationsBanc
Capital Markets, Inc. (individually, an "Agent" and collectively, the "Agents"),
on behalf of the Company. The Agents have agreed to use their reasonable best
efforts to solicit purchases of such Notes. The Company may also sell Notes to
an Agent acting as principal for its own account or otherwise, to be determined
by such Agent. No termination date for the offering of the Notes has been
established. The Company or an Agent may reject any order 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."
---------------------
MORGAN STANLEY & CO.
Incorporated
DEUTSCHE MORGAN GRENFELL
MERRILL LYNCH & CO.
NATIONSBANC CAPITAL MARKETS, INC.
May 10, 1996
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE AGENTS. THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF.
---------------------
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in U.S. dollars, and payments
of principal, premium, if any, and interest on the Notes will also be made in
U.S. dollars, unless the applicable Pricing Supplement provides that purchasers
are instead required to pay for the Notes in a Specified Currency, and/or that
payments of principal, premium, if any, and interest on such Notes will be made
in a Specified Currency. Currently, there are limited facilities in the United
States for the conversion of U.S. dollars into foreign currencies and vice
versa. In addition, most banks do not currently offer non-U.S. dollar
denominated checking or savings account facilities in the United States.
Accordingly, unless otherwise specified in a Pricing Supplement or unless
alternative arrangements are made, payment of principal, premium, if any, and
interest on Notes in a Specified Currency other than U.S. dollars will be made
to an account at a bank outside the United States. See "Description of Notes"
and "Foreign Currency Risks."
If the applicable Pricing Supplement provides for payments of principal of
and interest on a non-U.S. dollar denominated Note to be made in U.S. dollars or
for payments of principal of and interest on a U.S. dollar denominated Note to
be made in a Specified Currency other than U.S. dollars, the conversion of the
Specified Currency into U.S. dollars or U.S. dollars into the Specified
Currency, as the case may be, will be handled by the Exchange Rate Agent
identified in the Pricing Supplement (as defined below). Any Agent may act, from
time to time, as Exchange Rate Agent. The costs of such conversion will be borne
by the holder of a Note through deductions from such payments.
Reference herein to "U.S. dollars" or "U.S. $" or "$" are to the currency
of the United States of America.
---------------------
IN CONNECTION WITH THIS OFFERING, UNDERWRITERS, IF ANY, MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OFFERED
SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZATION, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes................. S-3
Foreign Currency Risks............... S-17
Certain U.S. Federal Income Tax
Consequences....................... S-18
Plan of Distribution................. S-26
Validity of Notes.................... S-26
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS
Available Information................ 2
Documents Incorporated by
Reference.......................... 3
The Company.......................... 4
Use of Proceeds...................... 4
Ratio of Earnings to Fixed Charges... 4
Description of the Debt Securities... 5
Plan of Distribution................. 14
Legal Matters........................ 15
Experts.............................. 15
</TABLE>
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DESCRIPTION OF NOTES
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 (a "Pricing Supplement") will
be described therein. The terms and conditions set forth in "Description of
Notes" will apply to each Note unless otherwise specified in the applicable
Pricing Supplement and in such Note.
If any Note is not to be denominated in U.S. dollars, the applicable
Pricing Supplement will specify the currency or currencies, including composite
currencies such as the European Currency Unit ("ECU"), in which the principal,
premium, if any, and interest, if any, with respect to such Note are to be paid,
along with any other terms relating to the non-U.S. dollar denomination,
including exchange rates for the Specified Currency as against the U.S. dollar
at selected times during the last five years, and any exchange controls
affecting such Specified Currency. See "Foreign Currency Risks."
GENERAL
The Notes will be issued under the Indenture dated as of June 27, 1995 (the
"Indenture") between the Company and The Bank of New York, as trustee (the
"Trustee"). The Notes issued under the Indenture will constitute one or more
series under such Indenture. The Notes will rank pari passu with all other
unsecured and unsubordinated indebtedness of the Company. The Notes may be
issued from time to time in an aggregate principal amount of up to $750,000,000
or the equivalent thereof in one or more foreign or composite currencies,
subject to reduction as a result of the sale by the Company of other Debt
Securities referred to in the accompanying Prospectus. For the purpose of this
Prospectus Supplement, (i) the principal amount of any Original Issue Discount
Note (as defined below) means the Issue Price (as defined below) of such Note
and (ii) the principal amount of any Note issued in a foreign currency or
composite currency means the U.S. dollar equivalent on the date of issue of the
Issue Price of such Note.
The Notes will mature on any day more than nine months from the date of
issue, as set forth in the applicable Pricing Supplement. Except as may be
provided in the applicable Pricing Supplement, the Notes will be issued only in
fully registered form. Unless otherwise provided in the applicable Pricing
Supplement, Notes will be denominated in Authorized Denominations (as defined
below).
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a Global Note or a Definitive Note. Except as set
forth in the Prospectus under "Description of Debt Securities -- Book-Entry Debt
Securities," Global Notes will not be issuable as Definitive Notes. The laws of
some states may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to own, transfer or pledge beneficial interests in Global
Securities. See "Book-Entry System" below.
The Notes may be presented for payment of principal and interest, transfer
of the Notes will be registrable and the Notes will be exchangeable at the
agency in The City of New York, maintained by the Company for such purpose;
provided that Global Notes will be exchangeable only in the manner and to the
extent set forth in the Prospectus under "Description of Debt
Securities -- Book-Entry Debt Securities." On the date hereof, the agent for the
payment, transfer and exchange of the Notes (the "Paying Agent") is The Bank of
New York, acting through its corporate trust office at 101 Barclay Street, Floor
21 West, New York, New York 10286.
The applicable Pricing Supplement will specify the price (the "Issue
Price") of each Note to be sold pursuant thereto (unless such Note is to be sold
at 100% of its principal amount), the interest rate or interest rate formula,
maturity, currency or composite currency and principal amount and any other
terms on which each Note will be issued.
S-3
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As used herein, the following terms shall have the meanings set forth
below:
"Authorized Denominations" means, unless otherwise provided in the
applicable Pricing Supplement, (i) with respect to Notes denominated in
U.S. dollars, U.S. $1,000 or any amount in excess thereof which is an
integral multiple of U.S. $1,000 and (ii) with respect to Notes denominated
in foreign or composite currencies, the equivalent of $1,000 (rounded to an
integral multiple of 1,000 units of such Specified Currency), or any amount
in excess thereof which is an integral multiple of 1,000 units of such
Specified Currency, as determined by reference to the noon dollar buying
rate in New York City for cable transfers of such Specified Currency
published by the Federal Reserve Bank of New York (the "Market Exchange
Rate") on the Business Day (as defined below) immediately preceding the
date of issuance; provided, however, that in the case of ECU's, the Market
Exchange Rate shall be the rate of exchange determined by the Commission of
the European Communities (or any successor thereto) as published in the
Official Journal of the European Communities, or any successor publication,
on the Business Day immediately preceding the date of issuance.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are
authorized or required by law, regulation or executive order to close in
The City of New York and (i) with respect to LIBOR Notes (as defined
below), is also a London Banking Day, (ii) with respect to Notes
denominated in a Specified Currency other than U.S. dollars, Australian
dollars or ECUs, in the principal financial center of the country of the
Specified Currency, (iii) with respect to Notes denominated in Australian
dollars, in Sydney and (iv) with respect to Notes denominated in ECUs, that
is not a non-ECU clearing day, as determined by the ECU Banking Association
in Paris.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
"London Banking Day" means any day on which dealings in deposits in
the Index Currency are transacted in the London interbank market.
"Original Issue Discount Note" means any Note having an Issue Price
less than its stated redemption price at maturity. See "Certain U.S.
Federal Income Tax Consequences -- Original Issue Discount -- General,"
below.
The "Record Date" with respect to any Interest Payment Date shall be
the date 15 calendar days prior to such Interest Payment Date, whether or
not such date shall be a Business Day.
PAYMENT CURRENCY
If the applicable Pricing Supplement provides for payments of interest and
principal on a non-U.S. dollar denominated Note to be made, at the option of the
holder of such Note, in U.S. dollars, conversion of the Specified Currency into
U.S. dollars will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to the holders of Notes and at which the applicable
dealer commits to execute a contract. If such bid quotations are not available,
payments will be made in the Specified Currency. All currency exchange costs
will be borne by the holders of Notes by deductions from such payments.
Except as set forth below, if the principal of, premium, if any, or
interest on, any Note is payable in a Specified Currency other than U.S. dollars
and such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances beyond
the control of the Company or is no longer used by the government of the country
issuing such currency or for the settlement of transactions by public
institutions within the international banking community, then the Company will
be entitled to satisfy its obligations to holders of the Notes by making such
payments in U.S. dollars on the basis of the Market Exchange Rate on the date of
such payment or, if the Market
S-4
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Exchange Rate is not available on such date, as of the most recent practicable
date. Any payment made under such circumstances in U.S. dollars where the
required payment is in a Specified Currency other than U.S. dollars will not
constitute an Event of Default.
If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or are no longer used in the European Monetary
System, then all payments in respect of such Note shall be made in U.S. dollars
until ECUs are again available or so used. The amount of each payment in U.S.
dollars shall be computed on the basis of the equivalent of the ECU in U.S.
dollars, determined as described below, as of the second Business Day prior to
the date on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date shall be
determined by the Company or the Exchange Rate Agent on the following basis. The
component currencies of the ECU for this purpose (the "Components") shall be the
currency amounts that were components of the ECU as of the last date on which
the ECU was used in the European Monetary System. The equivalent of the ECU in
U.S. dollars shall be calculated by aggregating the U.S. dollar equivalents of
the Components. The U.S. dollar equivalent of each of the Components shall be
determined by the Company or the Exchange Rate Agent on the basis of the most
recently available Market Exchange Rates for such Components.
If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that currency as a Component shall be
divided or multiplied in the same proportion. If two or more Components are
consolidated into a single currency, the amounts of those currencies as
Components shall be replaced by an amount in such single currency equal to the
sum of the appropriate amounts of the consolidated component currencies
expressed in such single currency. If any Component is divided into two or more
currencies, the amount of the original component currency shall be replaced by
the appropriate amounts of such two or more currencies, the sum of which shall
be equal to the amount of the original component currency.
All determinations referred to above made by the Company or its agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether or not the date
of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. The initial interest payment
on a Note will be made on the first Interest Payment Date falling after the date
the Note is issued; provided, however, that payments of interest (or, in the
case of an Amortizing Note, principal and interest) on a Note issued fewer than
15 calendar days before an Interest Payment Date will be paid on the next
succeeding Interest Payment Date to the holder of record on the Record Date with
respect to such succeeding Interest Payment Date, unless otherwise specified in
the applicable Pricing Supplement.
U.S. dollar payments of interest, other than interest payable at maturity
(or on the date of redemption or repayment, if a Note is redeemed or repaid by
the Company prior to maturity), will be made by check mailed to the address of
the person entitled thereto as shown on the Note register. U.S. dollar payments
of principal, premium, if any, and interest upon maturity, redemption or
repayment will be made in immediately available funds against presentation and
surrender of the Note. Notwithstanding the foregoing, (a) the Depositary, as
holder of Global Notes, shall be entitled to receive payments of interest by
wire transfer of immediately available funds and (b) a holder of U.S.
$10,000,000 (or the equivalent) or more in aggregate principal amount of
Definitive Notes having the same Interest Payment Date shall be entitled to
receive payments of interest by wire transfer of immediately available funds
upon written request to the Paying Agent, provided such request is received not
later than 15 calendar days prior to the applicable Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of Global Notes denominated in a Specified Currency electing to
receive payments of principal or any premium or interest in a
S-5
<PAGE> 6
currency other than U.S. dollars must notify the participant through which its
interest is held on or prior to the applicable Record Date, in the case of a
payment of interest, and on or prior to the sixteenth day prior to maturity, in
the case of principal or premium of such beneficial owner's election to receive
all or a portion of such payment in a Specified Currency. Such participant must
notify the Depositary (as defined below) of such election on or prior to the
third Business Day after such Record Date. The Depositary will notify the Paying
Agent of such election on or prior to the fifth Business Day after such Record
Date. If complete instructions are received by the participant and forwarded by
the participant to the Depositary, and by the Depositary to the Paying Agent, on
or prior to such dates, the beneficial owner will receive payments in the
Specified Currency by wire transfer of immediately available funds to an account
maintained by the payee with a bank located outside the United States; otherwise
the beneficial owner will receive payments in U.S. dollars.
Certain Notes, including Original Issue Discount Notes, may be considered
to be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant rate. See "Certain U.S.
Federal Income Tax Consequences -- Original Issue Discount," below. Unless
otherwise specified in the applicable Pricing Supplement, if the principal of
any Original Issue Discount Note is declared to be due and payable immediately
as described under "Description of Debt Securities -- Events of Default" in the
Prospectus, the amount due and payable with respect to such Note shall be
limited to the principal amount of such Note multiplied by its Issue Price
(expressed as a percentage of the aggregate principal amount), plus the original
issue discount amortized from the date of issue to the date of declaration,
which amortization shall be calculated using the "interest method" (computed in
accordance with generally accepted accounting principles in effect on the date
of declaration). Special considerations applicable to any such Notes will be set
forth in the applicable Pricing Supplement.
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the Notes
purchased in any single transaction.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof, except as described below under
"Extension of Maturity," until the principal thereof is paid or made available
for payment. Unless otherwise specified in the applicable Pricing Supplement,
such interest will be computed on the basis of a 360-day year of twelve 30-day
months. Unless otherwise specified in the applicable Pricing Supplement,
payments of interest on Fixed Rate Notes other than Amortizing Notes will be
made semiannually on each December 15 and June 15 and at maturity or upon any
earlier redemption or repayment. Unless otherwise specified in the applicable
Pricing Supplement, payments of principal and interest on Amortizing Notes,
which are securities on which payments of principal and interest are made in
equal installments over the life of the security, will be made either quarterly
on each December 15, March 15, June 15 and September 15 or semiannually on each
December 15 and June 15, as set forth in the applicable Pricing Supplement, and
at maturity or upon any earlier redemption or repayment. Payments with respect
to Amortizing Notes will be applied first to interest due and payable thereon
and then to the reduction of the unpaid principal amount thereof. A table
setting forth repayment information in respect of each Amortizing Note will be
provided to the original purchaser and will be available, upon request, to
subsequent holders.
If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, the interest payment shall be made on the next day that is a
Business Day, and no interest on such payment shall accrue for the period from
and after the Interest Payment Date. If the maturity (or date of redemption or
repayment) of any Fixed Rate Note falls on a day that is not a Business Day, the
payment of interest and principal (and premium, if any) will be made on the next
succeeding Business Day, and no interest on such payment shall accrue for the
period from and after the maturity date (or date of redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from
and including the date of issue or from and including the last date in respect
of which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be. The interest rates the Company will agree to pay
on newly issued Fixed Rate Notes are subject to
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change without notice by the Company from time to time, but no such change will
affect any Fixed Rate Notes theretofore issued or that the Company has agreed to
issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate determined
by reference to an interest rate basis or formula (the "Base Rate"), which may
be adjusted by a Spread and/or Spread Multiplier (each as defined below). The
applicable Pricing Supplement will designate one or more of the following Base
Rates as applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate
Note"), (b) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the
Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"),
(e) the Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury
Rate Note"), (g) the CMT Rate (a "CMT Rate Note") or (h) such other Base Rate or
interest rate formula as is set forth in such Pricing Supplement and in such
Floating Rate Note. The "Index Maturity" for any Floating Rate Note is the
period of maturity of the instrument or obligation from which the Base Rate is
calculated and will be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate for such Floating
Rate Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or ceiling,
on the rate of interest which may accrue during any interest period ("Maximum
Interest Rate"); and (ii) a minimum limitation, or floor, on the rate of
interest which may accrue during any interest period ("Minimum Interest Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by United States law of general application. Under
current New York law, the maximum rate of interest, subject to certain
exceptions, for any loan in an amount less than $250,000 is 16% and for any loan
in the amount of $250,000 or more but less than $2,500,000 is 25% per annum on a
simple interest basis. These limits do not apply to loans of $2,500,000 or more.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the Pricing Supplement, the Interest Reset Date
will be, in the case of Floating Rate Notes which reset daily, each Business
Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week, except as provided below; in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December, in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each year,
as specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of one month of each year,
as specified in the applicable Pricing Supplement; provided, however, that (a)
the interest rate in effect from the date of issue to the first Interest Reset
Date with respect to a Floating Rate Note will be the initial interest rate set
forth in the applicable Pricing Supplement (the "Initial Interest Rate") and (b)
unless otherwise specified in the applicable Pricing Supplement, the interest
rate in effect for the ten calendar days immediately prior to maturity,
redemption or repayment will be that in effect on the tenth calendar day
preceding such maturity, redemption or repayment date. If any Interest Reset
Date for any Floating Rate Note would otherwise be a day that is not a Business
Day, such Interest Reset Date shall be postponed to the next succeeding Business
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Day, except that in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Reset Date shall be the
immediately preceding Business Day.
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset Date,
on the third Wednesday of each month or on the third Wednesday of March, June,
September and December, as specified in the applicable Pricing Supplement; (ii)
in the case of Floating Rate Notes with a quarterly Interest Reset Date, on the
third Wednesday of March, June, September and December; (iii) in the case of
Floating Rate Notes with a semiannual Interest Reset Date, on the third
Wednesday of the two months specified in the applicable Pricing Supplement; and
(iv) in the case of Floating Rate Notes with an annual Interest Reset Date, on
the third Wednesday of the month specified in the applicable Pricing Supplement.
If any Interest Payment Date (other than at maturity, redemption or repayment)
for any Floating Rate Note would fall on a day that is not a Business Day with
respect to such Floating Rate Note, such Interest Payment Date will be postponed
to the following day that is a Business Day with respect to such Floating Rate
Note, except that, in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Payment Date shall be the
immediately preceding day that is a Business Day with respect to such LIBOR
Note. If the maturity date or any earlier redemption or repayment date of a
Floating Rate Note would fall 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, redemption or repayment date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from
and including the date of issue or from and including the last date to which
interest has been paid to, but excluding, the Interest Payment Date or maturity
date or date of redemption or repayment.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate Notes or by the
actual number of days in the year, in the case of Treasury Rate Notes and CMT
Rate Notes. All percentages used in or resulting from any calculation of the
rate of interest on a Floating Rate Note will be rounded, if necessary, to the
nearest one hundred-thousandth of a percentage point, with five one-millionths
of a percentage point rounded upward, 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 rounded upward. The interest rate in effect on
any Interest Reset Date will be the applicable rate as reset on such date. The
interest rate applicable to any other day is the interest rate from the
immediately preceding Interest Reset Date (or, if none, the Initial Interest
Rate).
Unless otherwise stated in the applicable Pricing Supplement, the
calculation agent (the "Calculation Agent") with respect to any issue of
Floating Rate Notes shall be The Bank of New York. Upon the request of the
holder of any Floating Rate Note, the Calculation Agent will provide the
interest rate then in effect and, if determined, the interest rate that will
become effective on the next Interest Reset Date with respect to such Floating
Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes and Prime Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note will be the day of the week in which such
Interest Reset Date falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal
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holiday, in which case the auction is normally held on the following Tuesday,
but such auction may be held on the preceding Friday. If, as the result of a
legal holiday, an auction is so held on the preceding Friday, such Friday will
be the Interest Determination Date pertaining to the Interest Reset Date
occurring in the next succeeding week. If an auction falls on a day that is an
Interest Reset Date, such Interest Reset Date will be the next following
Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest Payment
Date or date of maturity, as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)," or, if
not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated 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" (the "Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such 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
Interest Determination Date for certificates of deposit in an amount that is
representative for a single transaction at that time with a remaining maturity
closest to the Index Maturity designated in the Pricing Supplement of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The
City of New York selected by the Calculation Agent for negotiable certificates
of deposit of major United States money center banks; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the CD Rate in effect for the applicable period will be the
same as the CD Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on the CD
Rate Notes for which such CD Rate is being determined shall be the Initial
Interest Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement, as such rate shall be published in H.15(519), under the heading
"Commercial Paper." In the event that such rate is not published by 9:00 A.M.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on such
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Interest Determination Date for commercial paper of the specified Index Maturity
as published in Composite Quotations under the heading "Commercial Paper." If by
3:00 P.M., New York City time, on such Calculation Date such rate is not yet
available in either H.15(519) or Composite Quotations, then the Commercial Paper
Rate shall be the Money Market Yield of the arithmetic mean of the offered rates
as of 11:00 A.M., New York City time, on such Interest Determination Date of
three leading dealers of commercial paper in The City of New York selected by
the Calculation Agent for commercial paper of the specified Index Maturity,
placed for an industrial issuer whose bond rating is "AA," or the equivalent,
from a nationally recognized statistical rating agency; provided, however, that
if the dealers selected as aforesaid by the Calculation Agent are not quoting
offered rates as mentioned in this sentence, the Commercial Paper Rate in effect
for the applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the Commercial Paper Rate Notes
for which such Commercial Paper Rate is being determined shall be the Initial
Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C> <C> <C>
Money Market Yield = D X 360 X 100
--------------
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days for which interest is being calculated.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Federal Funds Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any 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 so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Federal Funds Rate will be the rate on such Interest Determination Date as
published in the Composite Quotations under the heading "Federal Funds/Effective
Rate." If such rate is not yet published in either H.15(519) or the Composite
Quotations by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Federal Funds Rate for such 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 Federal
funds, as of 9:00 A.M., New York City time, on such Interest Determination Date,
arranged by three leading brokers of Federal funds transactions in The City of
New York selected by the Calculation Agent; provided, however, that if the
brokers selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the Federal Funds Rate in effect for the applicable period will be
the same as the Federal Funds Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
payable on the Federal Funds Rate Notes for which such Federal Funds Rate is
being determined shall be the Initial Interest Rate).
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
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<PAGE> 11
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
for each Interest Determination Date will be determined by the Calculation Agent
as follows:
(i) As of the 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 having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, that appear on the Designated
LIBOR Page as of 11:00 A.M., London time, on that 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 Banking Day
immediately following such Interest Determination Date, that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on that Interest
Determination Date. If fewer than two offered rates appear (if "LIBOR
Reuters" is specified in the applicable Pricing Supplement) or no rate
appears (if "LIBOR Telerate" is specified in the applicable Pricing
Supplement), LIBOR in respect of the related Interest Determination Date
will be determined as if the parties had specified the rate described in
clause (ii) below.
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement) or no rate appears (if "LIBOR Telerate" is
specified in the applicable Pricing Supplement), 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 Banking Day
immediately following such Interest Determination Date, to prime banks in
the London interbank market at approximately 11:00 A.M., London time, on
such Interest Determination Date and in a principal amount of not less than
$1,000,000 (or the equivalent in the Index Currency, if the Index Currency
is not the U.S. dollar) that is representative of 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 Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR determined on such 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 for the country of the Index
Currency on such 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
of not less than $1,000,000 commencing on the second London Banking Day
immediately following such Interest Determination Date (or the equivalent
in the Index Currency, if the Index Currency is not the U.S. dollar) 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
in effect for the applicable period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the LIBOR Notes for
which such LIBOR is being determined shall be the Initial Interest Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the
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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.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set forth
in H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate
is not yet published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be the arithmetic mean of the rates of interest publicly
announced by each bank named on the Reuters Screen USPRIME1 (as defined below)
as such bank's prime rate or base lending rate as in effect for such Interest
Determination Date as quoted on the Reuters Screen USPRIME1 on such Interest
Determination Date, or, if fewer than four such rates appear on the Reuters
Screen USPRIME1 for such Interest Determination Rate, the rate shall be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Interest
Determination Date by at least two of the three major money center banks in The
City of New York selected by the Calculation Agent from which quotations are
requested. If fewer than two quotations are provided, the Prime Rate shall be
calculated by the Calculation Agent and shall be determined as the arithmetic
mean on the basis of the prime rates in The City of New York by the appropriate
number of substitute banks or trust companies organized and doing business under
the laws of the United States, or any State thereof, in each case having total
equity capital of at least U.S. $500 million and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent to
quote such rate or rates; provided, however, that if the banks or trust
companies selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the "Prime Rate" in effect for the applicable period will be the
same as the Prime Rate for the immediately preceding Interest Reset Period (or,
if there was no such Interest Reset Period, the rate of interest payable on the
Prime Rate Notes for which such Prime Rate is being determined shall be the
Initial Interest Rate). "Reuters Screen USPRIME1" means the display designated
as page "USPRIME1" on the Reuters Monitor Money Rates Services (or such other
page as may replace USPRIME1 on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the Maximum Interest Rate, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the rate
for the auction held on such date of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement, as published in H.15(519) under the heading "Treasury
Bills -- auction average (investment)" or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination Date
(expressed as a bond equivalent, 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 published or reported as provided above by 3:00 P.M., New
York City time, on such Calculation Date or if no such auction is held on such
Interest Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or
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<PAGE> 13
366 days, as applicable, and applied on a daily basis) calculated using the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
P.M., New York City time, on such Interest Determination Date, of three leading
primary United States government securities dealers selected by the Calculation
Agent for the issue of Treasury Bills with a remaining maturity closest to the
Index Maturity designated in the applicable Pricing Supplement; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting bid rates as mentioned in this sentence, the Treasury Rate for such
Interest Reset Date will be the same as the Treasury Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the rate of interest payable on the Treasury Rate Notes for which the Treasury
Rate is being determined shall be the Initial Interest Rate).
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed on
the Designated CMT Telerate Page (as defined below) 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 (as defined below) for (i) if the Designated CMT Telerate
Page is 7055, the rate on such 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 or the month, as applicable, in which the
related 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 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 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
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 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 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 (which
may include the Agents or their affiliates) selected by the Calculation Agent
(from five such Reference Dealers selected by the Calculation Agent, after
consultation with the Company, 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 Unites States ("Treasury notes") with
an original maturity of approximately the Designated CMT Maturity Index and
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 notes
quotations, the CMT Rate for such 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 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 $100,000,000. 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
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<PAGE> 14
obtained and neither the highest nor the 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
for such Interest Reset Date will be the same as the CMT Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the CMT Rate Notes for which the
CMT Rate is being determined shall be the Initial Interest Rate). If two
Treasury notes with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the quotes for the Treasury 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 an 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" shall be the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in an 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 two years.
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate (calculated
with reference to a Base Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Renewable Notes and in the applicable Pricing Supplement.
The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates in
May and November in each year (unless different Interest Payment Dates are
specified in the applicable Pricing Supplement) (each such Interest Payment
Date, an "Election Date"), the maturity of the Renewable Notes will be extended
to the Interest Payment Date occurring twelve months after such Election Date,
unless the holder thereof elects to terminate the automatic extension of the
maturity of the Renewable Notes or of any portion thereof having a principal
amount of $1,000 or any multiple of $1,000 in excess thereof by delivering a
notice of such effect to the Paying Agent not less than nor more than a number
of days to be specified in the applicable Pricing Supplement prior to such
Election Date. Such option may be exercised with respect to less than the entire
principal amount of the Renewable Notes; provided that the principal amount for
which such option is not exercised is at least $1,000 or any larger amount that
is an integral multiple of $1,000. Notwithstanding the foregoing, the maturity
of the Renewable Notes may not be extended beyond the Final Maturity Date, as
specified in the applicable Pricing Supplement (the "Final Maturity Date"). If
the holder elects to terminate the automatic extension of the maturity of any
portion of the principal amount of the Renewable Notes and such election is not
revoked as described below, such portion will become due and payable on the
Interest Payment Date falling six months (unless another period is specified in
the applicable Pricing Supplement) after the Election Date prior to which the
holder made such election.
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $1,000 or
any multiple of $1,000 in excess thereof by delivering a notice to such effect
to the Paying Agent on any day following the effective date of the election to
terminate the automatic extension of maturity and prior to the date 15 days
before the date on which such portion would otherwise mature. Such a revocation
may be made for less than the entire principal amount of the Renewable Notes for
which the automatic extension of maturity has been terminated; provided that the
principal amount of the Renewable Notes for which the automatic extension of
maturity has been terminated and for which such a revocation has not been made
is at least $1,000 or any larger amount that is an integral multiple of
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$1,000. Notwithstanding the foregoing, a revocation may not be made during the
period from and including a Record Date to but excluding the immediately
succeeding Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent holder.
The Renewable Notes may be redeemed in whole or in part at the option of
the Company on the Interest Payment Dates in each year specified in the
applicable Pricing Supplement, commencing with the Interest Payment Date
specified in the applicable Pricing Supplement, at a redemption price as stated
in the applicable Pricing Supplement, together with accrued and unpaid interest
to the date of redemption. Notwithstanding anything to the contrary in this
Prospectus Supplement, notice of redemption will be provided by mailing a notice
of such redemption to each holder by first class mail, postage prepaid, at least
180 days prior to the date fixed for redemption.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or nonfinancial indices or other factors (the
"Indexed Notes"), as indicated in the applicable Pricing Supplement. Holders of
Indexed Notes may receive a principal amount at maturity that is greater than or
less than the face amount of such Notes depending upon the fluctuation of the
relative value, rate or price of the specified index. Specific information
pertaining to the method for determining the principal amount payable at
maturity, a historical comparison of the relative value, rate or price of the
specified index and the face amount of the Indexed Note will be described in the
applicable Pricing Supplement.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note (other than an Amortizing
Note) will indicate whether the Company has the option to extend the maturity of
such Note for one or more periods of one or more whole years (each an "Extension
Period") up to but not beyond the date (the "Final Maturity Date") set forth in
such Pricing Supplement. If the Company has such option with respect to any such
Note (an "Extendible Note"), the following procedures will apply, unless
modified as set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to an Extendible Note by
notifying the Paying Agent of such exercise at least 45 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has already
been extended, prior to the maturity date then in effect (an "Extended Maturity
Date"). No later than 38 days prior to the Original Maturity Date or an Extended
Maturity Date, as the case may be (each, a "Maturity Date"), the Paying Agent
will mail to the holder of such Note a notice (the "Extension Notice") relating
to such Extension Period, by first class mail, postage prepaid, setting forth
(a) the election of the Company to extend the maturity of such Note; (b) the new
Extended Maturity Date; (c) the interest rate applicable to the Extension Period
(which, in the case of a Floating Rate Note, will be calculated with reference
to a Base Rate and the Spread and/or Spread Multiplier, if any); and (d) the
provisions, if any, for redemption during the Extension Period, including the
date or dates on which, the period or periods during which and the price or
prices at which such redemption may occur during the Extension Period. Upon the
mailing by the Paying Agent of an Extension Notice to the holder of an
Extendible Note, the maturity of such Note shall be extended automatically, and,
except as modified by the Extension Notice and as described in the next
paragraph, such Note will have the same terms it had prior to the mailing of
such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 A.M., New York City
time, on the twentieth calendar day prior to the Maturity Date then in effect
for an Extendible Note (or, if such day is not a Business Day, not later than
10:00 A.M., New York City time, on the immediately succeeding Business Day), the
Company may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any)
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for the Extension Period by causing the Paying Agent to send notice of such
higher interest rate (or, in the case of a Floating Rate Note, a higher Spread
and/or Spread Multiplier, if any) to the holder of such Note by first class
mail, postage prepaid, or by such other means as shall be agreed between the
Company and the Paying Agent. Such notice shall be irrevocable. All Extendible
Notes with respect to which the Maturity Date is extended in accordance with an
Extension Notice will bear such higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period, whether or not tendered for repayment.
If the Company elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Company to repay such
Note on the Maturity Date then in effect at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date. In order for
an Extendible Note to be repaid on such Maturity Date, the holder thereof must
follow the procedures set forth below under "Repayment at the Noteholders'
Option; Repurchase" for optional repayment, except that the period for delivery
of such Note or notification to the Paying Agent shall be at least 25 but not
more than 35 days prior to the Maturity Date then in effect and except that a
holder who has tendered an Extendible Note for repayment pursuant to an
Extension Notice may, by written notice to the Paying Agent, revoke any such
tender for repayment until 3:00 P.M., New York City time, on the twentieth
calendar day prior to the Maturity Date then in effect (or, if such day is not a
Business Day, until 3:00 P.M., New York City time, on the immediately succeeding
Business Day).
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Global Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, maturity date and other
terms, if any, will be represented by one or more Global Securities, and all
Floating Rate Global Notes having the same Issue Date, Initial Interest Rate,
Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity, Spread
and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, maturity date and other terms, if any, will be
represented by one or more Global Securities. Each Global Security representing
Global Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York ("DTC" or the "Depositary"), and registered in the
name of a nominee of the Depositary. Global Notes will not be exchangeable for
Definitive Notes, except under the circumstances described in the Prospectus
under "Description of Debt Securities -- Book-Entry Debt Securities." Definitive
Notes will not be exchangeable for Global Notes and will not otherwise be
issuable as Global Notes.
DTC has advised the Company that it 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 Securities Exchange Act of 1934. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants"). The
Rules applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
A further description of the Depositary's procedures with respect to Global
Securities representing Global Notes is set forth in the Prospectus under
"Description of The Debt Securities -- Global Securities." The Depositary has
confirmed to the Company, each Agent and the Trustee that it intends to follow
such procedures.
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OPTIONAL REDEMPTION
The Pricing Supplement will indicate that the Notes cannot be redeemed
prior to maturity or will indicate the terms on which the Notes will be
redeemable at the option of the Company. Notice of redemption will be provided
by mailing a notice of such redemption to each holder by first class mail,
postage prepaid, at least 30 days and not more than 60 days prior to the date
fixed for redemption to the respective address of each holder as that address
appears upon the books maintained by the Paying Agent. Unless otherwise provided
in the applicable Pricing Supplement, the Notes, except for Amortizing Notes,
will not be subject to any sinking fund.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment, unless such Note was
issued with original issue discount, in which case the Pricing Supplement will
specify the amount payable upon such repayment.
In order for such a Note to be repaid, the Paying Agent must receive at
least 30 days but not more than 60 days prior to the repayment date (i) the Note
with the form entitled "Option to Elect Repayment" on the reverse of the Note
duly completed or (ii) a facsimile transmission or a letter from a member of a
national securities exchange, or the National Association of Securities Dealers,
Inc. (the "NASD") or a commercial bank or trust company in the United States
setting forth the name of the holder of the Note, the principal amount of the
Note, the principal amount of the Note to be repaid, the certificate number or a
description of the tenor and terms of the Note, a statement that the option to
elect repayment is being exercised thereby and a guarantee that the Note to be
repaid, together with the duly completed form entitled "Option to Elect
Repayment" on the reverse of the Note, will be received by the Paying Agent not
later than the fifth Business Day after the date of such facsimile transmission
or letter, provided, however, that such facsimile transmission or letter shall
only be effective if such Note and form duly completed are received by the
Paying Agent by such fifth Business Day. Except in the case of Renewable Notes
or Extendible Notes, and unless otherwise specified in the applicable Pricing
Supplement, exercise of the repayment option by the holder of a Note will be
irrevocable. The repayment option may be exercised by the holder of a Note for
less than the entire principal amount of the Note but, in that event, the
principal amount of the Note remaining outstanding after repayment must be an
Authorized Denomination.
If a Note is represented by a Global Security, the Depositary's nominee
will be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different deadlines for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other direct or
indirect participant through which it holds an interest in a Note in order to
ascertain the deadline by which such an instruction must be given in order for
timely notice to be delivered to the Depositary.
The Company may purchase Notes at any price in the open market or
otherwise. Notes so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the relevant Trustee for
cancellation.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
Any investment in Notes that are denominated in, or the payment of which is
related to the value of, a specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar
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investment in a security denominated in U.S. dollars. Such risks include,
without limitation, the possibility of significant changes in rates of exchange
between the U.S. dollar and the various foreign currencies (or composite
currencies) and the possibility of the imposition or modification of exchange
controls by either the U.S. or a foreign government. Such risks generally depend
on economic and political events over which the Company has no control. In
recent years, rates of exchange between U.S. dollars and certain foreign
currencies have been highly volatile and such volatility may be expected to
continue in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations in
such rate that may occur during the term of any Note. Depreciation against the
U.S. dollar of the currency in which a Note is payable would result in a
decrease in the effective yield of such Note below its coupon rate and, in
certain circumstances, could result in a loss to the investor on a U.S. dollar
basis. In addition, depending on the specific terms of a currency linked Note,
changes in exchange rates relating to any of the currencies involved may result
in a decrease in its effective yield and, in certain circumstances, could result
in a loss of all or a substantial portion of the principal of a Note to the
investor.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS
AS TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN, OR THE
PAYMENT OF WHICH IS RELATED TO THE VALUE OF, SPECIFIED CURRENCIES OTHER THAN
U.S. DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium, if
any, and interest on the Notes. Such persons should consult their own counsel
with regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of, premium,
if any, or interest on a Note. Even if there are no actual exchange controls, it
is possible that the Specified Currency for any particular Note not denominated
in U.S. dollars would not be available when payments on such Note are due. In
that event, the Company would make required payments in U.S. dollars on the
basis of the Market Exchange Rate on the date of such payment, or if such rate
of exchange is not then available, on the basis of the Market Exchange Rate as
of the most recent practicable date. See "Description of Notes -- Payment
Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein shall constitute a part of this
Prospectus Supplement and is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in fluctuations
in currency exchange rates that may occur in the future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a court in the
United States, it is likely that such court would grant judgment relating to the
Notes only in U.S. dollars.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal U.S. Federal income tax
consequences resulting from the beneficial ownership of Notes by certain
persons. This summary does not purport to consider all the possible U.S. Federal
tax consequences of the purchase, ownership or disposition of the Notes and is
not intended to
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reflect the individual tax position of any beneficial owner. It deals only with
Notes and currencies or composite currencies other than U.S. dollars ("Foreign
Currency") held as capital assets. Moreover, except as expressly indicated, it
addresses initial purchasers and does not address beneficial owners that may be
subject to special tax rules, such as banks, insurance companies, dealers in
securities or currencies, purchasers that hold Notes (or Foreign Currency) as a
hedge against currency risks or as part of a straddle with other investments or
as part of a "synthetic security" or other integrated investment (including a
"conversion transaction") comprised of a Note and one or more other investments,
or purchasers that have a "functional currency" other than the U.S. dollar.
Except to the extent discussed below under "Non-U.S. Holders", this summary is
not applicable to non-United States persons not subject to U.S. Federal income
tax on their worldwide income. This summary is based upon the U.S. Federal tax
laws and regulations as now in effect and as currently interpreted and does not
take into account possible changes in such tax laws or such interpretations, any
of which may be applied retroactively. It does not include any description of
the tax laws of any state, local or foreign governments that may be applicable
to the Notes or holders thereof, and it does not discuss the tax treatment of
Notes denominated in certain hyperinflationary currencies or dual currency
Notes. Persons considering the purchase of Notes should consult their own tax
advisors concerning the application of the U.S. Federal tax laws to their
particular situations as well as any consequences to them under the laws of any
other taxing jurisdiction.
U.S. HOLDERS
Payments of Interest
In general, interest on a Note, whether payable in U.S. dollars or a
Foreign Currency (other than certain payments on a Discount Note, as defined and
described below under "Original Issue Discount"), will be taxable to a
beneficial owner who or which is (i) a citizen or resident of the United States,
(ii) a corporation created or organized under the laws of the United States or
any State thereof (including the District of Columbia) or (iii) a person
otherwise subject to United States Federal income taxation on its worldwide
income (a "U.S. Holder") as ordinary income at the time it is received or
accrued, depending on the holder's method of accounting for tax purposes. If an
interest payment is denominated in or determined by reference to a Foreign
Currency, then special rules, described below under "Foreign Currency Notes",
apply.
Original Issue Discount
The following discussion summarizes the United States Federal income tax
consequences to U.S. Holders of Notes issued with original issue discount for
Federal income tax purposes ("OID"). U.S. Holders of a Note issued with OID
generally will be subject to special tax accounting rules provided in the
Internal Revenue Code of 1986, as amended (the "Code"). On February 4, 1994, the
Treasury Department published final regulations (the "OID Regulations"), which
expand and illustrate the rules provided by the Code.
Special rules apply to OID on a Discount Note that is denominated in
Foreign Currency. See "Foreign Currency Notes -- Foreign Currency Discount
Notes".
General. A Note will be treated as issued with OID (a "Discount Note") if
the excess of the Note's "stated redemption price at maturity" over its issue
price is greater than a de minimis amount (set forth in the Code and the OID
Regulations). Generally, as discussed in "Description of Notes--General," above,
the Issue Price of a Note (or any Note that is part of an issue of Notes) will
be the first price at which a substantial amount of Notes that are part of such
issue of Notes are sold (other than to underwriters, placement agents or
wholesalers). Under the OID Regulations, the "stated redemption price at
maturity" of a Note is the sum of all payments provided by the Note that are not
payments of "qualified stated interest". A "qualified stated interest" payment
includes any stated interest payment on a Note that is unconditionally payable
at least annually at a single fixed rate (or at certain floating rates) that
appropriately takes into account the length of the interval between stated
interest payments. The Pricing Supplement will state whether a particular issue
of Notes will constitute an issue of Discount Notes.
In general, if the excess of a Note's stated redemption price at maturity
over its Issue Price is de minimis, then such excess constitutes "de minimis
OID". Under the OID Regulations, unless the election described
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below under "Election to Treat All Interest as Original Issue Discount" is made,
such a Note will not be treated as issued with OID (in which case the following
paragraphs under "Original Issue Discount" will not apply) and a U.S. Holder of
such a Note will recognize capital gain with respect to such de minimis OID as
stated principal payments on the Note are made. The amount of such gain with
respect to each such payment will equal the product of the total amount of the
Note's de minimis OID and a fraction, the numerator of which is the amount of
the principal payment made and the denominator of which is the stated principal
amount of the Note.
In certain cases, Notes that bear stated interest and are issued at par may
be deemed to bear OID for Federal income tax purposes, with the result that the
inclusion of interest in income for Federal income tax purposes may vary from
the actual cash payments of interest made on such Notes, generally accelerating
income for cash method taxpayers. Under the OID Regulations, a Note may be a
Discount Note where, among other things, (i) a Note bearing interest at a
floating rate (a "Floating Rate Note") provides for a maximum interest rate or a
minimum interest rate that is reasonably expected as of the issue date to cause
the yield on the debt instrument to be significantly less, in the case of a
maximum rate, or more, in the case of a minimum rate, than the expected yield
determined without the maximum or minimum rate, as the case may be; (ii) a
Floating Rate Note provides for significant front-loading or back-loading of
interest; or (iii) a Note bears interest at a floating rate in combination with
one or more other floating or fixed rates. Notice will be given in the
applicable Pricing Supplement when the Company determines that a particular Note
will be a Discount Note. Unless specified in the applicable Pricing Supplement,
Floating Rate Notes will not be Discount Notes.
The Code and the OID Regulations provide rules that require a U.S. Holder
of a Discount Note having a maturity of more than one year from its date of
issue to include OID in gross income before the receipt of cash attributable to
such income, without regard to the holder's method of accounting for tax
purposes. The amount of OID includible in gross income by a U.S. Holder of a
Discount Note is the sum of the "daily portions" of OID with respect to the
Discount Note for each day during the taxable year or portion of the taxable
year in which the U.S. Holder holds such Discount Note ("accrued OID"). The
daily portion is determined by allocating to each day in any "accrual period" a
pro rata portion of the OID allocable to that accrual period. Under the OID
Regulations, accrual periods with respect to a Note may be any set of periods
(which may be of varying lengths) selected by the U.S. Holder as long as (i) no
accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Note occurs on the first day or final day of an
accrual period.
The amount of OID allocable to an accrual period equals the excess of (a)
the product of the Discount Note's adjusted issue price at the beginning of the
accrual period and the Discount Note's yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (b) the sum of any payments of
qualified stated interest on the Discount Note allocable to the accrual period.
The "adjusted issue price" of a Discount Note at the beginning of the first
accrual period is the Issue Price and at the beginning of any accrual period
thereafter is (x) the sum of the Issue Price of such Discount Note, the accrued
OID for each prior accrual period (determined without regard to the amortization
of any acquisition premium or bond premium, which are discussed below), and the
amount of any qualified stated interest on the Note that has accrued prior to
the beginning of the accrual period but is not payable until a later date, less
(y) any prior payments on the Discount Note that were not qualified stated
interest payments. If a payment (other than a payment of qualified stated
interest) is made on the first day of an accrual period, then the adjusted issue
price at the beginning of such accrual period is reduced by the amount of the
payment. If a portion of the initial purchase price of a Note is attributable to
interest that accrued prior to the Note's issue date, the first stated interest
payment on the Note is to be made within one year of the Note's issue date and
such payment will equal or exceed the amount of pre-issuance accrued interest,
then the Issue Price will be decreased by the amount of pre-issuance accrued
interest, in which case a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued interest and not as an
amount payable on the Note.
The OID Regulations contain certain special rules that generally allow any
reasonable method to be used in determining the amount of OID allocable to a
short initial accrual period (if all other accrual periods are of
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equal length) and require that the amount of OID allocable to the final accrual
period equal the excess of the amount payable at the maturity of the Discount
Note (other than any payment of qualified stated interest) over the Discount
Note's adjusted issue price as of the beginning of such final accrual period. In
addition, if an interval between payments of qualified stated interest on a
Discount Note contains more than one accrual period, then the amount of
qualified stated interest payable at the end of such interval is allocated pro
rata (on the basis of their relative lengths) between the accrual periods
contained in the interval.
U.S. Holders of Discount Notes generally will have to include in income
increasingly greater amounts of OID over the life of the Notes.
Acquisition Premium. A U.S. Holder that purchases a Discount Note at its
original issuance for an amount in excess of its Issue Price but less than its
stated redemption price at maturity (any such excess being "acquisition
premium"), and that does not make the election described below under "Original
Issue Discount -- Election To Treat All Interest as Original Issue Discount", is
permitted to reduce the daily portions of OID by a fraction, the numerator of
which is the excess of the U.S. Holder's purchase price for the Note over the
Issue Price, and the denominator of which is the excess of the sum of all
amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, over the Note's Issue Price. Alternatively, a U.S.
Holder may elect to compute OID accruals as described under "Original Issue
Discount -- General" above, treating the U.S. Holder's purchase price as the
Issue Price.
Optional Redemption. If the Company has an option to redeem a Discount
Note, or the holder has an option to cause a Discount Note to be repurchased,
prior to the Discount Note's stated maturity, such option will be presumed to be
exercised if, by utilizing any date on which such Discount Note may be redeemed
or repurchased as the maturity date and the amount payable on such date in
accordance with the terms of such Discount Note (the "redemption price") as the
stated redemption price at maturity, the yield on the Discount Note would be (i)
in the case of an option of the Company, lower than its yield to stated
maturity, or (ii) in the case of an option of the holder, higher than its yield
to stated maturity. If such option is not in fact exercised when presumed to be
exercised, the Note would be treated solely for OID purposes as if it were
redeemed or repurchased, and a New Note were issued, on the presumed exercise
date for an amount equal to the Discount Note's adjusted issue price on that
date.
Short-Term Notes. Under the Code, special rules apply with respect to OID
on Notes that mature one year or less from the date of issuance ("Short-Term
Notes"). In general, a cash basis U.S. Holder of a Short-Term Note is not
required to include OID in income as it accrues for United States Federal income
tax purposes unless it elects to do so. Accrual basis U.S. Holders and certain
other U.S. Holders, including banks, regulated investment companies, dealers in
securities and cash basis U.S. Holders who so elect, are required to include OID
in income as it accrues on Short-Term Notes on a straight-line basis or, at the
election of the U.S. Holder, under the constant yield method (based on daily
compounding). In the case of U.S. Holders not required and not electing to
include OID in income currently, any gain realized on the sale or retirement of
Short-Term Notes will be ordinary income to the extent of the OID accrued on a
straight-line basis (unless an election is made to accrue the original issue
discount under the constant yield method) through the date of sale or
retirement. U.S. Holders who are not required and do not elect to include OID on
Short-Term Notes in income as it accrues will be required to defer deductions
for interest on borrowings allocable to Short-Term Notes in an amount not
exceeding the deferred income until the deferred income is realized.
Any U.S. Holder of a Short-Term Note can elect to apply the rules in the
preceding paragraph taking into account the amount of "acquisition discount", if
any, with respect to the Note (rather than the OID with respect to such Note).
Acquisition discount is the excess of the stated redemption price at maturity of
the Short-Term Note over the U.S. Holder's purchase price therefor. Acquisition
discount will be treated as accruing on a ratable basis or, at the election of
the U.S. Holder, on a constant-yield basis.
For purposes of determining the amount of OID subject to these rules, the
OID Regulations provide that no interest payments on a Short-Term Note are
qualified stated interest, but instead such interest payments are included in
the Short-Term Note's stated redemption price at maturity.
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<PAGE> 22
Notes Purchased at a Premium
Under the Code, a U.S. Holder that purchases a Note for an amount in excess
of its stated redemption price at maturity will not be subject to the OID rules
and may elect to treat such excess as "amortizable bond premium", in which case
the amount of qualified stated interest required to be included in the U.S.
Holder's income each year with respect to interest on the Note will be reduced
by the amount of amortizable bond premium allocable (based on the Note's yield
to maturity) to such year. Any election to amortize bond premium is applicable
to all bonds (other than bonds the interest on which is excludible from gross
income) held by the U.S. Holder at the beginning of the first taxable year to
which the election applies or thereafter acquired by the U.S. Holder, and may
not be revoked without the consent of the Internal Revenue Service ("IRS"). See
also "Original Issue Discount -- Election to Treat All Interest as Original
Issue Discount".
Notes Purchased at a Market Discount
A Note, other than a Short-Term Note, will be treated as issued at a market
discount (a "Market Discount Note") if the amount for which a U.S. Holder
purchased the Note is less than the Note's Issue Price, subject to a de minimis
rule similar to the rule relating to de minimis OID described under "Original
Issue Discount -- General".
In general, any gain recognized on the maturity or disposition of a Market
Discount Note will be treated as ordinary income to the extent that such gain
does not exceed the accrued market discount on such Note. Alternatively, a U.S.
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Market Discount Note. Such an election applies to
all debt instruments with market discount acquired by the electing U.S. 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.
Market discount accrues on a straight-line basis unless the U.S. Holder
elects to accrue such discount on a constant yield to maturity basis. Such an
election is applicable only to the Market Discount Note with respect to which it
is made and is irrevocable. A U.S. Holder of a Market Discount Note that does
not elect to include market discount in income currently generally will be
required to defer deductions for interest on borrowings allocable to such Note
in an amount not exceeding the accrued market discount on such Note until the
maturity or disposition of such Note.
The market discount rules do not apply to a Short-Term Note.
Election To Treat All Interest as Original Issue Discount
Any U.S. Holder may elect to include in gross income all interest that
accrues on a Note using the constant yield method described above under the
heading "Original Issue Discount -- General," with the modifications described
below. For purposes of this election, interest includes stated interest, OID, de
minimis OID, market discount acquisition discount, de minimis market discount
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium.
In applying the constant yield method to a Note with respect to which this
election has been made, the Issue Price of the Note will equal the electing U.S.
Holder's adjusted basis in the Note immediately after its acquisition, the issue
date of the Note will be the date of its acquisition by the electing U.S.
Holder, and no payments on the Note will be treated as payments of qualified
stated interest. This election is generally applicable only to the Note with
respect to which it is made and may not be revoked without the consent of the
IRS. If this election is made with respect to a Note with amortizable bond
premium, the electing U.S. Holder will be deemed to have elected to apply
amortizable bond premium against interest with respect to all debt instruments
with amortizable bond premium (other than debt instruments the interest on which
is excludible from gross income) held by such electing U.S. Holder as of the
beginning of the taxable year in which the election is made or any debt
instruments acquired thereafter. The deemed election with respect to amortizable
bond premium may not be revoked without the consent of the IRS.
If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Market Discount Note, as defined
above, then the electing U.S. Holder will be treated as having
S-22
<PAGE> 23
made the election discussed above under "Notes Purchased at a Market Discount"
to include market discount in income currently over the life of all debt
instruments held or thereafter acquired by such U.S. Holder.
Purchase, Sale and Retirement of the Notes
General. A U.S. Holder's tax basis in a Note generally will equal its U.S.
dollar cost (which, in the case of a Note purchased with a Foreign Currency,
will be the U.S. dollar value of the purchase price on the date of purchase),
increased by the amount of any OID or market discount (or acquisition discount,
in the case of a Short-Term Note) included in the U.S. Holder's income with
respect to the Note and the amount, if any, of income attributable to de minimis
OID included in the U.S. Holder's income with respect to the Note, and reduced
by the sum of (i) the amount of any payments that are not qualified stated
interest payments, and (ii) the amount of any amortizable bond premium applied
to reduce interest on the Note. A U.S. Holder generally will recognize gain or
loss on the sale or retirement of a Note equal to the difference between the
amount realized on the sale or retirement and the U.S. Holder's tax basis in the
Note. The amount realized on a sale or retirement for an amount in Foreign
Currency will be the U.S. dollar value of such amount on the date of sale or
retirement. Except to the extent described above under "Original Issue
Discount -- Short Term Notes" or "Market Discount" or below under "Foreign
Currency Notes -- Exchange Gain or Loss", and except to the extent attributable
to accrued but unpaid interest, gain or loss recognized on the sale or
retirement of a Note will be capital gain or loss and will be long-term capital
gain or loss if the Note was held for more than one year.
Extension of Maturity. The extension of the maturity of a Note pursuant to
its original terms could be viewed as a taxable exchange, depending on the
length of the extension period and whether other provisions of the Note (i.e.,
interest rate or redemption rights) also change. If the extension of a Note
causes a taxable exchange, a U.S. Holder will have an amount realized equal to
the issue price of the "New" Note and would recognize taxable gain or loss to
the extent such amount realized exceeds the U.S. Holder's adjusted basis in the
"old" Note. Such issue price could be greater or less than the adjusted issue
price on that date of the Note deemed exchanged, depending on market rates of
interest.
Foreign Currency Notes
Interest Payments. If an interest payment is denominated in or determined
by reference to a Foreign Currency, the amount of income recognized by a cash
basis U.S. Holder will be the U.S. dollar value of the interest payment, based
on the exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars. Accrual basis U.S. Holders may
determine the amount of income recognized with respect to such interest payment
in accordance with either of two methods. Under the first method, the amount of
income recognized will be based on the average exchange rate in effect during
the interest accrual period (or, with respect to an accrual period that spans
two taxable years, the partial period within the taxable year). Upon receipt of
an interest payment (including a payment attributable to accrued but unpaid
interest upon the sale or retirement of a Note) determined by reference to a
Foreign Currency, an accrual basis U.S. Holder will recognize ordinary income or
loss measured by the difference between such average exchange rate and the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars. Under the second method, an
accrual basis U.S. Holder may elect to translate interest income into U.S.
dollars at the spot exchange rate in effect on the last day of the accrual
period or, in the case of an accrual period that spans two taxable years, at the
exchange rate in effect on the last day of the partial period within the taxable
year. Additionally, if a payment of interest is actually received within 5
business days of the last day of the accrual period or taxable year, an accrual
basis U.S. Holder applying the second method may instead translate such accrued
interest into U.S. dollars at the spot exchange rate in effect on the day of
actual receipt (in which case no exchange gain or loss will result). Any
election to apply the second method will apply to all debt instruments held by
the U.S. Holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the U.S. Holder and may not be revoked without
the consent of the IRS.
Exchange of Amounts in Other than U.S. Dollars. Foreign Currency received
as interest on a Note or on the sale or retirement of a Note will have a tax
basis equal to its U.S. dollar value at the time such interest
S-23
<PAGE> 24
is received or at the time of such sale or retirement, as the case may be.
Foreign Currency that is purchased will generally have a tax basis equal to the
U.S. dollar value of the Foreign Currency on the date of purchase. Any gain or
loss recognized on a sale or other disposition of a Foreign Currency (including
its use to purchase Notes or upon exchange for U.S. dollars) will be ordinary
income or loss.
Foreign Currency Discount Notes. OID for any accrual period on a Discount
Note that is denominated in a Foreign Currency will be determined in the Foreign
Currency and then translated into U.S. dollars in the same manner as stated
interest accrued by an accrual basis U.S. Holder. Upon receipt of an amount
attributable to original issue discount (whether in connection with a payment of
interest or the sale or retirement of a Note), a U.S. Holder may recognize
ordinary income or loss.
Amortizable Bond Premium. In the case of a Note that is denominated in a
Foreign Currency, bond premium will be computed in units of Foreign Currency,
and amortizable bond premium will reduce interest income in units of the Foreign
Currency. At the time amortized bond premium offsets interest income, a U.S.
Holder may realize ordinary income or loss, measured by the difference between
exchange rates at that time and at the time of the acquisition of the Notes.
Market Discount. Market discount is determined in units of the Foreign
Currency, accrued market discount that is required to be taken into account on
the maturity or upon disposition of a Note is translated into U.S. dollars at
the exchange rate on the maturity or the disposition date, as the case may be
(and no part is treated as exchange gain or loss), accrued market discount
currently includible in income by an electing U.S. Holder is translated into
U.S. dollars at the average exchange rate for the accrual period (or the partial
accrual period during which the U.S. Holder held the Note), and exchange gain or
loss is determined on maturity or disposition of the Note (as the case may be)
in the manner described above under "Foreign Currency Notes -- Interest
Payments" with respect to the computation of exchange gain or loss on the
receipt of accrued interest by an accrual method holder.
Exchange Gain or Loss. Gain or loss recognized by a U.S. Holder on the
sale or retirement of a Note that is attributable to changes in exchange rates
will be treated as ordinary income or loss. However, exchange gain or loss is
taken into account only to the extent of total gain or loss realized on the
transaction.
Indexed Notes
The applicable Pricing Supplement will contain a discussion of any special
United States Federal income tax rules with respect to currency indexed notes or
other indexed Notes.
NON-U.S. HOLDERS
Subject to the discussion of backup withholding below, payments of
principal (and premium, if any) and interest (including OID) by the Company or
any agent of the Company (acting in its capacity as such) to any holder of a
Note that is not a U.S. Holder (a "Non-U.S. Holder") will not be subject to U.S.
Federal withholding tax, provided, in the case of interest (including OID), that
(i) the Non-U.S. Holder does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company entitled
to vote, (ii) the Non-U.S. Holder is not a controlled foreign corporation for
U.S. tax purposes that is related to the Company (directly or indirectly)
through stock ownership and (iii) either (A) the Non-U.S. Holder certifies to
the Company or its agent under penalties of perjury that it is not a United
States person and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Note certifies to the Company or its agent under
penalties of perjury that such statement has been received from the Non-U.S.
Holder by it or by another financial institution and furnishes the payor with a
copy thereof.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest (including OID) on the Note is effectively connected with the
conduct of such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed in the preceding paragraph (provided that such holder
furnishes a properly executed IRS Form 4224 on or before any payment date to
claim such exemption), may
S-24
<PAGE> 25
be subject to U.S. Federal income tax on such interest (or OID) in the same
manner as if it were a U.S. Holder. In addition, if the Non-U.S. Holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its effectively connected earnings and profits for the taxable year, subject to
certain adjustments. For purposes of the branch profits tax, interest (including
OID) on a Note will be included in the earnings and profits of such holder if
such interest (or OID) is effectively connected with the conduct by such holder
of a trade or business in the United States. In lieu of the certificate
described in the preceding paragraph, such a holder must provide the payor with
a properly executed IRS Form 4224 to claim an exemption from U.S. Federal
withholding tax.
Any capital gain, market discount or exchange gain realized on the sale,
exchange, retirement or other disposition of a Note by a Non-U.S. Holder will
not be subject to U.S. Federal income or withholding taxes if (i) such gain is
not effectively connected with a U.S. trade or business of the Non-U.S. Holder
and (ii) in the case of an individual, such Non-U.S. Holder (A) is not present
in the United States for 183 days or more in the taxable year of the sale,
exchange, retirement or other disposition or (B) does not have a tax home (as
defined in Section 911(d)(3) of the Code) in the United States in the taxable
year of the sale, exchange, retirement or other disposition and the gain is not
attributable to an office or other fixed place of business maintained by such
individual in the United States.
Notes held by an individual who is neither a citizen nor a resident of the
United States for U.S. Federal tax purposes at the time of such individual's
death will not be subject to U.S. Federal estate tax, provided that the income
from such Notes was not or would not have been effectively connected with a U.S.
trade or business of such individual and that such individual qualified for the
exemption from U.S. Federal withholding tax (without regard to the certification
requirements) described above.
PURCHASERS OF NOTES THAT ARE NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE POSSIBLE APPLICABILITY OF UNITED STATES WITHHOLDING
AND OTHER TAXES UPON INCOME REALIZED IN RESPECT OF THE NOTES.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes are outstanding, the Company is
required to provide the IRS with certain information, including the holder's
name, address and taxpayer identification number (either the holder's Social
Security number or its employer identification number, as the case may be), the
aggregate amount of principal and interest paid (including OID, if any) to that
holder during the calendar year and the amount of tax withheld, if any. This
obligation, however, does not apply with respect to certain U.S. Holders,
including corporations, tax-exempt organizations, qualified pension and profit
sharing trusts and individual retirement accounts.
In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or underreports its tax liability, the
Company, its agents or paying agents or a broker may be required to "backup"
withhold a tax equal to 31% of each payment of interest (including OID) and
principal (and premium, if any) on the Notes. This backup withholding is not an
additional tax and may be credited against the U.S. Holder's U.S. Federal income
tax liability, provided that the required information is furnished to the IRS.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof
(in its capacity as such) to a Non-U.S. Holder of a Note if such holder has
provided the required certification that it is not a United States person as set
forth in clause (iii) in the first paragraph under "Non-U.S. Holders" above, or
has otherwise established an exemption (provided that neither the Company nor
its agent has actual knowledge that the holder is a United States person or that
the conditions of any exemption are not in fact satisfied).
Payment of the proceeds from the sale of a Note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that if the broker is a United States person, a controlled
foreign corporation for United States tax purposes or a foreign person 50
percent or more of whose
S-25
<PAGE> 26
gross income from all sources for the three-year period ending with the close of
its taxable year preceding the payment was effectively connected with a U.S.
trade or business, information reporting may apply to such payments. Payment of
the proceeds from a sale of a Note to or through the U.S. office of a broker is
subject to information reporting and backup withholding unless the holder or
beneficial owner certifies as to its taxpayer identification number or otherwise
establishes an exemption from information reporting and backup withholding.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through
the Agents, who have agreed to use reasonable best efforts to solicit offers to
purchase Notes. The Company will have the sole right to accept offers to
purchase Notes and may reject any offer to purchase Notes in whole or in part.
An Agent will have the right to reject any offer to purchase Notes solicited by
it in whole or in part. Payment of the purchase price of the Notes will be
required to be made in immediately available funds. The Company will pay an
Agent, in connection with sales of Notes resulting from a solicitation made or
an offer to purchase received by such Agent, a commission ranging from .125% to
.750% of the principal amount of Notes to be sold, provided, however, that
commissions with respect to Notes maturing in thirty years or greater will be
negotiated.
The Company may also sell Notes to an Agent as principal for its own
account at discounts to be agreed upon at the time of sale. Such Notes may be
resold to investors and other purchasers at prevailing market prices, or prices
related thereto at the time of such resale, as determined by the Agent or, if so
agreed, at a fixed public offering price. In addition, the Agents may offer the
Notes they have purchased as principal to other dealers. The Agents may sell
Notes to any dealer at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed to any dealer will not be
in excess of the discount to be received by such Agent from the Company. After
the initial public offering of Notes to be resold to investors and other
purchasers, the public offering price (in the case of Notes to be resold at a
fixed public offering price) concession and discount may be changed.
The Company has reserved the right to sell the Notes directly to investors,
and may solicit and accept offers to purchase Notes directly from investors from
time to time on its own behalf. The Company may accept (but not solicit) offers
to purchase Notes through additional agents and may appoint additional agents
for the purpose of soliciting offers to purchase Notes, in either case on terms
substantially identical to the terms contained in the Distribution Agreement.
Such other agents, if any, will be named in the applicable Pricing Supplement.
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company and the Agents have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments made in
respect thereof. The Company has also agreed to reimburse the Agents for certain
expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange. The Company has been advised by the Agents that
the Agents intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Agents are not obligated to do so, however, and the Agents
may discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Debt Securities pursuant to the Indenture
referred to herein.
The Agents and/or certain of their affiliates may engage in transactions
with and perform services for the Company and certain of its affiliates in the
ordinary course of business.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Dow,
Lohnes & Albertson, counsel for the Company, or such other attorney of the
Company as the Company may designate, and for the Agents by Cravath, Swaine &
Moore.
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<PAGE> 27
$750,000,000
COX COMMUNICATIONS, INC.
DEBT SECURITIES
---------------------
The Company may offer and issue from time to time its debentures, notes,
bonds or other evidences of indebtedness (the "Debt Securities") for a maximum
aggregate initial offering price of $750 million (or the equivalent thereof
denominated in one or more foreign currencies, foreign currency units or
composite currencies). The Debt Securities may be offered as separate series in
amounts, at prices and on terms to be determined at the time of sale and to be
set forth in one or more Prospectus Supplements. Debt Securities may be issuable
in global form or registered form without coupons or in bearer form with or
without coupons attached. The Company will offer Debt Securities to the public
on terms determined by market conditions. Debt Securities may be sold for U.S.
dollars, foreign denominated currency or currency units; principal of and any
interest on Debt Securities may likewise be payable in U.S. dollars, foreign
denominated currency or currency units -- in each case, as the Company
specifically designates. The Debt Securities in respect of which this Prospectus
is being delivered are hereinafter also referred to collectively as the "Offered
Securities."
The accompanying Prospectus Supplement will set forth the specific terms of
the Offered Securities, including the specific designation, aggregate principal
amount, purchase price, maturity, redemption terms, interest rate (or manner of
calculation thereof), time of payment of interest (if any), terms for any
conversion or exchange (including the terms relating to the adjustment thereof),
listing (if any) on a securities exchange, currency, form (which may be
registered or bearer or certificated or global) and any other specific terms of
the Debt Securities. The accompanying Prospectus Supplement will also set forth
the name of and compensation to each dealer, underwriter or agent (if any)
involved in the sale of the Offered Securities being offered and the managing
underwriters with respect to each series sold to or through underwriters.
---------------------
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 Offered Securities may be offered through dealers, underwriters or
agents designated from time to time by the Company, as set forth in the
accompanying Prospectus Supplement. Net proceeds to the Company will be the
purchase price in the case of sales to a dealer, the public offering price less
discount in the case of sales to an underwriter or the purchase price less
commission in the case of sales through an agent -- in each case, less other
expenses attributable to issuance and distribution. No Offered Securities may be
sold without delivery of the applicable Prospectus Supplement describing the
method and terms of the offering of those Offered Securities. See "Plan of
Distribution" for possible indemnification arrangements for dealers,
underwriters and agents.
---------------------
May 1, 1996
<PAGE> 28
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR AN APPLICABLE SUPPLEMENT TO THIS
PROSPECTUS (EACH A "PROSPECTUS SUPPLEMENT") AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY COX COMMUNICATIONS, INC. (THE "COMPANY") OR ANY UNDERWRITER, DEALER OR AGENT.
THIS PROSPECTUS AND ANY APPLICABLE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
---------------------
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, is required to file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company can be inspected and
copied at the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at Seven
World Trade Center, 13th Floor, New York, New York, 10048 and Citicorp Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Company's Class A Common Stock, par value $1.00 per share, is listed
on the New York Stock Exchange (Symbol: COX), and reports, proxy statements and
other information concerning the Company may be inspected and copied at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933 (the "Securities Act"), which relates to
the Debt Securities (the "Registration Statement"). As permitted by the rules
and regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Debt Securities, reference is hereby made to the Registration Statement,
exhibits and schedules filed therewith. The Registration Statement may be
inspected without charge by anyone at the office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may
be obtained from the Commission upon payment of the prescribed fees. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to 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 all respects by such reference.
---------------------
IN CONNECTION WITH THIS OFFERING, UNDERWRITERS, IF ANY, MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OFFERED
SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZATION, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information...................... 2
Documents Incorporated by Reference........ 3
The Company................................ 4
Use of Proceeds............................ 4
Ratio of Earnings to Fixed Charges......... 4
<CAPTION>
PAGE
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<S> <C>
Description of the Debt Securities......... 5
Plan of Distribution....................... 14
Legal Matters.............................. 15
Experts.................................... 15
</TABLE>
2
<PAGE> 29
DOCUMENTS INCORPORATED BY REFERENCE
The following documents have been filed with the Commission by the Company
and are incorporated herein by reference and made a part hereof:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(ii) the Company's Current Reports on Form 8-K dated January 31, 1996;
(iii) the Company's Proxy Statement for the 1996 Annual Meeting of
Stockholders dated March 19, 1996; and
(iv) the consolidated balance sheets of Times Mirror Cable Television,
Inc. as of December 31, 1993 and 1994 and the related consolidated
statements of income, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1994 and report of independent
auditors included as Exhibit 99.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
All documents filed by the Company with the Commission pursuant to Sections
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 of the Offered Securities shall be
deemed to be incorporated in this Prospectus by reference and to be a part
hereof from the date of filing of such documents. The Company will provide,
without charge to any person to whom a copy of this Prospectus is delivered,
upon the written or oral request of such person, a copy of any document
incorporated by reference herein other than exhibits to such documents unless
such exhibits are specifically incorporated by reference in such document.
Requests should be directed to Dallas S. Clement, Assistant Treasurer, Cox
Communications, Inc., 1400 Lake Hearn Drive, Atlanta, Georgia 30319 (telephone:
(404) 843-5000).
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
3
<PAGE> 30
THE COMPANY
The Company is the fifth largest operator of cable television systems in
the United States. In addition, the Company is a fully integrated, diversified
media and broadband communications company with operations and investments in
three related areas: (i) U.S. broadband networks; (ii) cable television
programming; and (iii) international broadband networks. The Company was
incorporated in Delaware on May 19, 1994 under the name "Cox Cable
Communications, Inc.," and, on November 21, 1994, changed its name to "Cox
Communications, Inc." Prior to the Company's incorporation, the Company's
operations and investments were a division of Cox Holdings, Inc., a wholly-owned
subsidiary of Cox Enterprises, Inc., ("CEI"). These operations and investments
were contributed by CEI to the Company on May 25, 1994. The Company's principal
executive offices are located at 1400 Lake Hearn Drive, Atlanta, Georgia 30319
(telephone: (404) 843-5000).
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for general corporate purposes, which may include additions to working capital,
the repayment or redemption of existing indebtedness and the financing of
capital expenditures and acquisitions. The Company may borrow additional funds
from time to time from public and private sources on both a long-term and
short-term basis and may sell commercial paper to fund its future capital and
working capital requirements in excess of internally generated funds. See
"Description of Debt Securities."
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995(1) 1994(1) 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
2.8x 2.7x 8.7x 8.4x 6.8x
</TABLE>
- ---------------
(1) The ratio decreased in 1995 and 1994 due to increased interest expense
resulting from debt associated with the Company's merger with Times Mirror
Cable Television, Inc.
For purposes of this computation, earnings are defined as income before
income taxes (excluding losses and undistributed earnings on equity method
investments), minority interests and fixed charges (excluding capitalized
interest). Fixed charges are the sum of (i) interest cost (including capitalized
interest), (ii) estimated interest component of rent expense and (iii) dividends
on subsidiary preferred stock.
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<PAGE> 31
DESCRIPTION OF THE DEBT SECURITIES
GENERAL
The Debt Securities will be unsecured senior obligations of the Company.
Most of the assets of the Company are owned by its subsidiaries. Therefore, the
Company's rights and the rights of its creditors, including holders of Debt
Securities, to participate in the assets of any subsidiary upon such
subsidiary's liquidation or recapitalization will be subject to the prior claims
of such subsidiary's creditors, except to the extent that the Company may itself
be a creditor with recognized claims against the subsidiary.
The Debt Securities will constitute senior debt of the Company and, unless
otherwise specified in a Prospectus Supplement, will be issued under an
Indenture, dated as of June 27, 1995 (the "Indenture"), between the Company and
The Bank of New York, as Trustee (the "Trustee").
The Indenture does not limit the aggregate principal amount of debt
securities that may be issued thereunder, and the Indenture provides that debt
securities may be issued thereunder from time to time in one or more series. A
copy of the form of the Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The following summary of certain
provisions of the Indenture and the Debt Securities does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended. Capitalized terms used in the following summary and not otherwise
defined herein shall have the meanings ascribed to them in the Indenture.
Reference is made to the Prospectus Supplement for the following terms and
other possible terms of each series of the Debt Securities (to the extent such
terms are applicable to such Debt Securities): (i) the classification, specific
designation, aggregate principal amount, purchase price and denomination of the
Debt Securities; (ii) currency or units based on or relating to currencies in
which such Debt Securities are denominated and/or in which principal (and
premium, if any) and/or interest will or may be payable; (iii) any date of
maturity; (iv) interest rate or rates (or the method by which such rate will be
determined); (v) the dates on which any such interest will be payable; (vi) the
place or places where the principal of, premium, if any, and interest on the
Debt Securities will be payable; (vii) any repayment, redemption, prepayment or
sinking fund provisions; (viii) whether the Debt Securities will be issuable in
global form, registered form and/or bearer form ("Bearer Securities") and, if
Bearer Securities are issuable, any restrictions applicable to the exchange of
one form for another and to the offer, sale and delivery of Bearer Securities;
(ix) the terms, if any, on which such Debt Securities may be converted into or
exchanged for stock or other securities of the Company or other entities, any
specific terms relating to the adjustment thereof and the period during which
such Debt Securities may be so converted or exchanged; (x) any applicable United
States federal income tax consequences, including whether and under what
circumstances the Company will pay additional amounts on Offered Securities held
by a person who is not a U.S. person (as defined in the Prospectus Supplement)
in respect of any tax, assessment or governmental charge withheld or deducted
and, if so, whether the Company will have the option to redeem such Debt
Securities rather than pay such additional amounts; and (xi) any other specific
terms of the Debt Securities, including any additional events of default or
covenants provided for with respect to such Debt Securities, and any terms which
may be required by or advisable under applicable laws or regulations.
Debt Securities may be presented for exchange and registered Debt
Securities may be presented for transfer in the manner, at the places and
subject to the restrictions set forth in the Debt Securities and the Prospectus
Supplement. Such services will be provided without charge, other than any tax or
other governmental charge payable in connection therewith, but subject to the
limitations provided in the Indenture. Debt Securities in bearer form and the
coupons, if any, appertaining thereto will be transferable by delivery.
Debt Securities will bear interest at a fixed rate (a "Fixed Rate
Security") or a floating rate (a "Floating Rate Security"). Debt Securities
bearing no interest or interest at a rate that at the time of issuance is below
the prevailing market rate will be sold at a discount below their stated
principal amount. Special United States federal income tax considerations
applicable to any such discounted Debt Securities or to certain Debt
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<PAGE> 32
Securities issued at par which are treated as having been issued at a discount
for United States federal income tax purposes will be described in the relevant
Prospectus Supplement.
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on any
interest payment date, to be determined by reference to one or more currency
exchange rates, commodity prices, equity indices or other factors. Holders of
such Debt Securities may receive a payment of principal on any principal payment
date, or a payment of interest on any interest payment date, that is greater
than or less than the amount of principal or interest otherwise payable on such
dates, depending upon the value on such dates of the applicable currency,
commodity, equity index or other factor. Information as to the methods for
determining the amount of principal or interest payable on any date, the
currencies, commodities, equity indices or other factors to which the amount
payable on such date is linked and certain additional tax considerations will be
set forth in the applicable Prospectus Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple of $1,000.
GLOBAL SECURITIES
The registered Debt Securities of a series may be issued in the form of one
or more fully registered global Securities (a "Registered Global Security") that
will be deposited with a depositary (a "Debt Depositary") or with a nominee for
a Debt Depositary identified in the Prospectus Supplement relating to such
series and registered in the name of the Debt Depositary or a nominee thereof.
In such case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding registered Debt Securities of the series to be
represented by such Registered Global Securities. Unless and until it is
exchanged in whole for Debt Securities in definitive registered form, a
Registered Global Security may not be transferred except as a whole by the Debt
Depositary for such Registered Global Security to a nominee of such Debt
Depositary or by a nominee of such Debt Depositary to such Debt Depositary or
another nominee of such Debt Depositary or by such Debt Depositary or any such
nominee to a successor of such Debt Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any portion of
a series of Debt Securities to be represented by a Registered Global Security
will be described in the Prospectus Supplement relating to such series. The
Company anticipates that the following provisions will apply to all depositary
arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Debt Depositary for such
Registered Global Security ("participants") or persons that may hold interests
through participants. Upon the issuance of a Registered Global Security, the
Debt Depositary for such Registered Global Security will credit, on its
book-entry registration and transfer system, the participants' accounts with the
respective principal amounts of the Debt Securities represented by such
Registered Global Security beneficially owned by such participants. The accounts
to be credited shall be designated by any dealers, underwriters or agents
participating in the distribution of such Debt Securities. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership interests will be effected only through, records
maintained by the Debt Depositary for such Registered Global Security (with
respect to interests of participants) and on the records of participants (with
respect to interests of persons holding through participants). The laws of some
states may require that certain purchasers of securities take physical delivery
of such securities in definitive form. Such limits and such laws may impair the
ability to own, transfer or pledge beneficial interests in Registered Global
Securities.
So long as the Debt Depositary for a Registered Global Security, or its
nominee, is the registered owner of such Registered Global Security, such Debt
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Debt Securities represented by such Registered Global
Security for all purposes under the applicable Indenture. Except as set forth
below, owners of beneficial interests in a Registered Global Security will not
be entitled to have the Debt Securities represented by such Registered Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of such Debt Securities in definitive form and will not be
considered the owners or holders thereof under the
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<PAGE> 33
applicable Indenture. Accordingly, each person owning a beneficial interest in a
Registered Global Security must rely on the procedures of the Debt Depositary
for such Registered Global Security and, if such person is not a participant, on
the procedures of the participant through which such person owns its interest,
to exercise any rights of a holder under the applicable Indenture. The Company
understands that under existing industry practices, if it requests any action of
holders or if an owner of a beneficial interest in a Registered Global Security
desires to give or take any action which a holder is entitled to give or take
under the applicable Indenture, the Debt Depositary for such Registered Global
Security would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners holding
through them.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Registered Global Security registered in the name of a Debt
Depositary or its nominee will be made to such Debt Depositary or its nominee,
as the case may be, as the registered owner of such Registered Global Security.
None of the Company, the Trustee or any other agent of the Company or agent of
the Trustees will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in such Registered Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Debt Depositary for any Debt Securities
represented by a Registered Global Security, upon receipt of any payment of
principal, premium or interest in respect of such Registered Global Security,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in such Registered Global
Security as shown on the records of such Debt Depositary. The Company also
expects that payments by participants to owners of beneficial interests in such
Registered Global Security held through such participants will be governed by
standing customer instructions and customary practices, as is now the case with
the securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of such participants.
If the Debt Depositary for any Debt Securities represented by a Registered
Global Security is at any time unwilling or unable to continue as Debt
Depositary or ceases to be a clearing agency registered under the Exchange Act,
and a successor Debt Depositary registered as a clearing agency under the
Exchange Act is not appointed by the Company within 90 days, the Company will
issue such Debt Securities in definitive form in exchange for such Registered
Global Security. In addition, the Company may at any time and in its sole
discretion determine not to have any of the Debt Securities of a series
represented by one or more Registered Global Securities and, in such event, will
issue Debt Securities of such series in definitive form in exchange for all of
the Registered Global Security or Securities representing such Debt Securities.
Any Debt Securities issued in definitive form in exchange for a Registered
Global Security will be registered in such name or names as the Debt Depositary
shall instruct the relevant Trustee. It is expected that such instructions will
be based upon directions received by the Debt Depositary from participants with
respect to ownership of beneficial interests in such Registered Global Security.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, create, incur or assume any Lien (other than Permitted
Liens) on Restricted Property to secure the payment of Indebtedness of the
Company or any Restricted Subsidiary if, immediately after the creation,
incurrence or assumption of such Lien, the aggregate outstanding principal
amount of all Indebtedness of the Company and the Restricted Subsidiaries that
is secured by Liens (other than Permitted Liens) on Restricted Property would
exceed the greater of (i) $200 million or (ii) 15% of the aggregate outstanding
principal amount of all Indebtedness of the Company and the Restricted
Subsidiaries (whether or not so secured), unless effective provision is made
whereby the Debt Securities (together with, if the Company shall so determine,
any other Indebtedness ranking equally with the Debt Securities, whether then
existing or thereafter created) are
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<PAGE> 34
secured equally and ratably with (or prior to) such Indebtedness (but only for
so long as such Indebtedness is so secured).
Limitation on Indebtedness of Restricted Subsidiaries. The Company will
not permit any Restricted Subsidiary to incur any Indebtedness if, immediately
after the incurrence or assumption of such Indebtedness, the aggregate
outstanding principal amount of all Indebtedness of the Restricted Subsidiaries
would exceed the greater of (i) $200 million or (ii) 15% of the aggregate
outstanding principal amount of all Indebtedness of the Company and the
Restricted Subsidiaries; provided that, in any event, a Restricted Subsidiary
may incur Indebtedness to extend, renew or replace Indebtedness of such
Restricted Subsidiary to the extent that the principal amount of the
Indebtedness so incurred does not exceed the principal amount of the
Indebtedness extended, renewed or replaced thereby immediately prior to such
extension, renewal or replacement plus any premium, accrued and unpaid interest
or capitalized interest payable thereon.
Designation of Subsidiaries. The Company may designate a Restricted
Subsidiary as an Unrestricted Subsidiary or designate an Unrestricted Subsidiary
as a Restricted Subsidiary at any time, provided that (i) immediately after
giving effect to such designation, the Leverage Ratio of the Restricted Group is
not greater than 7:1 and the Company and the Restricted Subsidiaries are in
compliance with the "Limitation on Liens" and "Limitation on Indebtedness of
Restricted Subsidiaries" covenants, and (ii) an Officers' Certificate with
respect to such designation is delivered to the Trustee within 75 days after the
end of the fiscal quarter of the Company in which such designation is made (or,
in the case of a designation made during the last fiscal quarter of the
Company's fiscal year, within 120 days after the end of such fiscal year), which
Officers' Certificate shall state the effective date of such designation.
Mergers or Sales of Assets. The Indenture provides that the Company may
not merge into or consolidate with another corporation or sell or lease all or
substantially all its assets to another corporation unless (i) either (A) the
Company is the surviving corporation or (B) the resulting, surviving or
transferee corporation is organized under the laws of a state of the United
States or the District of Columbia and agrees to pay promptly when due the
principal of and premium, if any, and interest on the Debt Securities, and to
assume, perform and observe all the covenants and conditions of the Indenture,
and (ii) immediately after and giving effect to such transaction, no Event of
Default has occurred.
The Indenture does not contain any provisions affording holders of Debt
Securities any additional protection in the event that the Company enters into a
highly-leveraged transaction.
DEFINITIONS
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Indebtedness" means, without duplication, with respect to any Person: (i)
any indebtedness of such Person (A) for borrowed money or (B) evidenced by a
note, debenture or similar instrument (including a purchase money obligation)
given in connection with the acquisition of any property or assets, including
securities; (ii) any guarantee by such Person of any indebtedness of others
described in the preceding clause (i); and (iii) any amendment, extension,
renewal or refunding of any such indebtedness or guarantee. The term
"Indebtedness" excludes (i) any indebtedness of the Company or any Restricted
Subsidiary to the Company or another Restricted Subsidiary, (ii) any guarantee
by the Company or any Restricted Subsidiary of indebtedness of the Company or
another Restricted Subsidiary, (iii) trade accounts payable and (iv) letters of
credit, performance bonds and similar obligations issued in favor of
governmental or franchising authorities as a term of cable television franchise
or other governmental franchise, license, permit or authorization held by such
Person or any of its Subsidiaries.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Leverage Ratio" with respect to the Restricted Group means, as of the date
of and after giving effect to any designation of an Unrestricted Subsidiary as a
Restricted Subsidiary or any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary, in each case in accordance with the "Designation of
Subsidiaries"
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<PAGE> 35
covenant, the ratio of (i) the aggregate outstanding principal amount of all
Indebtedness of the Restricted Group as of such date to (ii) the product of four
times the Restricted Group Cash Flow for the most recent full fiscal quarter for
which financial information is available on such date.
"Permitted Liens" means: (i) any Lien which arises out of a judgment or
award against the Company or any Restricted Subsidiary with respect to which the
Company or such Restricted Subsidiary at the time shall be prosecuting an appeal
or proceeding for review (or with respect to which the period within which such
appeal or proceeding for review may be initiated shall not have expired) and
with respect to which (a) the Company or such Restricted Subsidiary shall have
secured a stay of execution pending such appeal or proceeding for review or (b)
the Company or such Restricted Subsidiary shall have posted a bond or
established adequate reserves (in accordance with generally accepted accounting
principles) for the payment of such judgment or award; (ii) any Lien upon any
real or personal property or interest therein of the Company or a Restricted
Subsidiary existing at the time of acquisition thereof or securing the payment
of Indebtedness incurred by the Company or such Restricted Subsidiary to finance
some or all of the purchase price of, or cost of construction of or improvements
on, any such property or interest therein; provided that (A) the outstanding
principal amount of the Indebtedness secured by such Lien does not at any time
exceed 100% of the greater of the purchase price for or the fair value of such
real or personal property or interest therein, (B) such Lien does not encumber
or constitute a charge against any other Restricted Property theretofore owned
by the Restricted Group (except that in the case of construction or improvement,
the Lien may extend to unimproved real property on which the property so
constructed or the improvement is located), and (C) the Indebtedness secured by
such Lien would be permitted to be incurred under the covenant described under
"Limitation on Indebtedness of Restricted Subsidiaries"; and (iii) any Lien
representing the extension, renewal or replacement (or successive extensions,
renewals or replacements) of Liens referred to in clause (ii) above; provided
that the principal of the Indebtedness secured thereby does not exceed the
principal of the Indebtedness secured thereby immediately prior to such
extension, renewal or replacement, plus any accrued and unpaid interest or
capitalized interest payable thereon, and that such extension, renewal or
replacement shall be limited to all or a part of the property (or interest
therein) subject to the Lien so extended, renewed or replaced (plus improvements
and construction on such property). The outstanding principal amount of
Indebtedness secured by a Lien permitted by clause (ii) or (iii) above or, if
less, the fair value of the property or interest therein secured thereby, shall
be included in the calculation pursuant to the covenant described under
"Limitation on Liens" of the aggregate outstanding principal amount of
Indebtedness secured by Liens on Restricted Property for purposes of determining
whether a Lien (other than a Permitted Lien) may be incurred in compliance with
such covenant.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Principal Property" means, as of any date of determination, any property
or assets owned by any Restricted Subsidiary other than (i) any such property
which, in the good faith opinion of the Board of Directors, is not of material
importance to the business conducted by the Company and its Restricted
Subsidiaries taken as a whole and (ii) any shares of any class of stock or any
other security of any Unrestricted Subsidiary.
"Restricted Group" means, as of any date of determination, the Company and
the Restricted Subsidiaries as of such date after giving effect to any
designation being made on such date in accordance with the "Designation of
Subsidiaries" covenant.
"Restricted Group Cash Flow" for any period means the Restricted Group Net
Income for such period, plus (i) the sum (without duplication) of the aggregate
of each of the following items of the Company and the Restricted Subsidiaries
for such period to the extent taken into account as charges to Restricted Group
Net Income for such period: (A) interest expense, (B) income tax expense, (C)
depreciation and amortization expense and other noncash charges, (D)
extraordinary items and (E) after-tax losses on sales of assets outside of the
ordinary course of business not otherwise included in extraordinary items in
accordance with generally accepted accounting principles, minus (ii) the sum
(without duplication) of the aggregate of each of the
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<PAGE> 36
following items of the Company and the Restricted Subsidiaries for such period
to the extent taken into account as credits to Restricted Group Net Income for
such period: (A) noncash credits, (B) extraordinary items and (C) after-tax
gains on sales of assets outside of the ordinary course of business not
otherwise included in extraordinary items in accordance with generally accepted
accounting principles.
For purposes of this definition, (i) "Restricted Group Net Income" for any
period means the aggregate of the net income (loss) for such period of the
Company and the Restricted Subsidiaries, determined on a consolidated basis in
accordance with generally accepted accounting principles; provided that the net
income (loss) of any Person accounted for by the equity method of accounting and
the net income (loss) of any Unrestricted Subsidiary shall be excluded, except
that the net income of any such Person or Unrestricted Subsidiary shall be
included to the extent of the amount of dividends or distributions paid by such
Person or Unrestricted Subsidiary to the Company or a Restricted Subsidiary
during such period; and (ii) if the Company or any Restricted Subsidiary
consummated any acquisition or disposition of assets during the period for which
Restricted Group Cash Flow is being calculated, or consummated any acquisition
or disposition of assets subsequent to such period and on or prior to the date
as of which the Leverage Ratio is to be determined, then, in each such case, the
Restricted Group Cash Flow for such period shall be calculated on a pro forma
basis (and not as a pooling of interests, if applicable) as if such acquisition
or disposition had occurred at the beginning of such period.
"Restricted Property" means, as of any date of determination, any Principal
Property and any shares of stock of a Restricted Subsidiary owned by the Company
or a Restricted Subsidiary.
"Restricted Subsidiary" means each Subsidiary of the Company other than the
Unrestricted Subsidiaries.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that has
been designated as an Unrestricted Subsidiary as permitted by the covenant
described under "Designation of Subsidiaries" and not thereafter redesignated as
a Restricted Subsidiary as permitted thereby and (ii) each Subsidiary of any
Unrestricted Subsidiary.
DEFAULTS
An Event of Default with respect to Debt Securities of any series is
defined in the Indenture as (i) a default in the payment of interest on the Debt
Securities when due, continued for 30 days, (ii) a default in the payment of
principal of any such Debt Security when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under
"-- Certain Covenants -- Mergers or Sales of Assets" above, (iv) the failure by
the company to comply within 60 days after notice with any of its other
agreements contained in the Indenture, including its obligations under the
covenants described above in "-- Certain Covenants" under "-- Limitation on
Liens," "-- Limitation on Indebtedness of Restricted Subsidiaries" or
"-- Designation of Subsidiaries," (v) Indebtedness of the Company or any
Restricted Subsidiary is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and the
total amount of such Indebtedness unpaid or accelerated exceeds 5% of the
aggregate outstanding principal amount of all
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<PAGE> 37
Indebtedness of the Company and the Restricted Subsidiaries (the
"cross-acceleration provision") or (vi) certain events of bankruptcy, insolvency
or reorganization of the Company or a Restricted Subsidiary (the "bankruptcy
provisions"). However, a default under clause (iv) with respect to a series of
Debt Securities will not constitute an Event of Default until the Trustee or the
holders of 25% in principal amount of the outstanding Debt Securities of such
series notify the Company of the default and the Company does not cure such
default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing with respect to a series of
Debt Securities, the Trustee or the holders of at least 25% in principal amount
of the outstanding Debt Securities of such series may declare the principal of
and accrued but unpaid interest on all the Debt Securities of such series to be
due and payable. Upon such a declaration, such principal and interest shall be
due and payable immediately. If an Event of Default relating to certain events
of bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Debt Securities will ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any holders of the Debt Securities. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Debt Securities of a series may rescind any such acceleration with
respect to the Debt Securities of such series and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Debt
Securities of any series unless such holders have offered to the Trustee
reasonable indemnity or security against any loss, liability or expense. Except
to enforce the right to receive payment of principal, premium (if any) or
interest when due, no holder of a Debt Security may pursue any remedy with
respect to the Indenture or the Debt Securities of the same series unless (i)
such holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Debt Securities of such series have requested the Trustee to pursue the remedy,
(iii) such holders have offered the Trustee reasonable security or indemnity
against any loss, liability or expense, (iv) the Trustee has not complied with
such request within 60 days after the receipt thereof and the offer of security
or indemnity and (v) the holders of a majority in principal amount of the
outstanding Debt Securities of such series have not given the Trustee a
direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the holders of a majority in principal amount of the
outstanding Debt Securities of any series are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights
of any other holder of a Debt Security of the same series or that would involve
the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing with
respect to a series of securities and is known to the Trustee, the Trustee must
mail to each holder of the Debt Securities of such series notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Debt Security, the Trustee
may withhold notice if and so long as a committee of its trust officers
determines that withholding notice is not opposed to the interest of the holders
of the Debt Securities of such series. In addition, the Company is required to
deliver to the Trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. The Company also is required to deliver to
the Trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action the
Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with respect to
a series of Debt Securities with the consent of the holders of a majority in
principal amount of the Debt Securities of such series then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Debt Securities) and any past default or compliance with any provisions may
also be waived with such a consent of the holders of a majority in principal
amount of the Debt Securities of such series then outstanding. However,
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without the consent of each holder of an outstanding Debt Security of such
series, no amendment may, among other things, (i) reduce the amount of Debt
Securities of such series whose holders must consent to an amendment, (ii)
reduce the rate of or extend the time for payment of interest on any Debt
Security of such series, (iii) reduce the principal of or extend the Stated
Maturity of any Debt Security of such series, (iv) reduce the premium payable
upon the redemption of any Debt Security of such series or change the time at
which any Debt Security of such series may or shall be redeemed, (v) make any
Debt Securities of such series payable in money other than that stated in the
Debt Security of such series, (vi) impair the right of any holder of the Debt
Securities of such series to receive payment of principal of and interest on
such holder's Debt Securities of such series on or after the due dates therefor
or to institute suit for the enforcement of any payment on or with respect to
such holder's Debt Securities or (vii) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions.
Without the consent of any holder of the Debt Securities, the Company and
the Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Debt Securities in addition to or in place of certificated Debt Securities, to
add guarantees with respect to the Debt Securities, to secure the Debt
Securities, to add to the covenants of the Company for the benefit of the
holders of the Debt Securities or to surrender any right or power conferred upon
the Company, to make any change that does not adversely affect the rights of any
holder of the Debt Securities or to comply with any requirement of the
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act.
The consent of the holders of the Debt Securities is not necessary under
the Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Debt Securities of the affected series a
notice briefly describing such amendment. However, the failure to give such
notice to all holders of the Debt Securities of such series, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Debt
Securities of a series and the Indenture with respect to such series ("legal
defeasance"), except for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or exchange of the
Debt Securities of such series, to replace mutilated, destroyed, lost or stolen
Debt Securities of such series and to maintain a registrar and paying agent in
respect of the Debt Securities of such series. The Company at any time may
terminate its obligations with respect to a series of Debt Securities under the
covenants described under "-- Certain Covenants" (other than the covenants
described under "-- Mergers or Sales of Assets"), the operation of the
cross-acceleration provision and the bankruptcy provisions with respect to
Restricted Subsidiaries described under "-- Defaults" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option with respect to a series of Debt Securities, payment of
the Debt Securities of such series may not be accelerated because of an Event of
Default with respect thereto. If the Company exercises its covenant defeasance
option with respect to a series of Debt Securities, payment of the Debt
Securities of such series may not be accelerated because of an Event of Default
specified in clause (iv), (v) or (vi) (with respect only to Restricted
Subsidiaries) under "-- Defaults" above.
In order to exercise either defeasance option with respect to a series of
Debt Securities, the Company must irrevocably deposit in trust (the "defeasance
trust") with the Trustee money or U.S. Government Obligations for the payment of
principal, premium (if any) and interest on the Debt Securities of such series
to redemption or maturity, as the case may be, and must comply with certain
other conditions, including delivery to the Trustee of an Opinion of Counsel to
the effect that holders of the Debt Securities of such series
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will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance and will be subject to federal income tax
on the same amount and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred (and, in the case
of legal defeasance only, such Opinion of Counsel must be based on a ruling of
the Internal Revenue Service or other change in applicable federal income tax
law).
TRANSFER
The Debt Securities may be transferred or exchanged in accordance with the
Indenture. Unless otherwise indicated in the applicable Prospectus Supplement,
the Debt Securities will be issued in registered form and will be transferable
only upon the surrender of the Debt Securities being transferred for
registration of transfer. The Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge payable in connection
with certain transfers or exchanges. The Company is not required to transfer or
exchange any Debt Security selected for redemption. In addition, the Company is
not required to transfer or exchange any Debt Security for a period of 15 days
before a selection of Debt Securities to be redeemed or before any interest
payment date.
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Debt
Securities.
The holders of a majority in 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 exercising any remedy available to the
Trustee, subject to certain exceptions. The Indenture provides that if an Event
of Default occurs (and is not cured) with respect to a series of Debt
Securities, the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any holder of Debt
Securities of such series, unless such holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or expense
and then only to the extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Debt Securities will be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
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PLAN OF DISTRIBUTION
The Company may sell Offered Securities on a negotiated or competitive
basis to or through underwriters or dealers, directly to one or more purchasers,
or through agents. A Prospectus Supplement will set forth the terms of the
offering of the Offered Securities offered thereby, including the name or names
of any underwriters, the purchase price of the Offered Securities, and the
proceeds to the Company from the sale, any underwriting discounts and other
items constituting underwriters' compensation, any public offering price, any
discounts or concessions allowed or reallowed or paid to dealers, and any
securities exchange or market on which the Offered Securities may be listed.
Only underwriters so named in such Prospectus Supplement are deemed to be
underwriters in connection with the Offered Securities offered thereby.
Offers to purchase Offered Securities may be solicited by agents designated
by the Company from time to time. Any such agent, who may be deemed to be an
underwriter as that term is defined in the Securities Act, involved in the offer
or sale of the Offered Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Company to such
agent set forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment. Agents may be entitled under agreements which may
be entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act, and
may be customers of, engage in transactions with or perform services for the
Company in the ordinary course of business.
If any underwriters are utilized in the sale of the Offered Securities in
respect of which this Prospectus is delivered, the Company will enter into an
underwriting agreement with such underwriters at the time of sale to them and
the names of the underwriters and the terms of the transaction will be set forth
in the Prospectus Supplement, which will be used by the underwriters to make
resales of the Offered Securities in respect of which this Prospectus is
delivered to the public. The underwriters may be entitled, under the relevant
underwriting agreement, to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for the Company in
the ordinary course of business.
If a dealer is utilized in the sale of the Offered Securities in respect of
which the Prospectus is delivered, the Company will sell such Offered Securities
to the dealer, as principal. The dealer may then resell such Offered Securities
to the public at varying prices to be determined by such dealer at the time of
resale. Dealers may be entitled to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for the Company in
the ordinary course of business.
Offered Securities may also be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms acting as principals for their own accounts or as agents
for the Company. Any remarketing firm will be identified and the terms of its
agreement, if any, with the Company and its compensation will be described in
the Prospectus Supplement. Remarketing firms may be entitled under agreements
which may be entered into with the Company to indemnification by the Company
against certain civil liabilities, including liabilities under the Securities
Act, and may be customers of, engage in transactions with or perform services
for the Company in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters or dealers to solicit offers by certain purchasers to
purchase Offered Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on a specified date in the
future. Each Contract will be for an amount not less than, and unless the
Company otherwise agrees the aggregate principal amount of Offered Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in the Prospectus Supplement. Institutions with whom Contracts,
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but shall in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
that the purchase by an institution of the Offered Securities
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covered by its Contract shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject. A commission indicated in the Prospectus Supplement will be paid to
underwriters and agents soliciting purchases of Offered Securities pursuant to
Contracts accepted by the Company. Such Contracts will be subject to only those
conditions set forth in the Prospectus Supplement, and the Prospectus Supplement
will set forth the commission payable for solicitation of such offers.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Offered
Securities will be passed upon for the Company by Dow, Lohnes & Albertson,
Washington, D.C. The underwriters or agents with respect to Offered Securities
will be represented by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 have been audited by Deloitte & Touche LLP
("Deloitte & Touche"), independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing. The consolidated financial statements of Times Mirror Cable
Television, Inc. at December 31, 1993 and 1994 and for each of the three years
in the period ended December 31, 1994 have been audited by Ernst & Young LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, and have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
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