<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 19, 2000)
U.S. $3,450,000,000
JOHN DEERE CAPITAL CORPORATION
MEDIUM-TERM NOTES, SERIES D
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
--------------
TERMS: We plan to offer and sell the Notes with various terms, including the
following:
- Ranking as our senior or subordinated indebtedness
- Stated maturities of 9 months to 30 years from date of issue
- Redemption and/or repayment provisions, whether mandatory, at our option, at
the option of the holders or none at all
- Payments in U.S. dollars or one or more foreign currencies
- Minimum denominations of $1,000 or other specified denominations for foreign
currencies
- Book-entry (through The Depository Trust Company) or certificated form
- Interest payments on fixed rate Notes on each May 15 and November 15
- Interest payments on floating rate Notes on a monthly, quarterly, seminannual
or annual basis
- Interest at fixed or floating rates, or no interest at all. The floating
interest rate may be based on one or more of the following indices plus or
minus a spread and/or multiplied by a spread multiplier:
- CD rate
- CMT rate
- Commercial paper rate
- Eleventh district cost of funds rate
- Federal funds rate
- LIBOR
- Prime rate
- Treasury rate
- Such other interest basis or interest rate formula as may be specified
in the applicable pricing supplement
We will specify the final terms for each Note, which may be different from
the terms described in this prospectus supplement, in the applicable pricing
supplement.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON PAGE S-3.
The aggregate initial public offering price of the Notes that we offer will
be limited to $3,450,000,000 or its equivalent in one or more foreign
Currencies, but this limit will decrease if we sell other securities that are
described in the attached prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS OR ANY PRICING SUPPLEMENT IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
AGENTS' COMMISSIONS AND
PRICE TO PUBLIC DISCOUNTS PROCEEDS TO THE COMPANY
--------------- ------------------------- --------------------------------
<S> <C> <C> <C>
Per Note...................... 100% .125% to .675% 99.325% to 99.875%
Total(1)...................... $3,450,000,000 $4,312,500 to $23,287,500 $3,426,712,500 to $3,445,687,500
</TABLE>
------------------------
(1) Or the equivalent thereof in one or more foreign currencies.
We may sell the Notes to the Agents as principals for resale at varying or
fixed offering prices or through the Agents as agents using their reasonable
best efforts on our behalf. We may also sell the Notes without the assistance of
the Agents (whether acting as principal or as agent).
-------------------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
------------
The date of this prospectus supplement is October 19, 2000.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Risk Factors................................................ S-3
About this Prospectus Supplement and the Pricing
Supplements................................................ S-5
Description of Notes........................................ S-5
Special Provisions Relating to Foreign Currency Notes....... S-21
United States Taxation...................................... S-24
Plan of Distribution........................................ S-33
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Where You Can Find More Information......................... 2
The Capital Corporation..................................... 3
Use of Proceeds............................................. 4
Prospectus.................................................. 4
Prospectus Supplement....................................... 4
Description of Debt Securities.............................. 5
Description of Debt Warrants................................ 19
Description of Preferred Stock.............................. 21
Plan of Distribution........................................ 25
Legal Opinions.............................................. 25
Experts..................................................... 25
</TABLE>
------------------------
You should rely only on the information contained in this prospectus
supplement. We have not, and the Agents have not, authorized any other person to
provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the Agents
are not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information appearing
in this prospectus supplement is accurate as of the date on the front cover of
this prospectus supplement only. Our business, financial condition, results of
operations and prospects may have changed since this date.
References in this prospectus supplement to "JDCC", the "Company", "we",
"us" or "our" are to John Deere Capital Corporation.
S-2
<PAGE>
RISK FACTORS
Your investment in the Notes is subject to certain risks, especially if the
Notes involve in some way a foreign currency. This prospectus supplement does
not describe all of the risks of an investment in the Notes, whether arising
because the Notes are denominated in a currency other than U.S. dollars or
because the return on the Notes is linked to one or more interest rate or
currency indices or formulas. You should consult your own financial and legal
advisors about the risks entailed by an investment in the Notes and the
suitability of your investment in the Notes in light of your particular
circumstances. The Notes are not an appropriate investment for investors who are
unsophisticated with respect to foreign currency transactions or transactions
involving the type of index or formula used to determine amounts payable.
Non-U.S. residents should consult their own legal and financial advisors with
regard to such matters. You should also consider carefully, among other factors,
the matters described below.
EXCHANGE RATES AND EXCHANGE CONTROLS
If you invest in foreign currency Notes and currency indexed Notes, there
will be significant risks not associated with investments in debt instruments
denominated in U.S. dollars or U.S. dollar based indexes. These risks include,
without limitation, the possibility of significant changes in the rate of
exchange between the U.S. dollar and your payment currency and the imposition or
modification of foreign exchange controls by either the United States or the
applicable foreign governments. We have no control over the factors that
generally affect these risks, such as economic, financial and political events
and the supply and demand for the applicable currencies. In recent years, rates
of exchange between the U.S. dollar and certain foreign currencies have been
volatile and such volatility may continue in the future. Past fluctuations in
any particular exchange rate are not necessarily indicative, however, of
fluctuations that may occur in the future. Fluctuations in exchange rates
against the U.S. dollar could result in a decrease in the U.S. dollar-equivalent
yield of your foreign currency Notes or currency indexed Notes, in the U.S.
dollar-equivalent value of the principal or any premium payable at maturity of
your Notes and, generally, in the U.S. dollar-equivalent market value of your
Notes. The currency risks with respect to your foreign currency Notes or
currency indexed Notes may be further described in the applicable pricing
supplement.
Foreign exchange rates can either float or be fixed by sovereign
governments. Governments, however, often do not voluntarily allow their
currencies to float freely in response to economic forces. Instead, governments
use a variety of techniques, such as intervention by that country's central
bank, or the imposition of regulatory controls or taxes, to affect the exchange
rate of their currencies. Governments may also issue a new currency to replace
an existing currency or alter the exchange rate or relative exchange
characteristics by the devaluation or revaluation of a currency. Thus, an
important risk in purchasing foreign currency Notes or currency indexed Notes
for U.S. dollar based investors is that their U.S. dollar-equivalent yields
could be affected by governmental actions that could change or interfere with
currency valuation that was previously freely determined, fluctuations in
response to other market forces and the movement of currencies across borders.
There will be no adjustment or change in the terms of the foreign currency Notes
or currency indexed Notes if exchange rates become fixed, or if any devaluation
or revaluation or imposition of exchange or other regulatory controls or taxes
occur, or other developments, affecting the U.S. dollar or any applicable
currency occur.
The paying agent will make all calculations relating to your foreign
currency Notes or currency indexed Notes. All of these determinations will, in
the absence of clear error, be binding on holders of the Notes.
S-3
<PAGE>
On January 1, 1999, Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, The Netherlands, Portugal and Spain (the "Participating
States") commenced a new stage of economic and monetary union and introduced a
single currency (the "euro"), which is legal tender in such Participating States
and will eventually substitute for the national currencies of the Participating
States. Bills and coins in euro will be circulated for the first time on
January 1, 2002 and for a three-year transitional period until December 31,
2001, the current currencies of the Participating States will remain legal
tender in those States as the physical currency units denominating and
representing the euro, but all financial records and accounts will thereafter be
stated in the euro. The conversion rate between the current currencies of each
Participating State and the euro was fixed irrevocably by the Council of the
European Union on January 1, 1999. The Council of the European Union has adopted
regulations providing specific rules for the introduction of the euro.
Any pricing supplement relating to Notes with a specified currency other
than U.S. dollars will contain information concerning historical exchange rates
for that currency against the U.S. dollar and a brief description of any
relevant exchange controls.
FOREIGN CURRENCY JUDGMENTS
The Indentures and the Notes will be, except to the extent described in a
pricing supplement, governed by, and construed in accordance with, the laws of
the State of New York. An action based upon an obligation payable in a currency
other than U.S. dollars may be brought in courts in the United States. However,
courts in the United States have not customarily rendered judgments for money
damages denominated in any currency other than U.S. dollars. In addition, it is
not clear, whether in granting such judgment, the rate of conversion would be
determined with reference to the date of default, the date judgment is rendered
or any other date. The Judiciary Law of the State of New York provides, however,
that an action based upon an obligation payable in a currency other than U.S.
dollars will be rendered in the foreign currency of the underlying obligation
and converted into U.S. dollars at a rate of exchange prevailing on the date the
judgment or decree is entered. In such cases, holders of foreign currency Notes
would bear the risk of exchange rate fluctuations between the time the amount of
judgment is calculated and the time the specified currency was converted into
U.S. dollars and paid to such holders.
This prospectus supplement, the accompanying prospectus and the applicable
pricing supplement do not describe all the risks of an investment in Notes
denominated in currencies other than U.S. dollars. We believe that these risks
are potentially too variable to ascertain and describe with any reasonable
degree of certainty and that preparation of a list of every potential material
risk incorporating every economic, financial, political and military
circumstance, among other things, would be impractical. You should consult your
own financial and legal advisors as to the risks entailed by an investment in
Notes denominated in currencies other than U.S. dollars. These Notes are not an
appropriate investment for investors who are unsophisticated with respect to
foreign currency transactions.
NOTES INDEXED TO INTEREST RATE, CURRENCY OR OTHER INDICES OR FORMULAS MAY HAVE
RISKS NOT ASSOCIATED WITH A CONVENTIONAL DEBT SECURITY
If you invest in Notes indexed to one or more interest rate, currency or
other indices or formulas, you will be subject to significant risks not
associated with a conventional fixed rate or floating rate debt security. These
risks include fluctuation of the particular indices or formulas and the
possibility that you will receive a lower, or no, amount of principal, premium
or interest and at different times than you expected. We have no control over a
number of matters, including economic, financial and political events, that are
important in determining
S-4
<PAGE>
the existence, magnitude and longevity of these risks and their results. In
addition, if an index or formula used to determine any amounts payable in
respect of the Notes contains a multiplier or leverage factor, the effect of any
change in the particular index or formula will be magnified. In recent years,
values of certain indices and formulas have been volatile and volatility in
those and other indices and formulas may be expected in the future. However,
past experience is not necessarily indicative of what may occur in the future.
CREDIT RATINGS
The credit ratings on the Notes may not reflect the potential impact of all
risks related to structure and other factors on the value of the Notes. In
addition, real or anticipated changes in our credit ratings will generally
affect the market value of the Notes.
ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS
We intend to use this prospectus supplement, the attached prospectus and a
related pricing supplement to offer our Notes from time to time.
This prospectus supplement provides you with certain terms of the Notes and
supplements the description of the Debt Securities contained in the attached
prospectus. If information in this prospectus supplement is inconsistent with
the prospectus, this prospectus supplement will replace the inconsistent
information in the prospectus.
Each time we issue Notes, we will prepare a pricing supplement which will
contain additional terms of the offering and the specific description of the
Notes being offered. The pricing supplement may also add, update or change
information in this prospectus supplement or the attached prospectus, including
provisions describing the calculation of interest and the method of making
payments under the terms of a Note. The flexibility available to us to set or
negotiate individualized terms for Notes means that there will be transactions,
particularly with Indexed Notes, that are quite complex. Often the terms of the
Notes differ from the terms described in this prospectus supplement. Any
information in the pricing supplement that is inconsistent with this prospectus
supplement will replace the inconsistent information in this prospectus
supplement.
DESCRIPTION OF NOTES
The following summary of certain terms of the Notes is not complete. For
additional terms of the Notes, you should also read the Indentures under which
the Notes will be issued, which are exhibits to our shelf registration statement
(File No. 333-39012). The following description of the Notes offered supplements
and, to the extent the descriptions are inconsistent, replaces the description
of the general terms and provisions of the Debt Securities which is found under
the heading "Description of Debt Securities" in the prospectus that is attached.
The following descriptions will apply to each Note unless otherwise specified in
the pricing supplement.
GENERAL
The Notes will be offered on a continuous basis and may be issued as Senior
Notes or Subordinated Notes.
The Notes are our direct and unsecured obligations. The total initial public
offering price of Senior and Subordinated Notes that may be offered using this
prospectus supplement, together with any debt warrants, is $3,450,000,000.
S-5
<PAGE>
Senior Notes are "Senior Securities", as described in the attached
prospectus and rank equally with all of our unsecured senior debt. Subordinated
Notes are "Subordinated Securities", as described in the attached prospectus,
and are junior in right of payment to all Senior Indebtedness.
The Senior Notes offered by this prospectus supplement will form a part of
the Medium-Term Notes, Series D, Due from 9 Months to 30 Years from Date of
Issue issued under the Senior Indenture. At the date of this prospectus
supplement, no Medium-Term Notes, Series D, were outstanding under the Senior
Indenture.
The Subordinated Notes offered by this prospectus supplement will form a
part of the Medium-Term Notes, Series D, issued under the Subordinated
Indenture. At the date of this prospectus supplement, no Medium-Term Notes,
Series D, were outstanding under the Subordinated Indenture.
The Indentures do not limit the amount of our Notes or other debt
obligations.
The Notes are not subject to any sinking fund.
The defeasance and covenant defeasance provisions of the Indentures
described under "Description of Debt Securities -- Provisions Applicable to Both
the Senior and Subordinated Indentures -- Defeasance" in the attached prospectus
will apply to the Notes.
Unless otherwise specified in the applicable pricing supplement, the Notes
will be denominated in U.S. dollars and all payments on the Notes will be made
in U.S. dollars. For further information regarding Foreign Currency Notes see
"Risk Factors" and "Special Provisions Relating To Foreign Currency Notes".
Payment of the purchase price of the Notes must be made in immediately
available funds.
As used in this prospectus supplement, "Business Day" means any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
commercial banks are authorized or required by law, regulation or executive
order to close in The City of New York; provided, however, that, with respect to
foreign currency Notes, such day is also not a day on which commercial banks are
authorized or required by law, regulation or executive order to close in the
Principal Financial Center (as defined below) of the country issuing the
specified currency (or, if the specified currency is the euro, such day is also
a day on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer (TARGET) System is open); provided, further, that, with respect to
Notes as to which LIBOR is an applicable interest rate basis, such day is also a
London Business Day.
"London Business Day" means a day on which commercial banks are open for
business (including dealings in the designated LIBOR Currency) in London.
"Principal Financial Center" means (i) the capital city of the country
issuing the specified currency or (ii) the capital city of the country to which
the designated LIBOR Currency relates, as applicable, except, in the case of (i)
or (ii) above, that with respect to United States dollars, Australian dollars,
Canadian dollars, Deutsche marks, Dutch guilders, Italian lire, Portuguese
escudos, South African rand and Swiss francs, the "Principal Financial Center"
shall be The City of New York, Sydney and (solely in the case of the specified
currency Melbourne), Toronto, Frankfurt, Amsterdam, Milan, London (solely in the
case of the designated LIBOR Currency), Johannesburg and Zurich, respectively.
The authorized denominations of Notes denominated in U.S. dollars will be
integral multiples of $1,000. The authorized denominations of foreign currency
Notes will be set forth in the applicable pricing supplement.
S-6
<PAGE>
BOOK-ENTRY DEBT SECURITIES
The Notes will be issued in book-entry form only. This means that we will
not issue actual Notes or certificates to each Holder. Instead, we will issue a
Global Security representing Notes with similar terms and such Global Security
will be held by The Depository Trust Company ("DTC") or its nominee. In order to
own a beneficial interest in a Note, you must be an institution that has an
account with DTC or have an account with an institution, such as a brokerage
firm, that has an account with DTC. For a more complete description of
Book-Entry Debt Securities, see "Description of Debt Securities--Provisions
Applicable to Both the Senior and Subordinated Indentures--Additional
Mechanics--Global Securities" in the prospectus.
Payments of principal of, premium, if any, and interest on, Notes
represented by a Global Security will be made in same-day funds to DTC in
accordance with arrangements then in effect between the applicable Trustee and
DTC.
INTEREST AND INTEREST RATES
GENERAL
Each Note will begin to accrue interest from the date it is originally
issued. The related pricing supplement will specify each Note as a Fixed Rate
Note, a Floating Rate Note, an Amortizing Note or an Indexed Note and describe
the method of determining the interest rate, including any Spread and/or Spread
Multiplier. For an Indexed Note, the related pricing supplement also will
describe the method for the calculation and payment of principal and interest.
The pricing supplement for a Floating Rate Note or Indexed Note may also specify
a maximum and a minimum interest rate.
A Note may be issued as a Fixed Rate Note or a Floating Rate Note or as a
Note that combines fixed and floating rate terms.
Interest rates offered with respect to Notes may differ depending upon,
among other things, the aggregate principal amount of Notes purchased in any
single transaction. Notes with similar variable terms but different interest
rates, as well as Notes with different variable terms, may be offered
concurrently to different investors. Interest rates or formulas and other terms
of Notes are subject to change from time to time, but no such change will affect
any Note already issued or as to which an offer to purchase has been accepted.
FIXED RATE NOTES
The pricing supplement for Fixed Rate Notes will describe a fixed interest
rate payable semi-annually in arrears on each May 15 and November 15 (each an
"Interest Payment Date"). Interest on Fixed Rate Notes will be computed on the
basis of a 360-day year of twelve 30-day months. If the maturity date or an
Interest Payment Date for any Fixed Rate Note is not a Business Day, principal,
premium, if any, and interest for that Note will be paid on the next Business
Day, and no interest will accrue from and after the maturity date or Interest
Payment Date.
ORIGINAL ISSUE DISCOUNT NOTES
We may issue original issue discount Notes (including zero coupon Notes)
("OID Notes") which are Notes issued at a discount from the principal amount
payable at the maturity date. There may not be any periodic interest payments on
OID Notes. For these Notes, interest normally accrues during the life of the
Note and is paid at the maturity date or upon earlier redemption. Upon a
redemption, repayment or acceleration of the maturity of an OID Note,
S-7
<PAGE>
the amount payable will be determined as set forth under "--Optional Redemption,
Repayment and Repurchase." Such amount normally is less than the amount payable
at the maturity date.
AMORTIZING NOTES
We may issue amortizing Notes, which are Fixed Rate Notes for which combined
principal and interest payments are made in installments over the life of each
Note ("Amortizing Notes"). Payments on Amortizing Notes are applied first to
interest due and then to the reduction of the unpaid principal amount. The
related pricing supplement for an Amortizing Note will include a table setting
forth repayment information.
FLOATING RATE NOTES
Each Floating Rate Note will have an interest rate basis or formula. That
formula may be based on:
- the CD Rate;
- the Commercial Paper Rate;
- LIBOR;
- the Federal Funds Rate;
- the Prime Rate;
- the Treasury Rate;
- the CMT Rate;
- the Eleventh District Cost of Funds Rate; or
- another negotiated interest rate basis or formula.
The pricing supplement will also indicate any Spread and/or Spread
Multiplier, which would be applied to the interest rate formula to determine the
interest rate. Any Floating Rate Note may have a maximum or minimum interest
rate limitation. In addition to any maximum interest rate limitation, the
interest rate on the Floating Rate Notes will in no event be higher than the
maximum rate permitted by New York law, as the same may be modified by United
States law for general application.
We will appoint a calculation agent to calculate interest rates on the
Floating Rate Notes. Unless we identify a different party in the pricing
supplement, the paying agent will be the calculation agent for each Note. Unless
otherwise specified in a pricing supplement, the "Calculation Date," if
applicable, relating 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 immediately preceding the relevant Interest Payment Date or the
maturity date, as the case may be.
Upon the request of the beneficial holder of any Floating Rate Note, the
calculation agent will provide the interest rate then in effect and, if
different, the interest rate that will become effective on the next Interest
Reset Date for the Floating Rate Note.
CHANGE OF INTEREST RATE. The interest rate on each Floating Rate Note may
be reset daily, weekly, monthly, quarterly, semi-annually, annually or on some
other specified basis (each, an "Interest Reset Date"). The Interest Reset Date
will be:
- for Notes with interest that resets daily, each Business Day;
S-8
<PAGE>
- for Notes (other than Treasury Rate Notes) with interest that resets
weekly, Wednesday of each week;
- for Treasury Rate Notes with interest that resets weekly, Tuesday of each
week, except as described below under "--Date Interest Rate is
Determined";
- for Notes with interest that resets monthly, the third Wednesday of each
month;
- for Notes with interest that resets quarterly, the third Wednesday of
March, June, September and December of each year;
- for Notes with interest that resets semi-annually, the third Wednesday of
each of the two months of each year indicated in the applicable pricing
supplement; and
- for Notes with interest that resets annually, the third Wednesday of the
month of each year indicated in the applicable pricing supplement.
The related pricing supplement describes the initial interest rate or
interest rate formula on each Note. That rate is effective until the following
Interest Reset Date. Thereafter, the interest rate will be the rate determined
on each Interest Determination Date. Each time a new interest rate is
determined, it becomes effective on the subsequent Interest Reset Date. If any
Interest Reset Date is not a Business Day, then the Interest Reset Date is
postponed to the next Business Day, except, in the case of a LIBOR Note, in
which case, if the next Business Day is in the next calendar month, the Interest
Reset Date is the immediately preceding Business Day. In addition, for Treasury
Rate Notes, if an Interest Determination Date would otherwise fall on an
Interest Reset Date, the particular Interest Reset Date will be postponed to the
next succeeding Business Day.
The Interest Determination Date for Federal Funds and Prime Rate Notes will
be the first Business Day preceding the Interest Reset Date.
DATE INTEREST RATE IS DETERMINED. The Interest Determination Date for all
CD, CMT and Commercial Paper Rate Notes is the second Business Day before the
Interest Reset Date, except in the case of LIBOR Notes the Interest
Determination Date will be the second London Business Day immediately preceding
the applicable Interest Reset Date.
The Interest Determination Date for Treasury Rate Notes will be the day of
the week in which the Interest Reset Date falls on which Treasury bills of the
Index Maturity are normally auctioned. Treasury bills are usually sold at
auction on Monday of each week, unless that day is a legal holiday, in which
case the auction is usually held on Tuesday. Sometimes, the auction is held on
the preceding Friday. If an auction is held on the preceding Friday, that day
will be the Interest Determination Date relating to the Interest Reset Date
occurring in the next week.
The Interest Determination Date for an Eleventh District Cost of Funds Rate
Note is the last Business Day of the month immediately preceding the applicable
Interest Reset Date in which the Federal Home Loan Bank of San Francisco
published the index.
The Interest Determination Date relating to a Floating Rate Note with an
interest rate that is determined by reference to two or more interest rate bases
will be the most recent Business Day which is at least two Business Days before
the applicable Interest Reset Date for each interest rate for the applicable
Floating Rate Note on which each interest rate basis is determinable.
PAYMENT OF INTEREST. Interest is paid as follows:
- for Notes with interest payable daily, weekly or monthly, on the third
Wednesday of each month;
S-9
<PAGE>
- for Notes with interest payable quarterly, on the third Wednesday of
March, June, September, and December of each year;
- for Notes with interest payable semi-annually, on the third Wednesday of
each of the two months specified in the applicable pricing supplement;
- for Notes with interest payable annually, on the third Wednesday of the
month specified in the applicable pricing supplement (each of the above an
"Interest Payment Date"); and
- at maturity, redemption or repurchase.
Each interest payment on a Floating Rate Note will include interest accrued
from, and including, the issue date or the last Interest Payment Date, as the
case may be, to, but excluding, the following Interest Payment Date or the
maturity date, as the case may be.
Interest on a Floating Rate Note will be payable beginning on the first
Interest Payment Date after its issue date to holders of record on the
corresponding Regular Record Date. If an Interest Payment Date (but not the
maturity date) is not a Business Day (except for LIBOR Notes), payment will be
postponed to the next Business Day. In the case of LIBOR Notes, such Interest
Payment Date will be the preceding Business Day if the next Business Day is in
the next calendar month. If the maturity date of any Floating Rate Note is not a
Business Day, principal, premium, if any, and interest for that Note will be
paid on the next Business Day, and no interest will accrue from and after the
maturity date.
Accrued interest on a Floating Rate Note is calculated by multiplying the
principal amount of a Note by an accrued interest factor. The accrued interest
factor is the sum of the interest factors calculated for each day in the period
for which accrued interest is being calculated. The interest factor for each day
is computed by dividing the interest rate in effect on that day by (1) the
actual number of days in the year, in the case of Treasury Rate Notes or CMT
Rate Notes, or (2) 360, in the case of other Floating Rate Notes. The interest
factor for Floating Rate Notes for which the interest rate is calculated with
reference to two or more interest rate bases will be calculated in each period
in the same manner as if only one of the applicable interest rate bases applied.
All percentages resulting from any calculation are rounded to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward. For example, 9.876545% (or .09876545) will be
rounded to 9.87655% (or .0987655). Dollar amounts used in the calculation are
rounded to the nearest cent (with one-half cent being rounded upward).
CD RATE NOTES. The "CD Rate" for any Interest Determination Date is the rate
on that date for negotiable U.S. dollar certificates of deposit having the Index
Maturity described in the related pricing supplement, as published in H.15(519)
prior to 3:00 P.M., New York City time, on the Calculation Date, for that
Interest Determination Date under the heading "CDs (secondary market)". The
"Index Maturity" is the period to maturity of the instrument or obligation with
respect to which the related interest rate basis or formulae will be calculated.
The following procedures will be followed if the CD Rate cannot be
determined as described above:
- If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the CD Rate will be the rate on that
Interest Determination Date for negotiable United States dollar
certificates of deposit of the Index Maturity described in the pricing
supplement as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "CDs (secondary market)."
- If that rate is not published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the
Calculation Date, then the
S-10
<PAGE>
calculation agent will determine the CD Rate to be the average of the
secondary market offered rates as of 10:00 A.M., New York City time, on
that Interest Determination Date, quoted by three leading nonbank dealers
of negotiable U.S. dollar certificates of deposit in New York City (which
may include an agent or its affilates) for negotiable U.S. dollar
certificates of deposit of major United States money-center banks with a
remaining maturity closest to the Index Maturity in an amount that is
representative for a single transaction in the market at that time
described in the pricing supplement. The calculation agent will select the
three dealers referred to above.
- If fewer than three dealers are quoting as mentioned above, the CD Rate
will remain the CD Rate then in effect on that Interest Determination
Date.
"H.15(519)" means the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
COMMERCIAL PAPER RATE NOTES. The "Commercial Paper Rate" for any Interest
Determination Date is the Money Market Yield of the rate on that date for
commercial paper having the Index Maturity described in the related pricing
supplement, as published in H.15(519) prior to 3:00 P.M., New York City time, on
the Calculation Date for that Interest Determination Date under the heading
"Commercial Paper -- Nonfinancial".
The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
- If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the Commercial Paper Rate will be the
Money Market Yield of the rate on that Interest Determination Date for
commercial paper having the Index Maturity described in the pricing
supplement, as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "Commercial Paper -- Nonfinancial."
- If that rate is not published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the
Calculation Date, then the calculation agent will determine the Commercial
Paper Rate to be the Money Market Yield of the average of the offered
rates of three leading dealers of US dollar commercial paper in New York
City (which may include an agent or its affilates) as of 11:00 A.M., New
York City time, on that Interest Determination Date for commercial paper
having the Index Maturity described in the pricing supplement placed for
an industrial issuer whose bond rating is "Aa", or the equivalent, from a
nationally recognized statistical rating organization. The calculation
agent will select the three dealers referred to above.
- If fewer than three dealers selected by the calculation agent are quoting
as mentioned above, the Commercial Paper Rate will remain the Commercial
Paper Rate then in effect on that Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
<TABLE>
<S> <C> <C> <C> <C>
D X 360
Money Market Yield = ---------------- X 100
360 - (D X M)
</TABLE>
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where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the reset period for which interest is being calculated.
LIBOR NOTES. On each Interest Determination Date, the calculation agent will
determine LIBOR as follows:
- If "LIBOR Telerate" is specified in the pricing supplement, LIBOR will be
the rate for deposits in the LIBOR Currency having the Index Maturity
described in the related pricing supplement commencing on the applicable
Interest Reset Date, as such rate appears on the Designated LIBOR Page as
of 11:00 A.M., London time, on that Interest Determination Date.
- If "LIBOR Reuters" is specified in the pricing supplement, LIBOR will be
the average of the offered rates calculated by the calculation agent, or
the offered rate, if the Designated LIBOR Page by its terms provides only
for a single rate, for deposits in the LIBOR Currency having the Index
Maturity described in the related pricing supplement commencing on the
applicable Interest Reset Date, as such rates 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 on the Designated LIBOR
Page.
If the pricing supplement does not specify "LIBOR Telerate" or "LIBOR Reuters,"
the LIBOR Rate will be LIBOR Telerate.
On any Interest Determination Date on which fewer than two offered rates appear
or no rate appears on the applicable Designated LIBOR Page, the calculation
agent will determine LIBOR as follows:
- LIBOR will be determined on the basis of the offered rates at which
deposits in the LIBOR Currency having the Index Maturity described in the
related pricing supplement on the Interest Determination Date and in a
principal amount that is representative of a single transaction in that
market at that time are offered by four major reference banks (which may
include affiliates of the agent) in the London interbank market commencing
on the applicable Interest Reset Date to prime banks in the London
interbank market at approximately 11:00 A.M., London time, on that
Interest Determination Date and in a principal amount that is
representative for a single transaction in the LIBOR Currency in that
market at that time. The calculation agent will select the four banks and
request the principal London office of each of those banks to provide a
quotation of its rate for deposits in the LIBOR Currency. If at least two
quotations are provided, LIBOR for that Interest Determination Date will
be the average of those quotations.
- If fewer than two quotations are provided as mentioned above, LIBOR will
be the rate calculated by the calculation agent as the average of the
rates quoted by three major banks, which may include affiliates of the
agent, in the Principal Financial Center at approximately 11:00 A.M., in
the Principal Financial Center, on that Interest Determination Date for
loans to leading European banks in the LIBOR Currency having the Index
Maturity designated in the pricing supplement and in a principal amount
that is representative for a single transaction in the LIBOR Currency in
that market at that time. The calculation agent will select the three
banks referred to above.
- If fewer than three banks selected by the calculation agent are quoting as
mentioned above, LIBOR will remain LIBOR then in effect on the Interest
Determination Date.
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"LIBOR Currency" means the currency specified in the applicable pricing
supplement as to which LIBOR shall be calculated or, if no such currency is
specified in the applicable pricing supplement, United States dollars.
"Designated LIBOR Page" means:
- if "LIBOR Reuters" is specified in the applicable pricing supplement, the
display on the Reuter Monitor Money Rates Service (or any successor
service) on the page specified in such Pricing Supplement (or any other
page as may replace such page on such service) for the purpose of
displaying the London interbank rates of major banks for the LIBOR
Currency; or
- if "LIBOR Telerate" is specified in the applicable pricing supplement or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method of calculating LIBOR, the
display on Bridge Telerate, Inc. (or any successor service, "Telerate") on
the page specified in such pricing supplement (or any other page as may
replace such page on such service) for the purpose of displaying the
London interbank rates of major banks for the LIBOR Currency.
FEDERAL FUNDS RATE NOTES. The "Federal Funds Rate" for any Interest
Determination Date is the rate on that date for United States dollar Federal
Funds, as published in H.15(519) prior to 3:00 P.M., New York City time, on the
Calculation Date for that Interest Determination Date under the heading "Federal
Funds (Effective)", as such rate is displayed on Telerate on page 120 (or any
other page as may replace such page on such service) ("Telerate Page 120").
The following procedures will be followed if the Federal Funds Rate cannot
be determined as described above:
- If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the Federal Funds Rate will be the
rate on that Interest Determination Date for United States dollar federal
funds, as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "Federal Funds (Effective)."
- If that rate does not appear on Telerate Page 120 or is not yet published
in H.15(519), H.15 Daily Update or another recognized electronic source by
3:00 P.M., New York City time, on the Calculation Date, then the
calculation agent will determine the Federal Funds Rate to be the average
of the rates for the last transaction in overnight United States dollar
Federal funds arranged by three leading brokers of United States dollar
Federal Funds transactions in New York City as of 9:00 A.M., New York City
time which may include the agent or its affiliates, on that Interest
Determination Date. The calculation agent will select the three brokers
referred to above.
- If fewer than three brokers selected by the calculation agent are quoting
as mentioned above, the Federal Funds Rate will be the Federal Funds Rate
in effect on that Interest Determination Date.
PRIME RATE NOTES. The "Prime Rate" for any Interest Determination Date is the
rate on that date, as published in H.15(519) by 3:00 P.M., New York City time,
on the Calculation Date for that Interest Determination Date under the heading
"Bank Prime Loan" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Interest Determination Date as
published in H.15 Daily Update, or such other recognized electronic source used
for the purpose of displaying such rate, under the caption "Bank Prime Loan."
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The following procedures will be followed if the Prime Rate cannot be
determined as described above:
- If the rate is not published in H.15(519) H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the
Calculation Date, then the calculation agent will determine the Prime Rate
to be the average of the rates of interest publicly announced by each bank
that appears on the Reuters screen designated as "US PRIME 1 Page" as that
bank's prime rate or base lending rate in effect as of 11:00 A.M., New
York City time for that Interest Determination Date.
- If fewer than four rates appear on the Reuters screen US PRIME 1 Page on
the Interest Determination Date, then the Prime Rate will be the average
of the prime rates or base lending rates quoted (on the basis of the
actual number of days in the year divided by a 360-day year) as of the
close of business on the Interest Determination Date by three major banks
which may include the agent or its affiliates in the City of New York
selected by the calculation agent.
- If the banks selected by the calculation agent are not quoting as
mentioned above, the Prime Rate will remain the Prime Rate then in effect
on the Interest Determination Date.
"Reuters Screen US PRIME 1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "US PRIME 1" page (or any
other page as may replace that page on that service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
TREASURY RATE NOTES. The "Treasury Rate" for any Interest Determination Date is
the rate set at the auction of direct obligations of the United States
("Treasury bills") having the Index Maturity described in the related pricing
supplement under the caption "INVESTMENT RATE" on the display on Telerate on
page 56 (or any other page as may replace such page on such service) ("Telerate
Page 56") or page 57 (or any other page as may replace such page on such
service) ("Telerate Page 57") by 3:00 P.M., New York City time, on the
Calculation Date for that Interest Determination Date.
The following procedures will be followed if the Treasury Rate cannot be
determined as described above:
- if the rate is not so published by 3:00 P.M., New York City time, on the
Calculation Date, the Treasury Rate will be the bond equivalent yield of
the rate for the applicable treasury bills as published in H.15 Daily
Update, or other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High," or
- if such rate is not so published in the H.15 Daily Update by 3:00 P.M.,
New York City time, on the Calculation Date, the Treasury Rate will be
bond equivalent yield of the auction rate of the applicable treasury bills
announced by the United States Department of the Treasury, or
- if the rate referred to above is not yet published or announced by the
United States Department of the Treasury by 3:00 P.M., New York City time,
or if the auction is not held, then the Treasury Rate will be the bond
equivalent yield of the rate on the applicable Interest Determination Date
of treasury bills having the Index Maturity specified in the applicable
pricing supplement published in H.15(519) under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market," or
- if such rate is not so published by 3:00 P.M., New York City time, on the
related Calculation Date, then the Treasury Rate will be the rate on the
applicable Interest Determination Date of the applicable Treasury bills as
published in H.15 Daily Update,
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or other recognized electronic sources used for the purpose of displaying
the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market," or
- if such rate is not so published in H.15(519), H.15 Daily Update or
another recognized electronic source by 3:00 P.M., New York City time, on
the related Calculation Date, then the calculation agent will determine
the Treasury Rate to be the bond equivalent yield of the average of the
secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on the applicable Interest Determination Date, of three primary
United States government securities dealers, (which may include the agent
or its affiliates) selected by the calculation agent, for the issue of
Treasury bills with a remaining maturity closest to the Index Maturity
specified in the applicable pricing supplement, or
- if fewer than three dealers selected by the calculation agent are quoting
as mentioned above, the Treasury Rate will remain the Treasury Rate in
effect on that Interest Determination Date.
"Bond equivalent yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
<TABLE>
<S> <C> <C> <C> <C>
D X N
Bond equivalent yield = ---------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for Treasury bills quoted on a
bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as the
case may be, and "M" refers to the actual number of days in the interest period
for which interest is being calculated.
CMT RATE NOTES. The "CMT Rate" for any Interest Determination Date is:
(1) if CMT Telerate Page 7051 is specified in the applicable pricing
supplement:
- the percentage equal to the yield for United States Treasury securities at
"constant maturity" having the Index Maturity specified in the applicable
pricing supplement as published in H.15(519) under the heading "Treasury
Constant Maturities," as the yield is displayed on Telerate (or any
successor service), on page 7051 (or any other page as may replace page
7051 on that service) ("Telerate Page 7051"), for the applicable Interest
Determination Date, or
- if the above rate does not appear on Telerate Page 7051, the percentage
equal to the yield for United States Treasury securities at "constant
maturity" having the Index Maturity specified in the applicable pricing
supplement and for the applicable Interest Determination Date as published
in H.15(519) under the heading "Treasury Constant Maturities," or
- if the above rate does not appear on Telerate Page 7051 or is not yet
published in H.15(519), the rate on the applicable Interest Determination
Date for the period of the Index Maturity specified in the applicable
pricing supplement as may then be published by either the Federal Reserve
System Board of Governors or the United States Department of the Treasury
that the calculation agent determines to be comparable to the rate which
would otherwise have been published in H.15(519), or
- if that rate is not published, then the CMT Rate will be calculated by the
calculation agent as a yield to maturity based on the average of the
secondary market bid prices at approximately 3:30 P.M., New York City
time, on the applicable Interest Determination Date of three leading
primary United States government securities dealers in The City
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of New York, (which may include the agents or their affiliates) (each, a
"reference dealer"), selected by the calculation agent from five 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 United
States Treasury securities with an original maturity equal to the Index
Maturity specified in the applicable pricing supplement, a remaining term
to maturity no more than 1 year shorter than the Index Maturity specified
in the applicable pricing supplement and in a principal amount that is
representative for a single transaction in the securities in the market at
that time, or
- if fewer than five but more than two of the prices referred to above are
provided as requested on the Interest Determination Date, then the CMT
Rate will be the average of the bid prices obtained and neither the
highest nor the lowest of the quotations shall be eliminated, or,
- if fewer than three prices referred to above are provided as requested on
the Interest Determination Date, then the CMT Rate will be calculated as a
yield to maturity based on the average of the secondary market bid prices
as of approximately 3:30 P.M., New York City time, on the applicable
Interest Determination Date of three reference dealers selected by the
calculation agent from five 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 United States Treasury securities with an original
maturity greater than the Index Maturity specified in the applicable
pricing supplement, a remaining term to maturity closest to the Index
Maturity specified in the applicable pricing supplement and in a principal
amount that is representative for a single transaction in securities in
the market at that time, or
- if fewer than five but more than two prices referred to above are provided
as requested on the Interest Determination Date, then the CMT Rate will be
the average of the bid prices obtained and neither the highest nor the
lowest of the quotations will be eliminated, or
- if fewer than three prices referred to above are provided as requested,
the CMT Rate will then be the CMT Rate in effect on the applicable
Interest Determination Date.
(2) if CMT Telerate Page 7052 is specified in the applicable pricing supplement:
- the percentage equal to the one-week or one-month, as specified in the
applicable pricing supplement, average yield for United States Treasury
securities at "constant maturity" having the Index Maturity specified in
the applicable pricing supplement as published in H.15(519) opposite the
heading "Treasury Constant Maturities," as the yield is displayed on
Telerate or any successor service, on page 7052 (or any other page as may
replace that specified page on that service) ("Telerate Page 7052"), for
the week or month, as applicable, ended immediately preceding the week or
month, as applicable, in which the related Interest Determination Date
falls, or
- if the above rate is not published on Telerate Page 7052, then the CMT
Rate will be the percentage equal to the one-week or one-month, as
specified in the applicable pricing supplement, average yield for United
States Treasury securities at "constant maturity" having the Index
Maturity specified in the applicable pricing supplement and for the week
or month, as applicable, preceding the applicable Interest Determination
Date as published in H.15(519) opposite the caption "Treasury Constant
Maturities," or
- if the above rate is not published on Telerate Page 7052 or is not yet
published or in H.15(519), for the one-week or one-month, as specified in
the applicable pricing
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supplement, then the CMT Rate will be the average yield for United States
Treasury securities at "constant maturity" having the Index Maturity
specified in the applicable pricing supplement as otherwise announced by
the Federal Reserve Bank of New York for the week or month, as applicable,
ended immediately preceding the week or month, as applicable, in which the
related Interest Determination Date falls, or
- if the Federal Reserve Bank of New York does not publish the rate referred
to above, then the CMT Rate will be calculated by the calculation agent as
a yield to maturity based on the average of the secondary market bid
prices at approximately 3:30 P.M., New York City time, on the applicable
interest determination date of three reference dealers selected by the
calculation agent from five 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 United States Treasury securities with an original
maturity equal to the Index Maturity specified in the applicable pricing
supplement, a remaining term to maturity no more than 1 year shorter than
the index maturity specified in the applicable pricing supplement and in a
principal amount that is representative for a single transaction in the
securities in the market at that time, or
- if fewer than five but more than two of the prices referred to above are
provided as requested, on the Interest Determination Date then the CMT
Rate will be the average of the bid prices obtained and neither the
highest nor the lowest of the quotations shall be eliminated, or
- if fewer than three prices referred to above are provided as requested,
then the calculation agent will determine the CMT Rate to be a yield to
maturity based on the average of the secondary market bid prices as of
approximately 3:30 P.M., New York City time, on the applicable Interest
Determination Date of three reference dealers selected by the calculation
agent from five 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 United States Treasury securities with an original maturity
greater than the Index Maturity specified in the applicable pricing
supplement, a remaining term to maturity closest to the Index Maturity
specified in the applicable pricing supplement and in a principal amount
that is representative for a single transaction in the securities in the
market at the time, or
- if fewer than five but more than two prices referred to above are provided
as requested, on the Interest Determination Date then the CMT Rate will be
the average of the bid prices obtained and neither the highest nor the
lowest of the quotations will be eliminated, or
- if fewer than three prices referred to above are provided as requested,
the CMT Rate will be the CMT Rate in effect on the applicable interest
determination date.
If two United States Treasury securities with an original maturity greater
than the index maturity specified in the applicable pricing supplement have
remaining terms to maturity equally close to the Index Maturity specified in the
applicable pricing supplement the quotes for the United States Treasury security
with the shorter original remaining term to maturity will be used.
ELEVENTH DISTRICT COST OF FUNDS RATE NOTES. The "Eleventh District Cost of
Funds Rate" for any Interest Determination Date is the rate equal to the monthly
weighted average cost of funds for the calendar month preceding the Interest
Determination Date as displayed on the Telerate Page 7058 (or any other page as
may replace that specified page on that service) as
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of 11:00 A.M., San Francisco time, on the Calculation Date for that Interest
Determination Date under the caption "11th District."
The following procedures will be used if the Eleventh District Cost of Funds
Rate cannot be determined as described above:
- If the rate is not displayed on the relevant page as of 11:00 A.M., San
Francisco time, on the Calculation Date, then the Eleventh District Cost
of Funds Rate will be the monthly weighted average cost of funds paid by
member institutions of the Eleventh Federal Home Loan Bank District, as
announced by the Federal Home Loan Bank of San Francisco, as the cost of
funds for the calendar month preceding the date of announcement.
- If no announcement was made relating to the calendar month preceding the
Interest Determination Date, the Eleventh District Cost of Funds Rate will
remain the Eleventh District Cost of Funds Rate then in effect on the
Interest Determination Date.
INDEXED NOTES
We may issue Notes for which the amount of interest or principal that you
will receive will not be known on your date of purchase. Interest or principal
payments for these types of Notes, which we call "Indexed Notes", are determined
by reference to securities, financial or non-financial indices, currencies,
commodities, interest rates, or composite or baskets of any or all of the above.
Examples of indexed items that may be used include a published stock index, the
common stock price of a publicly traded company, the value of the U.S. dollar
versus the Japanese Yen, or the price of a barrel of West Texas intermediate
crude oil.
If you purchase an Indexed Note, you may receive a principal amount at
maturity that is greater than or less than the Note's face amount, and an
interest rate that is greater than or less than the interest rate that you would
have earned if you had instead purchased a conventional debt security issued by
us at the same time with the same maturity. The amount of interest and principal
that you will receive will depend on the structure of the Indexed Note and the
level of the specified indexed item throughout the term of the Indexed Note and
at maturity. Specific information pertaining to the method of determining the
interest payments and the principal amount will be described in the pricing
supplement, as well as additional risk factors unique to the Indexed Note,
certain historical information for the specified indexed item and certain
additional United States federal tax considerations.
RENEWABLE NOTES
We may issue Renewable Notes ("Renewable Notes") which are notes which will
automatically renew at their maturity date unless the holder of the Renewable
Note elects to terminate the automatic extension feature by giving notice in the
manner described in the related pricing supplement.
The holder of the Renewable Note must give notice of termination at least 15
but not more than 30 days prior to the Renewal Date. The holder of a Renewable
Note may terminate the automatic extension for less than all of their Renewable
Notes only if the terms of the Note specifically permit partial termination. An
election to terminate the automatic extension of any portion of the Renewable
Note is not revocable and will be binding on the Holder of the Note. If the
Holder elects to terminate the automatic extension of the maturity of the Note,
the Holder will become entitled to the principal and interest accrued up to the
Renewal Date. The related pricing supplement will identify a final maturity date
beyond which the maturity date cannot be renewed.
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If a note is represented by a Global Security, DTC or its nominee will be
the holder of the Note and therefore will be the only entity that can exercise a
right to terminate the automatic extension of a Note. In order to ensure that
DTC or its nominee will exercise a right to terminate the automatic extension
provisions of a particular Note, the beneficial owner of the Note must instruct
the broker or other DTC participant through which it holds an interest in the
Note to notify DTC of its desire to terminate the automatic extension of the
Note. Different firms have different cut-off times for accepting instructions
from their customers and, accordingly, each beneficial owner should consult the
broker or other participant through which it holds an interest in a Note to
ascertain the cut-off time by which an instruction must be given for delivery of
timely notice to DTC or its nominee.
EXTENDIBLE NOTES
We may issue Notes whose stated maturity date may be extended at our option
(an "Extendible Note") for one or more whole year periods (each an "Extension
Period"), up to but not beyond a final maturity date described in the related
pricing supplement (but not to exceed 30 years from the date of issue).
We may exercise our option to extend the Extendible Note by notifying the
applicable Trustee (or any duly appointed paying agent) at least 45 but not more
than 60 days prior to the then effective maturity date. If we elect to extend
the Extendible Note, the Trustee (or paying agent) will mail (at least 40 days
prior to the maturity date) to the registered holder of the Extendible Note a
notice ("Extension Notice") informing the Holder of our election, the new
maturity date and any updated terms. Upon the mailing of the Extension Notice,
the maturity of such Note will be extended automatically as set forth in the
Extension Notice.
However, we may, not later than 20 days prior to the maturity date of an
Extendible Note (or, if such date is not a Business Day, on the immediately
succeeding Business Day), at our option, establish a higher interest rate, in
the case of a Fixed Rate Note, or a higher Spread and/or Spread Multiplier, in
the case of a Floating Rate Note, for the Extension Period by mailing or causing
the applicable Trustee (or paying agent) to mail notice of such higher interest
rate or higher Spread and/or Spread Multiplier to the Holder of the note. The
notice will be irrevocable.
If we elect to extend the maturity of an Extendible Note, the Holder of the
Note will have the option to instead elect repayment of the Note by us on the
then effective maturity date. In order for an Extendible Note to be so repaid on
the maturity date, we must receive, at least 15 days but not more than 30 days
prior to the maturity date:
(1) the note with the form "Option to Elect Repayment" on the reverse of the
Note duly completed; or
(2) a telegram, telex, 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 applicable
Trustee (or paying agent) not later than the fifth Business Day after the date
of the telegram, telex, facsimile transmission or letter; PROVIDED, HOWEVER,
that the telegram, telex, facsimile transmission or letter shall only be
effective if the Note and form duly completed are received by the applicable
Trustee (or paying agent) by that fifth Business Day. The option may be
exercised by the Holder of an Extendible Note for less than the aggregate
principal amount of the Note then outstanding if
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the principal amount of the Note remaining outstanding after repayment is an
authorized denomination.
If a Note is represented by a Global Security, DTC or its nominee will be
the Holder of that Note and therefore will be the only entity that can exercise
a right to repayment. To ensure that DTC or its nominee timely exercises a right
to repayment with respect to a particular Note, the beneficial owner of that
Note must instruct the broker or other participant through which it holds an
interest in the note to notify DTC of its desire to exercise a right of
repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other participant through which it holds an interest in a
Note to determine the cut-off time by which an instruction must be given for
timely notice to be delivered to DTC or its nominee.
WARRANTS AND UNITS
We may issue Notes paired with Warrants. A description of the Warrants to be
issued with Notes will be included in the related pricing supplement.
OPTIONAL REDEMPTION, REPAYMENT AND REPURCHASE
The pricing supplement for a Note will indicate whether we will have the
option to redeem the Note before the stated maturity and the price and date or
dates on which redemption may occur. If we are allowed to redeem a Note, we may
exercise the option by notifying the Trustee and the paying agent at least 45
days prior to the redemption date. At least 30 but not more than 60 days before
the redemption date, the Trustee will mail notice or cause the paying agent to
mail notice of redemption to the Holders. If a Note is only redeemed in part, we
will issue a new Note or Notes for the unredeemed portion.
The pricing supplement relating to a Note will also indicate whether you
will have the option to elect repayment by us prior to the stated maturity and
the price and the date or dates on which repayment may occur.
For a Note to be repaid, the paying agent must receive at least 30 but not
more than 60 days prior to an optional repayment date, such Note with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed.
You may also send the paying agent a facsimile or letter from a member of a
national securities exchange or the National Association of Securities Dealers,
Inc. or a commercial bank or trust company in the United States describing the
particulars of the repayment, including a guarantee that the Note and the form
entitled "Option to Elect Repayment" will be received by the paying agent no
later than five Business Days after such facsimile or letter. If you present a
Note for repayment, such act will be irrevocable. You may exercise the repayment
option for less than the entire principal of the Note, provided the remaining
principal outstanding is an authorized denomination. If you elect partial
repayment, your Note will be cancelled, and we will issue a new Note or Notes
for the remaining amount.
DTC or its nominee will be the Holder of each Global Security and will be
the only party that can exercise a right of repayment. If you are a beneficial
owner of a Global Security and you want to exercise your right of repayment, you
must instruct your broker or indirect participant through which you hold your
interest to notify DTC. You should consult your broker or such indirect
participant to discuss the appropriate cut-off times and any other requirements
for giving this instruction. The giving of any such instruction will be
irrevocable.
Regardless of anything in this prospectus supplement to the contrary, if a
Note is an Original Issue Discount Note (other than an Indexed Note), the amount
payable in the event of redemption or repayment prior to its stated maturity
will be the amortized face amount on the redemption or repayment date, as the
case may be. The amortized face amount of an
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Original Issue Discount Note will be equal to (i) the issue price plus
(ii) that portion of the difference between the issue price and the principal
amount of the Note that has accrued at the yield to maturity described in the
pricing supplement (computed in accordance with generally accepted U.S. bond
yield computation principles) by the redemption or repayment date. However, in
no case will the amortized face amount of an Original Issue Discount Note exceed
its principal amount.
We may at any time purchase Notes at any price in the open market or
otherwise. We may hold, resell or surrender for cancellation any Notes that we
purchase.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise indicated in the applicable pricing supplement, the Notes
will be denominated in U.S. dollars, payments of principal of and interest on
the Notes will be made in U.S. dollars and payment of the purchase price of the
Notes must be made in immediately available funds. If any of the Notes ("Foreign
Currency Notes") are to be denominated or payable in a currency or currency unit
other than U.S. dollars (a "specified currency"), the following provisions shall
apply in addition to, and to the extent inconsistent therewith shall replace,
the description of general terms and provisions of Notes set forth in the
accompanying prospectus and elsewhere in this prospectus supplement.
A pricing supplement with respect to any Foreign Currency Note (which may
include information with respect to applicable current foreign exchange
controls) is a part of this prospectus and prospectus supplement. Any
information concerning exchange rates 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.
CURRENCIES
We may offer Foreign Currency Notes denominated and/or payable in a
specified currency or specified currencies. Unless otherwise indicated in the
applicable pricing supplement, purchasers are required to pay for Foreign
Currency Notes in the specified currency. At the present time, there are limited
facilities in the United States for conversion of U.S. dollars into specified
currencies and vice versa, and banks may elect not to offer non-U.S. dollar
checking or savings account facilities in the United States. However, if
requested on or prior to the fifth Business Day preceding the date of delivery
of the Foreign Currency Notes, or by such other day as determined by the Agent
who presents such offer to purchase Foreign Currency Notes to us, such Agent may
be prepared to arrange for the conversion of U.S. dollars into the specified
currency set forth in the applicable pricing supplement to enable the purchasers
to pay for the Foreign Currency Notes. Each such conversion will be made by the
Agents on such terms and subject to such conditions, limitations and charges as
the Agents may from time to time establish in accordance with their regular
foreign exchange practices. All costs of exchange will be borne by the
purchasers of the Foreign Currency Notes.
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Information about the specified currency in which a particular Foreign
Currency Note is denominated and/or payable, including historical exchange rates
and a description of the currency and any exchange controls, will be set forth
in the applicable pricing supplement and, in the case of a composite currency, a
description thereof and a description of provisions for payment in the event
such composite currency is no longer used for the purposes for which it was
established.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of and interest on Foreign Currency Notes is payable by us in
the specified currency. Currently, banks do not generally offer non-U.S. dollar
denominated account facilities in their offices in the United States, although
they are permitted to do so. Accordingly, a holder of Foreign Currency Notes
will be paid in U.S. dollars converted from the specified currency unless such
holder elects to be paid in the specified currency, or as otherwise specified in
the applicable pricing supplement.
Any U.S. dollar amount to be received by a holder of a Foreign Currency Note
will be based on the highest bid quotation in The City of New York received by
an agent for us specified in the applicable pricing supplement (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 whom may be the Exchange Rate Agent) selected by the
Exchange Rate Agent and approved by us 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 all holders of Foreign
Currency Notes scheduled to receive U.S. dollar payments and at which the
applicable dealer commits to execute a contract. If three such bid quotations
are not available, payments will be made in the Specified Currency. All currency
exchange costs will be borne by the holder of the Foreign Currency Note by
deductions from such payments.
Unless otherwise indicated in the applicable pricing supplement, a holder of
Foreign Currency Notes may elect to receive payment of the principal of and
interest on the Foreign Currency Notes in the specified currency by transmitting
a written request for such payment to the corporate trust office of the Trustee
in The City of New York on or prior to the Regular Record Date or at least
fifteen calendar days prior to Maturity, as the case may be. Such request may be
in writing (mailed or hand delivered) or sent by cable, telex or other form of
facsimile transmission. A holder of a Foreign Currency Note may elect to receive
payment in the specified currency for all principal and interest payments and
need not file a separate election for each payment. Such election will remain in
effect until revoked by written notice to the Trustee, but written notice of any
such revocation must be received by the Trustee on or prior to the Regular
Record Date or at least fifteen calendar days prior to Maturity, as the case may
be. Holders of Foreign Currency Notes whose Notes are to be held in the name of
a broker or nominee should contact such broker or nominee to determine whether
and how an election to receive payments in the Specified Currency may be made.
Unless otherwise specified in the applicable pricing supplement, if the
specified currency is other than United States dollars, a Beneficial Owner of
the related Global Security who elects to receive payments of principal,
premium, if any, and/or interest, if any, in the specified currency must notify
the Participant through which it owns its interest on or prior to the applicable
Record Date or at least fifteen calendar days prior to the Maturity, as the case
may be, of such Beneficial Owner's election. Such Participant must notify the
Depositary of such election on or prior to the third Business Day after such
Record Date or at least twelve calendar days prior to Maturity, as the case may
be, and the Depositary will notify the Trustee of such election on or prior to
the fifth Business Day after such Record Date or at least ten
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calendar days prior to the Maturity, as the case may be. If complete
instructions are received by the Participant from the Beneficial Owner and
forwarded by the Participant to the Depositary, and by the Depositary to the
Trustee, on or prior to such dates, then such Beneficial Owner will receive
payments in the Specified Currency. See "Description of Debt
Securities--Provisions Applicable to Both the Senior and Subordinated
Indentures--Additional Mechanics--Global Securities" in the prospectus.
Principal and interest on Foreign Currency Notes paid in U.S. dollars will
be paid in the manner specified in the accompanying prospectus and this
prospectus supplement with respect to Notes denominated in U.S. dollars. See
"Description of Notes--General". Interest on Foreign Currency Notes paid in the
Specified Currency will be paid by check mailed on the relevant Interest Payment
Date to the persons entitled thereto to the address of such Holders as they
appear in the Security Register or, at our option, by wire transfer to a bank
account maintained by the holder in the country of the specified currency. The
principal of Foreign Currency Notes, together with interest accrued and unpaid
thereon, due at Maturity will be paid in immediately available funds upon
surrender of such Notes at the corporate trust office of the Trustee in The City
of New York, or, at our option, by wire transfer to such bank account of
immediately available funds to an account with a bank designated at least
fifteen calendar days prior to Maturity by the applicable registered holder,
provided the particular bank has appropriate facilities to make these payments
and the particular Foreign Currency Note is presented and surrendered at the
office or agency maintained by the Company for this purpose in the Borough of
Manhattan, The City of New York, in time for the Trustee to make these payments
in accordance with its normal procedures.
PAYMENT CURRENCY
If a specified currency is not available for the payment of principal or
interest with respect to a Foreign Currency Note due to the imposition of
exchange controls or other circumstances beyond our control, we will be entitled
to satisfy our obligations to holders of Foreign Currency Notes by making such
payment in U.S. dollars on the basis of the noon buying rate in The City of
New York for cable transfers of the specified currency as certified for customs
purposes (or, if not so certified as otherwise determined) by the Federal
Reserve Bank of New York (the "Market Exchange Rate") as computed by the
Exchange Rate Agent on the second Business Day prior to such payment or, if not
then available, on the basis of the most recently available Market Exchange Rate
or as otherwise indicated in an applicable pricing supplement. Any payment made
under such circumstances in U.S. dollars where the required payment is in a
specified currency will not constitute a default under the Indenture with
respect to the Notes.
All determinations referred to above made by the Exchange Rule Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
AS INDICATED ABOVE, AN INVESTMENT IN FOREIGN CURRENCY NOTES OR CURRENCY
INDEXED NOTES INVOLVES SUBSTANTIAL RISKS, AND THE EXTENT AND NATURE OF SUCH
RISKS CHANGE CONTINUOUSLY. AS WITH ANY INVESTMENT IN A SECURITY, PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED IN AN INVESTMENT IN FOREIGN CURRENCY NOTES OR CURRENCY INDEXED NOTES.
SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR PROSPECTIVE PURCHASERS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY MATTERS.
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UNITED STATES TAXATION
In the opinion of Shearman & Sterling, our special tax counsel, the
following summary accurately describes the material United States federal income
tax consequences of the purchase, ownership, and disposition of a Note, subject
to the limitations stated below. Such opinion is based on the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations (including proposed
Regulations and temporary Regulations) promulgated thereunder, rulings, official
pronouncements and judicial decisions, all as in effect on the date of this
prospectus supplement and all of which are subject to change, possibly with
retroactive effect, or to different interpretations. This summary provides
general information only and does not address all of the federal income tax
consequences that may be applicable to a holder of a Note. It does not address
all of the tax consequences that may be relevant to certain types of holders
subject to special treatment under the federal income tax law, such as financial
institutions, individual retirement and other tax-deferred accounts, dealers in
securities or currencies, life insurance companies, tax-exempt organizations,
persons holding Notes as a hedge or hedged against currency risk, as a position
in a straddle for tax purposes, as part of a "synthetic security" or other
integrated investment comprised of a Note and one or more other investments or
United States persons (as defined below) whose functional currency is other than
the U.S. dollar. It also does not discuss the tax consequences to subsequent
purchasers of Notes and is limited to investors who hold Notes as a capital
asset. The federal income tax consequences of purchasing, holding or disposing
of a particular Note will depend, in part, on the particular terms of such Note
as set forth in the applicable pricing supplement. The federal income tax
consequences of purchasing, holding or disposing of certain Floating Rate Notes,
Foreign Currency Notes (other than Single Foreign Currency Notes, as defined
below), Amortizing Notes, Floating Rate/Fixed Rate Notes, Indexed Notes,
Renewable Notes, Extendable Notes and exchangeable or convertible Debt
Securities and Notes with Warrants will be set out in the applicable pricing
supplement. Persons considering the purchase of Notes and making any election
under the Code or the Treasury Regulations with respect to such Notes should
consult their own tax advisors concerning the application of the United States
federal income tax law to their particular situations as well as any tax
consequences arising under the law of any state, local or foreign tax
jurisdiction, subject to the limitations stated below.
"Single Foreign Currency Note" shall mean a Note on which all payments a
holder is entitled to receive are denominated in or determined by reference to
the value of a single Foreign Currency. "Foreign Currency" shall mean a currency
or currency unit, other than a hyperinflationary currency or the U.S. dollar.
UNITED STATES PERSONS
For purposes of the following discussion, "United States person" means an
individual who is a citizen or resident of the United States, an estate subject
to United States federal income taxation without regard to the source of its
income, a corporation, partnership or other business entity created or organized
in or under the laws of the United States or any state or the District of
Columbia, or a trust if both (A) a court within the United States is able to
exercise primary supervision over the administration of the trust, and (B) one
or more United States persons have the authority to control all substantial
decisions of the trust. The following discussion pertains only to a holder of a
Note who is a beneficial owner of such Note and who is a United States person.
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PAYMENTS OF INTEREST ON NOTES THAT ARE NOT DISCOUNT NOTES
Except as discussed below under "Discount Notes" and "Short-Term Notes",
payments of interest on a Note will be taxable to a holder as ordinary interest
income at the time it is accrued or received in accordance with the holder's
method of tax accounting. If the payment is denominated in or determined with
reference to a single Foreign Currency, the amount required to be included in
income by a cash basis holder will be the U.S. dollar value of the amount paid
(determined on the basis of the "spot rate" on the date such payment is
received) regardless of whether the payment is in fact converted into U.S.
dollars. No exchange gain or loss will be recognized with respect to the receipt
of such payment.
Except in the case of a Spot Rate Convention Election (as defined below), a
holder of a Single Foreign Currency Note who uses the accrual method of
accounting or is otherwise required to accrue interest income prior to receipt
will be required to include in income for each taxable year the U.S. dollar
value of the interest that has accrued during such year, determined by
translating such interest at the average rate of exchange for the period or
periods during which such interest has accrued. The average rate of exchange for
an interest accrual period (or partial period) is the simple average of the spot
exchange rates for each business day of such period (or such other average that
is reasonably derived and consistently applied by the holder). Upon receipt of
an interest payment, such holder will recognize ordinary gain or loss in an
amount equal to the difference between the U.S. dollar value of the Foreign
Currency received (determined on the basis of the "spot rate" on the date such
payment is received) or, in the case of interest received in U.S. dollars rather
than in Foreign Currency, the amount so received and the U.S. dollar value of
the interest income that such holder has previously included in income with
respect to such payment. Any such gain or loss generally will not be treated as
interest income or expense, except to the extent provided by administrative
pronouncements of the Internal Revenue Service (the "Service").
A holder may elect (a "Spot Rate Convention Election") to translate accrued
interest into U.S. dollars at the "spot rate" on the last day of an accrual
period for the interest, or, in the case of an accrual period that spans two
taxable years, at the "spot rate" on the last day of the taxable year.
Additionally, if a payment of interest is received within five business days of
the last day of the accrual period, an electing holder may instead translate
such accrued interest into U.S. dollars at the "spot rate" on the day of
receipt. Any such election will apply to all debt instruments held by the United
States person at the beginning of the first taxable year to which the election
applies or thereafter acquired by the United States person and cannot be revoked
without the consent of the Service.
For purposes of this discussion, the "spot rate" generally means a rate that
reflects a fair market rate of exchange available to the public for currency
under a "spot contract" in a free market and involving representative amounts. A
"spot contract" is a contract to buy or sell a currency on or before two
business days following the date of the execution of the contract. If such a
spot rate cannot be demonstrated, the Service has the authority to determine the
spot rate.
PURCHASE, SALE, EXCHANGE OR RETIREMENT OF NOTES
A holder's tax basis in a Note generally will be the U.S. dollar cost of the
Note to such holder (which in the case of a Note purchased with Foreign Currency
will be determined by translating the purchase price at the spot rate on the
date of purchase), increased by any original issue discount, market discount or
acquisition discount (all as defined below) previously included in the holder's
gross income (as described below), and reduced by any amortized premium (as
described below) and any principal payments and payments of stated interest that
are not payments of qualified stated interest (as defined below).
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Upon the sale, exchange or retirement of a Note, a holder generally will
recognize gain or loss equal to the difference between the amount realized on
the sale, exchange or retirement (or the U.S. dollar value at the spot rate on
the date of the sale, exchange or retirement of the amount realized in Foreign
Currency), except to the extent such amount is attributable to accrued interest,
and the holder's tax basis in the Note. Except with respect to (i) gains or
losses attributable to changes in exchange rates (as described in the next
paragraph), (ii) gain attributable to market discount (as described below) and
(iii) gain on the disposition of a Short-Term Note (as described below), gain or
loss so recognized will be capital gain or loss and will be long-term capital
gain or loss, if, at the time of the sale, exchange or retirement, the Note was
held for more than one year. Under current law, long-term capital gains of
individuals are, under certain circumstances, taxed at lower rates than items of
ordinary income.
Gain or loss recognized by a holder on the sale, exchange or retirement of a
Single Foreign Currency Note that is attributable to changes in exchange rates
will be treated as ordinary income or loss and generally will not be treated as
interest income or expense except to the extent provided by administrative
pronouncements of the Service. Gain or loss attributable to changes in exchange
rates is recognized on the sale, exchange or retirement of a Single Foreign
Currency Note only to the extent of the total gain or loss recognized on such
sale, exchange or retirement.
EXCHANGE OF FOREIGN CURRENCY
A holder's tax basis in Foreign Currency purchased by the holder generally
will be the U.S. dollar value thereof at the spot rate on the date such Foreign
Currency is purchased. A holder's tax basis in Foreign Currency received as
interest on, or on the sale, exchange or retirement of, a Single Foreign
Currency Note will be the U.S. dollar value thereof at the spot rate at the time
such Foreign Currency is received. The amount of gain or loss recognized by a
holder on a sale, exchange or other disposition of Foreign Currency will be
equal to the difference between (i) the amount of U.S. dollars, the U.S. dollar
value at the spot rate of the Foreign Currency, or the fair market value in U.S.
dollars of the property received by the holder in the sale, exchange or other
disposition, and (ii) the holder's tax basis in the Foreign Currency.
Accordingly, a holder that purchases a Note with Foreign Currency will
recognize gain or loss in an amount equal to the difference, if any, between
such holder's tax basis in the Foreign Currency and the U.S. dollar value at the
spot rate of the Foreign Currency on the date of purchase. Generally, any such
gain or loss will be ordinary income or loss and will not be treated as interest
income or expense, except to the extent provided by administrative
pronouncements of the Service.
SUBSEQUENT INTEREST PERIODS AND EXTENSION OF MATURITY
If so specified in the pricing supplement relating to a Note, we may have
the option (a) to reset the interest rate, in the case of a Fixed Rate Note, or
to reset the Spread, the Spread Multiplier or other formula by which the
interest rate basis is adjusted, in the case of a Floating Rate Note, and/or
(b) to extend the Maturity of such Note. See "Description of Notes -- Interest
and Interest Rates" and "Description of Notes -- Extendible Notes". The
treatment of a holder of Notes with respect to which such an option has been
exercised who does not elect to have us repay such Notes will depend on the
terms established for such Notes by us pursuant to the exercise of such option
(the "revised terms"). Depending on the particular circumstances, such holder
may be treated as having surrendered such Notes for
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new Notes with the revised terms in either a taxable exchange or a
recapitalization qualifying for nonrecognition of gain or loss.
DISCOUNT NOTES
The following summary is a general description of U.S. federal income tax
consequences to holders of Notes issued with original issue discount ("Discount
Notes") and is based on the provisions of the Code as in effect on the date
hereof and on certain Treasury Regulations promulgated thereunder relating to
original issue discount (the "OID Regulations").
For U.S. federal income tax purposes, original issue discount is the excess
of the stated redemption price at maturity of each Discount Note over its issue
price, if such excess is greater than or equal to a DE MINIMIS amount (generally
1/4 of 1% of the Discount Note's stated redemption price at maturity multiplied
by the number of complete years to maturity from the issue date). The issue
price of an issue of Discount Notes that are issued for cash will be equal to
the first price at which a substantial amount of such Notes are sold for money.
For this purpose, sales to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers are ignored. The stated redemption price at maturity of a Discount
Note is the sum of all payments provided by the Discount Note other than
payments of "qualified stated interest". Under the OID Regulations, "qualified
stated interest" includes stated interest that is unconditionally payable in
cash or property (other than debt instruments of the issuer) at least annually
at a single fixed rate (with certain exceptions for lower rates paid during some
periods) or certain variable rates as described below. Interest is payable at a
single fixed rate only if the rate appropriately takes into account the length
of the interval between payments. Except as described below with respect to
Short-Term Notes, a holder of a Discount Note will be required to include
original issue discount in taxable income as it accrues before the receipt of
cash attributable to such income, regardless of such holder's method of
accounting for tax purposes. Special rules for Variable Rate Notes (as defined
below under "Variable Rate Notes") are described below under "Variable Rate
Notes".
The amount of original issue discount includible in taxable income by the
initial holder of a Discount Note is the sum of the daily portions of original
issue discount with respect to such Note for each day during the taxable year on
which such holder held such Note ("accrued original issue discount"). Generally,
the daily portion of the original issue discount is determined by allocating to
each day in any "accrual period" a ratable portion of the original issue
discount allocable to such accrual period. Under the OID Regulations, the
"accrual periods" for a Discount Note may be selected by each holder, may be of
any length, and may vary in length over the term of a Discount Note, provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs either on the first day or final day of an
accrual period. The amount of original issue discount allocable to each accrual
period is equal to the excess (if any) of (a) the product of a Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and adjusted for the length of such accrual period) over (b) the amount
of qualified stated interest, if any, payable on such Discount Note and
allocable to such accrual period. The "adjusted issue price" of a Discount Note
at the beginning of any accrual period generally is the sum of the issue price
of a Discount Note plus the accrued original issue discount allocable for all
prior accrual periods reduced by any prior payment on the Discount Note other
than a payment of qualified stated interest. Under these rules, a holder of a
Discount Note generally will have to include in taxable income increasingly
greater amounts of original issue discount in successive accrual periods.
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Original issue discount on a Discount Note that is also a Single Foreign
Currency Note will be determined for any accrual period in the applicable
Foreign Currency and then translated into U.S. dollars in the same manner as
interest income accrued by a holder on the accrual basis, including the
application of a Spot Rate Convention Election. See "Payments of Interest on
Notes that are not Discount Notes". Likewise, upon receipt of payment
attributable to original issue discount (whether in connection with a payment of
interest or the sale, exchange or retirement of a Discount Note), a holder will
recognize exchange gain or loss to the extent of the difference between such
holder's basis in the accrued original issue discount (determined in the same
manner as for accrued interest) and the U.S. dollar value of such payment
(determined by translating any Foreign Currency received at the spot rate on the
date of payment). Generally, any such exchange gain or loss will be ordinary
income or loss and will not be treated as interest income or expense, except to
the extent provided in administrative pronouncements of the Service. For this
purpose, all payments on a Note will be viewed first as the payment of qualified
stated interest (determined under the original issue discount rules), second as
payments of previously accrued original issue discount (to the extent thereof),
with payments considered made for the earliest accrual periods first, and
thereafter as the payment of principal.
If a holder's tax basis in a Discount Note immediately after purchase
exceeds the adjusted issue price of the Discount Note (the amount of such excess
is considered "acquisition premium") but is not greater than the stated
redemption price at maturity of such Discount Note, the amount includible in
income in each taxable year as original issue discount is reduced (but not below
zero) by that portion of the excess properly allocable to such year.
If a holder purchases a Discount Note for an amount in excess of the stated
redemption price at maturity, the holder does not include any original issue
discount in income and generally may be subject to the "bond premium" rules
discussed below. See "Amortizable Bond Premium". If a holder has a tax basis in
a Discount Note that is less than the adjusted issue price of such Discount
Note, the difference may be subject to the market discount provisions discussed
below. See "Market Discount".
Under the OID Regulations, a holder of a Note may elect to include in gross
income all interest that accrues on such Note using the constant yield method.
For this purpose, interest includes stated interest, acquisition discount,
original issue discount, DE MINIMIS original issue discount, market discount, DE
MINIMIS market discount, and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium. Special rules apply to elections made with
respect to Notes issued with amortizable bond premium or market discount. Once
made with respect to a Note, the election cannot be revoked without the consent
of the Service. A holder considering an election under these rules should
consult a tax advisor.
MARKET DISCOUNT
If a holder purchases a Note (other than a Discount Note) for an amount that
is less than its stated redemption price at maturity, or purchases a Discount
Note for less than its "revised issue price" (as defined under the Code) as of
the purchase date, the amount of the difference will be treated as "market
discount" unless such difference is less than a specified DE MINIMIS amount.
Under the market discount rules of the Code, a holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange or retirement of, a Note as ordinary income to the extent of
the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such payment or
disposition. Further, a disposition of a Note by gift (and in certain other
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circumstances) could result in the recognition of market discount income,
computed as if such Note had been sold at its then fair market value. In
addition, a holder who purchases a Note with market discount may be required to
defer the deduction of all or a portion of the interest paid or accrued on any
indebtedness incurred or maintained to purchase or carry such Note until the
maturity of the Note or its earlier disposition in a taxable transaction.
Market discount is considered to accrue ratably during the period from the
date of acquisition to the maturity date of a Note, unless the holder elects to
accrue market discount under the rules applicable to original issue discount. A
holder may elect to include market discount in income currently as it accrues,
in which case the rules described above regarding the deferral of interest
deductions will not apply.
With respect to a Single Foreign Currency Note, market discount is
determined in the applicable Foreign Currency. In the case of a holder who does
not elect current inclusion, accrued market discount is translated into U.S.
dollars at the spot rate on the date of disposition. No part of such accrued
market discount is treated as exchange gain or loss. In the case of a holder who
elects current inclusion, the amount currently includible in income for a
taxable year is the U.S. dollar value of the market discount that has accrued
during such year, determined by translating such market discount at the average
rate of exchange for the period or periods during which it accrued. Such an
electing holder will recognize exchange gain or loss with respect to accrued
market discount under the same rules as apply to accrued interest on a Single
Foreign Currency Note received by a holder on the accrual basis. See "Payments
of Interest on Notes that are not Discount Notes".
AMORTIZABLE BOND PREMIUM
Generally, if a holder's tax basis in a Note held as a capital asset exceeds
the stated redemption price at maturity of such Note, such excess may constitute
amortizable bond premium that the holder may elect to amortize under the
constant interest rate method over the period from his acquisition date to the
Note's maturity date. Any such election will apply to all debt instruments held
by the United States person at the beginning of the first taxable year to which
the election applies or thereafter acquired by the United States person and
cannot be revoked without the consent of the Service. Under certain
circumstances, amortizable bond premium may be determined by reference to an
early call date. Special rules apply with respect to Single Foreign Currency
Notes.
VARIABLE RATE NOTES
A "Variable Rate Note" is a Note that: (i) has an issue price that does not
exceed the total noncontingent principal payments by more than the lesser of (1)
the product of (x) the total noncontingent principal payments, (y) the number of
complete years to maturity from the issue date and (z) .015, or (2) 15 percent
of the total noncontingent principal payments, and (ii) does not provide for
stated interest other than stated interest compounded or paid at least annually
at (1) one or more "qualified floating rates," (2) a single fixed rate and one
or more qualified floating rates, (3) a single "objective rate" or (4) a single
fixed rate and a single objective rate that is a "qualified inverse floating
rate."
A qualified floating rate or objective rate in effect at any time during the
term of the instrument must be set at a "current value" of that rate. A "current
value" of a rate is the value of the rate on any day that is no earlier than 3
months prior to the first day on which that value is in effect and no later than
1 year following that first day.
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed
S-29
<PAGE>
funds in the currency in which the Note is denominated or (ii) it is equal to
the product of such a rate and either (a) a fixed multiple that is greater than
.65 but not more than 1.35, or (b) a fixed multiple greater than .65 but not
more than 1.35, increased or decreased by a fixed rate. If a Note provides for
two or more qualified floating rates that (i) are within 0.25 percent of each
other on the issue date or (ii) can reasonably be expected to have approximately
the same values throughout the term of the Note, the qualified floating rates
together constitute a single qualified floating rate. A rate is not a qualified
floating rate, however, if the rate is subject to certain restrictions
(including caps, floors, governors, or other similar restrictions) unless such
restrictions are fixed throughout the term of the Note or are not reasonably
expected to significantly affect the yield on the Note.
An "objective rate" is a rate, other than a qualified floating rate, that is
determined using a single, fixed formula and that is based on objective
financial or economic information. A rate will not qualify as an objective rate
if it is based on information that is within the control of the issuer (or a
related party) or that is unique to the circumstances of the issuer (or a
related party), such as dividends, profits, or the value of the issuer's stock
(although a rate does not fail to be an objective rate merely because it is
based on the credit quality of the issuer). A variable rate is not an objective
rate, however, if it is reasonably expected that the average value of the rate
during the first half of the Note's term will be either significantly less than
or significantly greater than the average value of the rate during the final
half of the Note's term. An objective rate is a "qualified inverse floating
rate" if (i) the rate is equal to a fixed rate minus a qualified floating rate,
and (ii) the variations in the rate can reasonably be expected to inversely
reflect contemporaneous variations in the qualified floating rate.
If interest on a Note is stated at a fixed rate for an initial period of one
year or less followed by either a qualified floating rate or an objective rate
for a subsequent period and (i) the fixed rate and the qualified floating rate
or objective rate have values on the issue date of the Note that do not differ
by more than 0.25 percent or (ii) the value of the qualified floating rate or
objective rate is intended to approximate the fixed rate, the fixed rate and the
qualified floating rate or the objective rate constitute a single qualified
floating rate or objective rate. Under these rules, Commercial Paper Rate Notes,
LIBOR Notes, Treasury Rate Notes, CD Rate Notes, Federal Funds Rate Notes, Prime
Rate Notes, and CMT Rate Notes generally will be treated as Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a single
qualified floating rate or objective rate and the interest is unconditionally
payable in cash at least annually, all stated interest on the Note is qualified
stated interest and the amount of OID, if any, is determined by using, in the
case of a qualified floating rate or qualified inverse floating rate, the value
as of the issue date of the qualified floating rate or qualified inverse
floating rate, or, in the case of any other objective rate, a fixed rate that
reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or a single objective rate, or at a single fixed rate
(other than at a single fixed rate for an initial period), the amount of
interest and OID accruals on the Note are generally determined by
(i) determining a fixed rate substitute for each variable rate provided under
the Variable Rate Note (generally, the value of each variable rate as of the
issue date or, in the case of an objective rate that is not a qualified inverse
floating rate, a rate that reflects the reasonably expected yield on the Note),
(ii) constructing the equivalent fixed rate debt instrument (using the fixed
rate substitute described above), (iii) determining the amount of qualified
stated interest and OID with respect to the equivalent fixed rate debt
instrument, and (iv) making the appropriate adjustments for actual variable
rates during the applicable accrual period.
S-30
<PAGE>
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than the
fixed rate. The qualified floating rate (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the Variable
Rate Note as of the issue date would be approximately the same as the fair
market value of an otherwise identical debt instrument that provides for the
qualified floating rate (or qualified inverse floating rate) rather than the
fixed rate.
SHORT-TERM NOTES
In general, an individual or other cash method holder of a Note that matures
one year or less from the date of its issuance (a "Short-Term Note") is not
required to accrue original issue discount on such Note unless it has elected to
do so. Holders who report income for federal income tax purposes under the
accrual method, however, and certain other holders, including banks, dealers in
securities and electing holders, are required to accrue original issue discount
(unless the holder elects to accrue "acquisition discount" in lieu of original
issue discount) on such Note. "Acquisition discount" is the excess of the
remaining stated redemption price at maturity of the Short-Term Note over the
holder's tax basis in the Short-Term Note at the time of the acquisition. In the
case of a holder who is not required and does not elect to accrue original issue
discount on a Short-Term Note, any gain realized on the sale, exchange or
retirement of such Short-Term Note will be ordinary income to the extent of the
original issue discount accrued through the date of sale, exchange or
retirement. Such a holder will be required to defer, until such Short-Term Note
is sold or otherwise disposed of, the deduction of a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry such
Short-Term Note. Original issue discount or acquisition discount on a Short-Term
Note accrues on a straight-line basis unless an election is made to use the
constant yield method (based on daily compounding).
In the case of a Short-Term Note that is also a Single Foreign Currency
Note, the amount of original issue discount or acquisition discount subject to
current accrual and the amount of any exchange gain or loss on a sale, exchange
or retirement are determined under the same rules that apply to accrued interest
on a Single Foreign Currency Note held by a holder on the accrual basis. See
"Payments of Interest on Notes that are not Discount Notes".
The market discount rules will not apply to a Short-Term Note having market
discount.
NON-UNITED STATES PERSONS
Subject to the discussion of backup withholding below, payments of
principal, premium, if any, and interest (including original issue discount) by
us or our agent (in its capacity as such) to any holder who is a beneficial
owner of a Note but is not a United States person will not be subject to United
States federal withholding tax provided, in the case of premium, if any, and
interest (including original issue discount) that (i) such holder does not
actually or constructively own 10% of more of the total combined voting power of
all classes of our stock entitled to vote, (ii) such holder is not a controlled
foreign corporation for United States tax purposes that is related to us through
stock ownership, and (iii) either (A) the beneficial owner of the Note certifies
to us or our agent, under penalties of perjury, that such owner is not a United
States person and provides its name and address (which certification can be made
on IRS Form W-8 or Form W-8BEN) or (B) a securities clearing organization, bank
or
S-31
<PAGE>
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "financial institution") certifies to us or
our agent, under penalties of perjury, that the certification described in
clause (A) hereof has been received from the beneficial owner by it or by
another financial institution acting for the beneficial owner and delivers to us
or our agent a copy of the certification described in clause (A). Recently
finalized Treasury Regulations provide alternative methods for satisfying the
certification requirement described in clause (iii)(A) and (B) above. These
Regulations generally will be effective for payments made after December 31,
2000, subject to certain transition rules. These Regulations also may require,
in the case of Notes held by a foreign partnership, that (x) the certification
described in clause (iii)(A) above be provided by the partners rather than by
the foreign partnership and (y) the partnership provide certain information,
including a United States taxpayer identification number. A look-through rule
would apply in the case of tiered partnerships.
If a holder of a Note who is not a United States person cannot satisfy the
requirements of the "portfolio interest" exception described above, payments of
interest (including original issue discount) made to such holder generally will
be subject to a 30% withholding tax (or such lower rate as may be provided by an
applicable income tax treaty between the United States and a foreign country)
unless the beneficial owner of the Note provides us or our paying agent, as the
case may be, with a properly executed (A) IRS Form 1001 or Form W-8BEN claiming
an exemption from withholding under the benefit of a tax treaty or (B) IRS
Form 4224 or Form W-8ECI stating that interest paid on the Note is not subject
to withholding tax because it is effectively connected with the beneficial
owner's conduct of a trade or business in the United States. Under the recently
finalized Treasury regulations, Holders who are not United States persons will
generally be required to provide the appropriate IRS Form W-8 in lieu of the IRS
Form 1001 and IRS Form 4224, although alternative documentation may be
applicable in certain situations.
If a holder of a Note who is not a United States person is engaged in a
trade or business in the United States and premium, if any, or interest
(including original issue discount) on the Note is effectively connected with
the conduct of such trade or business, such holder, although exempt from United
States withholding tax as discussed in the preceding paragraph (by reason of the
delivery of a properly completed IRS Form 4224 or Form W-8ECI), will be subject
to United States federal income tax on such premium, if any, and interest
(including original issue discount) in the same manner as if it were a United
States person. In addition, if such 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 adjustments.
Subject to the discussion of "backup" withholding below, any capital gain
realized upon the sale, exchange or retirement of a Note by a holder who is not
a United States person will not be subject to United States federal income or
withholding taxes unless (i) such gain is effectively connected with a United
States trade or business of the holder, or (ii) in the case of an individual,
such holder is present in the United States for 183 days or more in the taxable
year of the retirement or disposition and certain other conditions are met.
Notes held by an individual who at the time of death is neither a citizen
nor a resident of the United States for United States tax purposes will not be
subject to United States federal estate tax, provided that the income from the
Notes was not or would not have been effectively connected with a United States
trade or business of such individual and that such individual qualified for the
exemption from United States federal withholding tax (without regard to the
certification requirements) that is described above.
S-32
<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
The "backup" withholding and information reporting requirements may apply to
certain payments of principal, premium, if any, and interest (including original
issue discount) on a Note and to certain payments of proceeds of the sale or
retirement of a Note. We, our agent, a broker, the Trustee or any paying agent,
as the case may be, will be required to withhold tax from any payment that is
subject to backup withholding at a rate of 31% of such payment if the holder
fails to furnish his taxpayer identification number (social security number or
employer identification number), to certify that such holder is not subject to
backup withholding, or to otherwise comply with the applicable requirements of
the backup withholding rules. Certain holders (including, among others,
corporations) are not subject to the backup withholding and reporting
requirements.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by us or our agent (in its capacity as
such) to a holder of a Note who has provided the required certification under
penalties of perjury that it is not a United States person as set forth in
clause (iii) in the first paragraph under "Non-United States Persons" or has
otherwise established an exemption (provided that neither we nor such agent has
actual knowledge that the holder is a United States person or that the
conditions of any other exemption are not in fact satisfied). Recently finalized
Treasury Regulations, effective for payments made after December 31, 2000,
modify the application of the information reporting requirements and backup
withholding tax to holders who are not United States persons. Among other
things, these regulations require such holders to furnish new certifications of
their non-U.S. status.
Any amounts withheld under the backup withholding rules from a payment to a
holder may be claimed as a credit against such holder's United States federal
income tax liability provided required information is furnished to the Service.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
We are offering the Notes on a continuous basis through Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. (the "Agents"). The
Agents have agreed to use their best efforts to solicit orders to purchase Notes
at 100% of the principal amount thereof, unless otherwise specified in the
applicable pricing supplement. We will pay an Agent a commission ranging from
.125% to .675% of the principal amount of Notes with a stated maturity of 1 year
to 30 years. The exact commission paid will be determined by the stated maturity
of the Notes sold. The following table describes the potential proceeds we will
receive but does not include expenses payable by us which we estimate to be
$1,500,000.
<TABLE>
<CAPTION>
AGENTS' COMMISSIONS AND
PRICE TO PUBLIC DISCOUNTS PROCEEDS TO THE COMPANY
--------------- ------------------------- --------------------------------
<S> <C> <C> <C>
Per Note............. 100% .125% to .675% 99.325% to 99.875%
Total................ $3,450,000,000 $4,312,500 to $23,287,500 $3,426,712,500 to $3,445,687,500
</TABLE>
S-33
<PAGE>
We may arrange for Notes to be sold through any Agent or may sell Notes
directly to investors. If we sell Notes directly to investors, no commission or
discount will be paid. We also may sell Notes to any Agent as principal for the
Agent's account at a price agreed upon at the time of sale. These Notes may be
resold by the Agent to investors at a fixed public offering price or at
prevailing market prices, or at a related price, as determined by the Agent.
Unless otherwise specified in the pricing supplement, any Note sold to an Agent
as principal will be purchased at a price equal to 100% of the principal amount
minus a discount equal to the commission that would be paid on an agency sale of
a Note of identical maturity.
We reserve the right to withdraw, cancel or modify the offer made hereby
without notice and may accept orders or reject proposed purchases in whole or in
part. The Agents also have the right, using their reasonable discretion, to
reject any proposed purchase of the Notes in whole or in part.
Agents may sell Notes purchased from us as principal to other dealers for
resale, to investors and other purchasers and may provide any portion of the
discount received in connection with their purchase from us to these dealers. An
Agent may allow, and dealers may reallow, a discount to certain other dealers.
After the initial offering of the Notes, the offering price (in the case of
Notes to be resold on a fixed offering price basis), the concession and the
discount may be changed.
The Notes will not have an established trading market when issued. Also, the
Notes will not be listed on any securities exchange. The Agents may make a
market in the Notes, but are not obligated to do so and may discontinue any
market-making at any time without notice. The Agents may from time to time
purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that a secondary market for
the Notes will develop or that there will be liquidity in the secondary market
if one develops.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act. We have agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that they may be required to make in connection with this
indemnification.
Unless otherwise specified in the applicable pricing supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the specified currency in the City of New York on the date of
settlement. See "Description of the Notes--General."
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, the applicable Agent(s) will be
permitted to engage in certain transactions that stabilize the price of Notes.
These transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of Notes. If the Agent or Agents creates or
create, as the case may be, a short position in Notes (i.e., if it sells or they
sell Notes in an aggregate principal amount exceeding that set forth in the
applicable Pricing Supplement), they may reduce that short position by
purchasing Notes in the open market. In general, purchases of Notes for the
purpose of stabilization or to reduce a short position could cause the price of
Notes to be higher than it might be in the absence of these types of purchases.
Neither we nor any of the Agents makes any representation or prediction as
to the direction or magnitude of any effect that the transactions described in
the immediately preceding paragraph may have on the price of the Notes. In
addition, neither we nor any of the Agents makes any representation that the
Agents will engage in any such transactions or that such transactions, once
commenced, will not be discontinued without notice.
S-34
<PAGE>
In addition to the offerings of Notes described herein, Debt Securities
having terms substantially similar to the terms of the Notes offered hereby (but
constituting a separate series of Debt Securities for purposes of the applicable
Indenture) may be offered outside the United States by us on a continuing basis,
concurrently with the offering of the Notes hereby. We may also sell Notes,
other Debt Securities or Warrants to Purchase Debt Securities pursuant to
another prospectus supplement to the accompanying prospectus. These sales will
reduce the principal amount of Notes that may be offered by this prospectus
supplement and the accompanying prospectus.
In the ordinary course of its business, the Agents and their affiliates have
engaged and may in the future engage in investment and commercial banking
transactions with us and certain of our affiliates.
S-35
<PAGE>
JOHN DEERE CAPITAL CORPORATION
-------------------------------
By this prospectus, we offer up to
$3,450,000,000 of--
DEBT SECURITIES
WARRANTS TO PURCHASE DEBT SECURITIES
PREFERRED STOCK
---------------------------------
We will provide the specific terms of these securities in supplements to this
prospectus. You should read this prospectus and the supplements carefully before
you invest.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
------------------------------------------------
[LOGO]
The date of this Prospectus is October 19, 2000
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with the
SEC. You may read and copy any document we file at the SEC's public reference
rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 and in New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from the SEC's web site at http://www.sec.gov. Certain of our debt
securities are listed on the New York Stock Exchange and information about us
also is available there.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents that are considered part of this prospectus. Later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 by us (i) after the date of the filing of this
registration statement and prior to its effectiveness and (ii) until our
offering of securities has been completed. This prospectus is part of a
registration statement filed with the SEC.
- Annual Report on Form 10-K for the year ended October 31, 1999.
- Quarterly Reports on Form 10-Q for the quarters ended January 31, 2000,
April 30, 2000 and July 31, 2000.
- Current Reports on Form 8-K dated November 23, 1999, February 15, 2000,
May 16, 2000 and August 15, 2000.
You may obtain a copy of these filings at no cost, by writing or telephoning
us at the following address:
John Deere Capital Corporation
1 East First Street, Suite 600
Reno, Nevada 89501
Attn: Manager
(775) 786-5527
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. This prospectus is an offer to
sell or to buy only the securities referred to herein, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of the date hereof.
2
<PAGE>
THE CAPITAL CORPORATION
The principal business of John Deere Capital Corporation (Capital
Corporation) and its subsidiaries is providing and administering financing for
retail purchases of new and used equipment manufactured by Deere & Company's
agricultural, construction, and commercial and consumer equipment divisions. We
purchase retail installment sales and loan contracts (retail notes) from Deere &
Company and its wholly-owned subsidiaries (collectively called John Deere). John
Deere acquires these retail notes through John Deere retail dealers. We also
purchase and finance certain agricultural, construction, commercial and lawn and
grounds care retail notes unrelated to John Deere. In addition, we purchase and
finance recreational product retail notes acquired from dealers. We also lease
equipment to retail customers, finance and service revolving charge accounts
acquired from and offered through merchants or leading farm input providers in
the agricultural, construction and lawn and grounds care markets as well as
insured international export financing products, and provide wholesale financing
for inventories of recreational vehicles, yachts, John Deere engines, and John
Deere agricultural and John Deere construction equipment owned by dealers of
those products.
The Capital Corporation was incorporated under the laws of Delaware and
commenced operations in 1958. At January 1, 2000, we had 1,307 full-time and
part-time employees.
BUSINESS OF JOHN DEERE
John Deere's operations are categorized into four major business segments:
John Deere's worldwide AGRICULTURAL EQUIPMENT segment manufactures and
distributes a full line of farm equipment--including tractors; combine, cotton,
and sugarcane harvesters; tillage, seeding and soil preparation machinery;
sprayers; hay and forage equipment; materials handling equipment; and integrated
precision farming technology.
John Deere's worldwide CONSTRUCTION EQUIPMENT segment manufactures and
distributes a broad range of machines used in construction, earthmoving and
forestry--including backhoe loaders; crawler dozers and loaders;
four-wheel-drive loaders; excavators; scrapers; motor graders; log skidders; and
forestry harvesters.
John Deere's worldwide COMMERCIAL AND CONSUMER EQUIPMENT segment
manufactures and distributes equipment for commercial and residential
uses--including small tractors for lawn, garden, commercial and utility
purposes; riding and walk-behind mowers; golf course equipment; snowblowers;
handheld products such as chain saws, string trimmers and leaf blowers;
skid-steer loaders; utility vehicles; and other outdoor power products.
The products produced by the equipment segments are marketed primarily
through independent retail dealer networks and major retail outlets.
The CREDIT segment primarily includes the operations of the Capital
Corporation, John Deere Credit Company and John Deere Credit Inc. (Canada), and
primarily finances sales and leases by John Deere dealers of new and used
equipment and sales by non-Deere dealers of recreational products. In addition,
it provides wholesale financing to dealers of the foregoing equipment and for
inventories of recreational vehicles, manufactured housing units, yachts and
John Deere engines, and finances retail and commercial revolving charge
accounts.
In response to a recent accounting pronouncement, John Deere's segments were
redefined in 1999 to coincide with its internal organizational structure, the
way the operations are managed and evaluated by management and materiality
considerations. The manufacture and distribution of engines and drivetrain
components for the original equipment manufacturer market, previously aggregated
with the construction equipment segment, are now allocated to all three major
equipment segments. In addition, the operations of certain units involved in the
development and marketing of special technologies, which were previously
aggregated with the agricultural
3
<PAGE>
equipment and the commercial and consumer equipment segments, have been
aggregated and included with the health care and insurance operations in the
"Other" category, as they do not meet the materiality threshold included in the
new accounting standard. The insurance operations were sold in 1999.
USE OF PROCEEDS
Except as may be described otherwise in a prospectus supplement, we will add
the net proceeds from the sale of the securities under this prospectus to our
general funds and will use them for working capital and other general corporate
purposes, and will be available for, among other things, the purchase of
receivables or other assets. The proceeds may be applied initially to the
reduction of short-term indebtedness.
PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may
sell any combination of the following securities in one or more offerings up to
a total dollar amount of $3,450,000,000, or the equivalent thereof if any of the
securities are denominated in a currency, currency unit or composite currency
("currency") other than the U.S. dollar:
- unsecured debt securities ("debt securities"), which may be either senior
(the "senior securities") or subordinated (the "subordinated securities");
- warrants to purchase debt securities ("debt warrants"); or
- shares of our preferred stock (the "preferred stock").
The terms of the securities will be determined at the time of offering.
We will refer to the debt securities, debt warrants and preferred stock, or
any combination of those securities, proposed to be sold under this prospectus
and an accompanying prospectus supplement as the "offered securities". The
offered securities, together with any debt securities and preferred stock
issuable upon exercise of debt warrants or conversion or exchange of other
offered securities, will be referred to as the "securities".
PROSPECTUS SUPPLEMENT
This prospectus provides you with a general description of the debt
securities, warrants to purchase debt securities and preferred stock we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add to, update or change information contained in
this prospectus and, accordingly, to the extent inconsistent, information in
this prospectus is superseded by the information in the prospectus supplement.
You should read both this prospectus and any prospectus supplement together with
the additional information described under the heading "Where You Can Find More
Information".
The prospectus supplement to be attached to the front of this prospectus
will describe: the terms of the securities offered, any initial public offering
price, the price paid to us for the securities, the net proceeds to us and the
other specific terms related to the offering of these securities.
For more detail on the terms of the securities, you should read the exhibits
filed with our registration statement.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
We may issue debt securities in one or more distinct series. This section
summarizes the terms of the debt securities that are common to all series. Most
of the financial terms and other specific terms of any series of debt securities
that we offer will be described in a prospectus supplement to be attached to the
front of this prospectus. Since the terms of specific debt securities may differ
from the general information we have provided below, you should rely on
information in the prospectus supplement that contradicts different information
below.
As required by federal law for all bonds and notes of companies that are
publicly offered, the debt securities are governed by a document called an
"indenture". An indenture is a contract between us and a financial institution
acting as trustee on your behalf. The trustee has two main roles. First, the
trustee can enforce your rights against us if we default. There are some
limitations on the extent to which the trustee acts on your behalf, described
later on page 13. Second, the trustee performs certain administrative duties for
us.
Senior securities will be issued under an indenture dated as of March 15,
1997, as supplemented from time to time (the "senior indenture"), between us and
The Chase Manhattan Bank, trustee (the "senior trustee"), and subordinated
securities will be issued under an indenture dated as of March 15, 1997, as
supplemented from time to time (the "subordinated indenture"), between us and
Bank One Trust Company, National Association (as successor in interest to The
First National Bank of Chicago), trustee (the "subordinated trustee"). The term
"trustee" refers to either the senior trustee or the subordinated trustee, as
appropriate. We will refer to the senior indenture and the subordinated
indenture together as the "indentures" and each as an "indenture". The
indentures are subject to and governed by the Trust Indenture Act of 1939, as
amended.
Because this section is a summary, it does not describe every aspect of the
debt securities and the indentures. We urge you to read the indenture that is
applicable to you because it, and not this description, defines your rights as a
holder of debt securities. For example, in this section, we use capitalized
words to signify terms that are specifically defined in the indentures. Some of
the definitions are repeated in this prospectus, but for the rest you will need
to read the indentures. We have filed the form of each indenture as an exhibit
to a registration statement that we have filed with the SEC. See "Where You Can
Find More Information" on page 2 for information on how to obtain a copy of the
indentures.
PROVISIONS APPLICABLE TO BOTH THE SENIOR AND SUBORDINATED INDENTURES
GENERAL
The debt securities will be our unsecured obligations. The senior securities
will rank equally with all our other unsecured and unsubordinated indebtedness.
The subordinated securities will be subordinated in right of payment to the
prior payment in full of our Senior Indebtedness as described under
"--Subordinated Indenture Provisions--Subordination".
Each indenture provides that any debt securities proposed to be sold under
this prospectus and the attached prospectus supplement ("offered debt
securities") and any debt securities issuable upon the exercise of debt warrants
or upon conversion or exchange of other offered securities ("underlying debt
securities"), as well as other unsecured debt securities issued by us, may be
issued under that indenture in one or more series.
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With respect to the offered debt securities and any underlying debt
securities, you should read the prospectus supplement for the following terms:
- The title of the debt securities and whether the debt securities will
be senior securities or subordinated securities.
- The total principal amount of the debt securities and any limit on the
total principal amount of debt securities of the series.
- If not the principal amount of the debt securities, the portion of the
principal amount payable upon acceleration of the maturity of the debt
securities or how this portion will be determined.
- The date or dates, or how the date or dates will be determined or
extended, when the principal of the debt securities will be payable.
- The interest rate or rates, which may be fixed or variable, that the
debt securities will bear, if any, or how the rate or rates will be
determined, the date or dates from which any interest will accrue or
how the date or dates will be determined, the interest payment dates,
any record dates for these payments and the basis upon which interest
will be calculated if other than that of a 360-day year of twelve
30-day months.
- Any optional redemption provisions.
- Any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem the debt securities.
- The form in which we will issue the debt securities, if other than in
registered book-entry only form represented by global securities;
whether we will have the option of issuing debt securities in
"certificated" form; whether we will have the option of issuing
certificated debt securities in bearer form if we issue the securities
outside the United States to non-U.S. persons; any restrictions on the
offer, sale or delivery of bearer securities and the terms, if any,
upon which bearer securities of the series may be exchanged for
registered securities of the series and VICE VERSA (if permitted by
applicable laws and regulations).
- If other than U.S. dollars, the currency or currencies of the debt
securities.
- Whether the amount of payments of principal, premium or interest, if
any, on the debt securities will be determined with reference to an
index, formula or other method (which could be based on one or more
currencies, commodities, equity indices or other indices) and how these
amounts will be determined.
- The place or places, if any, other than or in addition to The City of
New York, of payment, transfer, conversion and/or exchange of the debt
securities.
- If other than denominations of $1,000 or any integral multiple in the
case of registered securities issued in certificated form and $5,000 in
the case of non-registered securities issued in bearer form, the
denominations in which the offered debt securities will be issued.
- The applicability of the provisions of article fourteen of the
applicable indenture described under "defeasance" and any provisions in
modification of, in addition to or in lieu of any of these provisions.
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- Whether and under what circumstances we will pay additional amounts in
respect of any tax, assessment or governmental charge and, if so,
whether we will have the option to redeem the debt securities rather
than pay the additional amounts (and the terms of this option).
- Any provisions granting special rights to the holders of the debt
securities upon the occurrence of specified events.
- Any changes or additions to the Events of Default or covenants
contained in the applicable indenture.
- Whether the debt securities will be convertible into or exchangeable
for any other securities and the applicable terms and conditions.
- Any other terms of the debt securities.
For purposes of this prospectus, any reference to the payment of principal
of or premium or interest, if any, on debt securities will include Additional
Amounts if required by the terms of the debt securities.
Neither indenture limits the amount of debt securities that may be issued
thereunder from time to time. Debt securities issued under an indenture, when a
single trustee is acting for all debt securities issued under the indenture, are
called the "indenture securities". Each indenture also provides that there may
be more than one trustee thereunder, each with respect to one or more different
series of indenture securities. See "Resignation of Trustee" on page 17. At a
time when two or more trustees are acting under either indenture, each with
respect to only certain series, the term "indenture securities" means the one or
more series of debt securities with respect to which each respective trustee is
acting. In the event that there is more than one trustee under either indenture,
the powers and trust obligations of each trustee described in this prospectus
will extend only to the one or more series of indenture securities for which it
is trustee. If two or more trustees are acting under either indenture, then the
indenture securities for which each trustee is acting would be treated as if
issued under separate indentures.
The indentures do not contain any provisions that give you protection in the
event we issue a large amount of debt or we are acquired by another entity.
We refer you to the prospectus supplement for information with respect to
any deletions from, modifications of or additions to the Events of Default or
our covenants that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
We have the ability to issue indenture securities with terms different from
those of indenture securities previously issued and, without the consent of the
holders thereof, to reopen a previous issue of a series of indenture securities
and issue additional indenture securities of that series unless the reopening
was restricted when that series was created.
CONVERSION AND EXCHANGE
If any debt securities are convertible into or exchangeable for other
securities, the prospectus supplement will explain the terms and conditions of
the conversion or exchange, including the conversion price or exchange ratio (or
the calculation method), the conversion or exchange period (or how the period
will be determined), if conversion or exchange will be mandatory or at the
option of the holder or us, provisions for adjusting the conversion price or the
exchange ratio and provisions affecting conversion or exchange in the event of
the redemption of the underlying debt securities. These terms may also include
provisions under which the number or amount of other securities to be received
by the holders of the debt securities upon conversion or exchange
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would be calculated according to the market price of the other securities as of
a time stated in the prospectus supplement.
ADDITIONAL MECHANICS
We may issue the debt securities in registered form, in which case we may
issue them either in book-entry form only or in "certificated" form. Debt
securities issued in book-entry form will be represented by global securities.
We expect that we will usually issue debt securities in book-entry only form
represented by global securities.
We also will have the option of issuing debt securities in non-registered
form as bearer securities if we issue the securities outside the United States
to non-U.S. persons. In that case, the prospectus supplement will set forth the
mechanics for holding the bearer securities, including the procedures for
receiving payments, for exchanging the bearer securities for registered
securities of the same series, and for receiving notices. The prospectus
supplement will also describe the requirements with respect to our maintenance
of offices or agencies outside the United States and the applicable U.S. tax law
requirements.
HOLDERS OF REGISTERED DEBT SECURITIES
BOOK-ENTRY HOLDERS. We will issue registered debt securities in book-entry
form only, unless we specify otherwise in the applicable prospectus supplement.
This means debt securities will be represented by one or more global securities
registered in the name of a depositary that will hold them on behalf of
financial institutions that participate in the depositary's book-entry system.
These participating institutions, in turn, hold beneficial interests in the debt
securities held by the depositary or its nominee. These institutions may hold
these interests on behalf of themselves or customers.
Under each indenture, only the person in whose name a debt security is
registered is recognized as the holder of that debt security. Consequently, for
debt securities issued in global form, we will recognize only the depositary as
the holder of the debt securities and we will make all payments on the debt
securities to the depositary. The depositary will then pass along the payments
it receives to its participants, which in turn will pass the payments along to
their customers who are the beneficial owners. The depositary and its
participants do so under agreements they have made with one another or with
their customers; they are not obligated to do so under the terms of the debt
securities.
As a result, investors will not own debt securities directly. Instead, they
will own beneficial interests in a global security, through a bank, broker or
other financial institution that participates in the depositary's book-entry
system or holds an interest through a participant. As long as the debt
securities are issued in global form, investors will be indirect holders, and
not holders, of the debt securities.
STREET NAME HOLDERS. In the future, we may issue debt securities in
certificated form or terminate a global security. In these cases, investors may
choose to hold their debt securities in their own names or in "street name".
Debt securities held in street name are registered in the name of a bank, broker
or other financial institution chosen by the investor, and the investor would
hold a beneficial interest in those debt securities through the account he or
she maintains at that institution.
For debt securities held in street name, we will recognize only the
intermediary banks, brokers and other financial institutions in whose names the
debt securities are registered as the holders of those debt securities and we
will make all payments on those debt securities to them. These institutions will
pass along the payments they receive to their customers who are the
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beneficial owners, but only because they agree to do so in their customer
agreements or because they are legally required to do so. Investors who hold
debt securities in street name will be indirect holders, and not holders, of the
debt securities.
LEGAL HOLDERS. Our obligations, as well as the obligations of the
applicable trustee and those of any third parties employed by us or the
applicable trustee, run only to the legal holders of the debt securities. We do
not have obligations to investors who hold beneficial interests in global
securities, in street name or by any other indirect means. This will be the case
whether an investor chooses to be an indirect holder of a debt security or has
no choice because we are issuing the debt securities only in global form.
For example, once we make a payment or give a notice to the holder, we have
no further responsibility for the payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect holders but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose (for example, to
amend an indenture or to relieve us of the consequences of a default or of our
obligation to comply with a particular provision of an indenture), we would seek
the approval only from the holders, and not the indirect holders, of the debt
securities. Whether and how the holders contact the indirect holders is up to
the holders.
When we refer to you, we mean those who invest in the debt securities being
offered by this prospectus, whether they are the holders or only indirect
holders of those debt securities. When we refer to your debt securities, we mean
the debt securities in which you hold a direct or indirect interest.
SPECIAL CONSIDERATIONS FOR INDIRECT HOLDERS. If you hold debt securities
through a bank, broker or other financial institution, either in book-entry form
or in street name, we urge you to check with that institution to find out:
- how it handles securities payments and notices,
- whether it imposes fees or charges,
- how it would handle a request for the holders' consent, if ever required,
- whether and how you can instruct it to send you debt securities registered
in your own name so you can be a holder, if that is permitted in the
future for a particular series of debt securities,
- how it would exercise rights under the debt securities if there were a
default or other event triggering the need for holders to act to protect
their interests, and
- if the debt securities are in book-entry form, how the depositary's rules
and procedures will affect these matters.
GLOBAL SECURITIES
WHAT IS A GLOBAL SECURITY? As noted above, we usually will issue debt
securities as registered securities in book-entry form only. A global security
represents one or any other number of individual debt securities. Generally, all
debt securities represented by the same global securities will have the same
terms.
Each debt security issued in book-entry form will be represented by a global
security that we deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that we
select for this purpose is called the depositary. Unless we specify otherwise in
the applicable prospectus supplement, The Depositary Trust Company, New York,
New York, known as DTC, will be the depositary for all debt securities issued in
book-entry form.
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A global security may not be transferred to or registered in the name of
anyone other than the depositary or its nominee, unless special termination
situations arise. We describe those situations below under "Special Situations
when a Global Security Will Be Terminated". As a result of these arrangements,
the depositary, or its nominee, will be the sole registered owner and holder of
all debt securities represented by a global security, and investors will be
permitted to own only beneficial interests in a global security. Beneficial
interests must be held by means of an account with a broker, bank or other
financial institution that in turn has an account with the depositary or with
another institution that has an account with the depositary. Thus, an investor
whose security is represented by a global security will not be a holder of the
debt security, but only an indirect holder of a beneficial interest in the
global security.
SPECIAL CONSIDERATIONS FOR GLOBAL SECURITIES. As an indirect holder, an
investor's rights relating to a global security will be governed by the account
rules of the investor's financial institution and of the depositary, as well as
general laws relating to securities transfers. The depositary that holds the
global security will be considered the holder of the debt securities represented
by the global security.
If debt securities are issued only in the form of a global security, an
investor should be aware of the following:
- An investor cannot cause the debt securities to be registered in his or
her name, and cannot obtain non-global certificates for his or her
interest in the debt securities, except in the special situations we
describe below.
- An investor will be an indirect holder and must look to his or her own
bank or broker for payments on the debt securities and protection of his
or her legal rights relating to the debt securities, as we describe under
"Holders of Registered Debt Securities" above.
- An investor may not be able to sell interests in the debt securities to
some insurance companies and other institutions that are required by law
to own their securities in non-book-entry form.
- An investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the debt
securities must be delivered to the lender or other beneficiary of the
pledge in order for the pledge to be effective.
- The depositary's policies, which may change from time to time, will govern
payments, transfers, exchanges and other matters relating to an investor's
interest in a global security. We and the trustee have no responsibility
for any aspect of the depositary's actions or for its records of ownership
interests in a global security. We and the trustee also do not supervise
the depositary in any way.
- DTC requires that those who purchase and sell interests in a global
security deposited in its book-entry system use immediately available
funds. Your broker or bank may also require you to use immediately
available funds when purchasing or selling interests in a global security.
- Financial institutions that participate in the depositary's book-entry
system, and through which an investor holds its interest in a global
security, may also have their own policies affecting payments, notices and
other matters relating to the debt security. There may be more than one
financial intermediary in the chain of ownership for an investor. We do
not monitor and are not responsible for the actions of any of those
intermediaries.
SPECIAL SITUATIONS WHEN A GLOBAL SECURITY WILL BE TERMINATED. In a few
special situations described below, a global security will be terminated and
interests in it will be exchanged for certificates in non-global form
(certificated securities). After that exchange, the choice of
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whether to hold the certificated debt securities directly or in street name will
be up to the investor. Investors must consult their own banks or brokers to find
out how to have their interests in a global security transferred on termination
to their own names, so that they will be holders. We have described the rights
of holders and street name investors under "Holders of Registered Debt
Securities" above.
The special situations for termination of a global security are as follows:
- if the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global security, and we do
not appoint another institution to act as depositary within 60 days,
- if we notify the trustee that we wish to terminate that global security,
or
- if an event of default has occurred with regard to the debt securities
represented by that global security and has not been cured or waived; we
discuss defaults later under "Events of Default".
The prospectus supplement may list situations for terminating a global
security that would apply only to the particular series of debt securities
covered by the prospectus supplement. If a global security is terminated, only
the depositary, and not we or the applicable trustee, is responsible for
deciding the names of the institutions in whose names the debt securities
represented by the global security will be registered and, therefore, who will
be the holders of those debt securities.
PAYMENT AND PAYING AGENTS
We will pay interest to the person listed in the applicable trustee's
records as the owner of the debt security at the close of business on a
particular day in advance of each due date for interest, even if that person no
longer owns the debt security on the interest due date. That day, usually about
two weeks in advance of the interest due date, is called the "record date".
Because we will pay all the interest for an interest period to the holders on
the record date, holders buying and selling debt securities must work out
between themselves the appropriate purchase price. The most common manner is to
adjust the sales price of the debt securities to prorate interest fairly between
buyer and seller based on their respective ownership periods within the
particular interest period. This prorated interest amount is called "accrued
interest".
PAYMENTS ON GLOBAL SECURITIES. We will make payments on a global security
in accordance with the applicable policies of the depositary as in effect from
time to time. Under those policies, we will make payments directly to the
depositary, or its nominee, and not to any indirect holders who own beneficial
interests in the global security. An indirect holder's right to those payments
will be governed by the rules and practices of the depositary and its
participants, as described under "What Is a Global Security?".
PAYMENTS ON CERTIFICATED SECURITIES. We will make payments on a debt
security in non-global certificated form as follows. We will pay interest that
is due on an interest payment date by check mailed on the interest payment date
to the holder at his or her address shown on the trustee's records as of the
close of business on the regular record date. We will make all payments of
principal and premium, if any, by check at the office of the applicable trustee
in New York, NY and/or at other offices that may be specified in the prospectus
supplement or in a notice to holders, against surrender of the debt security.
All payments by check will be made in next-day funds, that is funds that become
available on the day after the check is cashed.
Alternatively, if a certificated security has a face amount of at least
$10,000,000 and the holder asks us to do so, we will pay any amount that becomes
due on the debt security by wire
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transfer of immediately available funds to an account at a bank in New York
City, on the due date. To request payment by wire, the holder must give the
applicable trustee or other paying agent appropriate transfer instructions at
least 15 business days before the requested wire payment is due. In the case of
any interest payment due on an interest payment date, the instructions must be
given by the person who is the holder on the relevant regular record date. Any
wire instructions, once properly given, will remain in effect unless and until
new instructions are given in the manner described above.
PAYMENT WHEN OFFICES ARE CLOSED. If any payment is due on a debt security
on a day that is not a business day, we will make the payment on the next day
that is a business day. Payments postponed to the next business day in this
situation will be treated under the indentures as if they were made on the
original due date. A postponement of this kind will not result in a default
under any debt security or either indenture, and no interest will accrue on the
postponed amount from the original due date to the next day that is a business
day.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS
FOR INFORMATION ON HOW THEY WILL RECEIVE PAYMENTS ON THEIR DEBT SECURITIES.
EVENTS OF DEFAULT
You will have special rights if an Event of Default occurs in respect of the
debt securities of your series and is not cured, as described later in this
subsection.
WHAT IS AN EVENT OF DEFAULT? The term "Event of Default" in respect of the
debt securities of your series means any of the following:
- We do not pay the principal of, or any premium on, a debt security of the
series on its due date.
- We do not pay interest on a debt security of the series within 30 days of
its due date.
- We do not deposit any sinking fund payment in respect of debt securities
of the series on its due date.
- We remain in breach of a covenant in respect of debt securities of the
series for 60 days after we receive a written notice of default stating we
are in breach. The notice must be sent by either the trustee or holders of
25% of the principal amount of debt securities of the series.
- We file for bankruptcy or certain other events of bankruptcy, insolvency
or reorganization occur.
- Any other Event of Default in respect of debt securities of the series
described in the prospectus supplement occurs.
An Event of Default for a particular series of debt securities does not
necessarily constitute an Event of Default for any other series of debt
securities issued under an indenture. The trustee may withhold notice to the
holders of debt securities of any default, except in the payment of principal or
interest, if it considers the withholding of notice to be in the best interests
of the holders.
REMEDIES IF AN EVENT OF DEFAULT OCCURS. If an Event of Default has occurred
and has not been cured, the trustee or the holders of 25% in principal amount of
the debt securities of the affected series may declare the entire principal
amount of all the debt securities of that series to be due and immediately
payable. This is called a declaration of acceleration of maturity. A declaration
of acceleration of maturity may be canceled by the holders of at least a
majority in principal amount of the debt securities of the affected series.
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Except in cases of default, where the trustee has some special duties, the
trustee is not required to take any action under the applicable indenture at the
request of any holders unless the holders offer the trustee reasonable
protection from expenses and liability (called an "indemnity"). If reasonable
indemnity is provided, the holders of a majority in principal amount of the
outstanding debt securities of the relevant series may direct the time, method
and place of conducting any lawsuit or other formal legal action seeking any
remedy available to the trustee. The trustee may refuse to follow those
directions in certain circumstances. No delay or omission in exercising any
right or remedy will be treated as a waiver of that right, remedy or Event of
Default.
Before you are allowed to bypass your trustee and bring your own lawsuit or
other formal legal action or take other steps to enforce your rights or protect
your interests relating to the debt securities, the following must occur:
- You must give your trustee written notice that an Event of Default has
occurred and remains uncured.
- The holders of 25% in principal amount of all outstanding debt securities
of the relevant series must make a written request that the trustee take
action because of the default and must offer reasonable indemnity to the
trustee against the cost and other liabilities of taking that action.
- The trustee must not have taken action for 60 days after receipt of the
above notice and offer of indemnity.
- The holders of a majority in principal amount of the debt securities must
not have given the trustee a direction inconsistent with the above notice.
However, you are entitled at any time to bring a lawsuit for the payment of
money due on your debt securities on or after the due date.
Holders of a majority in principal amount of the debt securities of the
affected series may waive any past defaults other than
- the payment of principal, any premium or interest or
- in respect of a covenant that cannot be modified or amended without the
consent of each holder.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS
FOR INFORMATION ON HOW TO GIVE NOTICE OR DIRECTION TO OR MAKE A REQUEST OF THE
TRUSTEE AND HOW TO DECLARE OR CANCEL AN ACCELERATION.
Each year, we will furnish to each trustee a written statement of certain of
our officers certifying that to their knowledge we are in compliance with the
applicable indenture and the debt securities, or else specifying any default.
MERGER OR CONSOLIDATION
Under the terms of the indentures, we are generally permitted to consolidate
or merge with another entity. We are also permitted to sell all or substantially
all of our assets to another entity. However, we may not take any of these
actions unless all the following conditions are met:
- Where we merge out of existence or sell our assets, the resulting entity
must agree to be legally responsible for the debt securities.
- The merger or sale of assets must not cause a default on the debt
securities and we must not already be in default (unless the merger or
sale would cure the default). For purposes
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of this no-default test, a default would include an Event of Default that
has occurred and has not been cured, as described on page 12 under "What
Is an Event of Default?". A default for this purpose would also include
any event that would be an Event of Default if the requirements for giving
us a notice of default or our default having to exist for a specific
period of time were disregarded.
- Under the senior indenture, no merger or sale of assets may be made if as
a result any of our property or assets or any property or assets of one of
our Subsidiaries would become subject to any mortgage, lien or other
encumbrance unless either (i) the mortgage, lien or other encumbrance
could be created pursuant to the limitation on liens covenant in the
senior indenture (see "Senior Indenture Provisions--Limitation on Liens"
below) without equally and ratably securing the senior indenture
securities or (ii) the senior indenture securities are secured equally and
ratably with or prior to the debt secured by the mortgage, lien or other
encumbrance.
- We must deliver certain certificates and documents to the trustee.
- We must satisfy any other requirements specified in the prospectus
supplement relating to a particular series of debt securities.
MODIFICATION OR WAIVER
There are three types of changes we can make to either indenture and the
debt securities issued thereunder.
CHANGES REQUIRING YOUR APPROVAL. First, there are changes that we cannot
make to your debt securities without your specific approval. Following is a list
of those types of changes:
- change the stated maturity of the principal of or interest on a debt
security;
- reduce any amounts due on a debt security;
- reduce the amount of principal payable upon acceleration of the maturity
of a security following a default;
- adversely affect any right of repayment at the holder's option;
- change the place (except as otherwise described in the prospectus or
prospectus supplement) or currency of payment on a debt security;
- impair your right to sue for payment;
- adversely affect any right to convert or exchange a debt security in
accordance with its terms;
- modify the subordination provisions in the subordinated indenture in a
manner that is adverse to holders of the subordinated securities;
- reduce the percentage of holders of debt securities whose consent is
needed to modify or amend the applicable indenture;
- reduce the percentage of holders of debt securities whose consent is
needed to waive compliance with certain provisions of the applicable
indenture or to waive certain defaults;
- modify any other aspect of the provisions of either indenture dealing with
modification and waiver of past defaults, changes to the quorum or voting
requirements of the applicable indenture or the waiver of certain
covenants; and
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- change any obligation we have to pay additional amounts.
CHANGES NOT REQUIRING APPROVAL. The second type of change does not require
any vote by the holders of the debt securities. This type is limited to
clarifications and certain other changes that would not adversely affect holders
of the outstanding debt securities in any material respect. Nor do we need any
approval to make any change that affects only debt securities to be issued under
either indenture after the change takes effect.
CHANGES REQUIRING MAJORITY APPROVAL. Any other change to either indenture
and the debt securities would require the following approval:
- If the change affects only one series of debt securities, it must be
approved by the holders of a majority in principal amount of that series.
- If the change affects more than one series of debt securities issued under
the same indenture, it must be approved by the holders of a majority in
principal amount of all of the series affected by the change, with all
affected series voting together as one class for this purpose.
In each case, the required approval must be given by written consent.
The holders of a majority in principal amount of all of the series of debt
securities issued under an indenture, voting together as one class for this
purpose, may waive our compliance with some of our covenants in that indenture.
However, we cannot obtain a waiver of a payment default or of any of the matters
covered by the bullet points included above under "--Changes Requiring Your
Approval".
FURTHER DETAILS CONCERNING VOTING. When taking a vote, we will use the
following rules to decide how much principal to attribute to a debt security:
- For original issue discount securities, we will use the principal amount
that would be due and payable on the voting date if the maturity of these
debt securities were accelerated to that date because of a default.
- For debt securities whose principal amount is not known (for example,
because it is based on an index), we will use a special rule for that debt
security described in the prospectus supplement.
- For debt securities denominated in one or more foreign currencies, we will
use the U.S. dollar equivalent.
Debt securities will not be considered outstanding, and therefore not
eligible to vote, if we have deposited or set aside in trust money for their
payment or redemption. Debt securities will also not be eligible to vote if they
have been fully defeased as described later under "Defeasance--Full Defeasance".
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding indenture securities that are
entitled to vote or take other action under the indentures. If we set a record
date for a vote or other action to be taken by holders of one or more series,
that vote or action may be taken only by persons who are holders of outstanding
indenture securities of those series on the record date and must be taken within
eleven months following the record date.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS
FOR INFORMATION ON HOW APPROVAL MAY BE GRANTED OR DENIED IF WE SEEK TO CHANGE
THE APPLICABLE INDENTURE OR THE DEBT SECURITIES OR REQUEST A WAIVER.
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DEFEASANCE
The following provisions will be applicable to each series of debt
securities unless we state in the applicable prospectus supplement that the
provisions of covenant defeasance and full defeasance will not be applicable to
that series.
COVENANT DEFEASANCE. Under current federal tax law, we can make the deposit
described below and be released from some of the restrictive covenants in the
indentures under which the particular series was issued. This is called
"covenant defeasance". In that event, you would lose the protection of those
restrictive covenants but would gain the protection of having money and
government securities set aside in trust to repay your debt securities. If you
hold subordinated securities, you also would be released from the subordination
provisions described under "Subordinated Indenture Provisions--Subordination" on
page 18. In order to achieve covenant defeasance, we must do the following:
- We must deposit in trust for the benefit of all holders of the debt
securities of the particular series a combination of money and U.S.
government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the debt
securities on their various due dates.
- We must deliver to the trustee a legal opinion of our counsel confirming
that, under current federal income tax law, we may make the above deposit
without causing you to be taxed on the debt securities any differently
than if we did not make the deposit and just repaid the debt securities
ourselves at maturity.
If we accomplish covenant defeasance, you can still look to us for repayment
of the debt securities if there were a shortfall in the trust deposit or the
trustee is prevented from making payment. In fact, if one of the remaining
Events of Default occurred (such as our bankruptcy) and the debt securities
became immediately due and payable, there might be a shortfall. Depending on the
event causing the default, you may not be able to obtain payment of the
shortfall.
FULL DEFEASANCE. If there is a change in federal tax law, as described
below, we can legally release ourselves from all payment and other obligations
on the debt securities of a particular series (called "full defeasance") if we
put in place the following other arrangements for you to be repaid:
- We must deposit in trust for the benefit of all holders of the debt
securities of the particular series a combination of money and U.S.
government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the debt
securities on their various due dates.
- We must deliver to the trustee a legal opinion confirming that there has
been a change in current federal tax law or an IRS ruling that lets us
make the above deposit without causing you to be taxed on the debt
securities any differently than if we did not make the deposit and just
repaid the debt securities ourselves at maturity. Under current federal
tax law, the deposit and our legal release from the debt securities would
be treated as though we paid you your share of the cash and notes or bonds
at the time the cash and notes or bonds were deposited in trust in
exchange for your debt securities and you would recognize gain or loss on
the debt securities at the time of the deposit.
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If we ever did accomplish full defeasance, as described above, you would have to
rely solely on the trust deposit for repayment of the debt securities. You could
not look to us for repayment in the unlikely event of any shortfall. Conversely,
the trust deposit would most likely be protected from claims of our lenders and
other creditors if we ever became bankrupt or insolvent. If you had subordinated
securities, you would also be released from the subordination provisions
described later under "Subordinated Indenture Provisions--Subordination" on
page 18.
FORM, EXCHANGE AND TRANSFER OF REGISTERED SECURITIES
If registered debt securities cease to be issued in global form, they will
be issued:
- only in fully registered certificated form,
- without interest coupons, and
- unless we indicate otherwise in the prospectus supplement, in
denominations of $1,000 and amounts that are multiples of $1,000.
Holders may exchange their certificated securities for debt securities of
smaller denominations or combined into fewer debt securities of larger
denominations, as long as the total principal amount is not changed.
Holders may exchange or transfer their certificated securities at the office
of their trustee. We have appointed the trustee to act as our agent for
registering debt securities in the names of holders transferring debt
securities. We may appoint another entity to perform these functions or perform
them ourselves.
Holders will not be required to pay a service charge to transfer or exchange
their certificated securities, but they may be required to pay any tax or other
governmental charge associated with the transfer or exchange. The transfer or
exchange will be made only if our transfer agent is satisfied with the holder's
proof of legal ownership.
If we have designated additional transfer agents for your debt security,
they will be named in your prospectus supplement. We may appoint additional
transfer agents or cancel the appointment of any particular transfer agent. We
may also approve a change in the office through which any transfer agent acts.
If any certificated securities of a particular series are redeemable and we
redeem less than all the debt securities of that series, we may block the
transfer or exchange of those debt securities during the period beginning 15
days before the day we mail the notice of redemption and ending on the day of
that mailing, in order to freeze the list of holders to prepare the mailing. We
may also refuse to register transfers or exchanges of any certificated
securities selected for redemption, except that we will continue to permit
transfers and exchanges of the unredeemed portion of any debt security that will
be partially redeemed.
If a registered debt security is issued in global form, only the depositary
will be entitled to transfer and exchange the debt security as described in this
subsection, since it will be the sole holder of the debt security.
RESIGNATION OF TRUSTEE
Either trustee may resign or be removed with respect to one or more series
of indenture securities provided that a successor trustee is appointed to act
with respect to these series. In the event that two or more persons are acting
as trustee with respect to different series of indenture securities under one of
the indentures, each of the trustees will be a trustee of a trust separate and
apart from the trust administered by any other trustee.
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SENIOR INDENTURE PROVISIONS--LIMITATION ON LIENS
We covenant in the senior indenture that neither we nor any of our
subsidiaries will pledge or subject to any lien any of our or their property or
assets unless the indenture securities issued under that indenture are secured
by this pledge or lien equally and ratably with other indebtedness thereby
secured. There are excluded from this covenant, liens created to secure
obligations for the purchase price of physical property, liens of a Subsidiary
securing indebtedness owed to us, liens existing on property acquired upon
exercise of rights arising out of defaults on receivables acquired in the
ordinary course of business, sales of receivables accounted for as secured
indebtedness in accordance with generally accepted accounting principles,
certain liens not related to the borrowing of money and other liens not securing
borrowed money aggregating less than $500,000.
SUBORDINATED INDENTURE PROVISIONS--SUBORDINATION
Upon any distribution of our assets upon our dissolution, winding up,
liquidation or reorganization, the payment of the principal of (and premium, if
any) and interest, if any, on the subordinated securities is to be subordinated
to the extent provided in the subordinated indenture in right of payment to the
prior payment in full of all Senior Indebtedness, but our obligation to make
payment of the principal of (and premium, if any) and interest, if any, on the
subordinated securities will not otherwise be affected. In addition, no payment
on account of principal (or premium, if any), sinking fund or interest, if any,
may be made on the subordinated securities at any time unless full payment of
all amounts due in respect of the principal (and premium, if any), sinking fund
and interest on Senior Indebtedness has been made or duly provided for in money
or money's worth.
In the event that, notwithstanding the foregoing, any payment by us is
received by the subordinated trustee or the holders of any of the subordinated
securities before all Senior Indebtedness is paid in full, the payment or
distribution must be paid over to the holders of the Senior Indebtedness or on
their behalf for application to the payment of all the Senior Indebtedness
remaining unpaid until all the Senior Indebtedness has been paid in full, after
giving effect to any concurrent payment or distribution to the holders of the
Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness
upon this distribution by us, the holders of the subordinated securities will be
subrogated to the rights of the holders of the Senior Indebtedness to the extent
of payments made to the holders of the Senior Indebtedness out of the
distributive share of the subordinated securities.
By reason of this subordination, in the event of a distribution of assets
upon our insolvency, certain of our general creditors may recover more, ratably,
than holders of the subordinated securities. The subordinated indenture provides
that these subordination provisions will not apply to money and securities held
in trust under the defeasance provisions of the subordinated indenture.
Senior Indebtedness is defined in the subordinated indenture as the
principal of (and premium, if any) and unpaid interest on:
- our indebtedness (including indebtedness of others guaranteed by us),
whenever created, incurred, assumed or guaranteed, for money borrowed
(other than the indenture securities issued under the subordinated
indenture and our 8 5/8% Subordinated Debentures due 2019), unless in the
instrument creating or evidencing the same or under which the same is
outstanding it is provided that this indebtedness is not senior or prior
in right of payment to the subordinated securities, and
- renewals, extensions, modifications and refundings of any of this
indebtedness.
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If this prospectus is being delivered in connection with the offering of a
series of subordinated securities, the accompanying prospectus supplement or the
information incorporated by reference will set forth the approximate amount of
our Senior Indebtedness outstanding as of a recent date.
THE TRUSTEES UNDER THE INDENTURES
The Chase Manhattan Bank and Bank One Trust Company, National Association
( as successor in interest to The First National Bank of Chicago) are two of a
number of banks with which we and Deere & Company maintain ordinary banking
relationships and from which we and Deere & Company have obtained credit
facilities and lines of credit. The Chase Manhattan Bank also serves as trustee
under other indentures under which we or Deere & Company are the obligor.
John R. Stafford, a director of Deere & Company, is a director of The Chase
Manhattan Bank and its parent, The Chase Manhattan Corporation. Antonio
Madero B., a director of Deere & Company, is a member of the International
Advisory Council of The Chase Manhattan Corporation. Bank One Trust Company,
National Association also serves as trustee under another indenture under which
we are the obligor.
CERTAIN CONSIDERATIONS RELATING TO FOREIGN CURRENCIES
Debt securities denominated or payable in foreign currencies may entail
significant risks. These risks include the possibility of significant
fluctuations in the foreign currency markets, the imposition or modification of
foreign exchange controls and potential illiquidity in the secondary market.
These risks will vary depending upon the currency or currencies involved and
will be more fully described in the applicable prospectus supplement.
DESCRIPTION OF DEBT WARRANTS
We may issue (either separately or together with other offered securities)
debt warrants to purchase underlying debt securities ("offered debt warrants").
The debt warrants will be issued under warrant agreements (each a "debt warrant
agreement") to be entered into between us and a bank or trust company, as
warrant agent (the "debt warrant agent"), identified in the prospectus
supplement.
Because this section is a summary, it does not describe every aspect of the
debt warrants and the debt warrant agreement. We urge you to read the debt
warrant agreement because it, and not this description, defines your rights as a
holder of debt warrants. We have filed the form of debt warrant agreement as an
exhibit to the registration statement that we have filed with the SEC. See
"Where You Can Find More Information" on page 2 for information on how to obtain
a copy of the debt warrant agreement.
GENERAL
You should read the prospectus supplement for the terms of the offered debt
warrants, including the following:
- The title and aggregate number of the debt warrants.
- The title, rank, aggregate principal amount and terms of the underlying
debt securities purchasable upon exercise of the debt warrants.
- The principal amount of underlying debt securities that may be purchased
upon exercise of each debt warrant, and the price or the manner of
determining the price at which this principal amount may be purchased upon
exercise.
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- The time or times at which, or the period or periods during which, the
debt warrants may be exercised and the expiration date of the debt
warrants.
- Any optional redemption terms.
- Whether certificates evidencing the debt warrants will be issued in
registered or bearer form and, if registered, where they may be
transferred and exchanged.
- Whether the debt warrants are to be issued with any debt securities or any
other securities and, if so, the amount and terms of the debt securities
or other securities.
- The date, if any, on and after which the debt warrants and these debt
securities or other securities will be separately transferable.
- Any other terms of the debt warrants.
The prospectus supplement will also contain a discussion of the federal
income tax considerations relevant to the offering.
Debt warrant certificates will be exchangeable for new debt warrant
certificates of different denominations. No service charge will be imposed for
any permitted transfer or exchange of debt warrant certificates, but we may
require payment of any tax or other governmental charge payable in connection
therewith. Debt warrants may be exercised and exchanged and debt warrants in
registered form may be presented for registration of transfer at the corporate
trust office of the debt warrant agent or any other office indicated in the
prospectus supplement.
EXERCISE OF DEBT WARRANTS
Each offered debt warrant will entitle the holder thereof to purchase the
amount of underlying debt securities at the exercise price set forth in, or
calculable from, the prospectus supplement relating to the offered debt
warrants. After the close of business on the expiration date, unexercised debt
warrants will be void.
Debt warrants may be exercised by payment to the debt warrant agent of the
applicable exercise price and by delivery to the debt warrant agent of the
related debt warrant certificate, properly completed. Debt warrants will be
deemed to have been exercised upon receipt of the exercise price, subject to the
receipt by the debt warrant agent, within five business days thereafter, of the
debt warrant certificate or certificates. Upon receipt of this payment and the
properly completed debt warrant certificates, we will, as soon as practicable,
deliver the amount of underlying debt securities purchased upon exercise.
If fewer than all of the debt warrants represented by any debt warrant
certificate are exercised, a new debt warrant certificate will be issued for the
unexercised debt warrants. The holder of a debt warrant will be required to pay
any tax or other governmental charge that may be imposed in connection with any
transfer involved in the issuance of underlying debt securities purchased upon
exercise.
MODIFICATIONS
There are three types of changes we can make to a debt warrant agreement and
the debt warrants issued thereunder.
CHANGES REQUIRING YOUR APPROVAL. First, there are changes that cannot be
made to your debt warrants without your specific approval. Those types of
changes include modifications and amendments that:
- accelerate the expiration date;
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- increase the exercise price;
- reduce the number of outstanding debt warrants, the consent of the holders
of which is required for a modification or amendment; or
- otherwise materially and adversely affect the rights of the holders of the
debt warrants.
CHANGES NOT REQUIRING APPROVAL. The second type of change does not require
any vote by holders of the debt warrants. This type of change is limited to
clarifications and other changes that would not materially and adversely affect
the interests of holders of the debt warrants.
CHANGES REQUIRING A MAJORITY VOTE. Any other change to the debt warrant
agreement and the debt warrants requires a vote in favor by holders of not fewer
than a majority in number of the then outstanding unexercised debt warrants
affected thereby. Most changes fall into this category.
NO RIGHTS AS HOLDERS OF UNDERLYING DEBT SECURITIES
Before the warrants are exercised, holders of the debt warrants are not
entitled to payments of principal, premium or interest, if any, on the related
underlying debt securities or to exercise any other rights whatsoever as holders
of the underlying debt securities.
DESCRIPTION OF PREFERRED STOCK
Under our certificate of incorporation (the "certificate of incorporation"),
we are authorized to adopt resolutions providing for the issuance, in one or
more series, of up to 10,000 shares of preferred stock, $1.00 par value, with
the powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof adopted by our
Board of Directors or a duly authorized committee thereof.
Because this section is a summary, it does not describe every aspect of our
preferred stock. We urge you to read our certificate of incorporation and the
certificate of designations creating your preferred stock because they, and not
this description, define your rights as a holder of preferred stock. We have
filed our certificate of incorporation and will file the certificate of
designations with the SEC. See "Where You Can Find More Information" on page 2
for information on how to obtain copies of these documents.
The specific terms of any preferred stock proposed to be sold under this
prospectus and an attached prospectus supplement will be described in the
prospectus supplement. If so indicated in the prospectus supplement, the terms
of the offered preferred stock may differ from the terms set forth below.
GENERAL
Unless otherwise specified in the prospectus supplement relating to the
offered preferred stock, each series of preferred stock will rank on a parity as
to dividends and distribution of assets upon liquidation and in all other
respects with all other series of preferred stock. The preferred stock will,
when issued, be fully paid and nonassessable and holders thereof will have no
preemptive rights.
You should read the prospectus supplement relating to the preferred stock
offered thereby for specific terms, including:
- The title and stated value of the preferred stock.
- The number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred stock.
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- The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to the preferred stock.
- The date from which dividends on the preferred stock will accumulate, if
applicable.
- The liquidation rights of the preferred stock.
- The procedures for any auction and remarketing, if any, of the preferred
stock.
- The sinking fund provisions, if applicable, for the preferred stock.
- The redemption provisions, if applicable, for the preferred stock.
- Whether the preferred stock will be convertible into or exchangeable for
other securities and, if so, the terms and conditions of conversion or
exchange, including the conversion price or exchange ratio and the
conversion or exchange period (or the method of determining the same).
- Whether the preferred stock will have voting rights and the terms thereof,
if any.
- Whether the preferred stock will be listed on any securities exchange.
- Whether the preferred stock will be issued with any other securities and,
if so, the amount and terms of these other securities.
- Any other specific terms, preferences or rights of, or limitations or
restrictions on, the preferred stock.
Subject to our certificate of incorporation and to any limitations contained
in our outstanding preferred stock, we may issue additional series of preferred
stock, at any time or from time to time, with the powers, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof, as our Board of Directors or any duly
authorized committee thereof may determine, all without further action of our
stockholders, including holders of our then outstanding preferred stock.
If applicable, the prospectus supplement will also contain a discussion of
the material federal income tax considerations relevant to the offering.
DIVIDENDS
Holders of preferred stock will be entitled to receive cash dividends, when,
as and if declared by our Board of Directors, out of our assets legally
available for payment, at the rate and on the dates set forth in the prospectus
supplement. Each dividend will be payable to holders of record as they appear on
our stock books on the record date fixed by our Board of Directors. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable prospectus supplement.
We may not;
- declare or pay dividends (except in our stock junior as to dividends and
liquidation rights to the preferred stock ("junior stock")) or make any
other distributions on junior stock, or
- purchase, redeem or otherwise acquire junior stock or set aside funds for
that purpose (except in a reclassification or exchange of junior stock
through the issuance of other junior stock or with the proceeds of a
reasonably contemporaneous sale of junior stock),
if there are arrearages in dividends or failure in the payment of our sinking
fund or redemption obligations on any of our preferred stock and, in the case of
the first bullet point above, if
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dividends in full for the current quarterly dividend period have not been paid
or declared on any of our preferred stock.
Dividends in full may not be declared or paid or set apart for payment on
any series of preferred stock unless:
- there are no arrearages in dividends for any past dividend periods on any
series of preferred stock, and
- to the extent that the dividends are cumulative, dividends in full for the
current dividend period have been declared or paid on all preferred stock.
Any dividends declared or paid when dividends are not so declared, paid or set
apart in full will be shared ratably by the holders of all series of preferred
stock in proportion to the respective arrearages and undeclared and unpaid
current cumulative dividends. No interest, or sum of money in lieu of interest,
will be payable in respect of any dividend payment or payments that may be in
arrears.
CONVERSION AND EXCHANGE
If the preferred stock will be convertible into or exchangeable for common
stock or other securities, the prospectus supplement will set forth the terms
and conditions of that conversion or exchange, including the conversion price or
exchange ratio (or the method of calculating the same), the conversion or
exchange period (or the method of determining the same), whether conversion or
exchange will be mandatory or at the option of the holder or us, the events
requiring an adjustment of the conversion price or the exchange ratio and
provisions affecting conversion or exchange in the event of the redemption of
that preferred stock. These terms may also include provisions under which the
number of shares of common stock or the number or amount of other securities to
be received by the holders of that preferred stock upon conversion or exchange
would be calculated according to the market price of the common stock or those
other securities as of a time stated in the prospectus supplement.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of us, the holders of each series of the preferred stock will be
entitled to receive out of our assets available for distribution to
stockholders, before any distribution of assets is made to holders of any junior
stock, liquidating distributions in the amount set forth in the applicable
prospectus supplement plus all accrued and unpaid dividends. If, upon any
voluntary or involuntary liquidation, dissolution or winding up of us, the
amounts payable with respect to the preferred stock are not paid in full, the
holders of preferred stock of each series will share ratably in the distribution
of our assets in proportion to the full respective preferential amounts to which
they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of the preferred stock will
not be entitled to any further participation in any distribution of our assets.
Our consolidation or merger with or into any other corporation or corporations
or a sale of all or substantially all of our assets will not be deemed to be a
liquidation, dissolution or winding up of us for purposes of these provisions.
REDEMPTION
If so provided in the prospectus supplement, the offered preferred stock may
be redeemable in whole or in part at our option at the times and at the
redemption prices set forth therein.
If dividends on any series of preferred stock are in arrears or we have
failed to fulfill our sinking fund or redemption obligations with respect to any
series of preferred stock, we may not
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purchase or redeem shares of preferred stock or any other capital stock ranking
on a parity with the preferred stock as to dividends or upon liquidation, nor
permit any subsidiary to do so, without in either case the consent of the
holders of at least two-thirds of each series of preferred stock then
outstanding; provided, however, that:
- to meet our purchase, retirement or sinking fund obligations with respect
to any series of preferred stock, we may use shares of that preferred
stock acquired prior to the arrearages or failure of payment and then held
as treasury stock, and
- we may complete the purchase or redemption of shares of preferred stock
for which a contract was entered into for any purchase, retirement or
sinking fund purposes prior to the arrearages or failure of payment.
VOTING RIGHTS
Except as indicated below or in the prospectus supplement, or except as
expressly required by applicable law, the holders of the preferred stock will
not be entitled to vote. As used herein, the term "applicable preferred stock"
means those series of preferred stock to which the provisions described herein
are expressly made applicable by resolutions of our Board of Directors.
If the equivalent of six quarterly dividends payable on any shares of any
series of applicable preferred stock are in default (whether or not the
dividends have been declared or the defaulted dividends are consecutive), the
number of our directors will be increased by two and the holders of all
outstanding series of applicable preferred stock (whether or not dividends
thereon are in default), voting as a single class without regard to series, will
be entitled to elect the two additional directors until four consecutive
quarterly dividends are paid or declared and set apart for payment, if the
shares are non-cumulative, or until all arrearages in dividends and dividends in
full for the current quarterly period are paid or declared and set apart for
payment, if the shares are cumulative, whereupon all voting rights described
herein will be divested from the applicable preferred stock. The holders of
applicable preferred stock may exercise their special class voting rights at
meetings of the stockholders for the election of directors or at special
meetings for the purpose of electing directors, in either case at which the
holders of not less than one-third of the aggregate number of shares of
applicable preferred stock are present in person or by proxy.
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of any series of preferred stock will be required:
- for any amendment of our certificate of incorporation (or the related
certificate of designations) that will adversely affect the powers,
preferences or rights of the holders of the preferred stock of that
series, or
- to create any class of stock (or increase the authorized number of shares
of any class of stock) that will have preference as to dividends or upon
liquidation over the preferred stock of that series or create any stock or
other security convertible into or exchangeable for or evidencing the
right to purchase any stock of that class.
In addition, the affirmative vote of the holders of a majority of all the
then outstanding shares of preferred stock will be required to:
- increase the authorized amount of our preferred stock, or
- unless otherwise provided in the applicable prospectus supplement, create
any class of stock (or increase the authorized number of shares of any
class of stock) that will rank on a parity with the preferred stock either
as to dividends or upon liquidation, or create any
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stock or other security convertible into or exchangeable for or evidencing
the right to purchase any stock of that class.
PLAN OF DISTRIBUTION
We may sell the offered securities:
- through agents;
- to or through underwriters; or
- directly to other purchasers.
Any underwriters or agents will be identified and their compensation
described in the applicable prospectus supplement.
We (directly or through agents) may sell, and the underwriters may resell,
the offered securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or prices, which may be changed,
or at market prices prevailing at the time of sale, at prices related to
prevailing market prices or at negotiated prices.
In connection with the sale of offered securities, the underwriters or
agents may receive compensation from us or from purchasers of the offered
securities for whom they may act as agents. The underwriters may sell offered
securities to or through dealers, who may also receive compensation from
purchasers of the offered securities for whom they may act as agents.
Compensation may be in the form of discounts, concessions or commissions.
Underwriters, dealers and agents that participate in the distribution of the
offered securities may be underwriters as defined in the Securities Act of 1933
(the "Act"), and any discounts or commissions received by them from us and any
profit on the resale of the offered securities by them may be treated as
underwriting discounts and commissions under the Act.
We will indemnify the underwriters and agents against certain civil
liabilities, including liabilities under the Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, us or our affiliates in the ordinary course of their businesses.
If so indicated in the prospectus supplement relating to a particular series
or issue of offered securities, we will authorize underwriters, dealers or
agents to solicit offers by certain institutions to purchase the offered
securities from us under delayed delivery contracts providing for payment and
delivery at a future date. These contracts will be subject only to those
conditions set forth in the prospectus supplement, and the prospectus supplement
will set forth the commission payable for solicitation of these contracts.
LEGAL OPINIONS
The validity of the securities will be passed upon for us by Shearman &
Sterling, 599 Lexington Avenue, New York, New York 10022, and for any
underwriters, dealers or agents by Brown & Wood LLP, One World Trade Center, New
York, New York 10048.
EXPERTS
The financial statements incorporated in this prospectus by reference from
our Annual Report on Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of that
firm given upon their authority as experts in accounting and auditing.
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[LOGO]
U.S. $3,450,000,000
JOHN DEERE CAPITAL
CORPORATION
MEDIUM-TERM NOTES,
SERIES D
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
OCTOBER 19, 2000
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